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Exhibit 10.47
Notice of Grant of Stock Option
and Option Agreement Wind River Systems, Inc.
ID: 94-2873391
500 Wind River Way
Alameda, CA 94501
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[Name of Optionholder]
[Address of Optionholder] Option Number:
Plan: [Option Number]
1998 Non-Officer Stock Option Plan
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Effective on [Date of Grant] (the "Date of Grant"), you have been granted a(n)
Non-Qualified Stock Option to buy [Number of Shares] shares of Wind River
Systems, Inc. (the Company) stock at $[Price Per Share] per share. The date on
which your option begins to vest is [Vesting Start Date] (the "Vesting Start
Date").
The total option price of the shares granted is [Total Exercise Price of
Option].
Shares in each period will become fully vested on the date shown.
Shares
Vest Type
Full Vest
Expiration Date
[Number of Shares] On Vest Date [Month/Day/Year] [Month/Day/Year] [Number
of Shares] Monthly [Month/Day/Year] [Month/Day/Year]
Note: Please refer to Section 2 of your option agreement with regard to
limitation on exercise.
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By your signature and the Company's signature below, you and the Company agree
that this option is granted under and governed by the terms and conditions of
the Company's Stock Option Plan (see above reference to plan) as amended and
made available on the Wind River internal web site and the attached Option
Agreement, both of which are incorporated by reference and made a part of this
document.
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Wind River Systems, Inc.
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Date
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[Name of Optionholder]
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Date
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ATTACHMENT I
WIND RIVER SYSTEMS, INC.
1998 NON-OFFICER STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
(FOR OPTIONEES SUBJECT TO THE LAWS OF FRANCE)
(For Grants Made On or After August 1, 2001)
Pursuant to your Notice of Grant of Stock Option ("Grant Notice") and this
Stock Option Agreement, Wind River Systems, Inc. (the "Company") has granted you
an option under its 1998 Non-Officer Stock Option Plan (together with the
addendum to the 1998 Non-Officer Stock Option Plan attached hereto captioned
"Provisions Applicable to Persons Subject to the Laws of France" and
collectively referred to herein as the "Plan") to purchase the number of shares
of the Company's Common Stock indicated in your Grant Notice at the exercise
price indicated in your Grant Notice. Defined terms not explicitly defined in
this Stock Option Agreement but defined in the Plan shall have the same
definitions as in the Plan.
The details of your option are as follows:
1. Vesting. Subject to the limitations contained herein, your option will
vest as provided in your Grant Notice, provided that vesting will cease upon the
termination of your Continuous Service.
2. Limitation on Exercise. Notwithstanding any vesting under Section 1
hereof, your option may not be exercised prior to four years after the Date of
Grant.
3. Number of Shares and Exercise Price. The number of shares of Common
Stock subject to your option and your exercise price per share referenced in
your Grant Notice may be adjusted from time to time for capitalization
adjustments, as provided in Section 11 of the Plan, to the extent such
adjustments do not cause the Company to become subject to tax liabilities to
which it otherwise would not be subject.
4. Method of Payment. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of the
exercise price in cash or by check or in the following manner:
(a) In the Company's sole discretion at the time your option is exercised
and provided that at the time of exercise the Common Stock is publicly traded
and quoted regularly in The Wall Street Journal, pursuant to a program developed
under Regulation T as promulgated by the Federal Reserve Board that, prior to
the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds.
5. Whole Shares. You may exercise your option only for whole shares of
Common Stock.
6. Securities Law Compliance. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act.
The exercise of your option must also comply with other applicable laws and
regulations governing your option, and you may not exercise your option if the
Company determines that such exercise would not be in material compliance with
such laws and regulations.
7. Term. The term of this option commences on the Date of Grant, and
expires at midnight on the Expiration Date, (which is the day before the tenth
anniversary from the date of grant), unless this option expires sooner as set
forth below or in the Plan. In no event may this option be exercised on or after
the Expiration Date. This option shall terminate prior to the Expiration Date of
its term as follows: on the later of (i) six (6) months after the termination of
your Continuous Status as an Employee, Director or Consultant (as defined in the
Plan) with the Company or an Affiliate of the Company or (ii) if such
termination occurs prior to the expiration of the four (4) year period referred
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to in Section 2 of this option, four (4) years and six (6) months after the Date
of Grant, unless one of the following circumstances exists:
(a) If your termination of Continuous Status as an Employee, Director or
Consultant is due to your permanent and total disability (within the meaning of
Section 422(c)(6) of the Code), then this option will then expire on the earlier
of (i) the Expiration Date set forth above or (ii) twelve (12) months following
such termination; provided however, that if such termination occurs prior to the
expiration of the four (4) year period referred to in Section 2 of this option,
this option will expire on the earlier of (i) the Expiration Date set forth
above or (ii) five (5) years from the Date of Grant.
(b) If your termination of Continuous Status as an Employee, Director or
Consultant is due to your death or your death occurs within three (3) months
following such termination, then this option will expire on the earlier of
(i) the Expiration Date set forth above or (ii) six (6) months after your death.
(c) If during any part of such six (6) month period you may not exercise
your option solely because of the condition set forth in Section 6 above, then
your option will not expire until the earlier of the Expiration Date set forth
above or until this option shall have been exercisable for an aggregate period
of six (6) months after the later of (i) your termination of Continuous Status
as an Employee, Director or Consultant or (ii) four (4) years from the Date of
Grant.
However, this option may be exercised following termination of Continuous
Status as an Employee, Director or Consultant only as to that number of shares
as to which it was exercisable on the date of such termination under the
provisions of Section 1 of this option.
8. Exercise.
(a) You may exercise the vested portion of your option during its term, to
the extent specified above, by delivering a Notice of Exercise (in a form
designated by the Company) together with the exercise price to the Secretary of
the Company, or to such other person as the Company may designate, during
regular business hours, together with such additional documents as the Company
may then require.
(b) By exercising your option you agree that, as a condition to any
exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option or (2) the disposition of shares of Common Stock acquired upon such
exercise.
9. Transferability. Your option is not transferable, except by will or by
the laws of descent and distribution, and is exercisable during your life only
by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
10. Option not a Service Contract. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective shareholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
11. Withholding Obligations.
(a) At the time you exercise your option, in whole or in part, or at any
time thereafter as requested by the Company, you hereby authorize withholding
from payroll and any other amounts
2
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payable to you, and otherwise agree to make adequate provision for (including by
means of a "cashless exercise" pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board to the extent permitted
by the Company), any sums required to satisfy the federal, state, local and
foreign tax withholding obligations of the Company or an Affiliate, if any,
which arise in connection with your option.
(b) Upon your request and subject to approval by the Company, in its sole
discretion, and in compliance with any applicable conditions or restrictions of
law, the Company may withhold from fully vested shares of Common Stock otherwise
issuable to you upon the exercise of your option a number of whole shares of
Common Stock having a Fair Market Value, determined by the Company as of the
date of exercise, not in excess of the minimum amount of tax required to be
withheld by law. Any adverse consequences to you arising in connection with such
share withholding procedure shall be your sole responsibility.
(c) You may not exercise your option unless the tax withholding obligations
of the Company and/or any Affiliate are satisfied. Accordingly, you may not be
able to exercise your option when desired even though your option is vested, and
the Company shall have no obligation to issue a certificate for such shares of
Common Stock or release such shares of Common Stock from any escrow provided for
herein.
12. Notices. Any notices provided for in your option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by mail by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.
13. Governing Plan Document. Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option, and
is further subject to all interpretations, amendments, rules and regulations
which may from time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of your option and those of the
Plan, the provisions of the Plan shall control.
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ATTACHMENT II
NOTICE OF EXERCISE
Wind River Systems, Inc.
500 Wind River Way
Alameda, CA 94501
Date of Exercise:
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Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
Type of option: Nonstatutory
Effective Date of Option/Date of Grant:
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Number of shares as to which option is exercised:
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Certificate(s) to be issued in the name of:
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Total exercise price:
$
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Cash payment delivered herewith:
$
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By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the 1998 Non-Officer Stock Option Plan and
(ii) to provide for the payment by me to you (in the manner designated by you)
of your withholding obligation, if any, relating to the exercise of this option.
Very truly yours,
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(Signature)
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(Print Name)
1
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Exhibit 10.47
|
CONTROL AGREEMENT
(Deposit Account)
This CONTROL AGREEMENT (the "Agreement") dated as of the date
specified at the end of this Agreement is entered into among Fargo Electronics,
Inc., a Delaware corporation ("Customer"), LASALLE BANK NATIONAL ASSOCIATION, a
national banking association, as agent for the banks party to that certain
Credit Agreement dated as of September 15, 2000 ("Secured Party") and WELLS
FARGO BANK, N.A. ("Wells Fargo"), and sets forth the rights of Secured Party and
the obligations of Wells Fargo with respect to the demand deposit account of
Customer at Wells Fargo specified at the end of this Agreement (the "Restricted
Account").
1. Definitions. In this Agreement:
"Control" means control of a deposit amount, as defined in Revised Article 9.
"Instrument" is defined in the Uniform Commercial Code. "Security"
is defined in Article 8 of the Uniform Commercial Code. "Uniform
Commercial Code" means the Uniform Commercial Code as enacted in the State of
Minnesota, as amended from time to time, including, without limitation, on and
after the effective date of Minn. Laws 2000, Chapter 399, substantially
adopting Revised Article 9 of the Uniform Commercial Code as approved by the
National Conference of Commissioners on Uniform State Law Laws in July, 1998 (as
so adopted being sometimes herein referred to as “Revised Article 9”) by Revised
Article 9.
2. SECURED PARTY'S INTEREST IN RESTRICTED ACCOUNT. Secured Party
represents that it is either, as indicated at the end of this Agreement, (i) a
lender who has extended credit to Customer and has been granted a security
interest in the Restricted Account or (ii) such a lender and the agent for a
group of such lenders (the "Lenders"). Customer hereby confirms, and Wells
Fargo hereby acknowledges, that the Customer has given the Secured Party a
security interest in and has assigned to the Secured Party, all of the
Customer's existing and future accounts with Wells Fargo, and all amendments,
extensions, renewals and replacements thereof (collectively called the
"Account"), and all amounts now or at any time hereafter in the Restricted
Account, and all interest and other earnings which may now or hereafter accrue
thereon, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and all proceeds of the foregoing property (all such assigned
property being the "Collateral"). Such security interest and assignment are
called the "Security Interest". The Customer and the Secured Party hereby give
Wells Fargo notice of the Security Interest, and Wells Fargo acknowledges
receipt of such notice.
3. CONTROL. The Collateral constitutes a "Deposit Account", as
such term is defined in Revised Article 9. The Customer represents to the
Secured Party and Wells Fargo that the transaction secured by the Security
Interest is not a "Consumer Transaction", as such term is defined in Revised
Article 9. By entering into this Agreement, the Customer and Wells Fargo are
giving the Secured Party Control over the Collateral, and the Secured Party is
perfecting the Security Interest in the Collateral by Control. Wells Fargo will
comply with all written instructions originated by the Secured Party directing
disposition of the funds in the Restricted Account without any further consent
by the Customer. This means that Wells Fargo will comply with all written
orders, notices, requests and other instructions of the Secured Party relating
to the Collateral, including but not limited to orders, notices, requests and
other instructions to withdraw or transfer any Collateral, or redeem or
terminate the Restricted Account, and to pay or transfer any Collateral to the
Secured Party or any other person or entity. Customer hereby instructs Wells
Fargo to indicate on its records for the Restricted Account that Secured Party
has a security interest in the Restricted Account. Wells Fargo agrees to do
this. Customer and Secured Party would like to use the service of Wells Fargo
described in this Agreement (the "Service") to further the arrangements between
Secured Party and Customer regarding the Collateral.
4. ACCESS TO RESTRICTED ACCOUNT. Until Wells Fargo receives
notice from the Secured Party that the Customer's rights are terminated (a
"Rights Termination Notice"), Wells Fargo will comply with all notices,
requests, and other instructions from the Customer for disposition of funds in
the Restricted Account, including but not limited to orders, notices, requests
or instructions to withdraw or transfer any Collateral, and to pay or transfer
any Collateral to the Customer or any other person or entity, but not to redeem
or terminate the Restricted Account. Except in accordance with the previous
sentence, without the Secured Party's written consent Wells Fargo will not
comply with any order, notice, request or other instruction from the Customer or
any other person or entity except the Secured Party relating to any Collateral,
and Wells Fargo will not pay or transfer any Collateral to the Customer or any
other person or entity except the Secured Party. Customer agrees that it will
not be able to withdraw money from the Restricted Account, that it will not have
access to the Restricted Account or any Collateral, and that Secured Party will
have exclusive access to the Restricted Account and all Collateral, except as
specifically provided in this Agreement or as specifically agreed by Secured
Party in writing.
5. BALANCE REPORTS. Wells Fargo agrees that following receipt of
a Rights Termination Notice it will deliver by facsimile transmission to Secured
Party on each Banking Day (a day on which Wells Fargo is open to conduct its
regular banking business, other than a Saturday, Sunday or public holiday) a
report (the "Balance Report") showing the opening available balance in the
Restricted Account as of the beginning of such Banking Day. Secured Party and
Customer understand and agree that the opening available balance in the
Restricted Account at the beginning of any Banking Day will be determined
after deducting from the Restricted Account the face amount ("Returned Item
Amount") of all checks or other items credited to the Restricted Account and
then returned unpaid on the immediately preceding Banking Day for any reason
("Returned Item").
6. TRANSFERS TO SECURED PARTY. Wells Fargo agrees that on each
Banking Day following receipt of a Rights Termination Notice it will transfer to
the Secured Party's account specified at the end of this Agreement with the bank
specified at the end of this Agreement (the "Secured Party Account") the full
amount of the opening available balance in the Restricted Account at the
beginning of such Banking Day. Wells Fargo will determine the funds transfer
system to be used in making each funds transfer and the means by which each
transfer will be made, provided, however, that any such funds transfer shall be
subject to the provisions of Article 4A of the Uniform Commercial Code as
adopted and in effect from time to time in the State of California. Except for
changes to the Secured Party Account or the frequency with which funds are
transferred out of the Restricted Account to the Secured Party Account, which
changes Customer agrees may be made by the Secured Party alone in any writing
sent to Wells Fargo, changes to the transfer instructions in this Agreement can
only be made by Secured Party, Customer and Wells Fargo signing a new agreement
or an amendment to this Agreement, which new agreement or amendment has security
procedures similar to the security procedures specified in Section 7 of this
Agreement.
7. WIRE TRANSFER SECURITY PROCEDURES. Customer and Secured Party
have requested that following receipt of a Rights Termination Notice Wells Fargo
make the transfers out of the Restricted Account on Wells Fargo's initiative in
accordance with Section 6 of this Agreement even though Customer and Secured
Party understand that transfers out of the Restricted Account would be more
secure if they were each requested on Customer's or Secured Party's personal
computer using Wells Fargo's electronic funds transfer service, which service
contains Wells Fargo's recommended security procedures for funds transfers.
Customer and Secured Party agree that the following security procedures will be
used before the first transfer out of the Restricted Account to the Secured
Party Account specified at the end of this Agreement, before the first transfer
out of the Restricted Account to any new Secured Party account, and before any
change in the transfer instructions in this Agreement become effective, to
attempt to make certain that the transfers requested pursuant to Section 6 of
this Agreement or any other transfers out of the Restricted Account are
authorized by Customer and Secured Party: (1) Wells Fargo will compare the
signature under which Customer signs this Agreement with the sample signature at
the end of this Agreement under the heading "TRANSFER AUTHORIZERS", and (2)
Wells Fargo will call back one of the persons named at the end of this Agreement
under the heading "TRANSFER VERIFIERS" and attempt to obtain verification of the
transfers requested under this Agreement. This Agreement will not be accepted
by Wells Fargo or any transfer made out of the Restricted Account if the two
signatures do not, in Wells Fargo's opinion, match or if the transfers requested
under Section 6 of this Agreement or any other transfers out of the Restricted
Account are not verified by someone purporting to be a Transfer Verifier listed
at the end of this Agreement. Wells Fargo is under no obligation to confirm in
any other way the identity of any purported Transfer Verifier or the person
signing this Agreement for Customer. Customer and Secured Party agree to be
bound by each transfer out of the Restricted Account if Wells Fargo makes such
transfer in good faith and in compliance with these security procedures, even if
the transfer is not properly authorized by Customer. If Wells Fargo takes any
action in addition to these security procedures in an attempt to determine if
the transfers are authorized by Customer or Secured Party, such actions will not
become part of the security procedures, and Wells Fargo will not be liable for
not taking these actions or for not correctly performing these actions.
8. DELAYS IN MAKING FUNDS TRANSFERS. Secured Party and Customer
understand that a funds transfer may be delayed or not made if (a) the transfer
would cause Wells Fargo to exceed any limitation on its intra-day net funds
position established in accordance with Federal Reserve or other regulatory
guidelines or to violate any other Federal Reserve or other regulatory risk
control program, or (b) the funds transfer would otherwise cause Wells Fargo to
violate any applicable law or regulation. If a funds transfer cannot be made or
will be delayed, Wells Fargo will attempt in good faith to notify Secured Party
by telephone.
9. RELIANCE ON ACCOUNT NUMBER OF WIRE TRANSFER BENEFICIARY. If
Secured Party indicates a name and an identifying number for the bank of the
person or entity to receive funds transfers out of the Restricted Account,
Secured Party and Customer understand that Wells Fargo will rely on the number
Secured Party indicates even if that number identifies a bank different from the
bank Secured Party named. If Secured Party indicates a name and an account
number for the person or entity to receive funds transfers out of the Restricted
Account, Secured Party and Customer understand that the bank of that person or
entity may rely on the account number Secured Party indicates even if that
account number is not the account number for the person or entity who is to
receive the transfers.
10. REPORTING ERRORS IN TRANSFERS. If Secured Party or Customer
learns of any error in a funds transfer or any unauthorized funds transfer, then
the party learning of such error or unauthorized transfer (the "Informed Party")
must notify Wells Fargo as soon as possible in writing at Wells Fargo Bank,
N.A., Wire Investigations, MAC 0186-068, 155 Fifth Street, 6th Floor, San
Francisco, California 94103, or by telephone at (800) AT-WELLS (which is a
recorded line). In no case may such notice to Wells Fargo by an Informed Party
be made more than fourteen (14) calendar days after Wells Fargo's first
confirmation of a funds transfer to such Informed Party. If a funds transfer is
made in error and Wells Fargo suffers a loss because Secured Party or Customer
breached its agreement to notify Wells Fargo of such error within this fourteen
(14) calendar day period, then the party or parties which breached this
agreement shall be obligated to reimburse Wells Fargo for such loss promptly
upon demand by Wells Fargo; provided, however, that in the event both Secured
Party and Customer breach this notification requirement, Secured Party shall not
be obligated to reimburse Wells Fargo for such loss unless Customer fails to
satisfy Wells Fargo's demand for such reimbursement within fifteen (15) calendar
days after such demand is made on Customer.
11. PAYMENT OF RETURNED ITEM AMOUNTS. Secured Party and Customer
understand and agree that the Returned Item Amount of each Returned Item will be
paid by Wells Fargo debiting one or more of the demand deposit operating
accounts of Customer at Wells Fargo specified at the end of this Agreement (the
"Operating Accounts"), without notice to Secured Party or Customer, on the
Banking Day that each Returned Item is received, or, to the extent there are not
sufficient funds in the Operating Accounts to cover such returned Item Amounts
on the day they are to be debited to the Operating Accounts, by Wells Fargo
debiting the Restricted Account, without notice to Secured Party or Customer, on
the Banking Day that the applicable Returned Item is received. Customer agrees
to pay the Returned Item Amounts immediately on demand, without setoff or
counterclaim, to the extent there are not sufficient funds in the Operating
Accounts or the Restricted Account to cover such Returned Item Amounts on the
day they are to be debited to the Operating Accounts or the Restricted Account.
Secured Party agrees to pay the Returned Item Amounts within thirty (30)
calendar days after demand, without setoff or counterclaim, to the extent the
Returned Item Amounts are not paid in full by Customer within fifteen (15)
calendar days after demand on Customer by Wells Fargo.
12. PAYMENT OF WELLS FARGO FEES. Customer agrees to pay all Wells
Fargo's fees and charges for the maintenance and administration of the
Restricted Account and for the cash management and other account services
provided with respect to the Restricted Account (collectively "Wells Fargo
Fees"), including, but not limited to, the fees for (a) the Balance Reports
provided on the Restricted Account, (b) the wire transfer services received with
respect to the Restricted Account, (c) Returned Items, (d) funds advanced to
cover overdrafts in the Restricted Account (but without Wells Fargo being in any
way obligated to make any such advances), and (e) duplicate bank statements on
the Restricted Account. The Wells Fargo Fees will be paid by Wells Fargo
debiting the Restricted Account. All such debits will be made on the Banking
Day that the Wells Fargo Fees are due without notice to Secured Party or
Customer. If there are not sufficient funds in the Restricted Account to cover
fully the Wells Fargo Fees on the Banking Day they are debited from the
Restricted Account, such shortfall or the amount of such Wells Fargo Fees will
be paid by Customer sending Wells Fargo a check in the amount of such shortfall
or such Wells Fargo Fees, without setoff or counterclaim, within fifteen (15)
calendar days after demand of Wells Fargo. Secured Party agrees to pay the
Wells Fargo Fees within thirty (30) calendar days after demand, without setoff
or counterclaim, to the extent such Wells Fargo Fees are not paid in full by
Customer by check within fifteen (15) calendar days after demand on Customer by
Wells Fargo. Customer agrees to reimburse Secured Party on demand for any such
payments made on its behalf by Secured Party. Wells Fargo may, in its
discretion, change the Wells Fargo Fees upon thirty (30) calendar days prior
written notice to Customer and Secured Party.
13. ACCOUNT DOCUMENTATION. Secured Party and Customer agree that,
except as specifically provided in this Agreement, the Restricted Account will
be subject to, and Wells Fargo's operation of the Restricted Account will be in
accordance with, the terms and provisions of Wells Fargo's deposit account
opening documentation and other Wells Fargo account related documentation as in
effect and delivered to Customer and Secured Party from time to time, including,
but not limited to, Wells Fargo's "Wholesale Demand Deposit Account Disclosure
Statement", a copy of which Customer and Secured Party acknowledge having
received, (collectively, the "Account Documentation").
14. BANK STATEMENTS. Wells Fargo will, if so indicated on the
signature page of this Agreement, send to Secured Party by United States mail,
at the address indicated for Secured Party after its signature to this
Agreement, duplicate copies of all bank statements on the Restricted Account
which are sent to Customer. Customer and/or Secured Party will have thirty (30)
calendar days after receipt of a bank statement to notify Wells Fargo of an
error in such statement. Wells Fargo's liability for such errors is limited as
provided in Section 18 of this Agreement.
15. WAIVER OF SETOFF RIGHTS. Wells Fargo hereby waives any right
it may have to apply any Account Funds against the payment of any indebtedness
from time to time owing to Wells Fargo from Customer, except for debits to the
Restricted Account permitted under this Agreement for the payment of Returned
Item Amounts and Wells Fargo Fees.
16. BANKRUPTCY NOTICE. If Wells Fargo at any time receives notice
of the commencement of a bankruptcy case or other insolvency or liquidation
proceeding by or against Customer (a "Bankruptcy Notice"), Wells Fargo will
continue to comply with its obligations under this Agreement, except to the
extent that any action required of Wells Fargo under this Agreement is
prohibited under applicable bankruptcy laws or regulations or is stayed pursuant
to the automatic stay imposed under the United States Bankruptcy Code or by
order of any court or agency.
17. CLAIMS, LEGAL PROCESS AND NOTICES. If Wells Fargo receives
any claim, notice, legal process or court order relating to the Restricted
Account or any Collateral, Wells Fargo will notify Secured Party and Customer of
such receipt, unless Wells Fargo knows that Secured Party, with respect to so
notifying Secured Party, or Customer, with respect to so notifying Customer, is
already aware of such claim, notice, legal process or court order. Secured
Party and Customer understand and agree that Wells Fargo will comply with any
such legal process, legal notice or court order it receives if Wells Fargo
determines in its sole discretion that such legal process, legal notice or court
order is legally binding on it. If any claim or notice received by Wells Fargo
is not legally binding on it, as determined in its sole discretion, Wells Fargo
agrees to follow any instructions of Secured Party to comply or not comply with
such claim or notice if (a) such instructions are given promptly after Secured
Party is notified of such claim or notice and (b) such instructions do not
require Wells Fargo to violate any applicable law, regulation or court order.
Customer hereby irrevocably agrees that Wells Fargo is to follow any such
instructions of Secured Party with respect to any such non-binding claim or
notice even if such claim or notice is from Customer. If Wells Fargo does not
receive prompt instructions from Secured Party regarding compliance or
non-compliance with any such non-binding claim or notice, Secured Party and
Customer agree that Wells Fargo may determine in its sole discretion to comply
or not to comply with such claim or notice, except that Wells Fargo will not
comply with any such claim or notice from Customer conflicting with the terms of
this Agreement.
18. INDEMNIFICATION FOR FOLLOWING INSTRUCTIONS. Secured Party and
Customer each agree that, notwithstanding any other provision of this Agreement,
Wells Fargo will not be liable to Secured Party or Customer for any losses,
liabilities, damages, claims (including, but not limited to, third party
claims), demands, obligations, actions, suits, judgments, penalties, costs or
expenses, including, but not limited to, attorneys' fees, (collectively, "Losses
and Liabilities") suffered or incurred by Secured Party or Customer as a result
of or in connection with, (a) Wells Fargo following any written instruction of
Secured Party to comply or not comply with any non-binding claim or notice
referred to in Section 15 of this Agreement, (b) if no such instruction from
Secured Party is received within five (5) Banking Days after Secured Party’s
written notification of any such non-binding claim or notice, or within such
shorter time period as Wells Fargo may prescribe in writing to Secured Party,
Wells Fargo complying or not complying, as determined in its sole discretion,
with any such non-binding claim or notice, (c) Wells Fargo following any other
written instruction or request of Secured Party, or (d) Wells Fargo complying
with its obligations under this Agreement. Further, Customer, and to the extent
not paid by Customer within fifteen (15) calendar days after demand, Secured
Party, will indemnify Wells Fargo against any Losses and Liabilities Wells Fargo
may suffer or incur as a result of or in connection with any of the
circumstances referred to in subsections (a) through (d) in the preceding
sentence.
19. REPRESENTATIONS AND AGREEMENTS. The Customer and Wells Fargo
jointly and severally represent to the Secured Party, and agree that:
(a) No person or entity except the Secured Party has Control over
any of the Collateral. Neither the Customer nor Wells Fargo has entered into
any agreement that gives any person or entity except the Secured Party Control
over any Collateral. Neither the Customer nor Wells Fargo will permit any
person or entity except the Secured Party to have Control over any of the
Collateral, and neither the Customer nor Wells Fargo will enter into any
agreement that gives any person or entity except the Secured Party Control over
any of the Collateral. The Customer is and will remain the sole account holder
of the Restricted Account. No person or entity (except the Customer, the
Secured Party, and Wells Fargo) has any security interest, other interest, lien
or other right in any of the Collateral. The Customer and Wells Fargo will
immediately notify the Secured Party if any person or entity (other than the
Customer, the Secured Party, or Wells Fargo) makes a claim against any of the
Collateral, or claims any security interest, other interest, lien or other right
in any of the Collateral.
(b) Wells Fargo has not issued, and will not issue, any
Instrument, Security, or certificate for any Collateral, and Wells Fargo will
not give to the Customer or any other person or entity, other than the Secured
Party, any Instrument, Security, or certificate for any Collateral.
(c) Without the Secured Party's written consent, Wells Fargo shall
not honor any check or other item drawn on the Restricted Account or any other
withdrawal or transfer from the Restricted Account, except in favor of the
Secured Party.
(d) Wells Fargo agrees that all of Wells Fargo's existing and
future security interests, liens, claims, rights of setoff and recoupment, and
other right, title and interest in any of the Collateral are fully subordinate
to the Security Interest. Wells Fargo will not assert or enforce any of Wells
Fargo's existing or future security interests, liens, claims, rights of setoff
or recoupment, or other right, title or foregoing.
(e) Wells Fargo is a "Bank", as such term is defined in Revised
Article 9. The State of Minnesota is Wells Fargo's jurisdiction for purposes of
Section 9-304 of Revised Article 9. Wells Fargo has not entered into a separate
agreement with the Customer for purposes of determining Wells Fargo's
jurisdiction for purposes of perfecting a security interest in Deposit Accounts.
20. NO REPRESENTATIONS OR WARRANTIES OF WELLS FARGO CONCERNING
QUALITY OF SERVICE, ERRORS, ETC. Wells Fargo agrees to perform its obligations
under this Agreement in a manner consistent with the quality provided when Wells
Fargo performs similar services for its own account. However, Wells Fargo
cannot be responsible for the errors, acts or omissions of those individuals or
entities (other than Wells Fargo’s employees or affiliates), such as
communications carriers, correspondents or clearinghouses through which Wells
Fargo may perform its obligations under this Agreement or receive or transmit
information in performing its obligations under this Agreement. The Secured
Party and the Customer also understand that Wells Fargo cannot be responsible
for any loss, liability or delay caused by wars, failures in communications
networks, labor disputes, legal constraints, fires, power surges or failures,
earthquakes, civil disturbances or other events beyond Wells Fargo's control.
WELLS FARGO MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES WITH
RESPECT TO THE SERVICE IT IS TO PERFORM UNDER THIS AGREEMENT OTHER THAN THOSE
EXPRESSLY SPECIFIED IN THIS AGREEMENT.
21. LIMITATION OF LIABILITY. In the event that the Secured Party,
the Customer or Wells Fargo suffers or incurs any Losses and Liabilities as a
result of, or in connection with, its or any other party's performance or
failure to perform its obligations under this Agreement, the affected parties
shall negotiate in good faith in an effort to reach a mutually satisfactory
allocation of such Losses and Liabilities, it being understood that Wells Fargo
will not be responsible for any Losses and Liabilities due to any cause other
than its own negligence or breach of this Agreement, in which case its liability
to Secured Party and Customer shall, except with respect to Wells Fargo's own
negligence or breach of this Agreement with respect to its obligations to
Secured Party under Sections 6 and 7 of this Agreement, be limited to direct
money damages in an amount not to exceed ten (10) times all the Wells Fargo Fees
charged or incurred during the calendar month immediately preceding the calendar
month in which such Losses and Liabilities occurred (or, if no Wells Fargo Fees
were charged or incurred in the preceding month, the Wells Fargo Fees charged or
incurred in the month in which the Losses and Liabilities occurred). Customer
will indemnify Wells Fargo against any Losses and Liabilities suffered or
incurred by Wells Fargo as a result of third party claims to the extent such
Losses and Liabilities exceed the liability limitation specified in the
preceding sentence. The limitation of Wells Fargo's liability and the
indemnification by Customer set forth above shall not be applicable to the
extent any Losses and Liabilities of any party to this Agreement are directly
caused by Wells Fargo's gross negligence or willful misconduct. IN NO EVENT
WILL WELLS FARGO BE LIABLE FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, INDIRECT
OR PUNITIVE DAMAGES, WHETHER ANY CLAIM IS BASED ON CONTRACT OR TORT, WHETHER THE
LIKELIHOOD OF SUCH DAMAGES WAS KNOWN TO WELLS FARGO AND REGARDLESS OF THE FORM
OF THE CLAIM OR ACTION, INCLUDING, BUT NOT LIMITED TO, ANY CLAIM OR ACTION
ALLEGING GROSS NEGLIGENCE, WILLFUL MISCONDUCT, FAILURE TO EXERCISE REASONABLE
CARE OR FAILURE TO ACT IN GOOD FAITH. Any action against Wells Fargo by
Customer or Secured Party under or related to this Agreement must be brought
within two years after the cause of action accrues.
22. TERMINATION. This Agreement and the Service may be terminated
by Secured Party or Wells Fargo at any time by either of them giving sixty (60)
calendar days prior written notice of such termination to the other two parties
to this Agreement at their contact addresses specified after their signatures to
this Agreement; provided, however, that this Agreement and the Service may be
terminated immediately upon written notice from Wells Fargo to Customer and
Secured Party should Secured Party fail to make any payment when due to Wells
Fargo from Secured Party under the terms of this Agreement. Secured Party and
Customer agree that the Restricted Account may be closed as provided in the
Account Documentation, provided, however, that any closure of the Restricted
Account prior to termination of this Agreement shall require the prior written
consent of Secured Party. The rights of Wells Fargo and the obligations of
Customer and Secured Party under Sections 17, 18, 20, 21and 22 of this Agreement
will survive the termination of this Agreement and/or the closure of the
Restricted Account, and any liability of any party to this Agreement, as
determined under the provisions of this Agreement, with respect to acts or
omissions of such party prior to such termination or closure will also survive
such termination or closure. Upon any termination of this Agreement and the
Service or closure of the Restricted Account all collected balances in the
Restricted Account on the date of such termination or closure will be
transferred to Secured Party as requested by Secured Party in writing to Wells
Fargo.
23. MODIFICATIONS, AMENDMENTS, AND WAIVERS. Except as otherwise
provided in Section 6 of this Agreement, with respect to changes to the Secured
Party Account, or the transfer instructions in this Agreement, this Agreement
may not be modified or amended, or any provision thereof waived, except in a
writing signed by all the parties to this Agreement; provided, however, that the
Wells Fargo Fees may be changed after thirty (30) calendar days prior written
notice to Customer and Secured Party.
24. NOTICES. All notices from one party to another shall be in
writing, or be made by a telecommunications device capable of creating a
written record (which shall, for purposes of this Agreement be deemed to be
notice given in writing), shall be delivered to Customer, Secured Party and/or
Wells Fargo at their contact addresses specified after their signatures to this
Agreement, or any other address of any party notified to the other parties in
writing, and shall be effective upon receipt. Any notice sent by one party to
this Agreement to another party shall also be sent to the third party to this
Agreement. Wells Fargo is authorized by Customer and Secured Party to act on
any instructions or notices received by Wells Fargo if (a) such instructions or
notices purport to be made in the name of Secured Party, (b) Wells Fargo
reasonably believes that they are so made, and (c) they do not conflict with the
terms of this Agreement as such terms may be amended from time to time, unless
such conflicting instructions or notices are supported by a court order.
25. COSTS AND EXPENSES. If Wells Fargo is successful in enforcing
its rights and privileges under this Agreement against Customer or Secured Party
or if Customer or Secured Party is successful in enforcing its rights and
privileges under this Agreement against Wells Fargo, the party against whom such
rights and privileges are enforced agrees to reimburse the enforcing party
immediately upon demand, without setoff or counterclaim, for any and all costs,
expenses and/or attorneys' fees paid, suffered or incurred by, or imposed upon,
the enforcing party directly or indirectly as a result of, or in any way
connected with, such enforcement.
26. SUCCESSORS AND ASSIGNS. Neither Customer nor Secured Party
may assign or transfer its rights or obligations under this Agreement to any
person or entity without the prior written consent of Wells Fargo, which consent
will not be unreasonably withheld; provided, however, that no such consent will
be required in the case of an assignment or transfer by Secured Party if the
assignee is a bank affiliate of Secured Party. Wells Fargo may not assign its
rights or obligations under this Agreement to any person or entity without the
prior written consent of Secured Party, which consent will not be unreasonably
withheld; provided, however, that no such consent will be required if the
assignee is a bank affiliate of Wells Fargo Bank, N.A.
27. GOVERNING LAW. Customer and Secured Party understand that
Wells Fargo’s provision of the Service under this Agreement is subject to
federal laws and regulations. To the extent that such federal laws and
regulations are not applicable, this Agreement will be governed by and be
construed in accordance with the laws of the State of California.
28. SEVERABILITY. To the extent that this Agreement or the
Service to be provided under this Agreement are inconsistent with, or prohibited
or unenforceable under, any applicable law or regulation, they will be deemed
ineffective only to the extent of such prohibition or unenforceability and be
deemed modified and applied in a manner consistent with such law or regulation.
Any provision of this Agreement which is deemed unenforceable or invalid in any
jurisdiction shall not effect the enforceability or validity of the remaining
provisions of this Agreement or the same provision in any other jurisdiction.
29. USURY. It is never the intention of Wells Fargo to violate
any applicable usury or interest rate laws. Wells Fargo does not agree to, or
intend to contract for, charge, collect, take, reserve or receive (collectively,
“charge or collect”) any amount in the nature of interest or in the nature of a
fee, penalty or other charge which would in any way or event cause Wells Fargo
to charge or collect more than the maximum Wells Fargo would be permitted to
charge or collect by any applicable federal or state law. Any such excess
interest or unauthorized fee shall, notwithstanding anything stated to the
contrary in this Agreement, be applied first to reduce the amount owed, if any,
and then any excess amounts will be refunded.
30. TAX REPORTING. Until the Secured Party notifies Wells Fargo
to use a different name and number, Wells Fargo will make all reports relating
to the Collateral to all federal, state and local tax authorities under the name
and tax identification number of the Customer.
31. COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
32. ENTIRE AGREEMENT. This Agreement, together with the Account
Documentation, contains the entire and only agreement among all the parties to
this Agreement and between Wells Fargo and Customer and Wells Fargo and Secured
Party with respect to (a) the Service, (b) the interest of Secured Party and the
Lenders in the Collateral, and (c) Wells Fargo's obligations to Secured Party
and the Lenders in connection with the Collateral.
This Agreement has been signed by the duly authorized officers or
representatives of Customer, Secured Party and Wells Fargo on the date specified
below.
DATE: June 8, 2001
RESTRICTED ACCOUNT NUMBERS:
SECURED PARTY ACCOUNT NUMBER:
BANK OF SECURED PARTY ACCOUNT: LaSalle Bank National Association, ABA# 071 000
505
ý SECURED PARTY IS TO BE SENT DUPLICATE BANK STATEMENTS
FARGO ELECTRONICS, INC.
By: Name: /s/ Jeffrey D. Upin
--------------------------------------------------------------------------------
Title: General Counsel
--------------------------------------------------------------------------------
Address for all Notices: Fargo Electronics, Inc. 6533 Flying Cloud Drive
Eden Prairie, MN 55344
WELLS FARGO BANK, NATIONAL
ASSOCIATION LASALLE BANK NATIONAL ASSOCIATION,
agent By: By:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Name: /s/ Kent Paulson Name: /s/ Ann C. Pifer
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Title: Assistant Vice President Title: First Vice President
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Address For All Notices: Address For All Notices: Wells Fargo Bank, National
Association LaSalle Bank National Association 7900 Xerxes Ave S, N9307-013 601
Second Avenue South Bloomington, MN 55431 Suite 4100 Attention: Mr. Kent
Paulson Minneapolis, MN 55402 Attention: Ms. Ann Pifer
o SECURED PARTY IS THE ONLY LENDER
ý SECURED PARTY IS A LENDER AND AN AGENT FOR A GROUP OF LENDERS
TO THE WELLS FARGO BANK SIGNING THE ABOVE AGREEMENT: I certify that (a) I am
the Secretary of the Customer named in the above Restricted Account Agreement
(the “Agreement”), (b) each of the people named below as “TRANSFER AUTHORIZERS”
are authorized on behalf of the Customer to sign the Agreement and to authorize
transfers out of the Restricted Account specified in the Agreement, (c) the
sample signatures next to the names of the Transfer Authorizers below are the
true and authentic signatures of the named individuals, (d) each of the people
named below as “TRANSFER VERIFIERS” are authorized on behalf of the Customer to
verify transfers requested out of the Restricted Account, (e) the telephone
numbers next to the names of the Transfer Verifiers below are the true and
correct telephone numbers of the named individuals, (f) the person signing the
Agreement on behalf of the Customer has the proper authority to request funds
transfers out of the Restricted Account referenced in the Agreement and to make
such requests binding on the Customer even if (i) such person is not authorized
to withdraw funds from the Restricted Account under the account documentation
for the Restricted Account or (ii) such account documentation requires more than
one signature for the withdrawal of funds from the Restricted Account, (g) the
Wells Fargo Bank signing the Agreement ("Wells Fargo") may rely on the
information in this certificate, even if it should no longer be accurate, until
Wells Fargo receives an amendment to the Agreement or a new Restricted Account
Agreement signed by the Customer and the Secured Party named in the Agreement,
(h) the signature of the Customer at the end of the Agreement binds the Customer
to the terms and conditions of the Agreement, and (i) the resolution below is a
true copy of a resolution adopted by the Customer's Board of Directors and is
now in full force and effect:
TRANSFER AUTHORIZERS SAMPLE SIGNATURES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRANSFER VERIFIERS TELEPHONE NUMBERS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
"RESOLVED, that the Secretary acting alone is hereby authorized, in connection
with wire transfers out of our accounts at any Wells Fargo Bank to designate
persons who may request wire transfers and verify such requests, and to execute
and deliver such agreements, documents and other instruments, and to perform
such other acts, relating to wire transfers as the Secretary shall approve."
--------------------------------------------------------------------------------
Today's Date Customer Name Secretary's Name
--------------------------------------------------------------------------------
Secretary's Signature Date Resolution Adopted
|
Exhibit 10.7
[Sun Microsystems letterhead]
November 5, 1998
Mr. Rick LeFaivre
Borland International, Inc.
100 Borland Way
Scotts Valley, CA 95066
Re: Administrative Amendment regarding High Risk Restrictions
Dear Mr. LeFaivre:
Your Technology License and Distribution Agreement with Sun for certain Java
Technology (“TLDA”) contains a provision entitled “High Risk Activities” which:
(i) provides notice that the Java Technology is not intended for certain
applications or environments; (ii) prohibits your distribution of products
containing the technology for such use; and (iii) requires you to flow down the
notice to your licensees.
Sun has elected to make the latter two requirements optional on your part. As
such, the following revised High Risk Activities provision may be submitted at
your election in place of your current High Risk Activities clause.
“The Technology is not designed or intended for use in on-line control of
aircraft, air traffic, aircraft navigation or aircraft communications; or in the
design, construction, operation or maintenance of any nuclear facility. Sun
disclaims any express or implied warranty of fitness for such uses.”
This administrative amendment does not require your written acknowledgment or
approval.
Sincerely,
/s/ Mike Dillon
Michael A. Dillon
Director, Legal
Software and Technology |
EXHIBIT 10.7
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
DATED AS OF SEPTEMBER 24, 2001
BY AND AMONG
NUCO2 INC.,
THE LENDERS FROM TIME TO TIME PARTIES HERETO,
SUNTRUST BANK, AS SUCCESSOR BY MERGER TO
SUNTRUST BANK, SOUTH FLORIDA, NATIONAL ASSOCIATION,
AS ADMINISTRATIVE AGENT, AS ISSUING BANK AND
AS SWING LINE LENDER,
HELLER FINANCIAL, INC., AS SYNDICATION AGENT,
BNP PARIBAS, AS DOCUMENTATION AGENT,
AND
SUNTRUST ROBINSON HUMPHREY CAPITAL MARKETS,
A DIVISION OF SUNTRUST CAPITAL MARKETS, INC.,
AS ARRANGER
TABLE OF CONTENTS
ARTICLE I DEFINITIONS........................................................................................2
SECTION 1.01 Definitions.................................................................................2
SECTION 1.02 Calculations; Accounting Terms.............................................................18
SECTION 1.03 Other Definitional Provisions..............................................................18
SECTION 1.04 Captions...................................................................................19
ARTICLE II AMOUNT AND TERMS OF LOANS.........................................................................19
SECTION 2.01 Revolving Loan Commitments and Revolving Notes; Increase in Revolving Loan Commitments.....19
SECTION 2.02 Method of Borrowing Under the Commitments..................................................21
SECTION 2.03 Swing Line Subcommitment...................................................................22
SECTION 2.04 Letter of Credit Subcommitment.............................................................24
SECTION 2.05 Notice of Issuance of Letter of Credit; Agreement to Issue.................................24
SECTION 2.06 Payment of Amounts drawn under Letter of Credit............................................25
SECTION 2.07 Payment by Lenders.........................................................................25
SECTION 2.08 Obligations Absolute.......................................................................26
SECTION 2.09 Indemnification; Nature of Administrative Agent's Duties...................................27
SECTION 2.10 Prepayment of Borrowings Under the Commitments.............................................27
SECTION 2.11 Mandatory Prepayments......................................................................27
SECTION 2.12 Voluntary Reduction of Commitments.........................................................28
SECTION 2.13 Allocation of Payments.....................................................................28
SECTION 2.14 Termination of Commitments.................................................................29
SECTION 2.15 Use of Proceeds............................................................................29
SECTION 2.16 Fees 29
SECTION 2.17 Interest...................................................................................30
SECTION 2.18 Interest Periods...........................................................................31
SECTION 2.19 Increased Costs............................................................................31
SECTION 2.20 Capital Adequacy...........................................................................33
SECTION 2.21 Funding Losses.............................................................................33
SECTION 2.22 Making of Payments.........................................................................34
SECTION 2.23 Default Rate of Interest...................................................................34
SECTION 2.24 Proration of Payments......................................................................34
SECTION 2.25 Lenders' Obligations Several...............................................................35
SECTION 2.26 Payments Free of Taxes.....................................................................35
SECTION 2.27 Interest Rate Not Ascertainable, etc.......................................................37
SECTION 2.28 Illegality.................................................................................37
ARTICLE III CONDITIONS TO BORROWINGS..........................................................................38
SECTION 3.01 Conditions Precedent to Initial Advances...................................................38
SECTION 3.02 Conditions Precedent to Each Advance and Letters of Credit.................................41
SECTION 3.03 Effect of Amendment and Restatement........................................................42
ARTICLE IV REPRESENTATIONS AND WARRANTIES....................................................................43
SECTION 4.01 Corporate Status of Company; Status of Subsidiaries........................................43
SECTION 4.02 Corporate Power and Authority..............................................................44
SECTION 4.03 Compliance with Other Instruments..........................................................44
SECTION 4.04 Enforceable Obligations....................................................................44
SECTION 4.05 Governmental Authorizations................................................................45
SECTION 4.06 Intellectual Property......................................................................45
SECTION 4.07 Outstanding Indebtedness...................................................................45
SECTION 4.08 Insurance Coverage.........................................................................45
SECTION 4.09 Title to Properties........................................................................45
SECTION 4.10 No Burdensome Restrictions.................................................................46
SECTION 4.11 No Material Violation of Law...............................................................46
SECTION 4.12 No Default Under Other Agreements..........................................................46
SECTION 4.13 No Equity Investments......................................................................46
SECTION 4.14 Financial Statements.......................................................................46
SECTION 4.15 Litigation.................................................................................46
SECTION 4.16 Taxes 47
SECTION 4.17 Margin Regulations.........................................................................47
SECTION 4.18 ERISA 47
SECTION 4.19 Compliance With Environmental Laws.........................................................49
SECTION 4.20 Possession of Material Patents, Trademarks, Etc............................................49
SECTION 4.21 Subsidiaries...............................................................................49
SECTION 4.22 Disclosure.................................................................................50
SECTION 4.23 Projections................................................................................50
SECTION 4.24 Subordinated Debt..........................................................................50
ARTICLE V AFFIRMATIVE COVENANTS.............................................................................50
SECTION 5.01 Use of Proceeds............................................................................50
SECTION 5.02 Interest Rate Protection...................................................................51
SECTION 5.03 Reporting Covenants........................................................................51
SECTION 5.04 Maintenance of Properties..................................................................52
SECTION 5.05 Maintenance of Insurance...................................................................52
SECTION 5.06 Maintenance of Books; Inspection of Property and Records...................................52
SECTION 5.07 Existence and Status.......................................................................53
SECTION 5.08 Taxes and Claims...........................................................................53
SECTION 5.09 Compliance with Laws, Etc..................................................................53
SECTION 5.10 ERISA......................................................................................53
SECTION 5.11 Litigation.................................................................................54
SECTION 5.12 Notice of Events of Default................................................................54
SECTION 5.13 Stockholder Reports, etc...................................................................55
SECTION 5.14 Future Guarantors..........................................................................55
SECTION 5.15 Ownership of Guarantors....................................................................55
SECTION 5.17 Notices to Holders of Subordinated Debt...................................................56
ARTICLE VI NEGATIVE COVENANTS................................................................................56
SECTION 6.01 Limitation on Liens and Security Interests.................................................56
SECTION 6.02 Indebtedness...............................................................................57
SECTION 6.03 Compliance with ERISA......................................................................57
SECTION 6.04 Sale and Leaseback.........................................................................58
SECTION 6.05 Transactions with Affiliates...............................................................58
SECTION 6.06 Guaranties.................................................................................58
SECTION 6.07 Limitations on Payment Restrictions........................................................58
SECTION 6.08 Merger; Joint Ventures; Sale of Assets.....................................................58
ii
SECTION 6.09 Dividends; Loans, Investments, Advances....................................................59
SECTION 6.10 Nature of Business.........................................................................60
SECTION 6.11 Sale of Subsidiaries.......................................................................60
SECTION 6.12 Negative Pledges...........................................................................60
SECTION 6.13 Creation of Subsidiaries...................................................................60
SECTION 6.14 Prepayments Under and Amendment of Other Agreements........................................60
SECTION 6.15 Capital Expenditures.......................................................................61
SECTION 6.16 Changes Related to Preferred Stock.........................................................61
SECTION 6.17 Changes in Fiscal Year or Fiscal Quarter...................................................61
ARTICLE VII FINANCIAL COVENANTS...............................................................................62
SECTION 7.01 Senior Debt Coverage Ratio.................................................................62
SECTION 7.02 Total Debt Coverage Ratio..................................................................62
SECTION 7.03 Debt Service Coverage Ratio................................................................62
SECTION 7.04 Minimum EBITDA.............................................................................62
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES....................................................................63
SECTION 8.01 Events of Default..........................................................................63
SECTION 8.02 Remedies on Default........................................................................64
ARTICLE IX THE AGENT 65
SECTION 9.01 Appointment of Administrative Agent........................................................65
SECTION 9.02 Nature of Duties of Administrative Agent...................................................66
SECTION 9.03 Lack of Reliance on the Administrative Agent...............................................67
SECTION 9.04 Certain Rights of the Administrative Agent.................................................67
SECTION 9.05 Reliance by Administrative Agent...........................................................67
SECTION 9.06 The Administrative Agent in its Individual Capacity........................................67
SECTION 9.07 Successor Administrative Agent.............................................................68
SECTION 9.08 Authorization to Execute other Loan Documents..............................................68
SECTION 9.09 Indemnification............................................................................68
ARTICLE X MISCELLANEOUS.....................................................................................69
SECTION 10.01 Survival...................................................................................69
SECTION 10.02 Amendments; Consents.......................................................................69
SECTION 10.03 Notices....................................................................................70
SECTION 10.04 Severability; Time of Essence..............................................................71
SECTION 10.05 Governing Law; Submission to Jurisdiction..................................................71
SECTION 10.06 Payment of Costs...........................................................................72
SECTION 10.07 Indemnity..................................................................................73
SECTION 10.08 Benefit of the Agreement...................................................................73
SECTION 10.09 Subordination of Indebtedness..............................................................74
SECTION 10.10 Maximum Interest Rate......................................................................74
SECTION 10.11 Entire Agreement...........................................................................75
SECTION 10.12 Set-Off....................................................................................75
SECTION 10.13 Counterparts...............................................................................75
SECTION 10.14 Replacement Notes..........................................................................75
SECTION 10.15 Release....................................................................................75
iii
Annexes
Annex A Capital Expenditures
Exhibits
Exhibit A - Form of Revolving Note
Exhibit B - Form of Swing Line Note
Exhibit C - Form of Notice of Borrowing
Exhibit D - Form of Guaranty Agreement
Exhibit E - Form of Contribution Agreement
Exhibit F - Form of Closing Certificate
Exhibit G - Form of Opinion of Counsel of the Company and the Guarantors
Exhibit H - Form of Compliance Certificate
Exhibit I - Form of Assignment Agreement
Exhibit J - Projections
Schedules
Schedule 4.07 - Outstanding Indebtedness
Schedule 4.08 - Insurance Certificates
Schedule 4.18 - ERISA
Schedule 4.21 - Subsidiaries
Schedule 6.01 - Liens
iv
SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated
as of September 24, 2001, by and among NUCO2 INC., a Florida corporation (the
"Company"), SUNTRUST BANK, a Georgia banking corporation, as successor by merger
to SunTrust Bank, South Florida, National Association, a national banking
association ("SunTrust"), and the other banks and lending institutions that are
signatories to this Agreement or that hereafter become "Lenders" as provided
herein (SunTrust and such other banks and lending institutions, individually a
"Lender" and collectively, the "Lenders"), SunTrust in its capacity as
Administrative Agent for the Lenders (the "Administrative Agent"), as Issuing
Bank (the "Issuing Bank"), and as Swing Line Lender (the "Swing Line Lender"),
Heller Financial, Inc., a Delaware corporation, in its capacity as Syndication
Agent (the "Syndication Agent"), and BNP Paribas, a French banking organization
acting through its New York branch, in its capacity as Documentation Agent (the
"Documentation Agent").
W I T N E S S E T H :
-------------------
WHEREAS, the Company, the Administrative Agent and certain lenders
signatory thereto entered into that certain Amended and Restated Revolving
Credit Agreement, dated as of May 4, 1999, as amended by that certain First
Amendment to Amended and Restated Revolving Credit Agreement dated as of June
16, 1999, as amended by that certain Second Amendment and Waiver to Amended and
Restated Revolving Credit Agreement dated as of February 7, 2000, as amended by
that certain Third Amendment to Amended and Restated Revolving Credit Agreement
dated as of May 12, 2000, as amended by that certain Fourth Amendment to Amended
and Restated Revolving Credit Agreement dated as of September 28, 2000, and as
amended by that certain Fifth Amendment to Amended and Restated Revolving Credit
Agreement dated as of December 5, 2000 (the "Original Credit Agreement");
WHEREAS, certain financial institutions not parties to the Original
Credit Agreement (the "New Lenders") are willing to become Lenders hereunder and
to provide a portion of such revolving credit facility;
WHEREAS, the Company has requested, and the Lenders have agreed to
amend and restate the Original Credit Agreement to make certain amendments on
the terms and subject to the conditions set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. In addition to the other terms defined
herein, the following terms used herein shall have the meanings herein specified
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Additional Guarantor" shall have the meaning assigned to such term
in Section 5.14(a).
"Administrative Agent" shall have the meaning set forth in the first
paragraph of this Agreement.
"Advance" shall mean any advance by a Lender under the Commitments.
"Administrative Agent Fee" shall mean the administrative fee
described in the fee letter, payable on the Closing Date and thereafter
annually in advance to the Administrative Agent during the period prior to
the Commitment Termination Date.
"Affiliate" shall mean, with respect to any Person, any other Person
(including all directors and officers of such Person) that, directly or
indirectly through one or more intermediaries, controls or is controlled
by, or is under common control with, such first Person. A Person shall be
deemed to control another Person if such first Person possesses, directly
or indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" shall mean the Administrative Agent, the Syndication Agent
and the Documentation Agent.
"Agreement" shall mean this Second Amended and Restated Revolving
Credit Agreement, either as originally executed or as hereafter amended,
restated, renewed, extended, supplemented or otherwise modified from time
to time.
"Annualized EBITDA" shall mean (i) for the quarter ending September
30, 2001, EBITDA for the fiscal quarter ending on the last day of such
quarter multiplied by four; (ii) for the quarter ending December 31, 2001,
the sum of (a) EBITDA for the fiscal quarter ending on the last day of
such quarter plus (b) EBITDA for the fiscal quarter ending on the last day
of September 30, 2001, multiplied by two; (iii) for the quarter ending
March 31, 2002, the sum of (a) EBITDA for the fiscal quarter ending on the
last day of such quarter plus (b) EBITDA for the fiscal quarter ending on
the last day of December 31, 2001 plus (c) EBITDA for the fiscal quarter
ending on the last day of September 30, 2001, divided by three and then
multiplied by four; and (iv) for the quarter ending June 30, 2002 and
thereafter, EBITDA for the four preceding fiscal quarters ending on the
last day of such quarter; provided, however, to EBITDA for the quarter
ending September 30, 2001, while that quarter is used in the Annualized
EBITDA calculation for such quarter and each subsequent quarter, shall be
2
added non-recurring charges associated with the amortization of remaining
loan fees and any waiver fees and any termination cost associated with the
Company's current interest rate protection agreement during such quarter
in the amount of $1,600,000.00.
"Annualized Interest Expense" shall mean (i) for the quarter ending
September 30, 2001, Interest Expense for the fiscal quarter ending on the
last day of such quarter multiplied by four; (ii) for the quarter ending
December 31, 2001, the sum of (a) Interest Expense for the fiscal quarter
ending on the last day of such quarter plus (b) Interest Expense for the
fiscal quarter ending on the last day of September 30, 2001, multiplied by
two; (iii) for the quarter ending March 31, 2002, the sum of (a) Interest
Expense for the fiscal quarter ending on the last day of such quarter plus
(b) Interest Expense for the fiscal quarter ending on the last day of
December 31, 2001 plus (c) Interest Expense for the fiscal quarter ending
on the last day of September 30, 2001, divided by three and then
multiplied by four; and (iv) for the quarter ending June 30, 2002 and
thereafter, Interest Expense for the four preceding fiscal quarters ending
on the last day of such quarter.
"Applicable Commitment Fee Percentage" shall mean the percentage
designated below based on the Company's Total Debt Coverage Ratio for each
fiscal quarter-end, as indicated below:
Total Debt Coverage Ratio Applicable Commitment
Fee Percentage
Less than 2.50:1.0 0.375%
Greater than or equal to 2.50:1.0 and less than 3.00:1.0 0.375%
Greater than or equal to 3.00:1.0 and less than 3.50:1.0 0.50%
Greater than or equal to 3.50:1.0 and less than 4.00:1.0 0.50%
Greater than or equal to 4.00:1.0 0.50%
Each change in the Applicable Commitment Fee Percentage resulting from a
change in the Total Debt Coverage Ratio shall be effective on the first
Business Day immediately following the date of delivery to the
Administrative Agent of the annual financial statements required under
Section 5.03(a)(i), or the quarterly financial statements for each Fiscal
Quarter required under Section 5.03(a)(ii), as applicable, in each case
together with the Compliance Certificate required by Section 5.03(a)(ii),
indicating such change; provided, however, from the Closing Date through
and including March 31, 2002, the Applicable Commitment Fee Percentage
shall be 0.50%; provided, further, at any time any Default under Section
8.01(a), (j) or (k) or Event of Default has occurred and is continuing,
the Applicable Commitment Fee Percentage shall be 0.50%.
"Applicable Law" shall mean, anything in Section 10.05
notwithstanding, (i) all applicable common law and principles of equity
and (ii) all applicable provisions of all (a) constitutions, statutes,
3
rules, regulations and orders of governmental bodies, (b) Governmental
Approvals, and (c) orders, decisions, judgments and decrees of all courts
and arbitrators.
"Applicable Margin" shall mean the percentage designated below based
on the Company's Total Debt Coverage Ratio for each fiscal quarter-end, as
indicated below:
Total Debt Coverage Ratio Applicable Margin Applicable Margin
(LIBOR Advance) (Base Rate Advance)
Less than 2.50:1.0 2.50% 1.50%
Greater than or equal to 2.50:1.0
and less than 3.00:1.0 2.75% 1.75%
Greater than or equal to 3.00:1.0
and less than 3.50:1.0 3.00% 2.00%
Greater than or equal to 3.50:1.0
and less than 4.00:1.0 3.25% 2.25%
Greater than or equal to 4.00:1.0 3.50% 2.50%
Each change in the Applicable Margin resulting from a change in the Total
Debt Coverage Ratio shall be effective on the first Business Day
immediately following the date of delivery to the Administrative Agent of
the annual financial statements required under Section 5.03(a)(i), or the
quarterly financial statements for each Fiscal Quarter required under
Section 5.03(a)(ii), as applicable, in each case together with the
Compliance Certificate required by Section 5.03(a)(ii), indicating such
change; provided, however, that for the period commencing on the Closing
Date through and including March 31, 2002, the Applicable Margin on LIBOR
Advances and Base Rate Advances shall be 3.50% and 2.50%, respectively.
Notwithstanding the foregoing and subject to Section 2.23, at any time
during which the Company has failed to deliver such financial statements
and certificates when required by Sections 5.03(a)(i) and 5.03(a)(ii), as
applicable, the Applicable Margin shall be increased by 2% per annum,
until such time as the delinquent financial statements are delivered, at
which time the Applicable Margin shall be reset as provided above.
"Asset Value" shall mean, with respect to any property or asset of
the Company or any of its Subsidiaries as of any particular date, an
amount equal to the then book value of such property or asset as
established in accordance with GAAP.
"Assignment Agreement" shall mean an agreement in the form of
Exhibit I.
"Assignment of Leases" shall mean that certain Assignment of Leases
agreement, dated as of October 31, 1997, executed by the Company and each
Subsidiary in favor of the Administrative Agent, assigning the Company's
and each Subsidiary's lessee's interest in any leasehold (except those
leaseholds whose terms prohibit assignments), as the same may be hereafter
amended, restated, renewed, extended, supplemented or otherwise modified
from time to time.
4
"Availability" shall mean, with respect to any Commitment, at any
time, the amount by which such Commitment exceeds all Advances outstanding
under such Commitment.
"Bankruptcy Law" shall mean laws governing bankruptcy, suspension of
payments, reorganization, arrangement, adjustment of debts, relief of
debtors, dissolution, or other similar laws relating to the enforcement of
creditors' rights generally.
"Base Rate" shall mean the higher of (i) the rate which SunTrust
designates from time to time as its prime lending rate, as in effect from
time to time, and (ii) the Federal Funds Rate, as in effect from time to
time, plus one-half of one percent (0.50%) per annum (any changes in such
rates to be effective as of the date of any change in such rate). The
SunTrust prime lending rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer.
SunTrust may make commercial loans or other loans at rates of interest at,
above, or below the SunTrust prime lending rate.
"Base Rate Advance" shall mean any Advance made to the Company by
the Lenders at an interest rate equal to the Base Rate plus the Applicable
Margin for such Advance.
"Borrowing" shall mean a borrowing under the Commitments consisting
of simultaneous Advances by the Lenders, including Swing Line Borrowings.
"Business Day" shall mean a day of the year other than Saturday,
Sunday or any other day on which the Administrative Agent is required to
close.
"Capital Expenditures" shall mean, for any period, expenditures made
by the Company and its Subsidiaries to acquire or construct fixed assets,
property, plant, and equipment (including renewals, improvements and
replacements, but excluding repairs) and customer accounts during such
period computed in accordance with GAAP.
"Capital Stock" means all shares of capital stock of or in a Person,
whether voting or non-voting, and including, without limitation, common
stock, preferred stock and options or warrants to purchase or otherwise
acquire any such capital stock.
"CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act (42 U.S.C. ss. 9601 et seq.).
"Change in Control" shall mean the occurrence of one or more of the
following events: (a) any sale, lease, exchange or other transfer (in a
single transaction or a series of related transactions) of all or
substantially all of the assets of the Company to any Person or "group"
(within the meaning of the Exchange Act and the rules of the Securities
and Exchange Commission thereunder in effect on the date hereof), (b) the
acquisition of ownership, directly or indirectly, beneficially or of
record, by any Person or "group" (within the meaning of the Exchange Act
and the rules of the Securities and Exchange Commission thereunder as in
effect on the date hereof) of 40% or more of the outstanding shares of the
5
voting stock of the Company; (c) occupation of a majority of the seats
(other than vacant seats) on the board of directors of the Company by
Persons who were neither (i) nominated by the current board of directors
or (ii) appointed by directors so nominated, or (d) a "change in control"
under any Subordinated Debt.
"Closing Date" shall mean September 24, 2001.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and the rulings issued
thereunder.
"Collateral" shall mean all real and personal property and assets,
including, without limitation, all intangible property, now or hereafter
existing, of the Company and its Subsidiaries over which the Company or
such Subsidiary has granted a Lien to the Administrative Agent pursuant to
the Security Documents, and all proceeds and products thereof.
"Commitments" shall mean, collectively, the Revolving Loan
Commitments, the Letter of Credit Subcommitment and the Swing Line
Subcommitment.
"Commitment Fee" shall have the meaning set forth in Section
2.16(b).
"Commitment Termination Date" shall have the meaning set forth in
Section 2.01.
"Company" shall have the meaning set forth in the first paragraph of
this Agreement.
"Company Pledge Agreement" shall mean that certain Stock and Notes
Pledge Agreement (Company), dated as of October 31, 1997, executed by the
Company in favor of the Administrative Agent, as amended by that certain
First Amendment to Stock and Notes Pledge Agreement (Company), dated as of
May 4, 1999, as amended by that certain Second Amendment to Stock and
Notes Pledge Agreement (Company), dated as of the Closing Date, and as
hereafter amended, restated, supplemented or otherwise modified from time
to time.
"Company Security Agreement" shall mean that certain Amended and
Restated Security Agreement (Company), dated as of the Closing Date, and
as hereafter amended, restated, supplemented or otherwise modified from
time to time.
"Company Trademark Security Agreement" shall mean that certain
Trademark Security Agreement (Company), dated as of October 31, 1997,
executed by the Company in favor of the Administrative Agent, as amended
by the First Amendment to Trademark Security Agreement (Company), dated as
of May 4, 1999, as amended by that certain Second Amendment to Trademark
Security Agreement (Company), dated as of the Closing Date, and as
hereafter amended, restated, supplemented or otherwise modified from time
to time.
"Compliance Certificate" shall have the meaning set forth in Section
5.03(a)(ii).
6
"Consolidated Companies" shall mean, collectively, the Company and
all of its Subsidiaries.
"Consolidated Net Income (Loss)" shall mean, for any fiscal period
of the Company, the net income (or loss) of the Company and its
Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, but excluding therefrom (to the extent otherwise
included therein) (i) any extraordinary gains or losses, (ii) any gains
attributable to write-ups of assets and (iii) any equity interest of the
Company or any Subsidiary of the Company in the unremitted earnings of any
Person that is not a Subsidiary and (iv) any income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary or is merged into
or consolidated with the Company or any Subsidiary or the date that such
Person's assets are aquired by the Company or any Subsidiary.
"Consolidated Net Worth" shall mean, as of the date of
determination, the total shareholders' equity of the Company and its
Subsidiaries, determined in accordance with GAAP.
"Contractual Obligations" of any Person shall mean any provision of
any security issued by such Person or of any agreement, instrument or
undertaking under which such Person is obligated or by which it or any of
its property is bound.
"Contribution Agreement" shall mean that certain Amended and
Restated Contribution Agreement, dated as of May 4, 1999, as amended by
that certain First Amendment to Amended and Restated Contribution
Agreement, dated as of the Closing Date, executed by the Company and each
of the Guarantors, a copy of which is attached hereto as Exhibit E
attached hereto, as hereafter amended, restated, supplemented or otherwise
modified from time to time.
"Debt Service Coverage Ratio" shall mean, for any fiscal period of
the Company and its Subsidiaries on a consolidated basis, as of any date
of determination, the ratio of (a) Annualized EBITDA for the fiscal period
ending on the last day of such period, to (b) the sum of (x) Annualized
Interest Expense for the fiscal period ending on the last day of such
period plus (y) one-seventh (1/7) of the then outstanding balance of
Senior Debt.
"Default" shall mean any event that, with the giving of notice, or
lapse of time, or both, would constitute an Event of Default.
"Documentation Agent" shall have the meaning set forth in the first
paragraph of this Agreement.
"EBITDA" shall mean, for the Company and its Subsidiaries for any
period, an amount equal to the sum of (a) Consolidated Net Income (Loss)
for such period PLUS (b) to the extent deducted in determining
Consolidated Net Income (Loss) for such period, (i) Interest Expense, (ii)
income tax expense, and (iii) depreciation and amortization, determined on
a consolidated basis in accordance with GAAP in each case for such period.
7
"Environmental Indemnity" shall mean that certain Environmental
Indemnity Agreement, dated as of the Closing Date, executed by the Company
in favor of Administrative Agent on behalf of the Lenders, as amended,
restated, modified or otherwise supplemented.
"Environmental Laws" shall mean all federal, state, local and
foreign statutes and codes or regulations, rules or ordinances issued,
promulgated, or approved thereunder, now or hereafter in effect
(including, without limitation, those with respect to asbestos or asbestos
containing material or exposure to asbestos or asbestos containing
material), relating to pollution or protection of the environment and
relating to public health and safety, relating to (i) emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or industrial toxic or hazardous constituents, substances or
wastes, including without limitation, any Hazardous Substance (as such
term is defined under CERCLA), petroleum including crude oil or any
fraction thereof, any petroleum product or other waste, chemicals or
substances regulated by any Environmental Law into the environment
(including without limitation, ambient air, surface water, ground water,
land surface or subsurface strata), or (ii) the manufacture, processing,
distribution, use, generation, treatment, storage, disposal, transport or
handling of any Hazardous Substance (as such term is defined under
CERCLA), petroleum including crude oil or any fraction thereof, any
petroleum product or other waste, chemicals or substances regulated by any
Environmental Law, and (iii) underground storage tanks and related piping,
and emissions, discharges and releases or threatened releases therefrom,
such Environmental Laws to include, without limitation (i) the Clean Air
Act (42 U.S.C.ss. 7401 et seq.), (ii) the Clean Water Act (33 U.S.C.ss.
1251 et seq.), (iii) the Resource Conservation and Recovery Act (42
U.S.C.ss. 6901 et seq.), (iv) the Toxic Substances Control Act (15
U.S.C.ss.2601 et seq.) and (v) CERCLA.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974 and all rules and regulations promulgated pursuant thereto, as the
same may from time to time be supplemented or amended.
"ERISA Affiliate" shall mean any trade or business (whether
incorporated or unincorporated) which together with the Company is treated
as a single employer under Section 414(b), (c), (m) or (o) of the Code.
"Event of Default" shall have the meaning set forth in Article VIII.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute thereto.
"Executive Officer" shall mean each of the executive officers of the
Company and any Person hereafter holding the following office or offices
which, individually or collectively, are assigned substantially similar
duties: Chief Executive Officer, President and Chief Financial Officer.
"Facilities" shall mean, collectively, the Commitments described
hereunder.
8
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers,
as published for such day (or, if such day is not a Business Day, for the
next preceding Business Day) by the Federal Reserve Bank of Atlanta, or,
if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by
the Administrative Agent from three Federal funds brokers of recognized
standing selected by it.
"Fees" shall mean, collectively, the Administrative Agent Fee and
the Letter of Credit Fee.
"Fiscal Quarter" shall mean a fiscal quarter of the Company with
each such fiscal quarter ending on each March 31, June 30, September 30,
and December 31.
"Fiscal Year" shall mean a fiscal year of the Company; references to
a Fiscal Year with a number corresponding to any calendar year (e.g., the
"Fiscal Year 2001") refers to the Fiscal Year ending during such calendar
year with each such fiscal year ending on June 30.
"Foreign Plan" shall mean any pension, profit sharing, deferred
compensation, or other employee benefit plan, program or arrangement
maintained by any foreign subsidiary which, under applicable local law, is
required to be funded through a trust or other funding vehicle.
"GAAP" shall mean generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a significant
segment of the accounting profession in the United States of America,
which are applicable to the circumstances as of the date of determination;
provided, that for purposes of determining compliance with the financial
covenant levels in Article VII, such levels shall be determined on the
basis of GAAP in effect as of June 30, 2001.
"Governmental Approval" shall mean any order, permission,
authorization, consent, approval, license, franchise, permit or validation
of, exemption by, registration or filing with, or report or notice to, any
governmental agency or unit, or any public commission, board or authority.
"Guarantor Pledge Agreement" shall mean that certain Stock and Notes
Pledge Agreement (Guarantors), dated as of October 31, 1997, executed by
each Guarantor in favor of the Administrative Agent, as amended by that
certain First Amendment to Stock and Notes Pledge Agreement (Guarantors),
9
dated as of May 4, 1999, as amended by that certain Second Amendment to
Stock and Notes Pledge Agreement (Guarantors), dated as of the Closing
Date, and as hereafter amended, restated, supplemented or otherwise
modified from time to time.
"Guarantor Security Agreement" shall mean that certain Amended and
Restated Security Agreement (Guarantors), dated as of the Closing Date,
and as hereafter amended, restated, supplemented or otherwise modified
from time to time.
"Guarantor Trademark Security Agreement" shall mean that certain
Trademark Security Agreement (Guarantors), dated as of October 31, 1997,
executed by each Guarantor in favor of the Administrative Agent, as
amended by that certain First Amendment to Trademark Security Agreement
(Guarantors), dated as of May 4, 1999, as amended by that certain Second
Amendment to Trademark Security Agreement (Guarantors), dated as of the
Closing Date, and as hereafter amended, restated, supplemented or
otherwise modified from time to time.
"Guarantors" shall mean, collectively, each Subsidiary of the
Company that has executed a Guaranty Agreement as of the Closing Date,
together with all other Subsidiaries that hereafter execute a Guaranty
Agreement, and their respective successors and permitted assigns.
"Guarantor" shall mean any of the Guarantors.
"Guaranty Agreement" shall mean that certain Amended and Restated
Guaranty Agreement, dated as of May 4, 1999, as amended by that certain
First Amendment to Amended and Restated Guaranty Agreement dated as of the
Closing Date, executed by each of the Guarantors in favor of the Lenders
and the Administrative Agent, substantially in the form of Exhibit D
attached hereto, as hereafter amended, restated, supplemented or otherwise
modified from time to time.
"Guaranty Documents" shall mean, collectively, the Guaranty
Agreement, and each other guaranty agreement, mortgage, deed of trust,
assignment of lease, security agreement, pledge agreement, or other
security or collateral document guaranteeing or securing the Obligations,
as the same may be amended, restated, or supplemented from time to time,
and the Contribution Agreement executed by each of the Guarantors, as the
same may be amended, restated or supplemented from time to time.
"Guaranty Obligations" shall mean the obligation of the Guarantors
to the Lenders and the Administrative Agent, as set forth in the Guaranty
Agreement.
"Hazardous Substance" shall have the meaning assigned to that term
in CERCLA.
"Indebtedness" of any person shall mean, without duplication, (i)
obligations of such person for borrowed money, (ii) obligations of such
person evidenced by bonds, debentures, notes or other similar instruments,
(iii) obligations of such person in respect of the deferred purchase price
of property or services (other than trade payables incurred in the
ordinary course of business on terms customary in the trade), (iv)
obligations of such person under any conditional sale or other title
retention agreement(s) relating to property acquired by such person, (v)
capitalized lease obligations of such person, (vi) obligations, contingent
or otherwise, of such person in respect of letters of credit, acceptances
or similar extensions of credit, (vii) all indebtedness of a third party
10
secured by any lien on property owned by such person, whether or not such
indebtedness has been assumed by such person, (viii) all obligations of
such person, contingent or otherwise, to purchase, redeem, retire or
otherwise acquire for value any common stock of such person, (ix)
off-balance sheet liability retained in connection with asset
securitization programs, synthetic leases, sale and leaseback transactions
or other similar obligations arising with respect to any other transaction
which is the functional equivalent of or takes the place of borrowing but
which does not constitute a liability on the consolidated balance sheet of
such person and its subsidiaries, (x) obligations under any interest rate
hedge agreement or foreign exchange agreement, and (xi) guaranties by such
person of the type of indebtedness described in clauses (i) through (x)
above.
"Interest Expense" shall mean, for any fiscal period of the Company,
total cash interest expense (including, without limitation, interest
expense attributable to capitalized leases in accordance with GAAP during
such period (whether or not actually paid during such period)) plus the
net amount payable (or minus the net amount receivable) under hedging
agreements during such period (whether or not actually paid during such
period) of the Company and its Subsidiaries, on a consolidated basis.
"Interest Period" shall mean (i) as to any LIBOR Advance, the
interest period selected by the Company pursuant to Section 2.18(a), and
with respect to a Swing Line Loan, a period of such duration not to exceed
thirty (30) days, as the Company may request and the Swing Line Lender may
agree in accordance with Section 2.03.
"Investment" shall mean, when used with respect to any Person, any
direct or indirect advance, loan or other extension of credit (other than
the creation of receivables in the ordinary course of business) or capital
contribution by such Person (by means of transfers of property to others
or payments for property or services for the account or use of others, or
otherwise) to any Person, or any direct or indirect purchase or other
acquisition by such Person of, or of a beneficial interest in, capital
stock, partnership interests, bonds, notes, debentures or other securities
or equity interests issued by any other Person.
"Issuing Bank" shall have the meaning set forth in the first
paragraph of this Agreement.
"Lenders" shall have the meaning set forth in the first paragraph of
this Agreement.
"Lending Office" shall mean, for each Lender, the office such Lender
may designate in writing from time to time to the Company and the
Administrative Agent with respect to Base Rate Advances and LIBOR
Advances.
"Letter of Credit Fee" shall have the meaning set forth in Section
2.16(c).
"Letter of Credit Obligations" shall mean, with respect to Letters
of Credit, as at any date of determination, the sum of (a) the maximum
aggregate amount which at such date of determination is available to be
drawn by the beneficiaries thereof (assuming the conditions for drawing
thereunder have been met) under all Letters of Credit then outstanding,
11
plus (b) the aggregate amount of all drawings under Letters of Credit
honored by the Administrative Agent not theretofore reimbursed by the
Company.
"Letter of Credit Subcommitment" shall mean $2,000,000.
"Letters of Credit" shall mean the letters of credit issued pursuant
to Section 2.04 hereof by the Administrative Agent for the account of the
Company pursuant to the Letter of Credit Subcommitment of the Revolving
Loan Commitments.
"LIBOR" shall mean, for any Interest Period, the offered rates for
deposits in U.S. dollars for a period comparable to the Interest Period
appearing on the Telerate Screen Page 3750, as of 11:00 a.m., London time,
on the day that is two London banking days prior to the Interest Period.
If at least two such rates appear on the Telerate Screen Page 3750, the
rate for that Interest Period will be the arithmetic mean of such rates,
and in either case as such rates may be adjusted for any applicable
reserve requirements.
"LIBOR Advance" shall mean any advance made to the Company by the
Lenders at an interest rate equal to LIBOR plus the Applicable Margin for
such Advance.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien, assignment or charge of any kind or description and
shall include, without limitation, any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof including any lease or similar arrangement
with a public authority executed in connection with the issuance of
industrial development revenue bonds or pollution control revenue bonds,
and the filing of or agreement to give any financing statement under the
Uniform Commercial Code (or comparable law) of any jurisdiction naming the
owner of the asset to which such lien applies as a debtor (other than a
filing which does not evidence an outstanding secured obligation, or a
commitment to make advances or to incur any other obligation of any kind).
"Loan Documents" shall mean this Agreement, each Exhibit and
Schedule to this Agreement, the Notes, the Guaranty Documents, the
Security Documents, the Letters of Credit, and each other document,
instrument, certificate and opinion executed and delivered in connection
with the foregoing, each as amended, restated, supplemented or otherwise
modified from time to time as provided in Section 10.02.
"Margin Regulations" shall mean Regulation T, Regulation U and
Regulation X of the Board of Governors of the Federal Reserve System, as
the same may be in effect from time to time.
"Material Contract" shall mean any contract or other agreement,
written or oral, of the Company or its Subsidiaries the failure to comply
with which could reasonably be expected to have a Materially Adverse
Effect.
"Materially Adverse Effect" shall mean a materially adverse change
in the operations, business, property or assets of, or in the condition
(financial or otherwise) or prospects of, the Company and its
Subsidiaries, taken as a whole; provided, however, that realization of the
12
costs and charges taken by the Company for the Fiscal Quarter ending June
30, 2001 in the amount of $7,600,000.00 shall not be considered a material
adverse change; provided, further, that realization of the costs and
charges taken by the Company for the Fiscal Quarter ending September 30,
2001 in the amount of $1,600,000.00 shall not be considered a material
adverse change.
"Maximum Permissible Rate" shall mean, with respect to interest
payable on any amount, the rate of interest on such amount that, if
exceeded, could, under Applicable Law, result in (i) civil or criminal
penalties being imposed on any Lender or (ii) any Lender being unable to
enforce payment of (or if collected, to retain) all or part of such amount
or the interest payable thereon.
"Mortgaged Property" shall mean, collectively, all parcels of real
property owned or leased by the Company or any of its Subsidiaries which
is subject to a Mortgage or which is assigned under an Assignment of
Leases.
"Mortgages" shall mean, collectively, all of the mortgages,
leasehold mortgages, deeds of trust or deeds to secure debt hereafter
executed in favor of the Administrative Agent by the Company or any
Subsidiary, as the same may be hereafter amended, restated, renewed,
extended, supplemented or otherwise modified from time to time.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA as to which the Company, any Subsidiary or any
ERISA Affiliate is obligated to make, has made, or will be obligated to
make contributions on behalf of participants who are or were employed by
any of them.
"Notes" shall mean, collectively, the Revolving Notes and the Swing
Line Note.
"Notice of Borrowing" shall have the meaning set forth in Section
2.02(a) hereof.
"Notice of Interest Rate Conversion" shall have the meaning set
forth in Section 2.02(b) hereof.
"Obligations" shall mean all amounts owing to any Agent or any
Lender pursuant to the terms of this Agreement or any other Loan Document,
including without limitation, all Advances (including all principal and
interest payments due thereunder), Letter of Credit Obligations, Fees,
expenses, indemnification and reimbursement payments, indebtedness,
liabilities, and obligations of the Company and its Subsidiaries,
covenants and duties of the Company to the Lenders and the Agents of every
kind, nature and description, direct or indirect, absolute or contingent,
due or not due, in contract or tort, liquidated or unliquidated, arising
under this Agreement or under the other Loan Documents, by operation of
law or otherwise, now existing or hereafter arising or whether or not for
the payment of money or the performance or the nonperformance of any act,
including, but not limited to, all debts, liabilities and obligations
owing by the Company to others which the Lenders may have obtained by
assignment or otherwise, and all damages which the Company may owe to the
Lenders and the Agents by reason of any breach by the Company of any
representation, warranty, covenant, agreement or other provision of this
Agreement or of any other Loan Document.
13
"Original Credit Agreement" shall have the meaning set forth in the
first recital.
"Other Claims" shall have the meaning set forth in Section 5.08
hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"Person" shall mean an individual, corporation, partnership, trust,
limited liability company or unincorporated organization, a government or
any agency or political subdivision thereof.
"Plan" shall mean any employee benefit plan, program, arrangement,
practice or contract, maintained by or on behalf of the Company or an
ERISA Affiliate, which provides benefits or compensation to or on behalf
of employees or former employees, whether formal or informal, whether or
not written, including but not limited to the following types of plans:
(i) Executive Arrangements - any bonus, incentive compensation,
stock option, deferred compensation, commission, severance, "golden
parachute", "rabbi trust", or other executive compensation plan, program,
contract, arrangement or practice;
(ii) ERISA Plans - any "employee benefit plan" as defined in ERISA,
including, but not limited to, any defined benefit pension plan, profit
sharing plan, money purchase pension plan, savings or thrift plan, stock
bonus plan, employee stock ownership plan, Multiemployer Plan, or any
plan, fund, program, arrangement or practice providing for medical
(including post-retirement medical), hospitalization, accident, sickness,
disability, or life insurance benefits;
(iii) Other Employee Fringe Benefits - any stock purchase, vacation,
scholarship, day care, prepaid legal services, severance pay or other
fringe benefit plan, program, arrangement, contract or practice.
"Preferred Stock" shall mean (i) 5,000 shares of 8% cumulative
convertible preferred stock, no par value, of the Company, (ii) up to
2,500 shares of 8% cumulative convertible preferred stock, no par value,
of the Company to be issued to BNP Paribas or any Affiliate thereof and
(iii) such other preferred stock issued by the Company in form and
substance satisfactory to the Required Lenders.
"Pro Rata Share" shall mean, for any Lender, the proportion
expressed as a percentage equal to (1) the sum of such Lender's portion of
the Total Commitments (including, without duplication, any portion of the
Total Commitments in which such Lender has purchased a participation and
excluding, without duplication, any portion of the Total Commitments in
which such Lender has sold a participation), divided by (2) the sum of the
Total Commitments.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time, and any
regulation successor thereto.
14
"Related Parties" shall mean, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers,
employees, agents and advisors of such Person and such Person's
Affiliates.
"Required Lenders" shall mean Lenders whose combined Pro Rata Shares
of the Total Commitments are at least sixty-six and two-thirds percent (66
2/3%) of the Total Commitments.
"Revolving Loan Commitments" shall mean, for any Lender at any time,
the revolving credit facility severally established by such Lender in
favor of the Company pursuant to Section 2.01, as limited to the
Subcommitment Amount established pursuant to Section 2.01(d), as the same
may be increased pursuant to Section 2.01(b), as the same may be increased
or decreased from time to time as a result of any reduction thereof
pursuant to Section 2.12, any assignment thereof pursuant to Section
10.08, or any amendment thereof pursuant to Section 10.02.
"Revolving Loans" shall mean, collectively, the loans made to the
Company by the Lenders pursuant to Section 2.01.
"Revolving Note" shall mean a promissory note of the Company payable
to the order of any Lender in substantially the form of Exhibit A hereto,
evidencing the maximum aggregate principal indebtedness of the Company to
such Lender under such Lender's Revolving Loan Commitment, either as
originally executed or as it may be from time to time supplemented,
modified, amended, renewed or extended.
"Security Documents" shall mean, collectively, the Mortgages, the
Assignment of Leases, the Company Pledge Agreement, the Company Security
Agreement, the Company Trademark Security Agreement, the Guarantor Pledge
Agreement, the Guarantor Security Agreement, the Guarantor Trademark
Security Agreement, all UCC financing statements and fixture filings
naming the Company or any of its Subsidiaries as debtor and the
Administrative Agent as secured party, all stock certificates evidencing
shares of stock pledged to the Administrative Agent, together with undated
stock powers or other appropriate instruments of transfer executed in
blank, and all filings in the U.S. Patent and Trademark Office which are
required to be made under the Loan Documents.
"Senior Debt" shall mean, at any time, Total Debt minus the
aggregate principal amount of all Subordinated Debt.
"Senior Debt Coverage Ratio" shall mean, as of any date of
determination with respect to the Company, the ratio of (a) Senior Debt as
of such date of determination to (b) Annualized EBITDA measured as at the
Fiscal Quarter ending on such date of determination, or if such date of
determination is not the last day of any Fiscal Quarter, then ending
immediately prior to such date of determination.
"Senior Subordinated Debt" shall mean the senior Subordinated Debt
in respect of the 12% Senior Subordinated Notes issued pursuant to the
Senior Subordinated Note Purchase Agreement.
15
"Senior Subordinated Note Purchase Agreement" shall mean that
certain Senior Subordinated Note Purchase Agreement, dated as of October
31, 1997, between the Company and the Guarantors and the Investors listed
therein, as amended by that certain Amendment No. 1 to Senior Subordinated
Note Purchase Agreement dated as of November 14, 1997, as further amended
by that certain Amendment No. 2 to Senior Subordinated Note Purchase
Agreement, dated as of June 30, 1998, as further amended by that certain
Amendment No. 3 to Senior Subordinated Note Purchase Agreement, dated as
of May 4, 1999, as further amended by that certain Amendment No. 4 to
Senior Subordinated Note Purchase Agreement, dated as of January 14, 2000,
as further amended by that certain Amendment No. 5 to Senior Subordinated
Note Purchase Agreement, dated as of May 12, 2000, as further amended by
that certain Amendment No. 6 to Senior Subordinated Note Purchase
Agreement, dated as of December 5, 2000, as further amended by that
certain Amendment No. 7 to Senior Subordinated Note Purchase Agreement,
dated as of the Closing Date, and as hereafter amended and in effect from
time to time (subject, in the case of any amendment or modification
entered into after the date hereof, to the consent of the Required Lenders
to the extent required by Section 6.14).
"Stock" shall mean (a) with respect to any Person that is a
corporation, any and all shares, interests or equivalents in capital stock
(whether voting or nonvoting, and whether common or preferred) of such
corporation, and (b) with respect to any Person that is not a corporation,
any and all partnership, membership, limited liability company or other
equity interests of such Person; and in each case, any and all warrants,
rights, or options to purchase any of the foregoing.
"Subordinated Debt" shall mean all Indebtedness of the Company and
each of its Subsidiaries subordinated to all obligations of the Company or
such Subsidiary, as the case may be, arising under this Agreement and the
other Loan Documents to which it is a party, including but not limited to
the Senior Subordinated Debt.
"Subordinated Notes" shall mean a promissory note of the Company
payable to the order of the investors signatory to the Senior Subordinated
Note Purchase Agreement, evidencing the maximum aggregate principal
indebtedness of the Company to such investor, either as originally
executed or as it may be from time to time supplemented, modified,
amended, renewed or extended.
"Subsidiary" of any Person shall mean any corporation, partnership
or other Person of which a majority of all the outstanding capital stock
(including director's qualifying shares) or other securities or ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions is, at the time as
of which any such determination is being made, directly or indirectly
owned by such Person, or by one or more of the Subsidiaries of such
Person, and which corporation, partnership or other Person is consolidated
with such Person for financial reporting purposes. Unless otherwise
specified, "Subsidiaries" and "Subsidiary" shall mean the Subsidiaries and
a Subsidiary, respectively, of the Company.
16
"SunTrust" shall have the meaning set forth in the first paragraph
of this Agreement.
"Supplemental Documents" shall mean the supplements to the following
documents: the Guaranty Agreement, the Contribution Agreement, the
Guarantor Security Agreement, the Guarantor Pledge Agreement and the
Guarantor Trademark Security Agreement, as such supplements are more
specifically described and shown in each respective document.
"Swing Line" shall have the meaning assigned to such term in Section
2.03(a).
"Swing Line Advance" shall mean a Borrowing pursuant to Section 2.03
consisting of a Swing Line Loan made by the Swing Line Lender to the
Company at an interest rate equal to the Swing Line Rate.
"Swing Line Borrowing" shall mean a Borrowing consisting or to
consist of a Swing Line Advance.
"Swing Line Borrowing Notice" shall mean the notice given by the
Company to the Swing Line Lender requesting a Swing Line Advance as
provided in Section 2.03(b).
"Swing Line Lender" shall have the meaning set forth in the first
paragraph of this Agreement.
"Swing Line Loans" shall mean, collectively, the loans made to the
Company by the Swing Line Lender pursuant to Section 2.03.
"Swing Line Note" shall mean the promissory note evidencing the
Swing Line Loans substantially in the form of Exhibit B and duly completed
in accordance with the terms hereof.
"Swing Line Subcommitment" shall mean the commitment of the Swing
Line Lender to make Swing Line Loans in an aggregate principal amount at
any time outstanding not to exceed $2,000,000.
"Swing Line Rate" shall have the meaning set forth in Section
2.17(c).
"Swing Line Rate Advance" shall mean an Advance made or outstanding
as a Swing Line Loan bearing interest based on the Swing Line Rate as
provided in Section 2.17(c).
"Swing Line Rate Quote" shall mean an offer by the Swing Line Lender
to make a Swing Line Loan to the Company at the Swing Line Rate specified
therein for the interest period to be applicable to the Swing Line Loan as
specified therein, pursuant to Section 2.03(b).
"Syndication Agent" shall have the meaning set forth in the first
paragraph of this Agreement.
17
"Tax" shall mean, with respect to any person or entity, any federal,
state or foreign tax, assessment, customs duties, or other governmental
charge, levy or assessment (including any withholding tax) upon such
person or entity or upon such person's or entity's assets, revenues,
income or profits, other than income and franchise taxes imposed upon any
Lender by the jurisdictions (or any political subdivision thereof) in
which such Lender has its principal office or office from which its
Advances are made, or in which such Lender is incorporated.
"Total Debt" shall mean, at any time, all then currently outstanding
obligations, liabilities and indebtedness of the Company and its
Subsidiaries on a consolidated basis of the types described in the
definition of INDEBTEDNESS (other than as described in subsection (x)
thereof), including, but not limited to, all Revolving Loans, Swing Line
Loans and Letter of Credit Obligations under the Loan Documents.
"Total Debt Coverage Ratio" shall mean, as of any date of
determination with respect to the Company, the ratio of (a) Total Debt as
of such date of determination to (b) Annualized EBITDA measured as at the
Fiscal Quarter ending on such date of determination, or if such date of
determination is not the last day of any Fiscal Quarter, then ending
immediately prior to such date of determination
"Total Commitments" shall mean, at any time, the sum of the
Revolving Loan Commitments, including the Letter of Credit Subcommitment
of each of the Lenders, and in the case of the Swing Line Lender, the
Swing Line Subcommitment.
"United States" or "U.S." means the United States of America, its
fifty (50) States and the District of Columbia.
"U.S. Dollar" "Dollar" and "$" shall mean lawful money of the United
States of America.
SECTION 1.02 Calculations; Accounting Terms. Calculations of all
financial data herein shall be on a consolidated basis for the Company and all
Subsidiaries; and all accounting terms used herein shall, unless otherwise
expressly indicated, be in reference to the Company and its Subsidiaries, if
any, on a consolidated basis, which may be accounted for in accordance with the
equity investment method (to the extent such method is in accordance with GAAP),
and shall have the meanings ascribed thereto under and be interpreted in
accordance with GAAP. All calculations and determinations under Article VII
shall be made in accordance with accounting principles consistent with those
followed in the preparation of the annual or interim financial statements, as
applicable, referred to in Section 5.03.
SECTION 1.03 Other Definitional Provisions.
(a) Except as otherwise specified herein, all references herein (A)
to any Person, other than the Company or any Subsidiary, shall be deemed to
include such Person's successors, transferees and assignees, (B) to the Company
or any Subsidiary, shall be deemed to include such Person's successors, (C) to
any Applicable Law specifically defined or referred to herein shall be deemed
references to such Applicable Law as the same may be amended or supplemented
from time to time, and (D) to any contract defined or referred to herein shall
18
be deemed references to such contract (and, in the case of any instrument, any
other instrument issued in substitution therefor) as the terms thereof may have
been or may be amended, supplemented, waived or otherwise modified from time to
time.
(b) When used in this Agreement, the words "herein", "hereof" and
"hereunder" and words of similar import shall refer to this Agreement as a whole
and not to any provision of this Agreement, and "Section", "Subsection",
"Schedule" and "Exhibit" shall refer to Sections and Subsections of, and
Schedules and Exhibits to, this Agreement unless otherwise specified.
(c) Whenever the context so requires, the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
(d) All terms defined in this Agreement shall have the defined
meanings when used in any Note or, except as otherwise expressly stated therein,
any certificate, opinion or other Loan Document.
SECTION 1.04 Captions. Article and Section captions in this Agreement are
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
ARTICLE II
AMOUNT AND TERMS OF LOANS
SECTION 2.01 Revolving Loan Commitments and Revolving Notes;
Increase in Revolving Loan Commitments. (a) Subject to and upon the terms and
conditions set forth in this Agreement, (i) each of the Lenders severally
establishes until September 30, 2003 (September 30, 2003, is hereinafter
referred to as the "Commitment Termination Date") a revolving credit facility in
favor of the Company in aggregate principal at any one time outstanding not to
exceed the sum set forth opposite such Lender's name below, as the same may be
reduced from time to time pursuant to the terms hereof:
SunTrust Bank, as successor by merger to SunTrust Bank, South $20,000,000.00 33 1/3%
Florida, National Association
Heller Financial, Inc. $20,000,000.00 33 1/3%
BNP Paribas $20,000,000.00 33 1/3%
TOTAL: $60,000,000.00 100.00%
and (ii) each Lender agrees to purchase a participation interest in the Letters
of Credit in accordance with this Article II; provided, however, that in no
event may the aggregate principal amount of all outstanding Revolving Loans,
Swing Line Loans and Letter of Credit Obligations outstanding exceed at any time
the Total Commitments from time to time in effect. Within the limits of the
Revolving Loan Commitments, the Company may borrow, repay and reborrow under the
19
terms of this Agreement; provided, however, that (A) the aggregate principal
amount of each Borrowing shall not be less than $500,000 and shall be in
integral multiples of $100,000, (B) all of the Company's representations and
warranties are true and correct on and as of the date of each Borrowing, (C) the
Company may neither borrow nor reborrow should there exist a Default or an Event
of Default, or such would result from the Borrowing, and (D) the aggregate
outstanding amount of Advances and Letter of Credit Obligations, after giving
effect to each Borrowing and issuance of Letters of Credit, shall not exceed the
Total Commitments. At no time shall the number of Borrowings outstanding under
this Article II exceed seven; provided that, for the purpose of determining the
number of Borrowings outstanding, all Borrowings consisting of Base Rate
Advances shall be considered as one Borrowing. Borrowings under the Commitments
shall be made through simultaneous Advances by the Lenders, and the amount of
each such Borrowing shall be prorated among such Lenders based on the
percentages set forth above. All Advances by each Lender shall be evidenced by a
single Revolving Note payable to such Lender substantially in the form of
Exhibit A attached hereto. Each Revolving Note shall be dated as of the Closing
Date, shall be payable to the order of the respective Lender in a principal
amount equal to the amount set forth opposite such Lender's name above, shall
bear interest as provided for in this Agreement and shall mature on the
Commitment Termination Date or sooner should the principal and accrued interest
thereon be declared immediately due and payable as provided for herein. No
Lender shall have any obligation to advance funds in excess of an amount equal
to the percentage set forth opposite such Lender's name above multiplied by the
Total Commitments.
(b) So long as no Event of Default has occurred and is continuing,
the Company may, at any time by written notice to the Administrative Agent, who
shall promptly notify the Lenders, request that the Revolving Loan Commitments
be increased up to an amount not to exceed $75,000,000 (the "Requested
Commitment Amount"). No Lender (or any successor thereto) shall have any
obligation to increase its Revolving Loan Commitment or its other obligations
under this Agreement and the other Loan Documents, and any decision by a Lender
to increase its Revolving Loan Commitment shall be made in its sole discretion
independently from any other Lender.
(c) The Company shall have the right to obtain commitments from
existing Lenders or new banks or financial institutions in an aggregate amount
such that the existing Revolving Loan Commitments, plus the aggregate principal
amount of the new commitments by the Lenders or new banks or financial
institutions does not exceed the Requested Commitment Amount; provided, however,
that (1) the new banks or financial institutions must be acceptable to each
Agent, which acceptance will not be unreasonably withheld or delayed, and (2)
the new banks or financial institutions must become parties to this Agreement
pursuant to a joinder agreement in form and substance satisfactory to each
Agent, pursuant to which (x) they shall be granted all of the rights that
existing Lenders have under this Agreement and the other Loan Documents and (y)
they shall assume the same liabilities and obligations that the existing Lenders
have under this Agreement.
(d) Anything to the contrary contained herein notwithstanding, from
the period commencing with the Closing Date until such time that the Company has
received an aggregate amount of $5,000,000 (excluding the net cash proceeds of
any equity offering of Preferred Stock to BNP Paribas or any Affiliate thereof)
in any combination of (i) additional debt pursuant to Section 2.01(c) above or
20
(ii) the net cash proceeds of an equity offering of Preferred Stock or common
stock of the Company, the Company shall not be allowed to borrow more than
$57,500,000 (the "Subcommitment Amount") under the Revolving Loan Commitment and
the Lenders shall have no obligation to make Advances in excess of the
Subcommitment Amount. In the event that the Company is unable to obtain an
additional debt placement or equity infusion, at the written request of the
Company and with the consent of Lenders whose combined Pro Rata Shares of the
Total Commitments are at least seventy-five percent (75%) of the Total
Commitments, the Subcommitment Amount shall be terminated and the Company shall
be able to borrow up to the entire Revolving Loan Commitment.
SECTION 2.02 Method of Borrowing Under the Commitments.
(a) The Company shall give the Administrative Agent written or
telephonic notice (promptly confirmed in writing) of any requested Borrowing
under the Commitments, substantially in the form of Exhibit C attached hereto (a
"Notice of Borrowing"), specifying (i) the amount of the Borrowing, (ii) the
date the proposed Borrowing is to be made (which shall be a Business Day) and
(iii) that no Default or Event of Default exists, or would exist with notice or
the passing of time. Each Notice of Borrowing shall be given to the
Administrative Agent (x) in the case of Base Rate Advances, not later than 11:00
a.m. (New York, New York time) one Business Day prior to the date of such
requested Borrowing or (y) in the case of LIBOR Advances, not later than 11:00
a.m. (New York, New York time) at least three Business Days prior to the date
such requested Borrowing is to be made (which shall be a Business Day). The
Administrative Agent shall be entitled to rely on any telephonic Notice of
Borrowing which it believes in good faith to have been given by an Executive
Officer of the Company, and any Advances made by the Lenders based on such
telephonic notice shall, when deposited by the Administrative Agent to the
Company's Account No. 0128320009032 at SunTrust, be Advances for all purposes
hereunder.
(b) Whenever the Company desires to convert all or a portion of an
outstanding Borrowing consisting of Base Rate Advances into one or more
Borrowings consisting of LIBOR Advances, or to continue a Borrowing consisting
of LIBOR Advances for a new Interest Period, it shall give the Administrative
Agent written notice or telephonic notice (promptly confirmed in writing) at
least three Business Days before the date of such conversion, specifying each
such Borrowing to be converted into or continued as LIBOR Advances. Such notice
(a "Notice of Interest Rate Conversion") shall be given prior to 11:00 a.m. (New
York, New York time) on the date specified. Each such Notice of Interest Rate
Conversion shall be irrevocable and shall specify the aggregate principal amount
of the Advances to be converted or continued, the date of such conversion or
continuation and the Interest Period applicable thereto. If, upon the expiration
of any Interest Period in respect of any Borrowing, the Company shall have
failed to deliver the Notice of Interest Rate Conversion, the Company shall be
deemed to have elected to convert or continue such Borrowing to a Borrowing
consisting of Base Rate Advances. So long as any Default or Event of Default
shall have occurred and be continuing, no Borrowing may be converted into or
continued as (upon expiration of the current Interest Period) LIBOR Advances
unless the Administrative Agent and each of the Lenders shall have otherwise
consented in writing. No conversion of any Borrowing of LIBOR Advances shall be
permitted except on the last day of the Interest Period in respect thereof.
21
(c) Upon receipt of a Notice of Borrowing or a Notice of Interest
Rate Conversion from the Company, the Administrative Agent shall notify the
Lenders by telephone, which notice shall be promptly confirmed in writing
(including by telecopier) by the Administrative Agent to such Lenders, of such
Notice of Borrowing or Notice of Interest Rate Conversion and of each such
Lender's Pro Rata Share of the requested Borrowing or Interest Rate Conversion.
Not later than 1:00 p.m. (New York, New York time) on the date specified for the
Borrowing or Interest Rate Conversion in the Notice of Borrowing or Notice of
Interest Rate Conversion and in the notice to such Lender provided by the
Administrative Agent, each Lender shall promptly make its portion of the
Borrowing available to the Administrative Agent in immediately available funds,
and the Administrative Agent shall make available to the Company the amount so
received by the Administrative Agent from the Lenders not later than 3:00 p.m.
(New York, New York time) on such date. In the event any Lender shall fail to
make any Advance available to the Administrative Agent in immediately available
funds by 1:00 p.m. (New York, New York time) on the date specified, and provided
no Default or Event of Default shall have occurred and be continuing, the
Administrative Agent may advance such Lender's portion of the Borrowing on
behalf of such Lender, in which event such Lender shall promptly reimburse the
Administrative Agent for the amount thereof plus (i) if the amount of such
Lender's Advance is reimbursed to the Administrative Agent on or prior to the
calendar day next succeeding the date of the Borrowing, interest on such amount
at the rate equal to the Federal Funds Rate, or (ii) if the amount of such
Lender's Advance is reimbursed to the Administrative Agent after the calendar
day next succeeding the day of the Borrowing, interest on such amount at the
Base Rate; provided, however, that any such reimbursement by such Lender to the
Administrative Agent shall not relieve such Lender who fails to make any Advance
as provided above from liability to the Company for such failure. The amount of
interest payable as a result of any Lender's failure to make any Advance
available shall be calculated on the basis of a year of 360 days and paid for
the actual number of days such failure has continued (including the date of
payment). If such Lender fails to reimburse the Administrative Agent as provided
in this Section 2.02(c), then the Administrative Agent shall have the right to
deduct any amounts owed to it hereunder from Advances it makes to the Company in
subsequent Borrowings made by the Company.
SECTION 2.03 Swing Line Subcommitment.
(a) Notwithstanding anything contained herein to the contrary, the
Swing Line Lender hereby establishes a subcommitment within its Revolving Loan
Commitment of up to an aggregate of $2,000,000 (the "Swing Line") to accommodate
the short term borrowing needs of the Company. Sections 3.01 and 3.02 shall
apply equally to Borrowings made through the Swing Line and Borrowings or
Interest Rate Conversions requested or made through Section 2.02. The aggregate
amount of all Borrowings under the Swing Line shall not at any time exceed the
Swing Line Subcommitment, and to the extent any Borrowing under the Swing Line
would cause such a result after giving effect thereto, the Company shall be
required to request such Borrowing under Section 2.02(a) hereof. Any Borrowing
made by the Company under the Swing Line shall be for a period not to exceed 30
days.
(b) Whenever the Company desires to make a Borrowing under the Swing
Line, it shall give the Swing Line Lender prior written or telephonic notice
(promptly confirmed in writing) of any requested Borrowing under the Swing Line
(each a "Swing Line Borrowing Notice") prior to 11:00 a.m. (New York, New York
22
time) on the date of such Borrowing. Each Swing Line Borrowing Notice shall
specify the aggregate principal amount of the Swing Line Borrowing, the date of
such Swing Line Borrowing (which shall be a Business Day) and the interest
period to be applicable thereto. The Swing Line Lender shall make available to
the Company the amount of the Borrowing requested in the Swing Line Borrowing
Notice not later than 3:00 p.m. (New York, New York time) on such date, provided
that (i) no Default or Event of Default shall have occurred and be continuing
and (ii) the aggregated principal amount of the Swing Line Borrowings, including
the requested Borrowing under such Swing Line Borrowing Notice, shall be no
greater than the Swing Line Subcommitment.
(c) The Swing Line Lender, at any time and from time to time in its
sole discretion, may, on behalf of the Company (which hereby irrevocably
authorizes and directs the Swing Line Lender to act on its behalf), give a
Notice of Revolving Borrowing to the Administrative Agent requesting the Lenders
(other than the Swing Line Lender) to make Base Rate Advance in an amount equal
to the unpaid principal amount of any Swing Line Loan. Each Lender will make the
proceeds of its Base Rate Loan included in such Borrowing available to the
Administrative Agent for the account of the Swing Line Lender in accordance with
Section 2.07, which will be used solely for the repayment of such Swing Line
Loan.
(d) If for any reason a Base Rate Advance may not be (as determined
in the sole discretion of the Administrative Agent), or is not, made in
accordance with Section 2.03(c), then each Lender (other than the Swing Line
Lender) shall purchase an undivided participating interest in such Swing Line
Loan in an amount equal to its Pro Rata Share thereof on the date that such Base
Rate Advance should have occurred. On the date of such required purchase, each
Lender shall promptly transfer, in immediately available funds, the amount of
its participating interest to the Administrative Agent for the account of the
Swing Line Lender.
(e) Each Lender's obligation to make a Revolving Loan pursuant to
Section 2.03(c) or to purchase the participating interests pursuant to Section
2.03(d) shall be absolute and unconditional and shall not be affected by any
circumstance, including without limitation (i) any setoff, counterclaim,
recoupment, defense or other right that such Lender or any other Person may have
or claim against the Swing Line Lender, the Company or any other Person for any
reason whatsoever, (ii) the existence of a Default or an Event of Default or the
termination of any Lender's Revolving Loan Commitment, (iii) the existence (or
alleged existence) of any event or condition which has had or could reasonably
be expected to have a Materially Adverse Effect, (iv) any breach of this
Agreement or any other Loan Document by the Company, the Administrative Agent or
any Lender or (v) any other circumstance, happening or event whatsoever, whether
or not similar to any of the foregoing. If such amount is not in fact made
available to the Swing Line Lender by any Lender, the Swing Line Lender shall be
entitled to recover such amount on demand from such Lender, together with
accrued interest thereon for each day from the date of demand thereof at the
Federal Funds Rate. Until such time as such Lender makes its required payment,
the Swing Line Lender shall be deemed to continue to have outstanding Swing Line
Loans in the amount of the unpaid participation for all purposes of the Loan
Documents. In addition, such Lender shall be deemed to have assigned any and all
payments made of principal and interest on its Loans and any other amounts due
to it hereunder, to the Swing Line Lender to fund the amount of such Lender's
23
participation interest in such Swing Line Loans that such Lender failed to fund
pursuant to this Section, until such amount has been purchased in full.
(f) The Company's obligation to pay the principal of, and interest
on, the Swing Line Loans shall be evidenced by the records of the Swing Line
Lender and by the Swing Line Note payable to the Swing Line Lender (or its
assignee) completed in conformity with this Agreement.
(g) The outstanding principal amount under each Swing Line Loan
shall be due and payable in full on the Commitment Termination Date.
SECTION 2.04 Letter of Credit Subcommitment. Subject to, and upon
the terms and conditions, hereof (including the limitations of Section 2.01) the
Company may request, in accordance with the provisions of this Section 2.04 and
Section 2.05, that on and after the Closing Date, the Administrative Agent issue
a Letter or Letters of Credit for the account of the Company; provided, that (i)
no Letter of Credit shall have an expiration date that is later than ten days
prior to the Commitment Termination Date; (ii) each Letter of Credit issued by
the Administrative Agent shall be in a stated amount of at least $250,000; (iii)
the Administrative Agent shall have no obligation to issue any Letter of Credit,
if, after giving effect to such issuance, the aggregate Letter of Credit
Obligations would exceed the Letter of Credit Subcommitment; and (iv) the
Administrative Agent shall have no obligation to issue any Letter of Credit, if,
after giving effect to such issuance, the sum of the outstanding Revolving
Loans, Swing Line Loans and Letter of Credit Obligations would exceed the Total
Commitments.
SECTION 2.05 Notice of Issuance of Letter of Credit; Agreement to
Issue.
(a) Whenever the Company desires the issuance of a Letter of Credit,
it shall, in addition to any application and documentation procedures required
by the Administrative Agent for the issuance of such Letter of Credit, deliver
to the Administrative Agent a written notice no later than 11:00 A.M. (New York,
New York time) at least five (5) days in advance of the proposed date of
issuance. Each such notice shall specify (i) the proposed date of issuance
(which shall be a Business Day); (ii) the face amount of the Letter of Credit;
(iii) the expiration date of the Letter of Credit; and (iv) the name and address
of the beneficiary with respect to such Letter of Credit and shall attach a
precise description of the documentation and a verbatim text of any certificate
to be presented by the beneficiary of such Letter of Credit which would require
the Administrative Agent to make payment under the Letter of Credit, provided
that the Administrative Agent may require changes in any such documents and
certificates in accordance with its customary letter of credit practices, and
provided further, that no Letter of Credit shall require payment against a
conforming draft to be made thereunder on the same Business Day that such draft
is presented if such presentation is made after 11:00 A.M. (New York, New York
time). In determining whether to pay under any Letter of Credit, the
Administrative Agent shall be responsible only to determine that the documents
and certificate required to be delivered under its Letter of Credit have been
delivered, and that they comply on their face with the requirements of the
Letter of Credit. Promptly after receiving the notice of issuance of a Letter of
Credit, the Administrative Agent shall notify each Lender of such Lender's
respective participation therein, determined in accordance with its respective
Pro Rata Share of the Revolving Loan Commitments as determined on the date of
the issuance of such Letter of Credit.
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(b) The Administrative Agent agrees, subject to the terms and
conditions set forth in this Agreement, to issue for the account of the Company,
a Letter of Credit in a face amount equal to the face amount requested under
paragraph (a) above, following its receipt of a notice and the application and
other documents required by Section 2.05(a). Immediately upon the issuance of
each Letter of Credit, each Lender shall be deemed to, and hereby agrees to,
have irrevocably purchased from the Administrative Agent a participation in such
Letter of Credit and any drawing thereunder in an amount equal to such Lender's
Pro Rata Share multiplied by the face amount of such Letter of Credit.
SECTION 2.06 Payment of Amounts drawn under Letter of Credit.
(a) In the event of any request for a drawing under any Letter of
Credit by the beneficiary thereof, the Administrative Agent shall notify the
Company and the Lenders on or before the date on which the Administrative Agent
intends to honor such drawing, and the Company shall reimburse the
Administrative Agent on the day on which such drawing is honored in an amount,
in same day funds, equal to the amount of such drawing, provided that anything
contained in this Agreement to the contrary notwithstanding, unless the Company
shall have notified the Administrative Agent prior to 11:00 A.M. (New York, New
York time) on the Business Day immediately prior to the date on which such
drawing is honored, that the Company intends to reimburse the Administrative
Agent for the amount of such drawing in funds other than the proceeds of
Revolving Loans, the Company shall be deemed to have timely given a Notice of
Borrowing to the Administrative Agent requesting Revolving Loans which are Base
Rate Advances on the date on which such drawing is honored in an amount equal to
the amount of such drawing, and the Lenders shall by 1:00 P.M. (New York, New
York time) on the date of such drawing, make Revolving Loans which are Base Rate
Advances in the amount of such drawing, the proceeds of which shall be applied
directly by the Administrative Agent to reimburse the Administrative Agent for
the amount of such drawing, provided that for the purposes solely of such
Borrowing, the conditions and precedents set forth in Sections 3.01 and 3.02
hereof shall not be applicable, and provided further that if for any reason
proceeds of the Revolving Loans are not received by the Administrative Agent on
such date in the amount equal to the amount of such drawing, the Company shall
reimburse the Administrative Agent on the Business Day immediately following the
date of such drawing in an amount, in dollars and immediately available funds,
equal to the excess of the amount of such drawing over the amount of such
Revolving Loans, if any, which are so received, plus accrued interest on the
amount at the applicable rate of interest for Base Rate Advances.
(b) Notwithstanding any provision of this Agreement to the contrary,
to the extent that any Letter of Credit or portion thereof remains outstanding
on the Commitment Termination Date, the parties hereby agree that the
beneficiary or beneficiaries thereof shall be deemed to have made a drawing of
all available amounts pursuant to such Letters of Credit on the Commitment
Termination Date, which amounts shall be reimbursed to the Administrative Agent
as set forth above.
SECTION 2.07 Payment by Lenders. In the event that the Company shall
fail to reimburse the Administrative Agent as provided in Section 2.06 by
borrowing Revolving Loans, or otherwise providing an amount equal to the amount
of any drawing honored by the Administrative Agent pursuant to any Letter of
Credit issued by it, the Administrative Agent shall promptly notify each Lender
of the unreimbursed amount of such drawing and of such Lender's respective
participation therein. Each Lender shall make available to the Administrative
Agent an amount equal to its respective participation, in dollars and in
25
immediately available funds, at the office of the Administrative Agent specified
in such notice not later than 1:00 P.M. (New York, New York time) on the
Business Day after the date notified by the Administrative Agent. In the event
that any such Lender fails to make available to the Administrative Agent the
amount of such Lender's participation in such Letter of Credit, the
Administrative Agent shall be entitled to recover such amount on demand from
such Lender together with interest on such amount at the Base Rate. The
Administrative Agent shall distribute to each other Lender which has paid all
amounts payable under this Section with respect to any Letter of Credit, such
Lender's Pro Rata Share of all payments received by the Administrative Agent
from the Company in reimbursement of drawings honored by the Administrative
Agent under such Letter of Credit when such payments are received.
SECTION 2.08 Obligations Absolute. The obligation of the Company to
reimburse the Administrative Agent for drawings made under Letters of Credit
issued for the account of the Company and the Lenders' obligation to honor their
participations purchased therein shall be unconditional and irrevocable and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances, including without limitation, the following circumstances:
(a) Any lack of validity or enforceability of any Letter of Credit;
(b) The existence of any claim, set-off, defense or other right
which the Company or any Subsidiary or Affiliate of the Company may have at any
time against a beneficiary or any transferee of any Letter of Credit (or any
Persons or entities for whom any such beneficiary or transferee may be acting),
any Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated transaction (including without
limitation any underlying transaction between the Company or any of its
Subsidiaries and Affiliates and the beneficiary for which such Letter of Credit
was procured); provided that nothing in this Section shall affect the right of
the Company to seek relief against any beneficiary, transferee, Lender or any
other Person in any action or proceeding or to bring a counterclaim in any suit
involving such Persons;
(c) Any draft, demand, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any respect;
(d) Payment by the Administrative Agent under any Letter of Credit
against presentation of a demand, draft or certificate or other document which
does not comply with the terms of such Letter of Credit;
(e) Any other circumstance or happening whatsoever which is similar
to any of the foregoing; or
(f) the fact that a Default or an Event of Default shall have
occurred and be continuing.
26
SECTION 2.09 Indemnification; Nature of Administrative Agent's
Duties.
(a) In addition to amounts payable elsewhere provided in this
Agreement, without duplication, the Company hereby agrees to protect, indemnify,
pay and save the Administrative Agent and each Lender harmless from and against
any and all claims, demands, liabilities, damages, losses, costs, charges and
reasonable expenses (including reasonable attorney's fees and disbursements)
which the Administrative Agent or any Lender may incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of any Letter of Credit for
the account of the Company, other than as a result of the gross negligence or
willful misconduct of the Administrative Agent; or (ii) the failure of the
Administrative Agent to honor a drawing under any Letter of Credit due to any
act or omission (whether rightful or wrongful) of any present or future de jure
or de facto government or governmental authority.
(b) Notwithstanding any other provision contained in this Agreement,
the Administrative Agent shall not be obligated to issue any Letter of Credit,
nor shall any Lender be obligated to purchase its participation in any Letter of
Credit to be issued hereunder, if the issuance of such Letter of Credit or
purchase of such participation shall have become unlawful or prohibited by
compliance by Administrative Agent or such Lender in good faith with any law,
governmental rule, guideline, request, order, injunction, judgment or decree
(whether or not having the force of law); provided that in the case of the
obligation of a Lender to purchase such participation, such Lender shall have
notified the Administrative Agent to such effect in writing at least ten (10)
Business Days' prior to the issuance thereof by the Administrative Agent, which
notice shall relieve the Administrative Agent of its obligation to issue such
Letter of Credit pursuant to Section 2.04 and Section 2.05 hereof.
SECTION 2.10 Prepayment of Borrowings Under the Commitments. The
Company shall have the right to prepay Borrowings under the Commitments, in
whole at any time or in part from time to time, without premium or penalty (but,
in the case of LIBOR Advances, subject to the funding indemnification provisions
of Section 2.21), provided that (i) the Company gives the Administrative Agent
prior written notice of such prepayment, specifying the date such prepayment
will occur (which shall be a Business Day), (x) in the case of any Base Rate
Advance, at least one Business Day in advance of such date or (y) in the case of
any LIBOR Advance during an Interest Period, at least three Business Days in
advance of such date, (ii) each partial prepayment shall be in an amount of at
least $500,000 and integral multiples of $100,000, (iii) prepayments shall be
applied to repay Borrowings under the Commitments in the order set forth in
Section 2.13 hereof, and (iv) such prepayments include interest accrued, on the
principal amount prepaid, to the prepayment date.
SECTION 2.11 Mandatory Prepayments.
(a) If the sum of the (i) aggregate outstanding principal amount of
the Revolving Loans, (ii) aggregate outstanding principal amount of the Swing
Line Loans, and (iii) Letter of Credit Obligations exceed at any time the Total
Commitments, as reduced pursuant to Section 2.12 or otherwise, the Company shall
immediately repay the Swing Line Loans, Revolving Loans, or Letter of Credit
Obligations by an amount equal to such excess or, with respect to Letters of
Credit, shall deliver cash collateral for all outstanding Letters of Credit
pursuant to arrangements satisfactory to the Administrative Agent. Each
27
prepayment of Revolving Loans shall be applied first to Base Rate Advances to
the full extent thereof before application to LIBOR Advances.
(b) The Company shall make a mandatory prepayment from one hundred
percent (100%) of the after-tax net cash proceeds received by the Company or any
of its Subsidiaries from any sale or other disposition by the Company or any of
its Subsidiaries of any of their assets, provided, however, that such prepayment
provision shall not apply to sales of assets in the ordinary course of business
(such assets to include motorized vehicles, including cars and trucks) or the
sale of all or parts of the Company's stand alone high pressure cylinder
business, and certain other sales to be agreed upon in writing by the Company
and the Required Lenders. Such prepayment shall be due no later than five (5)
Business Days after any sale or other disposition by the Company of any of its
assets as set forth above along with a detailed calculation showing all
deductions from gross proceeds in order to arrive at net cash proceeds.
(c) The Company shall make a mandatory prepayment from one hundred
percent (100%) of net cash proceeds of any issuance of Stock (except for Stock
issued in connection with the exercise of employee or management stock options;
provided, however, that if the net cash proceeds from the exercise of employee
or management stock options exceeds $500,000 in the aggregate during any Fiscal
Year, the Company shall be required to make a mandatory prepayment equal to such
amount that is in excess of $500,000); provided, further, the Company shall not
be required to make a mandatory prepayment as a result of any equity issuance of
Preferred Stock to BNP Paribas or any Affiliate thereof. Such prepayment shall
be made no later than the Business Day following the date of receipt by Company
of any such net cash proceeds along with a detailed calculation showing all
deductions from gross proceeds in order to arrive at net cash proceeds.
(d) Notwithstanding anything in this Agreement to the contrary, no
reduction in the Commitments shall be required hereunder as a result of any
mandatory prepayment under this Section 2.11.
SECTION 2.12 Voluntary Reduction of Commitments. Upon at least five
(5) Business Days' prior written notice (or telephonic notice promptly confirmed
in writing) to the Administrative Agent, which notice shall specify (1) the
amount by which such Commitments are to be terminated and (2) the date such
termination is to occur, the Company shall have the right, without premium or
penalty, to terminate the Commitments, in whole or in part, provided that (a)
any partial termination pursuant to this Section 2.12 shall be in an amount of
at least $5,000,000 and integral multiples of $1,000,000 and (b) any such
termination shall apply to reduce proportionately and permanently the
Commitments. If the aggregate principal amount of Advances exceeds the amount of
the Commitments as so reduced, the Company shall immediately repay Borrowings
under such Commitments by an amount equal to such excess, together with accrued
but unpaid interest on such excess.
SECTION 2.13 Allocation of Payments.
(a) All principal and interest payments and prepayments made with
respect to Advances and payments in respect of Commitment Fees shall be
allocated among all outstanding Commitments and Advances to which such payments
28
relate, proportionately based on the Lenders' Pro Rata Shares of the
Commitments.
(b) All payments and prepayments made to the Administrative Agent by
the Company shall be applied in the following order: (a) first, to the
reimbursement of any fees which are due and payable, and expenses incurred by
and then due and payable to, the Administrative Agent, in accordance with the
terms of this Agreement, in connection with the administration of the
Commitments and otherwise (to the extent any such fees are payable by the
Company pursuant to the terms of this Agreement); (b) second, to the payment of
any accrued and unpaid interest and Fees which are due and payable, pro rata to
the Lenders based upon their respective Pro Rata Shares of the Commitments; and
(c) finally, to the payment of outstanding Advances.
SECTION 2.14 Termination of Commitments. The unpaid principal
balance and all accrued and unpaid interest and fees on the Notes will be due
and payable upon the first of the following dates or events to occur: (i)
acceleration of the maturity of any Note in accordance with the remedies
contained in Section 8.02 of this Agreement; or (ii) upon the expiration of the
Commitments on the Commitment Termination Date.
SECTION 2.15 Use of Proceeds. The proceeds of each Borrowing under
the Commitments will be used by the Company to refinance existing debt and
thereafter to provide for the working capital and general corporate needs of the
Company.
SECTION 2.16 Fees.
(a) On the Closing Date and on each anniversary thereof, the Company
shall pay to the Administrative Agent the Administrative Agent Fee, which fee
shall be nonrefundable when paid.
(b) The Company shall pay to the Administrative Agent, for the
account of and distribution of the respective Pro Rata Share to each Lender
(subject to the last sentence hereof), a commitment fee (the "Commitment Fee")
for the period commencing on the Closing Date to and including the Commitment
Termination Date, computed at a rate equal to the Applicable Commitment Fee
Percentage multiplied by the average daily unused portion of the Revolving Loan
Commitments of the Lenders, such fee being payable quarterly in arrears on the
last day of each calendar quarter, commencing on September 30, 2001, and on the
Commitment Termination Date. The Commitment Fee will be calculated on the basis
of a 360-day year for the actual number of days elapsed. For purposes of
determining the Commitment Fee, the outstandings under the Swing Line
Subcommitment shall not be included as a part of the outstandings under the
Revolving Loan Commitments.
(c) The Company shall pay, quarterly in arrears on the last day of
each calendar quarter, commencing on September 30, 2001, and on the Commitment
Termination Date, (i) to the Administrative Agent, for the account of and
distribution of the respective Pro Rata Share to each Lender, a letter of credit
fee equal to the Applicable Margin for LIBOR Advances multiplied by the average
daily aggregate Letter of Credit Obligations, and (ii) to the Administrative
Agent, for its own account, a letter of credit fronting fee equal to one-quarter
of one percent (0.25%) multiplied by the stated face amount of such Letter of
Credit (collectively, the "Letter of Credit Fee").
29
(d) The Company hereby authorizes the Administrative Agent to
withdraw an amount equal to the fees which are due and payable under clauses
(a), (b) or (c) above from any of its accounts with the Administrative Agent if
not paid on the due date for such fees. The Administrative Agent shall give the
Company notice of any such withdrawals, provided, however, that failure by the
Administrative Agent to give the Company notice shall not prevent the
Administrative Agent from making any such withdrawals under this Section.
SECTION 2.17 Interest.
(a) For Borrowings other than those made under the Swing Line, the
Company shall be entitled to select between the following two options to
establish the rate of interest at which the unpaid principal amount of the
Revolving Notes shall accrue:
(i) Base Rate Advances - interest shall accrue at the Base Rate
plus the Applicable Margin; or
(ii) LIBOR Advances - interest shall accrue at LIBOR plus the
Applicable Margin.
(b) All computations of interest accruing at the Base Rate shall be
made on the basis of a year of 365 days for the actual number of days (including
the first day but excluding the last day) occurring in the period for which the
Base Rate is payable (to the extent computed on the basis of days elapsed), and
all computations of Fees and interest accruing at rates other than the Base Rate
hereunder and under the Revolving Notes shall be made on the basis of a year of
360 days for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest or fees are
payable (to the extent computed on the basis of days elapsed). Interest on Base
Rate Loans shall be calculated based on the Base Rate from and including the
date of such Loan to but excluding the date of the repayment or conversion
thereof. Interest on LIBOR Loans shall be calculated on the basis of a year of
360 days for the actual number of days elapsed as to each Interest Period from
and including the first day thereof to but excluding the last day thereof. Each
determination by the Administrative Agent of the Base Rate, LIBOR, the rates
applicable after an Event of Default or any Fee hereunder shall be made in good
faith and, except for manifest error, shall be final, conclusive and binding for
all purposes. Interest on the Revolving Notes for Borrowings other than those
made under the Swing Line shall be payable to the Lenders as follows:
(i) Base Rate Advances -- on the last day of every quarter in
arrears; and
(ii) LIBOR Advances -- at the expiration of each Interest Period.
(c) For Borrowings made under the Swing Line, the rate of interest
at which the unpaid principal shall accrue on the Swing Line Note shall be equal
to the Base Rate in effect on each day such Swing Line Loan is outstanding.
Interest on each Swing Line Loan shall be payable on the maturity date of such
Swing Line Loan, which shall be the last day of the Interest Period applicable
thereto, and on the Commitment Termination Date (the "Swing Line Rate").
30
(d) The Company hereby authorizes the Administrative Agent to
withdraw an amount equal to the interest which is due and payable under clauses
(a), (b) or (c) above and under Section 2.23 from any of its accounts with the
Administrative Agent if not paid on the due date for such interest. The
Administrative Agent shall give the Company notice of any such withdrawals,
provided, however, that failure by the Administrative Agent to give the Company
notice shall not prevent the Administrative Agent from making any such
withdrawals under this Section.
SECTION 2.18 Interest Periods.
(a) In connection with the making or continuation of, or conversion
into, each Borrowing of LIBOR Advances, the Company shall select an Interest
Period to be applicable to such LIBOR Advance, which Interest Period shall be
either a 1, 2, or 3 month period.
(b) Notwithstanding paragraph (a) above:
(i) The initial Interest Period for any Borrowing of LIBOR
Advances shall commence on the date of such Borrowing (including the
date of any conversion from a Borrowing consisting of Base Rate
Advances) and each Interest Period occurring thereafter in respect of a
continuation of such Borrowing shall commence on the day on which the
immediately preceding Interest Period expires;
(ii) If any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, that if any Interest Period in
respect of LIBOR Advances would otherwise expire on a day that is not a
Business Day but is a day of the month after which no further Business
Day occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(iii) Any Interest Period in respect of LIBOR Advances which
begins on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period shall, subject to
part (iv) below, expire on the last Business Day of such calendar month;
(iv) No Interest Period in respect of LIBOR Advances shall extend
beyond any date upon which any prepayment is required to be made on the
Borrowings, unless the aggregate principal amount of Borrowings that are
not LIBOR Advances, or that have Interest Periods which will expire on
or before the date of the respective payment or prepayment, is equal to
or in excess of the amount of any such principal payments or prepayments
to be made; and
(v) No Interest Period with respect to the LIBOR Advances shall
extend beyond the Commitment Termination Date.
SECTION 2.19 Increased Costs.
(a) If, by reason of (x) after the date hereof, the introduction of
or any change (including, without limitation, any change by way of imposition or
increase of reserve requirements) in or in the interpretation of any law or
31
regulation, or (y) the compliance with any guideline or request from any central
bank or other governmental authority or quasi-governmental authority exercising
control over banks or financial institutions generally (whether or not having
the force of law):
(i) any Lender (or its applicable Lending Office) shall be
subject to any tax, duty or other charge with respect to its LIBOR
Advances or its obligation to make LIBOR Advances, or the basis of
taxation of payments to any Lender of the principal of or interest on
its LIBOR Advances or its obligation to make LIBOR Advances shall have
changed (except for changes in the tax on the overall net income of, or
any franchise tax on, such Lender or its applicable Lending Office
imposed by the jurisdiction in which such Lender's principal executive
office or applicable Lending Office is located); or
(ii) any reserve (including, without limitation, any imposed by
the Board of Governors of the Federal Reserve System), special deposit
or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender's applicable Lending
Office shall be imposed or deemed applicable or any other condition
affecting its LIBOR Advances or its obligation to make LIBOR Advances
shall be imposed on any Lender or its applicable Lending Office or the
London interbank market;
and as a result thereof there shall be any increase in the cost to such Lender
of agreeing to make or making, funding or maintaining LIBOR Advances (except to
the extent already included in the determination of LIBOR for LIBOR Advances),
or there shall be a reduction in the amount received or receivable by such
Lender or its applicable Lending Office, then the Company shall from time to
time, upon written notice from and demand by such Lender on the Company (with a
copy of such notice and demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender within five Business Days
after the date of such notice and demand, additional amounts sufficient to
indemnify such Lender against such increased cost. A certificate as to the
amount of such increased cost, submitted to the Company and the Administrative
Agent by such Lender in good faith and accompanied by a statement prepared by
such Lender describing in reasonable detail the basis for and calculation of
such increased cost, shall, except for manifest error, be final, conclusive and
binding for all purposes. In the event that the Company shall pay the increased
costs accrued through the date of payment as required under this Section
2.19(a), plus any funding losses as described in Section 2.21, then the Company
shall have the right to convert the relevant LIBOR Advance to a Base Rate
Advance, as provided in Section 2.02, and the Administrative Agent and each of
the Lenders shall be deemed to have given their consent thereto, as required
thereunder.
(b) If any Lender shall advise the Administrative Agent that at any
time, because of the circumstances described in clauses (x) or (y) in Subsection
2.19(a) or any other circumstances beyond such Lender's reasonable control
arising after the date of this Agreement affecting such Lender or the London
interbank market or the United States secondary certificate of deposit market or
such Lender's position in such markets, LIBOR, as determined by the
Administrative Agent, will not adequately and fairly reflect the cost to such
Lender of funding its LIBOR Advances, then, and in any such event:
32
(i) the Administrative Agent shall forthwith give notice (by
telephone confirmed in writing) to the Company and to the other Lenders
of such advice;
(ii) the Company's right to request and such Lender's obligation
to make or permit portions of the Loans to remain outstanding past the
last day of the then current Interest Periods as LIBOR Advances shall be
immediately suspended; and
(iii) such Lender shall make a Loan as part of the requested
Borrowing of LIBOR Advances, as the case may be, as a Base Rate Advance,
which such Base Rate Advance shall, for all other purposes, be
considered part of such Borrowing.
SECTION 2.20 Capital Adequacy. If, after the date of this Agreement,
any Lender shall have determined that the adoption of any applicable law, rule
or regulation regarding capital adequacy, or any change therein, or any change
in the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Lender with any request or
directive regarding capital adequacy not currently in effect or fully applicable
as of the Closing Date (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Lender's capital as a consequence of its
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy) by an amount deemed by
such Lender to be material, then, from time to time, promptly upon demand by
such Lender (with a copy to the Administrative Agent), the Company shall pay
such Lender such additional amount or amounts as will compensate such Lender for
such reduction. A certificate of any Lender claiming compensation under this
Section 2.20 and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive absent manifest error. In determining any such
amount, such Lender may use any reasonable averaging and attribution methods.
Each Lender will promptly notify the Company of any such adoption, change or
compliance of which it has knowledge which will entitle such Lender to
compensation pursuant to this Section, but the failure to give such notice shall
not affect such Lender's right to such compensation provided such Lender gives
such notice within 90 days after an officer of such Lender having responsibility
for the administration of this Agreement shall have received actual notice of
such adoption, change or compliance.
SECTION 2.21 Funding Losses. The Company shall compensate each
Lender, upon its written request to the Company (which request shall set forth
the basis for requesting such amounts in reasonable detail and which request
shall be made in good faith and, absent manifest error, shall be final,
conclusive and binding upon all of the parties hereto), for all losses, expenses
and liabilities (including, without limitation, any interest paid by such Lender
to lenders of funds borrowed by it to make or carry its LIBOR Advances, in
either case to the extent not recoverable by such Lender in connection with a
re-employment of such funds and including loss of anticipated profits, which the
Lender may sustain): (i) if for any reason (other than a default by such Lender)
a borrowing of, or conversion to or continuation of, LIBOR Advances to the
Company does not occur on the date specified therefor in a Notice of Borrowing
or Notice of Interest Rate Conversion (whether or not withdrawn), (ii) if any
repayment (including mandatory prepayments and any conversions) of any LIBOR
33
Advances by the Company occurs on a date which is not the last day of an
Interest Period applicable thereto, or (iii) if, for any reason, the Company
defaults in its obligation to repay its LIBOR Advances when required by the
terms of this Agreement.
SECTION 2.22 Making of Payments.
(a) The Fees and all payments of principal of, or interest on, the
Notes, and payments in respect of the Letters of Credit, shall be made in
immediately available funds free and clear of any defenses, set-offs,
counterclaims or withholdings or deductions for taxes to the Administrative
Agent at its principal office in New York, New York, for the accounts of the
respective Lenders. All such payments shall be made not later than 1:00 p.m.
(New York, New York time) and funds received after that hour shall be deemed to
have been received by the Administrative Agent on the next Business Day.
Payments to the Administrative Agent shall, as to the Company, constitute
payment to the applicable Lenders hereunder, other than Swing Line Loans.
(b) Subject to Subsection 2.18(b)(ii), whenever any payment to be
made hereunder or under any Revolving Note or the Swing Line Note shall be
stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest thereon shall be payable at the applicable rate
during such extension.
(c) On the Business Day that a payment is received or deemed to have
been received hereunder, the Administrative Agent shall remit in immediately
available funds to each Lender its share, based on the percentages set forth in
Section 2.01, of all payments received by the Administrative Agent on the
Revolving Notes.
SECTION 2.23 Default Rate of Interest. Upon the occurrence and
during the continuance of an Event of Default, to the extent permitted by law,
the principal amount of all outstanding Swingline Loans and Revolving Loans and
all other unpaid amounts, including but not limited to Letter of Credit Fees,
hereunder shall, on such date and thereafter, bear interest at the then
applicable interest rate plus an additional two percent (2.0%) per annum until
payment in full, provided, that, for any LIBOR Advance, at the end of the
applicable Interest Period, interest shall accrue at the Base Rate plus the
Applicable Margin plus two percent (2.0%) per annum. Interest accruing pursuant
to this Section 2.23 will be due and payable upon demand.
SECTION 2.24 Proration of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, through exercise of
any right of set-off or otherwise) after the occurrence and during the
continuance of an Event of Default on account of the principal of or interest on
any Revolving Note or any fees in respect of this Agreement in excess of its Pro
Rata Share of payments and other recoveries obtained by all the Lenders on
account of the principal of and interest on the Revolving Notes then held by
them or any fees due to them in respect of this Agreement, such Lender shall
notify the Administrative Agent thereof and forthwith purchase from the other
Lenders such participation in the Revolving Notes held by them or in such fees
owed to them as shall be necessary to cause such purchasing Lender to share the
excess payment or other recovery ratably with each of them; provided, however,
34
that if all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing Lender, the purchase from such Lender shall be
rescinded and the purchase price restored by each selling Lender to the extent
of such recovery, but without interest, unless the purchasing Lender is required
to pay interest on the amount so recovered, in which case each selling Lender
shall pay its Pro Rata Share of such interest. After the occurrence and during
the continuance of an Event of Default, disproportionate payments of interest
shall be shared by the purchase of separate participations in unpaid interest
obligations, disproportionate payments of fees shall be shared by the purchase
of separate participations in unpaid fee obligations, and disproportionate
payments of principal shall be shared by the purchase of separate participations
in unpaid principal obligations. The Company agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.24
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Company in the amount of such
participation. Each Lender shall give the Administrative Agent notice within
five (5) days of any payments or other recoveries described above which it
obtains.
SECTION 2.25 Lenders' Obligations Several. The obligation of each
Lender to make any Advance is several, and not joint or joint and several, and
is not conditioned upon the performance by all other Lenders of their
obligations to make Advances.
SECTION 2.26 Payments Free of Taxes.
(a) Any and all payments by the Company hereunder or under the Notes
shall be made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender, taxes
imposed on or measured by its net income, net profits, and franchise taxes (all
such excluded net income taxes, taxes on net profits and franchise taxes,
collectively referred to as the "Excluded Taxes"; all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
collectively referred to in this Section 2.26 as "Taxes"). If the Company shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Lender, (x) the sum so payable shall be
increased by such amount (the "Gross-up Amount") as may be necessary so that
after making all required deductions (including deductions with respect to Taxes
owed by such Lender on the Gross-up Amount payable under this Section 2.26(a))
such Lender receives an amount equal to the sum it would have received had no
such deductions been made, (y) the Company shall make such deductions, and (z)
the Company shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) The Company will indemnify each Lender for the full amount of
Taxes (together with any Taxes or Excluded Taxes owed by such Lender applicable
to the Gross-up Amount payable under clause (x) of Section 2.26(a) or on the
indemnification payments made by the Company under this Section 2.26(b), but
without duplication thereof), and any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes or such Excluded Taxes were correctly or legally asserted, so as to
compensate such Lender for any loss, cost, expense or liability incurred as a
consequence of any such Taxes. Payment pursuant to such indemnification shall be
made within ten (10) days from the date such Lender makes written demand
therefor. Within thirty (30) days after the date of the Company's payment of
35
Taxes, the Company will furnish to the relevant Lender, at its appropriate
Lending Office, the original or a certified copy of a receipt evidencing payment
thereof. In the event a Lender or the Administrative Agent receives a refund of,
or credit with respect to, any Taxes or Excluded Taxes paid by the Company
pursuant to Section 2.26(a) or this Section 2.26(b), such Lender or the
Administrative Agent shall pay the amount of such refund or credit to the
Company within thirty (30) days of receipt of such refund or application of such
credit.
(c) Each Lender that is not a "United States Person" (as defined in
the Internal Revenue Code of 1986, as amended) hereby agrees that:
(A) it shall, prior to the time it becomes a Lender
hereunder, deliver to the Company and the Administrative Agent:
(1) for each Lending Office located in the United
States, three (3) accurate and complete signed originals of
Internal Revenue Service Form W-8ECI or any successor thereto
("Form W-8ECI"), and/or
(2) for each Lending Office located outside the
United States, three (3) accurate and complete signed originals
of Internal Revenue Service Form W-8BEN or any successor thereto
("Form W-8BEN");
in each case indicating and establishing that such Lender, on the
date of delivery thereof, is entitled to receive payments of
principal, interest and fees for the account of such Lending
Office under this Agreement and the Notes are free from
withholding of any United States Federal income tax; provided,
that if the Form W-8ECI or Form W-8BEN, as the case may be,
supplied by a Lender fails to establish a complete exemption from
United States withholding tax as of the date such Lender becomes
a Lender, such Lender shall, within 15 days after a written
request from the Company or the Administrative Agent, deliver to
the Company and the Administrative Agent the forms or other
documents necessary to establish a complete exemption from United
States withholding tax as of such date;
(B) if at any time such Lender changes its Lending Office or
selects an additional Lending Office, it shall, at the same time or
reasonably promptly thereafter (but only to the extent the forms
previously delivered by it hereunder are no longer effective or do
not meet the requirements of Section 2.26(c)(A)) deliver to the
Company and the Administrative Agent in replacement for the forms
previously delivered by it hereunder:
(1) for such changed or additional applicable
Lending Office located in the United States of America, three (3)
accurate and complete signed originals of Form W-8ECI; or
(2) otherwise, three (3) accurate and complete
signed originals of Form W-8BEN;
36
in each case indicating and establishing that such Lender is on the
date of delivery thereof entitled to receive payments of principal,
interest and fees for the account of such changed or additional
Lending Office under this Agreement and the Notes are free from
withholding of any United States Federal income tax.
(d) In addition to the documents to be furnished pursuant to Section
2.26(c), each Lender shall, promptly upon the reasonable written request of the
Administrative Agent to that effect, deliver to the Company and the
Administrative Agent such other accurate and complete forms or similar
documentation as such Lender is legally able to provide and as may be required
from time to time by any applicable law, treaty, rule or regulation of any
jurisdiction in order to establish such Lender's tax status for withholding
purposes or as may otherwise be appropriate to eliminate or minimize any Taxes
on payments under this Agreement and the Notes.
(e) Each Lender shall use reasonable efforts to avoid or minimize
any amounts which might otherwise be payable by the Company pursuant to this
Section 2.26, except to the extent that a Lender determines that such efforts
would be disadvantageous to such Lender, as reasonably determined by such Lender
and which determination, if made in good faith, shall be binding and conclusive
on all parties hereto.
(f) Without prejudice to the survival of any other agreement of the
Company hereunder, the agreements and obligations of the Company and the Lenders
contained in this Section 2.26 shall survive the termination of this Agreement
and the payment in full of the principal of, premium, if any, interest, and fees
hereunder and under the Notes.
SECTION 2.27 Interest Rate Not Ascertainable, etc. In the event that
the Administrative Agent, in the case of LIBOR, shall have determined (which
determination shall be made in good faith and, absent manifest error, shall be
final, conclusive and binding upon all parties) that on any date for determining
LIBOR for any Interest Period, by reason of any changes arising after the date
of this Agreement affecting the London interbank market or the Administrative
Agent's position in such market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for in the
definition of LIBOR then, and in any such event, the Administrative Agent shall
forthwith give notice (by telephone confirmed in writing) to the Company and to
the Lenders of such determination and a summary of the basis for such
determination. Until the Administrative Agent notifies the Company that the
circumstances giving rise to the suspension described herein no longer exist,
the obligations of the Lenders to make, or permit portions of the Advances to
remain outstanding past the last day of the then current Interest Periods as,
LIBOR Advances shall be suspended, and such affected Advances shall bear the
same interest as Base Rate Advances.
SECTION 2.28 Illegality.
(a) In the event that any Lender shall have determined (which
determination shall be made in good faith and, absent manifest error, shall be
final, conclusive and binding upon all parties) at any time that the making or
continuance of any LIBOR Advance has become unlawful by compliance by such
Lender in good faith with any applicable law, governmental rule, regulation,
guideline or order (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful), then, in any such event, the
37
Lender shall give prompt notice (by telephone confirmed in writing) to the
Company and to the Administrative Agent of such determination and a summary of
the basis for such determination (which notice the Administrative Agent shall
promptly transmit to the other Lenders).
(b) Upon the giving of the notice to the Company referred to in
subsection (a) above, (i) the Company's right to request and such Lender's
obligation to make LIBOR Advances shall be immediately suspended, and such
Lender shall make an Advance as part of the requested Borrowing of LIBOR
Advances as a Base Rate Advance, and (ii) if the affected LIBOR Advance or
Advances are then outstanding, the Company shall immediately, or if permitted by
applicable law, no later than the date permitted thereby, upon at least one
Business Day's written notice to the Administrative Agent and the affected
Lender, convert each such Advance into an Advance or Advances to a Base Rate
Advance with an Interest Period ending on the date on which the Interest Period
applicable to the affected LIBOR Advances expires, provided that if more than
one Lender is affected at any time, then all affected Lenders must be treated
the same pursuant to this Subsection 2.28(b).
ARTICLE III
CONDITIONS TO BORROWINGS
The obligation of each Lender to make an Advance to the Company and
the obligation of the Administrative Agent to issue Letters of Credit hereunder
is subject to the satisfaction of the following conditions:
SECTION 3.01 Conditions Precedent to Initial Advances. At the time
of the making by each Lender of its initial Advance hereunder, unless otherwise
waived or consented to by the Required Lenders,
(a) subject to Section 3.03, all obligations of the Company to each
Agent or any Lender incurred prior thereto (including, without limitation, the
Company's obligation to reimburse the fees and disbursements of counsel to the
Administrative Agent in accordance with this Agreement), together with the Fees,
shall have been paid in full;
(b) the Administrative Agent shall have received the following, each
dated as of the Closing Date, if applicable, in form and substance satisfactory
to the Lenders and (except for the Notes) in sufficient copies for each Lender:
(i) A duly executed original of this Agreement.
(ii) A duly completed and executed original of a Revolving Note
payable to the order of each Lender in the principal amount of such
Lender's Commitment.
(iii) A duly completed and executed original of the Swing Line
Note payable to the order of the Swing Line Lender in the principal
amount of $2,000,000.
38
(iv) A duly executed original of the amendment to the Guaranty
Agreement and the amendment to the Contribution Agreement.
(v) A duly executed original of the Environmental Indemnity
Agreement.
(vi) A duly executed original of an assignment of all material
contracts with customers of the Company and its Subsidiaries;
(vii) A duly executed original of the Company Security Agreement
and the Guarantor Security Agreement, together (a) with such UCC
financing statements and UCC amendments recorded in such jurisdictions
as the Required Lenders deem necessary or desirable to perfect the
security interests granted thereunder and under the Company Pledge
Agreement, the Guarantor Pledge Agreement, the Company Trademark
Security Agreement, and the Guarantor Trademark Security Agreement and
(b) a duly executed landlord waiver with respect to all Collateral of
the Company located at 2800 SE Market Place, Stuart, Florida.
(viii) Lien searches in all relevant jurisdictions listing all
effective financing statements which name the Company or any of its
Subsidiaries as debtor, together with copies of such other financing
statements (none of which shall cover the Collateral purported to be
covered by the Company Security Agreement, the Guarantor Security
Agreement, the Company Pledge Agreement, the Guarantor Pledge Agreement,
the Company Trademark Security Agreement or the Guarantor Trademark
Security Agreement), other than financing statements in favor of the
Administrative Agent.
(ix) A duly executed original of the amendment to Company Pledge
Agreement and the amendment to Guarantor Pledge Agreement, together with
stock certificates evidencing the shares of stock of all Subsidiaries of
the Company pledged to the Administrative Agent thereunder and an
undated stock power for each such stock certificate, executed in blank
by the pledgor of such stock.
(x) A duly executed original of the amendments to Company
Trademark Security Agreement and the Guarantor Trademark Security
Agreement, together with such filings in the United States Patent and
Trademark Office as the Required Lenders deem necessary or desirable to
perfect the security interests granted under the Company Trademark
Security Agreement and the Guarantor Trademark Security Agreement.
(xi) Duly executed originals of any Mortgages and Assignments of
Leases to be recorded in the real estate records of the jurisdiction in
which the Mortgaged Property related thereto is located, together with
such fixture filings and amendments to existing fixture filings recorded
in such jurisdictions as the Required Lenders deem necessary or
desirable to perfect the security interests granted thereunder, and
endorsements to the existing title insurance policies for such Mortgage
or Assignment of Leases showing that the Administrative Agent has a
valid first priority Lien with respect to such Mortgaged Property
subject to no encumbrances other than such Mortgage or such Assignment
of Leases, and Liens permitted pursuant to Section 6.01 hereof.
39
(xii) Evidence satisfactory to the Required Lenders that all
other actions necessary or desirable to perfect and protect the security
interests created by the Security Documents have been taken.
(xiii) Certificates of insurance issued by the Company's
insurers, describing in reasonable detail the insurance maintained by
the Company and its Subsidiaries, together with appropriate evidence
showing that the Administrative Agent has been named as loss payee or
additional insured, as its interest may appear, on all insurance
policies insuring property of the Company and its Subsidiaries.
(xiv) Certificates signed by the Chief Executive Officer or the
Chief Financial Officer of each of the Company and the Guarantors as to
the solvency of such Company or Guarantor.
(xv) A duly executed original of the Closing Certificate, in the
form attached hereto as Exhibit F.
(xvi) Copies of the organizational papers of each of the Company
and the Subsidiaries, certified as true and correct by the Secretary of
State of the State in which the Company or such Subsidiary is
incorporated, and certificates from the Secretaries of State of the
States in which the Company or such Subsidiary is incorporated and of
each state in which the Company or such Subsidiary is legally required
to qualify to transact business as a foreign corporation, certifying the
Company's or Subsidiaries' good standing as a corporation in such
States.
(xvii) Copies of the bylaws of each of the Company and the
Guarantors of resolutions of the Board of Directors of each of the
Company and the Guarantors approving this Agreement, the Notes, the
Borrowings hereunder, the Security Documents and all other Loan
Documents to which the Company or such Guarantor is a party and of all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement, the Notes, the
Security Documents and all other Loan Documents to which the Company or
such Guarantor is a party, in each case certified as true and correct by
the Secretary or an Assistant Secretary of the Company or such
Guarantor.
(xviii) Copies of the June 30, 2001 audit, which such audit
shall be unqualified, the scope of which shall be in accordance with
GAAP, and shall state that such financial statements present fairly in
all material respects the financial condition as at the end of such
Fiscal Year, and the results of operations and statements of cash flows
of the Consolidated Companies for such Fiscal Year in accordance with
GAAP and that the examination by such accountants in connection with
such financial statements has been made in accordance with generally
accepted auditing standards.
(xix) A favorable written opinion of Olshan Grundman Frome
Rosenzweig & Wolosky LLP, counsel for the Company and the Guarantors,
substantially in the form of Exhibit G attached hereto, and covering
40
such additional matters relating to the transactions contemplated hereby
as the Required Lenders may reasonably request, addressed to each Agent
and the Lenders.
(xx) Certified copies of all consents, approvals,
authorizations, registrations or filings required to be made or obtained
by the Company or the Guarantors in connection with the transactions
contemplated hereby and by the other Loan Documents
(c) Since June 30, 2001, there shall have been no change which has
had or could reasonably be expected to have a Materially Adverse Effect;
(d) Evidence of the executed Amendment No. 7 to Senior Subordinated
Note Purchase Agreement, together with evidence that all conditions precedent to
the effectiveness of Amendment No. 7 to Senior Subordinated Note Purchase
Agreement have been contemporaneously satisfied or waived, in form and substance
satisfactory to the Lenders;
(e) All corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all Loan Documents and
other documents incident thereto or delivered in connection therewith shall be
satisfactory in form and substance to each Lender;
(f) The Company and its Subsidiaries shall have a Consolidated Net
Worth of at least $32,490,000;
(g) The Total Debt Coverage Ratio of the Company and its
Subsidiaries shall be no more than 4.50:1:00; provided, however, that
realization of the costs and charges taken by the Company for the Fiscal Quarter
ending June 30, 2001 in the amount of $7,600,000.00 shall not be considered in
the calculation of the Total Debt Coverage Ratio; provided, further, for
purposes of determining the Total Debt Coverage Ratio of the Company and its
Subsidiaries as of the Closing Date, Annualized EBITDA shall be the product of
EBITDA for the fiscal quarter ending on June 30, 2001 multiplied by four; and
(h) The Senior Debt Coverage Ratio shall be less than 2.75:1.00;
provided, however, that realization of the costs and charges taken by the
Company for the Fiscal Quarter ending June 30, 2001 in the amount of
$7,600,000.00 shall not be considered in the calculation of Senior Debt Coverage
Ratio; provided, further, for purposes of determining the Senior Debt Coverage
Ratio of the Company and its Subsidiaries as of the Closing Date, Annualized
EBITDA shall be the product of EBITDA for the fiscal quarter ending on June 30,
2001 multiplied by four.
SECTION 3.02 Conditions Precedent to Each Advance and Letters of
Credit. At the time of the making by the Lenders of each Advance hereunder
(including the initial Advances) and the issuance of all Letters of Credit
(before as well as after giving effect to such Advances and the proposed use of
the proceeds thereof and the issuance of Letters of Credit), the following
statements shall be true:
(a) The representations and warranties contained in Article IV
hereof are true and correct in all material respects on and as of the date of
such Borrowing or the issuance of such Letters of Credit as though made on and
as of such date, except insofar as such representations and warranties speak
41
only as of a prior date or reflect transactions and events after the Closing
Date, as permitted by the Loan Documents;
(b) No Default or Event of Default exists or would result from such
Borrowing or from the application of the proceeds therefrom;
(c) Since the date of the most recent consolidated financial
statements of the Company described in Section 4.14 or delivered to the Lenders
pursuant to Section 5.02, nothing shall have occured which has had or could
reasonably be expected to have a Materially Adverse Effect;
(d) There shall be no action or proceeding instituted or pending
before any court or other governmental authority or, to the knowledge of the
Company, threatened (i) which reasonably could be expected to have a Materially
Adverse Effect, or (ii) seeking to prohibit or restrict the ownership or
operation of any portion of the business or assets of the Company or any of its
Subsidiaries, or to compel the Company or any of its Subsidiaries to dispose of
or hold separate all or any portion of its businesses or assets, where such
portion or portions of such business(es) or assets, as the case may be,
constitute a material portion of the total businesses or assets of the Company
or its Subsidiaries;
(e) The Advances to be made and the use of proceeds or the issuance
of such Letters of Credit thereof shall not contravene, violate or conflict
with, or involve the Administrative Agent or any Lender in a violation of, any
Applicable Law;
(f) each Notice of Borrowing given by the Company in accordance with
Section 2.02(a) hereof or issuance of a Letter of Credit and the acceptance by
the Company of the proceeds of any Borrowing shall constitute a representation
and warranty by the Company, made as of the time of the making of such Borrowing
or the issuance of such Letter of Credit that the conditions specified in
Section 3.02(a) have been fulfilled as of such time unless a notice to the
contrary specifically captioned "Disclosure Statement" is received by each of
the Lenders from the Company prior to 5:00 p.m. (New York, New York time) on the
Business Day immediately preceding the date of the making of such Borrowing. To
the extent that the Required Lenders agree to make such Borrowing after receipt
of a Disclosure Statement in accordance with the preceding sentence, the
representations and warranties pursuant to the preceding sentence will be deemed
made as modified by the contents of such Disclosure Statement and repeated, as
so modified, as at the time of the making of such Borrowing. Any such
modification shall be effective only for the occasion on which the Lenders elect
to make an Advance on such Borrowing, and unless expressly agreed by the
Required Lenders in writing to the contrary in accordance with Section 10.02,
shall not be deemed a waiver or modification of any condition to the making of
any future Borrowing.
SECTION 3.03 Effect of Amendment and Restatement. Upon the
effectiveness of this Agreement pursuant to Section 3.01, from and after the
Closing Date: (a) the terms and conditions of the Original Credit Agreement
shall be amended as set forth herein and, as so amended, shall be restated in
their entirety, but only with respect to the rights, duties and obligations
among Company, the Lenders and the Administrative Agent accruing from and after
the Closing Date; (b) the New Lenders shall be deemed to have become Lenders
hereunder and under all other Loan Documents, and the Lenders party to the
42
Original Credit Agreement (the "Original Lenders") shall be deemed to have
assigned, and the New Lenders shall be deemed to have accepted assignment of, a
portion of the "Loans" and a portion of the participation in "Letters of Credit"
and "Swing Line Loans" outstanding under the Original Credit Agreement such that
after giving effect thereto, all "Loans" and all participations in "Letters of
Credit" and "Swing Line Loans" outstanding under the Original Credit Agreement
and now outstanding under this Agreement are held by the Lenders in amounts
equal to the Lenders' Pro Rata Shares of the respective Commitments, (c) this
Agreement shall not in any way release or impair the rights, duties, Obligations
or Liens created pursuant to the Original Credit Agreement or any other Loan
Document (as defined therein) or affect the relative priorities thereof, in each
case to the extent in force and effect thereunder as of the Closing Date and
except as modified hereby or by documents, instruments and agreements executed
and delivered in connection herewith, and all of such rights, duties,
Obligations and Liens are assumed, ratified and affirmed by Company; (d) all
indemnification obligations of the Company under the Original Credit Agreement
and any other Loan Documents (as defined therein) shall survive the execution
and delivery of this Agreement and shall continue in full force and effect for
the benefit of the Original Lenders, the Agent, and any other Person indemnified
under the Original Credit Agreement or any other Loan Document (as defined
therein) at any time prior to the Closing Date, (e) the Obligations incurred
under the Original Credit Agreement shall, to the extent outstanding on the
Closing Date, continue outstanding under this Agreement and shall not be deemed
to be paid, released, discharged or otherwise satisfied by the execution of this
Agreement, and this Agreement shall not constitute a refinancing, substitution
or novation of such Obligations or any of the other rights, duties and
obligations of the parties hereunder; (f) the execution, delivery and
effectiveness of this Agreement shall not operate as a waiver of any right,
power or remedy of the Original Lenders or the Agent (as defined therein) under
the Original Credit Agreement, nor constitute a waiver of any covenant,
agreement or obligation under the Original Credit Agreement, except to the
extent that any such covenant, agreement or obligation is no longer set forth
herein or is modified hereby; (g) any and all references to the Original Credit
Agreement in each and every Collateral Document and all other Loan Documents
shall, without further action of the parties, be deemed a reference to the
Original Credit Agreement, as amended and restated by this Agreement, and as
this Agreement shall be further amended, restated, supplemented or otherwise
modified from time to time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Company and the Subsidiaries represent and warrant as follows:
SECTION 4.01 Status of Company; Status of Subsidiaries. The Company
and each Subsidiary that is a corporation are duly organized, validly existing
and in good standing under the laws of the jurisdictions of their respective
incorporation and have the corporate power and authority to own their respective
property and assets and to transact the businesses in which they respectively
are engaged or presently propose to engage and are duly qualified and in good
standing as foreign corporations in all states where failure to be so qualified
and in good standing could have a Materially Adverse Effect. Each Subsidiary
43
that is a partnership or limited liability company is duly constituted or
organized, as the case may be, existing and in good standing under the laws of
the jurisdiction of its constitution and has all requisite power, authority and
legal right to own its property and assets and to transact the businesses in
which it is engaged or presently proposes to engage and is duly qualified and in
good standing as a foreign partnership or foreign limited liability company, as
the case may be, wherever failure to be so qualified and in good standing could
have a Materially Adverse Effect. The Company and each of its Subsidiaries have
the power to own their respective properties and to carry on their respective
businesses as now being conducted. The Company is adequately capitalized for the
purpose of conducting its business, was not formed solely for the purpose of
acting as agent for, or as an instrumentality of, any Subsidiary.
SECTION 4.02 Power and Authority. Each of the Company and the
Guarantors has the corporate or organizational power, as the case may be, and
has taken all necessary corporate action or other organizational action, as the
case may be, (including, without limitation, any consent of stockholders or
members, as the case may be, required by law or by its certificate of
incorporation, articles of organization, bylaws or operating agreement, as the
case may be) to authorize it, to execute, deliver and carry out the terms and
provisions of and to incur its obligations under this Agreement, the Notes, the
Security Documents and the other Loan Documents to which it is a party. This
Agreement, the Notes, the Security Documents and the other Loan Documents have
been duly authorized, executed and delivered by the Company and the Guarantors
party thereto.
SECTION 4.03 Compliance with Other Instruments. The execution,
delivery and performance by the Company and any Guarantors party thereto, as the
case may be, of this Agreement, the Notes, the Security Documents and the other
Loan Documents to which it is a party, (a) will not contravene any provision of
Applicable Law, rule, regulation, judgment, order or ruling, (b) will not
conflict with, be inconsistent with, or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of any Lien upon any of the property or
assets of the Company or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed to secure debt, deed of trust, or any other material
agreement or instrument to which the Company or any of its Subsidiaries is a
signatory or by which it is bound or to which it may be subject, (c) will not
violate any provision of the certificate of incorporation (or equivalent
thereof) or bylaws (or equivalent thereof) of the Company or any corporate
Subsidiary of the Company or the certificate of partnership or other document
governing the constitution or conduct of affairs of any Subsidiary of the
Company that is not a corporation, (d) will not require any Governmental
Approval and (e) will not result in the creation of any Lien upon the assets or
properties of the Company and its Subsidiaries except as contemplated by the
Security Documents. Neither the Company nor any of its Subsidiaries is a party
to, or otherwise subject to any provision contained in, any instrument
evidencing Indebtedness of the Company or any of its Subsidiaries, any agreement
relating thereto or any other contract or agreement (including its charter)
which limits the amount of, or otherwise imposes restrictions on the incurring
of, Indebtedness of the type to be evidenced by the Notes, other than the Senior
Subordinated Debt.
SECTION 4.04 Enforceable Obligations. This Agreement, the Notes, the
Security Documents and the other Loan Documents constitute the legal, valid and
binding obligation of the Company and the Guarantors party thereto, enforceable
44
in accordance with their terms, except as the enforceability thereof may be
limited by Bankruptcy Law and by general principles of equity.
SECTION 4.05 Governmental Authorizations. The Company and its
Subsidiaries are in good standing with respect to all governmental
authorizations, consents, approvals, orders, licenses and other actions required
by any governmental or non-governmental authority or Person, except where the
failure to maintain such good standing will not have a Materially Adverse
Effect.
SECTION 4.06 Intellectual Property. Each of the Company and its
Subsidiaries owns or has the right to use all patents, trademarks, service
marks, trade names, copyrights, licenses and other rights, free from burdensome
restrictions, which are material for the operation of its business as presently
conducted. Nothing has come to the attention of the Company, any of its
Subsidiaries or any of their respective directors and officers to the effect
that (i) any product, process, method, substance, part or other material
presently contemplated to be sold by or employed by Company or any of its
Subsidiaries in connection with its business may infringe any patent, trademark,
service mark, trade name, copyright, license or other right owned by any other
Person, (ii) there is pending or threatened any claim or litigation against or
affecting the Company or any of its Subsidiaries contesting its right to sell or
use any such product, process, method, substance, part or other material or
(iii) there is, or there is pending or proposed, any patent, invention, device,
application or principle or any statute, law, rule, regulation, standard or code
which would prevent, inhibit or render obsolete the production or sale of any
products of, or substantially reduce the projected revenues of, or otherwise
have a Materially Adverse Effect.
SECTION 4.07 Outstanding Indebtedness. Neither the Company nor any
of its Subsidiaries, on a consolidated basis, has outstanding any Indebtedness,
except as described on Schedule 4.07 hereto. There exists no default under the
provisions of any instrument evidencing or securing any Indebtedness of the
Company or any of its Subsidiaries or of any agreement otherwise relating
thereto which has had or would reasonably be expected to have a Materially
Adverse Effect.
SECTION 4.08 Insurance Coverage. All property of the Company and any
of its Subsidiaries is insured within terms reasonably acceptable to the Lenders
for the benefit of the Company or a Subsidiary of the Company in amounts deemed
adequate by the Company's management in its reasonable business judgment and not
materially less than those amounts customary in the industry in which the
Company and its Subsidiaries operate against risks usually insured against by
Persons operating businesses similar to those of the Company or its Subsidiaries
in the localities where such properties are located, and the Administrative
Agent has been named loss payee or additional insured, as its interest may
appear, on all such policies. Attached as Schedule 4.08 hereto are certificates
evidencing such insurance.
SECTION 4.09 Title to Properties. Each of the Company and its
Subsidiaries has (i) good and marketable fee simple title to its respective real
properties (other than real properties it leases from others), including such
real properties reflected in the financial statements referred to in Section
4.14, subject to no Lien of any kind except Liens permitted by Section 6.01, and
(ii) good title to all of its other respective properties and assets (other than
45
properties and assets which it leases from others), including the other
properties and assets reflected in the financial statements referred to in
Section 4.14, subject to no Lien of any kind except Liens permitted by Section
6.01. Each of the Company and its Subsidiaries enjoys peaceful and undisturbed
possession in all material leases necessary for the operation of its respective
properties and assets, none of which contains any unusual or burdensome
provisions that would adversely affect or impair the operation of such
properties and assets, and all such leases are valid and subsisting and in full
force and effect.
SECTION 4.10 No Burdensome Restrictions. Neither the Company nor any
of its Subsidiaries is a party to any contract or agreement that would result in
any burdensome restrictions that might reasonably be expected to have a
Materially Adverse Effect, including, but not limited to, any collective
bargaining agreements.
SECTION 4.11 No Material Violation of Law. Neither the Company nor
any of its Subsidiaries has any notice of any violation of any law, statute,
order, regulation or judgment entered against it by any court that may
reasonably be expected to have a Materially Adverse Effect.
SECTION 4.12 No Default Under Other Agreements. Neither the Company
nor any of its Subsidiaries is in default under any agreement or instrument
relating to any Indebtedness with an aggregate outstanding or principal amount
of $250,000 or more.
SECTION 4.13 No Equity Investments. Neither the Company nor any of
its Subsidiaries possesses investments in any equity or other long-term
investments in any person, except permitted investments allowed under Section
6.09, including any wholly-owned Subsidiaries of the Company and the
Subsidiaries.
SECTION 4.14 Financial Statements. The audited consolidated
financial statements of the Company dated June 30, 2001, and the related
consolidated statements of income (including supporting footnote disclosures),
with opinion of Margolin, Winer & Evens LLP heretofore furnished to the Lenders,
is all true and correct in all material respects and present fairly the
consolidated financial condition at the date of said financial statements and
the results of operations for the fiscal period then ending of the Company. The
Company as of such date did not have any significant liabilities, contingent or
otherwise, including liabilities for Taxes or any unusual forward or long-term
commitments which were not disclosed by or reserved against in the financial
statements referred to above or in the notes thereto, and at the present time
there are no material unrealized or anticipated losses from any unfavorable
commitments of the Company or any of its Subsidiaries. The financial statements
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved. Since June 30, 2001, nothing has occurred which
has had or could reasonably be expected to have a Materially Adverse Effect.
SECTION 4.15 Litigation. There are no actions, suits, investigations
or proceedings pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or any of its
Subsidiaries or any of their properties or rights by or before any court,
arbitrator or administrative or governmental body that would have a Materially
Adverse Effect.
46
SECTION 4.16 Taxes. Each of the Company and its Subsidiaries has
filed or caused to be filed all declarations, reports and tax returns including,
in the case of the Company and each Subsidiary located in the United States, all
federal and state income tax returns which it is required by law to file, and
has paid all Taxes which are shown as being due and payable on such returns or
on any assessments made against it or any of its properties. The accruals and
reserves on the books of the Company and its Subsidiaries in respect of Taxes
are adequate in all material respects for all periods. Neither the Company nor
any of its Subsidiaries has any knowledge of any unpaid adjustment, assessment
or any penalties or interest of significance, or any basis therefor, by any
taxing authority for any period, except those being contested in good faith and
by appropriate proceedings which effectively stay the enforcement of any Lien
and the attachment of a penalty.
SECTION 4.17 Margin Regulations. No part of the proceeds of any of
the Advances will be used for any purpose which violates, or which would be
inconsistent or not in compliance with, the provisions of the applicable Margin
Regulations.
SECTION 4.18 ERISA. Except as disclosed on Schedule 4.18 attached
hereto:
(a) Identification of Plans. (1) Neither the Company nor any of its
Subsidiaries maintains or contributes to or has an obligation to contribute to,
a Plan that is an "employee pension benefit plan" as defined in Section 3(2) of
ERISA or any plan, program or arrangement that provides for deferred
compensation, (2) neither the Company nor any of its Subsidiaries nor any of
their respective ERISA Affiliates in the last five years has maintained or
contributed to, or has had an obligation to contribute to, a Plan that is
subject to Title IV of ERISA and (3) neither the Company nor any of its
Subsidiaries maintains or contributes to any Foreign Plan.
(b) Compliance. Except as could not reasonably be expected to result
in a Materially Adverse Effect, each Plan maintained by Company and any of its
Subsidiaries is by its terms and in operation, in substantial compliance with
all applicable laws, and neither the Company nor any of its Subsidiaries has
been assessed, and to the knowledge of the Company, is subject to, any tax or
penalty with respect to any Plan of the Company, its Subsidiaries, or any ERISA
Affiliate thereof, including without limitation, any tax or penalty under Title
I or Title IV of ERISA or under Chapter 43 of the Tax Code, or any tax or
penalty resulting from a loss of deduction under Sections 162, 404, or 419 of
the Tax Code.
(c) Liabilities. Neither the Company nor any of its Subsidiaries has
been assessed and to the knowledge of the Company are not subject to, any
material monetary liabilities (including withdrawal liabilities) with respect to
any Plans or Foreign Plans of such the Company, its Subsidiaries or any of their
ERISA Affiliates, including without limitation, any liabilities arising from
Titles I or IV of ERISA, other than obligations to fund benefits under an
ongoing Plan and to pay current contributions, expenses and premiums with
respect to such Plans or Foreign Plans.
(d) Funding. The Company and its Subsidiaries and, with respect to
any Plan which is subject to Title IV of ERISA, each of their respective ERISA
Affiliates, have made full and timely payment of all amounts (A) required to be
contributed under the terms of each Plan and applicable law, and (B) required to
be paid as expenses (including PBGC or other premiums) of each Plan, and no Plan
47
subject to Title IV of ERISA has an "amount of unfunded benefit liabilities" (as
defined in Section 4001 (a)(18) of ERISA), determined as if such Plan terminated
on any date on which this representation and warranty is deemed made. Neither
the Company nor any of its Subsidiaries are subject to any liabilities with
respect to post-retirement medical benefits.
(e) Prohibited Transactions. Neither the Company nor any of its
Subsidiaries has engaged in, or has any knowledge of, any non-exempt prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Tax Code) with respect to any Plan.
(f) Qualification of Plans. A favorable determination as to the
qualification under Section 401(a) of the Tax Code has been made by the Internal
Revenue Service with respect to each Plan intended to be qualified under Section
401(a) of the Tax Code and, to the best knowledge of each of the Company and its
Subsidiaries, nothing has occurred since the date of such determination that
would adversely affect such qualification.
(g) Withdrawal. Except as could not reasonably be expected to result
in a Materially Adverse Effect, neither the Company, any of its Subsidiaries,
nor any of their respective ERISA Affiliates has:
(i) ceased operations at a facility so as to become subject to
the provisions of Section 4062(e) of ERISA,
(ii) withdrawn as a substantial employer so as to become subject
to the provisions of Section 4063 of ERISA,
(iii) ceased making contributions to any "employee pension
benefit plan" subject to the provisions of Section 4064(a) of ERISA to
which any of the Consolidated Companies or any of their respective ERISA
Affiliates made contributions,
(iv) incurred or caused to occur a "complete withdrawal" (within
the meaning of Section 4203 of ERISA) or a "partial withdrawal" (within
the meaning of Section 4205 of ERISA) from a Multiemployer Plan so as to
incur withdrawal liability under Section 4201 of ERISA (without regard to
subsequent reduction or waiver of such liability under Sections 4207 or
4208 of ERISA), or
(v) been a party to any transaction or agreement under which the
provisions of Section 4204 of ERISA were applicable and which could
reasonably be expected to result in liability for any of the Company or
its Subsidiaries.
(h) Proceedings. Except as could not reasonably be expected to
result in a Materially Adverse Effect, there are no actions, suits or claims
pending (other than routine claims for benefits) or, to the knowledge of any of
the Company or any of its Subsidiaries, which could reasonably be expected to be
asserted, against any Plan maintained for employees or the assets of any such
Plan. No civil or criminal action brought pursuant to the provisions of Title I,
Subtitle B, Part 5 of ERISA, is pending or, to the best knowledge of any of the
Company or any of its Subsidiaries, threatened against any fiduciary or any
Plan.
48
SECTION 4.19 Compliance With Environmental Laws.
(a) The Company and its Subsidiaries are not in violation of, and do
not presently have outstanding any liability under, have not been notified that
they are or may be liable under and do not have knowledge of any liability or
potential liability under any applicable Environmental Laws which violation,
liability or potential liability could reasonably be expected to have a
Materially Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries has received a
written request for information under any Environmental Laws stating or
suggesting that the Company or any of its Subsidiaries has or may have liability
thereunder or written notice that any such entity has been identified as a
potentially responsible party under any Environmental Laws, or any comparable
state law, or any public health or safety or welfare law, nor has any such
entity received any written notification that any Hazardous Substance that it or
any of its respective predecessors in interest has generated, stored, treated,
handled, transported, or disposed of, has been released or is threatened to be
released at any site at which any Person intends to conduct or is conducting a
remedial investigation or other action pursuant to any Environmental Laws.
(c) Each of the Company and its Subsidiaries has obtained all
material permits, licenses or other authorizations required for the conduct of
their respective operations under all applicable Environmental and Asbestos Laws
and each such authorization is in full force and effect.
(d) Each of the Company and its Subsidiaries complies in all
material respects with all laws and regulations relating to equal employment
opportunity and employee safety in all jurisdictions in which it is presently
doing business, and Company will use its reasonable best efforts to comply, and
to cause each of its Subsidiaries to comply, with all such laws and regulations
which may be legally imposed in the future in jurisdictions in which Company or
any of its Subsidiaries may then be doing business.
SECTION 4.20 Possession of Material Patents, Trademarks, Etc. Each
of the Company and its Subsidiaries possesses all patents, trademarks, licenses,
and other intellectual property rights that are necessary in any material
respect for the ownership, maintenance and operation of its properties and
assets and they are possessed free from any burdensome restrictions. To the
Company's knowledge, there are no infringements of such patents, trademarks,
licenses, and other intellectual property rights that could have a Materially
Adverse Effect.
SECTION 4.21 Subsidiaries. Schedule 4.21 attached hereto correctly
sets forth the name of each Subsidiary of the Company, the jurisdiction of such
Subsidiary's incorporation or organization and the ownership of all issued and
outstanding capital stock of such Subsidiary. All the outstanding shares of the
capital stock or other equity interests of each such Subsidiary have been
validly issued and are fully paid and nonassessable and all such outstanding
shares, except as noted on such Schedule 4.21, are owned of record and
beneficially by the Company or a wholly-owned Subsidiary of the Company free of
any Lien or claim, except for Liens in favor of the Administrative Agent.
49
SECTION 4.22 Disclosure. Neither this Agreement, any Loan Document
nor any other document, certificate or statement furnished to the Lenders or the
Administrative Agent by or on behalf of the Company or any Guarantor in
connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein not misleading, if, in either case, such fact is material to an
understanding of the financial condition, business, prospects or property of the
Company and its Subsidiaries, or the ability of the Company and its Subsidiaries
to fulfill its obligations under any Loan Documents to which it is a party.
SECTION 4.23 Projections. In the good faith judgment of the Chief
Financial Officer and Chief Executive Officer of the Company and its
Subsidiaries the projections, a copy of which are attached hereto as Exhibit J,
constitute the prospects of financial performance of the Company for the periods
indicated in such projections, absent unanticipated changed circumstances or
events, many of which are beyond the Company's control.
SECTION 4.24 Subordinated Debt. As of the Closing Date, the Company
has delivered to the Administrative Agent a complete and correct copy of the
Senior Subordinated Note Purchase Agreement and the Subordinated Notes
(including all schedules, exhibits, amendments, supplements, modifications,
assignments and all other documents delivered pursuant thereto or in connection
therewith). The Company has the corporate power and authority to incur the
Indebtedness evidenced by the Subordinated Notes. The subordination provisions
contained in the Senior Subordinated Note Purchase Agreement are enforceable
against the holders of the Subordinated Notes by Administrative Agent and
Lenders. All Obligations, including the Obligations to pay principal of and
interest on the Loans and the Letter of Credit Obligations, constitute senior
Indebtedness entitled to the benefits of the subordination provisions contained
in the Senior Subordinated Note Purchase Agreement. The principal of and
interest on the Notes, all Letter of Credit Obligations and all other
Obligations will constitute "senior debt" as that or any similar term is or may
be used in any other instrument evidencing or applicable to any other
Subordinated Debt. The Company acknowledges that the Administrative Agent and
each Lender are entering into this Agreement in reliance upon the subordination
provisions of the Subordinated Notes and this Section 4.24.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Note shall remain unpaid or any Lender shall have any
Commitment hereunder, unless the Required Lenders shall otherwise consent in
writing:
SECTION 5.01 Use of Proceeds. The proceeds of all Borrowings will be
used by the Company as provided in Section 2.15. None of the proceeds of any
Borrowing shall be used, directly or indirectly, to purchase or carry, or to
reduce or retire or refinance any credit incurred to purchase or carry, any
"margin security" or "margin stock" (within the meaning of the regulations of
50
the Board of Governors of the Federal Reserve System) or to extend credit to
others for the purpose of purchasing or carrying any such "margin security" or
"margin stock" or for any other purpose that might deem this transaction as a
"purpose credit" (within the meaning of the regulations of the Board of
Governors of the Federal Reserve System). If requested by any Lender, the
Company will furnish to such Lender statements in conformity with the
requirements of Federal Reserve Form U-1 referred to in Regulation U.
SECTION 5.02 Interest Rate Protection. Within 90 days from the
Closing Date, the Company shall enter into and maintain until the Commitment
Termination Date an agreement providing for payments which are related to
fluctuations of interest rates by which the Company is protected against changes
in the variable rates of interest payable on its indebtedness as to a notional
amount of approximately fifty-five percent (55%) of Total Debt.
SECTION 5.03 Reporting Covenants.
(a) The Company will furnish to the Administrative Agent for
distribution to each of the Lenders:
(i) as soon as available and in any event no later than 90 days
after the end of each Fiscal Year of the Company, an audited consolidated
balance sheet of the Company and its Subsidiaries as of the close of such
Fiscal Year, and the related audited consolidated statements of income and
cash flow of the Company and its Subsidiaries for such fiscal year, all in
reasonable detail and with (1) an unqualified opinion of Margolin, Winer &
Evens LLP, or such other independent certified public accountant of
recognized standing selected by the Company and satisfactory to the
Required Lenders, (2) a certificate (with supporting details and
calculations of financial covenants) from the Chief Financial Officer of
the Company stating whether a Default or Event of Default exists and (3) a
copy of the auditors letter to management; provided, however, that at any
other time that the auditors issue a letter to management, the Company
shall provide such letter within 10 days after receiving such letter;
provided, further, that if an auditors letter to management is available
at closing, the Company shall provide such letter on the Closing Date;
(ii) as soon as available and in any event within 45 days after
the end of each fiscal quarter of the Company that is not the end of a
Fiscal Year, its quarterly unaudited financial statements, together with
(A) a certificate in the form of Exhibit H hereto (the "Compliance
Certificate") by the Chief Financial Officer of the Company (with
supporting details and calculations of financial covenants) stating that
(x) the financials were prepared in accordance with GAAP (subject to
customary year-end audit adjustments) and that the covenants described in
Article VII have been met and (y) whether a Default or Event of Default
exists (specifying the nature thereof and intended response) and (B) a
comparison of the quarterly unaudited financial statements to the
projections and an analysis as to the differences, if any, between the
unaudited financial statements and the projections;
(iii) as soon as available and in any event within 45 days after
the end of each month, the consolidated balance sheet and related
statement of income of the Company, which shall include the amount of
Capital Expenditures for such month; and
51
(iv) as soon as available and in any event not later than
forty-five (45) days after the end of each fiscal year of the Company,
financial projections with supporting assumptions for the following fiscal
year, in a form satisfactory to the Agents.
In each case, such financial statements, pursuant to (a)(i), (a)(ii)
and (a)(iv) above, shall include balance sheets, income statements, and
statements of cash flows for the Company.
(b) The Company will promptly furnish to each of the Lenders notice
of certain other events, including the occurrence or existence of any Default or
Event of Default, any citation for a material violation of environmental laws or
regulations, important matters relating to funding of employee benefit plans, or
such other information as any Lender or the Administrative Agent may reasonably
request.
SECTION 5.04 Maintenance of Properties. The Company shall, and shall
cause each of its Subsidiaries to, maintain, preserve, protect and keep, or
cause to be maintained, preserved, protected and kept, its properties and every
part thereof in good repair, working order and condition, and from time to time
will make or cause to be made all needful and proper repairs, renewals,
replacements, extensions, additions, betterments, and improvements thereto, so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times other than those which the failure to
maintain would, individually or in the aggregate, have no Materially Adverse
Effect; provided, however, that the Company and each Subsidiary shall not be
under any obligation to repair or replace any such properties which have become
obsolete or have become unsuitable or inadequate for the purpose for which they
are used.
SECTION 5.05 Maintenance of Insurance. The Company shall, and shall
cause each of its Subsidiaries to, (i) maintain liability and workers'
compensation insurance with financially sound and reputable insurers (or
maintain a legally sufficient, fully funded, program of self insurance against
workers' compensation liabilities), and also maintain adequate insurance on its
properties against such hazards and in at least such amounts as is customary in
the business, and (ii) name the Administrative Agent as loss payee or additional
insured, as its interest may appear, on each of such insurance policies. At the
request of any Lender, the Company will forthwith deliver an officer's
certificate specifying the material details of such insurance in effect.
SECTION 5.06 Maintenance of Books; Inspection of Property and
Records. The Company shall, and shall cause each of its Subsidiaries to, keep
proper books of record and account containing complete and accurate entries in
all material respects of all of their respective financial and business
transactions and prepare or cause to be prepared its annual statements and
reports in accordance with GAAP. The Company shall, and shall cause each of its
Subsidiaries to, permit any person designated by any Lender, including third
party auditors, to visit and inspect any of its properties, corporate books and
financial records, to make copies and take extracts therefrom, and to discuss
its accounts, affairs, and finances with the principal officers of the Company
and such Subsidiary during reasonable business hours, all at such times as the
Lenders may reasonably request and at the expense of the Company; provided,
however, that any time following the occurrence and continuance of an Event of
Default, no prior notice to the Company and such Subsidiary shall be required.
52
The Company shall, and shall cause each of its Subsidiaries to, prepare or cause
to be prepared its interim statements and reports in accordance with GAAP,
subject to usual and customary year end audit and adjustments and footnote
disclosures.
SECTION 5.07 Existence and Status. The Company shall, and shall
cause each of its Subsidiaries that is a corporation to, maintain its corporate
existence, its material rights, franchises and licenses (for the scheduled
duration thereof), its patents, trademarks, trade names, service marks and other
intellectual property rights necessary or desirable in the normal conduct of its
business, its good standing in its state of incorporation and its qualification
and good standing as a foreign corporation in all jurisdictions where its
ownership of property or its business activities cause such qualification to be
required and the failure to do so could have a Materially Adverse Effect. The
Company shall cause each Subsidiary that is not a corporation to maintain its
present form of existence, its material rights, franchises and licenses (for the
scheduled duration thereof), its patents, trademarks, trade names, service marks
and other intellectual property rights necessary or desirable in the normal
conduct of its business, its good standing in the jurisdiction of its
constitution and its qualification and good standing as a foreign entity in all
jurisdictions where its ownership of property or its business activities cause
such qualification to be required and the failure to do so could have a
Materially Adverse Effect.
SECTION 5.08 Taxes and Claims. The Company shall, and shall cause
each of its Subsidiaries to, pay and discharge (i) all Taxes prior to the date
on which penalties attach thereto, and (ii) all claims (including, without
limitation, claims for labor, materials, supplies or services) (collectively
"Other Claims") which, if unpaid, might become a Lien upon any of its property;
provided, however, that the Company and its Subsidiaries shall not be required
to pay and discharge any such Tax or Other Claim so long as the legality or
amount thereof shall be promptly contested in good faith and by appropriate
proceedings which effectively stay the enforcement of any Lien and the
attachment of a penalty and the Company or such Subsidiary, as the case may be,
shall have set aside appropriate reserves therefor in accordance with GAAP.
SECTION 5.09 Compliance with Laws, Etc. The Company shall, and shall
cause each of its Subsidiaries to, comply with all Applicable Law (including,
without limitation, the Environmental Laws and Employee Benefit Laws) and
Contractual Obligations applicable to or binding on any of them where the
failure to comply with such Applicable Law and Contractual Obligations would
reasonably be expected to have a Materially Adverse Effect.
SECTION 5.10 ERISA. The Company shall, and shall cause each of its
Subsidiaries to, deliver to each of the Lenders:
(a) Promptly after the occurrence thereof with respect to any Plan,
or any trust established thereunder, notice of (A) a "reportable event"
described in Section 4043 of ERISA and the regulations issued from time to time
thereunder (other than a "reportable event" not subject to the provisions for
30-day notice to the PBGC under such regulations), or (B) any other event which
could subject the Company or any of its Subsidiaries to any tax, penalty or
liability under Title I or Title IV of ERISA or Chapter 43 of the Tax Code, or
any tax or penalty resulting from a loss of deduction under Sections 162, 404 or
419 of the Tax Code, or any tax, penalty or liability (other than amounts that
become payable in the normal operation of any Plan) under any requirement of
53
Applicable Law applicable to any Foreign Plan, where any such taxes, penalties
or liabilities exceed or could exceed $500,000 in the aggregate;
(b) Promptly after such notice must be provided to the PBGC, or to a
Plan participant, beneficiary or alternative payee, any notice required under
Section 101(d), 302(f)(4), 303, 304, 307, 4041(a)(2) of ERISA or under Section
401(a)(29) or 412 of the Tax Code with respect to any Plan of the Company, any
of its Subsidiaries or any ERISA Affiliate thereof;
(c) Upon the request of the Administrative Agent, promptly upon the
filing thereof with the Internal Revenue Service ("IRS") or the Department of
Labor ("DOL"), a copy of IRS Form 5500 or annual report for each Plan of the
Company, any of its Subsidiaries or ERISA Affiliate thereof which is subject to
Title IV of ERISA;
(d) Upon the request of the Administrative Agent, (A) true and
complete copies of any and all documents, government reports and IRS
determination or opinion letters or rulings for any Plan of the Company or any
of its Subsidiaries from the IRS, PBGC or DOL, (B) any reports filed with the
IRS, PBGC or DOL with respect to a Plan of the Company, any of its Subsidiaries
or any ERISA Affiliate thereof, or (C) a current statement of withdrawal
liability for each Multiemployer Plan of the Company, any of its Subsidiaries or
any ERISA Affiliate thereof; and
(e) Promptly upon the Company or any of its Subsidiaries becoming
aware thereof, notice that (i) any material contributions to any Foreign Plan
have not been made by the required due date for such contribution and such
default cannot immediately be remedied, (ii) any Foreign Plan is not funded to
the extent required by the law of the jurisdiction whose law governs such
Foreign Plan based on the actuarial assumptions reasonably used at any time, or
(iii) a material change is anticipated to any Foreign Plan that could reasonably
be expected to have a Materially Adverse Effect.
SECTION 5.11 Litigation. The Company shall give prompt written
notice to each of the Lenders of (a) any judgment entered by a court, tribunal,
administrative agency or arbitration panel in which the amount of liability is
$250,000 or more in excess of insurance coverage, or in which the aggregate
amount of liability is $500,000 or more in excess of insurance coverage, and (b)
any disputes which may exist between the Company or any of its Subsidiaries and
any governmental or regulatory body, in which the amount in controversy is
$250,000 or more and which may materially and adversely affect the normal
business operations of the Company or any of its Subsidiaries or any of their
respective properties and assets. The Company shall provide each of the Lenders,
on a quarterly basis, concurrently with the delivery of the Compliance
Certificate as provided under Section 5.03(a)(ii), a report which shall set
forth each action, proceeding or claim, of which the Company or any of its
Subsidiaries has notice, which is commenced or asserted against the Company or
any of its Subsidiaries, and in which the amount claimed or the potential
liability is $250,000 or more.
SECTION 5.12 Notice of Events of Default. The Company shall deliver
to each of the Lenders within five (5) days after any Executive Officer obtains
any knowledge of any condition, event or act which creates or causes a Default
or an Event of Default, a certificate signed by an officer of the Company
specifying the nature thereof, the period of existence thereof and what action
54
the Company or such Subsidiary proposes to take with respect thereto to the
extent that such Default is subject to notice and capable of being cured.
SECTION 5.13 Stockholder Reports, etc. Contemporaneously with the
sending or filing thereof, the Company will provide to the Administrative Agent
for distribution to each of the Lenders copies of all proxy statements,
financial statements, and reports which the Company sends to its stockholders,
and copies of all regular, periodic, and special reports, and all statements
which the Company files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or with any national
securities exchange.
SECTION 5.14 Future Guarantors.
(a) Subject to any prohibitions or limitations as to power or
authority imposed by law applicable to any such Subsidiary, the Company shall
cause (1) each Person incorporated or otherwise organized in the United States
that hereafter becomes a Subsidiary (an "Additional Guarantor") to become a
Guarantor under the Guaranty Agreement and to create a security interest in
favor of the Lenders in all of its assets, including, to the extent owned by
such Guarantor, 100% of the stock of other Subsidiaries, to the Administrative
Agent upon the creation of such Additional Guarantor by executing and delivering
to the Administrative Agent the Supplemental Documents; and (2) each Person that
owns the stock of the Additional Guarantor to pledge and deliver such stock to
the Administrative Agent, together with a supplement to the Company Pledge
Agreement or Guarantor Pledge Agreement, as the case may be, and with stock
powers or other appropriate instruments of transfer executed by such Person in
blank.
(b) The Additional Guarantor shall also deliver to the
Administrative Agent and the Lenders, simultaneously with the Supplemental
Documents, (1) Certified Requests for Information or Copies (Form UCC-11) or
equivalent reports, showing that there are no effective financing statements
which name the Additional Guarantor as debtor and (2) an opinion rendered by
legal counsel to such Additional Guarantor and the Person required to pledge the
shares of stock of the Additional Guarantor under the Security Documents to the
Administrative Agent, addressing the types of matters set forth in Exhibit G
hereof and such other matters as the Lenders may reasonably request, addressed
to the Administrative Agent and the Lenders.
SECTION 5.15 Ownership of Guarantors. The Company and its
Subsidiaries that own Guarantors shall maintain their percentage ownership of
such Guarantors existing as of the date hereof and shall not decrease its
ownership percentage in each Additional Guarantor pursuant to Section 5.14 after
the date hereof, as such ownership exists at the time such Additional Guarantor
becomes a Guarantor hereunder.
SECTION 5.16 Landlord Waivers. The Company shall use its best
efforts to deliver to the Administrative Agent, within 90 days from the Closing
Date, duly executed landlord waivers and/or warehouseman, or bailee with respect
to all Collateral of the Company or its Subsidiaries located at leased locations
or other locations not owned by the Company in fee simple. So long as any Note
shall remain unpaid or any Lender shall have any Commitment hereunder, the
Company or any of its Subsidiaries shall deliver to the Administrative Agent a
55
duly executed landlord waiver and/or warehouseman agreement, or bailee agreement
with respect to all Collateral of the Company or its Subsidiaries located at any
newly leased locations.
SECTION 5.17 Notices to Holders of Subordinated Debt.
Contemporaneously with the sending or filing thereof, the Company will provide
to the Administrative Agent for distribution to each of the Lenders, any notices
provided to holders of Subordinated Debt.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Note shall remain unpaid or any Lender shall have any
Commitment hereunder, without the written consent of the Required Lenders
(unless otherwise provided herein):
SECTION 6.01 Limitation on Liens and Security Interests. The Company
shall not, and shall not permit any of its Subsidiaries to, create, incur,
assume or suffer to exist, any Lien or other encumbrance of any kind on any of
its properties or assets, real or personal, wherever located, including assets
hereafter acquired, except
(a) Liens existing on the date hereof and described on Schedule
6.01;
(b) Liens in favor of the Administrative Agent;
(c) Liens for Taxes not yet payable or being contested in good faith
and by appropriate proceedings;
(d) deposits or pledges to secure payments of workmen's
compensation, unemployment insurance, old age pension and other social security
obligations;
(e) mechanics', carriers', workmen's, repairmen's, landlord's, or
other Liens arising in the ordinary course of business securing obligations
which are not overdue for a period longer than 60 days, or which are being
contested in good faith by appropriate proceedings;
(f) pledges or deposits to secure performance in connection with
bids, tenders, contracts (other than contracts for the payment of money) or
leases made in the ordinary course of the business of the Company or any of its
Subsidiaries;
(g) deposits to secure, or in lieu of, surety and appeal bonds to
which the Company or a Subsidiary of the Company is a party;
(h) deposits in connection with the prosecution or defense of any
claim in any court or before any administrative commission or agency;
(i) Liens arising out of judgments or awards with respect to which
the Company or a Subsidiary of the Company at the time shall in good faith be
diligently prosecuting an appeal or proceedings for review and with respect to
56
which it shall have secured a stay of execution pending such appeal or
proceedings for review; provided, however, that amount of any appeal bond or
cash collateral submitted by the Company and its Subsidiaries to prosecute an
appeal or proceedings for review shall not exceed $250,000 in the aggregate;
(j) purchase money security interests, and operating leases in the
ordinary course of business, for equipment and machinery, in each case purchased
in the ordinary course of business and to be used in the conduct of its
business, provided that any such security interest secures only the repayment of
the purchase price of such machinery or equipment, not to exceed at any time
$5,000,000 in the aggregate;
(k) Liens on fixtures in connection with existing mortgages on real
property or mortgages permitted hereunder; and (l) zoning restrictions,
easements, licenses, reservations and restrictions on the use of real property
or minor irregularities thereto that do not materially detract from the use
thereof or the assets of the Company or any of its Subsidiaries.
SECTION 6.02 Indebtedness. Create, incur, assume or suffer to exist,
or permit any of its Subsidiaries to create, incur, assume or suffer to exist,
any Indebtedness, other than:
(a) Indebtedness evidenced by this Agreement and by the Notes;
(b) Indebtedness outstanding on the date hereof which is set forth
on Schedule 4.07 hereto;
(c) secured Indebtedness to the extent permitted by clause (j) of
Section 6.01 above;
(d) unsecured current liabilities (not resulting from any borrowing)
incurred in the ordinary course of business for current purposes and not
represented by a promissory note or other evidence of indebtedness;
(e) Indebtedness related to interest rate swaps or hedges, or to
hedge the Company's variable interest rate exposure; or
(f) Indebtedness incurred and consented to in writing by the
Required Lenders.
SECTION 6.03 Compliance with ERISA. The Company shall not take or
fail to take, or permit any of its Subsidiaries or ERISA Affiliates to take or
fail to take, any action with respect to any Plans which are subject to Title IV
of ERISA or to continuation health care requirements for group health plans
under the Tax Code which could reasonably be expected to result in a Materially
Adverse Effect, including without limitation (a) establishing any such Plan, (b)
amending any such Plan (except where required to comply with applicable law),
(c) terminating or withdrawing from any such Plan, or (d) incurring an amount of
unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA, or any
withdrawal liability under Title IV of ERISA with respect to any such Plan.
57
SECTION 6.04 Sale and Leaseback. The Company shall not, and shall
not permit any of its Subsidiaries to, enter into any transaction with any other
entity whereby such other entity leases assets sold or otherwise transferred to
it by the Company or such Subsidiary.
SECTION 6.05 Transactions with Affiliates. The Company shall not,
and shall not permit any of its Subsidiaries to:
(a) Enter into any transaction or series of related transactions,
whether or not in the ordinary course of business, with any affiliate of the
Company or any of its Subsidiaries (but excluding any affiliate which is the
Company or any of its wholly-owned Subsidiaries), other than on terms and
conditions substantially as favorable to the Company or such Subsidiary as would
be obtained by the Company or such Subsidiary at the time in a comparable
arm's-length transaction with a Person other than an affiliate.
(b) Convey or transfer to any other Person (including the Company or
any of its Subsidiaries) any real property, buildings, or fixtures used in the
manufacturing or production operations of the Company or any of its
Subsidiaries, or convey or transfer to the Company or any of its Subsidiaries
any other assets (excluding conveyances or transfers in the ordinary course of
business) if at the time of such conveyance or transfer any Default or Event of
Default exists or would exist as a result of such conveyance or transfer.
SECTION 6.06 Guaranties. The Company shall not, and shall not permit
any of its Subsidiaries to, create, incur, assume, guarantee, suffer to exist or
otherwise become liable on or with respect to, directly or indirectly, any
guaranties other than:
(a) endorsements of instruments for deposit or collection in the
ordinary course of business; or
(b) guarantees of Indebtedness owed by any Consolidated Company to
another Consolidated Company.
SECTION 6.07 Limitations on Payment Restrictions. Except as
otherwise permitted under the Senior Subordinated Debt, the Company shall not,
and shall not permit any of its Subsidiaries to, create or otherwise cause or
suffer to exist or become effective, any consensual encumbrance or restriction
on the ability of the Company or any of its Subsidiaries to (i) pay dividends or
make any other distributions on stock of the Company or any of its Subsidiaries,
(ii) pay any indebtedness owed to the Company or any of its Subsidiaries, or
(iii) transfer any of its property or assets to the Company or any of its
Subsidiaries except any consensual encumbrance or restriction existing under the
Loan Documents or any Senior Subordinated Debt.
SECTION 6.08 Merger; Joint Ventures; Sale of Assets. The Company
shall not, and shall not permit any of its Subsidiaries to:
(a) merge or consolidate with any other entity, except the foregoing
restrictions shall not be applicable to mergers or consolidations of (x) any
Subsidiary with any other Subsidiary which is a Guarantor so long as Guarantor
is a survivor or (y) any Subsidiary with the Company so long as the Company is
the survivor;
58
(b) purchase, lease or otherwise acquire for cash, stock or other
consideration, the stock or other equity interests of any Person or all or any
substantial portion of the assets of any Person; or
(c) enter into a partnership or joint venture with any other entity;
provided, however, that so long as no Event of Default has occurred, the Company
or any of its Subsidiaries may request that the Required Lenders consent to its
entering into a partnership or joint venture for the purposes of carrying on its
business; or
(d) sell, lease, transfer or otherwise dispose of any assets, except
that this Section 6.08 shall not prohibit any disposition of (i) any asset if on
the date such asset is sold, the Asset Value of all asset sales occurring after
the Closing Date, taking into account the Asset Value of the proposed asset
sale, would not exceed on an aggregate basis five percent (5%) of the
Consolidated Net Worth of the Company and its Subsidiaries on the Closing Date
and such sale is in the ordinary course of business, (ii) any obsolete or
retired property not used or useful in its business (such assets to include
high-pressure tanks, motorized vehicles, including cars and trucks that may be
obtained by the Company as part of the group of assets of any corporation or
other business entity the Company may acquire), (iii) the sale of all or parts
of the Company's stand alone high pressure cylinder business or (iv) certain
other sales to be agreed upon in writing by the Company and the Required
Lenders.
SECTION 6.09 Dividends; Loans, Investments, Advances.
(a) In any fiscal year of the Company, the Company shall not pay or
declare any cash dividends on any of its Capital Stock; provided however, the
Company may accrue and accumulate, but not pay, dividends on the Preferred
Stock.
(b) The Company shall not, and shall not permit any of its
Subsidiaries to, make, permit or hold any loans or advances (not including
accounts receivable) to any Person, other than:
(i) Investments in Subsidiaries existing on the Closing Date;
(ii) direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or any agency
thereof, in each case supported by the full faith and credit of the United
States and maturing within one year from the date of creation thereof;
(iii) commercial paper maturing within one year from the date of
creation thereof rated in the highest grade by a nationally recognized
credit rating agency;
(iv) time deposits maturing within one year from the date of
creation thereof, including certificates of deposit issued by any Lender
and any office located in the United States of any bank or trust company
which is organized under the laws of the United States or any state
thereof and has total assets aggregating at least $500,000,000, including
without limitation, any such deposits in Eurodollars issued by a foreign
branch of any such bank or trust company; and
59
(v) Investments made by Plans.
SECTION 6.10 Nature of Business. The Company shall not, and shall
not permit any of its Subsidiaries to, engage in any business or businesses
other than those engaged in by the Company or such Subsidiary on the date
hereof; provided, however, that nothing herein contained shall prevent the
Company or any of its Subsidiaries (i) from expanding the location of its
business or businesses in the United States, (ii) from ceasing or omitting to
exercise any rights, licenses, permits, or franchises which in good faith in the
judgment of the Company or such Subsidiary can no longer be profitably
exercised, or (iii) from engaging in a business or businesses that are ancillary
to those engaged in by the Company or such Subsidiary on the date hereof.
SECTION 6.11 Sale of Subsidiaries. The Company shall not, and shall
not permit any of its Subsidiaries to, sell or otherwise dispose of any shares
of capital stock of or other ownership interest in any Subsidiary of the Company
(except in connection with any acquisition, merger or consolidation permitted by
Section 6.08), or permit any Subsidiary of the Company to issue any additional
shares of its capital stock or other incidents of ownership, except on a pro
rata basis to all its stockholders, partners or owners, as the case may be, and
provided that any such additional shares of capital stock or other incidents of
ownership issued to the Company, any Guarantor or Additional Guarantor are
pledged to the Administrative Agent.
SECTION 6.12 Negative Pledges. The Company shall not, and shall not
permit any of its Subsidiaries to, agree or covenant with any Person to restrict
in any way its ability to grant any Lien on its assets in favor of the Lenders,
except that this Section 6.12 shall not apply to (i) any covenants contained in
this Agreement or the Security Documents, (ii) the covenants contained in
Section 8.02 of the Senior Subordinated Note Purchase Agreement, and (iii)
covenants and agreements made in connection with Liens described in Section
6.01(j) but only if such covenant or agreement applies solely to the specific
machinery, equipment or real estate to which such Lien relates.
SECTION 6.13 Creation of Subsidiaries. Neither the Company nor any
of its Subsidiaries shall create or acquire any other Subsidiary or any other
affiliate after the Closing Date.
SECTION 6.14 Prepayments Under and Amendment of Other Agreements.
The Company shall not, and shall not permit any of its Subsidiaries to make,
without the prior written consent of the Lenders, any prepayments under any
Subordinated Debt document, except as a result of a refinancing permitted below.
With the prior written consent of the Required Lenders, the Company shall be
permitted to (i) amend or waive any material terms or conditions under any
Subordinated Debt document, and (ii) substitute or refinance any Subordinated
Debt, on a dollar for dollar basis; provided, however, the effect of such
amendment, waiver, substitution or refinancing shall not: (a) increase the
interest rate on such Subordinated Debt; (b) change the dates upon which
payments of principal or interest are due on such Subordinated Debt other than
to extend such dates; (c) change any default or event of default other than to
delete or make less restrictive any default provision therein, or add any
covenant with respect to such Subordinated Debt; (d) change the redemption or
prepayment provisions of such Subordinated Debt other than to extend the dates
60
thereof or to reduce the premiums payable in connection therewith; (e) grant
security or collateral to secure payment of such Subordinated Debt; or (f)
change or amend any other term if such change or amendment would materially
increase the obligations of the obligor or confer additional material rights of
the holder of such Subordinated Debt in a manner adverse to the Company, any of
its Subsidiaries, the Administrative Agent or any Lender, and without limiting
the foregoing, may not shorten the standstill period as prescribed in such
Subordinated Debt. With respect to Capital Stock, the Company shall not, and
shall not permit any of its Subsidiaries to, without the prior written consent
of the Lenders, make any payment to purchase, redeem, retire or acquire any
Capital Stock or any option, warrant, or other right to acquire such capital
stock; provided, however, notwithstanding the foregoing, the Company shall be
permitted, with the prior written consent of the Required Lenders, to substitute
or replace Capital Stock, on a dollar for dollar basis on terms no more onerous
to the Lenders than the Capital Stock existing as of the Closing Date.
SECTION 6.15 Capital Expenditures. The Company shall not, and shall
not permit any of its Subsidiaries to, make Capital Expenditures during any
period in excess of the amount listed for such period on Annex A attached
hereto; provided, however, commencing with Fiscal Year 2003, if the actual
aggregate amount of Capital Expenditures made by the Company and its
Subsidiaries during the prior Fiscal Year (the "Current CapEx") is less than the
respective limit specified on Annex A for such Fiscal Year (the "Specified
CapEx"), then the applicable limit for the immediately succeeding Fiscal Year
shall be increased by an amount equal to the difference between the Current
CapEx and the Specified CapEx (the "Carryover Amount"). For purposes of this
Section 6.15 Capital Expenditures made by the Company in any Fiscal Year shall
be deemed to be made first with Specified CapEx for such Fiscal Year, then, from
the Carryover Amount, if any; provided, further, that notwithstanding the
foregoing the Company may make acquisitions of customer accounts as a result of
exchanges with competitors in an amount not to exceed $1,000,000 in the
aggregate per Fiscal Year; provided, further, to the extent that the entire
$1,000,000 is not used in any given Fiscal Year, such amount shall carry over
and the $1,000,000 cap on acquisitions of customer accounts for the succeeding
Fiscal Year shall be increased by such amount.
SECTION 6.16 Changes Related to Preferred Stock. Neither the Company
nor any of its Subsidiaries shall change or amend the terms of the Preferred
Stock or any agreement executed in connection therewith if the effect of such
amendment is to: (a) change any default or event of default other than to delete
or make less restrictive any default provision therein, or add any covenant with
respect to such Preferred Stock; (b) change the redemption or prepayment
provisions of such Preferred Stock other than to extend the dates thereof or to
reduce the premiums payable in connection therewith; or (c) change or amend any
other term if such change or amendment would materially increase the obligations
of the obligor or confer additional material rights of the holder of such
Preferred Stock in a manner adverse to the Company, any of its Subsidiaries, the
Administrative Agent or any Lender; provided, however, the issuance of Preferred
Stock to BNP Paribas or its Affiliates pursuant to section (ii) of the
definition of Preferred Stock will not result in a violation of this Section
6.16.
SECTION 6.17 Changes in Fiscal Year or Fiscal Quarter. The Company
shall not make any change to its accounting practices if such change would not
comply with GAAP or make any change in its Fiscal Quarters or Fiscal Year.
61
ARTICLE VII
FINANCIAL COVENANTS
So long as any Note shall remain unpaid or any Lender shall have any
Commitment hereunder, without the consent of the Required Lenders:
SECTION 7.01 Senior Debt Coverage Ratio. The Company shall not
permit the Senior Debt Coverage Ratio at any time during a period specified
below to be greater than (i) 2.75 to 1.00 for the period beginning on the
Closing Date through and including December 31, 2001; (ii) 2.50 to 1.00 for the
period beginning January 1, 2002 through and including June 30, 2002; (iii) 2.25
to 1.00 for the period beginning July 1, 2002 through and including December 31,
2002; and (iv) 2.00 to 1.00 thereafter.
SECTION 7.02 Total Debt Coverage Ratio. The Company shall not permit
the Total Debt Coverage Ratio at any time during a period specified below to be
greater than (i) 4.50 to 1.00 for the period beginning on the Closing Date
through and including December 31, 2001; (ii) 4.25 to 1.00 for the period
beginning January 1, 2002 through and including June 30, 2002; (iii) 4.00 to
1.00 for the period beginning July 1, 2002 through and including September 30,
2002; (iv) 3.75 to 1.00 for the period beginning October 1, 2002 through and
including December 31, 2002; (v) 3.50 to 1.00 for the period beginning January
1, 2003 through and including March 31, 2003; (vi) 3.25 to 1.00 for the period
beginning April 1, 2003 through and including June 30, 2003; and (vii) 3.00 to
1.00 thereafter.
SECTION 7.03 Debt Service Coverage Ratio. The Company shall not
permit the Debt Service Coverage Ratio as of the last day of any fiscal quarter
of the Company to be less than (i) 1.15 to 1.00 for the period beginning on the
Closing Date through and including March 31, 2002; (ii) 1.20 to 1.00 for the
period beginning April 1, 2002 through and including June 30, 2002; (iii) 1.25
to 1.00, for the period beginning July 1, 2002 through and including September
30, 2002; and (iv) 1.30 to 1.00 thereafter.
SECTION 7.04 Minimum EBITDA. The Company shall maintain at all
times, calculated as of the last day of each Fiscal Quarter commencing with the
Fiscal Quarter beginning on July 1, 2001, Minimum EBITDA of not less than (i)
$4,699,000 for the Fiscal Quarter ending September 30, 2001, (provided, however,
EBITDA for the quarter ending September 30, 2001 shall be increased by adding
non-recurring charges associated with the amortization of remaining loan fees
and any waiver fees and any termination cost associated with the Company's
current interest rate protection agreement during such quarter in the amount of
$1,600,000.00); (ii) $4,950,000 for the Fiscal Quarter ending December 31, 2001,
(iii) $5,584,000 for the Fiscal Quarter ending March 31, 2002; (iv) $6,646,000
for the Fiscal Quarter ending June 30, 2002; (v) $7,423,000 for the Fiscal
Quarter ending on September 30, 2002; (vi) $8,069,000 for the Fiscal Quarter
ending December 31, 2002; (vii) $8,802,000 for the Fiscal Quarter ending March
31, 2003; (viii) $9,740,000 for the Fiscal Quarter ending June 30, 2003 and (ix)
$10,769,000 for the Fiscal Quarter ending September 30, 2003; provided, however,
if the Company completes an equity offering of Preferred Stock or common stock,
or a combination thereof, of the Company with net cash proceeds in excess of
$5,000,000 (excluding the net cash proceeds of any equity offering of Preferred
Stock to BNP Paribas or any Affiliate thereof), the Company shall be required to
62
maintain at all times, calculated as of the last day of each Fiscal Quarter
commencing with the Fiscal Quarter beginning on July 1, 2001, Minimum EBITDA of
not less than (i) $4,699,000 for the Fiscal Quarter ending September 30, 2001,
(provided, however, EBITDA for the quarter ending September 30, 2001 shall be
increased by adding non-recurring charges associated with the amortization of
remaining loan fees and any waiver fees and any termination cost associated with
the Company's current interest rate protection agreement during such quarter in
the amount of $1,600,000.00); (ii) $4,950,000 for the Fiscal Quarter ending
December 31, 2001, (iii) $5,584,000 for the Fiscal Quarter ending March 31,
2002; (iv) $6,276,000 for the Fiscal Quarter ending June 30, 2002; (v)
$7,010,000 for the Fiscal Quarter ending on September 30, 2002; (vi) $7,621,000
for the Fiscal Quarter ending December 31, 2002; (vii) $8,313,000 for the Fiscal
Quarter ending March 31, 2003; (viii) $9,199,000 for the Fiscal Quarter ending
June 30, 2003 and (ix) $10,171,000 for the Fiscal Quarter ending September 30,
2003.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01 Events of Default. Any one or more of the following
shall constitute an Event of Default hereunder:
(a) The Company shall fail to pay any principal amount owing when
due pursuant to this Agreement or the Notes; or
(b) The Company shall fail to pay any interest, fees, or any other
amounts owing pursuant to this Agreement or the Notes within three (3) Business
Days of the due date thereof; or
(c) The Company shall fail to perform or observe any covenant or
agreement contained in Section 5.04, Section 5.08 or Section 6.03, if remaining
unremedied for a period of ten (10) days after (x) an Executive Officer becomes
aware of such failure or (y) the Administrative Agent or any Lender gives notice
to the Company as provided under Section 10.03; or
(d) The Company shall fail to perform or observe any covenant or
agreement contained in Section 5.01, Section 5.02, Section 5.03, Section 5.12,
Section 5.15, Section 5.16, Article VI (other than Section 6.03) and Article
VII; or
(e) The Company shall fail to perform or observe any other covenant
or agreement set forth in this Agreement, other than those referred to in
clauses (a), (b), (c) and (d) above, and (to the extent such failure can be
remedied) such failure of performance shall not be remedied within thirty (30)
days after the earlier of the date on which (1) the Company or any Subsidiary
obtains knowledge thereof and (2) written notice thereof has been given by the
Administrative Agent to the Company; or
63
(f) Any representation, warranty or statement made by or on behalf
of the Company or any Guarantor to the Administrative Agent or any Lender in
this Agreement, the Company Security Agreement, the Company Pledge Agreement,
the Company Trademark Security Agreement, the Guarantor Security Agreement, the
Guarantor Pledge Agreement, the Guarantor Trademark Security Agreement, the
Mortgage and the Assignment of Leases shall be in any material respect
incorrect, false or misleading as of the time at which such representation or
warranty was given, or any representation, warranty or statement made by or on
behalf of the Company or any Guarantor to any Agent or any Lender in any other
Loan Documents or in any financial statement, report or certificate furnished
pursuant to this Agreement shall be in any material respect incorrect, false or
misleading as of the time at which such representation, warranty or statement
was made; or
(g) The Company or any of its Subsidiaries fails to make any payment
as and when such payment is due upon any Indebtedness having an aggregate unpaid
principal balance in excess of $250,000, other than Indebtedness owing or
arising pursuant to this Agreement and the Notes, or any other default, event or
condition shall have occurred or exist with respect to any such other
Indebtedness, or under any agreement or instrument evidencing, securing or
related to such other Indebtedness, the effect of which is to cause, or to
permit the holder or owner of such Indebtedness to cause, such Indebtedness or
any portion thereof, to become due prior to its stated maturity date or prior to
its regularly scheduled dates of payment; or
(h) A default or event of default shall have occurred and be
continuing under any Subordinated Debt, including the Senior Subordinated Note
Purchase Agreement or the Preferred Stock; or
(i) The Company or any of its Subsidiaries defaults in the
observance or performance of any Material Contract; or
(j) The Company or any of its Subsidiaries makes an assignment for
the benefit of its creditors or files a voluntary petition seeking relief under
any provision of any bankruptcy, reorganization, arrangement, insolvency or
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect; or
(k) Any involuntary petition is filed against the Company or any of
its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and such petition shall remain undismissed
for a period of sixty (60) days or the Company approves, consents or acquiesces
thereto; or
(l) The Company incurs any liability or is exposed to any potential
liability under any employee benefit plan that has or would have a Materially
Adverse Effect; or
(m) Final judgment for the payment of money in excess of $250,000
(not fully covered by insurance) or otherwise having a Materially Adverse Effect
shall have been rendered against the Company or any of its Subsidiaries and the
same shall have remained unpaid, unstayed on appeal, undischarged, or
undismissed for a period of sixty (60) days, or such longer period as may be
permitted by Applicable Law, during which execution may not be made, provided no
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judgment Lien has attached or continues to attach to the assets of the Company
or such Subsidiary during such longer period; or
(n) Any Change in Control occurs; or
(o) Two of Michael DeDomenico, the President and Chief Executive
Officer of the Company, Ron Jackson, the Executive Vice President, Operations of
the Company, or Gregg F. Stewart, the Chief Financial Officer of the Company
shall cease to function in such capacities and shall not be replaced with
persons of substantially equal qualifications, ability and experience within 120
days of such individuals ceasing to serve in such capacities; or
(p) Any change occurs which has had or could reasonably be expected
to have a Materially Adverse Effect.
SECTION 8.02 Remedies on Default.
(a) Upon (i) the occurrence and during the continuation of an Event
of Default (other than an Event of Default described in Section 8.01(j) or (k))
and (ii) the receipt of written instructions by the Administrative Agent from
the Required Lenders, the Administrative Agent shall (x) terminate all
obligations of the Lenders to the Company, including, without limitation, the
Commitments and all obligations to make Advances under this Agreement, and (y)
declare the Notes, including, without limitation, principal, accrued interest
and costs of collection (including, without limitation, reasonable attorneys'
fees if collected by or through an attorney at law or in bankruptcy,
receivership or other judicial proceedings) and all other Obligations
immediately due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are expressly waived.
(b) Upon the occurrence of an Event of Default under Section 8.01(j)
or (k) all obligations of the Lenders to the Company, including, without
limitation, the Commitments, shall terminate automatically and the Notes,
including, without limitation, principal, accrued interest and costs of
collection (including, without limitation, reasonable attorneys' fees if
collected by or through an attorney at law or in bankruptcy, receivership or
other judicial proceedings) and all other Obligations shall be immediately due
and payable, without presentment, demand, protest, or any other notice of any
kind, all of which are expressly waived.
(c) Upon the occurrence of an Event of Default and acceleration of
the Notes as provided in (a) or (b) above, the Administrative Agent with the
written consent of the Required Lenders, may pursue any remedy available under
this Agreement, the Notes, the Security Documents or any other Loan Document, or
available at law or in equity, all of which shall be cumulative. The order and
manner in which the rights and remedies of the Lenders under the Loan Documents
and otherwise may be exercised shall be determined by the Required Lenders.
(d) Regardless of how each Lender may treat the payments for the
purpose of its own accounting, for the purpose of computing the Company's
obligations hereunder and under the Notes, no application of the payments will
cure any Event of Default or prevent acceleration, or continued acceleration, of
amounts payable under the Loan Documents or prevent the exercise, or continued
exercise, of rights or remedies of the Lenders hereunder or under applicable
law.
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ARTICLE IX
THE AGENT
SECTION 9.01 Appointment of Administrative Agent.
(a) Each Lender irrevocably appoints SunTrust Bank as the
Administrative Agent and authorizes it to take such actions on its behalf and to
exercise such powers as are delegated to the Administrative Agent under this
Agreement and the other Loan Documents, together with all such actions and
powers that are reasonably incidental thereto. The Administrative Agent may
perform any of its duties hereunder or under the other Loan Documents by or
through any one or more sub-agents or attorneys-in-fact appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent or
attorney-in-fact may perform any and all of its duties and exercise its rights
and powers through their respective Related Parties. The exculpatory provisions
set forth in this Article shall apply to any such sub-agent or attorney-in-fact
and the Related Parties of the Administrative Agent, any such sub-agent and any
such attorney-in-fact and shall apply to their respective activities in
connection with the syndication of the credit facilities provided for herein as
well as activities as Administrative Agent.
(b) The Issuing Bank shall act on behalf of the Lenders with respect
to any Letters of Credit issued by it and the documents associated therewith
until such time and except for so long as the Administrative Agent may agree at
the request of the Required Lenders to act for the Issuing Bank with respect
thereto; provided, that the Issuing Bank shall have all the benefits and
immunities (i) provided to the Administrative Agent in this Article IX with
respect to any acts taken or omissions suffered by the Issuing Bank in
connection with Letters of Credit issued by it or proposed to be issued by it
and the application and agreements for letters of credit pertaining to the
Letters of Credit as fully as the term "Administrative Agent" as used in this
Article IX included the Issuing Bank with respect to such acts or omissions and
(ii) as additionally provided in this Agreement with respect to the Issuing
Bank.
SECTION 9.02 Nature of Duties of Administrative Agent. The
Administrative Agent shall not have any duties or obligations except those
expressly set forth in this Agreement and the other Loan Documents. Without
limiting the generality of the foregoing, (a) the Administrative Agent shall not
be subject to any fiduciary or other implied duties, regardless of whether a
Default or an Event of Default has occurred and is continuing, (b) the
Administrative Agent shall not have any duty to take any discretionary action or
exercise any discretionary powers, except those discretionary rights and powers
expressly contemplated by the Loan Documents that the Administrative Agent is
required to exercise in writing by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 10.02), and (c) except as expressly set forth in the Loan
Documents, the Administrative Agent shall not have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to the
Company or any of its Subsidiaries that is communicated to or obtained by the
Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by
it, its sub-agents or attorneys-in-fact with the consent or at the request of
the Required Lenders (or such other number or percentage of the Lenders as shall
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be necessary under the circumstances as provided in Section 10.02) or in the
absence of its own gross negligence or willful misconduct. The Administrative
Agent shall not be responsible for the negligence or misconduct of any
sub-agents or attorneys-in-fact selected by it with reasonable care. The
Administrative Agent shall not be deemed to have knowledge of any Default or
Event of Default unless and until written notice thereof is given to the
Administrative Agent by the Company or any Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with any Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or thereunder or in connection herewith or therewith, (iii)
the performance or observance of any of the covenants, agreements, or other
terms and conditions set forth in any Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of any Loan Document or any other
agreement, instrument or document, or (v) the satisfaction of any condition set
forth in Article III or elsewhere in any Loan Document, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent.
The Administrative Agent may consult with legal counsel (including counsel for
the Company) concerning all matters pertaining to such duties.
SECTION 9.03 Lack of Reliance on the Administrative Agent. Each of
the Lenders, the Swing Line Lender and the Issuing Bank acknowledges that it
has, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each of the Lenders, the Swing Line Lender and the Issuing Bank also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, continue to make its own decisions in
taking or not taking of any action under or based on this Agreement, any related
agreement or any document furnished hereunder or thereunder.
SECTION 9.04 Certain Rights of the Administrative Agent. If the
Administrative Agent shall request instructions from the Required Lenders with
respect to any action or actions (including the failure to act) in connection
with this Agreement, the Administrative Agent shall be entitled to refrain from
such act or taking such act, unless and until it shall have received
instructions from such Lenders; and the Administrative Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against the
Administrative Agent as a result of the Administrative Agent acting or
refraining from acting hereunder in accordance with the instructions of the
Required Lenders where required by the terms of this Agreement.
SECTION 9.05 Reliance by Administrative Agent. The Administrative
Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument,
document or other writing believed by it to be genuine and to have been signed,
sent or made by the proper Person. The Administrative Agent may also rely upon
any statement made to it orally or by telephone and believed by it to be made by
the proper Person and shall not incur any liability for relying thereon. The
Administrative Agent may consult with legal counsel (including counsel for the
Company), independent public accountants and other experts selected by it and
shall not be liable for any action taken or not taken by it in accordance with
the advice of such counsel, accountants or experts.
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SECTION 9.06 The Administrative Agent in its Individual Capacity.
The bank serving as the Administrative Agent shall have the same rights and
powers under this Agreement and any other Loan Document in its capacity as a
Lender as any other Lender and may exercise or refrain from exercising the same
as though it were not the Administrative Agent; and the terms "Lenders",
"Required Lenders", "holders of Notes", or any similar terms shall, unless the
context clearly otherwise indicates, include the Administrative Agent in its
individual capacity. The bank acting as the Administrative Agent and its
Affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with the Company or any Subsidiary or Affiliate of the Company
as if it were not the Administrative Agent hereunder.
SECTION 9.07 Successor Administrative Agent.
(a) The Administrative Agent may resign at any time by giving notice
thereof to the Lenders and the Company. Upon any such resignation, the Required
Lenders shall have the right to appoint a successor Administrative Agent,
subject to the approval by the Company provided that no Default or Event of
Default shall exist at such time. If no successor Administrative Agent shall
have been so appointed, and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of resignation, then the
retiring Administrative Agent may, on behalf of the Lenders and the Issuing
Bank, appoint a successor Administrative Agent, which shall be a commercial bank
organized under the laws of the United States of America or any state thereof or
a bank which maintains an office in the United States, having a combined capital
and surplus of at least $500,000,000.
(b) Upon the acceptance of its appointment as the Administrative
Agent hereunder by a successor, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations under this Agreement
and the other Loan Documents. If within 45 days after written notice is given of
the retiring Administrative Agent's resignation under this Section 9.07 no
successor Administrative Agent shall have been appointed and shall have accepted
such appointment, then on such 45th day (i) the retiring Administrative Agent's
resignation shall become effective, (ii) the retiring Administrative Agent shall
thereupon be discharged from its duties and obligations under the Loan Documents
and (iii) the Required Lenders shall thereafter perform all duties of the
retiring Administrative Agent under the Loan Documents until such time as the
Required Lenders appoint a successor Administrative Agent as provided above.
After any retiring Administrative Agent's resignation hereunder, the provisions
of this Article IX shall continue in effect for the benefit of such retiring
Administrative Agent and its representatives and agents in respect of any
actions taken or not taken by any of them while it was serving as the
Administrative Agent.
SECTION 9.08 Authorization to Execute other Loan Documents. Each
Lender hereby authorizes the Administrative Agent to execute on behalf of all
Lenders all Loan Documents other than this Agreement.
SECTION 9.09 Indemnification. Each Lender shall, ratably in
accordance with the respective outstanding principal amount of its Advances,
indemnify and hold the Administrative Agent and its directors, officers, agents
and employees harmless against any and all liabilities, obligations, losses,
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damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever (including, without limitation, attorneys' fees
and disbursements) that may be imposed on, incurred by, or asserted against it
or them in any way relating to or arising out of the Loan Documents (other than
losses incurred by reason of the failure by the Company to pay the obligations
due to the Lenders hereunder or under the Revolving Notes) or any action taken
or not taken by it as Administrative Agent thereunder, except for the gross
negligence or willful misconduct of the Administrative Agent. Without limitation
of the foregoing, each Lender shall reimburse the Administrative Agent upon
demand for that Lender's ratable share of any cost or expense incurred by the
Administrative Agent in connection with the negotiation, preparation, execution,
delivery, administration, amendment, waiver, refinancing, restructuring,
reorganization (including a bankruptcy reorganization) or enforcement of the
Loan Documents, to the extent that the Company is required to pay that cost or
expense but fails to do so upon demand.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Survival. All covenants, agreements, warranties and
representations made herein, in the other Loan Documents, or in any certificates
or other documents delivered in connection with this Agreement by or on behalf
of the Company or any Guarantor shall survive the advances of money made by the
Lenders to the Company hereunder and the delivery of this Agreement and the
other Loan Documents, and all such covenants, agreements, warranties and
representations shall be binding upon and inure to the benefit of the Company,
the Guarantors, the Lenders, the Administrative Agent, and their respective
successors and assigns, whether or not so expressed, provided, however, that the
Company may not assign or transfer any of its rights under this Agreement
without the prior written consent of each of the Lenders.
SECTION 10.02 Amendments; Consents. No amendment, modification,
supplement, termination, or waiver of any provision of this Agreement or any
other Loan Document, and no consent to any departure by the Company, any
Guarantor or any Subsidiary of the Company therefrom, may in any event be
effective unless in writing signed by the Required Lenders, and then only in the
specific instance and for the specific purpose given; provided, however, that
without the consent of Lenders whose combined Pro Rata Shares of the Total
Commitments are at least seventy-five percent (75%) of the Total Commitments no
amendment, waiver or modification of Section 2.01(d) shall be effective;
provided, further, that without the approval in writing of all Lenders, no
amendment, modification, supplement, termination, waiver, or consent may be
effective:
(a) to amend or modify the principal of, reduce the rate of interest
payable on, or any fees with respect to, any Lender's Note, the Fees or the
amount of any Lender's Commitment;
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(b) to postpone any date fixed for any payment of principal of, or
any installment of interest on, any Lender's Notes or the Fees, or to extend the
term of any Lender's Commitment;
(c) to amend or modify the definitions of "Revolving Loan
Commitment" or "Required Lenders", to amend or modify the provisions of Section
10.07 or of this Section 10.02;
(d) except as otherwise allowed herein, to release any of the
Collateral pledged to the Administrative Agent for the benefit of, inter alia,
the Administrative Agent or the Lenders pursuant to the Security Documents to
secure the Obligations, if any Obligations are outstanding or any Commitment has
not been terminated;
(e) to consent to the existence of any other lien, security interest
or encumbrance on the Collateral except as otherwise permitted herein;
(f) to subordinate any of the Obligations or the Commitments to any
other indebtedness of the Company or any of its Subsidiaries; and
(g) to release any Guarantor or to consent to the termination or
modification of any Guaranty Agreement, except for (or in connection with) a
sale of Guarantor permitted hereunder.
Any amendment, modification, supplement, termination, waiver or consent effected
in accordance with this Section 10.02 shall apply equally to, and shall be
binding upon, all Lenders and the Administrative Agent.
SECTION 10.03 Notices. All notices, consents, demands and other
communications provided for hereunder, unless otherwise provided, shall be in
writing and mailed, sent by facsimile transmission or delivered to the parties
hereto addressed as follows or at such other address as shall be designated by
any party in a written notice to the other party hereto:
If to the Company:
NuCo2 Inc.
2800 SE Market Place
Stuart, Florida 34997
Attn: Mr. Gregg F. Stewart
Chief Financial Officer
Telecopier No.: (561) 221-1690
Confirmation No.: (561) 221-1754
with a copy to:
NuCo2 Inc.
2800 SE Market Place
Stuart, Florida 34997
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Attn: Eric M. Wechsler, Esq.
Telecopier No.: (561) 221-1690
Confirmation No.: (561) 221-1754
If to the Administrative Agent, the Swing Line Lender or
the Issuing Bank:
SunTrust Bank
501 East Las Olas Blvd.
Ft. Lauderdale, FL 33301
Attn: Ms. Sandra Tozzie
Telecopier No.: (954) 765-7334
Confirmation No.: (954) 765-7301
with a copy to:
King & Spalding
191 Peachtree St.
Atlanta, Georgia 30303
Attn: G. Lemuel Hewes, Esq.
Telecopier No.: 404-572-5149
Confirmation No.: 404-572-4862
If to any other Lender or Agent:
The address, telecopier and confirmation numbers set
forth opposite its name on the signature pages hereof.
All notices that are sent by facsimile transmission or are hand
delivered shall be deemed to be delivered upon receipt. All notices which are
mailed shall be mailed first class certified mail--return receipt requested,
postage prepaid, and shall be deemed delivered upon actual receipt or three days
after being deposited in the mail, whichever shall occur first.
The parties hereto agree that their signatures by facsimile shall be
effective and binding upon them as though executed in ink on paper, and that the
parties shall exchange original ink signatures promptly following any such
delivery by facsimile.
SECTION 10.04 Severability; Time of Essence. Every provision of this
Agreement and the other Loan Documents are intended to be severable. If any term
or provision of this Agreement or the Loan Documents, or any other document
delivered in connection herewith shall be unenforceable in any respect, the
enforceability of the remaining provisions shall not thereby be affected. Time
is of the essence of this Agreement and the other Loan Documents.
SECTION 10.05 Governing Law; Submission to Jurisdiction.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND UNDER THE NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
71
GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF) OF THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT,
THE NOTES, OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN ANY COURT OF THE STATE
OF NEW YORK OR IN ANY COURT OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND THE COMPANY HEREBY IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS.
(c) THE COMPANY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
COMPANY AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS
AFTER SUCH MAILING.
(d) Nothing herein shall affect the right of any Agent, the Issuing
Bank, the Swing Line Lender, any Lender, any holder of a Note or the Company to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Company in any other jurisdiction.
(e) The Company hereby irrevocably designates, appoints and empowers
CT Corporation System, whose present address is 111 Eighth Avenue, 13th Floor,
New York, New York, 10011, as its authorized agent to receive, for and on its
behalf and its property, service of process in the State of New York when and as
such legal actions or proceedings may be brought in the courts of the State of
New York or of the United States of America sitting in New York, and such
service of process shall be deemed complete upon the date of delivery thereof to
such agent whether or not such agent gives notice thereof to the Company, or
upon the earliest of any other date permitted by applicable law. The Company
shall furnish the consent of CT Corporation System so to act to the
Administrative Agent on or prior to the Closing Date. It is understood that a
copy of said process served on such agent will as soon as practicable be
forwarded to the Company, at its address set forth below, but its failure to
receive such copy shall not affect in any way the service of said process on
said agent as the agent of the Company. The Company irrevocably consents to the
service of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of the copies thereof by certified mail, return
receipt requested, postage prepaid, to it at its address set forth herein, such
service to become effective upon the earlier of (i) the date ten (10) calendar
days after such mailing or (ii) any earlier date permitted by applicable law.
The Company agrees that it will at all times continuously maintain an agent to
receive service of process in the State of New York on behalf of itself and its
72
properties and in the event that, for any reason, the agent named above or its
successor shall no longer serve as its agent to receive service of process in
the State of New York on its behalf, it shall promptly appoint a successor so to
serve and shall advise the Agents and the Lenders thereof (and shall furnish to
the Administrative Agent the consent of any successor agent so to act). Nothing
in this Section 10.05 shall affect the right of any Agents or any Lender to
bring proceedings against the Company in the courts of any other jurisdiction or
to serve process in any other manner permitted by applicable law.
SECTION 10.06 Payment of Costs. The Company shall pay all reasonable
costs, expenses, taxes and fees incurred by the Administrative Agent in
connection with the negotiation, preparation, execution and delivery of this
Agreement, the term sheet relating to this Agreement, the Security Documents and
all other Loan Documents, including, without limitation, all of the reasonable
professional fees and expenses of King & Spalding, special counsel to the
Administrative Agent.
SECTION 10.07 Indemnity. The Company agrees to protect, indemnify
and save harmless each Agent and each Lender, and all directors, officers,
employees and agents of each Agent and each Lender, from and against any and all
(i) claims, demands and causes of action of any nature whatsoever brought by any
person or entity not a party to this Agreement and arising from or related or
incident to this Agreement or any other Loan Document, (ii) costs and expenses
incident to the defense of such claims, demands and causes of action, including,
without limitation, reasonable attorneys' fees, and (iii) liabilities,
judgments, settlements, penalties and assessments arising from such claims,
demands and causes of action, provided such claims, costs and liabilities are
not the result of the gross negligence or willful misconduct of such Agent or
such Lender. The indemnity contained in this Section shall survive the
termination of this Agreement.
SECTION 10.08 Benefit of the Agreement.
(a) This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the parties
hereto, provided that the Company may not assign or transfer any of its interest
hereunder without the prior written consent of the Lenders, and no such
assignment or transfer of any such obligations shall relieve the Company of its
obligations hereunder unless each Lender shall have consented to such release in
a writing specifically referring to the obligation from which the Company is to
be released.
(b) Any Lender may make, carry or transfer Advances at, to or for
the account of, any of its branch offices or the office of an Affiliate of such
Lender. Any Lender may at any time assign all or any portion of its rights in
this Agreement and the Revolving Notes issued to it to a Federal Reserve Bank;
provided that no such assignment shall release the Lender from any of its
obligations hereunder.
(c) Each Lender may assign or delegate all or a portion of its
interests, rights and obligations under this Agreement and the other Loan
Documents (including all or a portion of any of its Commitments and the Advances
at the time owing to it and the Revolving Notes held by it) to another financial
or lending institution or entity; provided, however, that (i) the Administrative
Agent and the Company must give their prior written consent to such assignment
73
(which consent, in the case of the Company, shall not be unreasonably withheld
or delayed) unless such assignment is to an Affiliate of the assigning Lender
or, in the case of the Company, unless a Default or an Event of Default has
occurred and is continuing, (ii) such assignment or delegation is complete or is
in minimum increments of $1,000,000, and (iii) the parties to each such
assignment shall execute and deliver to the Administrative Agent an Assignment
Agreement, and, together with a Revolving Note or Revolving Notes subject to
such assignment and, unless such assignment is to an Affiliate of such Lender, a
processing and recordation fee of $1,000. The Company shall not be responsible
for such processing and recordation fee or any costs or expenses incurred by any
Lender (other than the Administrative Agent) in connection with such assignment.
From and after the effective date specified in each Assignment Agreement, which
effective date shall be at least five (5) Business Days after the execution
thereof, the assignee thereunder shall be a party hereto and to the extent of
the interest assigned by such Assignment Agreement, have the rights and
obligations of a Lender under this Agreement. Within five (5) Business Days
after receipt of the notice and the Assignment Agreement, the Company, at its
own expense, shall execute and deliver to the Administrative Agent, in exchange
for the surrendered Revolving Note or Revolving Notes, a new Revolving Note or
Revolving Notes to the order of such assignee in a principal amount equal to the
applicable Commitments assumed by it pursuant to such Assignment and Acceptance
and new Revolving Note or Revolving Notes to the assigning Lender in the amount
of its retained Commitment or Commitments. Such new Revolving Note or Revolving
Notes shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Revolving Note or Revolving Notes, shall be dated the
date of the surrendered Revolving Note or Revolving Notes which they replace,
and shall otherwise be in substantially the form attached hereto.
(d) Each Lender may from time to time sell or otherwise grant
participations in all or a portion of its rights and obligations under this
Agreement and the other Loan Documents (including all or a portion of its
Commitments and the Advances owing to it and the Revolving Notes held by it) to
another financial or lending institution or entity, whereupon the holder of any
such participation, if the participation agreement so provides, shall be
entitled to all of the rights of a Lender hereunder; provided, however, that (i)
the Administrative Agent must give its prior written consent to such
participation unless such participation is to an Affiliate of such Lender, (ii)
such selling Lender's obligations under this Agreement shall remain unchanged,
(iii) such selling Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, and (iv) the Company, the
Administrative Agent and other Lenders shall continue to deal solely and
directly with each Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents, and such Lender
shall retain the sole right to enforce the obligations of the Company relating
to the Advances and to approve any amendment, modification or waiver of any
provisions of this Agreement or the other Loan Documents. Any Lender selling a
participation hereunder shall provide prompt written notice to the Company of
the name of such participant.
SECTION 10.09 Subordination of Indebtedness. Any Indebtedness of any
Guarantor now or hereafter owed to the Company is hereby subordinated in right
of payment to the payment by such Guarantor of its Guaranty Obligations such
that if a default in the payment of the Obligations shall have occurred and be
continuing, any such Indebtedness of such Guarantor owed to the Company, if
collected or received by the Company, shall be held in trust
74
by the Company for the holders of the Obligations and be paid over to the
Lenders and the Administrative Agent for application of such Guarantor's
Guaranty Obligations.
SECTION 10.10 Maximum Interest Rate. Nothing contained in this
Agreement or any Note shall require the Company to pay interest at a rate
exceeding the Maximum Permissible Rate. If interest payable to any Lender for
any period would exceed the Maximum Permissible Rate, such interest shall be
reduced automatically to the maximum amount that will not exceed the Maximum
Permissible Rate, and interest payable to any Lender for any subsequent period,
to the extent less than the Maximum Permissible Rate, shall, to that extent, be
increased by the aggregate amount of all such reductions.
SECTION 10.11 Entire Agreement. This Agreement and the other Loan
Documents executed and delivered contemporaneously herewith, together with the
exhibits and schedules attached hereto and thereto, constitute the entire
understanding of the parties with respect to the subject matter hereof, and any
other prior or contemporaneous agreements, whether written or oral, with respect
thereto. The execution of this Agreement and the other Loan Documents by the
Company was not based upon any facts or materials provided by the Administrative
Agent or any Lender, nor was the Company or any Guarantor induced to execute
this Agreement or any other Loan Document by any representation, statement or
analysis made by the Administrative Agent or any Lender.
SECTION 10.12 Set-Off. Upon the occurrence and during the
continuance of any Event of Default, each Lender, and each of its branches and
offices, is hereby authorized by the Company, at any time and from time to time,
without notice to the Company (i) to set off against, and to appropriate and
apply to the payment of the Obligations (in each case whether matured or
unmatured) any and all amounts owing by such Lender, or any such office or
branch, to the Company (whether payable in Dollars or any other currency,
whether matured or unmatured, and, in the case of deposits, whether general or
special, time or demand and however evidenced) and (ii) pending any such action,
to the extent necessary, to hold such amounts as collateral to secure such
Obligations and Guaranty Obligations and to return as unpaid for insufficient
funds any and all checks and other items drawn against any deposits so held as
such Lender in its sole discretion may elect. Each Lender shall give the Company
notice of its intention to exercise its rights under this Section 10.12;
provided, however, that failure by such Lender to give the Company notice shall
not prevent such Lender from exercising its rights as provided in this Section.
The Company, to the fullest extent it may effectively do so under Applicable
Law, agrees that any holder of a participation in any Advance may exercise
rights of set-off and counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Company in the amount of such participation.
SECTION 10.13 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which, taken together, shall constitute one and the same instrument.
SECTION 10.14 Replacement Notes. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Note, and in the case of any such loss, theft or destruction, upon delivery of
any indemnity agreement reasonably satisfactory to the Company or, in the case
75
of any such mutilation, upon surrender and cancellation of such Note, the
Company shall execute and deliver, in lieu thereof, a replacement note identical
in form and substance to such Note and dated as of the date of such Note, and
upon such execution and delivery of the replacement note all references in this
Agreement and in all other Loan Documents to the Note shall be deemed to refer
to such replacement note.
SECTION 10.15 Release. In consideration of the Administrative
Agent's and the Lenders' agreement to enter into this Agreement and to establish
the Commitments hereunder, the Company hereby (a) releases, acquits and forever
discharges the Administrative Agent and the Lenders, their respective agents,
employees, officers, directors, servants, representatives, attorneys,
affiliates, successors and assigns (collectively, the "Released Parties") from
any and all liabilities, claims, suits, debts, liens, losses, causes of action,
demands, rights, damages, costs and expenses of any kind, character or nature
whatsoever, known or unknown, fixed or contingent, that the Company may have or
claim to have against the Administrative Agent and the Lenders which might arise
out of or be connected with any act of commission or omission of the
Administrative Agent or the Lenders existing or occurring on or prior to the
date of this Agreement, including, without limitation, any claims, liabilities
or obligations relating to or arising out of or in connection with the Loan
Documents (including, without limitation, arising out of or in connection with
the initiation, negotiation, closing or administration of the transactions
contemplated thereby or related thereto), from the beginning of time until the
execution and delivery of this Agreement (the "Released Claims") and (b) agrees
forever to refrain from commencing, instituting or prosecuting any lawsuit,
action or other proceeding against the Released Parties with respect to any and
all Released Claims.
76
WITNESS the hand and seal of the parties hereto through their duly
authorized officers, as of the date first above written.
NUCO2 INC.,
A FLORIDA CORPORATION
Address:
c/o NuCo2, Inc. By: /s/ Gregg Stewart
2800 S.E. Market Place ----------------------------
Stuart, Florida 34997 Gregg Stewart
Chief Financial Officer
SUNTRUST BANK, AS SUCCESSOR BY MERGER TO
SUNTRUST BANK, SOUTH FLORIDA, NATIONAL
ASSOCIATION INDIVIDUALLY AND AS
ADMINISTRATIVE AGENT, ISSUING BANK AND
SWING LINE LENDER
By:/s/ Karen C. Copeland
-------------------------------------
Name: Karen C. Copeland
Title:Vice President
[SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
HELLER FINANCIAL, INC., AS A
LENDER AND AS SYNDICATION AGENT
By:/s/ Francois Delangle
-------------------------------------
Name: Francois Delangle
Title: Vice President
Address for Notices:
HELLER FINANCIAL, INC.
500 West Monroe Street
Chicago, Illinois 60661
ATTN: Account Manager
Corporate Finance
Telecopy: (312) 441-7367
With copies to:
HELLER FINANCIAL, INC.
622 Third Avenue
32nd Floor
New York, New York 10017
ATTN: Francois Delangle
Telecopy: (212) 880-2002
And
HELLER FINANCIAL, INC.
500 West Monroe Street
Chicago, Illinois 60661
ATTN: Legal Services
Corporate Finance
Telecopy: (312) 441-6876
[SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
BNP PARIBAS, AS A LENDER AND AS
DOCUMENTATION AGENT
By: /s/ Ross A. Catlin
----------------------------------------
Name: Ross A. Catlin
Title: Vice President
By: /s/ Judith A. Keane
----------------------------------------
Name: Judith A. Keane
Title: Vice President
Address for Notices:
-------------------------
-------------------------
-------------------------
-------------------------
[SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
|
EXHIBIT 10.4
NON-COMPETITION AGREEMENT
Dated as of February 13, 2001,
among
KPMG CONSULTING, LLC,
KPMG CONSULTING, INC.
and
KPMG LLP
--------------------------------------------------------------------------------
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (the “Agreement”), dated as of
February 13, 2001, is among KPMG LLP, a Delaware registered limited liability
partnership (the “Partnership”), KPMG Consulting, Inc., a Delaware corporation
(“Consulting, Inc.”), and KPMG Consulting, LLC, a Delaware limited liability
company (“LLC,” and together with Consulting, Inc., “Consulting”).
W I T N E S S E T H
WHEREAS, the Partnership has separated its Consulting Business (as
hereinafter defined) from its accounting and tax businesses;
WHEREAS, the Partnership formed Consulting, Inc. and LLC in
connection with the transfer to LLC of certain of the operating assets,
properties, personnel and liabilities related to the Consulting Business held by
the Partnership and certain Subsidiaries of the Partnership so that from and
after the Effective Date the Consulting Business was held by Consulting;
WHEREAS, the Partnership and Consulting desire to clearly
distinguish the types of professional services that will be provided by each of
the Partnership and Consulting;
WHEREAS, the Partnership and Consulting entered into the Division of
Services Agreement dated as of January 31, 2000 (the “Original Agreement”) which
shall remain in effect until the earlier of the occurrence of an IPO or a Change
in Control (each as defined herein); and
WHEREAS, the Partnership and Consulting desire to amend and restate
the terms of the non-competition provisions contained in the Original Agreement,
such amendment and restatement to be effective only upon the earlier of the
occurrence of an IPO or a Change in Control.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Partnership and
Consulting each hereby agree as follows:
ARTICLE I
DEFINITIONS, INTERPRETATIONS AND EFFECTIVENESS
Section 1.1. Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below.
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“BMP” means the Partnership’s proprietary Business Measurement
Process methodology used in connection with assurance services.
“Change in Control” shall mean:
(i) a sale or transfer to a non-affiliated third party of all or
substantially all of the assets of Consulting on a consolidated basis in any
transaction or series of related transactions; (ii) any merger,
consolidation or reorganization in which Consulting is a party, except for a
merger, consolidation or reorganization in which Consulting is the surviving
corporation and, after giving effect to such merger, consolidation or
reorganization, the holders of Consulting’s outstanding equity (on a fully
diluted basis) immediately prior to the merger, consolidation or reorganization
will own in the aggregate immediately following the merger, consolidation or
reorganization Consulting’s outstanding equity (on a fully diluted basis) either
(i) having the ordinary voting power to elect a majority of the members of
Consulting’s Board of Directors to be elected by the holders of Common Stock and
any other class which votes together with the Common Stock as a single class or
(ii) representing at least 50% of the equity value of Consulting as reasonably
determined by the Board of Directors; or (iii) any Person, other
than the Partnership or its affiliates, acquires beneficial ownership of 50% or
more of the outstanding equity of Consulting generally entitled to vote on the
election of directors.
“Consulting” has the meaning set forth in the Preamble.
“Consulting Business” means the business of Consulting, which shall
consist of the provision of the Consulting Services and the Consulting
Supporting Services.
“Consulting, Inc.” has the meaning set forth in the Preamble.
“Consulting, LLC” has the meaning set forth in the Preamble.
“Consulting Services” means those services provided by Consulting
and the Transferred Subsidiaries to their clients immediately following the
Effective Date, which consists of the Systems Integration and Integrated
Solutions Services, and in particular those services listed on Appendix A hereto
identified as Consulting Services, and any New Consulting Services.
“Consulting Supporting Services” shall mean those Consulting
Services that are necessary or advisable to be provided in connection with or
related to the provision of any of the Partnership Services to be provided to
any client of the Partnership Business.
“Dispute” has the meaning set forth in Section 3.1.
“Effective Date” means January 31, 2000.
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“IPO” shall mean the initial public offering of the common stock of
Consulting, Inc. registered under the Securities Act of 1933, as amended.
“New Consulting Service” shall mean a service related to the
Consulting Services that is not currently provided by the Partnership or
Consulting but which the Parties agree, in accordance with the terms of this
Agreement, shall constitute a Consulting Service.
“New Partnership Service” shall mean a service related to the
Partnership Services that is not currently provided by the Partnership or
Consulting but which the Parties agree, in accordance with the terms of this
Agreement, shall constitute a Partnership Service.
“New Service” shall mean a New Consulting Service or a New
Partnership Service.
“Original Agreement” shall have the meaning set forth in the
recitals.
“Partnership Services” means those services provided by the
Partnership or its Retained Subsidiaries immediately following the Effective
Date, which consists of the assurance and tax services currently provided by the
Partnership, other than Consulting Services, including without limitation,
attestation and verification services, business risk and technology risk
management services, and other services utilizing BMP as a platform for the
delivery of such services, including but not limited to those services
identified on Appendix A attached hereto as Assurance Services, and the New
Partnership Services.
“Partnership Supporting Services” shall mean those Partnership
Services that are necessary or advisable to be provided in connection with or
related to the provision of any of the Consulting Services to clients of the
Consulting Business.
“Party” means the Partnership, Consulting, Inc. or LLC.
“Person” means an individual, corporation, partnership, limited
liability company, unincorporated syndicate, unincorporated organization, trust,
trustee, executor, administrator or other legal representative, governmental
authority or agency, or any group of Persons acting in concert.
“Retained Subsidiaries” means any Subsidiary of the Partnership at
any time after the Effective Date, but excluding Consulting and the Transferred
Subsidiaries.
“Systems Integration and Integrated Solutions Services” means
services related to the installation and implementation of hardware and software
products, electronic commerce and other internet-based solutions and related
information technology services, including without limitation, software
development, resale, distribution and evaluation of third-party products,
strategic and operations advice and assistance, including without limitation,
operational or process redesign, operations improvement of a client’s internal
processes or the information flows required to support those operations;
provided, that such services shall be subject to any limitations set forth in
Appendix A.
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“Subsidiary” means, when used with reference to any Party, any
corporation, partnership, limited liability company or other entity, a majority
of the outstanding voting power of which is owned directly or indirectly by such
Party.
“Transferred Subsidiaries” means any Subsidiary which relates to the
Consulting Business and which is transferred to Consulting or a Subsidiary of
Consulting.
Section 1.2. Rules of Construction. In this Agreement, unless a
clear contrary intention appears:
(1) singular numbers includes the plural and vice versa;
(2) reference to any gender includes the other gender;
(3) reference to any Section means such Section of this Agreement and
references in any Section or definition to any clause means such clause of such
Section or definition; (4) “herein”, “hereunder”, “hereof”,
“hereto”, and words of similar import shall be deemed references to this
Agreement as a whole and not to any particular Section or other provision hereof
or thereof; (5) “including” (and with correlative meaning
“include”) means including without limiting the generality of any description
preceding such term; (6) relative to the determination of any
period of time, “from” means “from and including,” “to” means “to but excluding”
and “through” means “through and including;” and (7) headings
contained in this Agreement have been inserted for convenience of reference only
and are not to be used in construing this Agreement.
Section 1.3. Effectiveness of this Agreement. This Agreement shall
become effective upon the earlier to occur of (i) the consummation of an IPO, or
(ii) the consummation of a Change in Control. Prior to the effectiveness of this
Agreement, the Original Agreement shall be in full force and effect.
ARTICLE II
NON-COMPETITION
Section 2.1. Non-Competition. (a) From and after the Effective
Date, Consulting may provide the Consulting Services and shall not, directly or
through any Person controlling, controlled by, or under direct or indirect
common control with Consulting, engage in the provision of any Partnership
Services.
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(b) From and after the Effective Date, the Partnership may provide
the Partnership Services and shall not, directly or through any Person
controlling, controlled by, or under direct or indirect common control with the
Partnership, engage in the provision of any Consulting Services.
Section 2.2. New Services. The Partnership and Consulting
acknowledge that each of the Partnership Business and the Consulting Business
will, in the future, involve the provision of services not currently provided by
either the Partnership or Consulting and each agrees that it is advisable and in
the best interests of each of the Parties to provide a mechanism to evaluate the
appropriate Party to provide such services during the term of this Agreement. In
furtherance thereof, the Partnership and Consulting hereby agree that any New
Service shall become part of the business with respect to which such service
most closely relates at the time. To facilitate this agreement, each Party
shall, upon the written request of the other Party, but in any event no later
than March 31 and September 30 of each year during the term of this Agreement,
provide the other Party with information describing in reasonable detail New
Services which have been made available by the Party since the last report. The
Party offering such New Service shall have the exclusive right to do so and such
service shall be included within the definition of the services provided by such
Party as set forth herein unless the other Party sends written notice of its
objection thereto within 30 days of receipt of written notification. Any such
objection shall be considered a Dispute and shall be resolved in accordance with
the provisions of this Agreement.
Section 2.3. Additional Considerations and Agreements. (a) Nothing
in this Agreement shall limit the right of either Party to hire the personnel
needed to provide the services to be provided by such Party consistent with the
terms of this Agreement.
(b) During the term of this Agreement, Consulting shall not become
a licensed certified public accounting firm and the personnel of Consulting
shall not hold themselves out as certified public accountants or provide any
advice or interpretation of any accounting standards, literature or rules and
the interpretation thereof as promulgated by the applicable standard setting
bodies, including without limitation, the Financial Accounting Standards Board,
the American Institute of Certified Public Accountants and the Securities and
Exchange Commission, or the successors thereto, in any manner or by any means.
The Partnership shall not become a systems integrator.
(c) Each Party shall have the right to determine the appropriate
titles for its personnel, based on market acceptance and demand. Notwithstanding
the foregoing, the Partnership and Consulting each agree that, during the term
of this Agreement, it is advisable and in the best interests of each of the
Parties to limit the competition between the Partnership Business and the
Consulting Business with respect to the recruitment of personnel and in that
regard the Partnership hereby agrees to use all reasonable efforts to avoid the
use of the term “consultant” in connection with its recruiting efforts.
(d) The Partnership shall have the right to develop technology
tools to support and facilitate the delivery of the Partnership Services. The
Partnership may, but shall not be required to, utilize the services of
Consulting, other joint venture or alliance partners or any third party vendor
or contractor in connection with such development. The Partnership shall have
the
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right to enter into other joint ventures or alliances, or to use any third party
vendors or contractors in the development and/or delivery of non-technology
tools and Partnership Services.
(e) To the extent any client engagement as of the Effective Date
involved the services of both the Partnership and Consulting, the Parties agree
to negotiate in good faith the appropriate arrangements necessary to continue
such engagement following the Effective Date if the Parties so desire in a
prime/subcontractor relationship with fees payable by the client for such
contract work.
(f) The Partnership and Consulting each agree that it is advisable
and in the best interests of the Parties to provide a mechanism to avoid a
situation in which the Partnership and Consulting each submit a proposal to a
client to provide similar services to such client. If either Party obtains
information or otherwise becomes aware that the Partnership and Consulting each
intend to submit a proposal to a client with respect to the same potential
engagement, the Party with such information (the “Notifying Party”) shall send
written notice to the other Party (the “Receiving Party”) setting forth the name
of the client and a description of the services to be provided in connection
with such engagement. Within five (5) business days of receipt of such notice
the Receiving Party shall send the Notifying Party a response indicating whether
it intends to submit a proposal with respect to such engagement and, if so, why
it believes it is the appropriate Party to submit the proposal. Within two (2)
business days of receipt of a response indicating the Receiving Party’s
intention to submit a proposal, the Notifying Party will send the Receiving
Party written notice of objection if the Receiving Party also intends to submit
a proposal and such objection shall be considered a Dispute and shall be
resolved in accordance with the provisions of this Agreement.
(g) (i) The Partnership and Consulting each agree that nothing
set forth herein shall prohibit the Partnership from acquiring, purchasing or
otherwise combining with, and following such acquisition, purchase or
combination, actively engaging in, any business that has a subsidiary, division,
group, franchise or segment that is engaged in any Consulting Services, and
termination of this Agreement shall not occur, so long as such the Partnership
divests itself or causes the divestiture of such subsidiary, division, group,
franchise or segment within six months of the date of such acquisition, purchase
or combination.
(ii) This Agreement and the rights and obligations of the
Parties hereunder shall terminate in the event the Partnership enters into a
merger, consolidation, amalgamation or other business combination involving the
Partnership or KPMG International which results in the Partnership (either
directly or through any other Person controlling, controlled by, or under direct
or indirect common control with the Partnership) providing consulting services
comparable to those offered by Consulting if the Partnership fails to divest as
required pursuant to Section 2.3(g)(i).
(iii) In the event that this Agreement is terminated
pursuant to Section 2.3(g)(ii), Partnership shall pay to Consulting any damages
suffered by Consulting as a result of an event described in Section 2.3(g)(ii).
The Parties shall negotiate in good faith for a period of 30 days to determine
the amount of any such damages, and if the Parties are unable to agree within
such 30 day period, the matter shall be resolved as a Dispute under Article IV.
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(h) (i) The Partnership and Consulting each agree that nothing
set forth herein shall prohibit Consulting from acquiring, purchasing or
otherwise combining with, and following such acquisition, purchase or
combination, actively engaging in, any business that has a subsidiary, division,
group, franchise or segment that is engaged in any Partnership Services, and
termination of this Agreement shall not occur so long as Consulting divests
itself or causes the divestiture of such subsidiary, division, group, franchise
or segment within six months of the date of such acquisition, purchase or
combination.
(ii) This Agreement and the rights and obligations of the
Parties hereunder shall terminate in the event Consulting enters into a merger,
consolidation, amalgamation or other business combination involving Consulting
which results in Consulting (either directly or through any other Person
controlling, controlled by, or under direct or indirect common control with
Consulting) providing assurance or tax services comparable to those offered by
the Partnership if Consulting fails to divest as required pursuant to Section
2.3(h)(i).
(iii) In the event that this Agreement is terminated
pursuant to Section 2.3(h)(ii), Consulting shall pay to the Partnership any
damages suffered by the Partnership as a result of an event described in
Section 2.3(h)(ii). The Parties shall negotiate in good faith for a period of
30 days to determine the amount of any such damages, and if the Parties are
unable to agree within such 30 day period, the matter shall be resolved as a
Dispute under Article IV.
(i) The Parties agree that each of them may, but shall be under no
obligation to, refer clients to one another. In no event shall the Parties pay
referral fees, commissions or other compensation for any such referrals to each
other or to any subsidiary, affiliate, partner, principal, employee or agent of
the other entity.
(j) The Parties agree that they will not enter into any co- or
joint marketing, advertising or similar agreements or arrangements which (i) are
inconsistent with the agreements in Section 2.3(i), and (ii) do not clearly
state that the Partnership and Consulting are separate firms.
ARTICLE III
DISPUTE RESOLUTION
Section 3.1. Escalation. Except as provided in Section 4.2 hereof,
if a dispute, claim or controversy arises out of or arises in connection with
this Agreement, including, but not limited to, the termination or validity
hereof (a “Dispute”), the Partnership and Consulting agree to use the following
procedures, in lieu of either Party initially pursuing other available remedies,
to resolve the Dispute. The Parties agree that they will first attempt to settle
any Dispute arising out of this Agreement through good faith negotiations in the
spirit of mutual cooperation between business executives with authority to
resolve the Dispute. Prior to taking action as provided in Section 3.2, the
Parties shall first submit the Dispute to an appropriate corporate officer or
partner of each Party for resolution, and if such corporate officer and partner
are unable to resolve such Dispute, either Party may request that their
respective chief executive officers, or their respective delegees, attempt to
resolve such Dispute. The officers or delegees to
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whom any such claim or controversy is submitted shall attempt to resolve the
Dispute through good faith negotiations over a reasonable period, not to exceed
30 days in the aggregate unless otherwise agreed. Such 30-day period shall be
deemed to commence on the date of a notice from either Party describing the
particular Dispute.
Section 3.2. Submission to Mediation. If, within 30 days after
such meeting of officer and partner or delegees, the Parties have not succeeded
in negotiating a resolution of the Dispute, the Partnership and Consulting agree
to refer the matter to a panel consisting of one (1) senior partner or the
delegee thereof from the Partnership and one (1) executive officer or the
delegee thereof from Consulting (which individuals or delegees shall not have
been, as much as practicable, directly involved in the Dispute) for review and
resolution. These individuals are referred to herein as the “Senior Executives.”
Upon such referral, the Senior Executives shall review the following materials
provided by the Partnership and Consulting: a copy of the terms of this
Agreement and a concise (less than 10 page) summary of the basis of each party’s
contentions, including the relevant facts and areas of disagreement. If the
Dispute cannot be resolved by the Senior Executive panel pursuant to this
Section 3.2 within 30 days of the referral of such Dispute, the Partnership and
Consulting may then pursue the remedies contemplated by Section 3.3 and 3.4.
Section 3.3. Arbitration. Any dispute that is not resolved by
negotiations pursuant to Section 3.2 will, upon written notice by either Party
to the other Party involved in the Dispute, be resolved by binding arbitration
administered by the American Arbitration Association (“AAA”) in accordance with
its Commercial Arbitration Rules. Within ten (10) business days after the
commencement of arbitration, each Party shall select one person to act as
arbitrator and the two arbitrators so selected shall select a third arbitrator
within ten (10) business days of their appointment. If the arbitrators selected
by the Parties are unable or fail to agree upon the third arbitrator within such
time period, the third arbitrator shall be selected by the AAA within the
(10) business days following a written request by any of the parties to the AAA.
The place of arbitration shall be New York, New York, and the language of the
arbitration shall be English. It is understood and agreed by the Parties that
money damages might not be a sufficient remedy for any breach of this Agreement,
and that, notwithstanding anything else set forth in this Section 3.3 concerning
the arbitration of disputes and the procedure for such arbitration, and pending
the outcome of any such arbitration, the Parties shall be entitled to seek and
obtain injunctive relief as a provisional remedy for any such breach, which
shall not be deemed to be the exclusive remedy for any such breach but shall be
in addition to all other provisional remedies available at law or equity. The
prevailing Party in the arbitration shall be entitled, in addition to such other
relief as may be granted, to its reasonable attorney’s fees and other costs
reasonably incurred in such arbitration. The Parties specifically agree to be
bound by the decisions rendered by the arbitration panel provided for herein and
agree not to submit a dispute subject to this Section 3.3 to any national,
federal, state, provincial, local or other court or arbitration association
except as may be necessary to enforce the decision rendered by the arbitrators.
The Parties hereby agree that the existence of a Dispute and the details thereof
shall be considered confidential information, and each Party agrees not to
disclose such information to any other Person except those of its personnel that
have a need to know such information for purposes of attempting to resolve the
Dispute.
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Section 3.4. Injunctive Relief. Nothing contained in this
Article III shall prevent either Party from resorting to judicial process, in
accordance with Section 4.2 if injunctive or other equitable relief from a court
is necessary to prevent serious and irreparable injury to one Party or to
maintain the status quo before, during or after the commencement of the
mediation process set forth in this Article III. The use of arbitration
procedures will not be construed under the doctrine of laches, waiver or
estoppel to affect adversely either Party’s right to assert any claim or
defense.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 4.1. Entire Agreement. This Agreement constitutes the only
agreement between the Parties with respect to the subject matter hereof, there
being no prior written or oral promises or representations not incorporated
herein or therein.
Section 4.2. Choice of Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of New York,
as though all acts and omissions related hereto occurred in New York. Any
lawsuit arising from or related to this Agreement shall only be brought, to the
extent permitted by Section 3.3 and 3.4, in the United States District Court for
the Southern District of New York or in any state court in the State of New
York. To the extent permissible by law, the Parties hereby consent to the
jurisdiction and venue of such courts. Each Party hereby waives, releases and
agrees not to assert, and agrees to cause its Affiliates to waive, release and
not assert, any rights such Party or its Affiliates may have under any foreign
law or regulation that would be inconsistent with the terms of this Agreement as
governed by New York law.
Section 4.3. Amendment; Waiver. No amendment or modification of
the terms of this Agreement shall be binding on any Party unless reduced to
writing and signed by an authorized representative of the Party to be bound. The
waiver by any Party of any particular default by the other Party shall not
affect or impair the rights of the Party so waiving with respect to any
subsequent default of the same or a different kind; nor shall any delay or
omission by either Party to exercise any right arising from any default by the
other Party affect or impair any rights which the non-defaulting Party may have
with respect to the same or any future default.
Section 4.4. Severability. If any provision of this Agreement is
held invalid or unenforceable for any reason, the invalidity shall not affect
the validity of the remaining provisions of this Agreement, and the Parties
shall substitute for the invalid provision a valid provision which most closely
approximates the intent and economic effect of the invalid provision. Without
limiting the generality of the foregoing, if any provision of this Agreement
shall be determined, under applicable law, to be overly broad in duration,
geographical coverage or substantive scope, such provision shall be deemed
narrowed to the broadest term permitted by applicable law and shall be enforced
as so narrowed.
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Section 4.5. Counterparts. For convenience of the Parties, this
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original for all purposes.
Section 4.6. Beneficiaries. This Agreement is solely for the
benefit of the Parties and their respective Affiliates, successors and permitted
assigns and shall not confer upon any other Person any remedy, claim, liability,
reimbursement or other right in excess of those existing without reference to
this Agreement.
Section 4.7. Notices. All notices which either Party may be
required or desire to give to the other Party shall be in writing and shall be
given by personal service, telecopy, registered mail or certified mail (or its
equivalent), or overnight courier to the other Party at its respective address
or telecopy telephone number set forth below. Mailed notices and notices by
overnight courier shall be deemed to be given upon actual receipt by the Party
to be notified. Notices delivered by telecopy shall also be confirmed in writing
by the sending Party by overnight courier and shall be deemed to be given upon
actual receipt by the Parties to be notified.
If to the Partnership:
KPMG LLP 345 Park Avenue New York, NY 10154 Attention: Chairman
with a copy to:
KPMG LLP 345 Park Avenue New York, NY 10154 Attention: General
Counsel
If to Consulting:
KPMG Consulting, Inc. 1676 International Drive McLean, Virginia 22102
Attention: Chief Executive Officer
with a copy to:
KPMG Consulting, Inc. 1676 International Drive McLean, Virginia 22102
Attention: General Counsel
A Party may change its address or addresses set forth above by giving the other
Party notice of such change in accordance with the provisions of this Section.
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Section 4.8. Termination. This Agreement and the rights and
obligations of the Parties hereunder shall terminate on the earliest to occur of
(i) the mutual agreement of the Parties or (ii) the fifth anniversary of the
closing of the earlier of the IPO or a Change in Control or (iii) the date of a
termination pursuant to Section 2.3.
Section 4.9. Section Headings. All Section headings are for
convenience only and shall in no way modify or restrict any of the terms or
provisions hereof.
Section 4.10. Schedules and Exhibits. All Schedules and Exhibits
referred to herein are intended to be and hereby are specifically made a part of
this Agreement.
Section 4.11. Performance. Each Party shall cause to be performed,
and hereby guarantee the performance of, all actions, agreements and obligations
set forth herein to be performed by any Subsidiary or Affiliate of such Party.
Section 4.12. Limitation. The Parties understand and acknowledge
that this Agreement is among the Partnership, Consulting, Inc. and LLC and that
their respective partners, principals, officers, directors, shareholders and
members are not liable hereunder in their capacity as such.
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IN WITNESS WHEREOF, each of the Parties hereto have caused this Agreement
to be signed by its authorized representatives as of the date first above
written.
KPMG LLP By: /s/ Stephen G. Butler
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Name: Stephen G. Butler
Title: Chairman KPMG CONSULTING, LLC By: /s/ Randolph C. Blazer
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Name: Randolph C. Blazer
Title: President and CEO of KPMG Consulting, Inc., member KPMG CONSULTING, INC.
By: /s/ Randolph C. Blazer
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Name: Randolph C. Blazer
Title: President and CEO
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Appendix A to the Non-Competition Agreement
Non-Competition Between Assurance And Consulting
This document is Attachment A to the Non-Competition Agreement and is intended
to describe the division of services between Assurance and Consulting.
Service Assurance Consulting
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Systems Integration Services Performs none. Provides all such services.
Attestation Services
(1) Performs all. This applies to attestation services related to financial and
non financial information, including the authentication/audit ing of electronic
and digital transactions. Performs none. (2) Accounting Services Provides all
accounting, and bookkeeping services (including accounting issue resolution,
compilations and compilation assistance, accounting record reconstruction,
reconciliation assistance, account analysis and regulatory compliance reviews)
Performs information tasks in conjunction with and as a part of financial
systems implementations and program management of large scale programs. This is
not provided as a discrete service offering. Corporate Transactions, including:
• Valuation Services • Performs none. • Performs all. • Transaction Services •
Performs all. • Performs none. • Corporate Recovery • Performs all. • Performs
none. • Corporate Finance • Performs all. • Performs none. • Merger and
Integration Services • Provides as to Partnership Services • Provides as to
Consulting Services Actuarial Services Performs all. Performs none. Management
Advisory Services Performs all. Performs none.
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Service Assurance Consulting
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Litigation and Forensics Performs all, including:
• Litigation Support
• Intellectual Property Management
• Integrity Management and Ethics
• Forensics and Fraud Detection and Prevention
• Channel Management Not a discrete service. May provide expert testimony as
requested by clients. (3) Executive Search Performs none. Performs
none in the US. Finance and Accounting Outsourcing Provides functional design
and workforce to operate outsourced processes, and manages engagements. Provides
technology solution and support for systems and networks supporting engagements.
Consulting is expected to be the solution provider. Financial Risk Management
Financial Risk Management includes services that assist a client in
understanding its financial risks, designing mechanisms to control and mitigate
risks, and analyzing the implications of those risks. Financial risks include
derivative risks, credit risks, treasury risks and other financial instrument
risks. Provides none Business Risk Management Provides evaluative, diagnostic
and solution services for all areas of business risk. Provides technology
integration services in business risk engagements. Internal Controls Performs
assessments, designs and implements solutions related to internal controls and
as further defined under Information Risk Management below. Explicitly performs
Implements technology solutions.
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Service Assurance Consulting
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assessment, design and implementation of internal controls around information
security and privacy. Provides reports on the adequacy of systems of internal
controls. Business Measurement and Information Flows Provides services related
to the evaluation and/or attestation of information flows, including analyzing
information in systems, using analytics to understand this information and
measurement of business achievements. Services will focus on information
efficacy, privacy, reuse and management, as well as attestation of information
flows. Provides technology integration services. Strategy Consulting Provides
none Provides all Business Process Reengineering Provides none Provides all
Business Process Analysis Business Process Analysis services are a natural
extensions of the BMP methodology and continuous improvement aspects of the BMP
methodology. Provides technology and integration services to support Business
Process Analysis engagements. Business Process Analysis services assists
companies in understanding how they produce financial information for internal
and external uses. Such services include financial information flows in the
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Service Assurance Consulting
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areas of the finance function and operations. Business Process Analysis is
limited to: Business Process Analysis is limited to: • analyzing a business
process to understand its objectives, • understanding the impediments to
achievement of those objectives, and • making recommendations to improve the
controls to mitigate risk and improve the process.
Business Process Analysis does not include integrating technology solutions into
the process. Assurance can provide Business Process Analysis services for all
companies with which KPMG LLP has a BMP based attestation/verification
relationship. Assurance shall not perform Business Process Analysis services for
companies with which KPMG LLP does not have a BMP based attestation/verification
relationship unless they are below the following criteria or unless Consulting
declines to perform such engagements: Commercial entities listed in Fortune’s
1,500 largest
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Service Assurance Consulting
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companies based on revenues* Banks and Bank Holding Companies listed in the
American Bankers’ Top 50 in Assets, and any other financial services entity
including insurance, mortgage banking, brokerage, credit card processors or
other whose assets are the same size as the 50 largest Banks* Health Care
Providers in systems that include 7 or more acute care facilities* Federal
Government, State Governments and the 10 Largest Local Government units* Top 100
Research Universities, all state-wide University systems and all major state and
private University medical hospitals* Regulatory Services Provides all
evaluative, diagnostic and solution services for areas of regulatory risk.
Renders attest, compliance and consultative reports in this area. Provides no
regulatory services except for technology integration services to support
regulatory services engagements. (4) Quality Registrar Provides
all, including ISO registrar services. Provides none (5)
Information Risk Management
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Service Assurance Consulting
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• Functional Solutions • Assurance is explicitly responsible for assessing the
quality of Internal Controls and for providing solutions where improvements are
warranted or weaknesses exist. • Consulting may contract with assurance
providers, whereby assurance providers will provide functional internal controls
design expertise on large scale systems integration service offerings including
ERP,
e-Engineering and Supply Chain type engagements. • Assurance provides a range of
Business Continuity Management (BCM) services including Systems Availability,
Systems Reliability, and Systems Recoverability assessments. • Implements
technology solutions to respond to BCM issues. • Technical Solutions Assurance
will provide the technology solutions that focus on the Internal Controls
Infrastructure. Consulting provides technical solutions to systems integration
engagements including Analysis, Design, Architecture, Implementation, and
Quality Assurance. • Security Services Including Privacy(1) Assurance provides
these services from an internal controls perspective in response to demand for
security and privacy services at an enterprise, departmental, or application
level. Consulting provides these services from a systems integration perspective
in response to demand for security and privacy services as part of an overall
information systems architecture or systems integration engagement. These
services focus on assessment, and strategy development, architecture, Consulting
may partner with assurance providers to provide functional services should
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1 This is an area that Assurance and Consulting will have in common. However,
each practice engages the market for these services from different perspectives.
Assurance from an internal controls perspective and Consulting from a systems
integration perspective. |
EXHIBIT 10.1
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (this “Agreement”) is entered into as
of March 8, 2001 (the “Effective Date”), by and among G & W/LAKEVILLE CORPORATE
CENTER, LLC, a California limited liability company (“Seller”), and REGAN
HOLDING CORP., a California corporation (“Buyer”).
THIS AGREEMENT IS ENTERED INTO on the basis of the following facts,
intentions and understandings of the parties:
A. Seller is the owner of the land (the “Land”) and the improvements
located thereon (the “Improvements”), commonly known as 2084 Lakeville Highway
and 2090 Marina Avenue in the City of Petaluma, County of Sonoma, State of
California. The Land is more particularly described in Exhibit A, attached
hereto. The Land and the Improvements are hereinafter collectively referred to
as the “Real Property.”
B. The Real Property is subject to that certain Lakeville Industrial
Center Net Lease (the “Lease”) dated October 28, 1998, entered into between
Seller, as Landlord, and Buyer, as Tenant. Pursuant to the Lease, Seller granted
to Buyer an option to purchase the Property. Buyer has exercised its option to
purchase the Property.
C. Seller now desires to sell the Property (as hereinafter defined) to
Buyer, and Buyer desires to purchase the Property from Seller, in accordance
with the terms of the Lease and this Agreement.
NOW THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Seller and Buyer hereby agree as follows:
1. Purchase and Sale of Property. Seller shall sell to Buyer, and Buyer
shall purchase from Seller, on the terms, covenants and conditions set forth in
this Agreement, the following described property (collectively, the “Property”):
1.1. Real Property. The Real Property, together with all minerals,
oil, gas and other hydrocarbon substances thereon and all easements, access
rights, air, water and riparian rights, development rights, solar rights and all
tenements, privileges and appurtenances pertaining thereto;
1.2. Personal Property. All fixtures, equipment, machinery,
building materials, furniture, furnishings and other personal property located
on, attached to, or used in connection with the operation and maintenance of the
Real Property that are owned by Seller (collectively, the “Personal Property”);
1.
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1.3. Intangible Property. Seller’s interest in any and all
intangible personal property arising out of or in connection with the ownership
or operation of the Real Property, including (i) the right to use the current
names of the Real Property, (ii) all licenses, permits, certificates of
occupancy and franchises issued to Seller by federal, state or local municipal
authorities relating to the use, maintenance, occupancy or operation of the Real
Property, (iii) all warranties given by third parties with respect to the Real
Property, and (iv) all service, equipment, maintenance, construction and
employment agreements (collectively, the “Service Contracts”) entered into by
Seller with respect to the Real Property and listed on Exhibit B, attached
hereto, which Buyer elects to have assigned to it pursuant to the provisions of
this Agreement (collectively, the “Intangible Property”); and
1.4. Lease. The Lease, together with all security and damage
deposits held by Seller in accordance with the terms of the Lease.
2. Purchase Price. Buyer shall pay to Seller the purchase price (the
“Purchase Price”) in the amount of Ten Million Six Hundred Thousand Dollars
($10,600,000) for the Property. The Purchase Price shall be paid in the manner
described in Section 4.
3. Deposit. Within two (2) business days after the execution of this
Agreement, Buyer and Seller shall open an escrow account (the “Escrow”) with
North American Title (“Escrow Holder”), and Buyer shall deposit with Escrow
Holder by cashier’s check or immediately available federal wire transfer cash in
the amount of Forty Thousand Dollars ($40,000) (the “Deposit”). Escrow Holder
shall place the Deposit in an interest-bearing account at an institution
acceptable to Buyer, to be held as a deposit on account of the Purchase Price.
(The Deposit and all interest earned thereon shall hereinafter collectively be
referred to as the “Earnest Money Deposit.”) Upon Close of Escrow, the Earnest
Money Deposit shall be applied against the Purchase Price.
4. Payment of Purchase Price. On or before Close of Escrow, Buyer shall
deposit with Escrow Holder by immediately available federal wire transfer or
cashier’s check an additional amount equal to the difference between the
Purchase Price and the Earnest Money Deposit, plus or minus the closing
adjustments and prorations described in Section 11.7.
5. Remedies; Liquidated Damages.
5.1. Remedies. If the transfer of the Property from Seller to Buyer
does not close as a result of a default by Seller under this Agreement, Buyer’s
sole remedy shall be either (but not both) (i) the return of the Earnest Money
Deposit and reimbursement of Buyer’s actual expenses incurred in connection with
this transaction, not to exceed Fifty Thousand Dollars ($50,000), or (ii) an
action for specific performance of this Agreement (with Buyer thereby waiving
any other remedy which Buyer may have against Seller at law or in equity).
5.2. LIQUIDATED DAMAGES. IF THE TRANSFER OF THE PROPERTY FROM
SELLER TO BUYER IS NOT CONSUMMATED DUE TO A DEFAULT BY BUYER
2.
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UNDER THIS AGREEMENT, SELLER SHALL HAVE THE RIGHT TO TERMINATE THIS AGREEMENT IN
WRITING IMMEDIATELY AND WITHOUT FURTHER OBLIGATION TO BUYER. SELLER SHALL BE
ENTITLED TO RETAIN ANY PORTION OF THE EARNEST MONEY DEPOSIT THEN HELD BY ESCROW
HOLDER AS LIQUIDATED DAMAGES AND AS SELLER’S SOLE REMEDY. NOTWITHSTANDING THE
FOREGOING, THIS PROVISION SHALL NOT LIMIT SELLER’S RIGHT TO OBTAIN REIMBURSEMENT
FOR ATTORNEYS’ FEES AND COSTS, AFFECT BUYER’S RESTORATION OBLIGATIONS, OR WAIVE
OR AFFECT BUYER’S INDEMNITY OBLIGATIONS AND SELLER’S RIGHTS TO THOSE INDEMNITY
OBLIGATIONS UNDER THIS AGREEMENT. THE PARTIES AGREE THAT SELLER’S ACTUAL DAMAGES
AS A RESULT OF BUYER’S DEFAULT UNDER THIS AGREEMENT WOULD BE DIFFICULT OR
IMPOSSIBLE TO DETERMINE, AND THE EARNEST MONEY DEPOSIT IS THE BEST ESTIMATE OF
THE AMOUNT OF DAMAGES SELLER WOULD SUFFER AS A RESULT OF SUCH DEFAULT. SELLER
HEREBY WAIVES THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3389. THE PARTIES
WITNESS THEIR AGREEMENT TO THIS LIQUIDATED DAMAGES PROVISION BY INITIALING THIS
SECTION:
Seller: (/s/MTW) Buyer: (/s/HLS)
6. Due Diligence.
6.1. Seller’s Studies. Seller either has or will provide to Buyer
within two (2) business days after the Effective Date copies of the documents
and materials (the “Due Diligence Documents”) described in Exhibit C, attached
hereto. In addition, Seller shall make available at Seller’s office for Buyer’s
review all studies, reports, maps, surveys, and other documents relating to the
Property and the Lease in Seller’s possession or control (together with the Due
Diligence Documents hereinafter referred to as the “Due Diligence Materials”).
6.2. Survey. During the Due Diligence Period, Buyer, at Buyer’s
sole cost and expense, shall the right to have an ALTA survey (the “Survey”)
prepared of the Real Property.
6.3. Right of Entry. During the period (the “Contract Period”)
commencing on the Effective Date and ending on the earlier of Close of Escrow or
termination of this Agreement, Buyer’s representatives, agents, consultants and
contractors shall have the right to enter the Real Property to conduct
investigations of the Property and the physical and economic conditions thereof,
including the conduct of such engineering, economic feasibility and soil tests
as Buyer may desire (each, a “Buyer Inspection”), pursuant to the following
terms and conditions:
6.3.1. Buyer’s Expense. Each Buyer Inspection shall be at
Buyer’s sole cost and expense.
3.
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6.3.2. No Interference. Any entry by Buyer or its
representatives, agents, consultants or contractors shall not interfere with
Seller’s use of the Real Property.6.3.3. Seller’s Approval Rights. Seller shall
have the right to approve of any proposed physical testing or drilling of the
Real Property, which approval may be withheld by Seller in its sole and absolute
discretion.6.3.4. Restoration. Buyer, at Buyer’s sole cost and expense, shall
restore the Real Property to its condition existing immediately prior to Buyer’s
Inspections if, for any reason, the Property is not transferred by Seller to
Buyer. The restoration obligation contained in this Section 6.3.4 shall survive
the termination of this Agreement.
6.3.5. Indemnity. Buyer shall indemnify, defend and hold
harmless Seller for, from and against any and all claims, damages, costs,
liabilities and losses (including mechanics’ liens) and expenses (including,
without limitation, reasonable attorneys’ fees) arising out of any entry by
Buyer or its agents, representatives, consultants or contractors on the Real
Property. The indemnity obligations contained in this Section 6.3.5 shall
survive Close of Escrow or any termination of this Agreement.
6.4. Designation of Representatives. Seller and Buyer each shall
designate one (1) representative to act for them in scheduling and arranging
visits to and inspections of the Real Property and in coordinating the delivery
of and/or access to the Due Diligence Materials pursuant to Section 6.1 above.
Buyer’s Representative and Seller’s Representative are identified in the Summary
of Certain Terms. Each party shall have the right to change its respective
representative by notice to the other party given in accordance with Section
15.7.
6.5. Disapproval of Seller’s Studies or Buyer’s Inspections.
6.5.1. Termination Notice. Buyer shall have the right, at
any time during the period (the “Due Diligence Period”) commencing on the
Effective Date and ending at 6:00 p.m. Pacific Standard Time on the thirtieth
(30th) day after the Effective Date to disapprove of the results of Buyer’s
review of the Due Diligence Materials, Buyer’s Inspections of the Real Property
or any aspect of this transaction, by notifying Seller in writing (a
“Termination Notice”). If Buyer fails to provide Seller with a Termination
Notice prior to the expiration of the Due Diligence Period, then Buyer shall be
deemed to have approved the results of Buyer’s review of the Due Diligence
Materials and Buyer’s Inspections.
6.5.2. Result of Termination Notice. If Buyer delivers a
Termination Notice to Seller during the Due Diligence Period, then this
Agreement shall terminate and Seller shall immediately direct Escrow Holder to
return the Earnest Money Deposit to Buyer.
6.6. Title Review. Buyer shall notify Seller in writing (the “Title
Objection Notice”) prior to the expiration of the Due Diligence Period if Buyer
objects to the condition of title as shown on a title report (the “Title
Report”) for the Real Property issued by North American Title (“Title Company”)
or any items shown on the Survey. Buyer shall be deemed to have approved the
condition of title as shown on the Title Report and the Survey if Buyer fails to
4.
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deliver to Seller the Title Objection Notice prior to the expiration of the Due
Diligence Period. If Buyer timely delivers to Seller the Title Objection Notice,
Seller shall notify Buyer in writing within three (3) business days after
Seller’s receipt of the Title Objection Notice of Seller’s election to either
(i) cure or satisfy all or some of the objection(s) (the “Objections”) set forth
in the Title Objection Notice and/or (ii) not to cure or satisfy any of the
Objections. Seller shall have until Close of Escrow to cure or satisfy any
Objections that Seller elects to cure or satisfy and Seller’s failure to do so
by Close of Escrow shall constitute a default by Seller under this Agreement. If
Seller fails to notify Buyer in writing of its election within the three
(3) business day period referenced above, Seller shall be deemed to have elected
not to cure or satisfy all of the Objections. If Seller notifies Buyer in
writing of its election not to cure or satisfy any of the Objections or is
deemed to have elected not to cure or satisfy any of the Objections, then Buyer
shall either: (A) waive the Objections and proceed with Close of Escrow pursuant
to all of the terms of this Agreement, with a reduction in the Purchase Price
equal to the cost of curing the Objections as reasonably estimated by Buyer, or
(B) terminate this Agreement by written notice to Seller. Buyer shall notify
Seller in writing of its election either to terminate this Agreement or waive
the Objections pursuant to the foregoing sentence within three (3) business days
after Buyer’s receipt of Seller’s response to the Title Objection Notice. If
Buyer fails to notify Seller in writing of its election to either terminate this
Agreement or waive the Objections within the time period provided above, Buyer
shall be deemed to have terminated this Agreement. If Buyer terminates this
Agreement pursuant to this Section, Seller shall immediately direct Escrow
Holder to return the Earnest Money Deposit to Buyer.
6.7. Modification of Title Report. In the event that Title Company
issues any modification or supplement to the Title Report between the end of the
Due Diligence Period and Close of Escrow that is not the result of activities of
Buyer or any of Buyer’s agents, representatives, consultants or contractors,
and, if, in Buyer’s reasonable judgment, the change materially and adversely
affects the Real Property or Buyer’s projected use thereof, Buyer shall have
three (3) business days after receipt of the modification or supplement to the
Title Report in which to object thereto by written notice to Seller. If Buyer
objects to such a change, Seller shall have three (3) days after the date Seller
receives Buyer’s objection notice (and, if necessary, Close of Escrow shall be
extended by the number of days necessary to give Seller this full three (3) day
period) in which to notify Buyer in writing of its election either to satisfy or
cure Buyer’s objection or not to satisfy or cure Buyer’s objection. Seller shall
have until Close of Escrow to cure or satisfy any objections that Seller elects
to cure or satisfy and Seller’s failure to do so by Close of Escrow shall
constitute a default by Seller under this Agreement. Seller shall be deemed to
have elected not to cure or satisfy all of Buyer’s objections if Seller fails to
notify Buyer in writing of its election within the three (3) day period
referenced above. If Seller notifies Buyer in writing of its election not to
satisfy the objection or Seller is deemed to have elected not to cure or satisfy
Buyer’s objection, then Buyer shall either: (A) waive the objection and proceed
with Close of Escrow pursuant to all of the terms of this Agreement, or
(B) terminate this Agreement. Buyer shall notify Seller in writing of its
election either to terminate this Agreement or waive its objection within three
(3) business days after the earlier of Buyer’s receipt of Seller’s written
notice election not to cure Buyer’s objection or the expiration of the three
(3) day period within which Seller was required to notify Buyer of its election.
If
5.
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Buyer terminates this Agreement pursuant to this Section, (i) this Agreement,
and all of the obligations, rights and liabilities of Buyer and Seller to each
other hereunder shall terminate; and (ii) Seller shall immediately direct Escrow
Holder to return the Earnest Money Deposit to Buyer.
6.8. Service Contracts. Buyer shall notify Seller in writing prior
to the end of the Due Diligence Period as to which (if any) Service Contracts
Buyer shall assume at Close of Escrow. Seller shall terminate all other Service
Contracts by Close of Escrow.
6.9. Assumption of Bonds. Notwithstanding anything to the contrary
contained in Section 11.7 of this Agreement, Buyer agrees to purchase the
Property subject to outstanding bonds attributable to and unpaid assessments
assessed against the Property (with no adjustment to the Purchase Price).
7. Status
7.1. As-Is Purchase. Except as otherwise provided in Section 14.2,
Seller hereby specifically disclaims any warranty, guaranty or representation,
oral or written, past, present or future, of, as to or concerning (i) the nature
and condition of the Property, including, but not by way of limitation, the
water, soil, geology, environmental conditions (including the presence or
absence of any Hazardous Materials (defined below)), and the suitability thereof
for any and all activities and uses which Buyer may elect to conduct thereon;
(ii) the nature and extent of any right-of-way, lease, possessory interest,
lien, encumbrance, license, reservation, condition or otherwise; and (iii) the
compliance of the Property or its operation with any laws, ordinances or
regulations of any government or other body. The sale of the Property as
provided for herein is made on an “AS IS” basis, and Buyer expressly
acknowledges that, in consideration of the agreements of Seller herein, and
except as otherwise expressly specified herein, SELLER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING,
BUT IN NO WAY LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY. The term
“Hazardous Materials” shall mean any substance: (i) the presence of which
requires investigation or remediation under any federal, state or local statute,
regulation, ordinance, order, action, policy or common law; (ii) which is or
becomes defined as a “hazardous waste,” “hazardous substance,” pollutant or
contaminant under any federal, state or local statute, regulation, ordinance,
rule, directive or order or any amendments thereto (hereinafter referred to as
“Environmental Laws”) including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
et seq.) and/or the Resource Conservation and Recovery Act (41 U.S.C.
Section 6901 et seq.); (iii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is
or becomes regulated by any governmental authority, agency, department,
commission, board, agency or instrumentality of the United States, the State of
California or any political subdivision thereof; (iv) which contains gasoline,
diesel fuel or other petroleum hydrocarbons; (v) which contains polychlorinated
biphenyls (PCBs), asbestos or urea formaldehyde foam insulation; or (vi) radon
gas.
6.
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7.2. Release. Excluding any claim that Buyer may have against Seller as a
result of any breach by Seller of any of Seller’s representations or warranties
set forth in Section 14.2, effective as of Close of Escrow, Buyer, for itself
and its agents, affiliates, successors and assigns, hereby releases and forever
discharges Seller and its officers, directors, shareholders, members, partners,
agents, affiliates, successors and assigns (collectively, “Seller’s Parties”)
from, and waives any right to proceed against Seller or Seller’s Parties for,
any and all costs, expenses, claims, liabilities and demands (including
attorneys’ fees and costs) at law or in equity, whether known or unknown,
arising out of the physical, environmental, economic, legal or other condition
of the Property, including any claims for contribution pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or any other Environmental Laws which Buyer has or may have in the
future. Without limiting the foregoing, Buyer hereby specifically waives the
provisions of Section 1542 of the California Civil Code which provide:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT
TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.”
Buyer hereby specifically acknowledges that Buyer has carefully reviewed this
Section 7.2, and discussed its import with legal counsel, is fully aware of its
consequences, and that the provisions of this Section 7.2 are a material part of
this Agreement.
Buyer (/s/HLS) (X) agrees.
8. Operation of Property. Seller hereby covenants with Buyer that
during the Contract Period:
8.1. Leases, Contracts. Seller shall not enter into, amend
or terminate any lease, service contract or any other agreement or contract
affecting or relating to the Real Property that will survive Close of Escrow
(including any Service Contract) without the prior written consent of Buyer,
which consent shall not be unreasonably withheld;
8.2. Insurance. All insurance coverage carried by Seller
with respect to the Real Property and in effect as of the Effective Date shall
remain continuously in full force and effect;
8.3. Maintenance. Seller shall continue to maintain the Real
Property in substantially the same manner in which Seller is maintaining the
Real Property as of the Effective Date;
7.
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8.4. Personal Property. Seller shall not remove any Personal
Property from the Real Property unless it is replaced with a comparable item of
equal quality and quantity as existed at the time of such removal and shall
maintain the Personal Property in good condition and repair.
8.5. Withdrawal. Seller shall withdraw the Property from the
market and not enter into any agreement to sell the Property to any other party
or otherwise negotiate with any other party concerning a sale of the Property.
9. Grant Deed. Seller shall convey to Buyer all of its interest in the
Real Property by a grant deed (the “Deed”) in the form of Exhibit D, attached
hereto.
10. Conditions Precedent. In addition to the documents and funds which
must be placed into Escrow prior to Close of Escrow as stated in Section 11 of
this Agreement, the following are conditions precedent to Close of Escrow:
10.1. Seller. The following are conditions precedent to
Seller’s obligation to proceed with Close of Escrow:
10.1.1. No Proceedings. No suit, action or other
proceeding (instituted by any party other than Seller) shall be pending which
seeks, nor shall there exist any judgment the effect of which is, to restrain
the purchase and sale of the Property;
10.1.2. Buyer’s Representations True and Correct.
Buyer’s representations and warranties set forth herein shall be true and
correct in all material respects on Close of Escrow;
10.1.3. Performance of Covenants. Buyer shall have
performed all of Buyer’s covenants and agreements contained in this Agreement
that are required to be performed by Buyer prior to or on Close of Escrow; and
10.1.4. Authority. Buyer shall have provided to
Seller and Title Company prior to Close of Escrow evidence of authority for
Buyer to enter into this Agreement and purchase the Property from Seller.
10.2. Buyer. The following are conditions precedent to the
Buyer’s obligation to proceed with Close of Escrow:
10.2.1. Satisfaction With Due Diligence. Buyer’s
inspection and approval during the Due Diligence Period of the Due Diligence
Materials, the Lease, the Service Contracts, the Survey and all other physical,
environmental, legal and any other matters relating to the Property that Buyer
may elect to investigate;
10.2.2. Title. Buyer’s inspection and approval of all
title and survey matters relating to the Property within the time periods
provided in Sections 6.6 and 6.7;
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10.2.3. Owner’s Title Policy. Buyer’s receipt prior
to Close of Escrow of an irrevocable written commitment of Title Company to
issue, upon the payment of its regularly scheduled premium, an ALTA Owner’s
Policy (1992 Form) of title insurance, with extended coverage (the “Owner’s
Title Policy”) dated as of the date and time of the recordation of the Deed, in
the amount of the Purchase Price, insuring Buyer that fee simple title to the
Real Property is vested in Buyer, subject only to (i) a lien for real property
taxes and assessments not then delinquent; (ii) matters of title respecting the
Real Property approved or deemed approved by Buyer during the Due Diligence
Period; and (iii) matters affecting the condition of title to the Real Property
created by or with the written consent of Buyer or its agents, representatives,
consultants or contractors;
10.2.4. Financing. Buyer’s obligations to perform
pursuant to this Agreement are contingent upon Buyer’s ability to obtain
financing in an amount of approximately $5,500.000.00 on terms acceptable to
Buyer in sufficient time to close escrow pursuant to this Agreement . Buyer
acknowledges that it will use it best efforts to obtain financing in as prompt a
manner as is commercially feasible; it being Buyer’s desire to close escrow as
soon as possible.
10.2.5. No Proceedings. As of Close of Escrow, no
suit, action or other proceeding (instituted by any party other than Buyer)
shall be pending which seeks, nor shall there exist any judgment the effect of
which is, to restrain the purchase and sale of the Property;
10.2.6. Seller’s Representations True and Correct. As
of Close of Escrow, Seller’s representations and warranties set forth in this
Agreement shall be true and correct in all material respects;
10.2.7. Performance and Covenants. Seller shall have
performed all of the covenants and agreements herein that Seller is required to
perform on or before Close of Escrow.
10.2.8. Authority. Seller shall have provided to
Buyer and Title Company at Close of Escrow with evidence of authority to enter
into this Agreement and transfer the Property to Buyer.
10.3. Failure of Buyer’s Conditions Precedent. If any of
Buyer’s conditions precedent described in Section 10.2 have not been satisfied
or waived by the time provided therein, then this Agreement shall terminate.
Upon termination of this Agreement pursuant to the foregoing sentence, Seller
shall direct the Escrow Holder to return the Earnest Money Deposit to Buyer. If
Close of Escrow fails to occur due to a default under this Agreement by either
Seller or Buyer, the parties’ respective remedies shall be as described in
Section 5 hereof.
11. Escrow.
11.1. Time. Close of Escrow shall occur when all documents
and funds specified in this Section 11 have been deposited into Escrow. The
failure of Seller or Buyer to be in a position by the Scheduled Closing Date (as
defined in the Summary of Certain Terms) to
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fulfill their respective obligations with respect to Close of Escrow and thus
enable Title Company to cause Close of Escrow to occur on the Scheduled Closing
Date shall constitute a default by the party so failing.
11.2. Documents. On or before the business day immediately
preceding the Scheduled Closing Date, the parties shall deposit into Escrow the
funds and documents described below.
11.2.1. Seller. Seller shall deposit the following:
a. Deed. A duly executed and
acknowledged Deed, conveying to Buyer all of its interest in the Real Property;
b. Bill of Sale and Assignment. Two
(2) duly executed counterparts of a Bill of Sale and Assignment (the
“Assignment”) in the form of Exhibit E, attached hereto, transferring to Buyer
all of Seller’s interest in the Lease, Personal Property and Intangible
Property;
c. Non-Foreign Person Certificate. A
duly executed non-foreign person certificate (the “Non-Foreign Person
Certificate”) under Section 1445 of the Internal Revenue Code in the form of
Exhibit F, attached hereto;
d. Form 597-W. A duly executed
Withholding Exemption Certificate for Real Estate Sales (Form 597-W) (the
“Form 597-W”);
e. Seller’s Date Down Certificates. A
Seller’s Date Down Certificate (“Seller’s Date Down Certificate”) in the form of
Exhibit G, attached hereto; and
f. Additional Documents. Such
additional documents and funds, including without limitation, escrow
instructions consistent with the terms and conditions of this Agreement, as may
be reasonably required of Seller to close the transaction in accordance with
this Agreement.
11.2.2. Buyer. Buyer shall deposit the following:
a. Purchase Price. The Purchase Price,
plus or minus the closing adjustments and prorations due hereunder;
b. Assignment. Two (2) duly executed
original counterparts of the Assignment;
c. Buyer’s Date Down Certificate. A
duly executed Buyer’s Date Down Certificate in the form of Exhibit H, attached
hereto; and
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d. Additional Documents. Such
additional documents and funds, including without limitation, escrow
instructions consistent with the terms and conditions of this Agreement, as may
be reasonably required of Buyer to close the transaction in accordance with this
Agreement.
11.3. Procedure. Escrow Holder shall close the Escrow as
follows:
11.3.1. Record Deed. Record the Deed in the
Official Records of Sonoma County, California and deliver conformed copies
thereof to Buyer and Seller;
11.3.2. Purchase Price. Deliver to Seller by
wire transfer to the account designated by Seller in writing, the Purchase
Price, minus prorations and closing costs;
11.3.3. Additional Deliveries to Seller.
Deliver to Seller one (1) fully executed original of the Assignment and Buyer’s
Date Down Certificate; and
11.3.4. Additional Deliveries to Buyer.
Deliver to Buyer (i) one (1) fully executed original of the Non-Foreign
Certificate, Assignment, Form 597-W, and Seller’s Date Down Certificate, and
(ii) the Owner’s Title Policy.
11.4. Possession. Seller shall deliver possession of the
Property to Buyer at Close of Escrow free and clear of all tenants and
occupants, except for the Buyer under the Lease.
11.5. Deliveries Outside Escrow. Upon Close of Escrow,
Seller shall deliver (or shall have previously delivered) to Buyer, the
following items in Seller’s possession:
11.5.1. Keys; Security Systems. Keys to all
buildings located on the Real Property and access codes to any security systems
comprising part of the Property;
11.5.2. Approvals. Originals or, to the extent
originals are not available, copies of all governmental licenses, permits and
approvals relating to the occupancy or use of the Real Property;
11.5.3. Project Agreements and Project
Documents. Originals, or to the extent originals are not available, copies of
all construction drawings and specifications (including, without limitation,
structural, electrical, HVAC, mechanical and plumbing plans and specifications)
and any addenda thereto, and all other blueprints, architectural documents,
operating manuals and similar documents, landscaping plans, development plans
and shop drawings relating to the Improvements.
11.5.4. Warranties. Originals or, to the
extent originals are not available, copies of all existing warranties given by
third parties with respect to the Real Property.
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11.6. Escrow Instructions. This Agreement shall serve as
escrow instructions and an executed copy of this Agreement shall be deposited by
Seller and Buyer with Escrow Holder following the execution and delivery hereof.
The parties agree to execute for the benefit of Escrow Holder such additional
escrow instructions as required, provided that the additional escrow
instructions do not change the terms of this Agreement but merely offer
protection to Escrow Holder. Seller and Buyer hereby designate Escrow Holder as
the “Reporting Person” for the transaction pursuant to Section 6045(e) of the
Internal Revenue Code.
11.7. Closing Costs and Prorations.
11.7.1. Closing Costs
a. Buyer’s Share of Closing
Costs. Buyer shall pay the following portions of the closing costs (the “Closing
Costs”) in connection with transfer of the Property: (A) the title insurance
premiums for the Owner’s Title Policy and any endorsements requested by Buyer;
(B) the Escrow fees; and (C) all recording fees incurred in connection with the
Deed.
b. Seller’s Share of Closing
Costs. Seller shall pay the following portions of the Closing Costs: (A) all
City and County documentary transfer taxes; and (B) all recording fees not the
responsibility of Buyer pursuant to Section 11.7.1.a above.
c. No Close of Escrow. If Close
of Escrow does not occur because of a failure of either Seller or Buyer to
comply with its obligations under this Agreement, the costs incurred in
connection with the Escrow, including the cost of the Title Report and any
cancellation fees or other costs of Title Company, shall be paid by the
defaulting party. If Close of Escrow does not occur because of any other reason,
including any termination of this Agreement by Buyer pursuant to Sections 6.5,
6.6 or 6.7, such costs shall be paid equally by Buyer and Seller.
11.7.2. Lease Rentals. All accrued rent
(including all accrued operating expenses and tax escalations and recoveries),
charges and revenues of any kind under the Lease shall be prorated as of
11:59 p.m. Pacific Standard Time on the day immediately prior to Close of Escrow
(the “Proration Date”) based on the actual number of days in the month in which
Close of Escrow occurs. Seller shall receive a credit at Close of Escrow for any
uncollected rent, charges or revenues for the month in which Close of Escrow
occurs. If, after Close of Escrow, either Buyer or Seller receives any revenue
to which it is not entitled under the terms of this Agreement, the party
receiving the revenue shall promptly forward such amount to the other party.
11.7.3. Re-Proration. There shall be no
re-prorations after the Closing Date of any Tenant reconciliations.
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11.7.4. Leasing Costs. All leasing commissions
and tenant improvement costs (collectively, “Leasing Costs”) due or payable in
connection with the Lease shall be paid in full by Seller at or prior to Close
of Escrow. Buyer shall be responsible for all Leasing Costs which shall become
due after Close of Escrow in connection with any other leases entered into by
Buyer.
11.7.5. Security Deposits. Buyer shall receive
a credit against the Purchase Price equal to all security deposits currently
held by Seller in connection with the Lease.
11.7.6. Real Estate Taxes. All real and
personal property taxes attributable to the Real Property (to the extent they
are not the obligation of the tenant under the Lease) shall be prorated as of
11:59 p.m. Pacific Standard Time on the Proration Date based on a 365-day year
and the assessed value of the Property in effect on the Proration Date. Seller
shall pay or credit Buyer for all such taxes attributable to periods through and
including the Proration Date. If at any time after the Proration Date additional
or supplemental taxes (which are not the obligation of the tenant under the
Lease) are assessed against the Real Property by reason of any event occurring
prior to or on the Proration Date, or there is any rebate of such taxes (with
Seller being responsible for the supplemental or additional taxes attributable
to the period prior to and including the Proration Date and Buyer being
responsible for the supplemental or additional taxes attributable to the period
after the Proration Date), Buyer and Seller shall promptly re- prorate such
taxes, and any amounts due from one party to the other shall be paid in cash at
that time. All real and personal property taxes, installments of bonds, special
taxes and assessments, and supplemental or additional taxes which are the
obligations of Buyer as tenant under the Lease shall be considered to be rent
for purposes of prorating such taxes and shall be prorated among Buyer and
Seller pursuant to Section 11.7.2.
11.7.7. Utilities. Buyer shall arrange with
all utility services and companies serving the Real Property to have accounts
started in the name of Buyer or its property manager beginning as of the Closing
Date. Buyer and Seller shall cooperate to have the utility services and
companies make utility readings as of the Proration Date. If readings cannot be
made, utility charges shall be prorated as of 11:59 p.m. Pacific Standard Time
on the Proration Date based on estimates from the latest bills available;
provided, in any event, Seller shall pay, through and including the Proration
Date, all utility charges attributable to the Real Property that are not payable
directly by Buyer as tenant under the Lease. All utility charges attributable to
the Real Property that are payable directly by Buyer as tenant under the Lease
shall be considered to be rent for purposes of prorating such utility charges
and shall be prorated among Buyer and Seller pursuant to Section 11.7.2).
11.7.8. Insurance. Seller shall not assign to
Buyer any insurance policies in connection with the Property.
11.7.9. Calculations for Closing. Seller and
Buyer shall provide Escrow Holder with a preliminary calculation of prorations
no later than three (3) days prior to the
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Proration Date and a final calculation no later than one (1) day prior to the
Proration Date. The final calculation shall be executed by each party and may be
relied upon by Escrow Holder in completing the closing adjustments and
prorations. In the event incomplete information is available, or estimates have
been utilized to calculate prorations as of the Proration Date, any prorations
relating thereto shall be further adjusted and completed outside of Escrow
within sixty (60) days after the Proration Date or as soon as possible after
complete information becomes available to Buyer and Seller. Any adjustments to
initial estimated prorations that are required upon review of such complete
information shall be made by Buyer and Seller, with due diligence and
cooperation, by prompt cash payment to the party entitled to a credit as a
result of such adjustments. Any errors or adjustments in calculations of the
foregoing adjustments shall be corrected or adjusted as soon as practicable
after Close of Escrow.
11.7.10. Additional Costs. Buyer and Seller
each shall pay their own legal, lending and other fees and expenses incurred in
connection with the negotiation, documentation and closing of the contemplated
transactions.
11.8. Failure to Furnish Non-Foreign Person Certificate. If
Seller shall fail to deposit into Escrow the Non-Foreign Person Certificate as
required by this Agreement, Buyer may at its option either (i) delay Close of
Escrow until such time as Seller has complied with the conditions set forth
herein, and such adjournment shall not place Buyer in default of its obligations
hereunder, or (ii) withhold from the Purchase Price and remit to the Internal
Revenue Service, a sum equal to ten percent (10%) of the gross selling price of
the Property or such other sum as shall be required in accordance with the
withholding obligations imposed upon Buyer pursuant to Section 1445 of the Code.
Such withholding shall not place Buyer in default under this Agreement, and
Seller shall not be entitled to claim that such withholding shall excuse
Seller’s performance under this Agreement.
12. Brokerage Commission. Upon Close of Escrow, a real estate sales
commission (the “Commission”) shall be paid by Seller to Sabella & Lipman
(“Seller’s Broker”) in an amount as agreed upon in writing between Seller and
Broker. Except for Seller’s payment of such commission (from payment of which
Seller shall indemnify and hold harmless Buyer), each party to this Agreement
warrants to the other that no person or entity can properly claim a right to a
real estate commission, finder’s fee or other real estate brokerage-type
compensation (collectively, “Real Estate Compensation”) based upon the acts of
that party with respect to the transaction contemplated by this Agreement. Each
party hereby agrees to indemnify and defend the other (by counsel reasonably
acceptable to the party seeking indemnification) against and hold the other
harmless from and against any and all loss, damage, liability or expense,
including costs and reasonable attorneys’ fees, resulting from any claims for
Real Estate Compensation by any person or entity based upon such acts.
13. Condemnation/Casualty.
13.1. Right to Terminate. If before Close of Escrow, all or
any portion of the Property is damaged or destroyed by fire or other casualty,
or is taken by condemnation or
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eminent domain (or an action of condemnation or eminent domain has been
commenced or threatened against all or any portion of the Property), Seller
shall promptly notify Buyer of such fact, and Buyer shall have the option to
terminate this Agreement upon notice to Seller on or before the Closing Date.
13.2. Election to Terminate. Upon Buyer’s termination of
this Agreement pursuant to this Section 13, Seller shall immediately instruct
Escrow Holder to return Earnest Money Deposit to Buyer. Upon termination of this
Agreement, neither Buyer nor Seller shall have any further rights or obligations
under this Agreement.
13.3. No Election to Terminate. If Buyer does not exercise
the option to terminate this Agreement, neither Buyer nor Seller shall have the
right to terminate this Agreement. However, Buyer shall be entitled to receive
and keep at Close of Escrow all insurance proceeds, in the event of a casualty,
and all rights to receive future awards, in the case of a taking by condemnation
or eminent domain with respect to the Property, and Close of Escrow shall be
consummated pursuant to the terms hereof without any reduction in the Purchase
Price. Until the Close of Escrow or the earlier termination of this Agreement by
Buyer, all such insurance proceeds and awards shall be deposited with Title
Company into Escrow, for disbursement in accordance with the foregoing
provisions.
14. Representations and Warranties.
14.1. Buyer. Buyer represents and warrants to Seller the
following:
14.1.1. Authority. Buyer has the full power to
execute and deliver and fully perform its obligations under this Agreement; and
this Agreement constitutes a valid and legally binding obligation of Buyer,
enforceable in accordance with its terms.
14.1.2. No Violation. Neither this Agreement
nor anything provided to be done hereunder violates or shall violate any
contract, agreement or instrument to which Buyer is a party, the effect of which
shall be to prohibit or to seek or purport to prohibit Buyer from fulfilling its
obligations under this Agreement.
14.1.3. No Assignment. Buyer has not made
(i) a general assignment for the benefit of creditors; (ii) filed any voluntary
petition in bankruptcy or suffered the filing of an involuntary petition by
Buyer’s creditors; (iii) suffered the appointment of a receiver to take
possession of all or substantially all of Buyer’s assets; (iv) suffered the
attachment or other judicial seizure of all, or substantially all, of Buyer’s
assets; (v) admitted in writing its inability to pay its debts as they become
due; or (vi) made an offer of settlement, extension or composition to its
creditors generally.
14.2. Seller. Seller represents and warrants to Buyer the
following:
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14.2.1. Authority. Seller has the full power
to execute and deliver and fully perform its obligations under this Agreement;
and this Agreement constitutes a valid and legally binding obligation of Seller,
enforceable in accordance with its terms.
14.2.2. No Violation. . Neither this Agreement
nor anything provided to be done hereunder violates or shall violate any
contract, agreement or instrument to which Seller is a party, the effect of
which shall be to prohibit or to seek or purport to prohibit Seller from
fulfilling its obligations under this Agreement.
14.2.3. No Assignment. Seller has not (i) made
a general assignment for the benefit of creditors; (ii) filed any voluntary
petition in bankruptcy or suffered the filing of an involuntary petition by its
creditors; (iii) suffered the appointment of a receiver to take possession of
all or substantially all of its assets; (iv) suffered the attachment or other
judicial seizure of all, or substantially all, of its assets; (v) admitted in
writing its inability to pay its debts as they come due; or (vi) made an offer
of settlement, extension or composition to its creditors generally.
14.2.4. No Litigation. Seller has not received
any actual notice of any pending or threatened litigation which would materially
and adversely affect the Property.
14.2.5. Notice of Violations. Except as
disclosed in the Due Diligence Documents, Seller has not received any written
notice from any governmental authority and Seller is not aware of any violation
of any law, regulation or code, including any building code, with respect to the
Property which has not been cured.
14.2.6. No Eminent Domain Action. Seller has
not received any written notice from any governmental authority and Seller is
not aware of any eminent domain proceedings for the condemnation of the Real
Property that are threatened or currently pending.
14.2.7. Service Contracts. The documents
constituting the Service Contracts which are delivered or made available to
Buyer pursuant to Section 6.1 are true, correct and complete copies of the
Service Contracts and there is no default or alleged default by Seller or the
vendor under the Service Contracts that has not been cured.
14.2.8. No Additional Leases. Seller has not
entered into or assumed any lease relating to the Property that is in effect as
of the Effective Date except for the Lease.
14.2.9. Licenses, Permits, Etc. Seller has
obtained all approvals, easements and rights of way which are required by any
and all governmental authorities having jurisdiction over the Property or by
private parties for the normal use, occupancy and operation of the Property and
to ensure continued free and unrestricted vehicular and pedestrian ingress to
and egress from the Property; all such approvals are in full force and effect
and, to Seller’s actual knowledge, there are no facts or circumstances which
might result in revocation of or failure to renew the same; to Seller’s actual
knowledge, the Improvements comply with all applicable laws, statutes,
ordinances, rules and regulations of any and all govern-mental or
quasi-governmental
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agencies having or claiming jurisdiction over the Property or the use of all or
any part thereof (“Legal Requirements”) and there are no violations thereof.
14.2.10. Due Diligence Materials. All Due
Diligence Materials and other information which Seller has provided to Buyer
concerning the Property are correct and complete.
14.2.11. Outstanding Contracts. As of the
Closing Date, there will be no outstanding contracts made by Seller for any
improvements to the Property which have not been fully paid for.
14.2.12. Property. Except for Buyer, no one
has any option or right of first refusal to purchase the Property.
14.2.13. Hazardous Materials.
(i) To Seller’s actual
knowledge, the Property is not in violation of any Environmental Laws.
(ii) Except as disclosed
in the Due Diligence Documents, to Seller’s actual knowledge, there has been no
use, presence, disposal, storage, generation or release (as those terms are used
in the Environmental Laws, and hereinafter collectively referred to as “Use”) of
Hazardous Materials on, from or under the Property during the period that Seller
has owned the Property or any prior period.
(iii) To Seller’s actual
knowledge, no enforcement action or litigation has been brought or threatened
against Seller or the Property during the period that Seller has owned the
Property or any prior period, nor any settlements reached by Seller or any prior
owner of or other party having any interest in the Property, with any party or
parties, alleging use of any Hazardous Materials on, from or under the Property.
(iv) To Seller’s actual
knowledge, there are no underground storage tanks on the Property.
(v) The scope of the
representations and warranties set forth in Sections 14.2.13(i), (ii), (iii),
(iv) and (v) shall not diminish in any respect any liability of Seller to Buyer
which would otherwise exist under the Environmental Laws.
14.2.14. Subsequent Changes. Seller will
promptly notify Buyer in writing of any event or occurrence which would cause
any of Seller’s above representations and warranties to cease to be true or
correct in any respect.
14.3. No Warranties. Except for those representations and
warranties expressly set forth in Section 14.2, the parties understand and
acknowledge that no person acting on behalf of Seller is authorized to make, and
by execution hereof Buyer acknowledges that no person has
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made, any representation or warranty regarding the Property, or the transaction
contemplated herein, or regarding Leases or the zoning, construction, physical
condition or other status of the Real Property. No representation, warranty,
agreement, statement, guaranty or promise, if any, made by any person acting on
behalf of Seller which is not contained in this Agreement shall be valid or
binding on Seller.
15. Miscellaneous.
15.1. Successors and Assigns. This Agreement shall be
binding upon the heirs, executors, administrator, and successors and assigns of
Seller and Buyer. Notwithstanding the forgoing, except in order to effectuate an
Exchange, neither Buyer nor Seller may assign its rights and obligations under
this Agreement without the prior written consent of the other party (which
consent may be withheld in each party’s sole discretion). No assignment by Buyer
or Seller shall result in assigning party being released from any obligations
under this Agreement. Any assignment in violation of this Section shall be void.
15.2. Entire Agreement. This Agreement contains all of the
covenants, conditions and agreements between the parties and shall supersede all
prior correspondence, agreements and understandings, both oral and written.
15.3. Attorneys’ Fees. Should either party employ attorneys
to enforce any of the provisions of this Agreement or to protect its interest in
any manner arising under this Agreement, or to recover damages for breach of
this Agreement, or to enforce any judgment relating to this Agreement and the
transaction contemplated hereby, the prevailing party shall be entitled to
reasonable attorneys’ fees and court costs.
15.4. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
15.5. Further Assurances. Seller and Buyer shall promptly
perform, execute and deliver or cause to be performed, executed and/or delivered
at or after Close of Escrow any and all acts, deeds and assurances, including
the delivery of any documents, as either party or Escrow Holder may reasonably
require in order to carry out the intent and purpose of this Agreement.
15.6. Severability. In case any one (1) or more of the
provisions contained in this Agreement for any reason is held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
15.7. Notices.
15.7.1. Means/Receipt. All notices or other
communications required or permitted hereunder shall be in writing, and shall be
personally delivered or sent by registered or certified mail, postage prepaid,
return receipt requested, national overnight courier service (next
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business day delivery) or facsimile, and shall be deemed received upon the
earlier of (i) if personally delivered, the date of delivery to the address of
the person to receive such notice, (ii) if mailed, three (3) business days after
the posting by the United States Post Office, (iii) if sent by national
overnight courier service (next business day delivery), one (1) business day
after delivery to such courier service, or (iv) if given by facsimile, upon
electronic evidence of receipt.
15.7.2. Addresses. Any notice to Seller shall
be sent to Seller at Seller’s Address, as stated on page (i) of this Agreement.
Any notice to Buyer shall be sent to Buyer at Buyer’s Address, as stated on page
(i) of this Agreement.
15.8. Counterparts. This Agreement may be executed in one
(1) or more counterparts, and all the counterparts shall constitute but one
(1) and the same agreement, notwithstanding that all parties hereto are not
signatory to the same or original counterpart.
15.9. Time. Time is of the essence of every provision
contained in this Agreement.
15.10. Nonwaiver. Unless otherwise expressly provided in
this Agreement, no waiver by Seller or Buyer of any provision hereof shall be
deemed to have been made unless expressed in writing and signed by Seller or
Buyer, as the case may be. No delay or omission in the exercise of any right or
remedy accruing to Seller or Buyer, as the case may be, upon any breach under
this Agreement shall impair such right or remedy or be construed as a waiver of
any such breach theretofore or thereafter occurring. The waiver by Seller or
Buyer of any breach of any term, covenant or condition herein stated shall not
be deemed to be a waiver of any other term, covenant or condition.
15.11. Survival. Each of the terms, covenants and conditions
of this Agreement contained in this Agreement shall survive the delivery of the
Deed to Buyer and shall not be deemed to have merged into the Deed; provided,
however, that unless Seller or Buyer, as the case may be, receives a written
notice regarding an alleged breach of any representation, warranty or covenant
of Seller or Buyer contained in the Sections referenced above on or prior to the
date that is three (3) months after Close of Escrow, then Seller’s or Buyer’s
obligations and liability with respect to such representation, warranty or
covenant, as applicable, shall terminate on the date that is three (3) months
after Close of Escrow.
15.12. Captions. Section titles or captions contained in
this Agreement are inserted as a matter of convenience and for reference, and in
no way define, limit, extent or describe the scope of this Agreement.
15.13. Exhibits. All exhibits attached hereto shall be
incorporated herein by reference as if set out herein in full.
15.14. Construction. The parties acknowledge that each party
and its counsel have reviewed and revised this Agreement and that the normal
rule of construction to the effect
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that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any amendment or exhibits
hereto.
15.15. Business Day. As used herein, the term “business day”
shall mean any day other than a Saturday, Sunday or day on which banks in the
State of California are authorized to be closed for business.
16. Deferred Exchange. Either party may consummate the purchase or sale of
the Property as part of a so-called like kind exchange (the “Exchange”) pursuant
to Section 1031 of the Internal Revenue Code of 1986, as amended, provided that
(i) Close of Escrow shall not be delayed or affected by reason of the Exchange,
nor shall the consummation or accomplishment of the Exchange be a condition
precedent or condition subsequent to either party’s obligations under this
Agreement; (ii) the party electing to consummate this transaction as part of an
Exchange (the “Electing Party”) shall effect the Exchange through an assignment
of this Agreement, or its rights under this Agreement, to a qualified
intermediary; (iii) the other party (the “Accommodator”) shall not be required
to take an assignment of the purchase agreement for the relinquished property or
be required to acquire or hold title to any real property for purposes of
consummating the Exchange; and (iv) the Electing Party shall pay any additional
costs that would not otherwise have been incurred by the Accommodator had the
Electing Party not consummated this transaction through the Exchange. The
Accommodator shall not by this Agreement or acquiescence to the Exchange
proposed by the Electing Party have its rights under this Agreement affected or
diminished in any manner or be responsible for compliance with or be deemed to
have warranted to the Electing Party that the Exchange in fact complies with
Section 1031 of the Internal Revenue Code of 1986, as amended.
17. No Effect on Buyer’s Rights Under Lease Upon Failure to Close. In the
event the Parties fail to close escrow for any reason, such failure to close
shall not terminate or effect in any way, Buyer’s right to continue as the
Tenant pursuant to the Lease and all Addendums thereto including, but not
limited to, the Tenant’s right therein to extend the term(s) of the Lease, the
right of first offer and the right of first refusal.
20.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement in one
or more counterparts, on the date set forth above, effective as of the date
first above written.
“Seller” G & W/LAKEVILLE CORPORATE CENTER, LLC, a California limited
liability company
By: G&W Ventures, LLC, a California
limited liability company, its Managing
Member By: /s/ MATTHEW T. WHITE
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Name: Matthew T. White
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Its: Manager
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“Buyer” REGAN HOLDING CORP., a California
corporation By: /s/ H. LYNN STAFFORD
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Name: H. Lynn Stafford
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Its: Chief Information Officer
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By:
--------------------------------------------------------------------------------
Name:
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Its:
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21.
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EXHIBIT A
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LAND
The land referred to in this Report is situated in the County of Sonoma,
City of Petaluma, State of California, described as follows:
PARCEL ONE:
PARCELS 1 and 2 as shown and designated upon City of Petaluma Parcel
Map No. 171, filed December 30, 1980 in Book 316 of Maps, Page 22,
Sonoma County Records.
EXCEPTING THEREFROM that portion contained in Deed to the City of
Petaluma, a Municipal Corporation, recorded February 1, 1990 under
Instrument No. 90-11544, and re-recorded March 27, 1990 as Document
No. 90-30132, and re-recorded April 18, 1990 as Document No. 90-38789,
Sonoma County Records.
ALSO EXCEPTING THEREFROM that portion contained in Deed to John M.
Headley, et al, recorded February 1, 1990 as Instrument No. 90-11545,
and re-recorded March 27, 1990 as Document No. 90-30135.
ALSO EXCEPTING THEREFROM that portion contained in the Deed of Trust
to the City of Petaluma recorded June 7, 1996 as Document No.
96-50841, Sonoma County Records.
PARCEL TWO:
AN EASEMENT for public utilities, 10 feet wide, lying Easterly of and
adjacent to, the Westerly line of the above-described Parcel, being
more particularly described as follows:
BEGINNING at Point “X” as set forth in Parcel 1 of Corporation Grant
Deed recorded February 1, 1990 in Document No. 90-11545. Thence along
said line common to Teitler and U-Haul Company South 54 degrees 08
minutes 19 seconds East, 10.00 feet; thence leaving said line and
parallel with the above-described Right-of-Way line South 35 degrees
51 minutes 41 seconds West, 143.47 feet to the point of curvature;
thence on a tangent curve to the right, radius 133 feet, through a
central angle of 27 degrees 28 minutes 28 seconds, an arc length of
63.78 feet to a point on the existing Easterly Right-of-Way line of
Marina Avenue; thence along said line North 35 degrees 51 minutes 41
seconds East, 26.65 feet; thence on a non-tangent curve to the right
whose center bears North 37 degrees 44 minutes 44 seconds West, radius
123 feet, through a central angle of 16 degrees, 23 minutes 35
seconds, an arc length of 35.19 feet to a point of tangency; thence
North 35 degrees 51 minutes 41 seconds East, 143.47 feet to the point
of beginning.
EXCEPTING therefrom all that portion lying within parcel one above.
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PARCEL THREE:
FOR THE PLACE OF COMMENCEMENT BEGIN at the Northwesterly corner of the
tract of land described in the Deed from Brandon Heirs to A.W. Baker,
dated May 14, 1912 and recorded in Book 73 of Official Records of
Sonoma County, Page 388, said Northwesterly corner being on the
Southerly line of the Lakeville Highway, thence Easterly along the
Southerly line of said Highway, 318.36 feet to a point; thence
Southwesterly and parallel with the Northwesterly line of said tract
of land so conveyed to A.W. Baker, 239.12 feet to the actual place of
commencement; thence Northwesterly at right angles, 100 feet to a
point; thence Northeasterly at right angles, 60 feet to a point on the
Southwesterly line of the land described in the Deed from A.W. Baker,
et al, to Stanley McCutchan, dated October 13, 1927 and recorded June
26, 1928 in Book 205 of Official Records of Sonoma County, Page 149;
thence Southeasterly at right angles and along the Southwesterly line
of said land conveyed to McCutchan, 100 feet to a point; thence
Southwesterly at right angles 60 feet to the place of commencement.
EXCEPTING THEREFROM that portion lying within the City of Petaluma,
Sonoma County, California, being a portion of the Lands of John M.
Headley and Delores A. Headley, husband and wife, co-trustees under a
declaration of trust dated April 2, 1981 and amended June 14, 1982, as
conveyed by Deed recorded under Document No. 90-11543 of Official
Records, Sonoma County Records, and being more particularly described
as follows:
BEGINNING at the most Westerly corner of said lands, also being a
point on the Easterly Right-Of-Way line of Marina Avenue; thence along
said Right-Of-Way line North 35 degrees 51 minutes 41 seconds East,
8.56 feet to a point hereinafter referred to as Point “A”; thence
leaving said Right-Of-Way line in a Southerly direction, on a curve
concave Westerly, with a radius of 155 feet, through a central angle
of 3 degrees 14 minutes 35 seconds, an arc length of 8.77 feet to a
point on the Southwesterly line of said lands; thence along said line
North 54 degrees 08 minutes 19 seconds West, 1.94 feet to the point of
beginning.
A.P. Nos. 005-050-020 and 031 |
Exhibit 10.3 Security Agreement between eVision USA.Com, Inc. and Online Credit
Limited dated June 27, 2001
SECURITY AGREEMENT
This SECURITY AGREEMENT is made June 27, 2001, by and between eVision
USA.Com, Inc., 1888 Sherman St, Suite 500, Denver, Colorado, 80203 ("eVision")
and Online Credit Limited of 2601 Island Place Tower, 510 King's Road, North
Point Hong Kong ("OCL")(collectively the "Parties").
Recitals
WHEREAS, eVision and OCL has entered into five separate long-term
debenture agreements that remain outstanding, which are specifically referenced
below:
Debentures referenced:
1) The $4,000,000 10% Convertible Debenture Due December 15, 2007 dated
December 30, 1997 and all subsequent amendments between eVision and OCL;
2) The $1,500,000 10% Convertible Debenture Due December 15, 2007 dated
May 17, 1998 between eVision and OCL;
3) The $1,000,000 10% Convertible Debenture Due December 15, 2007 dated
August 5, 1998 between eVision and OCL;
4) The $1,000,000 12% Convertible Debenture Due December 15, 2007 dated
November 17, 1998 which subsequently had $160,000 in principal paid down under
the “Supplemental Letter of Agreement to the $500,000 12% convertible debenture
due March 24, 1999 dated September 25, 1998 and all subsequent amendments issued
by eVision to Online Credit and the $1,000,000 12% convertible debenture due
December 15, 2007 dated November 17, 1998 issued by eVision to Online Credit”
dated May 24, 2001 between eVision and OCL; and
5) The $589,889.00 12% Convertible Debenture Due June 4, 2006 dated June
4, 2001 between eVision and OCIL, and assigned to OCL (“2001 B-1 Debenture”).
(collectively the “Debentures”)
WHEREAS, eVision and OCL has entered into an Asset Purchase Agreement
dated June 8, 2001, which has been subsequently amended through an Asset
Purchase Agreement Extension dated June 26, 2001 moving the Effective Time of
the Asset Purchase Agreement until shareholders' approval is obtained by eVision
or until OCL and eVision mutually agree to terminate the Asset Purchase
Agreement (“The Asset Purchase Agreement”);
WHEREAS, these Debentures require eVision to make quarterly interest
payments in stock or cash, at the discretion of OCL;
It is therefore agreed:
1. OCL Commitment. OCL agrees to reduce the interest rate, relating to
the 2001 B-1 Debenture from 12% to 2% per annum, effective June 4, 2001.
2. eVision Commitments. In consideration of the OCL Commitment, eVision
agrees to secure its performance under the Debentures with a security interest
in its ownership of certain assets ("Collateral"). The Collateral shall include:
a. all debt, equity and derivative instruments of
eBanker that eVision owns, except that owned by eVision's subsidiary American
Fronteer Financial Corporation, as of the date of this Agreement consisting of:
i. 1 Series A preferred share,
ii. 1,083,533 common shares,
iii. 330,000 warrants to purchase shares @ $3.00 expiring 8/11/03,
iv. 307,692 warrants to purchase shares @ $8.00 expiring 3/31/05,
v. 307,692 warrants to purchase shares @ $9.00 expiring 3/31/05,
and
vi. 660,000 face value in 10% convertible debentures;
b. all shares of Global Growth that eVision owns as of
the date of this Agreement; and
c. 1,050,000 shares of Global Med that eVision owns as
of the date of this Agreement.
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3. Collateral Escrow. Within a reasonable period after execution, the
Collateral, along with stock powers executed in blank, will be transferred to
OCL to hold pursuant to this Security Agreement.
4. Collateral Control. Prior to default as provided in this Security
Agreement, and subject to terms herein, eVision shall retain the economic and
beneficial ownership of the secured shares, which make up the Collateral.
5. Voting rights. During the term of the Debentures, and so long as
eVision is not in default in the performance of any term of this agreement or in
the payment of the Debentures, eVision shall have the right to exercise the
voting rights (if any) attached to the Collateral.
6. Representations. eVision makes no warranties and representations as
to the restrictions upon the transfer of any secured shares. eVision represents
that it has the right to transfer such shares free of any encumbrances and
without obtaining the consents of the other shareholders.
7. Adjustments. If, during the term of this Security Agreement, any
share dividend, reclassification, readjustment, or other change is declared or
made in the capital structure of the respective issuers of the Collateral, all
new, substituted, and additional shares, or other securities, issued by reason
of any such change shall be held by OCL under the terms of this agreement in the
same manner as the Collateral originally secured hereunder.
8. Warrants, rights, options, dividends, exchanges and other
distributions. If, during the term of this agreement, subscription warrants,
rights, options, exchanges or other non-cash distributions (“Non-Cash
Distributions”) are issued in connection with the Collateral, eVision shall
immediately secure such assets to OCL in the same manner as the Collateral
secured hereunder.
If any Non-Cash Distributions are exercised by eVision, all new shares or
other securities and instruments so acquired by eVision shall be immediately be
collateralized under the terms of this agreement in the same manner as the
Collateral originally secured hereunder. The respective exchange values
stipulated in Section 10 will increase by the cash proceeds contributed by
eVision to exercise the Distribution.
During the term of this agreement, all dividends and other amounts paid by the
securities underlying the Collateral shall be paid to OCL and offset against the
interest and principal of Debenture. The respective exchange values stipulated
in Section 10 will decrease by the dividend amount.
9. Payment of Debentures; Term of Security. Upon payment of the
principal and interest of the Debentures, OCL shall deliver or transfer to
eVision all the Collateral including new shares, securities or other instruments
received by OCL pursuant to article 3 and 7, above as a result of its security
interest in the Collateral. This Security Agreement’s term elapses upon the
earlier of full payment of the principal and interest of the Debentures or when
the Asset Purchase Agreement is approved by shareholders of eVision.
2
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10. Default. If eVision defaults in the performance of any terms of this
agreement, or in the payment of the principal or interest of the Debentures, OCL
shall provide eVision with a fourteen (14) day written notice to cure. If
eVision fails to cure during this period, OCL shall have the rights and remedies
provided in the Uniform Commercial Code in force in the State of Colorado at the
date of this agreement, as well as any remedies in the Debentures. In an event
of default, OCL shall also have the right, but not the obligation, to exchange:
a. eVision‘s ownership of securities listed under
article 2(a) for $5,518,416 of the Debentures and/or the Debenture‘s unpaid
accrued interest;
b. eVision‘s ownership of securities listed under
article 2(b) for $1,000,000 of the Debentures and/or the Debenture‘s unpaid
accrued interest; and/or
c. eVision’s ownership of securities listed under
article 2(c) for an amount equal to 1,050,000 multiplied by the average of the
last 10 daily closing prices of Global Med Technologies, Inc. at the time of the
exchange, discounted 10% if the securities are restricted at the time of the
exchange, of the Debentures and/or the Debenture’s unpaid accrued interest.
If eVision defaults in the performance of any term of this agreement, or in
the payment of principal or interest of the Debentures, and OCL elects to
exercise the right to exchange as listed above in this Section 10, but the
outstanding principal and interest is less than the exchange values listed
above, OCL shall pay eVision the difference between the exchange values listed
above and the outstanding Debentures’ principal and interest.
11. Asset Substitution. eVision will inform OCL if it intends to enter
into any transaction involving change of ownership, or any other loss of
control, of any of the Collateral. OCL will have the right to review and approve
the transaction. OCL agrees that their approval will not be unreasonably
withheld or delayed. The asset arising out of the transaction will substitute
and replace the transacted Collateral if it is non-cash and it will be used to
reduce the interest and principal of the debenture if it is cash.
12. Transfer. In the event of default, eVision appoints OCL its attorney
to arrange for the transfer of the record, beneficial and economic ownership of
the Collateral in the respective issuer’s books to the name OCL designates. OCL
shall hold the secured shares as security for the repayment of the Debentures,
and shall not encumber or dispose of the shares except as provided herein.
13. Restrictions. Upon transfer, OCL recognizes that OCL may be unable
to effect a public sale of all or a part of the Collateral consisting of
securities by reason of certain prohibitions contained in the Securities Act of
1933, but may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obliged to agree, among other things,
to acquire such securities for their own account, for investment and not with a
view to the distribution or resale thereof. OCL agrees that private sales so
made may be at prices and other terms less favorable to the seller than if such
securities were sold at public sales.
14. Liability Disclaimer. Under no circumstances whatsoever shall OCL be
deemed to assume any responsibility for or obligation or duty with respect to
any part or all of the Collateral, of any nature or kind whatsoever, or any
matter or proceedings arising out of or relating thereto. OCL shall not be
required to take any action of any kind to collect or protect any interest in
the Collateral, including but not limited to any action necessary to preserve
its or eVision’s rights against prior parties to any of the Collateral. OCL
shall not be liable or responsible in any way for any diminution in the value of
the Collateral, or for any act or default as agent or bailee. OCL’s prior
recourse to any part of all of the Collateral shall not constitute a condition
of any demand for payment or of any suit or other proceeding for collection.
3
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15. Nonwaiver. No failure or delay on the part of the Parties in
exercising any of its rights and remedies hereunder or otherwise shall
constitute a waiver thereof, and no single or partial waiver by the Parties of
any default or other right or remedy which it may have shall operate as a waiver
of any other default, right or remedy or of the same default, right or remedy on
a future occasion.
16. Modification. No provision hereof shall be modified, altered or
limited except by an instrument in writing expressly referring to this Security
Agreement and to the provision so modified or limited, and executed by the
Parties.
17. Authorization. The execution and delivery of this agreement has been
authorized by the Boards of Directors of the Parties and by any necessary vote
or consent of stockholders of the Parties.
18. Binding Effect. This agreement shall be binding upon the Parties'
respective successors and assigns and shall, together with the rights and
remedies of OCL hereunder, inure to the benefit of OCL and its successors,
endorsees and assigns.
19. Headings. Headings in this agreement are only for convenience and
shall not be used to interpret or construe its provisions.
20. Governing law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Colorado.
21. Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
22. Severability. If any term of this agreement is held to be invalid,
illegal or unenforceable, such determination shall not affect the validity of
the remaining terms.
In witness whereof the Parties have executed this agreement as of the date first
written.
EVISION USA.COM, INC.
ONLINE CREDIT LTD.
By: /s/ Robert H. Trapp
By: /s/ Fai Chan
Title: Managing Director
Title: Chief Operating Officer
4
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|
Exhibit 10.4
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") dated December 31, 2000, is
by and between Schmitt Industries, Inc. ("Buyer") and Hortex Anstalt ("Seller").
Seller owns beneficially and of record 400,000 shares of Common Stock of the
Buyer (the "Shares"). Seller desires to sell the Shares to Buyer on the terms
and subject to the conditions set forth herein, and Buyer desires to purchase
the Shares on such terms and conditions.
SECTION 1. PURCHASE OF SHARES
1.1 Purchase of Shares. Subject to the terms and conditions set forth
herein, at the Closing (as defined below) Seller will sell all of the Shares to
Buyer and Buyer will purchase all of the Shares from Seller.
1.2 Purchase Price. Buyer will pay to Seller for the Shares a total of
$472,000 (the "Purchase Price") based on a price of $1.18 per share (the average
closing price of a share of Buyer's Common Stock as quoted on Nasdaq-National
Market for the last five trading days of December 2000).
1.3 Payment of Purchase Price. The Purchase Price will be paid to Seller as
follows:
(1) A cash amount of $94,400 shall be paid by Buyer to Seller at Closing;
and
(2) A promissory note in the form of Exhibit A shall be delivered by Buyer
to Seller at Closing (the "Note").
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Buyer to enter into this Agreement and purchase
the Shares, Seller represents and warrants that:
2.1 Title. Seller has, and upon purchase thereof by Buyer pursuant to the
terms of this Agreement Buyer will have, good and marketable title to the
Shares, free and clear of all security interests, liens, encumbrances, or other
restrictions or claims, subject only to restrictions as to marketability imposed
by securities laws.
2.2 Authorization. The execution, delivery, and performance by Seller of
this Agreement and the Blank Stock Power (as defined below) have been duly
authorized by Seller.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to Seller to enter into this Agreement and sell the
Shares, Buyer hereby represents and warrants to Seller as follows:
3.1 Authorization. The execution, delivery, and performance by Buyer of this
Agreement and the Note have been duly and validly authorized by Buyer.
SECTION 4. CLOSING
4.1 Time and Manner of Closing. The closing (the "Closing") of this
transaction will be held on December 31, 2000. At the Closing, Seller shall
deliver to Buyer the certificate(s) evidencing the Shares, together with a duly
executed Blank Stock Power in the form of Exhibit B, and Buyer shall deliver to
Seller the cash amount referred to in Section 1.3, in a manner to be agreed upon
by the parties, and the duly executed Note.
Page 1
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SECTION 5. MISCELLANEOUS PROVISIONS
5.1 Amendment and Modification. This Agreement may be amended, modified, or
supplemented only by a written agreement signed by Buyer and Seller.
5.2 Governing Law. All matters with respect to this Agreement, including but
not limited to matters of validity, construction, effect, and performance, will
be governed by the laws of the state of Oregon.
5.3 Counterparts. This Agreement may be executed in two or more fully or
partially executed counterparts, each of which will be deemed an original
binding the signer thereof against the other signing parties, but all
counterparts together will constitute one and the same instrument.
5.4 Entire Agreement. This Agreement and any other document to be furnished
pursuant to the provisions hereof embody the entire agreement and understanding
of the parties hereto as to the subject matter contained herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
HORTEX ANSTALT
By:
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SCHMITT INDUSTRIES, INC.
By:
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Wayne A. Case, President
Page 2
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EXHIBIT A
PROMISSORY NOTE
$377,600 Portland, Oregon December 31, 2000
FOR VALUE RECEIVED, the undersigned promises to pay in lawful money of the
United States to the order of Hortex Anstalt the principal sum of $377,600
(three hundred seventy-seven thousand six hundred dollars) to be paid on or
before December 31, 2002. The unpaid balance of the principal amount shall bear
interest at the rate of 9% per annum from the date of this note until fully
paid. Accrued interest on the unpaid principal shall be paid on or before
March 31, June 30, September 30 and December 31, 2001 and March 31, June 30,
September 30 and December 31, 2002. Principal in the amount of $25,000 shall
also be paid on each such date except December 31, 2002 at which time all unpaid
principal shall be paid.
This note may be prepaid, in whole or in part, without penalty.
If any payment due pursuant to this note is not made when due, then at the
option of the holder of this note the entire indebtedness represented by this
note, upon 10 days' written notice to the undersigned, shall immediately become
due and payable and thereafter shall bear interest at the rate of 9% per annum.
Failure or delay of the holder to exercise this option shall not constitute a
waiver of the right to exercise the option in the event of subsequent default or
in the event of continuance of any existing default after demand for the
performance of the terms of this note.
The undersigned shall pay upon demand any and all expenses, including
reasonable attorney fees, incurred or paid by the holder of this note without
suit or action in attempting to collect funds due under this note. If an action
is instituted for the collection of this note, the prevailing party shall be
entitled to recover, at trial or on appeal, such sums as the court may adjudge
reasonable as attorney fees, in addition to costs and necessary disbursements.
The undersigned and its successors and assigns hereby waive presentment for
payment, notice of dishonor, protest, notice of protest, and diligence in
collection, and consent that the time of payment on any part of this note may be
extended by the holder without otherwise modifying, altering, releasing,
affecting, or limiting their liability.
SCHMITT INDUSTRIES, INC.
By:
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Wayne A. Case,
President
Page 3
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|
EXHIBIT 10(w) - MATERIAL CONTRACTS
SECOND AMENDMENT TO THE NATIONAL WESTERN LIFE INSURANCE COMPANY
1995 STOCK AND INCENTIVE PLAN
Paragraph VII(h) of the1995 Stock and Incentive Plan has been amended to read as
follows:
"(h) Fixed Grants to Directors. Each individual who was a non-employee Director
of the Company on the date of approval of the Plan received an Option to
purchase 1,000 shares of Common Stock at the Fair Market Value thereof on the
date of the grant, and each Director received an Option to purchase 1,000 shares
on June 19, 1998, the date of the approval of the First Amendment to the Plan.
Each individual who is a Director of the Company on the date of the approval of
this Second Amendment shall receive an Option to purchase an additional 1,000
shares of Common Stock at the Fair Market Value thereof at the date of grant of
the Option. Each additional individual person who thereafter becomes a new
Director of the Company shall, on completion of three (3) years of continuous
service following election to such office, receive an Option to purchase 1,000
shares of Common Stock at the Fair Market Value thereof at the date of grant of
the Option, and each such person, upon completion of five (5) years of
continuous service as Director of the Company, shall receive an Option to
purchase an additional 2,000 shares of Common Stock at the Fair Market Value
thereof at the date of grant of the Option. However, in no event shall a
Director receive options to purchase any such Director shares that in the
aggregate total more than 3,000 shares under the Plan. Each Option granted under
this paragraph VII(h) shall (i) not constitute an Incentive Stock Option, (ii)
not have Stock Appreciation Rights granted in connection therewith, (iii) have a
term of ten (10) years, (iv) vest twenty percent (20%) per year on each of the
first five (5) anniversary dates of the grant thereof for Directors subject to
acceleration and vesting pursuant to paragraph XII (c), and (v) cease to be
exercisable after the date which is three (3) months after the termination of
such individual's service as a Director (provided that such exercise period
shall be extended to one (1) year in the event of the death of the Director).
Any director holding Options granted under this paragraph VII(h) who is a member
of the Committee shall not participate in any action of the Committee with
respect to any claim or dispute involving any such Director."
|
Exhibit 10.5
[w52358w5235801.gif]
High Speed Net Solutions, Inc.
To: Barry Johnson
Date: June 7, 2001
Re: Your Employment with High Speed Net Solutions, Inc. d/b/a Summus
Barry:
I am pleased to offer you the full-time position of Vice-President of
Products at High Speed Net Solutions, Inc. d/b/a/ Summus (the “Company” or
“HSNS”), in Raleigh, NC reporting to Gary Ban, Chief Operating Officer.
Here are the details of the offer:
1. Title: VP of Products 2. Annual Salary: $135,000 3.
Semimonthly Payment: $5,625.00 4. Car Allowance: $600 / mo.
5. Stock Options: As a full time regular employee, you will be eligible to
receive 200,000 stock options that vest quarterly over a three (3) year period.
The strike price of one-third of the options will be at a 50% discount to market
price, the remaining two-thirds will be at a 25% discount to market price.
Market price is set at $3.00 / share. All options are subject to the approval of
the Board of Directors. The shares issuable upon exercise of the options will be
subject to any agreement in effect between you and the Company at the time of
exercise.
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2
6. Location of Employment: Your place of employment will be 434 Fayetteville
Street Mall, Suite 600, Raleigh, North Carolina 27601. It is anticipated that
you will commute to Raleigh for a period of at least 90 days but no longer than
180 days. Temporary housing will be provided for 180 days and re-evaluated after
120 days for possible extension. 7. Non-competition, Confidentiality and
Assignment of Invention Provisions: You will be required to sign a
Non-competition, Confidentiality and Assignment of Inventions Agreement, which
is required for all employees of the Company having significant duties. 8.
Benefits: You will be entitled to the other benefits generally available to
full-time employees of the Company from time to time. Currently, these benefits
include:
a) Vacation Policy: You will be entitled to three (3) weeks (or fifteen
calendar days) of vacation time annually. Your vacation is accrued throughout
the calendar year but is available to you upon your date of hire (pro-rated
portion of annual vacation time) and the start of each calendar year following.
b) You will be provided six (6) sick/personal days per calendar year.
These days can be used for personal or family illness, death of a family member,
or to attend to personal business. Sick/personal days cannot be carried forward
or used in lieu of vacation time. Absence due to illness extending beyond six
(6) days must be supported by a physician’s note. c) Health & Dental
Insurance: The Company pays 100% of your premium for health insurance and dental
insurance for you and your family (qualified dependents). The current insurance
plan is with Blue Cross Blue Shield of North Carolina. As a resident of Illinois
you will utilize the BCBS network for the state of Illinois. d) Vision
Insurance: The Company pays 100% of your premium for a vision insurance plan
through Vision Service Plan. e) Life Insurance: A life insurance policy is
provided by the Company for you in the amount of $25,000. f) Short-term
and Long-term Disability Protection: Beginning on the 16th day of an absence due
to injury or sickness, the Company will provide income replacement for 100% of
your base salary through 60 days of absence, and then 80% from 60 to 90 days.
Following 90 days, a long-term disability insurance plan pays 66-2/3% of your
salary. g) 401(k) Retirement Plan: You are eligible to contribute upon
employment to the Company 401(k) plan. You may defer from
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3
1% - 15% of your salary, within IRS maximum guidelines. The Company will
match 50% of the first 4% of your salary contribution. Company matching
contributions vest over four years. h) Performance Bonus Program: You will
be eligible to receive up to 100% (a target set annually) of your annual salary
based on specified company and individual performance goals jointly defined by
you and your supervisor. Your performance goals will be established within the
first two weeks of your employment. The bonus will be paid after receipt of the
audited fiscal year-end financial statements of the Company certified by its
CPAs. Bonus plans and payout are subject to Board approval and may consist of
cash, options or a combination of both. Your bonus for the first year will be
prorated based on months of service. i) Sign on bonus: You will receive a
sign on bonus consisting of 10,000 options at a strike price of $.50. These
options will vest monthly over the next 180 days. All options are subject to the
approval of the Board of Directors. j) Relocation: After a period of
90 days, the Company will evaluate the cost to move you and your family to North
Carolina.
9. This agreement is made with the understanding that this does not constitute
a guarantee of employment and is an offer for at-will employment. Conditions of
employment are subject to change. Details regarding benefits coverage are
available in the plan documents in Human Resources. 10. Start Date: Your
start date is tentatively set for Tuesday, June 12, 2001. The offer will remain
in effect for a period of ten days. Please sign and return this agreement to me,
via fax is acceptable at 919-807-5604.
Sincerely,
Gary E. Ban
/s/ Gary E. Ban
Chief Operating Officer
ACCEPTED AND AGREED:
/s/ Barry J. Johnson
--------------------------------------------------------------------------------
Barry J. Johnson
Date: June 7, 2001
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EXHIBIT 10.5
$85,000,000
LEASE AGREEMENT
BETWEEN
BNP PARIBAS LEASING CORPORATION
("BNPPLC")
AND
ROSS STORES, INC.
("Ross")
May 10, 2001
(Fort Mill, South Carolina)
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TABLE OF CONTENTS
Page
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1. TERM 5 (a) Scheduled Term 5 (b) Automatic Termination as of
the Base Rent Commencement Date Resulting From an Election by Ross to Terminate
the Purchase Option and Ross's Initial Remarketing Rights and Obligations 5
(c) Election by BNPPLC to Terminate After an Issue 97-10 Election 5
(d) Election by Ross to Terminate After Accelerating the Designated Sale Date
5 (e) Extension of the Term 6
2.
USE AND CONDITION OF THE PROPERTY
6 (a) Use 6 (b) Condition of the Property 7 (c)
Consideration for and Scope of Waiver 7
3.
RENT
7 (a) Base Rent Generally 7 (b) Calculation of and Due Dates for
Base Rent 8 (i) Amount Payable On the Base Rent Commencement Date
8 (ii) Determination of Payment Due Dates, After the Base Rent
Commencement Date, Generally 8 (iii) Special Adjustments to Base
Rent Payment Dates and Periods 8 (iv) Base Rent Formula 8
(v) Fixed Rate Lock 8 (vi) Interest Rate Swap to Cover Gap 9
(c) Early Termination of a Fixed Rate Lock 10 (d) Additional Rent 10
(e) Arrangement Fee 11 (f) Commitment Fees 11 (g)
Administrative Agency Fees 11 (h) Upfront Fees 12 (i) Issue
97-10 Prepayments 12 (j) No Demand or Setoff 12 (k) Default
Interest and Order of Application 12
4.
NATURE OF THIS AGREEMENT
12 (a) "Net" Lease Generally 12 (b) No Termination 13 (c)
Tax Reporting 13 (d) Characterization of this Lease 14
5.
PAYMENT OF EXECUTORY COSTS AND LOSSES RELATED TO THE PROPERTY
15 (a) Impositions 15 (b) Increased Costs; Capital Adequacy
Charges 15 (c) Ross's Payment of Other Losses; General Indemnification
16 (d) Exceptions and Qualifications to Indemnities 17
6.
CONSTRUCTION
19 (a) Construction Advances; Outstanding Construction Allowance 19
(b) Calculation of Carrying Costs 19 (c) Limits on the Amount of
Carrying Costs Tied to Maximum Construction Allowance 19 (d) Ross's
Right to Control the Construction Project 20 (e) Landlord's Election to
Continue Construction 20 (i) Take Control of the Property 20
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(ii) Continuation of Construction 20 (iii) Arrange for
Turnkey Construction 21 (iv) Suspension or Termination of
Construction 21 (f) Powers Coupled With an Interest 22 (g)
Completion Notice 22
7.
STATUS OF PROPERTY ACQUIRED WITH FUNDS PROVIDED BY BNPPLC
22
8.
ENVIRONMENTAL
22 (a) Environmental Covenants by Ross 22 (b) Right of BNPPLC to
do Remedial Work Not Performed by Ross 23 (c) Environmental Inspections
and Reviews 23 (d) Communications Regarding Environmental Matters 24
9.
INSURANCE REQUIRED AND CONDEMNATION
25 (a) Liability Insurance 25 (b) Property Insurance 25 (c)
Failure to Obtain Insurance 25 (d) Condemnation 25
10.
APPLICATION OF INSURANCE AND CONDEMNATION PROCEEDS
26 (a) Collection and Application of Insurance and Condemnation Proceeds
Generally 26 (b) Advances of Escrowed Proceeds to Ross 26 (c)
Application of Escrowed Proceeds as a Qualified Prepayment 27 (d)
Special Provisions Applicable After Completion by Ross of the Construction
Project 27 (e) Special Provisions Applicable After a CMA Termination
Event or Event of Default 27 (f) Ross's Obligation to Restore 27
(g) Takings of All or Substantially All of the Property on or after the Base
Rent Commencement Date 28
11.
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF ROSS CONCERNING THE
PROPERTY
28 (a) Compliance with Covenants and Laws 28 (b) Operation of the
Property 28 (c) Debts for Construction, Maintenance, Operation or
Development 29 (d) Repair, Maintenance, Alterations and Additions 30
(e) Permitted Encumbrances and Development Documents 30 (f) Books
and Records Concerning the Property 30
12.
FINANCIAL COVENANTS AND OTHER COVENANTS INCORPORATED BY REFERENCE TO SCHEDULE 1
31
13.
FINANCIAL STATEMENTS AND OTHER REPORTS
31 (a) Financial Statements; Required Notices; Certificates 31
14.
ASSIGNMENT AND SUBLETTING BY ROSS
32 (a) BNPPLC's Consent Required 32 (b) Standard for BNPPLC's
Consent to Assignments and Certain Other Matters 32 (c) Consent Not a
Waiver 33
15.
ASSIGNMENT BY BNPPLC
33 (a) Restrictions on Transfers 33 (b) Effect of Permitted
Transfer or other Assignment by BNPPLC 33
16.
BNPPLC'S RIGHT OF ACCESS
33
2
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17.
EVENTS OF DEFAULT
34
18.
REMEDIES
36 (a) Basic Remedies 36 (b) Notice Required So Long As the
Purchase Option and Ross's Initial Remarketing Rights and Obligations Continue
Under the Purchase Agreement 37 (c) Enforceability 38 (d)
Remedies Cumulative 38
19.
DEFAULT BY BNPPLC
38
20.
QUIET ENJOYMENT
38
21.
SURRENDER UPON TERMINATION
39
22.
HOLDING OVER BY ROSS
39
23.
INDEPENDENT OBLIGATIONS EVIDENCED BY THE OTHER OPERATIVE DOCUMENTS
39
Exhibits and Schedules
AExhibit Legal Description
AExhibit
Insurance Requirements
AExhibit
Excepts from Existing Credit Agreement
Exhibit D
Fixed Rate Lock Notice
Exhibit E
Base Rent Period Election Form
Schedule 1
Financial Covenants and Other Requirements
3
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LEASE AGREEMENT
This LEASE AGREEMENT(this "Lease") is made and dated as of May 10, 2001 (the
"Effective Date") by and between BNP PARIBAS LEASING CORPORATION, a Delaware
corporation ("BNPPLC"), and ROSS STORES, INC., a Delaware corporation ("Ross").
RECITALS
Contemporaneously with the execution of this Lease, BNPPLC and Ross are
executing a Common Definitions and Provisions Agreement dated as of the
Effective Date (the "Common Definitions and Provisions Agreement") which by this
reference is incorporated into and made a part of this Lease for all purposes.
As used in this Lease, capitalized terms defined in the Common Definitions and
Provisions Agreement and not otherwise defined in this Lease are intended to
have the respective meanings assigned to them in the Common Definitions and
Provisions Agreement.
Pursuant to the Acquisition Contract, which covers the Land described in
Exhibit, BNPPLC is acquiring the Land and any appurtenances thereto and all
existing Improvements thereon from Seller contemporaneously with the execution
of this Lease.
In anticipation of BNPPLC's acquisition of the Land and the existing
Improvements thereon under the Acquisition Contract, BNPPLC and Ross have
reached agreement as to the terms and conditions upon which BNPPLC is willing to
lease the Land and the existing Improvements and the Improvements to be
constructed on the Land as hereinafter provided, and by this Lease BNPPLC and
Ross desire to evidence such agreement.
GRANTING CLAUSES
BNPPLC does hereby LEASE, DEMISE and LET unto Ross for the term hereinafter
set forth all right, title and interest of BNPPLC, now owned or hereafter
acquired, in and to:
(1) the Land;
(1) any and all Improvements;
(1) all easements and other rights appurtenant to the Improvements, whether
now owned or hereafter acquired by BNPPLC; and
(1) (A) any land lying within the right-of-way of any street, open or
proposed, adjoining the Land, (B) any sidewalks and alleys adjacent to the Land
and (C) any strips and gores between the Land and any abutting land not owned or
leased by BNPPLC.
BNPPLC's interest in all property described in clauses (1) through (4) above are
hereinafter referred to collectively as the "Real Property".
To the extent, but only to the extent, that assignable rights or interests
in, to or under the following have been or will be acquired by BNPPLC under the
Acquisition Contract or acquired by BNPPLC pursuant to Paragraph below, BNPPLC
also hereby grants and assigns to Ross for the term of this Lease the right to
use and enjoy (and, in the case of contract rights, to enforce) such rights or
interests of BNPPLC:
(a) any goods, equipment, furnishings, furniture and other tangible and
intangible (including, without limitation, rights in software) personal property
of whatever nature that are located on the Land and all renewals or replacements
of or substitutions for any of the foregoing, including, without limitation, all
property listed on Schedule I of each Construction Advance Request
Form delivered in accordance with the Construction Management Agreement;
4
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(b) the benefits, if any, conferred upon the owner of the Real Property by
the Permitted Encumbrances and Development Documents; and
(c) any permits, licenses, franchises, certificates, and other rights and
privileges against third parties related to the Real Property.
Such rights and interests of BNPPLC, whether now existing or hereafter arising,
are hereinafter collectively called the "Personal Property". The Real Property
and the Personal Property are hereinafter sometimes collectively called the
"Property."
However, the leasehold estate conveyed hereby and Ross's rights hereunder
are expressly made subject and subordinate to the terms and conditions of this
Lease, to the Permitted Encumbrances, and to any other claims or encumbrances
not constituting Liens Removable by BNPPLC.
GENERAL TERMS AND CONDITIONS
The Property is leased by BNPPLC to Ross and is accepted and is to be used
and possessed by Ross upon and subject to the following terms and conditions:
1. TERM.
2.
(a) Scheduled Term. The term of this Lease (the "Term") shall commence on
and include the Effective Date, and end on the first Business Day of May, 2006,
unless sooner terminated as expressly herein provided.
(b)
(c) Automatic Termination as of the Base Rent Commencement Date Resulting
From an Election by Ross to Terminate the Purchase Option and Ross's Initial
Remarketing Rights and Obligations. If Ross terminates the Purchase Option and
Ross's Initial Remarketing Rights and Obligations prior to the Base Rent
Commencement Date pursuant to subparagraph 4(B) of the Purchase Agreement, then
this Lease shall terminate automatically on the Base Rent Commencement Date.
Just as any such termination of the Purchase Option and Ross's Initial
Remarketing Rights and Obligations shall be subject to the condition (set forth
in subparagraph 4(B) of the Purchase Agreement) that Ross pay an Issue 97-10
Prepayment to BNPPLC, so too will the termination of this Lease pursuant to this
subparagraph be subject the condition that Ross make the Issue 97-10 Prepayment
to BNPPLC.
(d)
(e) Election by BNPPLC to Terminate After an Issue 97-10 Election. By
notice to Ross BNPPLC shall be entitled to terminate this Lease, as BNPPLC deems
appropriate in its sole and absolute discretion, at any time after receiving a
notice given by Ross to make any Issue 97-10 Election. Upon any termination of
this Lease by BNPPLC pursuant to this subparagraph, Ross shall become obligated
to pay to BNPPLC an Issue 97-10 Prepayment, which obligation will survive the
termination of this Lease.
(f)
(g) Election by Ross to Terminate After Accelerating the Designated Sale
Date. Provided Ross has not made any Issue 97-10 Election, Ross shall be
entitled to accelerate the Designated Sale Date (and thus accelerate the
purchase of BNPPLC's interest in the Property by Ross or by an Applicable
Purchaser pursuant to the Purchase Agreement) by sending a notice to BNPPLC as
provided in clause (2) of the definition of "Designated Sale Date" in the Common
Definitions and Provisions Agreement. In the event, because of Ross's election
to so accelerate the Designated Sale Date or for
5
--------------------------------------------------------------------------------
any other reason, the Designated Sale Date occurs before the end of the
scheduled Term, Ross may terminate this Lease on or after the Designated Sale
Date; provided, however, as a condition to any such termination by Ross, Ross
must have done the following prior to the termination:
(i) purchased or caused an Applicable Purchaser to purchase the Property
pursuant to the Purchase Agreement and satisfied all of Ross's other obligations
under the Purchase Agreement;
(i) paid to BNPPLC all Base Rent, all Commitment Fees and all other Rent
due on or before or accrued through the Designated Sale Date; and
(i) paid any Breakage Costs or Fixed Rate Settlement Amount caused by
BNPPLC's sale of the Property pursuant to the Purchase Agreement.
(a) Extension of the Term. The Term may be extended at the option of Ross
for two successive periods of five years each; provided, however, that prior to
any such extension the following conditions must have been satisfied: (A) at
least one hundred eighty days prior to the commencement of any such extension,
BNPPLC and Ross must have agreed in writing upon, and received the consent and
approval of BNPPLC's Parent and all other Participants to (1) a corresponding
extension to the date specified in clause (1) of the definition of Designated
Sale Date in the Common Definitions and Provisions Agreement, and (2) an
adjustment to the Rent that Ross will be required to pay for the extension, it
being expected that the Rent for the extension may be different than the Rent
required for the original Term, and it being understood that the Rent for any
extension must in all events be satisfactory to both BNPPLC and Ross, each in
its sole and absolute discretion; (B) no Event of Default shall have occurred
and be continuing at the time of Ross's exercise of its option to extend;
(C) prior to any such extension, Ross must have completed the Construction
Project in accordance with the Construction Management Agreement and must not
have made any Issue 97-10 Election; and (D) immediately prior to any such
extension, this Lease must remain in effect. With respect to the condition that
BNPPLC and Ross must have agreed upon the Rent required for any extension of the
Term, neither Ross nor BNPPLC is willing to submit itself to a risk of liability
or loss of rights hereunder for being judged unreasonable. Accordingly, both
Ross and BNPPLC hereby disclaim any obligation express or implied to be
reasonable in negotiating the Rent for any such extension. Subject to the
changes to the Rent payable during any extension of the Term as provided in this
Paragraph, if Ross exercises its option to extend the Term as provided in this
Paragraph, this Lease shall continue in full force and effect, and the leasehold
estate hereby granted to Ross shall continue without interruption and without
any loss of priority over other interests in or claims against the Property that
may be created or arise after the date hereof and before the extension.
1. USE AND CONDITION OF THE PROPERTY.
2.
(a) Use. Subject to the Permitted Encumbrances, the Development Documents
and the terms hereof, Ross may use and occupy the Property during the Term, but
only for the following purposes and other lawful purposes incidental thereto:
(i) construction and development of the Construction Project;
(i) administrative and office space;
(i) research and development, production, assembly, distribution and
warehousing, in each case of products that are of substantially the same type
and character as those regularly sold by Ross in the ordinary course of its
business as of the Effective Date;
(i) cafeteria, library and other support facilities that Ross may provide
to its employees; and
6
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(vi) other lawful purposes (including research and development or production
of products that are not of substantially the same type and character as those
regularly sold by Ross in the ordinary course of its business as of the
Effective Date) approved in advance and in writing by BNPPLC, which approval
will not be unreasonably withheld after completion of the Construction Project
(but Ross acknowledges that BNPPLC's withholding of such approval shall be
reasonable if BNPPLC determines in good faith that (1) giving the approval may
materially increase BNPPLC's risk of liability for any existing or future
environmental problem, or (2) giving the approval is likely to substantially
increase BNPPLC's administrative burden of complying with or monitoring Ross's
compliance with the requirements of this Lease or other Operative Documents).
(a) Condition of the Property.
(b) Ross acknowledges that it has carefully and fully inspected the Property
and accepts the Property in its present state, AS IS, and without any
representation or warranty, express or implied, as to the condition of such
property or as to the use which may be made thereof. Ross also accepts the
Property without any covenant, representation or warranty, express or implied,
by BNPPLC or its Affiliates regarding the title thereto or the rights of any
parties in possession of any part thereof, except as expressly set forth in
Paragraph. BNPPLC shall not be responsible for any latent or other defect or
change of condition in the Land or in Improvements, fixtures and personal
property forming a part of the Property or for any violations with respect
thereto of Applicable Laws. Further, BNPPLC shall not be required to furnish to
Ross any facilities or services of any kind, including water, steam, heat, gas,
air conditioning, electricity, light or power.
(c)
(d) Consideration for and Scope of Waiver. The provisions of
subparagraph above have been negotiated by BNPPLC and Ross after due
consideration for the Rent payable hereunder and are intended to be a complete
exclusion and negation of any representations or warranties of BNPPLC or its
Affiliates, express or implied, with respect to the Property that may arise
pursuant to any law now or hereafter in effect or otherwise, except as expressly
set forth herein.
(e)
(f) However, such exclusion of representations and warranties by BNPPLC is
not intended to impair any representations or warranties made by other parties,
the benefit of which may pass to Ross during the Term because of the definition
of Personal Property and Property above.
(g)
2. RENT.
3.
(a) Base Rent Generally. On the Base Rent Commencement Date and on each
Base Rent Date through the end of the Term, Ross shall pay BNPPLC rent ("Base
Rent"). Each payment of Base Rent must be received by BNPPLC no later than
10:00 a.m. (Pacific time) on the date it becomes due; if received after
10:00 a.m. (Pacific time) it will be considered for purposes of this Lease as
received on the next following Business Day. At least five days prior to any
Base Rent Commencement Date or Base Rent Date upon which an installment of Base
Rent shall become due, BNPPLC shall notify Ross in writing of the amount of each
installment, calculated as provided below. Any failure by BNPPLC to so notify
Ross, however, shall not constitute a waiver of BNPPLC's right to payment, but
absent such notice Ross shall not be in default hereunder for any underpayment
resulting therefrom if Ross, in good faith, reasonably estimates the payment
required, makes a timely payment of the amount so
7
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estimated and corrects any underpayment within three Business Days after being
notified by BNPPLC of the underpayment.
(a) Calculation of and Due Dates for Base Rent. Payments of Base Rent
shall be calculated and become due as follows:
(b)
(i) Amount Payable On the Base Rent Commencement Date. The Base Rent
payable on the Base Rent Commencement Date shall equal the difference (if any)
between (a) the total amount that would have been added to the Outstanding
Construction Allowance as Carrying Costs on such date if not for the limit set
forth in subparagraph, and (b) the Carrying Costs actually added on such date to
the Outstanding Construction Allowance, consistent with the limit set forth in
subparagraph.
(i) Determination of Payment Due Dates, After the Base Rent Commencement
Date, Generally. For all Base Rent Periods subject to a Base Rent Period
Election of one month or three months, Base Rent shall be due in one installment
on the Base Rent Date upon which the Base Rent Period ends. For Base Rent
Periods subject to a Base Rent Period Election of six months, Base Rent shall be
payable in two installments, with the first installment becoming due on the Base
Rent Date that occurs on the first Business Day of the third calendar month
following the commencement of such Base Rent Period, and with the second
installment becoming due on the Base Rent Date upon which the Base Rent Period
ends.
(i) Special Adjustments to Base Rent Payment Dates and
Periods. Notwithstanding the foregoing, if Ross or any Applicable Purchaser
purchases BNPPLC's interest in the Property pursuant to the Purchase Agreement,
any accrued unpaid Base Rent and all outstanding Additional Rent shall be due on
the date of purchase in addition to the purchase price and other sums due BNPPLC
under the Purchase Agreement.
(i) Base Rent Formula. Each installment of Base Rent payable for any Base
Rent Period shall equal:
•Stipulated Loss Value on the first day of such Base Rent Period, times
•the sum of (a) the Spread in effect on the first day of such Base Rent Period
and (b) the Effective Rate for the period from and including the preceding Base
Rent Date to but not including the Base Rent Date upon which the installment is
due, times
•the number of days in the period from and including the preceding Base Rent
Date to but not including the Base Rent Date upon which the installment is due,
divided by
•three hundred sixty.
Assume, only for the purpose of illustration: that prior to the first day of
such Base Rent Period the Construction Allowance has been fully funded, but
Qualified Prepayments have been received by BNPPLC, leaving a Stipulated Loss
Value of $15,000,000; that the sum of the Spread and the Effective Rate is six
percent; and that such Base Rent Period contains exactly thirty days. Under such
assumptions, the Base Rent for the hypothetical Base Rent Period will equal:
$15,000,000 × 6% × 30/360 = $75,000
(i) Fixed Rate Lock. At any time during the Term, Ross may deliver a
notice in the form attached to this Lease as Exhibit D (a "Fixed Rate Lock
Notice"), requesting that BNPPLC establish a fixed rate for use in the
calculation of the Effective Rate hereunder (a "Fixed Rate Lock") for all Base
Rent Periods commencing on or after a date specified in such notice (the "Fixed
Rate Lock Date"). Promptly after receiving a Fixed Rate Lock Notice, BNPPLC will
enter
8
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into an Interest Rate Swap with BNP Paribas (the "First Interest Rate Swap");
except that BNPPLC may decline to enter into the First Interest Rate Swap and to
establish a Fixed Rate Lock, if:
a) Ross does not deliver the Fixed Rate Lock Notice to BNPPLC at least
three Business days prior to the Fixed Rate Lock Date specified therein;
a) Ross specifies a Fixed Rate Lock Date in the Fixed Rate Lock Notice that
is (i) not the first Business Day of a calendar month which falls after the
Projected Base Rent Commencement Date, or (ii) prior to the end of any Base Rent
Period that has commenced before BNPPLC receives the Fixed Rate Lock Notice, or
(iii) less than ten days prior to the date upon which BNPPLC receives the Fixed
Rate Lock Notice;
a) any notice has been given to accelerate the Designated Sale Date as
provided in the definition thereof in the Common Definitions and Provisions
Agreement;
a) the estimate of the Fixed Rate (First Swap) (hereinafter defined)
specified by Ross in the Fixed Rate Lock Notice is for any reason less than the
fixed rate available to BNPPLC under any Interest Rate Swap proposed by BNP
Paribas;
a) at the time the Fixed Rate Lock Notice is given, the First Interest Rate
Swap requested thereby is contrary to any applicable law, rule or regulation, or
any interpretation thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
any request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency (including, without limitation, any
such requirement imposed by the Board of Governors of the United States Federal
Reserve System); or
a) any event has occurred or circumstance exists that constitutes an Event
of Default or a CMA Termination Event or that would, with the giving of notice
or passing of time or both, constitute an Event of Default or a CMA Termination
Event.
The notional principal amount of the First Interest Rate Swap will equal the
amount that Ross in good faith estimates will equal the Stipulated Loss Value on
the Fixed Rate Lock Date (the "Estimated SLV"); provided, that if the Fixed Rate
Lock Notice is given on or after the Base Rent Commencement Date, such amount
will not exceed the Stipulated Loss Value on the date such notice is given; and,
provided further, that in no event will such amount exceed the sum of the
Maximum Construction Allowance and the Initial Construction Advance. The fixed
rate used to calculate payments required of BNPPLC under the First Interest Rate
Swap, as the counterparty designated the fixed rate payor, shall constitute the
"Fixed Rate (First Swap)" (herein so called) for purposes of this Lease.
(i) Interest Rate Swap to Cover Gap. If a Fixed Rate Lock is established
on or prior to the Base Rent Commencement Date, BNPPLC will, on a date that is
after the Base Rent Commencement Date and prior to the Fixed Rate Lock Date,
enter into a second Interest Rate Swap with BNP Paribas (the "Second Interest
Rate Swap") in order to establish a fixed rate for use in the calculation of the
Effective Rate hereunder for all Base Rent Periods commencing on or after the
Fixed Rate Lock Date. The notional amount of the Second Interest Rate Swap will
equal the excess projected by BNPPLC of the Stipulated Loss Value on the Fixed
Rate Lock Date over the notional amount of the First Interest Rate Swap on the
Fixed Rate Lock Date. The fixed rate used to calculate payments required of
BNPPLC under such Second Interest Rate Swap, as the counterparty designated the
fixed rate payor, shall constitute the "Fixed Rate (Second Swap)"
9
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(herein so called) for purposes of this Lease. Notwithstanding the foregoing,
BNPPLC will not be required to enter into the Second Interest Rate Swap as
described in this subparagraph if:
a) BNPPLC expects that the Stipulated Loss Value on the Fixed Rate Lock
Date is or will be equal to or less than the notional amount of the First
Interest Rate Swap on the Fixed Rate Lock Date;
a) the Fixed Rate Lock has been terminated as hereinafter provided;
a) any notice has been given to accelerate the Designated Sale Date as
provided in the definition thereof in the Common Definitions and Provisions
Agreement;
a) the Second Interest Rate Swap is contrary to any applicable law, rule or
regulation, or any interpretation thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive (whether or not having the force of law) of
any such authority, central bank or comparable agency (including, without
limitation, any such requirement imposed by the Board of Governors of the United
States Federal Reserve System); or
a) any event has occurred or circumstance exists that constitutes an Event
of Default or a CMA Termination Event or that would, with the giving of notice
or passing of time or both, constitute an Event of Default or a CMA Termination
Event.
(a) Early Termination of a Fixed Rate Lock. After a Fixed Rate Lock is
established, BNPPLC may cause or suffer a termination in whole or in part of the
First Interest Rate Swap and/or the Second Interest Rate Swap in the event that
(i) Ross fails to make any payment of Base Rent required hereunder on the Base
Rent Date when it first becomes due, (ii) the Designated Sale Date occurs before
the date specified in clause (1) of the definition thereof in the Common
Definitions and Provisions Agreement, (iii) for any reason a Qualified
Prepayment is applied to reduce Stipulated Loss Value, (iv) Stipulated Loss
Value on the Fixed Rate Lock Date is less than the sum of the notional amounts
of all Interest Rate Swaps in effect on the Fixed Rate Lock Date for any reason,
or (v) Stipulated Loss Value on the Fixed Rate Lock Date is more than the
notional amount of the First Interest Rate Swap on the Fixed Rate Lock Date, but
the conditions set forth in the preceding subparagraph to BNPPLC's obligation to
enter into a Second Interest Swap (having a notional amount equal to the
difference) are not satisfied for any reason. Ross must reimburse to BNPPLC any
Fixed Rate Settlement Amount charged to BNPPLC in connection with such a
termination, and if the termination is a complete, rather than a partial,
termination of all Interest Rate Swaps then in effect, it will for purposes of
this Lease constitute a termination of the Fixed Rate Lock itself. Further, if
BNPPLC is charged penalties or interest because of its failure to make a timely
payment required under an Interest Rate Swap, and if BNPPLC's failure to make
the timely payment was caused by Ross's failure to make a timely payment of Base
Rent or other amounts due hereunder or under other Operative Documents, then
such penalties or interest shall constitute Losses against which BNPPLC is
entitled to be indemnified pursuant to subparagraph.
(b)
(c) If a Fixed Rate Lock is terminated as provided in this subparagraph,
Ross shall have no right to require BNPPLC to enter into another Interest Rate
Swap in order to establish a new fixed rate.
(d)
(e) Additional Rent. All amounts which Ross is required to pay to or on
behalf of BNPPLC pursuant to this Lease, together with every charge, premium,
interest and cost set forth herein which may be added for nonpayment or late
payment thereof, shall constitute rent (all such amounts, other than Base Rent,
are herein called "Additional Rent", and together Base Rent and Additional Rent
are herein sometimes called "Rent").
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(f)
(g) Arrangement Fee. Upon execution and delivery of this Lease by BNPPLC,
an Arrangement Fee (the "Arrangement Fee") will be paid to BNPPLC from the
Initial Funding Advance (and thus be included in Stipulated Loss Value) in the
amount provided in the letter dated as of December 4, 2000, from BNPPLC to Ross.
(h)
(i) Commitment Fees. For each Construction Period, fees ("Commitment
Fees") from Construction Advances made pursuant to the Construction Management
Agreement shall accrue as follows:
(j)
(i) For each Construction Period ending before the first anniversary of the
Effective Date, Commitment Fees shall equal:
•fifteen basis points (15/100 of 1%), times an amount equal to:
a) the First Year Commitment, less
a) the Funded Construction Allowance on the first day of such Construction
Period; plus
•twenty five basis points (25/100 of 1%), times an amount equal to:
a) the Maximum Construction Allowance, less
a) the greater of (I) the First Year Commitment, or (II) the Funded
Construction Allowance on the first day of such Construction Period; times
•the number of days in such Construction Period; divided by
•three hundred sixty.
(i) For each Construction Period ending on or after the first anniversary
of the Effective Date, Commitment Fees shall equal:
•twenty five basis points (25/100 of 1%), times an amount equal to:
a) the Maximum Construction Allowance (as reduced on the day prior to the
first anniversary of the Effective Date, to the extent required by the proviso
in the definition thereof in the Common Definitions and Provisions Agreement),
less
a) the Funded Construction Advances on the first day of such Construction
Period; times
•the number of days in such Construction Period; divided by
•three hundred sixty.
Ross shall pay accrued and unpaid Commitment Fees in arrears on the first
Business Day of January, April, July, and October of each calendar year,
beginning with the first Business Day of July, 2001 and continuing regularly
throughout the Term so long as Commitment Fees have accrued and remain unpaid.
However, if any Commitment Fees shall have accrued and remain unpaid on the
Designated Sale Date, such accrued unpaid Commitment Fees shall be due on the
Designated Sale Date.
(a) Administrative Agency Fees. Upon execution and delivery of this Lease
by BNPPLC, an administrative agency fee (an "Administrative Agency Fee") will be
paid to BNPPLC from the Initial Funding Advance (and thus be included in
Stipulated Loss Value) in the amount provided in the letter
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dated as of December 4, 2000, from BNPPLC to Ross. Also, on each anniversary of
the date hereof, Ross shall pay to BNPPLC an administrative agency fee (also, an
"Administrative Agency Fee") in the amount set forth in the letter agreement
dated as of December 4, 2000, from BNPPLC to Ross.
(b)
(c) Upfront Fees. Ross will pay to BNPPLC an upfront syndication fee (an
"Upfront Syndication Fee") equal to ten basis points (10/100 of 1%) times the
total dollar amount of any commitment transferred from BNPPLC to any Participant
(other than an Affiliate of BNPPLC) that becomes a party to the Participation
Agreement by executing such agreement or one or more supplements as provided
therein. The Upfront Syndication Fee payable with respect to any currency
commitment transferred from BNPPLC under the Participation Agreement will be due
when BNPPLC provides Ross a copy of the documents that accomplish the transfer,
it being understood that such transfers may take place after the execution of
this Lease.
(d)
(e) Issue 97-10 Prepayments. Following any Issue 97-10 Election or any CMA
Termination Event under (and as defined in) the Construction Management
Agreement, Ross shall make an Issue 97-10 Prepayment to BNPPLC within three
Business Days after receipt of any demand for such a payment. BNPPLC may demand
an Issue 97-10 Prepayment pursuant to this subparagraph at any time and from
time to time (as Project Costs increase) after any Issue 97-10 Election or CMA
Termination Event.
(f)
(g) No Demand or Setoff. Except as expressly provided herein, Ross shall
pay all Rent without notice or demand and without counterclaim, deduction,
setoff or defense.
(h)
(i) Default Interest and Order of Application. All Rent shall bear
interest, if not paid when first due, at the Default Rate in effect from time to
time from the date due until paid; provided, that nothing herein contained will
be construed as permitting the charging or collection of interest at a rate
exceeding the maximum rate permitted under Applicable Laws. BNPPLC shall be
entitled to apply any amounts paid by or on behalf of Ross against any Rent then
past due in the order the same became due or in such other order as BNPPLC may
elect.
(j)
2. NATURE OF THIS AGREEMENT.
3.
(a) "Net" Lease Generally. Subject only to the exceptions listed in
subparagraph below, it is the intention of BNPPLC and Ross that Base Rent, the
Arrangement Fees, Administrative Agency Fees, Commitment Fees, the Upfront
Syndication Fees, and other payments herein specified shall be absolutely net to
BNPPLC and that Ross shall pay all costs, expenses and obligations of every kind
relating to the Property or this Lease which may arise or become due, including:
(i) any taxes payable by virtue of BNPPLC's receipt of amounts paid to or on
behalf of BNPPLC in accordance with Paragraph; (ii) any amount for which BNPPLC
is or becomes liable with respect to the Permitted Encumbrances or the
Development Documents; and (iii) any costs incurred by BNPPLC (including
Attorneys' Fees) because of BNPPLC's acquisition or ownership of any interest in
the Property or because of this Lease or the transactions contemplated herein.
(b)
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(c) No Termination. Except as expressly provided in this Lease itself,
this Lease shall not terminate, nor shall Ross have any right to terminate this
Lease, nor shall Ross be entitled to any abatement of the Rent, nor shall the
obligations of Ross under this Lease be excused, for any reason whatsoever,
including any of the following: (i) any damage to or the destruction of all or
any part of the Property from whatever cause, (ii) the taking of the Property or
any portion thereof by eminent domain or otherwise for any reason, (iii) the
prohibition, limitation or restriction of Ross's use or development of all or
any portion of the Property or any interference with such use by governmental
action or otherwise, (iv) any eviction of Ross or of anyone claiming through or
under Ross, (v) any default on the part of BNPPLC under this Lease or under any
other agreement to which BNPPLC and Ross are parties, (vi) the inadequacy in any
way whatsoever of the design, construction, assembly or installation of any
improvements, fixtures or tangible personal property included in the Property
(it being understood that BNPPLC has not made, does not make and will not make
any representation express or implied as to the adequacy thereof), (vii) any
latent or other defect in the Property or any change in the condition thereof or
the existence with respect to the Property of any violations of Applicable Laws,
(viii) any breach by Seller of the Acquisition Contract or other agreements or
promises or representations made in connection with the Acquisition Contract, or
(ix) any other cause whether similar or dissimilar to the foregoing. It is the
intention of the parties hereto that the obligations of Ross hereunder shall be
separate and independent of the covenants and agreements of BNPPLC, that Base
Rent and all other sums payable by Ross hereunder shall continue to be payable
in all events and that the obligations of Ross hereunder shall continue
unaffected, unless the requirement to pay or perform the same shall have been
terminated or limited pursuant to an express provision of this Lease. Without
limiting the foregoing, Ross waives to the extent permitted by Applicable Laws,
except as otherwise expressly provided herein, all rights to which Ross may now
or hereafter be entitled by law (including any such rights arising because of
any implied "warranty of suitability" or other warranty under Applicable Laws)
(i) to quit, terminate or surrender this Lease or the Property or any part
thereof or (ii) to any abatement, suspension, deferment or reduction of the
Rent.
However, nothing in this subparagraph shall be construed as a waiver by Ross
of any right Ross may have at law or in equity to the following remedies,
whether because of BNPPLC's failure to remove a Lien Removable by BNPPLC or
because of any other default by BNPPLC under this Lease that continues beyond
the period for cure provided in Paragraph: (i) the recovery of monetary damages,
(ii) injunctive relief in case of the violation, or attempted or threatened
violation, by BNPPLC of any of the express covenants, agreements, conditions or
provisions of this Lease which are binding upon BNPPLC (including the
confidentiality provisions set forth in subparagraph below), or (iii) a decree
compelling performance by BNPPLC of any of the express covenants, agreements,
conditions or provisions of this Lease which are binding upon BNPPLC.
(a) Tax Reporting. BNPPLC and Ross shall report this Lease and the
Purchase Agreement for federal income tax purposes as a conditional sale unless
prohibited from doing so by the Internal Revenue Service. If the Internal
Revenue Service shall challenge BNPPLC's characterization of this Lease and the
Purchase Agreement as a conditional sale for federal income tax reporting
purposes, BNPPLC shall notify Ross in writing of such challenge and consider in
good faith any reasonable suggestions by Ross about an appropriate response. In
any event, Ross shall (subject only to the limitations set forth in this
subparagraph) indemnify and hold harmless BNPPLC from and against all
liabilities, costs, additional taxes (other than Excluded Taxes) and other
expenses that may arise or become due because of such challenge or because of
any resulting recharacterization required by the Internal Revenue Service,
including any additional taxes that may become due upon any sale under the
Purchase Agreement to the extent (if any) that such additional taxes are not
offset by tax savings resulting from additional depreciation deductions or other
tax benefits to BNPPLC of the recharacterization. If BNPPLC receives a written
notice of any challenge by the Internal Revenue Service that BNPPLC believes
will be covered by this Paragraph, then BNPPLC shall promptly furnish a copy of
such notice to Ross. The failure to so provide a copy of the notice to Ross
shall not excuse
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Ross from its obligations under this Paragraph; provided, that if none of the
officers of Ross and none of the employees of Ross responsible for tax matters
are aware of the challenge described in the notice and such failure by BNPPLC
renders unavailable defenses that Ross might otherwise assert, or precludes
actions that Ross might otherwise take, to minimize its obligations hereunder,
then Ross shall be excused from its obligation to indemnify BNPPLC against
liabilities, costs, additional taxes and other expenses, if any, which would not
have been incurred but for such failure. For example, if BNPPLC fails to provide
Ross with a copy of a notice of a challenge by the Internal Revenue Service
covered by the indemnities set out in this Lease and Ross is not otherwise
already aware of such challenge, and if as a result of such failure BNPPLC
becomes liable for penalties and interest covered by the indemnities in excess
of the penalties and interest that would have accrued if Ross had been promptly
provided with a copy of the notice, then Ross will be excused from any
obligation to BNPPLC to pay the excess.
(b)
(c) Characterization of this Lease.
(d)
(i) Both Ross and BNPPLC intend that (A) for the purposes of determining
the proper accounting for this Lease under GAAP with respect to Ross, BNPPLC
will be treated as the owner and lessor of the Property and Ross will be treated
as the lessee of the Property and (B) for income tax purposes and commercial law
(including bankruptcy) and regulatory purposes, (1) this Lease and the other
Operative Documents shall be treated as a financing arrangement, (2) BNPPLC will
be deemed a lender making loans to Ross in the aggregate principal amount equal
to Stipulated Loss Value, which loans are secured by the Property, and (3) Ross
shall be treated as the owner of the Property and will be entitled to, inter
alia, all tax benefits available to the owner of the Property. Without limiting
the generality of the foregoing, Ross and BNPPLC desire that their intent as set
forth in this subparagraph be given effect both in the context of any
bankruptcy, insolvency or receivership proceedings concerning Ross or BNPPLC and
in other contexts. Accordingly, Ross and BNPPLC expect that in the event of any
bankruptcy, insolvency or receivership proceedings affecting Ross or BNPPLC or
any enforcement or collection actions arising out of such proceedings, the
transactions evidenced by this Lease and the other Operative Documents shall be
characterized and treated as loans made to Ross by BNPPLC, as unrelated third
party lender to Ross, secured by the Property.
(i) The parties hereto intend that this Lease constitutes a "finance lease"
and not a "consumer lease" under Article 2A of the UCC and Ross hereby waives
the provisions of UCC Sections 2A 401 through 403 inclusive and Section 508, and
acknowledge that under no circumstances shall this Lease be subject to
repudiation by Ross.
(i) Notwithstanding the foregoing, Ross acknowledges and agrees that none
of BNPPLC or the other Interested Parties has made, or shall be deemed to have
made, in the Operative Documents or otherwise, any representations or warranties
concerning how this Lease and the other Operative Documents will be
characterized or treated under applicable accounting rules, tax, bankruptcy,
regulatory, commercial or any other rules or concerning the tax, accounting or
legal characteristics of the Operative Documents. Ross further acknowledges and
agrees that it has, as it deemed appropriate, obtained from and relied upon its
own professional accountants, counsel and other advisors for such tax,
accounting and legal advice concerning the Operative Documents.
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(i) In any event, Ross must indemnify and hold harmless BNPPLC from and
against all liabilities, costs, additional taxes and other expenses that may
arise or become due because of any refusal of US taxing authorities to recognize
and give effect to the intention of the parties as set forth in subparagraph
(including any additional income or capital gains tax that may become due
because of payments to BNPPLC of the purchase price upon any sale under the
Purchase Agreement) because of the insistence of such taxing authorities that
BNPPLC be treated as the "true owner" of the Property for tax purposes, to the
extent (if any) that such liabilities, costs, additional taxes and other
expenses are not offset by tax savings to BNPPLC resulting from additional
depreciation deductions or other tax benefits available to BNPPLC as a result of
the position taken by such taxing authorities.
1. PAYMENT OF EXECUTORY COSTS AND LOSSES RELATED TO THE PROPERTY.
2.
(a) Impositions. Subject only to the exceptions listed in
subparagraph below, Ross shall pay or cause to be paid prior to delinquency all
ad valorem taxes assessed against the Property and other Impositions. If
requested by BNPPLC from time to time, Ross shall furnish BNPPLC with receipts
showing payment of all Impositions prior to the applicable delinquency date
therefor.
(b)
(c) Notwithstanding the foregoing, Ross may in good faith, by appropriate
proceedings, contest the validity, applicability or amount of any asserted
Imposition, and pending such contest Ross shall not be deemed in default under
any of the provisions of this Lease because of the Imposition if (1) Ross
diligently prosecutes such contest to completion in a manner reasonably
satisfactory to BNPPLC, and (2) Ross promptly causes to be paid any amount
adjudged by a court of competent jurisdiction to be due, with all costs,
penalties and interest thereon, promptly after such judgment becomes final;
provided, however, in any event each such contest shall be concluded and the
contested Impositions must be paid by Ross prior to the earlier of (i) the date
that any criminal prosecution is instituted or overtly threatened against BNPPLC
or its directors, officers or employees because of the nonpayment thereof or
(ii) the date any writ or order is issued under which any property owned or
leased by BNPPLC (including the Property) may be seized or sold or any other
action is taken against BNPPLC or against any property owned or leased by BNPPLC
because of the nonpayment thereof, or (iii) any Designated Sale Date upon which,
for any reason, Ross or an Affiliate of Ross or any Applicable Purchaser shall
not purchase BNPPLC's interest in the Property pursuant to the Purchase
Agreement for a price to BNPPLC (when taken together with any additional
payments made by Ross pursuant to Paragraph 1(A)(2) of the Purchase Agreement,
in the case of a purchase by an Applicable Purchaser) equal to the Break Even
Price.
(d)
(e) Increased Costs; Capital Adequacy Charges. Subject only to the
exceptions listed in subparagraph below:
(f)
(i) If after the Effective Date there shall be any increase in the cost to
BNPPLC's Parent or any other Participant agreeing to make or making, funding or
maintaining advances to BNPPLC in connection with the Property because of any
Banking Rules Change, then Ross shall from time to time, pay to BNPPLC for the
account of BNPPLC's Parent or such other Participant, as the case may be,
additional amounts sufficient to compensate BNPPLC's Parent or the Participant
for such increased cost. A certificate as to the amount of such increased cost,
submitted to BNPPLC and
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Ross by BNPPLC's Parent or the other Participant, shall be conclusive and
binding upon Ross, absent clear and demonstrable error.
(i) BNPPLC's Parent or any other Participant may demand additional payments
("Capital Adequacy Charges") if BNPPLC's Parent or the other Participant
determines that any Banking Rules Change affects the amount of capital to be
maintained by it and that the amount of such capital is increased by or based
upon the existence of advances made or to be made to BNPPLC to permit BNPPLC to
maintain BNPPLC's investment in the Property or to make Construction Advances.
To the extent that BNPPLC's Parent or another Participant demands Capital
Adequacy Charges as compensation for the additional capital requirements
reasonably allocable to such investment or advances, Ross shall pay to BNPPLC
for the account of BNPPLC's Parent or the other Participant, as the case may be,
the amount so demanded.
(i) Notwithstanding the foregoing provisions of this subparagraph, Ross
shall not be obligated pay any claim for compensation pursuant to this
subparagraph arising or accruing more than six months prior to the date Ross is
notified that BNPPLC or a Participant intends to make the claim; provided,
however, that Ross shall not be excused by this subparagraph from providing such
compensation for any period during which notice on behalf of BNPPLC or the
Participant, as the case may be, could not be provided because of the
retroactive application of the statute, regulation or other basis for the claim.
(i) Any amount required to be paid by Ross under this subparagraph shall be
due fifteen days after a notice requesting such payment is received by Ross.
(a) Ross's Payment of Other Losses; General Indemnification. Subject only
to the exceptions listed in subparagraph below:
(b)
(i) All Losses (including Environmental Losses) asserted against or
incurred or suffered by BNPPLC or other Interested Parties at any time and from
time to time by reason of, in connection with or arising out of (A) their
ownership or alleged ownership of any interest in the Property or the Rents,
(B) the use and operation of the Property, (C) the negotiation, administration
or enforcement of the Operative Documents, (D) the making of Funding Advances,
(E) the Construction Project, (F) the breach by Ross of this Lease or any other
document executed by Ross in connection herewith, (G) any failure of the
Property or Ross itself to comply with Applicable Laws, (H) Permitted
Encumbrances, (I) Hazardous Substance Activities, including those occurring
prior to Effective Date, (J) any obligations under the Acquisition Contract that
survive the closing under the Acquisition Contract, (K) any Interest Rate Swaps
that BNPPLC enters into as described in subparagraphs and of this Lease (but
excluding from such Losses any Fixed Rate Settlement Amount that Ross must
reimburse to BNPPLC pursuant to other provisions of this Lease), or (L) any
bodily or personal injury or death or property damage occurring in or upon or in
the vicinity of the Property through any cause whatsoever, shall be paid by
Ross, and Ross shall indemnify and defend BNPPLC and other Interested Parties
from and against all such Losses.
(i) THE INDEMNITIES AND RELEASES PROVIDED HEREIN FOR THE BENEFIT OF BNPPLC
AND OTHER INTERESTED PARTIES, INCLUDING THE INDEMNITY SET FORTH IN THE PRECEDING
SUBPARAGRAPH, SHALL APPLY EVEN IF AND WHEN THE SUBJECT MATTERS OF THE
INDEMNITIES AND RELEASES ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OR STRICT
LIABILITY OF BNPPLC OR ANOTHER INTERESTED PARTY. FURTHER, SUCH INDEMNITIES AND
RELEASES WILL APPLY EVEN IF INSURANCE OBTAINED BY ROSS OR REQUIRED OF ROSS BY
THIS LEASE OR OTHER OPERATIVE DOCUMENTS IS NOT ADEQUATE TO COVER LOSSES AGAINST
OR FOR WHICH THE INDEMNITIES AND RELEASES ARE PROVIDED. ROSS'S LIABILITY,
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HOWEVER, FOR ANY FAILURE TO OBTAIN INSURANCE REQUIRED BY THIS LEASE OR OTHER
OPERATIVE DOCUMENTS WILL NOT BE LIMITED TO LOSSES AGAINST WHICH INDEMNITIES ARE
PROVIDED HEREIN, IT BEING UNDERSTOOD THAT SUCH INSURANCE IS INTENDED TO DO MORE
THAN PROVIDE A SOURCE OF PAYMENT FOR LOSSES AGAINST WHICH BNPPLC AND OTHER
INTERESTED PARTIES ARE ENTITLED TO INDEMNIFICATION BY THIS LEASE.
(i) Costs and expenses for which Ross shall be responsible pursuant to this
subparagraph will include reasonable appraisal fees, filing and recording fees,
inspection fees, survey fees, taxes, brokerage fees and commissions, abstract
fees, title policy fees, Uniform Commercial Code search fees, escrow fees and
Attorneys' Fees incurred by BNPPLC with respect to the Property, whether such
costs and expenses are incurred at the time of execution of this Lease or at any
time during the Term. Such costs and expenses will also include Attorneys' Fees
or other costs incurred to evaluate lien releases and other information
submitted by Ross with requests for Construction Advances.
(i) Ross's obligations under this subparagraph shall survive the
termination or expiration of this Lease. Any amount to be paid by Ross under
this subparagraph shall be due fifteen days after a notice requesting such
payment is received by Ross.
(i) If an Interested Party notifies Ross of any claim or proceeding
included in, or any investigation or allegation concerning, Losses for which
Ross is responsible pursuant to this subparagraph, Ross shall assume on behalf
of the Interested Party and conduct with due diligence and in good faith the
investigation and defense thereof and the response thereto with counsel selected
by Ross, but reasonably satisfactory to the Interested Party; provided, that the
Interested Party shall have the right to be represented by advisory counsel of
its own selection and at its own expense; and provided further, that if any such
claim, proceeding, investigation or allegation involves both Ross and the
Interested Party and the Interested Party shall have reasonably concluded that
there are legal defenses available to it which are inconsistent with or in
addition to those available to Ross, then the Interested Party shall have the
right to select separate counsel to participate in the investigation and defense
of and response to such claim, proceeding, investigation or allegation on its
own behalf, and Ross shall pay or reimburse the Interested Party for all
Attorney's Fees incurred by the Interested Party because of the selection of
such separate counsel. If Ross fails to assume promptly (and in any event within
thirty days after being notified of the applicable claim, proceeding,
investigation or allegation) the defense of the Interested Party, then the
Interested Party may contest (or settle, with the prior consent of Ross, which
consent will not be unreasonably withheld) the claim, proceeding, investigation
or allegation at Ross's expense using counsel selected by the Interested Party.
Moreover, if any such failure by Ross continues for sixty days or more after
Ross is notified of any such claim, proceeding, investigation or allegation, the
Interested Party may elect not to contest or continue contesting the same and
instead, in accordance with the written advice of counsel, settle (or pay in
full) all claims related thereto without Ross's consent and without releasing
Ross from any obligations to the Interested Party under this subparagraph.
(a) Exceptions and Qualifications to Indemnities.
(b)
(i) BNPPLC acknowledges and agrees that nothing in subparagraph or the
preceding subparagraphs of this Paragraph shall be construed to require Ross to
pay or reimburse (w) any costs or expenses incurred by any Interested Party
(including BNPPLC or any transferee of BNPPLC) to accomplish any Permitted
Transfers described in clauses (2), (5), (6) or (8) of the definition thereof in
the Common Definitions and Provisions Agreement, (x) Excluded Taxes, (y) Losses
incurred or suffered by any Interested Party that are proximately caused by (and
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attributed by any applicable principles of comparative fault to) the Established
Misconduct of that Interested Party, or (z) Losses incurred or suffered in
connection with the execution of the Participation Agreement by Participants (or
supplements making them parties thereto) or in connection with any negotiation
or due diligence Participants may undertake before entering into the
Participation Agreement. Further, without limiting BNPPLC's rights (as provided
in other provisions of this Lease and other Operative Documents) to include the
following in the calculation of the Outstanding Construction Allowance,
Stipulated Loss Value, the Break Even Price and the Maximum Permitted Prepayment
(as applicable) or to collect Base Rent, Issue 97-10 Prepayments, a Supplemental
Payment and other amounts, the calculation of which depends upon the Outstanding
Construction Allowance, Stipulated Loss Value, the Break Even Price and the
Maximum Permitted Prepayment, BNPPLC acknowledges and agrees that nothing in
subparagraph or the preceding subparagraphs of this Paragraph shall be construed
to require Ross to pay or reimburse an Interested Party for:
a) costs paid by BNPPLC with the proceeds of the Initial Funding Advance as
part of the Transaction Expenses; or
a) Construction Advances, including costs and expenditures incurred or paid
by or on behalf of BNPPLC after any Landlord's Election to Continue
Construction, to the extent that such costs and expenditures are considered to
be Construction Advances pursuant to subparagraph.
Further, if an Interested Party receives a written notice of Losses that such
Interested Party believes are covered by the indemnity in subparagraph, then
such Interested Party will be expected to promptly furnish a copy of such notice
to Ross. The failure to so provide a copy of the notice to Ross shall not excuse
Ross from its obligations under subparagraph; provided, that if Ross is unaware
of the matters described in the notice and such failure renders unavailable
defenses that Ross might otherwise assert, or precludes actions that Ross might
otherwise take, to minimize its obligations, then Ross shall be excused from its
obligation to indemnify such Interested Party (and any Affiliate of such
Interested Party) against the Losses, if any, which would not have been incurred
or suffered but for such failure. For example, if BNPPLC fails to provide Ross
with a copy of a notice of an obligation covered by the indemnity set out in
subparagraph and Ross is not otherwise already aware of such obligation, and if
as a result of such failure BNPPLC becomes liable for penalties and interest
covered by the indemnity in excess of the penalties and interest that would have
accrued if Ross had been promptly provided with a copy of the notice, then Ross
will be excused from any obligation to BNPPLC (or any Affiliate of BNPPLC) to
pay the excess.
(i) Notwithstanding anything to the contrary in subparagraph or the
preceding subparagraphs of this Paragraph, Ross's liability for payments
required by the preceding subparagraphs of this Paragraph, and not excused by
the preceding subparagraph, prior to substantial completion of the Construction
Project ("Construction-Period Indemnity Payments") shall be subject to the
following provisions:
a) Ross may decline to pay any Construction-Period Indemnity Payments other
than the following (it being understood that Ross's payment of the following
Construction-Period Indemnity Payments shall not be subject to any abatement or
deferral by anything contained in this subparagraph):
(1) Construction-Period Indemnity Payments eligible for reimbursement to
Ross under the terms and conditions of the Construction Management Agreement;
and
(1) Construction-Period Indemnity Payments that constitute Absolute
Construction Obligations.
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a) Any Construction-Period Indemnity Payment Ross is excused from paying by
this subparagraph, together with interest thereon at the Default Rate, will be
included in the calculation of the Break Even Price under (and as defined in)
the Purchase Agreement.
1. CONSTRUCTION.
2.
(a) Construction Advances; Outstanding Construction Allowance. The
Construction Management Agreement entitles Ross to receive from BNPPLC—subject
to the terms and conditions set forth in the Construction Management
Agreement—Construction Advances on Advance Dates from time to time to pay or
reimburse Ross for the costs of the Construction Project and certain other costs
described in the Construction Management Agreement. In addition, BNPPLC may from
time to time make expenditures or incur costs constituting Construction Advances
after a Landlord's Election to Continue Construction as described in
subparagraph. As used herein, references to the "Outstanding Construction
Allowance" mean the difference on the date in question (but not less than zero)
of (A) the total Construction Advances made by or on behalf of BNPPLC on or
prior to the date in question, plus (B) all Carrying Costs added on or prior to
the date in question, less (C) any funds received and applied as Qualified
Prepayments on or prior to the date in question. Base Rent will not accrue for
any Construction Period. But for each Construction Period charges ("Carrying
Costs") shall accrue for each Construction Period as described below and will be
added to (and thereafter be included in) the Outstanding Construction Allowance
on the last day of such Construction Period (i.e., generally on the Advance Date
upon which such Construction Period ends). However, if for any reason Stipulated
Loss Value (and thus the Outstanding Construction Allowance included as a
component thereof) must be determined as of any date between Advance Dates, the
Outstanding Construction Allowance determined on such date shall include not
only Carrying Costs added on or before the immediately preceding Advance Date
computed as described below, but also Carrying Costs accruing on and after such
preceding Advance Date to but not including the date in question.
(a) Calculation of Carrying Costs. Subject to the limitations set forth in
subparagraph 6(c), Carrying Costs accruing for any Construction Period shall
equal:
(b)
•the amount on the first day of such Construction Period of Stipulated Loss
Value under (and as defined in) the Common Definitions and Provisions Agreement,
times
•the sum of (1) the Spread in effect on the first day of such Construction
Period and (2) the Effective Rate for such Construction Period, times
•the number of days in the period from and including the preceding Advance Date
to but not including the Advance Date upon which the period ends, divided by
•three hundred sixty.
Assume, only for the purpose of illustration: that on the first day of a
hypothetical Construction Period such Construction Period Combined Stipulated
Loss Value is $15,000,000; that the sum of the Spread and the Effective Rate for
such Construction Period is six percent; and that such Construction Period
contains exactly thirty days. Under such assumptions, the Carrying Costs for the
hypothetical Construction Period will equal:
$15,000,000 × 6% × 30/360 = $75,000
(a) Limits on the Amount of Carrying Costs Tied to Maximum Construction
Allowance. Notwithstanding the foregoing, because the Construction Allowance
available to Ross under the Construction Management Agreement is limited in
amount to the Maximum Construction Allowance,
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and because Carrying Costs are to be charged against the Construction Allowance,
Carrying Costs added to the Outstanding Construction Allowance on the Base Rent
Commencement Date shall not exceed the amount that can be added without causing
the Funded Construction Allowance to exceed the Maximum Construction Allowance.
If, because of an extension of the Base Rent Commencement Date by BNPPLC (as
described in the definition thereof in the Common Definitions and Provisions
Agreement) or because of any Landlord's Election to Continue Construction, the
Funded Construction Allowance already exceeds the Maximum Construction
Allowance, then no Carrying Costs will be added to the Outstanding Construction
Allowance on the Base Rent Commencement Date.
(b)
(c) Ross's Right to Control the Construction Project. Subject to BNPPLC's
rights under subparagraph of this Lease, the Construction Management Agreement
grants to Ross the sole right and responsibility for designing and constructing
the Construction Project, it being understood that although title to all
Improvements will pass directly to BNPPLC (as more particularly provided in
Paragraph), BNPPLC's obligation with respect to the Construction Project shall
be limited to the making of advances under and subject to the conditions set
forth in the Construction Management Agreement. No contractor or other third
party shall be entitled to require BNPPLC to make advances as a third party
beneficiary of this Lease or of the Construction Management Agreement or
otherwise.
(d)
(e) Landlord's Election to Continue Construction. Without limiting
BNPPLC's other rights and remedies under this Lease, and without terminating
this Lease or Ross's obligations hereunder or under any of the other documents
referenced herein, in the event of any termination of the Construction
Management Agreement as provided in subparagraph 4(D) or
subparagraph 4(E) thereof, BNPPLC shall be entitled (but not obligated) to take
whatever action it deems necessary or appropriate by the use of legal
proceedings or otherwise to continue or complete the Construction Project in a
manner substantially consistent (to the extent practicable under Applicable
Laws) with the general description of the Construction Project set forth in
Exhibit B to the Construction Management Agreement and with the permitted use of
the Property set forth in subparagraph. (As used herein, "Landlord's Election to
Continue Construction" means any election by BNPPLC to continue or complete the
Construction Project pursuant to the preceding sentence.) After any Landlord's
Election to Continue Construction, BNPPLC may do any one or more of the
following pursuant to this subparagraph without further notice and regardless of
whether any Event of Default is then continuing:
(f)
(i) Take Control of the Property. BNPPLC may cause Ross and any
contractors or other parties on the Property to vacate the Property until the
Construction Project is complete or BNPPLC elects not to continue work on the
Construction Project.
(i) Continuation of Construction. BNPPLC may perform or cause to be
performed any work to complete or continue the construction of the Construction
Project. In this regard, so long as work ordered or undertaken by BNPPLC is
substantially consistent (to the extent practicable under Applicable Laws) with
the general description of the Construction Project set forth in Exhibit B to
the Construction Management Agreement and the permitted use of the Property set
forth in subparagraph, BNPPLC shall have complete discretion to:
a) proceed with construction according to such plans and specifications as
BNPPLC may from time to time approve;
a) establish and extend construction deadlines as BNPPLC from time to time
deems appropriate, without obligation to adhere to the deadlines for completion
of construction set forth in the Construction Management Agreement;
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a) hire, fire and replace architects, engineers, contractors, construction
managers and other consultants as BNPPLC from time to time deems appropriate,
without obligation to use, consider or compensate architects, engineers,
contractors, construction managers or other consultants previously selected or
engaged by Ross;
a) determine the compensation that any architect, engineer, contractor,
construction manager or other consultant engaged by BNPPLC will be paid, and the
terms and conditions that will govern the payment of such compensation
(including whether payment will be due in advance, over the course of
construction or on some other basis and including whether contracts will be let
on a fixed price basis, a cost plus a fee basis or some other basis), as BNPPLC
from time to time deems appropriate;
a) pay, settle or compromise existing or future bills and claims which are
or may be liens against the Property or as BNPPLC considers necessary or
desirable for the completion of the Construction Project or the removal of any
clouds on title to the Property;
a) prosecute and defend all actions or proceedings in connection with the
construction of the Construction Project;
a) select and change interior and exterior finishes for the Improvements
and landscaping as BNPPLC from time to time deems appropriate; and
a) generally do anything that Ross itself might have done if Ross had
satisfied or obtained BNPPLC's waiver of the conditions specified therein.
(i) Arrange for Turnkey Construction. Without limiting the generality of
the foregoing, BNPPLC may engage any contractor or real estate developer BNPPLC
believes to be reputable to take over and complete construction of the
Construction Project on a "turnkey" basis.
(i) Suspension or Termination of Construction. Notwithstanding any
Landlord's Election to Continue Construction, BNPPLC may subsequently elect at
any time to suspend or terminate further construction without obligation to
Ross.
For purposes of this Lease and other Operative Documents (including the
determination of the Outstanding Construction Allowance, Stipulated Loss Value,
the Break Even Price and the Maximum Permitted Prepayment), after any Landlord's
Election to Continue Construction, all costs and expenditures incurred or paid
by or on behalf of BNPPLC to complete or continue construction as provided in
this subparagraph shall be considered Construction Advances and Project Costs,
regardless of whether they cause the Funded Construction Allowance to exceed the
Maximum Construction Allowance. Further, as used in the preceding sentence,
"costs incurred" by BNPPLC will include costs that BNPPLC has become obligated
to pay to any third party that is not an Affiliate of BNPPLC (including any
contractor), even if the payments for which BNPPLC has become so obligated will
constitute prepayments for work or services to be rendered after payment and
notwithstanding that BNPPLC's obligations for the payments may be conditioned
upon matters beyond BNPPLC's control. For example, even if a construction
contract between BNPPLC and a contractor excused BNPPLC from making further
progress payments to the contractor upon Ross's failure to make any required
Issue 97-10 Prepayment hereunder, the obligation to make a progress payment
would nonetheless be "incurred" by BNPPLC, for purposes of determining whether
BNPPLC has incurred costs considered to be Project Costs and Construction
Advances, when BNPPLC's obligation to pay it became subject only to Ross's
payment of an Issue 97-10 Prepayment or other conditions beyond BNPPLC's
control. If and to the extent, however, BNPPLC does incur costs considered as
Construction Advances under this subparagraph, but (1) BNPPLC does not actually
pay the costs and after incurring them BNPPLC is fully and finally excused from
the obligation to pay them for any reason other than a breach by Ross of this
Lease or other Operative Documents, or (2) BNPPLC receives a refund of such
costs,
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then the costs BNPPLC is excused from paying or refunded to BNPPLC shall be
considered Qualified Prepayments.
(a) Powers Coupled With an Interest. BNPPLC's rights under
subparagraph are intended to constitute powers coupled with an interest which
cannot be revoked.
(b)
(c) Completion Notice. After any Landlord's Election to Continue
Construction, BNPPLC may provide a notice (a "Completion Notice") to Ross,
advising Ross that construction of the Construction Project is substantially
complete or that BNPPLC no longer intends to continue such construction at that
time.
1. STATUS OF PROPERTY ACQUIRED WITH FUNDS PROVIDED BY BNPPLC. All Improvements
constructed during the term of this Lease shall be owned by BNPPLC and shall
constitute "Property" covered by this Lease. Further, to the extent heretofore
or hereafter acquired (in whole or in part) with any portion of the Initial
Funding Advance or with any Construction Advances or with other funds for which
Ross has received or hereafter receives reimbursement from the Initial Funding
Advance or Construction Advances, all furnishings, furniture, chattels, permits,
licenses, franchises, certificates and other personal property of whatever
nature shall have been acquired on behalf of BNPPLC by Ross, shall be owned by
BNPPLC and shall constitute "Property" covered by this Lease, as shall all
renewals or replacements of or substitutions for any such Property. Ross shall
not authorize or permit the transfer of title to the Improvements or to any
other such Property to pass through Ross or Ross's Affiliates before it is
transferred to BNPPLC from contractors, suppliers, vendors or other third
Persons. Nothing herein shall constitute authorization of Ross by BNPPLC to bind
BNPPLC to any construction contract or other agreement with a third Person, but
any construction contract or other agreement executed by Ross for the
acquisition or construction of Improvements or other components of the Property
may provide for the transfer of title as required by the preceding sentence.
Upon request of BNPPLC, Ross shall deliver to BNPPLC an inventory describing all
significant items of Personal Property (and, in the case of tangible personal
property, showing the make, model, serial number and location thereof) other
than Improvements, with a certification by Ross that such inventory is true and
complete and that all items specified in the inventory are covered by this Lease
free and clear of any Lien other than the Permitted Encumbrances or Liens
Removable by BNPPLC.
1. ENVIRONMENTAL.
2.
(a) Environmental Covenants by Ross. Ross covenants that:
(b)
(i) Ross shall not conduct or permit others to conduct Hazardous Substance
Activities, except Permitted Hazardous Substance Use and Remedial Work.
(i) Ross shall not discharge or permit the discharge of anything on or from
the Property that would require any permit under applicable Environmental Laws,
other than (1) storm water runoff, (2) waste water discharges through a publicly
owned treatment works, (3) discharges that are a necessary part of any Remedial
Work, and (4) other similar discharges consistent with the definition herein of
Permitted Hazardous Substance Use, in each case in strict compliance with
Environmental Laws.
(i) Following any discovery that Remedial Work is required by Environmental
Laws or otherwise believed by BNPPLC to be reasonably required, and to the
extent not inconsistent with the other provisions of this Lease, Ross shall
promptly perform and diligently and continuously pursue such Remedial Work, in
each case in strict compliance with Environmental Laws.
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(i) If requested by BNPPLC in connection with any Remedial Work required by
this subparagraph, Ross shall retain independent environmental consultants
acceptable to BNPPLC to evaluate any significant new information generated
during Ross's implementation of the Remedial Work and to discuss with Ross
whether such new information indicates the need for any additional measures that
Ross should take to protect the health and safety of persons (including
employees, contractors and subcontractors and their employees) or to protect the
environment. Ross shall implement any such additional measures to the extent
required with respect to the Property by Environmental Laws or otherwise
believed by BNPPLC to be reasonably required and to the extent not inconsistent
with the other provisions of this Lease.
(a) Right of BNPPLC to do Remedial Work Not Performed by Ross. If Ross's
failure to cure any breach of the covenants set forth in subparagraph continues
beyond the Environmental Cure Period (as defined below), BNPPLC may, in addition
to any other remedies available to it, conduct all or any part of the Remedial
Work. To the extent that Remedial Work is done by BNPPLC pursuant to the
preceding sentence (including any removal of Hazardous Substances), the cost
thereof shall be a demand obligation owing by Ross to BNPPLC. As used in this
subparagraph, "Environmental Cure Period" means the period ending on the earlier
of: (1) one hundred eighty days after Ross is notified of the breach which must
be cured within such period, (2) the date that any writ or order is issued for
the levy or sale of any property owned by BNPPLC (including the Property)
because of such breach, (3) the date that any criminal action is instituted or
overtly threatened against BNPPLC or any of its directors, officers or employees
because of such breach, or (4) any Designated Sale Date upon which, for any
reason, Ross or an Affiliate of Ross or any Applicable Purchaser shall not
purchase BNPPLC's interest in the Property pursuant to the Purchase Agreement
for a net price to BNPPLC (when taken together with any Supplemental Payment
made by Ross pursuant to Paragraph 1(A)(2) of the Purchase Agreement, in the
case of a purchase by an Applicable Purchaser) equal to Stipulated Loss Value.
(b)
(c) Environmental Inspections and Reviews. BNPPLC reserves the right to
retain environmental consultants to review any report required by Applicable Law
to be prepared by Ross or to conduct BNPPLC's own investigation to confirm
whether Ross is complying with the requirements of this Paragraph. Ross grants
to BNPPLC and to BNPPLC's agents, employees, consultants and contractors the
right to enter upon the Property during reasonable hours and after reasonable
notice to inspect the Property and to perform such tests as BNPPLC deems
necessary or appropriate to review or investigate Hazardous Substances in, on,
under or about the Property or any discharge or suspected discharge of Hazardous
Substances into groundwater or surface water from the Property. Ross shall
promptly reimburse BNPPLC for the fees of its environmental consultants and the
costs of any such inspections and tests; provided, however, BNPPLC's right to
such reimbursement shall be limited to the following circumstances: (1) a breach
of this Paragraph by Ross shall, in fact, have occurred or an Event of Default
shall have occurred and be continuing at the time BNPPLC engages the consultants
or first initiates the inspections and tests; (2) BNPPLC shall have engaged the
consultants or undertaken the tests and inspections to establish the condition
of the Property just prior to any conveyance of the Property pursuant to the
Option Agreement or to the expiration of this Lease; (3) BNPPLC shall have
engaged the consultants or undertaken the inspections and tests to satisfy any
regulatory requirements applicable to BNPPLC or its Affiliates; or (4) BNPPLC
shall have engaged the consultants or undertaken the tests because BNPPLC was
notified of a violation of Environmental Laws concerning the Property by any
governmental authority or owner of other land in the vicinity of the Land.
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(d)
(e) Communications Regarding Environmental Matters.
(f)
(i) Ross shall immediately advise BNPPLC of (1) any discovery of any event
or circumstance which would render any of the representations of Ross herein or
in the Closing Certificate concerning environmental matters materially
inaccurate or misleading if made at the time of such discovery and assuming that
Ross was aware of all relevant facts, (2) any Remedial Work (or change in
Remedial Work) required or undertaken by Ross or its Affiliates in response to
any (A) discovery of any Hazardous Substances on, under or about the Property
other than Permitted Hazardous Substances or (B) any claim for damages resulting
from Hazardous Substance Activities, (3) Ross's discovery of any occurrence or
condition on any real property adjoining or in the vicinity of the Property
which could cause the Property or any part thereof to be subject to any
ownership, occupancy, transferability or use restrictions under Environmental
Laws, or (4) any investigation or inquiry of any failure or alleged failure by
Ross to comply with Environmental Laws affecting the Property by any
governmental authority responsible for enforcing Environmental Laws. For
purposes of the foregoing sentence, the term "discovery" shall be deemed to mean
actual knowledge by an officer of Ross or by a manager of the facility located
on the Property. In such event, Ross shall deliver to BNPPLC within sixty days
after BNPPLC's request, a preliminary written environmental plan setting forth a
general description of the action that Ross proposes to take with respect
thereto, if any, to bring the Property into compliance with Environmental Laws
or to correct any breach by Ross of this Paragraph, including any proposed
Remedial Work, the estimated cost and time of completion, the name of the
contractor and a copy of the construction contract, if any, and such additional
data, instruments, documents, agreements or other materials or information as
BNPPLC may request.
(i) Ross shall provide BNPPLC with copies of all material written
communications with federal, state and local governments, or agencies relating
to the matters listed in the preceding clause (i). Ross shall also provide
BNPPLC with copies of any correspondence from third Persons which threaten
litigation over any significant failure or alleged significant failure of Ross
to maintain or operate the Property in accordance with Environmental Laws.
BNPPLC shall use reasonable efforts to not to disclose to third parties the
information described in this clause (ii); provided, however, that (A) BNPPLC
may disclose such information (A) to its directors, officers, employees, and
agents, (B) in response to a legal process or as otherwise required by law,
rule, regulation, or judicial or administrative request or order, (C) if such
information becomes publicly available or known through sources other than
BNPPLC, and (D) as BNPPLC believes necessary, in the exercise of its reasonable
business judgement, in connection with any efforts by BNPPLC to protect the
value of the Property.
(i) Prior to Ross's submission of a Material Environmental Communication to
any governmental or regulatory agency or third party, Ross shall, to the extent
practicable, deliver to BNPPLC a draft of the proposed submission (together with
the proposed date of submission), and in good faith assess and consider any
comments of BNPPLC regarding the same. Promptly after BNPPLC's request, Ross
shall meet with BNPPLC to discuss the submission, shall provide any additional
information requested by BNPPLC and shall provide a written explanation to
BNPPLC addressing the issues raised by comments (if any) of BNPPLC regarding the
submission, including a reasoned analysis supporting any decision by Ross not to
modify the submission in accordance with comments of BNPPLC.
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1. INSURANCE REQUIRED AND CONDEMNATION.
2.
(a) Liability Insurance. Throughout the Term Ross shall maintain
commercial general liability insurance against claims for bodily and personal
injury, death and property damage occurring in or upon or resulting from any
occurrence in or upon the Property under one or more insurance policies that
satisfy the requirements set forth in Exhibit. Ross shall deliver and maintain
with BNPPLC for each liability insurance policy required by this Lease written
confirmation of the policy and the scope of the coverage provided thereby issued
by the applicable insurer or its authorized agent, which confirmation must also
satisfy the requirements set forth in Exhibit.
(a) Property Insurance. Throughout the Term Ross will keep all
Improvements (including all alterations, additions and changes made to the
Improvements) insured against fire and other casualty under one or more property
insurance policies that satisfy the requirements set forth in Exhibit. Ross
shall deliver and maintain with BNPPLC for each property insurance policy
required by this Lease written confirmation of the policy and the scope of the
coverage provided thereby issued by the applicable insurer or its authorized
agent, which confirmation must also satisfy the requirements set forth in
Exhibit. If any of the Property is destroyed or damaged by fire, explosion,
windstorm, hail or by any other casualty against which insurance shall have been
required hereunder, (i) BNPPLC may, but shall not be obligated to, make proof of
loss if not made promptly by Ross after notice from BNPPLC, (ii) each insurance
company concerned is hereby authorized and directed to make payment for such
loss directly to BNPPLC as loss payee for application as required by Paragraph,
and (iii) BNPPLC may, on behalf of Ross, settle, adjust or compromise any and
all claims for loss, damage or destruction under any policy or policies of
insurance (provided, that if any such claim is for less than $500,000, if no CMA
Termination Event shall have occurred and no Event of Default shall have
occurred and be continuing, Ross shall have the right to settle, adjust or
compromise the claim as Ross deems appropriate; and, provided further, that so
long as no CMA Termination Event shall have occurred and no Event of Default
shall have occurred and be continuing, BNPPLC must provide Ross with at least
forty-five days notice of BNPPLC's intention to settle any such claim before
settling it unless Ross shall already have approved of the settlement by
BNPPLC). If any casualty shall result in damage to or loss or destruction of the
Property, Ross shall give immediate notice thereof to BNPPLC and Paragraph shall
apply.
(b)
(c) Failure to Obtain Insurance. If Ross fails to obtain any insurance or
to provide confirmation of any such insurance as required by this Lease, BNPPLC
shall be entitled (but not required) to obtain the insurance that Ross has
failed to obtain or for which Ross has not provided the required confirmation
and, without limiting BNPPLC's other remedies under the circumstances, BNPPLC
may require Ross to reimburse BNPPLC for the cost of such insurance and to pay
interest thereon computed at the Default Rate from the date such cost was paid
by BNPPLC until the date of reimbursement by Ross (provided, however, that any
such insurance cost paid by BNPPLC prior to the Base Rent Commencement Date will
be charged against the Construction Allowance under the Construction Management
Agreement as if it had been paid by Ross).
(d)
(e) Condemnation. Immediately upon obtaining knowledge of the institution
of any proceedings for the condemnation of the Property or any portion thereof,
or any other similar governmental or quasi-governmental proceedings arising out
of injury or damage to the Property or any portion thereof, each party shall
notify the other (provided, however, BNPPLC shall have no liability for its
failure to provide such notice) of the pendency of such proceedings. Ross shall,
at its expense, diligently prosecute any such proceedings and shall consult with
BNPPLC, its attorneys and experts and
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cooperate with them as requested in the carrying on or defense of any such
proceedings. All proceeds of condemnation awards or proceeds of sale in lieu of
condemnation with respect to the Property and all judgments, decrees and awards
for injury or damage to the Property shall be paid to BNPPLC as Escrowed
Proceeds, and all such proceeds will be applied as provided in Paragraph. BNPPLC
is hereby authorized, in the name of Ross, at any time after a CMA Termination
Event or when an Event of Default shall have occurred and be continuing, or
otherwise with Ross's prior consent, to execute and deliver valid acquittances
for, and to appeal from, any such judgment, decree or award concerning
condemnation of any of the Property. BNPPLC shall not be in any event or
circumstances liable or responsible for failure to collect, or to exercise
diligence in the collection of, any such proceeds, judgments, decrees or awards.
(f)
2. APPLICATION OF INSURANCE AND CONDEMNATION PROCEEDS.
(a) Collection and Application of Insurance and Condemnation Proceeds
Generally. This Paragraph shall govern the application of proceeds received by
BNPPLC or Ross during the Term from any third party (1) under any property
insurance policy as a result of damage to the Property (including proceeds
payable under any insurance policy covering the Property which is maintained by
Ross), (2) as compensation for any restriction placed upon the use or
development of the Property or for the condemnation of the Property or any
portion thereof, or (3) because of any judgment, decree or award for injury or
damage to the Property; excluding, however, any funds paid to BNPPLC by BNPPLC's
Parent, by an Affiliate of BNPPLC or by any Participant that is made to
compensate BNPPLC for any Losses BNPPLC may suffer or incur in connection with
this Lease or the Property. Except as provided in subparagraph, Ross will
promptly pay over to BNPPLC any insurance, condemnation or other proceeds
covered by this Paragraph which Ross may receive from any insurer, condemning
authority or other third party. All proceeds covered by this Paragraph,
including those received by BNPPLC from Ross or third parties, shall be applied
as follows:
(b)
(i) First, proceeds covered by this Paragraph will be used to reimburse
BNPPLC for any costs and expenses, including Attorneys' Fees, that BNPPLC
incurred to collect the proceeds.
(i) Second, the proceeds remaining after such reimbursement to BNPPLC
(hereinafter, the "Remaining Proceeds") will be applied, as hereinafter more
particularly provided, either as a Qualified Prepayment or to reimburse Ross or
BNPPLC for the actual out-of-pocket costs of repairing or restoring the
Property. Until, however, any Remaining Proceeds received by BNPPLC are applied
by BNPPLC as a Qualified Prepayment or applied by BNPPLC to reimburse costs of
repairs to or restoration of the Property pursuant to this Paragraph, BNPPLC
shall hold and maintain such Remaining Proceeds as Escrowed Proceeds in an
interest bearing account, and all interest earned on such account shall be added
to and made a part of such Escrowed Proceeds.
(a) Advances of Escrowed Proceeds to Ross. Except as otherwise provided
below in this Paragraph, BNPPLC shall advance all Remaining Proceeds held by it
as Escrowed Proceeds to reimburse Ross for the actual out-of-pocket cost to Ross
of repairing or restoring the Property in accordance with the requirements of
this Lease and the other Operative Documents as the applicable repair or
restoration progresses and upon compliance by Ross with such terms, conditions
and requirements as may be reasonably imposed by BNPPLC. In no event, however,
shall BNPPLC be required to pay Escrowed Proceeds to Ross in excess of the
actual out-of-pocket cost to Ross of the applicable repair or restoration, as
evidenced by invoices or other documentation satisfactory to BNPPLC, it being
understood that BNPPLC may retain and apply any such excess as a Qualified
Prepayment.
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(b)
(c) Application of Escrowed Proceeds as a Qualified Prepayment. Provided
Ross has completed the Construction Project pursuant to the Construction
Management Agreement and no Event of Default shall have occurred and be
continuing, BNPPLC shall apply any Remaining Proceeds paid to it (or other
amounts available for application as a Qualified Prepayment) as a Qualified
Prepayment on any date that BNPPLC is directed to do so by a notice from Ross;
however, if such a notice from Ross specifies an effective date for a Qualified
Prepayment that is less than five Business Days after BNPPLC's actual receipt of
the notice, BNPPLC may postpone the date of the Qualified Prepayment to any date
not later than five Business Days after BNPPLC's receipt of the notice. In any
event, except when BNPPLC is required by the preceding sentence to apply
Remaining Proceeds or other amounts as a Qualified Prepayment on an Advance Date
or Base Rent Date, BNPPLC may deduct Breakage Costs or Fixed Rate Settlement
Amount incurred in connection with any Qualified Prepayment from the Remaining
Proceeds or other amounts available for application as the Qualified Prepayment,
and Ross will reimburse BNPPLC upon request for any such Breakage Costs or Fixed
Rate Settlement Amount that BNPPLC incurs but does not deduct.
(d)
(e) Special Provisions Applicable After Completion by Ross of the
Construction Project. If, after the Base Rent Commencement Date and Ross's
completion of the Construction Project pursuant to the Construction Management
Agreement, any taking by condemnation of any portion of the Property or any
casualty resulting in the diminution, destruction, demolition or damage to any
portion of the Property shall (in the good faith judgment of BNPPLC) reduce the
then current "AS IS" market value by less than $500,000 and (in the good faith
estimation of BNPPLC) be unlikely to result in Remaining Proceeds of more than
$500,000, and if no Event of Default shall have occurred and be continuing, then
BNPPLC will, upon Ross's request, instruct the condemning authority or insurer,
as applicable, to pay the Remaining Proceeds resulting therefrom directly to
Ross. Ross shall apply any such Remaining Proceeds to the repair or restoration
of the Property to a safe and secure condition and to a value of no less than
the value before taking or casualty.
(f)
(g) Special Provisions Applicable After a CMA Termination Event or Event of
Default. Notwithstanding the foregoing, after any CMA Termination Event, and
when any Event of Default shall have occurred and be continuing, BNPPLC shall be
entitled to receive and collect all insurance, condemnation or other proceeds
governed by this Paragraph and to apply all Remaining Proceeds, when and to the
extent deemed appropriate by BNPPLC in its sole discretion, either (A) to the
reimbursement of Ross or BNPPLC for the out-of-pocket cost of repairing or
restoring the Property, or (B) as Qualified Prepayments.
(h)
(i) Ross's Obligation to Restore. Regardless of the adequacy of any
Remaining Proceeds available to Ross hereunder, and notwithstanding other
provisions of this Lease to the contrary:
(j)
(1) If, prior to the Base Rent Commencement Date, the Property is damaged by
fire or other casualty or any part of the Property is taken by condemnation,
Ross shall to the maximum extent possible, as part of the Work contemplated in
the Construction Management Agreement, restore the Property or the remainder
thereof and continue construction of the Construction Project on and subject to
the terms and conditions set forth in the Construction Management Agreement.
However, any additional costs required to complete the Construction Project
resulting from such a casualty or taking prior to the Base Rent Commencement
Date shall, to the extent not covered by
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Remaining Proceeds paid to Ross as provided in this Lease, be subject to
reimbursement by BNPPLC under the Construction Management Agreement on the same
terms and conditions that apply to reimbursements of other costs of the Work
thereunder.
(2) If, on or after the Base Rent Commencement Date, the Property is damaged
by fire or other casualty or less than all or substantially all of the Property
is taken by condemnation, Ross must:
A) promptly restore or improve the Property or the remainder thereof to a
value no less than Stipulated Loss Value and to a reasonably safe and sightly
condition; or
B) promptly restore the Property to a reasonably safe and sightly condition
and pay to BNPPLC for application as a Qualified Prepayment the amount (if any),
as determined by BNPPLC, needed to reduce Stipulated Loss Value to no more than
the then current "AS IS" market value of the Property or remainder thereof.
(a) Takings of All or Substantially All of the Property on or after the
Base Rent Commencement Date. In the event of any taking of all or substantially
all of the Property on or after the Base Rent Commencement Date, BNPPLC shall be
entitled to apply all Remaining Proceeds as a Qualified Prepayment. In addition,
if Stipulated Loss Value immediately prior to any such taking exceeds the sum of
the Remaining Proceeds resulting from such condemnation, then BNPPLC shall be
entitled to recover the excess from Ross upon demand as an additional Qualified
Prepayment, whereupon this Lease shall terminate. Any taking of so much of the
Real Property as, in BNPPLC's reasonable good faith judgment, makes it
impracticable to restore or improve the remainder thereof as required by
part (2) of the preceding subparagraph shall be considered a taking of
substantially all the Property for purposes of this Paragraph.
1. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF ROSS CONCERNING THE
PROPERTY. Ross represents, warrants and covenants as follows:
2.
(a) Compliance with Covenants and Laws. The use of the Property permitted
by this Lease complies, or will comply after Ross obtains available permits as
the tenant under this Lease, in all material respects with all Applicable Laws.
Ross has obtained or will promptly obtain all utility, building, health and
operating permits as may be required by any governmental authority or
municipality having jurisdiction over the Property for the construction
contemplated herein and the use of the Property permitted by this Lease.
(a) Operation of the Property. During the Term, Ross shall operate the
Property in a good and workmanlike manner and substantially in compliance with
all Applicable Laws and will pay or cause to be paid all fees or charges of any
kind in connection therewith. (If Ross does not promptly correct any failure of
the Property to comply with Applicable Laws that is the subject of a written
notice given to Ross or BNPPLC by any governmental authority, then for purposes
of the preceding sentence, Ross shall be considered not to have maintained the
Property "substantially in accordance with Applicable Laws" whether or not the
noncompliance would be substantial in the absence of the notice.) During the
Term, Ross shall not use or occupy, or allow the use or occupancy of, the
Property in any manner which violates any Applicable Law or which constitutes a
public or private nuisance or which makes void, voidable or cancelable any
insurance then in force with respect thereto. During the Term, to the extent
that any of the following would, individually or in the aggregate, increase the
likelihood of a CMA Termination Event under the Construction Management
Agreement or materially and adversely affect the value of the Property or the
use of the Property for purposes permitted by this Lease, Ross shall not,
without BNPPLC's prior consent: (i) initiate or permit any zoning
reclassification of the Property; (ii) seek any variance under existing zoning
ordinances applicable to the Property; (iii) use or permit the use of the
Property in a manner that would result in such use becoming a nonconforming
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use under applicable zoning ordinances or similar laws, rules or regulations;
(iv) execute or file any subdivision plat affecting the Property; or (v) consent
to the annexation of the Property to any municipality. If during the Term (A) a
change in the zoning or other Applicable Laws affecting the permitted use or
development of the Property shall occur after the Base Rent Commencement Date
that (in BNPPLC's good faith judgment) reduces the value of the Property, or
(B) conditions or circumstances on or about the Property are discovered after
the Base Rent Commencement Date (such as the presence of an endangered species)
which substantially impede development and thereby (in BNPPLC's good faith
judgment) reduce the value of the Property, then Ross shall upon demand pay
BNPPLC an amount equal to such reduction (as determined by BNPPLC in good faith)
for application as a Qualified Prepayment. Ross shall not permit any drilling or
exploration for, or extraction, removal or production of, minerals from the
surface or subsurface of the Property, and Ross shall not do anything that could
reasonably be expected to significantly reduce the market value of the Property.
If Ross receives a notice or claim from any federal, state or other governmental
authority that the Property is not in compliance with any Applicable Law, or
that any action may be taken against BNPPLC because the Property does not comply
with any Applicable Law, Ross shall promptly furnish a copy of such notice or
claim to BNPPLC.
(b)
(c) Notwithstanding the foregoing, Ross may in good faith, by appropriate
proceedings, contest the validity and applicability of any Applicable Law with
respect to the Property, and pending such contest Ross shall not be deemed in
default hereunder because of the violation of such Applicable Law, if Ross
diligently prosecutes such contest to completion in a manner reasonably
satisfactory to BNPPLC, and if Ross promptly causes the Property to comply with
any such Applicable Law upon a final determination by a court of competent
jurisdiction that the same is valid and applicable to the Property; provided,
however, in any event such contest shall be concluded and the violation of such
Applicable Law must be corrected by Ross and any claims asserted against BNPPLC
or the Property because of such violation must be paid by Ross, all prior to the
earlier of (i) the date that any criminal prosecution is instituted or overtly
threatened against BNPPLC or any of its directors, officers or employees because
of such violation, (ii) the date that any action is taken by any governmental
authority against BNPPLC or any property owned by BNPPLC (including the
Property) because of such violation, or (iii) a Designated Sale Date upon which,
for any reason, Ross or an Affiliate of Ross or any Applicable Purchaser shall
not purchase BNPPLC's interest in the Property pursuant to the Purchase
Agreement for a price to BNPPLC (when taken together with any additional
payments made by Ross pursuant to Paragraph 1(A)(2) of the Purchase Agreement,
in the case of a purchase by an Applicable Purchaser) equal to the Break Even
Price.
(d)
(e) Debts for Construction, Maintenance, Operation or Development. Ross
shall cause all debts and liabilities incurred in the construction, maintenance,
operation or development of the Property, including all debts and liabilities
for labor, material and equipment and all debts and charges for utilities
servicing the Property, to be promptly paid; provided, that nothing in this
subparagraph will be construed to require Ross to remove Liens Removable by
BNPPLC.
(f)
(g) Notwithstanding the foregoing, Ross may in good faith, by appropriate
proceedings, contest the validity, applicability or amount of any asserted
mechanic's or materialmen's lien and pending such contest Ross shall not be
deemed in default under this subparagraph because of the contested lien if
(1) within sixty days after being asked to do so by BNPPLC, Ross bonds over to
BNPPLC's reasonable satisfaction all such contested liens against the Property
alleged to secure an amount in excess of $500,000 (individually or in the
aggregate), (2) Ross diligently prosecutes such contest to completion in a
manner reasonably satisfactory to BNPPLC, and (3) Ross promptly causes to be
paid any amount
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adjudged by a court of competent jurisdiction to be due, with all costs and
interest thereon, promptly after such judgment becomes final; provided, however,
that in any event each such contest shall be concluded and the lien, interest
and costs must be paid by Ross prior to the earlier of (i) the date that any
criminal prosecution is instituted or overtly threatened against BNPPLC or its
directors, officers or employees because of the nonpayment thereof, (ii) the
date that any writ or order is issued under which the Property or any other
property in which BNPPLC has an interest may be seized or sold or any other
action is taken against BNPPLC or any property in which BNPPLC has an interest
because of the nonpayment thereof, or (iii) a Designated Sale Date upon which,
for any reason, Ross or an Affiliate of Ross or any Applicable Purchaser shall
not purchase BNPPLC's interest in the Property pursuant to the Purchase
Agreement for a price to BNPPLC (when taken together with any additional
payments made by Ross pursuant to Paragraph 1(A)(2) of the Purchase Agreement,
in the case of a purchase by an Applicable Purchaser) equal to the Break Even
Price.
(h)
(i) Repair, Maintenance, Alterations and Additions. Ross shall keep the
Property in good order, operating condition and appearance and shall cause all
necessary repairs, renewals and replacements to be promptly made. Ross will not
allow any of the Property to be materially misused, abused or wasted, and Ross
shall promptly replace any worn-out fixtures and Personal Property with fixtures
and Personal Property comparable to the replaced items when new. All Personal
Property and fixtures listed on Schedule I of each Construction Advance Request
Form that is delivered to BNPPLC as provided in the Construction Management
Agreement shall be installed or placed on the Property, and shall not be removed
from the Property except as expressly permitted by this subparagraph. Ross shall
not, without the prior consent of BNPPLC, (i) remove from the Property any
fixture or Personal Property having significant value except such as are
replaced by Ross by fixtures or Personal Property of equal suitability and
value, free and clear of any lien or security interest (and for purposes of this
clause "significant value" will mean any fixture or Personal Property that has a
value of more than $100,000 or that, when considered together with all other
fixtures and Personal Property removed and not replaced by Ross by items of
equal suitability and value, has an aggregate value of $500,000 or more) or
(ii) make material new Improvements or alter Improvements in any material
respect, except as part of the Work performed in accordance with the
Construction Management Agreement. Without limiting the foregoing, Ross will
notify BNPPLC before making any significant alterations to the Improvements
after the completion of the Construction Project. Nothing in this subparagraph,
however, is intended to limit Ross's rights and obligations under other express
provisions of this Lease and the Construction Management Agreement with respect
to the Construction Project.
(j)
(k) Permitted Encumbrances and Development Documents. Ross shall during
the Term comply with and will cause to be performed all of the covenants,
agreements and obligations imposed upon the owner of any interest in the
Property by the Permitted Encumbrances or the Development Documents. Without
limiting the foregoing, Ross shall cause all amounts to be paid when due, the
payment of which is secured by any Lien against the Property created by the
Permitted Encumbrances. Without the prior consent of BNPPLC, Ross shall not
enter into, initiate, approve or consent to any modification of any Permitted
Encumbrance or Development Document that would create or expand or purport to
create or expand obligations or restrictions which would encumber BNPPLC's
interest in the Property. (Whether BNPPLC must give any such consent requested
by Ross during the Term of this Lease shall be governed by subparagraph 3(A) of
the Closing Certificate and Agreement.)
(l)
(m) Books and Records Concerning the Property. Ross shall keep books and
records that are accurate and complete in all material respects for the Property
and, subject to Paragraph, will permit all such books and records (including all
contracts, statements, invoices, bills and claims for labor,
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materials and services supplied for the construction and operation of any
Improvements) to be inspected and copied by BNPPLC. This subparagraph shall not
be construed as requiring Ross to regularly maintain separate books and records
relating exclusively to the Property; provided, however, that upon request, Ross
shall construct or abstract from its regularly maintained books and records
information required by this subparagraph relating to the Property.
1. FINANCIAL COVENANTS AND OTHER COVENANTS INCORPORATED BY REFERENCE TO
SCHEDULE 1. Throughout the Term of this Lease, Ross shall comply with (a) the
requirements of Schedule 1 attached hereto and (b) all financial covenants,
negative covenants and other requirements of Sections 6.04 through Section 6.10
and Article VII of the Existing Credit Agreement.
2.
3. FINANCIAL STATEMENTS AND OTHER REPORTS.
4.
(a) Financial Statements; Required Notices; Certificates. Throughout the
Term of this Lease, Ross shall deliver to BNPPLC and to each Participant:
(i) as soon as available and in any event within one hundred twenty days
after the end of each fiscal year of Ross, a consolidated balance sheet of Ross
and its Consolidated Subsidiaries as of the end of such fiscal year and a
consolidated income statement and statement of cash flows of Ross and its
Consolidated Subsidiaries for such fiscal year, all in reasonable detail and all
prepared in accordance with GAAP and accompanied by a report and opinion of
accountants of national standing selected by Ross, which report and opinion
shall be prepared in accordance with generally accepted auditing standards and
shall not be subject to any qualifications or exceptions as to the scope of the
audit nor to any qualification or exception which BNPPLC determines, in BNPPLC's
reasonable discretion, is unacceptable;
(i) as soon as available and in any event within sixty days after the end
of each of the first three quarters of each fiscal year of Ross, the
consolidated balance sheet of Ross and its Consolidated Subsidiaries as of the
end of such quarter and the consolidated income statement and the consolidated
statement of cash flows of Ross and its Consolidated Subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the end of
such quarter, all in reasonable detail and all prepared in accordance with GAAP
and certified by the chief financial officer, controller, or vice president of
finance of Ross (subject to year-end adjustments);
(i) together with the financial statements furnished in accordance with
subparagraph and, a certificate of the chief financial officer, controller, or
vice president of finance of Ross: (i) certifying that to the knowledge of Ross
no Default or Event of Default under this Lease has occurred and is continuing
or, if a Default or Event of Default has occurred and is continuing, a brief
statement as to the nature thereof and the action which is proposed to be taken
with respect thereto, (ii) certifying that the representations of Ross set forth
in the Operative Documents are true and correct in all material respects as of
the date thereof as though made on and as of the date thereof or, if not then
true and correct, a brief statement as to why such representations are no longer
true and correct, and (iii) with computations demonstrating compliance with the
financial covenants contained in Schedule 1;
(i) promptly after the sending or filing thereof, copies of all proxy
statements, financial statements and reports which Ross sends to Ross's
stockholders, and copies of all regular, periodic and special reports, and all
registration statements (other than registration statements on Form S-8 or any
form substituted therefor) which Ross files with the Securities and Exchange
Commission or any governmental authority which may be substituted therefor, or
with any national securities exchange;
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(i) upon request by BNPPLC, a statement in writing certifying that the
Operative Documents are unmodified and in full effect (or, if there have been
modifications, that the Operative Documents are in full effect as modified, and
setting forth such modifications) and the dates to which the Base Rent has been
paid and either stating that to the knowledge of Ross no Default or Event of
Default under this Lease has occurred and is continuing or, if a Default or
Event of Default under this Lease has occurred and is continuing, a brief
statement as to the nature thereof; it being intended that any such statement by
Ross may be relied upon by any prospective purchaser or mortgagee of the
Property and by the Participants;
(i) as soon as possible after, and in any event within ten days after Ross
becomes aware that, any of the following has occurred, with respect to which the
potential aggregate liability to Ross relating thereto is $500,000 or more, a
notice signed by a senior financial officer of Ross setting forth details of the
following and the response, if any, which Ross or its ERISA Affiliate proposes
to take with respect thereto (and a copy of any report or notice required to be
filed with or given to PBGC by Ross or an ERISA Affiliate with respect to any of
the following or the events or conditions leading up to the following):(A) the
assertion, to secure any Unfunded Benefit Liabilities, of any Lien against the
assets of Ross, against the assets of any Plan or Multiemployer Plan or against
any interest of BNPPLC or Ross in the Property, or (B) the taking of any action
by the PBGC or any other governmental authority against Ross to terminate any
Plan of Ross or any ERISA Affiliate of Ross or to cause the appointment of a
trustee or receiver to administer any such Plan; and
(i) such other information respecting the condition or operations,
financial or otherwise, of Ross, of any of its Subsidiaries or of the Property
as BNPPLC or any Participant through BNPPLC may from time to time reasonably
request.
BNPPLC is hereby authorized to deliver a copy of any information or
certificate delivered to it pursuant to this subparagraph to BNPPLC's Parent, to
the Participants and to any regulatory body having jurisdiction over BNPPLC or
BNPPLC's Parent or any Participant that requires or requests it.
1. ASSIGNMENT AND SUBLETTING BY ROSS.
2.
(a) BNPPLC's Consent Required. Without the prior consent of BNPPLC, Ross
shall not assign, transfer, mortgage, pledge or hypothecate this Lease or any
interest of Ross hereunder and shall not sublet all or any part of the Property,
by operation of law or otherwise; provided, that subject to subparagraph below,
if (and after) Ross completes the Construction Project pursuant to the
Construction Management Agreement and so long as no Event of Default has
occurred and is continuing: (1) Ross shall be entitled to sublet no more than
forty-nine percent (49%) (computed on the basis of square footage) of the
useable space in then existing and completed building Improvements, if any, so
long as (i) any sublease by Ross is made expressly subject and subordinate to
the terms hereof, and (ii) such sublease has a term equal to or less than the
remainder of the then effective Term of this Lease; and (2) Ross shall be
entitled to assign or transfer this Lease or any interest of Ross hereunder to
an Affiliate of Ross if both Ross and its Affiliate confirm their joint and
several liability hereunder by written notice given to BNPPLC.
(a) Standard for BNPPLC's Consent to Assignments and Certain Other
Matters. Consents and approvals of BNPPLC which are required by this Paragraph
will not be unreasonably withheld or delayed, but Ross acknowledges that
BNPPLC's withholding of such consent or approval shall be reasonable if BNPPLC
determines in good faith that (1) giving the approval may materially increase
BNPPLC's risk of liability for any existing or future environmental problem, or
(2) giving the approval is likely to materially increase BNPPLC's administrative
burden of complying with or monitoring Ross's compliance with the requirements
of this Lease.
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(b)
(c) Consent Not a Waiver. No consent by BNPPLC to a sale, assignment,
transfer, mortgage, pledge or hypothecation of this Lease or Ross's interest
hereunder, and no assignment or subletting of the Property or any part thereof
in accordance with this Lease or otherwise with BNPPLC's consent, shall release
Ross from liability hereunder; and any such consent shall apply only to the
specific transaction thereby authorized and shall not relieve Ross from any
requirement of obtaining the prior consent of BNPPLC to any further sale,
assignment, transfer, mortgage, pledge or hypothecation of this Lease or any
interest of Ross hereunder.
(d)
2. ASSIGNMENT BY BNPPLC.
3.
(a) Restrictions on Transfers. Except by a Permitted Transfer, BNPPLC
shall not assign, transfer, mortgage, pledge, encumber or hypothecate this Lease
or the other Operative Documents or any interest of BNPPLC in and to the
Property during the Term without the prior consent of Ross, which consent Ross
may withhold in its sole discretion. Further, notwithstanding anything to the
contrary herein contained, if withholding taxes are imposed on the rents and
other amounts payable to BNPPLC hereunder because of BNPPLC's assignment of this
Lease to any citizen of, or any corporation or other entity formed under the
laws of, a country other than the United States, Ross shall not be required to
compensate BNPPLC or any such assignee for the withholding tax. If, in breach of
this subparagraph, BNPPLC transfers the Property or any part thereof by a
conveyance or that does not constitute a Permitted Transfer, with the result
that additional transfer taxes or other Impositions are assessed against the
Property or the owner thereof, BNPPLC shall be required to pay such additional
transfer taxes or other Impositions.
(a) Effect of Permitted Transfer or other Assignment by BNPPLC. If,
without breaching subparagraph, BNPPLC sells or otherwise transfers the Property
and assigns to the transferee all of BNPPLC's rights under this Lease and under
the other Operative Documents, and if the transferee expressly assumes all of
BNPPLC's obligations under this Lease and under the other Operative Documents,
then BNPPLC shall thereby be released from any obligations arising after such
assumption under this Lease or under the other Operative Documents (other than
any liability for a breach of any continuing obligation to provide Construction
Advances under the Construction Management Agreement), and Ross shall look
solely to each successor in interest of BNPPLC for performance of such
obligations. (As used in this subparagraph, "Operative Documents" is intended to
mean the Operative Documents as defined in the Common Definitions and Provisions
Agreement.)
1. BNPPLC's RIGHT OF ACCESS.
2.
(a) During the Term, BNPPLC and BNPPLC's representatives may (subject to
subparagraphs and) enter the Property at any reasonable time after five Business
Days advance written notice to Ross for the purpose of making inspections or
performing any work BNPPLC is authorized to undertake by the next
subparagraph or for the purpose confirming whether Ross has complied with the
requirements of this Lease or the other Operative Documents.
(a) If Ross fails to perform any act or to take any action required of it by
this Lease or the Closing Certificate, or to pay any money which Ross is
required by this Lease or the Closing Certificate to pay, and if such failure or
action constitutes an Event of Default or renders BNPPLC or any director,
officer, employee or Affiliate of BNPPLC at risk of criminal prosecution or
renders BNPPLC's interest in the Property or any part thereof at risk of
forfeiture by forced sale or otherwise,
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then in addition to any other remedies specified herein or otherwise available,
BNPPLC may, perform or cause to be performed such act or take such action or pay
such money. Any expenses so incurred by BNPPLC, and any money so paid by BNPPLC,
shall be a demand obligation owing by Ross to BNPPLC. Further, BNPPLC, upon
making such payment, shall be subrogated to all of the rights of the person,
corporation or body politic receiving such payment. But nothing herein shall
imply any duty upon the part of BNPPLC to do any work which under any provision
of this Lease Ross may be required to perform, and the performance thereof by
BNPPLC shall not constitute a waiver of Ross's default. BNPPLC may during the
progress of any such work permitted by BNPPLC hereunder on or in the Property
keep and store upon the Property all necessary materials, tools, and equipment.
BNPPLC shall not in any event be liable for inconvenience, annoyance,
disturbance, loss of business, or other damage to Ross or the subtenants or
invitees of Ross by reason of making such repairs or the performance of any such
work on or in the Property, or on account of bringing materials, supplies and
equipment into or through the Property during the course of such work (except
for any liability in excess of the liability insurance limits established in
Exhibit resulting from death or injury or damage to the property of third
parties caused by the Established Misconduct of BNPPLC or its officers,
employees, or agents in connection therewith), and the obligations of Ross under
this Lease shall not thereby be excused in any manner.
(b)
(c) Ross shall have no obligation to provide proprietary information (as
defined in the next sentence) to BNPPLC, except and to the extent that
(1) BNPPLC reasonably determines that BNPPLC cannot accomplish the purposes of
BNPPLC's inspection of the Property or exercise of other rights granted pursuant
to the various express provisions of this Lease and the other Operative
Documents without evaluating such information. For purposes of this Lease
"proprietary information" includes Ross's intellectual property, trade secrets
and other confidential information of value to Ross about, among other things,
Ross's manufacturing processes, products, marketing and corporate strategies,
but in no event will "proprietary information" include any disclosure of
substances and materials (and their chemical composition) which are or
previously have been present in, on or under the Property at the time of any
inspections by BNPPLC, nor will "proprietary information" include any additional
disclosures reasonably required to permit BNPPLC to determine whether the
presence of such substances and materials has constituted a violation of
Environmental Laws. In addition, under no circumstances shall Ross have any
obligation to disclose to BNPPLC or any other party any proprietary information
of Ross (including, without limitation, any pending applications for patents or
trademarks, any research and design and any trade secrets) except if and to the
limited extent reasonably necessary to comply with the express provisions of
this Lease or the other Operative Documents.
(d)
(e) So long as Ross remains in possession of the Property, BNPPLC or
BNPPLC's representative will, before making any inspection or performing any
work on the Property authorized by this Lease, if then requested to do so by
Ross to maintain Ross's security: (i) sign in at Ross's security or information
desk if Ross has such a desk on the premises, (ii) wear a visitor's badge or
other reasonable identification, (iii) permit an employee of Ross to observe
such inspection or work, and (iv) comply with other similar reasonable
nondiscriminatory security requirements of Ross that do not, individually or in
the aggregate, significantly interfere with inspections or work of BNPPLC
authorized by this Lease.
1. EVENTS OF DEFAULT. Each of the following events shall be an "Event of
Default" by Ross under this Lease:
(a) Ross shall fail to pay when due any installment of Rent due hereunder
and such failure shall continue for five (5) Business Days after Ross is
notified in writing thereof (except with regard to a
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payment required upon the termination or expiration of this Lease or any of the
Operative Documents, in which case there shall be no notice or grace period
required).
(b)
(c) Ross shall fail to cause any representation or warranty of Ross
contained herein or in the Construction Management Agreement or the Closing
Certificate that was false or misleading in any material respect when made to be
made true and not misleading (other than as described in the other clauses of
this Paragraph), or Ross shall fail to comply with any term, provision or
covenant of this Lease or of the Construction Management Agreement or the
Closing Certificate (other than as described in the other clauses of this
Paragraph), and in either case shall not cure such failure prior to the earlier
of (A) thirty days after written notice thereof is sent to Ross or (B) the date
any writ or order is issued for the levy or sale of any property owned by BNPPLC
(including the Property) or any criminal prosecution is instituted or overtly
threatened against BNPPLC or any of its directors, officers or employees because
of such failure; provided, however, that so long as no such writ or order is
issued and no such criminal prosecution is instituted or overtly threatened, the
period within which such failure may be cured by Ross shall be extended for a
further period (not to exceed an additional sixty days) as shall be necessary
for the curing thereof with diligence, if (but only if) (x) such failure is
susceptible of cure but cannot with reasonable diligence be cured within such
thirty day period, (y) Ross shall promptly have commenced to cure such failure
and shall thereafter continuously prosecute the curing thereof with reasonable
diligence and (z) the extension of the period for cure will not, in any event,
cause the period for cure to extend beyond the earlier to occur of (i) the date
that is sixty days after such initial thirty day period and (ii) the date that
is five days prior to the expiration of this Lease.
(d)
(e) Ross shall abandon the Property.
(f)
(g) Ross or any Subsidiary shall fail to make any payment or payments of
principal, premium or interest, of Debt of Ross described in the next sentence
when due (taking into consideration the time Ross may have to cure such failure,
if any, under the documents governing such Debt). As used in this clause, "Debt"
shall include only Debt (as defined in the Common Definitions and Provisions
Agreement) of Ross or any of its Subsidiaries now existing or arising in the
future (1) payable to any Interested Party, or (2) payable to any other Person
and with respect to which $5,000,000 or more is actually due and payable because
of acceleration or otherwise.
(h)
(i) Ross: (a) shall generally not, or be unable to, or shall admit in
writing its inability to, pay its debts as such debts become due; or (b) shall
make an assignment for the benefit of creditors, petition or apply to any
tribunal for the appointment of a custodian, receiver or trustee for it or a
substantial part of its assets; or (c) shall file any petition or application to
commence any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or (d) shall have had any such
petition or application filed against it; or (e) by any act or omission shall
indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a custodian,
receiver or trustee for all or any substantial part of its property; or
(f) shall suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of sixty days or more.
(j)
(k) One or more final judgments, decrees or orders for the payment of money
in excess of $5,000,000 in the aggregate shall be rendered against Ross and such
judgments, decrees or orders shall
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continue unsatisfied and in effect for a period of thirty consecutive days
without Ross's having obtained an agreement (or after the expiration or
termination of an agreement) of the Persons entitled to enforce such judgment,
decrees or orders not to enforce the same pending negotiations with Ross
concerning the satisfaction or other discharge of the same. (For purposes of
this provision, no judgment, decree or order will be considered "final" until
Ross's right to appeal, if any, shall have expired or been exhausted.)
(l)
(m) Ross shall breach the requirements of Paragraph, which by reference to
Schedule 1 establishes certain financial covenants and other requirements.
(n)
(o) as of the effective date of this Lease, any of the representations or
warranties of Ross contained in subparagraphs 2(A)—(J) of the Closing
Certificate shall be false or misleading in any material respect.
(p)
(q) Ross shall fail to pay the full amount of any Supplemental Payment
required by the Purchase Agreement on the Designated Sale Date.
(r)
(s) Ross shall breach any covenants or other provisions of Section 6.04
through and including Section 6.10 and Article VII of the Existing Credit
Agreement or a default shall occur under Section 8.01(h) or 8.01(m) of the
Existing Credit Agreement (a copy of such provisions is attached hereto as
Exhibit C); provided, that if the Existing Credit Agreement provides that Ross
may cure the breach, then the breach shall not constitute an Event of Default
hereunder unless Ross fails to complete the cure within the time allowed by the
Existing Credit Agreement.
1. REMEDIES.
2.
(a) Basic Remedies. At any time after an Event of Default and after BNPPLC
has given any notice required by subparagraph, BNPPLC shall be entitled at
BNPPLC's option (and without limiting BNPPLC in the exercise of any other right
or remedy BNPPLC may have, and without any further demand or notice except as
expressly described in this subparagraph), to exercise any one or more of the
following remedies:
(i) By notice to Ross, BNPPLC may terminate Ross's right to possession of
the Property. A notice given in connection with unlawful detainer proceedings
specifying a time within which to cure a default shall terminate Ross's right to
possession if Ross fails to cure the default within the time specified in the
notice.
(i) Upon termination of Ross's right to possession and without further
demand or notice, BNPPLC may re-enter the Property in any manner not prohibited
by Applicable Law and take possession of all improvements, additions,
alterations, equipment and fixtures thereon and remove any persons in possession
thereof. Any property in the Improvements may be removed and stored in a
warehouse or elsewhere at the expense and risk of and for the account of Ross.
(i) Upon termination of Ross's right to possession, this Lease shall
terminate and BNPPLC may recover from Ross:
a) The worth at the time of award of the unpaid Rent which had been earned
at the time of termination;
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a) The worth at the time of award of the amount by which the unpaid Rent
which would have been earned after termination until the time of award exceeds
the amount of such rental loss that Ross proves could have been reasonably
avoided;
a) The worth at the time of award of the amount by which the unpaid Rent
for the balance of the scheduled Term after the time of award exceeds the amount
of such rental loss that Ross proves could be reasonably avoided; and
a) Any other amount necessary to compensate BNPPLC for all the detriment
proximately caused by Ross's failure to perform Ross's obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom, including the costs and expenses (including Attorneys' Fees,
advertising costs and brokers' commissions) of recovering possession of the
Property, removing persons or property therefrom, placing the Property in good
order, condition, and repair, preparing and altering the Property for reletting,
all other costs and expenses of reletting, and any loss incurred by BNPPLC as a
result of Ross's failure to perform Ross's obligations under the other Operative
Documents.
The "worth at the time of award" of the amounts referred to in subparagraph and
subparagraph shall be computed by allowing interest at the Default Rate. The
"worth at the time of award" of the amount referred to in subparagraph shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).
a) Such other amounts in addition to or in lieu of the foregoing as may be
permitted from time to time by applicable South Carolina law.
(i) Even if Ross has breached this Lease and abandoned the Property, this
Lease shall continue in effect for so long as BNPPLC does not terminate Ross's
right to possession, and BNPPLC may enforce all of BNPPLC's rights and remedies
under this Lease, including the right to recover the Rent as it becomes due
under this Lease. Ross's right to possession shall not be deemed to have been
terminated by BNPPLC except pursuant to subparagraph hereof. The following shall
not constitute a termination of Ross's right to possession:
a) Acts of maintenance or preservation or efforts to relet the Property;
a) The appointment of a receiver upon the initiative of BNPPLC to protect
BNPPLC's interest under this Lease; or
a) Reasonable withholding of consent to an assignment or subletting, or
terminating a subletting or assignment by Ross.
(a) Notice Required So Long As the Purchase Option and Ross's Initial
Remarketing Rights and Obligations Continue Under the Purchase Agreement. So
long as Ross remains in possession of the Property and there has been no
termination of the Purchase Option and Ross's Initial Remarketing Rights and
Obligations as provided Paragraph 4 of the Purchase Agreement, BNPPLC's right to
exercise remedies provided in subparagraph will be subject to the condition
precedent that BNPPLC shall have notified Ross, at a time when an Event of
Default shall have occurred and be continuing, of BNPPLC's intent to exercise
remedies provided in subparagraph at least sixty days prior to exercising the
remedies. The condition precedent is intended to provide Ross with an
opportunity to exercise the Purchase Option or Ross's Initial Remarketing Rights
and Obligations before losing possession of the Property pursuant to
subparagraph. The condition precedent is not, however, intended to extend any
period for curing an Event of Default. Accordingly, if an Event of Default has
occurred, and regardless of whether any Event of Default is then continuing,
BNPPLC may proceed immediately to exercise remedies provided in subparagraph at
any time after the earlier of (i) sixty days after BNPPLC has
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given such a notice to Ross, (ii) any date upon which Ross relinquishes
possession of the Property, or (iii) any termination of the Purchase Option and
Ross's Initial Remarketing Rights and Obligations.
(b)
(c) Enforceability. This Paragraph shall be enforceable to the maximum
extent not prohibited by Applicable Law, and the unenforceability of any
provision in this Paragraph shall not render any other provision unenforceable.
(d)
(e) Remedies Cumulative. No right or remedy herein conferred upon or
reserved to BNPPLC is intended to be exclusive of any other right or remedy, and
each and every such right and remedy shall be cumulative and in addition to any
other right or remedy given to BNPPLC hereunder or now or hereafter existing in
favor of BNPPLC under Applicable Law or in equity. In addition to other remedies
provided in this Lease, BNPPLC shall be entitled, to the extent permitted by
Applicable Law or in equity, to injunctive relief in case of the violation, or
attempted or threatened violation, of any of the covenants, agreements,
conditions or provisions of this Lease, or to a decree compelling performance of
any of the other covenants, agreements, conditions or provisions of this Lease
to be performed by Ross, or to any other remedy allowed to BNPPLC at law or in
equity. Nothing contained in this Lease shall limit or prejudice the right of
BNPPLC to prove for and obtain in proceedings for bankruptcy or insolvency of
Ross by reason of the termination of this Lease, an amount equal to the maximum
allowed by any statute or rule of law in effect at the time when, and governing
the proceedings in which, the damages are to be proved, whether or not the
amount be greater, equal to, or less than the amount of the loss or damages
referred to above. Without limiting the generality of the foregoing, nothing
contained herein shall modify, limit or impair any of the rights and remedies of
BNPPLC under the Purchase Documents, and BNPPLC shall not be required to give
the sixty day notice described in subparagraph as a condition precedent to any
acceleration of the Designated Sale Date or to taking any action to enforce the
Purchase Documents.
(f)
2. DEFAULT BY BNPPLC. If BNPPLC should default in the performance of any of
its obligations under this Lease, BNPPLC shall have the time reasonably
required, but in no event less than thirty days, to cure such default after
receipt of notice from Ross specifying such default and specifying what action
Ross believes is necessary to cure the default. If Ross prevails in any
litigation brought against BNPPLC because of BNPPLC's failure to cure a default
within the time required by the preceding sentence, then Ross shall be entitled
to an award against BNPPLC for the monetary damages proximately caused to Ross
by such default.
3.
4. Notwithstanding the foregoing, BNPPLC's right to cure as provided in this
Paragraph will not in any event extend the time within which BNPPLC must remove
Liens Removable by BNPPLC as required by Paragraph beyond the Designated Sale
Date.
5.
6. QUIET ENJOYMENT. Provided Ross pays the Base Rent and all Additional Rent
payable hereunder as and when due and payable and keeps and fulfills all of the
terms, covenants, agreements and conditions to be performed by Ross hereunder,
BNPPLC shall not during the Term disturb Ross's peaceable and quiet enjoyment of
the Property; however, such enjoyment shall be subject to the terms, provisions,
covenants, agreements and conditions of this Lease, to Permitted Encumbrances,
to Development Documents and to any other claims not constituting Liens
Removable by BNPPLC. If any
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Lien Removable by BNPPLC is claimed against the Property, BNPPLC will remove the
Lien Removable by BNPPLC promptly. Any breach by BNPPLC of this Paragraph shall
render BNPPLC liable to Ross for any monetary damages proximately caused
thereby, but as more specifically provided in subparagraph above, no such breach
shall entitle Ross to terminate this Lease or excuse Ross from its obligation to
pay Rent.
7.
8. SURRENDER UPON TERMINATION. Unless Ross or an Applicable Purchaser
purchases or has purchased BNPPLC's entire interest in the Property pursuant to
the terms of the Purchase Agreement, Ross shall, upon the termination of Ross's
right to occupancy, surrender to BNPPLC the Property, including Improvements
constructed by Ross and fixtures and furnishings included in the Property, free
of all Hazardous Substances (including Permitted Hazardous Substances) and
tenancies and with all Improvements in substantially the same condition as of
the date the same were initially completed, excepting only (i) ordinary wear and
tear that occurs between the maintenance, repairs and replacements required by
other provisions of this Lease, and (ii) demolition, alterations and additions
which are expressly permitted by the terms of this Lease and which have been
completed by Ross in a good and workmanlike manner in accordance with all
Applicable Laws. Any movable furniture or movable personal property belonging to
Ross or any party claiming under Ross, if not removed at the time of such
termination and if BNPPLC shall so elect, shall be deemed abandoned and become
the property of BNPPLC without any payment or offset therefor. If BNPPLC shall
not so elect, BNPPLC may remove such property from the Property and store it at
Ross's risk and expense.
9.
10. Nothing in this Paragraph will be construed to require Ross to surrender
the Property to BNPPLC during the continuation of any breach by BNPPLC of any
obligation it has under the Purchase Agreement to convey the Property to Ross or
an Applicable Purchaser.
11. HOLDING OVER BY ROSS. Should Ross not purchase BNPPLC's right, title and
interest in the Property as provided in the Purchase Agreement, but nonetheless
continue to hold the Property after the termination of this Lease without
BNPPLC's consent, whether such termination occurs by lapse of time or otherwise,
such holding over shall constitute and be construed as a tenancy from day to day
only, at a daily Base Rent equal to: (i) Stipulated Loss Value on the day in
question, times (ii) the Default Rate for such day; divided by (iii) three
hundred and sixty; subject, however, to all of the terms, provisions, covenants
and agreements on the part of Ross hereunder. No payments of money by Ross to
BNPPLC after the termination of this Lease shall reinstate, continue or extend
the Term of this Lease and no extension of this Lease after the termination
thereof shall be valid unless and until the same shall be reduced to writing and
signed by both BNPPLC and Ross.
12.
13. INDEPENDENT OBLIGATIONS EVIDENCED BY THE OTHER OPERATIVE DOCUMENTS. Ross
acknowledges and agrees that nothing contained in this Lease shall limit, modify
or otherwise affect any of Ross's obligations under the other Operative
Documents, which obligations are intended to be separate, independent and in
addition to, and not in lieu of, the obligations set forth herein. In the event
of any inconsistency between the express terms and provisions of the Purchase
Documents and the express terms and provisions of this Lease, the express terms
and provisions of the Purchase Documents shall control. In the event of any
inconsistency between the express terms and provisions of the Construction
Management Agreement or the Closing Certificate and the express terms and
provisions of this Lease, the express terms and provisions of this Lease shall
control; provided, nothing
39
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herein will limit or impair Ross's obligations under the Closing Certificate
following any expiration of termination of this Lease.
14.
15.
[The signature pages follow.]
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IN WITNESS WHEREOF, Ross and BNPPLC have caused this Lease Agreement to be
executed as of May 10, 2001.
"Ross"
ROSS STORES, INC.
By:
/s/ J.CALL
--------------------------------------------------------------------------------
John G. Call
Senior Vice President
Chief Financial Officier
41
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[Continuation of signature pages to Lease Agreement dated to be effective
May 10, 2001]
"BNPPLC"
BNP PARIBAS LEASING CORPORATION
By:
/s/ LLOYD G. COX
--------------------------------------------------------------------------------
Lloyd G. Cox,
Managing Director
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Exhibit
Legal Description
All that certain real property situate in Fort Mill, South Carolina, described
as follows:
[TO BE ADDED.]
[[NOTE: PLEASE PROVIDE LEGAL DESCRIPTION.]]
TAX MAP NUMBER:
DERIVATION: Deed from to Grantor dated , and
recorded in Deed Book at Page
1
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Exhibit
Insurance Requirements
I. LIABILITY INSURANCE:
A. Ross must maintain commercial general liability ("CGL") insurance on an
occurrence basis, affording immediate protection to the limit of not less than
$15,000,000 combined single limit for bodily and personal injury, death and
property damage in respect of any one occurrence. The CGL insurance must be
primary to, and shall receive no contribution from, any insurance policies or
self-insurance programs otherwise afforded to or available to the Interested
Parties, collectively or individually. Further, the CGL insurance must include
blanket contractual liability coverage which insures contractual liability under
the indemnifications set forth in this Lease (though such coverage or the amount
thereof shall in no way limit such indemnifications).
B. Any deductible or self-insured retention applicable to the CGL insurance
shall not exceed $10,000 at any time when Ross shall continue to have the right
to exercise any Issue 97-10 Election, or shall have previously exercised an
Issue 97-10 Election. After the expiration of Ross's right to exercise any Issue
97-10 Election, and provided no Issue 97-10 Election has been exercised by Ross,
Ross may increase any deductible or self-insured retention applicable to such
insurance, but not to an amount in excess of $500,000.
C. The forms of insurance policies (including endorsements) used to provide
the CGL insurance required by this Lease, and the insurance company or companies
providing the CGL insurance, must be acceptable to BNPPLC. BNPPLC shall have the
right from time to time and at any time to review and approve such policy forms
(including endorsements) and the insurance company or companies providing the
insurance. Without limiting the generality of the foregoing, BNPPLC may
reasonably require (and unless and until Ross is otherwise notified by BNPPLC,
BNPPLC does require) that such insurance be provided under forms and by
companies consistent with the following:
(1) Forms: CGL Insurance must be provided on Insurance Services Office
("ISO") forms CG 0001 1093 or CG 0001 0196 or equivalent substitute forms
providing the same or greater coverage.
(2) Rating Requirements: Insurance must be provided through insurance or
reinsurance companies rated by the A.M. Best Company of Oldwick, New Jersey as
having a policyholder's rating of A or better and a reported financial
information rating of X or better.
(3) Required Endorsements: CGL Insurance must be endorsed to provide or
include:
(a) in any policy containing a general aggregate limit, ISO form amendment
"Aggregate Limits of Insurance Per Location" CG 2504 1185 or equivalent
substitute form;
(c) a waiver of subrogation, using ISO form CG 2404 1093 or equivalent
substitute form (and under the commercial umbrella, if any), in favor of "BNP
Paribas Leasing Corporation and other Interested Parties (as defined in the
Common Definitions and Provisions Agreement between Ross Stores, Inc. and BNP
Paribas Leasing Corporation dated May 10, 2001)";
(c) ISO additional insured form CG 2026 1185 or equivalent substitute form,
without modification (and under the commercial umbrella, if any), designating as
additional insureds "BNPPLC and other Interested Parties, as defined in the
Common Definitions and Provisions Agreement between Ross Stores, Inc. and BNP
Paribas Leasing Corporation dated May 10, 2001)"; and
(d) provisions entitling BNPPLC to 30 days' notice from the insurer prior to
any cancellation, nonrenewal or material modification to the CGL coverage.
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(4) Other Insurance: Each policy to contain standard CGL "other insurance"
wording, unmodified in any way that would make it excess over or contributory
with the additional insured's own commercial general liability coverage.
II. PROPERTY INSURANCE:
A. Ross must maintain property insurance in "special form" (including
theft) or against "all risks," providing the broadest available coverage for all
Improvements (as defined in the Common Provisions and Definitions Agreement but
excluding those Improvements to be demolished by Ross prior to the commencement
of construction contemplated in the Construction Management Agreement) and
equipment included in the Property, on a blanket basis if multiple buildings are
involved, with no exclusions for vandalism, malicious mischief, or sprinkler
leakage, and including coverage against earthquake and all coverage perils
normally included within the definitions of extended coverage, vandalism,
malicious mischief and, if the Property is in a flood zone, flood. In addition,
boiler and machinery coverage must be maintained at all times by endorsement to
the property insurance policy or by separate policy. Also, during any period of
significant construction on any Improvements, the property insurance must
include builder's completed value risk insurance for such Improvements, with no
protective safeguard endorsement, and (without limiting the other requirements
of this Exhibit) builder's completed value risk insurance must provide the
following coverages:
(1)materials and supplies at other locations awaiting installation;
(2)materials and supplies in transit to the worksite for installation;
(3)loss of use or consequential loss;
(4)pollutant cleanup and removal;
(5)freezing;
(6)collapse during construction, resulting from fault, defect, error or omission
in design, plan, specification or workmanship;
(7)construction ordinance or law;
(8)mechanical or electrical breakdown;
(9)debris removal additional limit;
(10)preservation of property;
(11)fire department service charge;
(12)additional interest on construction loan due to delays in the completion of
construction;
(13)loss of rental income;
(14)legal/professional fees (in the amount of no less than $1,500,000) and other
soft costs as reasonably determined by Ross, subject to BNPPLC's approval.
B. The property insurance required hereby must provide coverage in the
amount no less than replacement value (exclusive of land, foundation, footings,
excavations and grading) with endorsements for contingent liability from
operation of building laws, increased cost of construction and demolition costs
which may be necessary to comply with building laws. Subject to the approval of
BNPPLC, Ross will be responsible for determining the amount of property
insurance to be maintained from time to time, but Ross must maintain such
coverage on an agreed value basis to eliminate the effects of coinsurance.
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C. Any deductible or self-insured retention applicable to the property
insurance shall not exceed $50,000 at any time when Ross shall continue to have
the right to exercise any Issue 97-10 Election, or shall have previously
exercised an Issue 97-10 Election; provided, that with respect to earthquake
coverage the deductible may be as high as five percent of the value of the
Improvements. After the expiration of Ross's right to exercise any Issue 97-10
Election, and provided no Issue 97-10 Election has been exercised by Ross, Ross
may increase any deductible or self-insured retention applicable to such
insurance, provided the increased amount shall not exceed (1) $500,000 for all
coverages other than earthquake coverage, and (2) for earthquake coverage only,
five percent of the aggregate amount of the property insurance required to
satisfy this Lease, calculated as described in the preceding paragraph.
D. The property insurance shall cover not only the value of Ross's interest
in the Improvements, but also the interest of BNPPLC, with BNPPLC shown as an
insured as its interests may appear.
E. The forms of insurance policies (including endorsements) used to provide
the property insurance required by this Lease, and the insurance company or
companies providing the property insurance, must be acceptable to BNPPLC. BNPPLC
shall have the right from time to time and at any time to review and approve
such policy forms (including endorsements) and the insurance company or
companies providing such insurance. Without limiting the generality of the
foregoing, BNPPLC may reasonably require (and unless and until Ross is otherwise
notified by BNPPLC, BNPPLC does require) that such insurance be provided under
forms and by companies consistent with the following:
(1) Rating Requirements: Insurance to be provided through insurance or
reinsurance companies rated by the A.M. Best Company of Oldwick, New Jersey as
having (a) a policyholder's rating of A or better, (b) a reported financial
information rating of no less than X, and (c) in the case of each insurance or
reinsurance company, a reported financial information rating which indicates an
adjusted policyholders' surplus equal to or greater than the underwriting
exposure that such company has under the insurance or reinsurance it is
providing for the Property.
(2) Required Endorsements: Ross's property insurance must be endorsed to
provide or include:
(a) a waiver of subrogation in favor of "BNPPLC and other Interested
Parties, as defined in the Common Definitions and Provisions Agreement between
Ross Stores, Inc. and BNP Paribas Leasing Corporation dated May 10, 2001)";
(b) that Ross's insurance is primary, with any policies of BNPPLC or other
Interested Parties being excess, secondary and noncontributing;
(c) that the protection afforded to BNPPLC by such insurance shall not be
reduced or impaired by acts or omissions of Ross or any other beneficiary or
insured; and
(d) that BNPPLC must be notified at least thirty days prior to any
cancellation, nonrenewal or reduction of insurance coverage.
III. OTHER INSURANCE RELATED REQUIREMENTS:
A. BNPPLC must be notified in writing immediately by Ross of claims against
Ross that might cause a reduction below seventy-five percent (75%) of any
aggregate limit of any policy.
B. Ross's property insurance must be evidenced by ACORD form 27 "Evidence
of Property Insurance" completed and interlineated in a manner satisfactory to
BNPPLC to show compliance with the requirements of this Exhibit. Copies of
endorsements to the property insurance must be attached to such form.
4
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C. Ross's CGL insurance must be evidenced by ACORD form 25 "Certificate of
Insurance" completed and interlineated in a manner satisfactory to BNPPLC to
show compliance with the requirements of this Exhibit. Copies of endorsements to
the CGL insurance must be attached to such form.
D. Such evidence of required insurance must be delivered upon execution of
this Lease and new certificate or evidence of insurance must be delivered no
later than 10 days prior to expiration of existing policy.
E. Ross shall not cancel, fail to renew, or make or permit any material
reduction in any of the policies or certificates described in this Exhibit
without the prior written consent of BNPPLC. The certificates (ACORD forms 27
and 25) described in this Exhibit must contain the following express provision:
"This is to certify that the policies of insurance described herein have
been issued to the insured Ross Stores, Inc. for whom this certificate is
executed and are in force at this time. In the event of cancellation,
non-renewal, or material reduction in coverage affecting the certificate holder,
at least sixty days prior notice shall be given to the certificate holder."
F. The limits of liability under the liability insurance required by this
Lease may be provided by a single policy of insurance or by a combination of
primary and umbrella policies, but in no event shall the total limits of
liability available for any one occurrence or accident be less than those
required by this Exhibit.
G. Ross shall provide copies, certified as complete and correct by an
authorized agent of the applicable insurer, of all insurance policies required
by this Exhibit within twenty days after receipt of a request for such copies
from BNPPLC.
5
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Exhibit C
Excerpts from Existing Credit Agreement
6.04 Notices. The Company shall promptly notify the Agent and each Bank:
(a) of the occurrence of any Default or Event of Default, and of the
occurrence or existence of any event or circumstance that foreseeably will
become a Default or Event of Default;
(b) of any matter that has resulted or may result in a Material Adverse
Effect, including (i) breach or non-performance of, or any default under, a
Contractual obligation of the Company or any Subsidiary; (ii) any dispute,
litigation, investigation, proceeding or suspension between the Company or any
Subsidiary and any Governmental Authority; or (iii) the commencement of, or any
material development in, any litigation or proceeding affecting the Company or
any Subsidiary; including pursuant to any applicable Environmental Laws;
(c) of any of the following events affecting the Company or any ERISA
Affiliate (but in no event more than 10 days after such event), together with a
copy of any notice with respect to such event that may be required to be filed
with a Governmental Authority and any notice delivered by a Governmental
Authority to the Company or any ERISA Affiliate with respect to such event:
(i) an ERISA Event;
(ii) if any of the representations and warranties in Section 5.07 cease to
be true and correct;
(iii) the adoption of any new Pension Plan or other Plan subject to
Section 412 of the Code by the Company or an ERISA Affiliate;
(iv) the adoption of any amendment to a Pension Plan or other Plan subject
to Section 412 of the Code, if such amendment results in a material increase in
contributions or Unfunded Pension Liability; or
(v) the commencement of contributions by the Company or an ERISA Affiliate
to any Pension Plan, Multiemployer Plan or other Plan subject to Section 412 of
the Code;
(d) of any material change in accounting policies or financial reporting
practices by the Company or any of its subsidiaries.
(e) of any new Subsidiaries other than those specifically disclosed in
part (a) of Schedule 5.16 hereto; or any new Equity Investments other than those
specifically disclosed in part (b) of Schedule 5.16.
Each notice pursuant to this Section shall be accompanied by a written
statement by a Responsible officer of the Company setting forth details of the
occurrence referred to therein, and stating what action the Company proposes to
take with respect thereto and at what time. Each notice under subsection
(a) shall describe with particularity any and all clauses or provisions of this
Agreement or other Loan Document that have been breached or violated.
6.05 Preservation of Corporate Existence, Etc. The Company shall, and
shall cause each of its Subsidiaries to:
(a) preserve and maintain in full force and effect its corporate existence
and good standing under the laws of its state or jurisdiction of incorporation;
(b) preserve and maintain in full force and effect all rights, privileges,
qualifications, permits, licenses and franchises necessary or desirable in the
normal conduct of its business except in connection with transactions permitted
by Section 7.03 and sales of assets permitted by Section 7.02;
1
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(c) use its reasonable efforts, in the ordinary course of business, to
preserve its business organization and preserve the goodwill and business of the
customers, suppliers and others having material business relations with it; and
(d) preserve or renew all of its registered trademarks, trade names and
service marks, the non-preservation of which could reasonably be expected to
have a Material Adverse Effect.
6.06 Maintenance of Property. The Company shall maintain, and shall cause
each of its Subsidiaries to maintain, and preserve all its property which is
used or useful in its business in good working order and condition, ordinary
wear and tear excepted, except as permitted by Section 7.02. The Company shall
use the standard of care typical in the industry in the operation and
maintenance of its facilities.
6.07 Insurance. The Company shall maintain, and shall cause each of its
Subsidiaries to maintain, with financially sound and reputable independent
insurers, insurance with respect to its Properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons. The Company's current
program of self-insurance for workers' compensation shall be deemed acceptable
under this paragraph.
6.08 Payment of Obligations. The Company shall, and shall cause its
Subsidiaries to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or levies upon
it or its properties or assets, unless the same are being contested in good
faith by appropriate proceedings and adequate reserves in accordance with GAAP
are being maintained by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a Lien upon its
property; and
(c) all indebtedness, as and when due and payable, but subject to any
subordination provisions contained in any instrument or agreement evidencing
such indebtedness.
6.09 Compliance with Laws. The Company shall comply, and shall cause each
of its Subsidiaries to comply, in all material respects with all Requirements of
Law of any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist.
6.10 Inspection of Property and Books and Records. The Company and its
subsidiaries shall maintain proper books of record and account in accordance
with GAAP. The Company and its Subsidiaries shall permit representatives and
independent contractors of the Agent or any Bank, no more frequently than
annually, to inspect any of their respective Properties, to examine their books
and records, and make copies thereof, and to discuss their affairs with their
respective directors, officers, and independent public accountants, all at
reasonable times during normal business hours; provided, however, when an Event
of Default exists the Agent or any Bank may do any of the foregoing more
frequently than annually and at the expense of the Company.
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ARTICLE VII
NEGATIVE COVENANTS
The Company hereby covenants and agrees that, so long as any Bank shall have
any Revolving Commitment hereunder, or any Loan or other Obligation shall remain
unpaid or unsatisfied, unless the Majority Banks waive compliance in writing:
7.01 Limitation on Liens. The Company shall not, and the Company shall not
suffer or permit any of its Subsidiaries to, create, assume or suffer to exist
any security interest, lien (including, but not limited to, the lien of an
attachment, judgment or execution) or encumbrance, securing a charge or
obligation, on or with respect to any real or personal property of the Company
or any Subsidiary whether now owned or hereafter acquired, except:
(a) liens for current taxes, assessments or other governmental charges which
are not delinquent or remain payable without any penalty, or the validity of
which is contested in good faith by appropriate proceedings upon stay of
execution of the enforcement thereof;
(b) deposits or pledges to secure:
(i) statutory obligations;
(ii) surety or appeal bonds;
(iii) bonds for release of attachment, stay of execution or injunction; or
(iv) performance of bids, tenders, contracts (other than for the repayment
of borrowed money) or leases, or for purposes of like general nature in the
ordinary course of its business as presently conducted;
(c) purchase money liens and liens on real property securing construction or
permanent real estate financing where the lien does not exceed 100% of the cost
of the real property and all improvements thereon and does not extend beyond the
property purchased or constructed;
(d) a security interest in favor of the issuer of any letter of credit for
the account of the Company, covering any documents presented in connection with
a drawing under any letter of credit; all goods which are described in such
documents or any letter of credit; and the proceeds thereof; and
(e) security interests and liens securing charges or obligations of the
Company or any Subsidiary in amounts not to exceed an aggregate of $2,000,000 in
addition to those permitted under subsections (a) through (d) of this section.
The Company shall not, and shall not suffer or permit any of its Subsidiaries
to, acquire Margin Stock to the extent that more than 25% of the value of the
assets subject to the restrictions of this paragraph consist of Margin Stock.
7.02 Disposition of Assets. The Company shall not, and shall not suffer or
permit any of its Subsidiaries to, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
(a) dispositions of inventory, or used, worn-out or surplus equipment, all
in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is exchanged for
credit against the purchase price of similar replacement equipment, or the
proceeds of such sale are reasonably promptly applied to the purchase price of
such replacement equipment; and
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(c) dispositions of property by the Company or any of its Subsidiaries to
the Company or any of its Subsidiaries pursuant to reasonable business
requirements; provided, however, that such dispositions do not result in the
movement of any such property from a domestic subsidiary to a Subsidiary located
outside the United States.
7.03 Consolidations and Mergers. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, merge, consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person.
7.04 Loans; Advances; Investments; Acquisitions; Guarantees. The Company
shall not, and shall not permit any Subsidiary to, make any loans or advances
to, or any investment in, any person or entity; nor acquire, or permit any
Subsidiary to acquire, any interest in any entity; nor enter into, or permit any
Subsidiary to enter into, any joint venture; nor guarantee or, become liable, or
permit any subsidiary to guarantee or become liable, in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, any liabilities or obligations of any other person or entity,
except any of the foregoing in any fiscal year so long as the total dollar
amount of all such transactions by the Company and the Subsidiaries does not
exceed an aggregate of (a) 10% of the Company's Tangible Net Worth as of the end
of the immediately preceding fiscal year, plus (b) the cost of the acquisitions
and investments financed by the issuance of equity.
7.05 Transactions with Affiliates. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, enter into any transaction with any
Affiliate of the Company or of any such Subsidiary, except (a) as expressly
permitted by this Agreement, or (b) in the ordinary course of business and
pursuant to the reasonable requirements of the business of the Company or such
subsidiary; in each case (a) and (b), upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Company or such
Subsidiary.
7.06 Use of Proceeds. The Company shall not and shall not suffer or permit
any of its Subsidiaries to use any portion of the Loan proceeds, directly or
indirectly, (i) to purchase or carry Margin Stock (except the repurchase by the
Company of the Company's own stock, with such stock being retired upon its
repurchase), (ii) to repay or otherwise refinance indebtedness of the Company or
others incurred to purchase, or carry Margin Stock, (iii) to extend credit for
the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any
security in any transaction that is subject to Section 13 or 14 of the Exchange
Act.
7.07 Use of Proceeds—Ineligible Securities. The Company shall not,
directly or indirectly, use any portion of the Loan proceeds (i) knowingly to
purchase Ineligible Securities from the Arranger during any period in which the
Arranger makes a market in such Ineligible Securities, (ii) knowingly to
purchase during the underwriting period Ineligible Securities being underwritten
by the Arranger, or (iii) to make payments of principal or interest on
Ineligible Securities underwritten by the Arranger and issued by or for the
benefit of the Company or any Affiliate of the Company.
7.08 Compliance with ERISA. The Company shall not, and shall not suffer or
permit any of its Subsidiaries to, (i) terminate any Plan subject to Title IV of
ERISA so as to result in any material (in the opinion of the Majority Banks)
liability to the Company or any ERISA Affiliate, (ii) permit to exist any ERISA
Event or any other event or condition, which presents the risk of a material (in
the opinion of the Majority Banks) liability to any member of the Controlled
Group, (iii) make a complete or partial withdrawal (within the meaning of ERISA
Section 4201) from any Multiemployer Plan so as to result in any material (in
the opinion of the Majority Banks) liability to the Company or any ERISA
Affiliate, (iv) enter into any new Plan or modify any existing Plan so as to
increase its obligations thereunder which could result in any material (in the
opinion of the Majority Banks) liability to any
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member of the Controlled Group, or (v) permit the present value of all
nonforfeitable accrued benefits under any Plan (using the actuarial assumptions
utilized by the PBGC upon termination of a Plan) materially (in the opinion of
the Majority Banks) to exceed the fair market value of Plan assets allocable to
such benefits, all determined as of the most recent valuation date for each such
Plan.
7.09 Change in Business. The Company shall not, and shall not permit any
of its Subsidiaries to, engage in any material line of business substantially
different from those lines of business carried on by it on the date hereof.
7.10 Change in Structure. The Company shall not and shall not permit any
of its Subsidiaries to, make any changes in its equity capital structure
(including in the terms of its outstanding stock, but excluding the Company's
stock repurchase programs), or amend its certificate of incorporation or by-laws
in any material respect.
7.11 Accounting Changes. The Company shall not, and shall not suffer or
permit any of its Subsidiaries to, make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change the
fiscal year of the Company or of any of its consolidated Subsidiaries.
[8.01]
(h) ERISA. (i) An ERISA Event shall occur with respect to a Pension Plan
or Multiemployer Plan which has resulted or could reasonably expected to result
in liability of the Company under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $1,000,000;
(ii) the commencement or increase of contributions to, or the adoption of or the
amendment of a Pension Plan by the Company or an ERISA Affiliate which has
resulted or could reasonably be expected to result in an increase in Unfunded
Pension Liability among all Pension Plans in an aggregate amount in excess of
$1,000,000; (iii) any of the representations and warranties contained in
Section 5.07 shall cease to be true and correct in any material respect; or
(iv) the Company or an ERISA Affiliate shall fail to pay when due, after the
expiration of any applicable grace period, any installment payment with respect
to its withdrawal liability under Section 4201 of ERISA under a Multiemployer
Plan, which has resulted or could reasonably be expected to result in a Material
Adverse Effect.
(m) Adverse Change. There shall occur a Material Adverse Effect.
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Exhibit D
Fixed Rate Lock Notice
, 200
SENT VIA FIRST CLASS MAIL
AND BY TELECOPY TO (972) 788-9140
BNP Paribas Leasing Corporation
12201 Merit Drive
Suite 860
Dallas, Texas 75251
Attention: Lloyd G. Cox
Re: Lease Agreement dated as of May 10, 2001 (the "Lease"), between Ross
Stores, Inc., as lessee, ("Ross") and BNP Paribas Leasing Corporation, as lessor
("BNPPLC")
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings
assigned to them in the Common Definitions and Provisions Agreement with is
referenced in the Lease. By this letter, which is given pursuant to subparagraph
of the Lease, Ross requests that BNPPLC promptly establish a Fixed Rate (First
Swap) for a notional amount of $ (which amount is the Estimated SLV
described in subparagraph of the Lease) for use in the calculation of the
Effective Rate for all Base Rent Periods commencing on or after the following
Fixed Rate Lock Date: , 200 .
As contemplated in the conditions set forth in subparagraph of the Lease,
such Fixed Rate Lock Date is the first Business Day of a calendar month which
falls after the Projected Base Rent Commencement Date; such Fixed Rate Lock Date
does not fall prior to the end of any Base Rent Period which has commenced or
will commence before BNPPLC receives this notice; and Ross expects BNPPLC to
receive this notice more than ten days prior to such Fixed Rate Lock Date.
In an earlier phone conversation today between a representative of Ross
and at the New York Branch of BNP Paribas, Ross requested an estimate
from BNP Paribas of the Fixed Rate (First Swap) that would be established by
BNPPLC and BNP Paribas entering into an Interest Rate Swap. The estimate
provided by telephone was: percent ( %) per annum.
By this letter, Ross confirms that it will accept such a rate or any lower rate
as the Fixed Rate (First Swap) for purposes of the Lease.
NOTE: BNPPLC SHALL BE ENTITLED TO DISREGARD THIS NOTICE IF THE CONDITIONS TO A
FIXED RATE LOCK, AS SPECIFIED IN SUBPARAGRAPH OF THE LEASE, HAVE NOT BEEN
SATISFIED. HOWEVER, ROSS REQUESTS THAT BNPPLC NOTIFY ROSS IMMEDIATELY IF FOR ANY
REASON BNPPLC BELIEVES THIS NOTICE WILL NOT BE EFFECTIVE.
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Executed on the date first written above.
ROSS STORES, INC.
By:
Name (Print):
--------------------------------------------------------------------------------
Title (Print):
--------------------------------------------------------------------------------
cc BNP Paribas New York Branch
787 Seventh Avenue
New York, New York 10019
Attention: Christopher Criswell
VIA FIRST CLASS MAIL
AND TELECOPY TO: (212) 841-3049
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Exhibit E
Notice of Base Rent Period Election
BNP Leasing Corporation
12201 Merit Drive
Suite 860
Dallas, Texas 75251
Attention: Lloyd G. Cox
Re: Lease Agreement dated as of May 10, 2001, and both between Ross
Stores, Inc., as tenant, and BNP Paribas Leasing Corporation, as landlord
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings
assigned to them in the Lease Agreement referenced above. This letter
constitutes notice to you that the Base Rent Period Election under the Lease
Agreement shall be:
month(s),
beginning with the first Base Rent Period that commences on or after:
, .
NOTE: YOU SHALL BE ENTITLED TO DISREGARD THIS NOTICE IF THE NUMBER OF MONTHS
SPECIFIED ABOVE IS NOT A PERMITTED NUMBER UNDER THE DEFINITION OF "LIBOR PERIOD
ELECTION" IN THE COMMON DEFINITIONS AND PROVISIONS AGREEMENTS REFERENCED IN THE
LEASE AGREEMENTS, OR IF THE DATE SPECIFIED ABOVE CONCERNING THE COMMENCEMENT OF
THE LIBOR PERIOD ELECTION IS LESS THAN TEN BUSINESS DAYS AFTER YOUR RECEIPT OF
THIS NOTICE. HOWEVER, WE ASK THAT YOU NOTIFY US IMMEDIATELY IF FOR ANY REASON
YOU BELIEVE THIS NOTICE IS DEFECTIVE.
Executed this day of , 20 .
ROSS STORES, INC.
Name:
--------------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------------
[cc all Participants]
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Schedule 1
FINANCIAL COVENANTS
FINANCIAL COVENANTS AND CREDIT PROVISIONS
This Schedule 1 is attached to and made a part of the Lease Agreement (the
"Lease") dated to be effective as of May 10, 2001 (the "Effective Date"),
between BNP Paribas Leasing Corporation, a Delaware corporation ("BNPPLC") and
Ross Stores, Inc., a Delaware corporation ("Ross").
Part I—Defined Terms
In this Schedule 1, capitalized terms used but not defined herein shall have
the meaning assigned to them in the Lease or the Common Definitions and
Provisions Agreement referenced in the Lease; and the following capitalized
terms shall have the following meanings:
"Adjusted Debt" means, at any date of the determination thereof, the sum
(without duplication of any item) of total indebtedness for borrowed money
outstanding as of such date plus liabilities under guaranties, standby letters
of credit, and any other contingent obligations (which term, for purposes of
this definition, shall not include Documentary Letters of Credit) plus Debt
existing under synthetic or other leases described in subsection (h) of the
definition of Debt plus with respect to other operating leases under which Ross
is the lessee, six times the amount of Ross' operating rent expense and
operating lease expense for the four fiscal quarters immediately preceding the
date of measurement.
"Adjusted Interest Coverage Ratio" means, for any accounting period, the ratio
for Ross and its Subsidiaries, on a consolidated basis, of (a) the sum of
EBITDA, operating rent expense, and operating lease expense for such period to
(b) the sum of operating rent expense, operating lease expense, and interest
expense for such period.
"Capitalization" means, at any date of the determination thereof, (1) Adjusted
Debt on such date plus (2) shareholders' equity on such date.
"Consolidated Subsidiary" means any Subsidiary of Ross whose accounts are or are
required to be consolidated with the accounts of Ross in accordance with GAAP.
"Documentary Letter of Credit" means a letter of credit (a) issued at the
request of Ross, as applicant, for the benefit of a vendor of Ross authorizing
the vendor to draw on the letter of credit if it satisfies certain terms and
condition specified therein and (b) that expires no more than ninety days after
its issue date, subject to extension by the addition of purchase orders between
Ross and such vendor from time to time in the ordinary course of business.
"EBITDA" means, for any period, for Ross and its Subsidiaries on a consolidated
basis, the net income (or net loss) for such period, plus, to the extent
deducted in determining net income (or net loss), the sum of (a) interest
expense, (b) income tax expense, (c) depreciation expense, (d) amortization
expense, (e) non-cash extraordinary charges, and (f) losses on asset sales;
(g) minus, to the extent added in determining net income (or net loss), gains on
asset sales.
"Leverage Ratio" means, for any accounting period, the ratio, expressed as a
percentage, of (a) Adjusted Debt for such period to (b) Capitalization for such
period. Thus, for example, if Ross's Adjusted Debt and Capitalization at any
quarter end were $69,000,000 and $98,000,000, respectively, the Leverage Ratio
would be calculated as follows:
$69,000,000 ÷ 98,000,000 = 0.7041
"Rolling Four Quarter Period" means a period of four consecutive fiscal quarters
of Ross.
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"Test Dates" mean the earlier of the following dates after each fiscal quarter
of Ross that ends on or after June 30, 2001: (1) the seventh Business Day after
the release by Ross of its financial statements for the fiscal quarter or
(2) the first Business Day of the third calendar month following the end of the
fiscal quarter.
"Test Period" means any Rolling Four Quarter Period.
Part II—Financial Covenants for Lease Agreement
1.Minimum Adjusted Interest Coverage Ratio After the Year 2000. Ross covenants
that it shall not at any time suffer or permit an Adjusted Interest Coverage
Ratio of less than 1.80 to 1.00 for any Rolling Four Quarter Period.
2.Maximum Leverage Ratio. Ross covenants that it shall not at any time suffer or
permit a Leverage Ratio of more than 0.75 to 1.00 at the end of any fiscal
quarter of Ross.
Part III—Tests to Establish Spread
On each Test Date, the Spread will be reset and established at the Level in
the grid below which corresponds to the Adjusted Interest Coverage Ratio for the
then latest Test Period just ended (and for which Ross has reported earnings as
necessary to compute the Adjusted Interest Coverage Ratio); provided, that:
(a) promptly after earnings are reported by Ross for the latest quarter in
any Test Period, Ross must notify BNPPLC of any resulting change in the Spread
under these provisions, and no reduction in the Spread from one period to the
next will be effective for purposes of the Operative Documents unless, prior to
the Test Date for the next period, Ross shall have provided BNPPLC with a
written notice setting forth and certifying the calculation under these
provisions that justifies the reduction; and
(b) notwithstanding anything to the contrary in this definition, on any date
when an Event of Default has occurred and is continuing, the Spread shall not be
reduced.
Levels
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Adjusted Interest Coverage Ratio
--------------------------------------------------------------------------------
Spread
--------------------------------------------------------------------------------
Level 1 greater than 4.00 65.0 basis points
Level 2
greater than 3.25, but less than or equal to 4.00
75.0 basis points
Level 3
greater than 2.50, but less than or equal to 3.25
90.0 basis points
Level 4
less than 2.50
125.0 basis points
All determinations of the Spread by BNPPLC shall, in the absence of clear and
demonstrable error, be binding and conclusive for purposes of the Operative
Documents. Further BNPPLC may, but shall not be required, to rely on the
determination of the Spread set forth in any notice delivered by Ross as
described above in clause (a) of this definition.
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COMMON DEFINITIONS AND PROVISIONS AGREEMENT
between
BNP PARIBAS LEASING CORPORATION
and
ROSS STORES, INC.
Dated as of May 10, 2001
Schedule 1—Page 1
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TABLE OF CONTENTS
Page
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ARTICLE I—LIST OF DEFINED TERMS:
Absolute Construction Obligations
1 Acquisition Contract 2 Active Negligence 2 Additional Rent 2
Administrative Agency Fee 2 Advance Date 2 Affiliate 2 Applicable Laws 3
Applicable Purchaser 3 Arrangement Fee 3 Attorneys' Fees 3 Balance of
Unpaid Construction-Period Indemnity Payments 3 Banking Rules Change 3 Base
Rate 3 Base Rent 3 Base Rent Commencement Date 3 Base Rent Date 4 Base
Rent Period 4 Period Election 5 BNPPLC 5 BNPPLC's Parent 5 Breakage
Costs 5 Break Even Price 6 Business Day 6 Capital Adequacy Charges 6
Capital Lease 6 Carrying Costs 6 Closing Certificate 6 CMA Suspension
Event 6 CMA Suspension Notice 6 CMA Suspension Period 6 CMA Termination
Event 6 Code 6 Commitment Fees 6 Common Definitions and Provisions
Agreement 6 Completion Notice 6 Construction Advances 6 Construction
Advance Request 7 Construction Allowance 7 Construction Management Agreement
7 Construction Period 7 Construction-Period Indemnity Payments 7
Construction Project 7 Debt 7 Default 7 Default Rate 8
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Defaulting Participant 8 Defective Work 8 Designated Sale Date 8
Development Documents 8 Effective Date 8 Effective Rate 8 Environmental
Laws 9 Environmental Cutoff Date 9 Environmental Losses 9 Environmental
Reports 9 ERISA 9 ERISA Affiliate 9 Escrowed Proceeds 9 Established
Misconduct 10 Eurocurrency Liabilities 10 Eurodollar Rate Reserve Percentage
10 Event of Default 11 Existing Credit Agreement 11 Excluded Taxes 11
Fed Funds Rate 11 First Interest Rate Swap 12 Fixed Rate 12 Fixed Rate
(First Swap) 12 Fixed Rate (Second Swap) 12 Fixed Rate Lock 12 Fixed Rate
Lock Date 12 Fixed Rate Lock Termination 12 Fixed Rate Lock Termination Date
12 Fixed Rate Lock Notice 13 Fixed Rate Loss 13 Fixed Rate Settlement
Amount 13 Floating Rate Payor 13 FOCB Notice 13 Funded Construction
Allowance 13 Funding Advances 13 Future Work 13 GAAP 13 Hazardous
Substance 13 Hazardous Substance Activity 14 Impositions 14 Improvements
14 Lease 14 Initial Funding Advance 14 Interested Party 15 Interest Rate
Swap 15 Issue 97-1 Non-performance-related Subjective Event of Default 15
Issue 97-10 Election 15 Issue 97-10 Prepayment 16 Land 16 Landlord's
Election to Continue Construction 16
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LIBOR 17 Lien 17 Liens Removable by BNPPLC 17 Losses 18 Market Quotation
18 Material Environmental Communication 18 Maximum Construction Allowance
18 Maximum Permitted Termination Fees 18 Maximum Permitted Prepayment 18
Maximum Remarketing Obligation 19 Minimum Extended Remarketing Price 19
Multiemployer Plan 19 Notice of Ross's Intent to Terminate 19 Operative
Documents 19 Outstanding Construction Allowance 19 Participant 19
Participation Agreement 19 PBGC 19 Period 19 Permitted Encumbrances 20
Permitted Hazardous Substance Use 20 Permitted Hazardous Substances 20
Permitted Transfer 20 Person 21 Personal Property 21 Plan 21
Pre-Commencement Casualty 21 Prime Rate 21 Prior Work 21 Project Costs
21 Projected Base Rent Commencement Date 22 Projected Cost Overruns 22
Property 22 Purchase Agreement 22 Purchase Documents 22 Purchase Option
22 Qualified Affiliate 22 Qualified Prepayments 22 Real Property 23
Reference Market-makers 23 Reimbursable Construction-Period Costs 23
Remedial Work 23 Rent 23 Residual Risk Percentage 23 Responsible Financial
Officer 23 Sale Closing Documents 23 Scope Change 23 Second Interest Rate
Swap 23 Seller 23 Spread 23
iii
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Stipulated Loss Value 23 Subsidiary 23 Supplemental Payment 24 Term 24
Third Party Contract 24 Third Party Price 24 Third Party Sale Notice 24
Third Party Sale Proposal 24 Third Party Target Price 24 Transaction
Expenses 24 Unfunded Benefit Liabilities 24 Voluntary Ross Construction
Contributions 24 Voluntary Retention of the Property 24 Work 24 Ross 24
Ross's Extended Remarketing Period 24 Ross's Extended Remarketing Right 24
Ross's Initial Remarketing Rights and Obligations 25
ARTICLE II—PROVISIONS USED IN COMMON:
24 Notices
25 25 Severability 26 26 No Merger 26 27 No Implied Waiver 26
28 Entire and Only Agreements 26 29 Binding Effect 27 30 Time is of the
Essence 27 31 Governing Law 27 32 Paragraph Headings 27 33 Negotiated
Documents 27 34 Terms Not Expressly Defined in an Operative Document 27
35 Other Terms and References 27 36 Execution in Counterparts 28 37 Not a
Partnership, Etc 28
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COMMON DEFINITIONS AND PROVISIONS AGREEMENT
This Common Definitions and Provisions Agreement, by and between BNP PARIBAS
LEASING CORPORATION, a Delaware corporation ("BNPPLC"), and ROSS STORES, INC., a
Delaware corporation ("Ross"), is dated as of May 10, 2001, the Effective Date.
RECITALS
Contemporaneously with the execution of this Common Definitions and
Provisions Agreement, Ross is executing the Closing Certificate (as defined
below) in favor of BNPPLC, and BNPPLC and Ross are executing the Lease (as
defined below), the Construction Management Agreement (as defined below), and
the Purchase Agreement (as defined below), all of which concern the Property (as
defined below). Each of the Closing Certificate, the Lease, the Construction
Management Agreement and the Purchase Agreement (together with this Common
Definitions and Provisions Agreement, the "Operative Documents") are intended to
create separate and independent obligations upon the parties thereto. However,
Ross and BNPPLC intend that all of the Operative Documents share certain
consistent definitions and other miscellaneous provisions. To that end, the
parties are executing this Common Definitions and Provisions Agreement and
incorporating it by reference into each of the other Operative Documents.
AGREEMENTS
ARTICLE I—LIST OF DEFINED TERMS
Unless a clear contrary intention appears, the following terms shall have
the respective indicated meanings as used herein and in the other Operative
Documents:
"Absolute Construction Obligations "means the following:
(1) Construction-Period Indemnity Payments required because of or in
connection with or arising out of Environmental Losses incurred or suffered by
any Interested Party;
(2) Construction-Period Indemnity Payments required because of or in
connection with or arising out of Losses incurred or suffered by BNPPLC that
BNPPLC would not have incurred or suffered but for any act or any omission of
Ross or of any Ross's contractors or subcontractors during the period that the
Construction Management Agreement remains in force or during any other period
that Ross remains in possession or control of the Construction Project
(excluding, however, as described below certain Losses consisting of claims
related to any failure of Ross to complete the Construction Project);
(3) Construction-Period Indemnity Payments required because of or in
connection with or arising out of Losses incurred or suffered by BNPPLC that
would not have been incurred but for any fraud, misapplication of funds
(including Construction Advances), illegal acts, or willful misconduct on the
part of the Ross or its employees or agents or any other party for whom Ross is
responsible; and
(4) Construction-Period Indemnity Payments required because of or in
connection with or arising out of Losses incurred or suffered by BNPPLC that
would not have been incurred but for any bankruptcy proceeding involving Ross.
For purposes of clause (2) of this definition, "acts and omissions of Ross"
shall include (i) any decision by Ross to make a Scope Change without the prior
approval of BNPPLC, (ii) any failure of Ross to maintain insurance required by
the Lease or the Construction Management Agreement, (iii) any decision not to
continue or complete Work under the Construction Management Agreement because of
a change in Ross's facility needs or in Ross's plans to meet its facility needs
(such as, for example, a decision by Ross to lease or acquire another less
expensive facility as an alternative to the Improvements), (iv) any failure of
Ross to reserve termination rights in Third Party Contracts as
1
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required by subparagraph 1(A)(2)(b) of the Construction Management Agreement,
and (v) any other breach by Ross of the Construction Management Agreement.
Thus, for example, if a third party asserts a claim for damages against
BNPPLC because of injuries the third party sustained while on the Land as a
result of Ross's breach of its obligation under the Construction Management
Agreement to keep the Land and the Improvements thereon in a reasonably safe
condition as Work progresses under Ross's direction and control, then any
Construction-Period Indemnity Payment required because of such third party claim
will constitute an Absolute Construction Obligation under clause (2) of this
definition. Similarly, if a claim against BNPPLC by a third party injured on the
Land during the progress of the Work is uninsured or under-insured only because
of Ross's failure to obtain liability insurance in accordance with the
requirements of the Lease (the premiums for which insurance are reimbursable
from Construction Advances as provided in the Construction Management
Agreement), then Construction-Period Indemnity Payments to BNPPLC for the
uninsured or under-insured Losses arising out of the third party claim will
constitute Absolute Construction Obligations under clause (2) of this
definition.
It is understood, however, that a failure of Ross to complete construction
of the Construction Project will not necessarily constitute a breach of the
Construction Management Agreement, given that Ross may elect to terminate the
Construction Management Agreement as provided in subparagraph 4(D) thereof. In
the event the Construction Management Agreement is terminated by Ross pursuant
to subparagraph 4(D) thereof or by BNPPLC pursuant to subparagraph 4(E) thereof,
clause (2) of this definition will not be construed to include
Construction-Period Indemnity Payments, the sole reason for which are Losses
suffered by BNPPLC consisting of claims related to Ross's failure to complete
the Construction Project.
"Acquisition Contract" means the Option Agreement executed on or about the
date hereof between Seller and Ross covering the Land described in Exhibit A
attached to the Lease, the interests of Ross therein having being assigned to
BNPPLC pursuant to the assignment dated as of the Effective Date between Ross
and BNPPLC, with the consent and approval of Seller.
"Active Negligence" of any Person (including BNPPLC) means, and is limited
to, the negligent conduct on the Property (and not mere omissions) by such
Person or by others acting and authorized to act on such Person's behalf in a
manner that proximately causes actual bodily injury or property damage for which
Ross does not carry (and is not obligated by the Lease to carry) insurance.
"Active Negligence" shall not include (1) any negligent failure of BNPPLC to act
when the duty to act would not have been imposed but for BNPPLC's status as
owner of the Land, the Improvements or any interest in any other Property or as
a party to the transactions described in the Lease or the other Operative
Documents, (2) any negligent failure of any other Interested Party to act when
the duty to act would not have been imposed but for such party's contractual or
other relationship to BNPPLC or participation or facilitation in any manner,
directly or indirectly, of the transactions described in the Lease or other
Operative Documents, or (3) the exercise in a lawful manner by BNPPLC (or any
party lawfully claiming through or under BNPPLC) of any right or remedy provided
in or under the Lease or the other Operative Documents.
"Additional Rent" shall have the meaning assigned to it in subparagraph of
the Lease.
"Administrative Agency Fee" shall have the meaning assigned to it in
subparagraph 3(f) of the Lease.
"Advance Date" means, regardless of whether any Construction Advance shall
actually be made thereon, the first Business Day of every calendar month,
beginning with the first Business Day in May, 2001 and continuing regularly
thereafter to and including the Base Rent Commencement Date.
"Affiliate" of any Person means any other Person controlling, controlled by
or under common control with such Person. For purposes of this definition, the
term "control" when used with respect to
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any Person means the power to direct the management of policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Applicable Laws" means any or all of the following, to the extent
applicable to Ross or the Property or the Lease or the other Operative
Documents: restrictive covenants; zoning ordinances and building codes; flood
disaster laws; health, safety and environmental laws and regulations; the
Americans with Disabilities Act and other laws pertaining to disabled persons;
and other laws, statutes, ordinances, rules, permits, regulations, orders,
determinations and court decisions.
"Applicable Purchaser" means any third party designated by Ross to purchase
BNPPLC's interest in the Property and in any Escrowed Proceeds as provided in
the Purchase Agreement.
"Arrangement Fee" shall have the meaning assigned to it in subparagraph of
the Lease.
"Attorneys' Fees" means the expenses and reasonable fees of counsel to the
parties incurring the same, excluding costs or expenses of in-house counsel
(whether or not accounted for as general overhead or administrative expenses),
but otherwise including printing, photostating, duplicating and other expenses,
air freight charges, and fees billed for law clerks, paralegals, librarians and
others not admitted to the bar but performing services under the supervision of
an attorney. Such terms shall also include all such fees and expenses incurred
with respect to appeals, arbitrations and bankruptcy proceedings, and whether or
not any manner of proceeding is brought with respect to the matter for which
such fees and expenses were incurred.
"Balance of Unpaid Construction-Period Indemnity Payments" shall have the
meaning assigned to it in subparagraph 1(B)(1) of the Purchase Agreement.
"Banking Rules Change" means either: (1) the introduction of or any change
in any law or regulation applicable to BNPPLC, BNPPLC's Parent or any other
Participant, or in the generally accepted interpretation by the institutional
lending community of any such law or regulation, or in the interpretation of any
such law or regulation asserted by any regulator, court or other governmental
authority (including any change by way of imposition or increase of reserve
requirements included in the Eurodollar Rate Reserve Percentage) or (2) the
compliance by BNPPLC, BNPPLC's Parent or any other Participant with any new
guideline or new request from any central bank or other governmental authority
(whether or not having the force of law).
"Base Rate" for any Construction Period or Base Rent Period means a rate
equal to the higher of (1) the Prime Rate in effect on the first day of such
period, or (2) the rate which is fifty basis points (50/100 of 1%) above the Fed
Funds Rate for that period.
"Base Rent" means the rent payable by Ross pursuant to subparagraph of the
Lease.
"Base Rent Commencement Date" means the earlier of (1) the Projected Base
Rent Commencement Date, (2) the first Business Day of the first calendar month
to follow by twenty days or more the day upon which any Completion Notice is
given, or (3) the first Business Day of the first calendar month upon which the
Funded Construction Allowance shall equal or exceed the Maximum Construction
Allowance. For example, if on the first Business Day of November, 2002,
construction of the Construction Project is continuing, the Funded Construction
Allowance is $76,190,000 (before adding any Carrying Costs for the preceding
month) and the Maximum Construction Allowance is $76,200,000, and if Carrying
Costs of $17,500 would be added to the Funded Construction Allowance on such day
if the Construction Allowance were not limited to the Maximum Construction
Allowance, then (absent an extension by BNPPLC as described below) such day
shall be the Base Rent Commencement Date and on such day $10,000 will be added
to the Funded Construction Allowance as Carrying Cost and $7,500 will be payable
as Base Rent pursuant to subparagraph of the Lease. Notwithstanding the
forgoing, if for any reason (including a termination of the Construction
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Management Agreement) Ross has not completed the Construction Project thirty
days in advance of the scheduled Base Rent Commencement Date determined pursuant
to the first sentence of this definition, BNPPLC shall be entitled (but not
obligated) to extend the Base Rent Commencement Date one or more times and at
any time before the Construction Project actually is complete and ready for
occupancy. To so extend the Base Rent Commencement Date, BNPPLC shall notify
Ross thereof and of the date to which the Base Rent Commencement Date is
extended, which may be the first Business Day of any calendar month designated
by BNPPLC in the notice of extension, provided that BNPPLC will not so designate
any date more than sixty days after the date upon which the Construction Project
is expected by BNPPLC (at the time of the designation) to be complete.
"Base Rent Date" means a date upon which Base Rent must be paid under the
Lease, all of which dates shall be the first Business Day of a calendar month.
The first Base Rent Date shall be determined as follows:
a) If a Base Rent Period Election of one month is in effect on the Base
Rent Commencement Date, then the first Business Day of the first calendar month
following the Base Rent Commencement Date shall be the first Base Rent Date.
b) If the Base Rent Period Election in effect on the Base Rent Commencement
Date is three months or six months, then the first Business Day of the third
calendar month following the Base Rent Commencement Date shall be the first Base
Rent Date.
Each successive Base Rent Date after the first Base Rent Date shall be the
first Business Day of the first or third calendar month following the calendar
month which includes the preceding Base Rent Date, determined as follows:
(1) If a Base Rent Period Election of one month is in effect on a Base Rent
Date, then the first Business Day of the first calendar month following such
Base Rent Date shall be the next following Base Rent Date.
(2) If a Base Rent Period Election of three months or six months is in
effect on a Base Rent Date, then the first Business Day of the third calendar
month following such Base Rent Date shall be the next following Base Rent Date.
Thus, for example, if the Base Rent Commencement Date falls on the first
Business Day of September, 2001 and a Base Rent Period Election of two months
commences on the Base Rent Commencement Date, then the first Base Rent Date
shall be the first Business Day of November, 2001.
"Base Rent Period" means a period for which Base Rent must be paid under the
Lease, each of which periods shall correspond to the Base Rent Period Election
for such period. The first Base Rent Period shall begin on and include the Base
Rent Commencement Date, and each successive Base Rent Period shall begin on and
include the Base Rent Date upon which the preceding Base Rent Period ends. Each
Base Rent Period, including the first Base Rent Period, shall end on but not
include the first or second Base Rent Date after the Base Rent Date upon which
such period began, determined as follows:
(1) If the Base Rent Period Election for a Base Rent Period is one month or
three months, then such Base Rent Period shall end on the first Base Rent Date
after the Base Rent Date upon which such period began.
(2) If the Base Rent Period Election for a Base Rent Period is six months,
then such Base Rent Period shall end on the second Base Rent Date after the Base
Rent Date upon which such period began.
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The determination of Base Rent Periods can be illustrated by two examples:
1) If Ross makes a Base Rent Period Election of three months for a
hypothetical Base Rent Period beginning on the first Business Day in January,
2001, then such Base Rent Period will end on but not include the first Base Rent
Date after it begins; that is, such Base Rent Period will end on the first
Business Day in April, 2001, the third calendar month after January, 2001.
2) If, however, Ross makes a Base Rent Period Election of six months for
the hypothetical Base Rent Period beginning the first Business Day in January,
2001, then such Base Rent Period will end on but not include the second Base
Rent Date after it begins; that is, the first Business Day in July, 2001.
"Base Rent Period Election" for any Base Rent Period means a period of one
month, three months or six months as designated by Ross at least five Business
Days prior to the commencement of such Base Rent Period by a notice given to
BNPLC in the form of Exhibit E attached to the Lease. (For purposes of the Lease
a Base Rent Period Election for any Base Rent Period shall also be considered
the Base Rent Period Election in effect on the Base Rent Commencement Date or
Base Rent Date upon which such Base Rent Period begins.) Any Base Rent Period
Election so designated by Ross shall remain in effect for the entire Base Rent
Period specified in Ross's notice to BNPLC (provided such Base Rent Period
commences at least ten Business Days after BNPLC's receipt of the notice) and
for all subsequent Base Rent Periods until a new designation becomes effective
in accordance with the provisions set forth in this definition. Notwithstanding
the foregoing, however: (1) Ross shall not be entitled to designate a Base Rent
Period Election that would cause a Base Rent Period to extend beyond the end of
the scheduled Term or beyond the Fixed Rate Lock Date; (2) changes in the Base
Rent Period Election shall become effective only upon the commencement of a new
Base Rent Period; and (3) if (a) Ross fails to make a Base Rent Period Election
consistent with the foregoing requirements for any Base Rent Period or (b) an
Event of Default shall have occurred and be continuing on the third Business Day
preceding the commencement of any Base Rent Period or (c) a Fixed Rate Lock is
in effect on the first day of any Base Rent Period, then the Base Rent Period
Election for such Base Rent Period shall be deemed to be one month.
"BNPPLC" means BNP Paribas Leasing Corporation, a Delaware corporation.
"BNPPLC's Parent" means BNPPLC's Affiliate, BNP Paribas, a bank organized
and existing under the laws of France and any successors of such bank.
"Breakage Costs" means any and all costs, losses or expenses incurred or
sustained by BNPPLC's Parent (as a Participant or otherwise) or any other
Participant, for which BNPPLC's Parent or the Participant shall request
reimbursement from BNPPLC, because of the resulting liquidation or redeployment
of deposits or other funds:
(1) used to make or maintain Funding Advances upon application of a
Qualified Prepayment or upon any sale of the Property pursuant to the Purchase
Agreement, if such application or sale occurs on any day other than the last day
of a Construction Period or Base Rent Period; or
(2) reserved to provide a Construction Advance that Ross requests, but
thereafter declines to take for any reason, or that Ross requests but is not
permitted to take because of its failure to satisfy any of the conditions
specified in the Construction Management Agreement; or
(3) used to make or maintain Funding Advances upon the acceleration of the
end of any Base Rent Period pursuant subparagraph of the Lease.
Breakage Costs will include, for example, losses attributable to any decline
in LIBOR as of the effective date of any application described in the
clause (1) preceding, as compared to LIBOR used to determine the Effective Rate
then in effect. Each determination by BNPPLC's Parent or the applicable
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Participant of Breakage Costs shall, in the absence of clear and demonstrable
error, be conclusive and binding upon Ross.
"Break Even Price" shall have the meaning assigned to it in
subparagraph 1(B)(1) of the Purchase Agreement.
"Business Day" means any day that is (1) not a Saturday, Sunday or day on
which commercial banks are generally closed or required to be closed in New York
City, New York or San Francisco, California, and (2) a day on which dealings in
deposits of dollars are transacted in the London interbank market; provided that
if such dealings are suspended indefinitely for any reason, "Business Day" shall
mean any day described in clause (1).
"Capital Adequacy Charges" means any additional amounts BNPPLC's Parent or
any other Participant requests BNPPLC to pay as compensation for an increase in
required capital as provided in subparagraph of the Lease.
"Capital Lease" means any lease which has been or should be capitalized on
the books of the lessee in accordance with GAAP or for federal income tax
purposes.
"Carrying Costs" means the charges added to and made a part of the
Outstanding Construction Allowance (and thus also added to and made a part of
the Funded Construction Allowance) from time to time on and before the Base Rent
Commencement Date pursuant to and as more particularly described in
subparagraph of the Lease.
"Closing Certificate" means the Closing Certificate and Agreement dated as
of the Effective Date between Ross and BNPPLC, as such Closing Certificate and
Agreement may be extended, supplemented, amended, restated or otherwise modified
from time to time in accordance with its terms.
"CMA Suspension Event" shall have the meaning assigned to it in
subparagraph 4(A) of the Construction Management Agreement.
"CMA Suspension Notice" shall have the meaning assigned to it in
subparagraph 4(B)(1) of the Construction Management Agreement.
"CMA Suspension Period" shall have the meaning assigned to it in
subparagraph 4(C) of the Construction Management Agreement.
"CMA Termination Event" shall have the meaning assigned to it in
subparagraph 4(B)(2) of the Construction Management Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment Fees" shall have the meaning assigned to it in subparagraph of
the Lease.
"Common Definitions and Provisions Agreement" means this Agreement, which is
incorporated by reference into each of the other Operative Documents.
"Completion Notice" means (1) a notice required by subparagraph 1(B) of the
Construction Management Agreement from Ross to BNPPLC, advising BNPPLC when
construction of the Construction Project is substantially complete, or (2) a
notice permitted by subparagraph of the Lease from BNPPLC to Ross, advising Ross
after any Landlord's Election to Complete Construction when construction of the
Construction Project is substantially complete or that BNPPLC no longer intends
to continue such construction.
"Construction Advances" means (1) actual advances of funds made by or on
behalf of BNPPLC to or on behalf of Ross pursuant to Paragraph 2 of the
Construction Management Agreement, and (2) amounts considered as Construction
Advances pursuant to subparagraph of the Lease.
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"Construction Advance Request" shall have the meaning assigned to it in
subparagraph 2(C)(1) of the Construction Management Agreement.
"Construction Allowance" means the allowance, consisting of Construction
Advances and Carrying Costs, which is to be provided for the Construction
Project as more particularly described in the Construction Management Agreement
and Paragraph of the Lease.
"Construction Management Agreement" means the Construction Management
Agreement dated as of the Effective Date between BNPPLC and Ross, as such
Management Agreement may be extended, supplemented, amended, restated or
otherwise modified from time to time in accordance with its terms.
"Construction Period" means each successive period of approximately one
month, with the first Construction Period beginning on and including the
Effective Date and ending on but not including the first Advance Date. Each
successive Construction Period after the first Construction Period shall begin
on and include the day on which the preceding Construction Period ends and shall
end on but not include the next following Advance Date, until the last
Construction Period, which shall end on but not include the earlier of the Base
Rent Commencement Date or any Designated Sale Date upon which Ross or any
Applicable Purchaser shall purchase BNPPLC's interest in the Property pursuant
to the Purchase Agreement.
"Construction-Period Indemnity Payments" shall have the meaning assigned to
it in subparagraph of the Lease.
"Construction Project" means the new buildings or other substantial
Improvements to be constructed, or the alteration of existing Improvements, as
described generally in Exhibit B attached to the Construction Management
Agreement.
"Debt" of any Person means (without duplication of any item):
(a) indebtedness of such Person for borrowed money; (b) indebtedness of such
Person for the deferred purchase price of property or services (except trade
payables and accrued expenses constituting current liabilities in the ordinary
course of business); (c) the face amount of any standby letters of credit issued
for the account of such Person; (d) obligations of such Person arising under
acceptance facilities; (e) guaranties, endorsements (other than for collection
in the ordinary course of business) and other contingent obligations of such
Person to purchase, to provide funds for payment, to provide funds to invest in
any Person, or otherwise to assure a creditor against loss; (f) obligations of
others secured by any Lien on property of such Person; (g) obligations of such
Person as lessee under Capital Leases; and (h) the obligations of such Person,
contingent or otherwise, under any "synthetic" or other lease of property or
related documents (including a separate purchase agreement) which obligate such
Person or any of its Affiliates (whether by purchasing or causing another Person
to purchase any interest in the leased property or otherwise) to guarantee a
minimum residual value of the leased property to the lessor. For purposes of
this definition, the amount of the obligations described in clause (h) of the
preceding sentence with respect to any lease classified according to GAAP as an
"operating lease," shall equal the sum of (1) the present value of rentals and
other minimum lease payments required in connection with such lease [calculated
in accordance with SFAS 13 and other GAAP relevant to the determination of the
whether such lease must be accounted for as an operating lease or capital
lease], plus (2) the fair value of the property covered by the lease; provided,
however, that such amount shall not exceed the price, as of the date a
determination of Debt is required hereunder, for which the lessee can purchase
the leased property pursuant to any valid ongoing purchase option if, upon such
a purchase, the lessee shall be excused from paying rentals or other minimum
lease payments that would otherwise accrue after the purchase.
"Default" means any event which, with the passage of time or the giving of
notice or both, would (if not cured within any applicable cure period)
constitute an Event of Default.
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"Default Rate" means, for any period prior to the Designated Sale Date, a
floating per annum rate equal to two percent (2%) above the Prime Rate, and for
any period commencing on or after the Designated Sale Date, Default Rate shall
mean a floating per annum rate equal to five percent (5%) above the Prime Rate.
However, in no event will the "Default Rate" at any time exceed the maximum
interest rate permitted by law.
"Defaulting Participant" shall have the meaning assigned to it in Section 1
of the Participation Agreement.
"Defective Work" shall have the meaning assigned to it in
subparagraph 1(A)(2)(f) of the Construction Management Agreement.
"Designated Sale Date" means the earlier of:
(1) the first Business Day of May, 2006; or
(2) any Business Day designated as the "Designated Sale Date" under (and as
defined in) this Common Definitions and Provisions Agreement in an irrevocable,
unconditional notice given by Ross to BNPPLC before Ross has made any Issue
97-10 Election; provided, that if the Business Day so designated by Ross is not
at least thirty days after the date of such notice, the notice will be of no
effect for purposes of this definition; and, provided further, to be effective
for purposes of this definition, the notice must include an express,
unconditional, unequivocal and irrevocable (A) waiver by Ross of any remaining
right Ross may have under any of the Operative Documents to make any Issue 97-10
Election, and (B) acknowledgment and agreement by Ross that, because of Ross's
election to accelerate the Designated Sale Date, the Maximum Remarketing
Obligation will equal the Break Even Price under the Purchase Agreement; or
(3) any Business Day designated as such in a notice given by BNPPLC to Ross
when any Event of Default has occurred and is continuing; provided, that if the
Business Day so designated by BNPPLC is not at least thirty days after the date
of such notice, the notice will be of no effect for purposes of this definition;
(4) any Business Day designated as such in a notice given by BNPPLC to Ross
after the effective date of any termination of the Construction Management
Agreement by BNPPLC as provided in subparagraph 4(E) thereof; or
(5) any Business Day designated as such in a notice given by BNPPLC to Ross
after Ross has given a notice exercising or attempting to exercise any Issue
97-10 Election.
"Development Documents" means the contracts, ordinances and other documents
described in Exhibit C attached to the Closing Certificate, as the same may be
modified from time to time in accordance with the Lease and the Closing
Certificate, and any applications, permits or certificates concerning or
affecting the use or development of the Property that may be submitted, issued
or executed from time to time as contemplated in such contracts, ordinances and
other documents or that BNPPLC may hereafter execute, approve or consent to at
the request of Ross.
"Effective Date" means May 10, 2001.
"Effective Rate" means, with respect to any Base Rent Period, the per annum
rate determined as follows:
(1) For any such Base Rent Period that begins before the Fixed Rate Lock
Date applicable to any Fixed Rate Lock, the Effective Rate shall equal LIBOR for
such Base Rent Period.
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(2) For any such Base Rent Period that begins on or after the Fixed Rate
Lock Date applicable to any Fixed Rate Lock and that ends before or on the date
the Fixed Rate Lock is terminated as provided in subparagraph of the Lease, the
Effective Rate shall equal the Fixed Rate for such Base Rent Period.
(3) For any such Base Rent Period that ends on or after the date a Fixed
Rate Lock is terminated as provided in subparagraph of the Lease, the Effective
Rate shall equal LIBOR for such Base Rent Period.
"Environmental Laws" means any and all existing and future Applicable Laws
pertaining to safety, health or the environment, or to Hazardous Substances or
Hazardous Substance Activities, including the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 (as amended, "CERCLA"), and the
Resource Conservation and Recovery Act of 1976, as amended by the Used Oil
Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980, and the
Hazardous and Solid Waste Amendments of 1984 (as amended, "RCRA").
"Environmental Cutoff Date" means the later of the dates upon which (i) the
Lease terminates, or (ii) Ross surrenders possession and control of the Property
and ceases to have interest in the Land or Improvements or rights with respect
thereto under any of the Operative Documents.
"Environmental Losses" means Losses suffered or incurred by BNPPLC or any
other Interested Party, directly or indirectly, relating to or arising out of,
based on or as a result of any of the following: (i) any Hazardous Substance
Activity on or prior to the Environmental Cutoff Date; (ii) any violation on or
prior to the Environmental Cutoff Date of any applicable Environmental Laws
relating to the Property or to the ownership, use, occupancy or operation
thereof; (iii) any investigation, inquiry, order, hearing, action, or other
proceeding by or before any governmental or quasi-governmental agency or
authority in connection with any Hazardous Substance Activity that occurs or is
alleged to have occurred on or prior to the Environmental Cutoff Date; or
(iv) any claim, demand, cause of action or investigation, or any action or other
proceeding, whether meritorious or not, brought or asserted against any
Interested Party which directly or indirectly relates to, arises from, is based
on, or results from any of the matters described in clauses (i), (ii), or (iii)
of this definition or any allegation of any such matters. For purposes of
determining whether Losses constitute "Environmental Losses," as the term is
used in the Lease, any actual or alleged Hazardous Substance Activity or
violation of Environmental Laws relating to the Property will be presumed to
have occurred prior to the Environmental Cutoff Date unless Ross establishes by
clear and convincing evidence to the contrary that the relevant Hazardous
Substance Activity or violation of Environmental Laws did not occur or commence
prior to the Environmental Cutoff Date.
"Environmental Reports" means collectively the following reports (whether
one or more), which were provided by Ross to BNPPLC prior to the Effective Date:
Phase I Environmental Site Assessment for Project Falcon 200 Acre Site, Fort
Mill, South Carolina, dated August 11, 2000, prepared by Trigon Engineering
Consultants, Inc.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Affiliate" means any Person who for purposes of Title IV of ERISA is
a member of Ross's controlled group, or under common control with Ross, within
the meaning of Section 414 of the Internal Revenue Code, and the regulations
promulgated and rulings issued thereunder.
"Escrowed Proceeds" means, subject to the exclusions specified in the next
sentence, any money that is received by BNPPLC from time to time during the Term
(and any interest earned thereon) from any party (1) under any property
insurance policy as a result of damage to the Property, (2) as compensation for
any restriction imposed by any governmental authority upon the use or
development
9
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of the Property or for the condemnation of the Property or any portion thereof,
(3) because of any judgment, decree or award for physical damage to the Property
or (4) as compensation under any title insurance policy or otherwise as a result
of any title defect or claimed title defect with respect to the Property;
provided, however, in determining the amount of "Escrowed Proceeds" there shall
be deducted all expenses and costs of every type, kind and nature (including
Attorneys' Fees) incurred by BNPPLC to collect such proceeds. Notwithstanding
the foregoing, "Escrowed Proceeds" will not include (A) any payment to BNPPLC by
a Participant or an Affiliate of BNPPLC that is made to compensate BNPPLC for
the Participant's or Affiliate's share of any Losses BNPPLC may incur as a
result of any of the events described in the preceding clauses (1) through (4),
(B) any money or proceeds that have been applied as a Qualified Prepayment or to
pay any Breakage Costs or other costs incurred in connection with a Qualified
Prepayment, (C) any money or proceeds that, after no less than ten days notice
to Ross, BNPPLC returns or pays to a third party because of BNPPLC's good faith
belief that such return or payment is required by law, (D) any money or proceeds
paid by BNPPLC to Ross or offset against any amount owed by Ross, or (E) any
money or proceeds used by BNPPLC in accordance with the Lease for repairs or the
restoration of the Property or to obtain development rights or the release of
restrictions that will inure to the benefit of future owners or occupants of the
Property. Until Escrowed Proceeds are paid to Ross pursuant to Paragraph of the
Lease, transferred to a purchaser under the Purchase Agreement as therein
provided or applied as a Qualified Prepayment or as otherwise described in the
preceding sentence, BNPPLC shall keep the same deposited in one or more interest
bearing accounts, and all interest earned on such account shall be added to and
made a part of Escrowed Proceeds.
"Established Misconduct" of a Person means, and is limited to: (1) if the
Person is bound by the Operative Documents or the Participation Agreement, a
breach by such Person of the express provisions of the Operative Documents or
the Participation Agreement, as applicable, that continues beyond any period for
cure provided therein, and (2) conduct of such Person or its Affiliates that has
been determined to constitute wilful misconduct or Active Negligence in or as a
necessary element of a final judgment rendered against such Person by a court
with jurisdiction to make such determination. Established Misconduct of one
Interested Party shall not be attributed to a second Interested Party unless the
second Interested Party is an Affiliate of the first. Negligence which does not
constitute Active Negligence shall not in any event constitute Established
Misconduct. For purposes of this definition, "conduct of a Person" will include
(1) the conduct of an employee of that Person, but only to the extent that the
employee is acting within the scope of his employment by that Person, as
determined in or as a necessary element of a final judgment rendered against
such Person by a court with jurisdiction to make such determination, and (2) the
conduct of an agent of that Person (such as an independent environmental
consultant engaged by that Person), but only to the extent that the agent is, as
determined in or as a necessary element of a final judgment rendered against
such Person by a court with jurisdiction to make such determination, (x) acting
within the scope of the authority granted to him by such Person, (y) not acting
with the consent or approval of or under the direction of Ross or Ross's
Affiliates, employees or agents, and (z) not acting in good faith to mitigate
Losses that such Person may suffer because of a breach or repudiation by Ross of
the Lease or the Purchase Documents.
"Eurocurrency Liabilities" shall have the meaning assigned to it in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Rate Reserve Percentage" means, for purposes of determining the
Effective Rate for any Construction Period or Base Rent Period, the reserve
percentage applicable two Business Days before the first day of such period
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal reserve
requirement) for BNPPLC's Parent with respect to liabilities or deposits
consisting of or including Eurocurrency
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Liabilities (or with respect to any other category or liabilities by reference
to which LIBOR is determined) having a term comparable to such period.
"Event of Default" shall have the meaning assigned to it in subparagraph of
the Lease.
"Existing Credit Agreement" means the Credit Agreement dated as of
September 15, 1997, among Ross Stores, Inc., as Borrower, Bank of America
National Trust and Savings Association, as Agent, and other lending institutions
listed therein. Requirements or Defaults established in the Lease or other
Operative Documents by reference to the Existing Credit Agreement shall be
construed as if:
•the Existing Credit Agreement continued indefinitely (and obligations of Ross
remained outstanding thereunder) notwithstanding any expiration or termination
thereof;
•no modification of, or waiver under, the Existing Credit Agreement were
executed or granted after the Effective Date unless such modification or waiver
is approved by BNPPLC;
•the Existing Credit Agreement required Ross to deliver to BNPPLC copies of the
notices and certificates required by Section 6.04 thereof, contemporaneously
with the delivery of the original notices and certificates to any Agent or
Lender thereunder;
•any merger or other transaction that would have an adverse regulatory or other
impact upon BNPPLC or any Participant would be prohibited by the Existing Credit
Agreement to the same extent that the Existing Credit Agreement would prohibit
any such merger or other transaction because of an adverse regulatory or other
impact upon any Agent or Lender thereunder; and
•the Existing Credit Agreement required BNPPLC's approval or consent to anything
for which the Existing Credit Agreement requires the consent or approval of any
Agent or Lender thereunder, including any document, instrument or provision that
the Existing Credit Agreement describes as being "in form and substance
satisfactory to" (or by words of like effect) any Agent or Lender thereunder.
"Excluded Taxes" means (1) all federal, state and local income taxes upon
Base Rent, Administrative Agency Fees, Upfront Syndication Fees, any interest
paid to BNPPLC or any Participant pursuant to subparagraph of the Lease, and any
additional compensation claimed by BNPPLC pursuant to subparagraph of the Lease;
(2) any transfer or change of ownership taxes assessed because of BNPPLC's
transfer or conveyance to any third party of any rights or interest in the
Lease, the Purchase Agreement or the Property (other than any such taxes
assessed because of any Permitted Transfer under clauses (1), (3), (4) or (7) of
the definition of Permitted Transfer in this Agreement), (3) all federal, state
and local income taxes upon any amounts paid as reimbursement for or to satisfy
Losses incurred by BNPPLC or any Participant to the extent such taxes are offset
by a corresponding reduction of BNPPLC's or the applicable Participant's income
taxes because of BNPPLC's or such Participant's deduction of the reimbursed
Losses from its taxable income or because of any tax credits attributable
thereto. If, however, a change in Applicable Laws after the Effective Date
results in an increase in such taxes for any reason other than an increase in
the applicable tax rates (e.g., a disallowance of deductions that would
otherwise be available against payments described in clause (A) of this
definition), then for purposes of the Operative Documents, the term "Excluded
Taxes" will not include the increase in such taxes attributable to the change.
"Fed Funds Rate" means, for any period, a fluctuating interest rate
(expressed as a per annum rate and rounded upwards, if necessary, to the next
1/16 of 1%) equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rates are not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by BNPPLC's Parent from three Federal funds brokers of
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recognized standing selected by BNPPLC's Parent. All determinations of the Fed
Funds Rate by BNPPLC's Parent shall, in the absence of clear and demonstrable
error, be binding and conclusive upon Ross.
"First Interest Rate Swap" shall have the meaning assigned to it in
subparagraph of the Lease.
"First Year Commitment" means $75,000,000.
"Fixed Rate" means, with respect to any Base Rent Period, the per annum rate
determined as follows:
(1) if BNPPLC entered into the Second Interest Rate Swap as described in
subparagraph of the Lease, and if such Second Interest Rate Swap remains in
effect, then Fixed Rate will mean:
(a) the sum of:
(i) (x) the Fixed Rate (First Swap) established as described in
subparagraph of the Lease multiplied by (y) the notional amount of the First
Interest Rate Swap as of the first day of such Base Rent Period; plus
(ii) (x) the Fixed Rate (Second Swap) established as described in
subparagraph of the Lease multiplied by (y) the notional amount of the Second
Interest Rate Swap as of the first day of such Base Rent Period;
(b) divided by the sum of the notional amounts of the First Interest Rate
Swap and the Second Interest Rate Swap, as of the first day of such Base Rent
Period.
For example, assume that the Fixed Rate (First Swap) is 5.5%; the notional
amount of the First Interest Rate Swap as of the first day of the applicable
Base Rent Period is $75,000,000; the Fixed Rate (Second Swap) is 6%; and the
notional amount of the Second Interest Rate Swap as of the first day of the
applicable Base Rent Period is $10,000,000. In this example, the Effective Rate
for such Base Rent Period would be equal to
[(5.5% × $75,000,000) + (6% × $10,000,000)]/$85,000,000, or 5.5441176%.
(2) if BNPPLC did not enter into a Second Interest Rate Swap as described in
subparagraph of the Lease, or if BNPPLC did enter into a Second Interest Rate
Swap, but it no longer remains in effect for any reason, then Fixed Rate will
mean the Fixed Rate (First Swap) established as described in subparagraph of the
Lease.
"Fixed Rate (First Swap)" means the fixed rate of interest established by
BNPPLC pursuant to a Fixed Rate Lock Notice delivered by Ross as described in
subparagraph of the Lease. The determination by BNPPLC of the Fixed Rate (First
Swap) shall, in the absence of clear and demonstrable error, be conclusive and
binding upon Ross.
"Fixed Rate (Second Swap)" means the fixed rate of interest established by
BNPPLC pursuant to subparagraph of the Lease. The determination by BNPPLC of the
Fixed Rate (Second Swap) shall, in the absence of clear and demonstrable error,
be conclusive and binding upon Ross.
"Fixed Rate Lock" shall have the meaning assigned to it in subparagraph of
the Lease.
"Fixed Rate Lock Date" shall have the meaning assigned to it in subparagraph
of the Lease.
"Fixed Rate Lock Termination" means any termination in whole or in part of
any Interest Rate Swap as described in the first and second sentences of
subparagraph of the Lease.
"Fixed Rate Lock Termination Date" means the date upon which a Fixed Rate
Lock Termination is effective. In the case of a Fixed Rate Lock Termination that
results from BNPPLC's receipt of a Qualified Prepayment, the date such Qualified
Prepayment is applied to reduce Stipulated Loss Value shall constitute the Fixed
Rate Lock Termination Date. In the case of any Fixed Rate Lock
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Termination resulting from an acceleration of the Designated Sale Date as
provided in clauses (2) or (3) the definition thereof in the this Common
Definitions and Provisions Agreement, the Fixed Rate Lock Termination Date shall
constitute the Designated Sale Date. In the case of a Fixed Rate Lock
Termination that results from an excess of the Stipulated Loss Value on the
Fixed Rate Lock Date over the notional amount of the First Interest Rate Swap on
the Fixed Rate Lock Date, the date that such termination becomes effective shall
constitute the Fixed Rate Lock Termination Date.
"Fixed Rate Lock Notice" shall have the meaning assigned to it in
subparagraph of the Lease.
"Fixed Rate Loss" means an amount reasonably determined in good faith by the
Floating Rate Payor to be its total losses and costs in connection with any
Fixed Rate Lock Termination. Fixed Rate Loss will include any loss of bargain,
cost of funding or, at the election of the Floating Rate Payor but without
duplication, loss or cost incurred as a result of its terminating, liquidating,
obtaining or reestablishing any hedge or related trading position. The Floating
Rate Payor will be expected to determine the Fixed Rate Loss as of the date of
the relevant Fixed Rate Lock Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable.
The Floating Rate Payor may (but need not) determine its Fixed Rate Loss by
reference to quotations of relevant rates or prices from one or more leading
dealers in the relevant markets.
"Fixed Rate Settlement Amount" means, with respect to any Fixed Rate Lock
Termination:
(a) the Market Quotation for such Fixed Rate Lock Termination, if a Market
Quotation can be determined and if (in the reasonable belief of the Floating
Rate Payor as the party making the determination) determining a Market Quotation
would produce a commercially reasonable result; or
(b) the Fixed Rate Loss, if any, for such Fixed Rate Lock Termination if a
Market Quotation cannot be determined or would not (in the reasonable belief of
the Floating Rate Payor as the party making the determination) produce a
commercially reasonable result.
"Floating Rate Payor" means BNP Paribas or any successor or assign of BNP
Paribas under an Interest Rate Swap.
"FOCB Notice" shall have the meaning assigned to it in subparagraph 4(B)(1)
of the Construction Management Agreement.
"Funded Construction Allowance" means on any day the Outstanding
Construction Allowance on that day, including all Construction Advances and
Carrying Costs added to the Outstanding Construction Allowance on or prior to
that day, plus the amount of any Qualified Prepayments deducted on or prior to
that day in the calculation of such Outstanding Construction Allowance, less any
Voluntary Ross Construction Contributions added on or prior to that day in the
calculation of such Qualified Prepayments.
"Funding Advances" means (1) the Initial Funding Advance and (2) all future
advances made by BNPPLC's Parent or any other Participant to or on behalf of
BNPPLC to allow BNPPLC to provide the Construction Allowance.
"Future Work" shall have the meaning assigned to it in
subparagraph 2(C)(2)(b) of the Construction Management Agreement.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, applied on a basis consistent with
those used in the preparation of the financial statements referred to in
subparagraph of the Lease (except for changes with which Ross's independent
public accountants concur).
"Hazardous Substance" means (i) any chemical, compound, material, mixture or
substance that is now or hereafter defined or listed in, regulated under, or
otherwise classified pursuant to, any
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Environmental Laws as a "hazardous substance," "hazardous material," "hazardous
waste," "extremely hazardous waste or substance," "infectious waste," "toxic
substance," "toxic pollutant," or any other formulation intended to define, list
or classify substances by reason of deleterious properties, including
ignitability, corrosiveness, reactivity, carcinogenicity, toxicity or
reproductive toxicity; (ii) petroleum, any fraction of petroleum, natural gas,
natural gas liquids, liquified natural gas, synthetic gas usable for fuel (or
mixtures of natural gas and such synthetic gas), and ash produced by a resource
recovery facility utilizing a municipal solid waste stream, and drilling fluids,
produced waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources; (iii) asbestos and
any asbestos containing material; and (v) any other material that, because of
its quantity, concentration or physical or chemical characteristics, poses a
significant present or potential hazard to human health or safety or to the
environment if released into the workplace or the environment.
"Hazardous Substance Activity" means any actual, proposed or threatened use,
storage, holding, release (including any spilling, leaking, leaching, pumping,
pouring, emitting, emptying, dumping, disposing into the environment, and the
continuing migration into or through soil, surface water, groundwater or any
body of water), discharge, deposit, placement, generation, processing,
construction, treatment, abatement, removal, disposal, disposition, handling or
transportation of any Hazardous Substance from, under, in, into or on the
Property, including the movement or migration of any Hazardous Substance from
surrounding property, surface water, groundwater or any body of water under, in,
into or onto the Property and any resulting residual Hazardous Substance
contamination in, on or under the Property. "Hazardous Substance Activity" also
means any existence of Hazardous Substances on the Property that would cause the
Property or the owner or operator thereof to be in violation of, or that would
subject the Property to any remedial obligations under, any Environmental Laws,
including CERCLA and RCRA, assuming disclosure to the applicable governmental
authorities of all relevant facts, conditions and circumstances pertaining to
the Property.
"Impositions" means all sales, excise, ad valorem, gross receipts, business,
transfer, stamp, occupancy, rental and other taxes, levies, fees, charges,
surcharges, assessments or penalties which arise out of or are attributable to
the Lease or which are imposed upon BNPPLC or the Property because of the
ownership, leasing, occupancy, sale or operation of the Property, or any part
thereof or interest therein, or relating to or required to be paid by any of the
Permitted Encumbrances or the Development Documents, excluding only Excluded
Taxes. "Impositions" shall include real estate taxes imposed because of a change
of use or ownership of the Property on or prior to the date of any sale by
BNPPLC pursuant to the Purchase Agreement.
"Improvements" means any and all (1) buildings and other real property
improvements now or hereafter erected on the Land, and (2) equipment (e.g., HVAC
systems, elevators and plumbing fixtures) attached to the buildings or other
real property improvements, the removal of which would cause structural or other
material damage to the buildings or other real property improvements or would
materially and adversely affect the value or use of the buildings or other real
property improvements.
"Lease" means the Lease Agreement dated as of the Effective Date between
BNPPLC, as landlord, and Ross, as tenant, pursuant to which Ross has agreed to
lease BNPPLC's interest in the Property, as such Lease Agreement may be
extended, supplemented, amended, restated or otherwise modified from time to
time in accordance with its terms.
"Initial Funding Advance" means the advance made by BNPPLC's Parent
(directly or through one or more of its Affiliates) to or on behalf of BNPPLC on
or prior to the Effective Date to cover the cost of BNPPLC's acquisition of the
Property and certain Transaction Expenses and other amounts described in this
definition. The amount of the Initial Funding Advance may be confirmed by a
separate closing certificate executed by Ross as of the Effective Date. To the
extent that BNPPLC does
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not itself use the entire Initial Funding Advance to pay Transaction Expenses
incurred by BNPPLC, the remainder thereof will be advanced to Ross, with the
understanding that Ross shall use any such amount advanced for one or more of
the following purposes: (1) the payment or reimbursement of Transaction Expenses
incurred by Ross; (2) the payment or reimbursement of expenses incurred by Ross
in connection with the Construction Project, including the planning, design,
engineering, construction and permitting of thereof; (3) the maintenance of the
Property; or (4) the payment of Rents next due.
"Interested Party" means each of (1) BNPPLC, its Affiliates and its
successors and assigns as to the Property or any part thereof or any interest
therein, (2) BNPPLC's Parent, and (3) any other Participants and their permitted
successors and assigns under the Participation Agreement; provided, however,
none of the following shall constitute an Interested Party: (a) any Person to
whom BNPPLC may transfer an interest in the Property by a conveyance that is not
a Permitted Transfer and others that cannot lawfully claim an interest in the
Property except through or under such a transfer by BNPPLC, (b) Ross or any
Person that cannot lawfully claim an interest in the Property except through or
under a conveyance from Ross, or (c) any Applicable Purchaser under the Purchase
Agreement and any Person that cannot lawfully claim an interest in the Property
except through or under a conveyance from such Applicable Purchaser.
"Interest Rate Swap" means an interest rate exchange transaction, entered
into between BNPPLC, as the fixed rate payor, and BNP Paribas, as the swap
counterparty and floating rate payor, under a 1992 ISDA Master Agreement,
published by the International Swaps and Derivatives Association, Inc., as
supplemented by the definitions and such schedules, annexes, exhibits and
supplements as are agreed upon by the parties thereto, pursuant to which BNP
Paribas agrees to pay monthly to BNPPLC a floating rate of interest equal to
LIBOR and BNPPLC agrees to pay monthly to BNP Paribas a fixed rate of interest
for a term that commences on the Fixed Rate Lock Date and ends on the last day
of the scheduled Term of the Lease.
"Issue 97-1 Non-performance-related Subjective Event of Default" means an
Event of Default that is unrelated to the Property or the use or maintenance
thereof and that results solely from (A) a breach by Ross of a provision in any
Operative Document, the occurrence of which breach cannot be objectively
determined, or (B) any other event described in subparagraph of the Lease, the
occurrence of which event cannot be objectively determined. For example, an
Event of Default under subparagraph of the Lease resulting solely from a failure
of Ross to "generally" pay its debts as such debts become due (in contrast to a
failure of Ross to pay Rent to BNPPLC as it becomes due under the Lease) would
constitute an Issue 97-1 Non-performance-related Subjective Event of Default.
Likewise, an Event of Default resulting solely from a breach by Ross of
Paragraph L of Part IV of Schedule 1 attached to the Lease would constitute an
Issue 97-1 Non-performance-related Subjective Event of Default. In no event,
however, will the term "Issue 97-1 Non-performance-related Subjective Event of
Default" include an Event of Default resulting from (1) a failure of Ross to
make any payment required to BNPPLC under the Operative Documents, (2) a breach
by Ross of the provisions set forth in Part II of Schedule 1 attached to the
Lease (which set forth financial covenants), (3) any failure of Ross to use,
maintain and insure the Property in accordance with the requirements of the
Lease, or (4) any failure of Ross to pay the full amount of any Supplemental
Payment on the Designated Sale Date as required by the Purchase Agreement.
Except as provided in subparagraph 1(A)(2)(c)(i) of the Purchase Agreement, the
characterization of any Event of Default as an Issue 97-1
Non-performance-related Subjective Event of Default will not affect the rights
or remedies available to BNPPLC because of the Event of Default.
"Issue 97-10 Election" means any of the following elections by Ross: (1) an
election to terminate the Construction Management Agreement as provided in
subparagraph 4(D) thereof; and (2) an election to terminate Ross's Initial
Remarketing Rights and Obligations as provided in subparagraph 4(B) of the
Purchase Agreement.
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"Issue 97-10 Prepayment" means a payment to BNPPLC, required by subparagraph
of the Lease or by subparagraphs 4(B) or 4(C) of the Purchase Agreement, equal
in each case to (A) the Maximum Permitted Prepayment, computed as of the date on
which the payment becomes due, less (B) the accreted value of any prior payments
actually received by BNPPLC from Ross constituting Issue 97-10 Prepayments or
Voluntary Ross Construction Contributions. For purposes of the preceding
sentence, "accreted value" of a payment shall mean the amount of the payment
plus an amount equal to the interest that would have accrued on the payment if
it bore interest at the Effective Rate.
"Land" means the land covered by the land described in Exhibit A attached to
the Closing Certificate, the Lease and the Purchase Agreement.
"Landlord's Election to Continue Construction" shall have the meaning
assigned to it in subparagraph of the Lease.
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"LIBOR" means, for purposes of determining the Effective Rate for each
Construction Period or Base Rent Period, the rate determined by BNPPLC's Parent
to be the average rate of interest per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) of the rates at which deposits of dollars are offered or
available to BNPPLC's Parent in the London interbank market at approximately
11:00 a.m. (London time) on the second Business Day preceding the first day of
such period. BNPPLC shall instruct BNPPLC's Parent to consider deposits, for
purposes of making the determination described in the preceding sentence, that
are offered: (i) for delivery on the first day of such Construction Period or
Base Rent Period, as the case may be, (ii) in an amount equal or comparable to
the total (projected on the applicable date of determination by BNPPLC's Parent)
Stipulated Loss Value on the first day of such period, and (iii) for a time
equal or comparable to the length of such period. If BNPPLC's Parent so chooses,
it may determine LIBOR for any period by reference to the rate reported by the
British Banker's Association on Page 3750 of the Telerate Service at
approximately 11:00 a.m. (London time) on the second Business Day preceding the
first day of such period. If for any reason BNPPLC's Parent determines that it
is impossible or unreasonably difficult to determine LIBOR with respect to a
given Construction Period or Base Rent Period in accordance with the foregoing,
or if BNPPLC's Parent shall determine that it is unlawful (or any central bank
or governmental authority shall assert that it is unlawful) for BNPPLC, BNPPLC's
Parent or any Participant to provide or maintain Funding Advances during any
Construction Period or Base Rent Period for which Carrying Costs or Base Rent is
computed by reference to LIBOR, then "LIBOR" for that period shall equal the
Base Rate for that period. All determinations of LIBOR by BNPPLC's Parent shall,
in the absence of clear and demonstrable error, be binding and conclusive upon
Ross.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any lease in the nature
thereof, any agreement to sell receivables with recourse, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction). In addition, for purposes of subparagraph A.(8) of Part IV of
Schedule 1 attached to the Lease, "Lien" includes any Liens under ERISA relating
to Unfunded Benefit Liabilities of which Ross is required to notify BNPPLC under
subparagraph of the Lease (irrespective of whether Ross actually notifies BNPPLC
as required thereunder).
"Liens Removable by BNPPLC" means, and is limited to, Liens encumbering the
Property that are asserted (1) other than as contemplated in the Operative
Documents, by BNPPLC itself, (2) by third parties lawfully claiming through or
under BNPPLC (which for purposes of the Lease shall include any judgment liens
established against the Property because of a judgment rendered against BNPPLC
and shall also include any liens established against the Property to secure past
due Excluded Taxes), or (3) by third parties lawfully claiming under a deed or
other instrument duly executed by BNPPLC; provided, however, Liens Removable by
BNPPLC shall not include (A) any Permitted Encumbrances or Development Documents
(regardless of whether claimed through or under BNPPLC), (B) the Operative
Documents or any other document executed by BNPPLC with the knowledge of (and
without objection by) Ross's counsel contemporaneously with the execution and
delivery of the Operative Documents, (C) Liens which are neither lawfully
claimed through or under BNPPLC (as described above) nor claimed under a deed or
other instrument duly executed by BNPPLC, (D) Liens claimed by Ross or claimed
through or under a conveyance made by Ross, (E) Liens arising because of
BNPPLC's compliance with Applicable Law, the Operative Documents, Permitted
Encumbrances, the Development Documents or any written request made by Ross,
(F) Liens securing the payment of property taxes or other amounts assessed
against the Property by any governmental authority, other than to secure the
payment of past due Excluded Taxes or to secure damages caused by (and
attributed by any applicable principles of comparative fault to) BNPPLC's own
Established Misconduct, (G) Liens resulting from or arising in connection with
any breach by Ross of the Operative Documents; or (H) Liens resulting from or
arising in connection with any Permitted Transfer that occurs more than thirty
days after any Designated Sale Date upon which, for any reason, Ross or an
Affiliate of Ross or
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any Applicable Purchaser shall not purchase BNPPLC's interest in the Property
pursuant to the Purchase Agreement for a cash price to BNPPLC (when taken
together with any Supplemental Payment made by Ross pursuant to
Paragraph 1(A)(2) of the Purchase Agreement, in the case of a purchase by an
Applicable Purchaser) equal to the Break Even Price.
"Losses" means the following: any and all losses, liabilities, damages
(whether actual, consequential, punitive or otherwise denominated), demands,
claims, administrative or legal proceedings, actions, judgments, causes of
action, assessments, fines, penalties, costs and expenses (including Attorneys'
Fees and the fees of outside accountants and environmental consultants), of any
and every kind or character, foreseeable and unforeseeable, liquidated and
contingent, proximate and remote.
"Market Quotation" means, with respect to any Fixed Rate Lock Termination,
an amount determined by the Floating Rate Payor on the basis of quotations from
Reference Market-makers. Each quotation will be for an amount, if any, that
would be paid by the Floating Rate Payor in consideration of an agreement
between it and the quoting Reference Market-maker to enter into a transaction
(the "Replacement Transaction") that would have the effect of preserving for the
Floating Rate Payor the economic equivalent of any payment or delivery (whether
the underlying obligation was absolute or contingent and assuming the
satisfaction of each applicable condition precedent) that would, but for the
occurrence of the relevant Fixed Rate Lock Termination, have been required under
any one or more Interest Rate Swaps affected by such Fixed Rate Lock
Termination. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market-maker may, in good faith, agree. The
Floating Rate Payor (or its agent) will request each Reference Market-maker to
provide its quotation to the extent reasonably practicable as of the same day
and time (without regard to different time zones) on the effective date of or as
soon as reasonably practicable after the relevant Fixed Rate Lock Termination.
The date and time as of which those quotations are to be obtained will be
selected in good faith by the Floating Rate Payor. If more than three quotations
are provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the quotations having the highest and lowest
values. If exactly three such quotations are provided, the Market Quotation will
be the quotation remaining after disregarding the highest and lowest quotations.
For this purpose, if more than one quotation has the same highest value or
lowest value, then one of such quotations shall be disregarded. If fewer than
three quotations are provided, it will be deemed that the Market Quotation in
respect of such Fixed Rate Lock Termination cannot be determined.
"Material Environmental Communication" means a communication between Ross or
its agents and a regulatory agency or third party, which causes, or potentially
could cause (whether by implementation of or response to said communication), a
material change in the scope, duration, or nature of any Remedial Work.
"Maximum Construction Allowance" means an amount equal to $85,000,000, less
the Initial Funding Advance under and as defined in this Agreement; provided,
however, if on the day prior to the first anniversary of the Effective Date the
First Year Commitment exceeds the Funded Construction Allowance, then the
Maximum Construction Allowance will be reduced automatically and without further
notice by an amount equal to such excess.
"Maximum Permitted Termination Fees" shall have the meaning indicated in
subparagraph 1(A)(2)(b) of the Construction Management Agreement.
"Maximum Permitted Prepayment" as of any date means the amount equal to the
lesser of the following:
(1) eighty-nine and nine-tenths of one percent (89.9%) of the aggregate of
(i) all Project Costs paid or incurred on or prior to such date, plus
(ii) ninety-seven percent (97%) of (a) Carrying Costs added to the Outstanding
Construction Allowance on or prior to such date, and
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(b) Commitment Fees reimbursed pursuant to the Construction Management Agreement
on or prior to such date; or
(2) eighty-nine and nine-tenths of one percent (89.9%) of Stipulated Loss
Value on such date.
"Maximum Remarketing Obligation" shall have the meaning indicated in
subparagraph 1(A)(2)(c) of the Purchase Agreement.
"Minimum Extended Remarketing Price" shall have the meaning assigned to it
in subparagraph 2(B) of the Purchase Agreement.
"Mortgage" means the Mortgage, Security Agreement and Fixture Filing from
BNPPLC to BNP Paribas, in its capacity as agent for the Participants, securing
the obligations of BNPPLC under the Participation Agreement.
"Multiemployer Plan" means a multiemployer plan as defined in Section 3(37)
of ERISA to which contributions have been made by Ross or any ERISA Affiliate
during the preceding six years and which is covered by Title IV of ERISA.
"Notice of Ross's Intent to Terminate" shall have the meaning assigned to it
in subparagraph 4(D) of the Construction Management Agreement.
"Operative Documents" means the Closing Certificate, the Lease, the
Construction Management Agreement, the Purchase Agreement, and this Common
Definitions and Provisions Agreement.
"Outstanding Construction Allowance" shall have the meaning assigned to it
in subparagraph of the Lease.
"Participant" means BNPPLC's Parent and any other Person that, upon becoming
a party to the Participation Agreement by executing a supplement as contemplated
therein, agrees from time to time to participate in all or some of the risks and
rewards to BNPPLC of the Lease and the Purchase Documents. As of the Effective
Date, the only Participant is BNPPLC's Parent, but BNPPLC may agree after the
Effective Date to share in risks and rewards of the Lease and the Purchase
Documents with other Participants. However, no Person other than BNPPLC's Parent
and its Affiliates shall qualify as a Participant for purposes of the Operative
Documents or other agreements concerning the Property to which Ross is a party
unless such Person, either (a) during the continuance of an Event of Default
(without the necessity for Ross's approval) or (b) otherwise with Ross's prior
written approval (which approval will not be unreasonably withheld), became a
party to the Participation Agreement by executing a supplement to that agreement
as contemplated therein.
"Participation Agreement" means the Participation Agreement between BNPPLC
and BNPPLC's Parent dated as of the Effective Date, pursuant to which BNPPLC's
Parent has agreed to participate in the risks and rewards to BNPPLC of the Lease
and the other Operative Documents, as such Participation Agreement may be
extended, supplemented, amended, restated or otherwise modified from time to
time in accordance with its terms. It is understood, however, that because the
Participation Agreement expressly makes Ross a third party beneficiary of the
Participant's obligations thereunder to make advances to BNPPLC in connection
with Construction Advances under the Construction Management Agreement, Ross's
consent will be required to any amendment of the Participation Agreement that
limits or excuses such obligations.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Period" means a Construction Period or a Base Rent Period, as the context
requires.
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"Permitted Encumbrances" means (i) the encumbrances and other matters
affecting the Property that are set forth in Exhibit B attached to the Closing
Certificate, (ii) any easement agreement or other document affecting title to
the Property executed by BNPPLC at the request of or with the consent of Ross,
(iii) any ground lease executed pursuant to the Purchase Agreement, (iv) any
Liens securing the payment of Impositions which are not delinquent or claimed to
be delinquent or which are being contested in accordance with subparagraph of
the Lease, (v) mechanics' and materialmen's liens for amounts not past due or
claimed to be past due or which are being contested in accordance with
subparagraph of the Lease; and (vi) all terms and conditions of the Acquisition
Contract, to the extent such terms and conditions survive the closing under the
Acquisition Contract and affect title to the Property.
"Permitted Hazardous Substance Use" means the use, generation, storage and
offsite disposal of Permitted Hazardous Substances in strict accordance with
applicable Environmental Laws and with due care given the nature of the
Hazardous Substances involved; provided, the scope and nature of such use,
generation, storage and disposal shall not:
(1) exceed that reasonably required for the construction of the Construction
Project in accordance with the Lease and the Construction Management Agreement
or for the operation of the Property for the purposes expressly permitted under
subparagraph of the Lease; or
(2) include any disposal, discharge or other release of Hazardous Substances
from the Property in any manner that might allow such substances to reach
surface water or groundwater, except (i) through a lawful and properly
authorized discharge (A) to a publicly owned treatment works or (B) with
rainwater or storm water runoff in accordance with Applicable Laws and any
permits obtained by Ross that govern such runoff; or (ii) any such disposal,
discharge or other release of Hazardous Substances for which no permits are
required and which are not otherwise regulated under applicable Environmental
Laws.
Further, notwithstanding anything to the contrary herein contained, Permitted
Hazardous Substance Use shall not include any use of the Property in a manner
that requires a RCRA treatment, storage or disposal permit, including a
landfill, incinerator or other waste disposal facility.
"Permitted Hazardous Substances" means Hazardous Substances used and
reasonably required for the construction of the Construction Project or for the
use of the Property by Ross and its permitted subtenants and assigns for the
purposes expressly permitted by subparagraph of the Lease, in either case in
strict compliance with all Environmental Laws and with due care given the nature
of the Hazardous Substances involved. Without limiting the generality of the
foregoing, Permitted Hazardous Substances shall include usual and customary
office, laboratory and janitorial products.
"Permitted Transfer" means any one or more of the following: (1) the
creation or conveyance by BNPPLC of rights and interests in favor of any
Participant pursuant to the Participation Agreement; (2) the creation or
conveyance (except as described in other clauses of this definition) of rights
and interests in favor of or to BNP Paribas (through its San Francisco Branch or
otherwise), as BNPPLC's Parent, or any other Qualified Affiliate of BNPPLC,
provided that Ross must be notified before any such conveyance to BNP Paribas or
another Qualified Affiliate of (A) any interest in the Property or any portion
thereof by an assignment or other document which will be recorded in the real
property records of York County, South Carolina or (B) BNPPLC's entire interest
in the Land and the Property; (3) the Mortgage or any assignment or conveyance
made to accomplish a foreclosure of any lien or security interest created by the
Mortgage, provided that such assignment or conveyance is made expressly subject
to the rights of Ross under the Operative Documents; (4) any conveyance required
by the Agency Agreement for the benefit of the Participants following a
foreclosure under the Mortgage at which the Participant's agent under the Agency
Agreement is the purchaser of the Property or any part thereof, provided that
any such assignment or conveyance is made expressly subject to the rights of
Ross under the Operative Documents; (5) any other assignment or conveyance by
BNPPLC or its
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permitted successors or assigns to any present or future Participants or agent
for the Participants of any lien or security interest against the Property,
provided that such assignment or conveyance is made expressly subject to the
rights of Ross under the Operative Documents; (6) any agreement to exercise or
refrain from exercising rights or remedies under the Operative Documents made by
BNPPLC with any present or future Participant; (7) any assignment or conveyance
by BNPPLC requested by Ross or required by any Permitted Encumbrance, by the
Purchase Agreement, by the Acquisition Contract, by any other Development
Contract or by Applicable Laws; or (8) any assignment or conveyance after a
Designated Sale Date on which Ross shall not have purchased or caused an
Applicable Purchaser to purchase BNPPLC's interest in the Property and, if
applicable, after the expiration of the thirty day cure period specified in
Paragraph 4(D) of the Purchase Agreement.
"Person" means an individual, a corporation, a partnership, an
unincorporated organization, an association, a joint stock company, a joint
venture, a trust, an estate, a government or agency or political subdivision
thereof or other entity, whether acting in an individual, fiduciary or other
capacity.
"Personal Property" shall have the meaning assigned to it on page of the
Lease.
"Plan" means any employee benefit or other plan established or maintained,
or to which contributions have been made, by Ross or any ERISA Affiliate of Ross
during the preceding six years and which is covered by Title IV of ERISA, other
than a Multiemployer Plan.
"Pre-Commencement Casualty" shall have the meaning assigned to it in
subparagraph 1(A)(2)(a) of the Construction Management Agreement.
"Prime Rate" means the prime interest rate or equivalent charged by BNPPLC's
Parent in the United States of America as announced or published by BNPPLC's
Parent from time to time, which need not be the lowest interest rate charged by
BNPPLC's Parent. If for any reason BNPPLC's Parent does not announce or publish
a prime rate or equivalent, the prime rate or equivalent announced or published
by either CitiBank, N.A. or any New York branch or office of Credit Commercial
de France as selected by BNPPLC shall be used to compute the rate describe in
the preceding sentence. The prime rate or equivalent announced or published by
such bank need not be the lowest rate charged by it. The Prime Rate may change
from time to time after the Effective Date without notice to Ross as of the
effective time of each change in rates described in this definition.
"Prior Work" shall have the meaning assigned to it in
subparagraph 2(C)(2)(b) of the Construction Management Agreement.
"Project Costs" means the following:
(a) costs incurred for the Work (as defined in the Construction Management
Agreement), including not only hard costs incurred for the new Improvements
described in Exhibit attached to the Construction Management Agreement, but also
the following costs to the extent reasonably incurred in connection with the
Construction Project:
•soft costs, such as architectural fees, engineering fees and fees and costs
paid in connection with obtaining project permits and approvals required by
governmental authorities or the Development Documents,
•site preparation costs, and
•costs of offsite and other public improvements required as conditions of
governmental approvals for the Construction Project or required by the
Development Documents;
(b) costs incurred to maintain insurance required by (and consistent with
the requirements of) the Lease prior to the Base Rent Commencement Date, and
costs of repairing any damage to the Improvements by fire or other casualty
prior to the Base Rent Commencement Date, to the
21
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extent such cost is not covered by insurance proceeds made available to Ross as
provided in the Lease;
(c) Impositions that have accrued or become due under the Lease prior to the
Base Rent Commencement Date; and
(d) cancellation or termination fees or other compensation payable by Ross
or BNPPLC pursuant to any contract concerning the Construction Project made by
Ross or BNPPLC with any general contractor, architect, engineer or other third
party because of any election by Ross or BNPPLC to cancel or terminate such
contract.
Project Costs will include costs incurred by BNPPLC to continue or complete the
Construction Project after any Landlord's Election to Continue Construction as
provided in subparagraph of the Lease.
"Projected Base Rent Commencement Date" means the first Business Day of May,
2003.
"Projected Cost Overruns" shall have the meaning assigned to it in
subparagraph 3(A) of the Construction Management Agreement.
"Property" means the Personal Property and the Real Property, collectively.
All rights, titles and interests acquired by BNPPLC under the Acquisition
Contract are intended to be encompassed within the term "Property" as such term
is used in the Operative Documents.
"Purchase Agreement" means the Purchase Agreement dated as of the Effective
Date between BNPPLC and Ross, as such Purchase Agreement may be extended,
supplemented, amended, restated or otherwise modified from time to time in
accordance with its terms.
"Purchase Documents" means collectively (1) the Purchase Agreement and
(2) the Memorandum of Purchase Agreement executed by BNPPLC and Ross as of the
Effective Date and recorded to provide notice of the Purchase Agreement.
"Purchase Option" shall have the meaning assigned to it in
subparagraph 1(A)(1) of the Purchase Agreement.
"Qualified Affiliate" means any Person that is one hundred percent (100%)
owned, directly or indirectly, by BNP Paribas or any successor of such bank;
provided, that such Person can make (and has in writing made) the same
representations to Ross that BNPPLC has made in Paragraphs 3(E) and 3(F) of the
Closing Certificate; and, provided, further, that such Person is not insolvent.
"Qualified Prepayments" means (A) any Issue 97-10 Prepayments received by
BNPPLC, (B) any Voluntary Ross Construction Contributions received by BNPPLC
pursuant to subparagraph 3(C) of the Construction Management Agreement, and
(C) any payments received by BNPPLC from time to time during the Term (1) under
any property insurance policy as a result of damage to the Property, (2) as
compensation for any restriction placed upon the use or development of the
Property or for the condemnation of the Property or any portion thereof,
(3) because of any judgment, decree or award for injury or damage to the
Property, or (4) under any title insurance policy or otherwise as a result of
any title defect or claimed title defect with respect to the Property; provided,
however, that (x) in determining the amount of "Qualified Prepayments", there
shall be deducted all expenses and costs of every kind, type and nature
(including taxes, Breakage Costs and Attorneys' Fees) incurred by BNPPLC with
respect to the collection or application of such payments, (y) "Qualified
Prepayments" shall not include any payment to BNPPLC by a Participant or an
Affiliate of BNPPLC that is made to compensate BNPPLC for the Participant's or
Affiliate's share of any Losses BNPPLC may incur as a result of any of the
events described in the preceding clauses (1) through (4) and (z) "Qualified
Prepayments" shall not include any payments received by BNPPLC that BNPPLC has
paid or is obligated to pay to Ross for the restoration or repair of the
Property or that BNPPLC is holding as Escrowed Proceeds pursuant to Paragraph of
the Lease or any other provision of the Lease. For
22
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purposes of computing the total Qualified Prepayments (and other amounts
dependent upon Qualified Prepayments, such as Stipulated Loss Value and the
Outstanding Construction Allowance) paid to or received by BNPPLC as of any
date, payments described in the preceding clauses (1) through (4) will be
considered as Escrowed Proceeds, not Qualified Prepayments, until they are
actually applied as Qualified Prepayments by BNPPLC as provided in the Paragraph
of the Lease.
"Real Property" shall have the meaning assigned to it on page of the Lease.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the Floating Rate Payor in good faith from among dealers of the
highest credit standing which satisfy all the criteria that the Floating Rate
Payor applies generally at the time in deciding whether to offer or to make an
extension of credit.
"Reimbursable Construction-Period Costs" shall have the meaning assigned to
it in Paragraph 2 of the Construction Management Agreement.
"Remedial Work" means any investigation, monitoring, clean-up, containment,
remediation, removal, payment of response costs, or restoration work and the
preparation and implementation of any closure or other required remedial plans
that any governmental agency or political subdivision requires or approves (or
could reasonably be expected to require if it was aware of all relevant
circumstances concerning the Property), whether by judicial order or otherwise,
because of the presence of or suspected presence of Hazardous Substances in, on,
under or about the Property or because of any prior Hazardous Substance
Activity. Without limiting the generality of the foregoing, Remedial Work also
means any obligations imposed upon or undertaken by Ross pursuant to Development
Documents or any recommendations or proposals made therein.
"Rent" means the Base Rent and all Additional Rent.
"Residual Risk Percentage" means fifteen percent (15%).
"Responsible Financial Officer" means the chief financial officer, the
controller, the vice president of finance, the treasurer or the assistant
treasurer of Ross.
"Sale Closing Documents" shall have the meaning assigned to it in
subparagraph 1(C) of the Purchase Agreement.
"Scope Change" shall have the meaning assigned to it in
subparagraph 1(A)(1)(b) of the Construction Management Agreement.
"Second Interest Rate Swap" shall have the meaning assigned to it in
subparagraph of the Lease.
"Seller" means Greenfield Realty Company, LLC, an Indiana limited liability
company.
"Spread" means (a) prior to the first Test Date (as such term is defined in
Schedule I attached to the Lease), 90 basis points and (b) on and after the
first Test Date, the number of basis points calculated as provided in
Schedule I attached to the Lease.
"Stipulated Loss Value" as of any date means the amount equal to the sum of
the Initial Funding Advance, plus the sum of all Construction Advances and
Carrying Costs added to the Outstanding Construction Allowance on or prior to
such date, minus all funds actually received by BNPPLC and applied as Qualified
Prepayments on or prior to such date. Under no circumstances will any payment of
Base Rent, the Arrangement Fee, Administrative Agency Fees, Upfront Syndication
Fees, or Commitment Fees reduce Stipulated Loss Value.
"Subsidiary" means, with respect to any Person, any Affiliate of which at
least a majority of the securities or other ownership interests having ordinary
voting power then exercisable for the election of directors or other persons
performing similar functions are at the time owned directly or indirectly by
such Person.
23
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"Supplemental Payment" shall have the meaning assigned to it in
subparagraph 1(A)(2)(c) of the Purchase Agreement.
"Term" shall have the meaning assigned to it in subparagraph of the Lease.
"Third Party Contract" shall have the meaning assigned to it in
subparagraph 1(A)(2)(b) of the Construction Management Agreement.
"Third Party Price" shall have the meaning assigned to it in
subparagraph 1(A)(2) of the Purchase Agreement.
"Third Party Sale Notice" shall have the meaning assigned to it in
subparagraph 2(C) of the Purchase Agreement.
"Third Party Sale Proposal" shall have the meaning assigned to it in
subparagraph 2(C) of the Purchase Agreement.
"Third Party Target Price" shall have the meaning assigned to it in
subparagraph 2(C) of the Purchase Agreement.
"Transaction Expenses" means costs incurred in connection with the
preparation and negotiation of the Operative Documents and related documents and
the consummation of the transactions contemplated therein.
"Unfunded Benefit Liabilities" means, with respect to any Plan or
Multiemployer Plan, the amount (if any) by which the present value of all
benefit liabilities (within the meaning of Section 4001(a)(16) of ERISA) under
the Plan or Multiemployer Plan exceeds the market value of all Plan or
Multiemployer assets allocable to such benefit liabilities, as determined on the
most recent valuation date of the Plan or Multiemployer Plan and in accordance
with the provisions of ERISA for calculating the potential liability of Ross or
any ERISA Affiliate of Ross under Title IV of ERISA.
"Voluntary Ross Construction Contributions" shall have the meaning assigned
to it in subparagraph 3(C) of the Construction Management Agreement. (As
provided therein, in no event will payments that constitute and qualify as
Voluntary Ross Construction Contributions exceed twenty percent of the Maximum
Construction Allowance.)
"Voluntary Retention of the Property" means an affirmative election made by
BNPPLC to keep the Property pursuant to, and under the circumstances described
in, the second sentence of subparagraph 1(A)(2)(a) of the Purchase Agreement.
"Work" shall have the meaning assigned to it in subparagraph 1(A)(2)(a) of
the Construction Management Agreement.
"Ross" means Ross Stores, Inc., a Delaware corporation.
"Ross's Extended Remarketing Period" shall have the meaning assigned to it
in subparagraph 2(A) of the Purchase Agreement.
"Ross's Extended Remarketing Right" shall have the meaning assigned to it in
subparagraph 2(A) of the Purchase Agreement.
24
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"Ross's Initial Remarketing Rights and Obligations" shall have the meaning
assigned to it in subparagraph 1(A)(2) of the Purchase Agreement.
ARTICLE II—RULES OF INTERPRETATION
The following provisions will apply to and govern the interpretation of each
of the Operative Documents:
1 Notices. The provision of any Operative Document, or of any Applicable
Laws with reference to the sending, mailing or delivery of any notice or demand
under any Operative Document or with reference to the making of any payment
required under any Operative Document, shall be deemed to be complied with when
and if the following steps are taken:
(i) All Rent and other amounts required to be paid by Ross to BNPPLC shall
be paid to BNPPLC in immediately available funds by wire transfer to:
Federal Reserve Bank of New York
ABA 026007689 BNP Paribas
/BNP/ BNP San Francisco
/AC/ 14334000176
/Ref/ Ross Fort Mill SC Synthetic Lease
or at such other place and in such other manner as BNPPLC may designate in a
notice to Ross.
(i) All advances paid to Ross by BNPPLC under the Construction Management
Agreement or in connection therewith shall be paid to Ross in immediately
available funds at such place and in such manner as Ross may reasonably
designate from time to time by notice to BNPPLC signed by a Responsible
Financial Officer of Ross.
(i) All notices, demands, approvals, consents and other communications to
be made under any Operative Document to or by the parties thereto must, to be
effective for purpose of such Operative Document, be in writing. Notices,
demands and other communications required or permitted under any Operative
Document are to be sent to the addresses set forth below (or in the case of
communications to Participants, at the addresses set forth in Schedule 1 to the
Participation Agreement) and shall be given by any of the following means:
(A) personal service, with proof of delivery or attempted delivery retained;
(B) electronic communication, whether by telex, telegram or telecopying (if
confirmed in writing sent by United States first class mail, return receipt
requested); or (C) registered or certified first class mail, return receipt
requested. Such addresses may be changed by notice to the other parties given in
the same manner as provided above. Any notice or other communication sent
pursuant to clause (A) or (B) hereof shall be deemed received upon such personal
service or upon dispatch by electronic means, and, if sent pursuant to
clause (C) shall be deemed received five days following deposit in the mail.
Address of BNPPLC:
BNP Paribas Leasing Corporation
12201 Merit Drive
Suite 860
Dallas, Texas 75251
Attention: Lloyd G. Cox
Telecopy: (972) 788-9191
With a copy to:
BNP Paribas, San Francisco
180 Montgomery Street
25
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San Francisco, California 94104
Attention: Katherine Wolfe
Telecopy: (415) 296-8954
And for draw requests and funding notices, with a copy to:
BNP Paribas, San Francisco
180 Montgomery Street
San Francisco, California 94104
Attention: Thomas Kunz
Telecopy: (415) 956-4230
Address of Ross:
Ross Stores, Inc.
8333 Central Avenue
Newark, California 94560
Attention: Chief Financial Officer
Telecopy: (510) 505-4388
1 SEVERABILITY. If any term or provision of any Operative Document or the
application thereof shall to any extent be held by a court of competent
jurisdiction to be invalid and unenforceable, the remainder of such document, or
the application of such term or provision other than to the extent to which it
is invalid or unenforceable, shall not be affected thereby.
2
3 NO MERGER. There shall be no merger of the Lease or of the leasehold
estate created by the Lease with any other interest in the Property by reason of
the fact that the same person may acquire or hold, directly or indirectly, the
Lease or the leasehold estate created hereby and any other interest in the
Property, unless all Persons with an interest in the Property that would be
adversely affected by any such merger specifically agree in writing that such a
merger shall occur. There shall be no merger of the Purchase Agreement or of the
purchase options or obligations created by the Purchase Agreement with any other
interest in the Property by reason of the fact that the same person may acquire
or hold, directly or indirectly, the Lease or the leasehold estate created
hereby and any other interest in the Property, unless all Persons with an
interest in the Property that would be adversely affected by any such merger
specifically agree in writing that such a merger shall occur.
4
5 NO IMPLIED WAIVER. The failure of BNPPLC or Ross to insist at any time
upon the strict performance of any covenant or agreement or to exercise any
option, right, power or remedy contained in any Operative Document shall not be
construed as a waiver or a relinquishment thereof for the future. The waiver of
or redress for any breach of any Operative Document by any party thereto shall
not prevent a similar subsequent act from constituting a violation. Any express
waiver of any provision of any Operative Document shall affect only the term or
condition specified in such waiver and only for the time and in the manner
specifically stated therein. No waiver by any party to any Operative Document of
any provision therein shall be deemed to have been made unless expressed in
writing and signed by the party to be bound by the waiver. A receipt by BNPPLC
of any Rent with knowledge of the breach by Ross of any covenant or agreement
contained in the Lease or any other Operative Document shall not be deemed a
waiver of such breach.
6
7 ENTIRE AND ONLY AGREEMENTS. The Operative Documents supersede any prior
negotiations and agreements between BNPPLC and Ross concerning the Property, and
no amendment
26
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or modification of any Operative Document shall be binding or valid unless
expressed in a writing executed by all parties to such Operative Document.
8
9 BINDING EFFECT. Except to the extent, if any, expressly provided to the
contrary in any Operative Document with respect to assignments thereof, all of
the covenants, agreements, terms and conditions to be observed and performed by
the parties to the Operative Documents shall be applicable to and binding upon
their respective successors and, to the extent assignment is permitted
thereunder, their respective assigns.
10
11 TIME IS OF THE ESSENCE. Time is of the essence as to all obligations of
Ross and BNPPLC and all notices required of Ross and BNPPLC under the Operative
Documents.
12
13 GOVERNING LAW. Each Operative Document shall be governed by and
construed in accordance with the laws of the State of South Carolina without
regard to conflict or choice of laws.
14
15 PARAGRAPH HEADINGS. The paragraph and section headings contained in the
Operative Documents are for convenience only and shall in no way enlarge or
limit the scope or meaning of the various and several provisions thereof.
16
17 NEGOTIATED DOCUMENTS. All the parties to each Operative Document and
their counsel have reviewed and revised or requested revisions to such Operative
Document, and the usual rule of construction that any ambiguities are to be
resolved against the drafting party shall not apply to the construction or
interpretation of any Operative Documents or any amendments thereof.
18
19 TERMS NOT EXPRESSLY DEFINED IN AN OPERATIVE DOCUMENT. As used in any
Operative Document, a capitalized term that is not defined therein or in this
Common Definitions and Provisions Agreement, but is defined in another Operative
Document, shall have the meaning ascribed to it in the other Operative Document.
20
21 OTHER TERMS AND REFERENCES. Words of any gender used in each Operative
Document shall be held and construed to include any other gender, and words in
the singular number shall be held to include the plural and vice versa, unless
the context otherwise requires. References in any Operative Document to
Paragraphs, subparagraphs, Sections, subsections or other subdivisions shall
refer to the corresponding Paragraphs, subparagraphs, Sections, subsections or
subdivisions of that Operative Document, unless specific reference is made to
another document or instrument. References in any Operative Document to any
Schedule or Exhibit shall refer to the corresponding Schedule or
Exhibit attached to that Operative Document, which shall be made a part thereof
by such reference. All capitalized terms used in each Operative Document which
refer to other documents shall be deemed to refer to such other documents as
they may be renewed, extended, supplemented, amended or otherwise modified from
time to time, provided such documents are not renewed, extended or modified in
breach of any provision contained in the Operative Documents or, in the case of
any other document to which BNPPLC is a party or of which BNPPLC is an intended
beneficiary, without the consent of BNPPLC. All accounting terms used but not
specifically defined in any Operative Document shall be construed in accordance
with GAAP. The words "this [Agreement]", "herein", "hereof",
27
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"hereby", "hereunder" and words of similar import when used in each Operative
Document refer to that Operative Document as a whole and not to any particular
subdivision unless expressly so limited. The phrases "this Paragraph", "this
subparagraph", "this Section", "this subsection" and similar phrases used in any
operative document refer only to the Paragraph, subparagraph, Section,
subsection or other subdivision described in which the phrase occurs. As used in
the Operative Documents the word "or" is not exclusive. As used in the Operative
Documents, the words "include", "including" and similar terms shall be construed
as if followed by "without limitation to".
22
23 EXECUTION IN COUNTERPARTS. To facilitate execution, each Operative
Document may be executed in as many identical counterparts as may be required.
It shall not be necessary that the signature of, or on behalf of, each party, or
that the signature of all persons required to bind any party, appear on each
counterpart. All counterparts, taken together, shall collectively constitute a
single instrument. It shall not be necessary in making proof of any Operative
Document to produce or account for more than a single counterpart containing the
respective signatures of, or on behalf of, each of the parties hereto. Any
signature page to any counterpart may be detached from such counterpart without
impairing the legal effect of the signatures thereon and thereafter attached to
another counterpart identical thereto except having attached to it additional
signature pages.
24
25 NOT A PARTNERSHIP, ETC. NOTHING IN ANY OPERATIVE DOCUMENT IS INTENDED
TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE BETWEEN
BNPPLC AND ROSS. NEITHER THE EXECUTION OF ANY OPERATIVE DOCUMENT NOR THE
ADMINISTRATION THEREOF OR OTHER DOCUMENTS REFERENCED HEREIN BY BNPPLC, NOR ANY
OTHER RIGHT, DUTY OR OBLIGATION OF BNPPLC UNDER OR PURSUANT TO ANY OPERATIVE
DOCUMENT IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF BNPPLC TO
ROSS.
26
[The signature pages follows.]
28
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IN WITNESS WHEREOF, Ross and BNPPLC have caused this Common Definitions and
Provisions Agreement to be executed as of May 10, 2001.
"Ross"
ROSS STORES, INC.
By:
--------------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------------
29
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[Continuation of signature pages to Common Definitions and Provisions Agreement
dated to be effective May 10, 2001]
"BNPPLC"
BNP PARIBAS LEASING CORPORATION
By:
--------------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------------
30
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CONSTRUCTION MANAGEMENT AGREEMENT
BETWEEN
BNP PARIBAS LEASING CORPORATION
("BNPPLC")
AND
ROSS STORES, INC.
("Ross")
May 10, 2001
(Fort Mill, South Carolina)
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
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CONSENT AND AUTHORIZATION 1
GENERAL TERMS AND CONDITIONS
1
1.
CONSTRUCTION BY ROSS
1 (A) The Construction Project 1 (1) Construction Approvals by
BNPPLC 1 (a) Preconstruction Approvals by BNPPLC 1
(b) Definition of Scope Change 2 (c) Approval of Scope Changes
2 (2) Ross's Right to Control and Responsibility for Construction
2 (a) Performance of the Work 2 (b) Third Party
Contracts 3 (c) Third Party Estoppels 3 (d)
Adequacy of Drawings, Specifications and Budgets 4 (e) Existing
Condition of the Land and Improvements 4 (f) Correction of
Defective Work 4 (g) Clean Up. 4 (h) No Damage
for Delays 4 (i) No Fee For Construction Management 4
(3) Quality of Work 4 (B) Completion Notice 4
2.
CONSTRUCTION ADVANCES
5 (A) Costs Subject to Reimbursement Through Construction Advances 5
(B) Exclusions From Reimbursable Construction-Period Costs 6 (C)
Conditions to Ross's Right to Receive Construction Advances 6 (1)
Construction Advance Requests 6 (2) Amount of the Advances 6
(a) Limit Dependent Upon the Maximum Construction Allowance 6
(b) Limit Dependent Upon Costs Previously Incurred by Ross 7
(c) Limit During CMA Suspension Period 7 (d) Restrictions
Imposed for Administrative Convenience 8 (3) No Advances After Certain
Dates 8 (D) Breakage Costs for Construction Advances Requested But Not
Taken 8 (E) No Third Party Beneficiaries 8 (F) No Waiver 8
(G) Funding by Participants 8
3.
COST OVERRUNS
9 (A) Definition of Projected Cost Overruns 10 (B) Notice of
Projected Cost Overruns 10 (C) Election to Make a Voluntary Ross
Construction Contribution 10
4.
SUSPENSION AND TERMINATION
10 (A) CMA Suspension Events 10 (1) Projection of Cost Overruns
10 (2) Interruption of Construction 11
--------------------------------------------------------------------------------
(3) Failure of Ross to Correct Defective Work 11 (4) Failure
of Ross to Provide Evidence of Costs and Expenses 11 (B) FOCB Notices
and CMA Termination Events 11 (C) Rights and Obligations of Ross During
a CMA Suspension Period 12 (D) Election by Ross to Terminate 12
(E) BNPPLC's Right to Terminate 12 (F) Rights and Obligations
Surviving Termination 12 (G) Cooperation by Ross Following any
Termination 13
Exhibits
A Exhibit Legal Description
A Exhibit
Description of the Construction Project (With Site Plan Attached)
A Exhibit
Form of Contractor Estoppel
A Exhibit
Form of Design Professional Estoppel
A Exhibit
Construction Advance Request Form
A Exhibit
Notice of Voluntary Ross Funding Commitment
A Exhibit
Notice of Termination by Ross
2
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CONSTRUCTION MANAGEMENT AGREEMENT
This CONSTRUCTION MANAGEMENT AGREEMENT (this "Agreement") is made and dated
as of May 10, 2001 (the "Effective Date") by and between BNP PARIBAS LEASING
CORPORATION, a Delaware corporation ("BNPPLC"), and ROSS STORES, INC., a
Delaware corporation ("Ross").
RECITALS
Contemporaneously with the execution of this Agreement, BNPPLC and Ross are
executing a Common Definitions and Provisions Agreement dated as of the
Effective Date (the "Common Definitions and Provisions Agreement") which by this
reference is incorporated into and made a part of this Agreement for all
purposes. As used in this Agreement, capitalized terms defined in the Common
Definitions and Provisions Agreement and not otherwise defined in this Agreement
are intended to have the respective meanings assigned to them in the Common
Definitions and Provisions Agreement.
Pursuant to the Lease Agreement executed by BNPPLC and Ross
contemporaneously with this Agreement (the "Lease"), which covers the
Improvements on the Land described in Exhibit, BNPPLC is leasing the
Improvements and any appurtenances thereto to Ross.
In anticipation of the construction of new or additional Improvements for
Ross's use pursuant to the Lease, BNPPLC and Ross have agreed upon the terms and
conditions upon which BNPPLC is willing to authorize Ross to arrange and manage
such construction and upon which BNPPLC is willing to provide funds for such
construction, and by this Agreement BNPPLC and Ross desire to evidence such
agreement.
CONSENT AND AUTHORIZATION
Subject to the terms and conditions set forth in this Agreement and in the
Lease, BNPPLC does hereby grant its consent and authorization to Ross for the
construction by Ross of the Construction Project on the Land and for the
management by Ross of such construction; provided, however, all rights of Ross
against BNPPLC hereunder are expressly made subject and subordinate to the
Permitted Encumbrances and to any other claims or encumbrances affecting the
Land or the Property that may be asserted by third parties and that do not
constitute Liens Removable by BNPPLC.
GENERAL TERMS AND CONDITIONS
1 CONSTRUCTION BY ROSS.
2
(A) The Construction Project.
(B)
(1) Construction Approvals by BNPPLC.
(a) Preconstruction Approvals by BNPPLC. Ross submitted and obtained
BNPPLC's approval of the site plan and descriptions of the Construction Project
referenced in Exhibit. Also set forth in Exhibit is a general description of the
Construction Project. The Construction Project, as constructed by Ross pursuant
to this Agreement, and all construction contracts and other agreements executed
or adopted by Ross in connection therewith, shall be not materially inconsistent
with the plans or other items referenced in Exhibit, except to the extent
otherwise provided by any Scope Change (as defined below) approved by BNPPLC and
except as
1
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otherwise provided in subparagraph 6(e) of the Lease if BNPPLC should make a
Landlord's Election to Continue Construction after any termination of this
Agreement.
(a) Definition of Scope Change. As used herein, "Scope Change" means a
change to the Construction Project that, if implemented, will make the quality,
function or capacity of the Improvements "materially different" (as defined
below in this subparagraph) than as described or inferred by site plan, plans
and renderings referenced in Exhibit. The term "Scope Change" is not intended to
include the mere refinement, correction or detailing of the site plan, plans or
renderings submitted to BNPPLC by Ross. As used in this subparagraph, a
"material difference" means a difference that could reasonably be expected to
(a) after completion of the Construction Project and the funding of all
Construction Advances required in connection therewith, significantly reduce any
excess of the market value of the Property over Stipulated Loss Value or
significantly increase any excess of Stipulated Loss Value over the market value
of the Property, (b) change the general character of the Improvements from that
needed to accommodate the uses permitted by subparagraph 2(a) of the Lease, or
(c) result in Projected Cost Overruns (as defined below).
(a) Approval of Scope Changes. Before making a Scope Change, Ross shall
provide to BNPPLC a reasonably detailed written description of the Scope Change,
a revised construction budget for the Construction Project and a copy of any
changes to the drawings, plans and specifications for the Improvements required
in connection therewith, all of which must be approved in writing by BNPPLC (or
by any inspecting architect appointed by BNPPLC from time to time) before the
Scope Change is implemented. BNPPLC's approval shall not in any event constitute
a waiver of subparagraph or of any other provision of this Agreement or the
Lease.
(1) Ross's Right to Control and Responsibility for Construction. Subject
to the terms and conditions set forth in this Agreement and in the Lease, and
prior to any termination of this Agreement as provided in subparagraphs and,
Ross shall have the sole right to control and the sole responsibility for the
design and construction of the Construction Project, including the means,
methods, sequences and procedures implemented to accomplish such design and
construction. Although title to all Improvements will pass directly to BNPPLC
(as more particularly provided in Paragraph 7 of the Lease), BNPPLC's obligation
with respect to the Construction Project shall be limited to the making of
advances under and subject to the conditions set forth in this Agreement and in
Paragraph 6 of the Lease. Without limiting the foregoing, Ross acknowledges and
agrees that:
(a) Performance of the Work. Except as provided in subparagraphs and, Ross
must, using its commercially reasonable effort and judgment and in an
expeditious and economical manner not inconsistent with the interests of BNPPLC,
perform or cause to be performed all work required, and will provide or cause to
be provided all supplies and materials required, to design and complete
construction of the Construction Project (collectively "Work") no later than the
second anniversary of the Effective Date. The Work will include obtaining all
necessary building permits and other governmental approvals required in
connection with the design and construction of the Construction Project, or
required in connection with the use and occupancy thereof (e.g., final
certificates of occupancy). The Work will also include any repairs or
restoration required because of damage to Improvements by fire or other casualty
prior to the Base Rent Commencement Date (a "Pre-commencement Casualty");
however, the cost of any such repairs or restoration will be subject to
reimbursement not only through Construction Advances made on and subject to the
terms and conditions of this Agreement, but also through the application of
Escrowed Proceeds as provided in the Lease. Ross will, through its Third Party
Contracts for construction of the Work, schedule and supervise all Work, monitor
the quality and specifications of major components of materials and services
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used in connection with all Work and will keep full and detailed accounts as may
be necessary to document expenditures made or expenses incurred for the Work.
(a) Third Party Contracts.
1) Ross shall not enter into any construction contract or other agreement
with a third party concerning the Work or the Construction Project (a "Third
Party Contract") in the name of BNPPLC or otherwise purport to bind BNPPLC to
any obligation to any third party.
1) In any Third Party Contract between Ross and any of its Affiliates (an
"Affiliate's Contract") Ross shall reserve the right to terminate the contract
at any time, without cause, and without subjecting Ross to liability for any
Termination Fee (as defined below). Further, Ross shall not enter into any
Affiliate's Contract that obligates Ross to pay more than would be required
under an arms-length contract or that would require Ross to pay its Affiliate
any amount in excess of the sum of actual, out-of-pocket direct costs and
internal labor costs incurred by the Affiliate to perform such contract.
1) As necessary to limit the total Reimbursable Third Party Contract
Termination Fees (as defined below) for which BNPPLC may be required to provide
Construction Advances to no more than $8,500,000 (the "Maximum Permitted
Termination Fees"), Ross shall reserve in every significant Third Party Contract
an absolute express right to terminate such contract at any time, without cause.
Although any Third Party Contract (other than an Affiliate's contract) may
require Ross to pay a specified Termination Fee in the event of such a
termination, the specified Termination Fee must not exceed the difference
computed by subtracting (I) the aggregate of all Termination Fees that have been
paid or would become payable by Ross if Ross terminated all other Third Party
Contracts, from (II) the Maximum Permitted Termination Fees. Without limiting
the foregoing, Ross will manage and administer all Third Party Contracts as
necessary to ensure that, at any point in time, Ross can terminate all such
contracts without becoming liable for Termination Fees in excess of the Maximum
Permitted Termination Fees.
1) As used in this Agreement, "Termination Fee" means any amount, however
denominated, for which Ross will be obligated under a Third Party Contract as a
result of any election or decision by Ross to terminate such Third Party
Contract, including demobilization costs; provided, however, amounts payable for
Prior Work [as defined below] as of the date any such termination are not
intended to be characterized as Termination Fees for purposes of this Agreement.
If, as described in the preceding paragraph, Ross reserves an absolute express
right in a Third Party Contract to terminate such contract at any time, without
cause, for a specified dollar amount, such dollar amount will constitute a
Termination Fee. If no such right is reserved in a Third Party Contract, the
Termination Fee applicable to such contract for purposes of this Agreement will
be the amount of damages that Ross could be required to pay (in addition to
payments required for Prior Work) upon an anticipatory repudiation of the Third
Party Contract by Ross.
(a) Third Party Estoppels. If requested by BNPPLC with respect to any
material general construction contract between Ross and a third party contractor
for any part of the Work, Ross shall cause the contractor to execute and deliver
to BNPPLC an estoppel letter substantially in the form of Exhibit. Similarly, if
requested by BNPPLC with respect to any material architectural or engineering
contract between Ross and a third party professional or firm for any part of the
Work, Ross shall cause the professional or firm thereunder to execute and
deliver to BNPPLC an estoppel letter substantially in the form of Exhibit.
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(a) Adequacy of Drawings, Specifications and Budgets. BNPPLC has made and
will make no representations as to the adequacy of any budgets, site plans,
renderings, plans, drawings or specifications for the Construction Project, and
no modification of any such budgets, site plans, renderings, plans, drawings or
specifications that may be required from time to time will entitle Ross to any
adjustment in the Construction Allowance.
(a) Existing Condition of the Land and Improvements. Ross is familiar with
the conditions of the Land and any existing Improvements on the Land. Ross shall
have no claim for damages against BNPPLC or for an increase in the Construction
Allowance by reason of any condition (concealed or otherwise) of or affecting
the Land or Improvements.
(a) Correction of Defective Work. Ross will promptly commence to correct
and diligently and continuously pursue correction of all Work performed prior to
any termination of this Agreement that does not comply with the requirements of
this Agreement or that is otherwise defective (in either case, "Defective Work")
at Ross's sole expense. If Ross fails to correct any Defective Work or fails to
carry out Work in accordance with this Agreement, BNPPLC may (but will not be
required to) order Ross to stop all Work until the cause for such failure has
been eliminated.
(a) Clean Up. Upon the completion of all Work, Ross will remove all waste
material and rubbish from and about the Land, as well as all tools, construction
equipment, machinery and surplus materials. Ross will keep the Land and the
Improvements thereon in a reasonably safe and sightly condition as Work
progresses.
(a) No Damage for Delays. Ross shall have no claim for damages against
BNPPLC or for an increase in the Construction Allowance by reason of any delay
in the performance of any Work. Nor shall Ross have any claim for an extension
of the deadline specified in subparagraph for completing the Work because of any
such period of delay, unless, however, such delay has been caused by BNPPLC's
intentional interference with Work. In the event (and only to the extent) that
any such intentional interference by BNPPLC continues after Ross provides
written notice to cease, Ross shall be entitled to an extension of such
deadline. BNPPLC's exercise of its rights and remedies permitted under this
Agreement or the other Operative Documents will not be construed as intentional
interference with Ross's performance of any Work.
(a) No Fee For Construction Management. Ross shall have no claim for any
fee or other compensation or for any reimbursement of internal administrative or
overhead expenses of Ross under this Agreement, it being understood that Ross is
executing this Agreement in consideration of the rights expressly granted to it
herein and in the Lease.
(1) Quality of Work. Ross shall cause the Work undertaken and administered
by it pursuant to this Agreement to be performed (a) in a safe and good and
workmanlike manner, (b) in accordance with Applicable Laws, (c) in compliance
with (i) the provisions of this Agreement and the Lease, (ii) the material
provisions of the Permitted Encumbrances and (iii) the material provisions of
the Development Documents, and (d) in a manner that, upon completion and taken
as a whole, enhances the value of the Property by an amount commensurate with
the Construction Advances and Carrying Costs added to the Outstanding
Construction Allowance in connection therewith.
(A) Completion Notice. Ross shall provide a notice (a "Completion Notice")
to BNPPLC promptly after construction of the Construction Project is
substantially complete, advising BNPPLC of the substantial completion.
(B)
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2 CONSTRUCTION ADVANCES.
3
(A) Costs Subject to Reimbursement Through Construction Advances. Subject
to the terms and conditions set forth herein, Ross shall be entitled to a
Construction Allowance, from which BNPPLC will make Construction Advances on
Advance Dates from time to time to pay or reimburse Ross for the following costs
("Reimbursable Construction-Period Costs") to the extent the following costs are
not already included in Transaction Expenses paid by BNPPLC from the Initial
Funding Advance:
(1) the actual costs and expenses incurred or paid by Ross for the
preparation, negotiation and execution of this Agreement and the other Operative
Documents or for the negotiation of the Acquisition Contract and related
agreements with Seller (including agreements that establish entitlement rights
appurtenant to the Property);
(1) the cost of title insurance or other out of pocket expenses described in
subparagraph 5(c)(iii) of the Lease to the extent paid by Ross prior to the Base
Rent Commencement Date;
(1) Commitment Fees payable prior to the Base Rent Commencement Date;
(1) costs of the Work, including not only hard costs incurred for the
demolition of existing improvements (if any) and construction of new
Improvements described in Exhibit, but also the following costs to the extent
reasonably incurred in connection with the Construction Project:
•soft costs payable to third parties, such as legal fees, architectural fees,
engineering fees, construction management fees, transaction management fees and
fees and costs paid in connection with obtaining project permits and approvals
required by governmental authorities or the Development Documents,
•site preparation costs, and
•costs of offsite and other public improvements required as conditions of
governmental approvals for the Construction Project or as required by the
Development Documents;
(1) the cost of maintaining insurance required by (and consistent with the
requirements of) the Lease prior to the Base Rent Commencement Date, and costs
of repairing any damage to the Improvements caused by a Pre-commencement
Casualty to the extent such costs are not covered by Escrowed Proceeds made
available to Ross as provided in the Lease prior to the Base Rent Commencement
Date ("Reimbursable Restoration Costs");
(1) Impositions that accrue or become due under the Lease prior to the Base
Rent Commencement Date;
(1) except as otherwise provided in subparagraph below, Termination Fees
payable by Ross in connection with any Third Party Contract between Ross and a
Person not an Affiliate of Ross because of any election by Ross to cancel or
terminate such contract during a CMA Suspension Period (as defined below); and
(1) purchase of equipment, including equipment listed on Construction
Advance Request Forms delivered to BNPPLC as contemplated by this Agreement, for
use in connection with the operation of the facility described on Exhibit B.
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(A) Exclusions From Reimbursable Construction-Period
Costs. Notwithstanding anything herein to the contrary, BNPPLC shall not be
required to make any Construction Advance to pay or to reimburse or compensate
Ross for any Absolute Construction Obligations or any of the following:
(B)
(1) Environmental Losses;
(1) Losses that would not have been incurred but for any act or omission of
Ross or of any Ross's contractors or subcontractors, which act or omission is
contrary in any material respect to the other terms and conditions of this
Agreement or to the terms and conditions of the other Operative Documents,
during the period that this Agreement remains in force or during any other
period that Ross remains in possession or control of the Construction Project
pursuant to the Lease or otherwise;
(1) Losses that would not have been incurred but for any fraud,
misapplication of Construction Advances or other funds, illegal acts, or willful
misconduct on the part of the Ross or its employees or agents or any other party
for whom Ross is responsible; and
(1) Losses that would not have been incurred but for any bankruptcy
proceeding involving Ross.
For purposes of this subparagraph, "acts and omissions" described in
clause (2) preceding shall include (i) any decision by Ross to make any Scope
Change without the prior approval of BNPPLC, (ii) any failure of Ross to
maintain insurance required by the Lease or this Agreement, (iii) any decision
of Ross not to continue or complete Work because of a change in Ross's facility
needs or in Ross's plans to meet its facility needs (such as, for example, a
decision by Ross to lease or acquire another less expensive facility as an
alternative to the Improvements), (iv) any failure of Ross to correct Defective
Work performed prior to a termination of this Agreement pursuant to
subparagraph or subparagraph, (v) any failure by Ross to reserve termination
rights in significant Third Party Contracts as required by subparagraph, and
(v) any other material breach by Ross of this Agreement.
(A) Conditions to Ross's Right to Receive Construction Advances. BNPPLC's
obligation to provide Construction Advances to Ross from time to time under this
Agreement shall be subject to the following terms and conditions, all of which
terms and conditions are intended for the sole benefit of BNPPLC, and none of
which terms and conditions shall limit in any way the right of BNPPLC to treat
costs or expenditures incurred or paid by or on behalf of it as Construction
Advances pursuant to subparagraph 6(e) of the Lease:
(B)
(1) Construction Advance Requests. Ross must make a written request (a
"Construction Advance Request") for any Construction Advance, specifying the
amount of such advance, at least five Business Days prior to the Advance Date
upon which the advance is to be paid. To be effective for purposes of this
Agreement, a Construction Advance Request must be in substantially the form
attached as Exhibit. Ross shall not submit more than one Construction Advance
Request in any calendar month.
(1) Amount of the Advances.
(a) Limit Dependent Upon the Maximum Construction Allowance. Ross shall
not be entitled to require any Construction Advance that would cause the Funded
Construction Allowance to exceed the Maximum Construction Allowance.
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(a) Limit Dependent Upon Costs Previously Incurred by Ross. Ross shall not
be entitled to require any Construction Advance that would cause the aggregate
of all Construction Advances to exceed the sum of:
(i) Reimbursable Construction-Period Costs that Ross has, to the reasonable
satisfaction of BNPPLC, substantiated as having been paid or incurred by Ross
other than for Work (e.g., Impositions), plus
(ii) the Reimbursable Construction-Period Costs that Ross has, to the
reasonable satisfaction of BNPPLC, substantiated as having been paid or incurred
for Prior Work as of the date of the Construction Advance Request requesting the
advance.
As used in this Agreement, "Prior Work" means all labor and services actually
performed, and all materials actually delivered to the construction site, in
accordance with this Agreement prior to the date in question as part of the
Work, and "Future Work" means labor and services performed or to be performed,
and materials delivered or to be delivered, after the date in question as part
of the Work. For purposes of this Agreement, Ross and BNPPLC intend to allocate
Reimbursable Construction- Period Costs between Prior Work and Future Work in a
manner that is generally consistent with the allocations expressed or implied in
construction-related contracts negotiated in good faith between Ross and third
parties not affiliated with Ross (e.g., a general contractor); however, in order
to verify the amount of Reimbursable Construction-Period Costs actually paid or
incurred by Ross and the proper allocation thereof between Prior Work and Future
Work, BNPPLC shall be entitled (but not required) to: (x) request, receive and
review copies of such agreements between Ross and third parties and of draw
requests, budgets or other supporting documents provided to Ross in connection
with or pursuant to such agreements as evidence of the allocations expressed or
implied therein, (y) from time to time engage one or more independent inspecting
architects, certified public accountants or other appropriate professional
consultants and, absent manifest error, rely without further investigation upon
their reports and recommendations, and (z) without waiving BNPPLC's right to
challenge or verify allocations required with respect to future Construction
Advances, rely without investigation upon the accuracy of Ross's own
Construction Advance Requests.
(a) Limit During CMA Suspension Period. Without limiting the other terms
and conditions imposed by this Agreement for the benefit of BNPPLC with respect
all Construction Advances, BNPPLC shall have no obligation to make any
Construction Advance during any CMA Suspension Period (as defined below) that
would cause the aggregate of all Construction Advances to exceed the sum of:
(i) Reimbursable Construction-Period Costs that Ross has, to the reasonable
satisfaction of BNPPLC, substantiated as having been paid or incurred by Ross
other than for Work (e.g., Impositions), plus
(ii) the Reimbursable Construction-Period Costs that Ross has, to the
reasonable satisfaction of BNPPLC, substantiated as having been paid or incurred
for Prior Work (as defined below) as of the date the CMA Suspension Period
commenced.
For purposes of computing the limits described in this subparagraph,
Reimbursable Construction-Period Costs "other than for Work" shall include
Termination Fees that qualify as Reimbursable Construction-Period Costs pursuant
to subparagraph ("Reimbursable Third Party Contract Termination Fees"). Ross
acknowledges, however, that Termination Fees will not exceed the Maximum
Permitted Termination Fees, so long as Ross complies with the requirements of
subparagraph. That is, but for an "act or omission of Ross" as such phrase is
used in subparagraph, the aggregate of all Termination Fees shall not exceed the
Maximum
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Permitted Termination Fees. Accordingly, if the aggregate of any Termination
Fees do exceed the Maximum Permitted Termination Fees, the excess shall not
qualify as Reimbursable Third Party Contract Termination Fees.
(a) Restrictions Imposed for Administrative Convenience. Ross shall not
request any Construction Advance (other than the final Construction Advance Ross
intends to request) for an amount less than $500,000.
(1) No Advances After Certain Dates. BNPPLC shall have no obligation to
make any Construction Advance (x) after the Base Rent Commencement Date, (y) on
or after the Designated Sale Date, or (z) on or after the date of any
termination of this Agreement pursuant to subparagraph or subparagraph.
(A) Breakage Costs for Construction Advances Requested But Not Taken. If
Ross requests but thereafter declines to accept any Construction Advance, or if
Ross requests a Construction Advance that it is not permitted to take because of
its failure to satisfy any of the conditions specified in subparagraph, Ross
shall pay upon demand any resulting Breakage Costs.
(B)
(C) No Third Party Beneficiaries. No contractor or other third party shall
be entitled to require BNPPLC to make advances as a third party beneficiary of
this Agreement or of the Lease or otherwise.
(D)
(E) No Waiver. No funding of Construction Advances and no failure of
BNPPLC to object to any Work proposed or performed by or for Ross shall
constitute a waiver by BNPPLC of the requirements contained in this Agreement.
(F)
(G) Funding by Participants. Ross acknowledges that, as provided in the
Participation Agreement, each Participant has agreed to pay to BNPPLC a
Percentage (under and as defined in the Participation Agreement) of the
Construction Advances required by this Agreement. Ross also acknowledges that
BNPPLC will not be responsible to Ross for any failure of any Participant (other
than an Affiliate of BNPPLC) to provide advances required by the Participation
Agreement. So long as any Participant (other than an Affiliate of BNPPLC) fails
to provide its Percentage of any requested Construction Advance, then the amount
of the Construction Advance for which BNPPLC shall be obligated hereunder shall
be reduced, subject to Section 2(G)(2) below, by the amount that the Participant
should have provided, but failed to provide, in accordance with the
Participation Agreement. No such reduction, however, of BNPPLC's obligation
hereunder shall release or impair the obligation of the Participant directly to
Ross, created by Ross's status as a third party beneficiary of the Participant's
commitment under the Participation Agreement to provide the Participant's
Percentage of Construction Advances. Further, any such failure shall excuse
BNPPLC's obligation to provide the requested Construction Advance only to the
extent of the funds that the applicable Participant or Participants should have
advanced (but did not advance) to BNPPLC, and in the event of any such failure:
(1) BNPPLC will immediately notify Ross, but BNPPLC will not in any event be
liable to Ross for BNPPLC's failure to do so.
8
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(1) BNPPLC will to the extent possible postpone reductions of Construction
Advances because of the failure by any one or more Participants not Affiliates
of BNPPLC ("Defaulting Participants") to make required advances under the
Participation Agreement (a "Participant Default") by adjusting (and readjusting
from time to time, as required) ratably the funding "Percentages" of BNPPLC and
the Participants, and by BNPPLC making and requesting the Participants to make
advances to BNPPLC on the basis of such adjusted Percentages, in each case
regarding the Participants as provided in the Participation Agreement; however,
so long as a Participant Default continues, no Construction Advance shall be
required that would cause the Outstanding Construction Allowance to exceed
(1) the Maximum Construction Allowance available under this Agreement, less
(2) all amounts that should have been, but because of a continuing Participant
Default have not been, advanced by any one or more of the Participants to BNPPLC
under the Participation Agreement with respect to Construction Advances.
(1) Further, after a Participant Default, and so long as no CMA Termination
Event (as defined below) has occurred and no Event of Default has occurred and
is continuing, BNPPLC shall do the following as reasonably requested by Ross,
provided that nothing in this provision shall require BNPPLC to take any action
that would violate Applicable Laws, that would constitute a breach of BNPPLC's
obligations under the Participation Agreement, or that would require BNPPLC to
waive any rights or remedies it has under this Agreement or other Operative
Documents:
(a) BNPPLC shall promptly make a written demand upon the Defaulting
Participants for the cure of the Participant Default, and
(a) BNPPLC shall not unreasonably withhold its approval for the substitution
of any new participant proposed by Ross for Defaulting Participants, if (A) the
proposed substitution does not require BNPPLC to waive rights against the
Defaulting Participants, (B) the new participant will agree (by executing
supplement to the Participation Agreement as provided in the Participation
Agreement) to provide funds to replace the payments that would otherwise be
required of the Defaulting Participants with respect to future Construction
Advances, (C) the new participant (or Ross) provides the funds (if any) needed
to terminate the Defaulting Participants' rights to receive payments of "Net
Cash Flow" (as defined in the Participation Agreement) that BNPPLC will be
required to pay the new participant under the terms of the substitution
reasonably proposed by Ross, (D) the new participant (or Ross) provides and
agrees in writing to provide funds needed to reimburse BNPPLC for any and all
Losses incurred by BNPPLC in connection with or because of the substitution of
the new participant for the Defaulting Participants, including any cost of
defending and paying any claim asserted by Defaulting Participants because of
the substitution (but not including any liability of BNPPLC to the Defaulting
Participants for damages caused by BNPPLC's bad faith or gross negligence in the
performance of BNPPLC's obligations to the Defaulting Participants), (E) the
obligations of BNPPLC to the new participant per dollar of the new participant's
"investment" (it being understood that such investment will be computed in a
manner consistent with the examples set forth in Exhibit A to the Participation
Agreement, but net of reimbursements to BNPPLC under clause (D) preceding) shall
not exceed the obligations per dollar of investment by the Defaulting
Participants that BNPPLC would have had to the Defaulting Participants if there
had been no Participant Default, and (F) the new participant shall be a
reputable financial institution having a net worth of no less than seven and one
half percent (7.5%) of total assets and total assets of no less than
$10,000,000,000.00 (all according to then recent audited financial statements).
1 COST OVERRUNS
2
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(A) Definition of Projected Cost Overruns. As used in this Agreement,
"Projected Cost Overruns" shall mean the excess (if any), calculated as of the
date of each Construction Advance Request, of (1) the total of projected
Reimbursable Construction-Period Costs yet to be incurred or for which Ross has
yet to be reimbursed hereunder (including projected Reimbursable
Construction-Period Costs for Future Work), over (2) the sum of a) any Voluntary
Construction Contribution Ross has committed to pay as provided in subparagraph,
but has yet to pay, plus b) the balance of the remaining Construction Allowance
then projected to be available to cover such costs. The balance of the remaining
Construction Allowance then projected to be available will equal (i) the amount
(if any) by which the Maximum Construction Allowance exceeds the Funded
Construction Allowance, less (ii) the sum of (a) projected future Carrying
Costs, plus (b) any funds that should have been but were not advanced to BNPPLC
by any Defaulting Participants under (and as defined in) the Participation
Agreement.
(B) Notice of Projected Cost Overruns. If for any reason (including any
damage to the Property by fire or other casualty or any taking of any part of
the Property by condemnation) Ross believes (after taking into account any
Voluntary Ross Construction Contributions Ross has made or committed to make as
provided in subparagraph) that Projected Cost Overruns are more likely than not
at the time Ross submits any Construction Advance Request, Ross shall state such
belief in the Construction Advance Request and, if Ross can reasonably do so,
Ross will estimate the approximate amount of such Projected Cost Overruns.
(C)
(D) Election to Make a Voluntary Ross Construction Contribution. As used
in this Agreement, "Voluntary Ross Construction Contribution" shall mean a
voluntary, nonrefundable payment made to BNPPLC by Ross prior to the Base Rent
Commencement Date and delivered with or pursuant to a notice in the form of
Exhibit, confirming that a Voluntary Ross Construction Contribution is being
paid or will be paid pursuant to this subparagraph. In no event, however, will
the aggregate of any such payments that constitute and qualify as Voluntary Ross
Construction Contributions for purposes of this Agreement and the other
Operative Documents exceed twenty percent (20%) of the Maximum Construction
Allowance. To prevent the occurrence of or to cure any CMA Suspension Event
described in subparagraph, Ross shall be entitled (but not obligated) to make or
commit to make a Voluntary Ross Construction Contribution in addition to (and,
except as provided in the definition of Issue 97-10 Prepayment in the Common
Definitions and Provisions Agreement without reducing or excusing) any other
amounts then due from Ross to BNPPLC pursuant to the Operative Documents. Like
other Qualified Prepayments, any Voluntary Ross Construction Contribution will
reduce the Outstanding Construction Allowance as described in the definition
thereof in the Common Definitions and Provisions Agreement. In contrast,
however, to other Qualified Prepayments, Voluntary Ross Construction
Contributions will be subtracted for purposes of calculating the Funded
Construction Allowance and, thus, will effectively increase the subsequent
Construction Advances available under the limit established by subparagraph.
(E)
3 SUSPENSION AND TERMINATION.
4
(A) CMA Suspension Events. Each of the following events shall be a "CMA
Suspension Event" under this Agreement:
(B)
(1) Projection of Cost Overruns. Either (a) BNPPLC shall receive any
Construction Advance Request stating that Ross believes Projected Cost Overruns
are more likely than not, as provided
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in subparagraph and Ross shall fail to give any notice pursuant to
Paragraph 3(C) that effectively eliminates the likelihood of Projected Cost
Overruns, or (b) (i) BNPPLC shall otherwise determine in good faith that
significant Projected Cost Overruns are likely (taking into account any failure
of a Defaulting Participant to provide funds to BNPPLC as required by the
Participation Agreement and any prior Voluntary Ross Construction Contributions
Ross has made or committed to make as provided in subparagraph), (ii) BNPPLC
shall notify Ross of such determination and the basis therefor, and (iii) Ross
shall fail to give any notice pursuant to subparagraph that, by committing Ross
to make or increase Voluntary Ross Construction Contributions, effectively
eliminates the likelihood of the Projected Cost Overruns on or before five
Business Days after BNPPLC's notice to Ross of such determination.
(1) Interruption of Construction. The Construction Project shall, for any
reason after Work commences, no longer be substantially progressing (and shall
not have progressed in any substantial way during the preceding forty-five days,
in a good and workmanlike manner and substantially in accordance with Applicable
Laws, with Permitted Encumbrances, with Development Documents and with the
requirements of this Agreement; provided that if the cause of the lack of
progress is damage to the Property by fire or other casualty, any taking of any
part of the Property by condemnation, or a force majeure event, then the
forty-five day period referenced above shall be extended to ninety days.
(1) Failure of Ross to Correct Defective Work. Ross shall fail to commence
within 30 days and thereafter diligently pursue the correction of any Defective
Work of which Ross has received notice.
(1) Failure of Ross to Provide Evidence of Costs and Expenses. BNPPLC
shall have requested, and Ross shall have failed to provide within ten Business
Days after receipt of the request, with respect to any Construction Advance:
(1) invoices, requests for payment from contractors and other evidence
reasonably establishing that the costs and expenses for which Ross has requested
or is requesting reimbursement constitute actual Reimbursable
Construction-Period Costs, and (2) canceled checks, lien waivers and other
evidence reasonably establishing that all prior Construction Advances have been
used by Ross to pay, and only to pay, the Reimbursable Construction-Period Costs
for which the prior advances were requested and made.
(A) FOCB Notices and CMA Termination Events.
(B)
(1) As used herein, "FOCB Notice" means a notice that BNPPLC is considering
a termination of this Agreement pursuant to subparagraph below, given by BNPPLC
to Ross prior to BNPPLC's receipt from Ross of a Completion Notice and given
when:
(a) any Event of Default has occurred and is continuing; or
(a) any CMA Suspension Event shall have occurred, Ross shall have received
notice of such CMA Suspension Event (a "CMA Suspension Notice") and the CMA
Suspension Event shall have continued for thirty days after Ross's receipt of
such CMA Suspension Notice; or
(a) Ross shall have failed to maintain the following insurance, or to
provide insurance certificates to BNPPLC as required by the Lease with respect
to the following insurance, and such failure shall have continued for a period
of five Business Days after any notice to Ross thereof:
1) property insurance as required by the Lease, including builder's
completed value risk insurance as BNPPLC may require to protect BNPPLC's and
Ross's interests in the Improvements under construction against risks of
physical loss, such insurance to be maintained by Ross at all times until
completion of the Construction Project; and
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1) commercial general liability insurance as required by the Lease; or
(1) For purposes of this Agreement and the other Operative Documents, "CMA
Termination Event" shall mean either of the following:
(a) BNPPLC's receipt of a Notice of Ross's Intent to Terminate (as defined
below); or
(a) BNPPLC's delivery of an FOCB Notice as provided above.
(A) Rights and Obligations of Ross During a CMA Suspension Period. As used
herein, "CMA Suspension Period" shall mean any period (1) beginning with the
date of any CMA Suspension Notice, FOCB Notice or Notice of Ross's Intent to
Terminate, and (2) ending on the earlier of (a) the first date upon which (i) no
CMA Suspension Events shall be continuing, and (ii) no CMA Termination Events
shall have occurred, or (b) the effective date of any termination of this
Agreement as described in subparagraph or subparagraph. During any CMA
Suspension Period, Ross shall have the right to suspend the Work; provided,
however, the obligations of Ross which are to survive any termination of this
Agreement shall also continue and survive during any such suspension of the
Work.
(B)
(C) Election by Ross to Terminate. Ross may elect to terminate this
Agreement at any time prior to the Base Rent Commencement Date when Ross has
determined that (1) the Construction Advances to be provided to it hereunder
will not be sufficient to cover all Reimbursable Construction-Period Costs,
whether because the cost of the Work exceeds budgeted expectations (resulting in
Projected Cost Overruns), because of damage to the Property by fire or other
casualty (other than damage that would not have occurred, or been uninsured or
under-insured, but for an act or omission of Ross), because of a taking of any
part of the Property by condemnation, or because Ross can no longer satisfy
conditions to BNPPLC's obligation to provide Construction Advances herein, or
(2) the Construction Project cannot be substantially completed before the Base
Rent Commencement Date for reasons other than a breach by Ross of this
Agreement. To be effective, however, any such election to terminate this
Agreement must be made by giving BNPPLC and the Participants a notice thereof
prior to the Base Rent Commencement Date in the form of Exhibit (a "Notice of
Ross's Intent to Terminate"), stating that Ross intends to terminate this
Agreement pursuant to this subparagraph on a date specified therein, which date
is not less than thirty days after the date of such notice. Unless terminated
sooner pursuant to subparagraph, this Agreement will automatically terminate on
the effective date so specified in any Notice of Ross's Intent to Terminate.
(D)
(E) BNPPLC's Right to Terminate. BNPPLC shall be entitled to terminate
this Agreement at any time (x) more than ninety days after BNPPLC has given an
FOCB Notice as described in subparagraph (regardless of whether at the time of
such termination by BNPPLC an Event of Default or other event or circumstance
described in subparagraph is continuing), or (y) after BNPPLC's receipt of a
Notice of Ross's Intent to Terminate.
(F)
(G) Rights and Obligations Surviving Termination. Following any
termination of this Agreement as provided in subparagraph or in, Ross shall have
no obligation to continue or complete any Work; provided, however, no
termination of this Agreement shall reduce or excuse the following rights and
obligations of the parties under the following Subsections 4(F)(1) and 4(F)(2),
it being intended that all such rights and obligations shall survive and
continue after any such termination:
(H)
12
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(1) the rights and obligations of Ross and BNPPLC under the Operative
Documents other than this Construction Management Agreement, including Absolute
Construction Obligations imposed upon Ross by the Lease; and
(1) Ross's obligations described in the next subparagraph.
(A) Cooperation by Ross Following any Termination. After any termination
of this Agreement as provided in subparagraph or subparagraph, Ross shall comply
with the following terms and conditions, all of which shall survive any such
termination:
(1) Ross shall promptly deliver copies to BNPPLC of all Third Party
Contracts and purchase orders made by Ross in the performance of or in
connection with the Work, together with copies of all plans, drawings,
specifications, bonds and other materials relating to the Work in Ross's
possession, including all papers and documents relating to governmental permits,
orders placed, bills and invoices, lien releases and financial management under
this Agreement. All such deliveries shall be made free and clear of any liens,
security interests, or encumbrances, except such as may be created by the
Operative Documents. Ross may retain originals and copies of all of the aforsaid
documents.
(1) Promptly after any request from BNPPLC made with respect to any Third
Party Contract, Ross shall deliver a letter confirming: (i) that Ross has not
performed any act or executed any other instrument which invalidates or modifies
such contract in whole or in part (or, if so, the nature of such modification);
(ii) the extent to which such contract is valid and subsisting and in full force
and effect; (iii) that there are no defaults or events of default then existing
under such contract and, to Ross's knowledge, no event has occurred which with
the passage of time or the giving of notice, or both, would constitute such a
default or event of default (or, if there is a default, the nature of such
default in detail); (iv) that the services and construction contemplated by such
contract is proceeding in a satisfactory manner in all material respects (or if
not, a detailed description of all significant problems with the progress of the
services or construction); (v) in reasonable detail the then critical dates
projected by Ross for work and deliveries required by such contract; (vi) the
total amount received by the other party to such contract for work or services
provided by the other party through the date of the letter; (vii) the estimated
total cost of completing the services and work contemplated under such contract
as of the date of the letter, together with any current draw or payment schedule
for the contract; and (viii) any other information BNPPLC may reasonably request
to allow it to decide what steps it should take concerning the contract within
BNPPLC's rights under this Agreement and the other Operative Documents.
(1) Ross will make reasonable efforts, as and to the extent requested by
BNPPLC, to secure the cancellation of any then existing Third Party Contract
upon terms satisfactory to BNPPLC. Ross shall bear any cancellation fees or
other Losses resulting from any cancellation of a Third Party Contract after the
effective date of a termination of this Agreement.
(1) Ross will make reasonable efforts, as and to the extent requested by
BNPPLC, to secure any required consents or approvals for an assignment of any
then existing Third Party Contract to BNPPLC or its designee, upon terms
satisfactory to BNPPLC. To the extent assignable, any Third Party Contract will
be assigned by Ross to BNPPLC upon request.
(1) If Ross has canceled any Third Party Contract before and in anticipation
of a termination of this Agreement, Ross shall make every reasonable effort, as
and to the extent requested by BNPPLC, to secure a reinstatement of such Third
Party Contract in favor of BNPPLC and upon terms satisfactory to BNPPLC.
(1) For a period not to exceed ten days after the termination, Ross shall
take such steps as are reasonably necessary to preserve and protect Work
completed and in progress and to protect materials, equipment, and supplies at
the Property or in transit.
13
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IN WITNESS WHEREOF, Ross and BNPPLC have caused this Construction Management
Agreement to be executed as of May 10, 2001.
"Ross"
ROSS STORES, INC.
By:
/s/ J.Call
--------------------------------------------------------------------------------
John G. Call
Senior Vice President
Chief Financial Officier
14
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[Continuation of signature pages to Construction Management Agreement dated to
be effective as of May 10, 2001]
"BNPPLC"
BNP PARIBAS LEASING CORPORATION
By:
/s/ Lloyd G. Cox
--------------------------------------------------------------------------------
Lloyd G. Cox,
Managing Director
15
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Exhibit
Legal Description
All that certain real property situate in Fort Mill, South Carolina, described
as follows:
[TO BE ADDED]
1
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Exhibit
Description of the Construction Project
Subject to future Scope Changes, the Construction Project will be
substantially consistent with the following general description and with the
Site Plan attached to this Exhibit.
The improvements will consist of the following, together with related parking
and other improvements and the equipment listed from time to time on
Construction Advance Request Forms delivered in accordance with the terms of the
Construction Management Agreement:
The improvements, to be known as the Ross Stores Southeast Retail Distribution
Center, will be a 1.2M square foot facility capable of shipping an estimated
1.4M units daily to each of it's stores located throughout the United States
eventually including the Carolinas, Florida and Georgia. This facility will
ultimately employ over 1100 associates responsible for processing merchandise,
handling transportation and conducting Ross Stores Distribution business. This
state-of-the-art Southeast Distribution Center (SEDC) will be comprised of three
main components: the building, the material handling equipment (MHE) and the
Warehouse Management System.
The 1.2M square foot building will be made up of a merchandise processing area,
a reserve inventory storage area, multiple associate break areas and 33,000 feet
of office space including the cafeteria. Merchandise will be received, ticketed
and then shipped from this facility. An 800-trailer parking lot will be
constructed to support the operations and unit-volume requirements.
Leading-edge material handling equipment will be installed throughout the SEDC
to allow associates to efficiently and effectively process merchandise through
the DC. This MHE will include conveyor equipment, multiple forklifts,
radio-frequency equipment, a carton shoe-shipping sorter and tilt-tray sorters.
A new Warehouse Management System (WMS) will be implemented with the start-up of
this facility also. The Warehouse management system is responsible for all of
the computer systems that control and account for all of the processing in the
DC. This will be a new WMS modified and customized for the specific requirements
of the Ross Stores business.
1
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Exhibit
Estoppel From Contractor
, 20
BNP Paribas Leasing Corporation
12201 Merit Drive, Suite 860
Dallas, Texas 75251
Attention: Lloyd G. Cox
Re: Assignment of Construction Contract
Ladies and Gentlemen:
The undersigned hereby represents to BNP PARIBAS LEASING CORPORATION, a
Delaware corporation ("BNPPLC"), and covenants with BNPPLC as follows:
1 The undersigned has entered into that certain [Construction Contract]
(the "Construction Contract") by and between the undersigned and Ross
Stores, Inc. ("Ross") dated , for the construction of the improvements to
be constructed as part of Ross's Fort Mill, South Carolina distribution center
leased by Ross (the "Improvements") on the land described in the Lease Documents
described below (the "Land" and, together with the Improvements and any other
improvements now on or constructed in the future on the Land, the "Project").
2
3 The undersigned has been advised that, by a Lease Agreement and a
Construction Management Agreement, both dated as of May 10, 2001 (collectively,
the "Lease Documents"), BNPPLC is leasing the Project to Ross and has agreed,
subject to the terms and conditions of the Lease Documents, to provide a
construction allowance for the design and construction of the Improvements. The
undersigned has also been advised that the Lease Documents expressly provide
that third parties (including the undersigned) are not intended as beneficiaries
of the Lease Documents and, thus, will have no standing to enforce any
obligations of Ross or BNPPLC under the Lease Documents, including any such
obligation that BNPPLC may have to provide the construction allowance. The
undersigned understands that the Lease Documents expressly provide that Ross is
not authorized to enter into any construction contract or other agreement with
any third party in the name of BNPPLC or to otherwise bind BNPPLC to any
contract with a third party.
4
5 A complete and correct copy of the Construction Contract is attached to
this letter. The Construction Contract is in full force and effect and has not
been modified or amended, except as provided in any written modifications or
amendments which are also attached to this letter.
6
7 The undersigned has not sent or received any notice of default or any
other notice for the purpose of terminating the Construction Contract, nor does
the undesigned have knowledge of any existing circumstance or event which, but
for the elapse of time or otherwise, would constitute a default by the
undersigned or by Ross under the Construction Contract.
The undersigned acknowledges and agrees that:
a) Title to all Improvements shall, when constructed on the Land, pass
directly to BNPPLC, not to Ross. BNPPLC shall not, however, be held liable for,
and the undersigned shall not assert, any claims, demands or liabilities against
BNPPLC arising under or in any way relating to the Construction Contract;
provided, this paragraph will not (1) be construed as a waiver of any
2
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statutory mechanic's or materialmen's liens against the interests of Ross in and
to the Land or the improvements thereon that may otherwise exist or arise in
favor of the undersigned, or (2) prohibit the undersigned from asserting any
claims or making demands against BNPPLC under the Construction Contract if
BNPPLC elects in writing, pursuant to paragraph b) below, to assume the
Construction Contract in the event Ross's right to possession of the Land is
terminated, it being understood that in the event of such an assumption BNPPLC
shall be liable for the unpaid balance of the contract sum due for the work of
the undersigned, payable pursuant to (and subject to the terms and conditions
set forth for the benefit of the owner in) the Construction Contract, but in no
event shall BNPPLC otherwise be personally liable for any acts or omissions on
the part of Ross.
b) Upon any termination of Ross's right to possession of the Project under
the Lease Documents, including any eviction of Ross resulting from an Event of
Default (as defined in the Lease Documents), BNPPLC shall be entitled (but not
obligated), by notice to the undersigned and without the necessity of the
execution of any other document, to assume Ross's rights and obligations under
the Construction Contract, cure any defaults by Ross thereunder and enforce the
Construction Contract and all rights of Ross thereunder. Within ten days of
receiving notice from BNPPLC that Ross's right to possession has been
terminated, the undersigned shall send to BNPPLC a written estoppel letter
stating: (i) that the undersigned has not performed any act or executed any
other instrument which invalidates or modifies the Construction Contract in
whole or in part (or, if so, the nature of such modification); (ii) that the
Construction Contract is valid and subsisting and in full force and effect;
(iii) that there are no defaults or events of default then existing under the
Construction Contract and no event has occurred which with the passage of time
or the giving of notice, or both, would constitute such a default or event of
default (or, if there is a default, the nature of such default in detail);
(iv) that the construction contemplated by the Construction Contract is
proceeding in a satisfactory manner in all material respects (or if not, a
detailed description of all significant problems with the progress of
construction); (v) a reasonably detailed report of the then critical dates
projected by the undersigned for work and deliveries required to complete the
Project; (vi) the total amount received by the undersigned for construction
through the date of the letter; (vii) the estimated total cost of completing the
undersigned's work as of the date of the letter, together with a current draw
schedule; and (viii) any other information BNPPLC may request to allow it to
decide whether to assume the Construction Contract. BNPPLC shall have seven days
from receipt of such written certificate containing all such requested
information to decide whether to assume the Construction Contract. If BNPPLC
fails to assume the Construction Contract within such time, the undersigned
agrees that BNPPLC shall not be liable (and the undersigned shall not assert or
bring any action against BNPPLC, except to enforce statutory lien rights, if
any, of the undersigned against the Land or improvements on the Land) for any
damages or other amounts resulting from the breach or termination of the
Construction Contract or under any other theory of liability of any kind or
nature, but rather the undersigned shall look solely to Ross (and statutory lien
rights, if any, of the undersigned against the Land and any improvements
thereon) for the recovery of any such damages or other amounts.
c) If BNPPLC notifies the undersigned that BNPPLC shall not assume the
Construction Contract pursuant to the preceding paragraph following the
termination of Ross's right to possession of the Project under the Lease
Documents, the undersigned shall immediately discontinue the work under the
Construction Contract and remove its personnel from the Project, and BNPPLC
shall be entitled to take exclusive possession of the Project. The undersigned
shall also, upon request by BNPPLC, deliver and assign to BNPPLC all plans and
specifications and other contract documents previously delivered to the
undersigned (except that the undersigned may keep an original set of the
Construction Contract and other contract documents executed by Ross), all other
material relating to the work which belongs to BNPPLC or Ross, and all papers
3
--------------------------------------------------------------------------------
and documents relating to governmental permits, orders placed, bills and
invoices, lien releases and financial management under the Construction
Contract. Notwithstanding the undersigned's receipt of any notice from BNPPLC
that BNPPLC declines to assume the Construction Contract, the undersigned shall
for a period not to exceed fifteen days after receipt of such notice take such
steps, at BNPPLC's expense, as are reasonably necessary to preserve and protect
work completed and in progress and to protect materials, equipment and supplies
at the site or in transit.
d) If the Construction Contract is terminated by Ross before BNPPLC is
given the opportunity to elect whether or not to assume the Construction
Contract as provided herein, BNPPLC shall nonetheless have the right hereunder
to assume the Construction Contract, as if it had not been terminated, upon any
termination of Ross's right to possession of the Project under the Lease
Documents; provided, however, that if the work of the undersigned under the
Construction Contract has been disrupted because of Ross's termination of the
Construction Contract, the undersigned shall be entitled to an equitable
adjustment to the price of the Construction Contract, following any assumption
thereof by BNPPLC, for the additional costs incurred by the undersigned
attributable to the disruption; and, provided further, that if BNPPLC does
assume the Construction Contract, BNPPLC shall receive a credit against the
price of the Construction Contract for any consideration paid to the undersigned
by Ross because of Ross's prior termination of the Construction Contract
(whether such consideration is designated a termination fee, settlement payment
or otherwise).
e) No action taken by BNPPLC or the undersigned with respect to the
Construction Contract shall prejudice any other rights or remedies of BNPPLC or
the undersigned provided by law, by the Lease Documents, by the Construction
Contract or otherwise against Ross.
f) The undersigned agrees promptly to notify BNPPLC of any material default
or claimed material default by Ross under the Construction Contract of which the
undersigned is aware, describing with particularity the default and the action
the undersigned believes is necessary to cure the same. The undersigned will
send any such notice to BNPPLC prominently marked "URGENT—NOTICE OF ROSS'S
DEFAULT UNDER CONSTRUCTION AGREEMENT WITH ROSS STORES, INC.—FORT MILL, SOUTH
CAROLINA" at the address specified for notice below (or at such other addresses
as BNPPLC shall designate in notice sent to the undersigned), by certified or
registered mail, return receipt requested. Following receipt of such notice, the
undersigned will permit BNPPLC or its designee to cure any such default within
the time period reasonably required for such cure, but in no event less than
thirty days. If it is necessary or helpful to take possession of all or any
portion of the Project to cure a default by Ross under the Construction
Contract, the time permitted by the undersigned for cure by BNPPLC will include
the time necessary to terminate Ross's right to possession of the Project and
evict Ross, provided that BNPPLC commences the steps required to exercise such
right within sixty days after it is entitled to do so under the terms of the
Lease Documents and applicable law. If the undersigned incurs additional costs
due to the extension of the aforementioned cure period, the undersigned shall be
entitled to an equitable adjustment to the price of the Construction Contract
for such additional costs.
g) Any notice or communication required or permitted hereunder shall be
given in writing, sent by (a) personal delivery or (b) expedited delivery
service with proof of delivery or (c) United
4
--------------------------------------------------------------------------------
States mail, postage prepaid, registered or certified mail or (d) telegram,
telex or telecopy, addressed as follows:
To the undersigned:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Telecopy: ( ) -
To BNPPLC:
BNP Paribas Leasing Corporation
12201 Merit Drive, Suite 860
Dallas, Texas 75251
Attention: Lloyd G. Cox
Telecopy: (972) 788-9191
A copy of any such notice or communication will also be sent to Ross by
(a) personal delivery or (b) expedited delivery service with proof of delivery
or (c) United States mail, postage prepaid, registered or certified mail or
(d) telegram, telex or telecopy, addressed as follows:
Ross Stores, Inc.
8333 Central Avenue
Newark, California 94560
Telecopy: ( ) -
h) The undersigned acknowledges that it has all requisite authority to
execute this letter. The undersigned further acknowledges that BNPPLC has
requested this letter, and is relying on the truth and accuracy of the
representations made herein, in connection with BNPPLC's decision to advance
funds for construction under the Lease Documents with Ross.
Very truly yours,
By:
--------------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------------
Ross joins in the execution of this letter solely for the purpose of
evidencing its consent hereto, including its consent to the provisions that
would allow, but not require, BNPPLC to assume the Construction Contract in the
event Ross is evicted from the Project.
Ross Stores, Inc.
By:
--------------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------------
5
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Exhibit
Estoppel From Design Professionals
, 20
BNP Paribas Leasing Corporation
12201 Merit Drive, Suite 860
Dallas, Texas 75251
Attention: Lloyd G. Cox
Re: Assignment of [Architect's Agreement/Engineering Contract]
Ladies and Gentlemen:
The undersigned hereby represents to BNP PARIBAS LEASING CORPORATION, a
Delaware corporation ("BNPPLC"), and covenants with BNPPLC as follows:
1 The undersigned has entered into that certain [Architect's
Agreement/Engineering Contract] (the "Agreement") by and between the undersigned
and Ross Stores, Inc. ("Ross") dated , for the [design/engineering] of the
improvements to be constructed as part of Ross's Fort Mill, South Carolina
distribution center leased by Ross (the "Improvements") on the land described in
the Lease Documents described below (the "Land" and, together with the
Improvements and any other improvements now on or constructed in the future on
the Land, the "Project").
2
3 The undersigned has been advised that, by a Lease Agreement and a
Construction Management Agreement, both dated as of May 10, 2001 (collectively,
the "Lease Documents"), BNPPLC is leasing the Project to Ross and has agreed,
subject to the terms and conditions of the Lease Documents, to provide a
construction allowance for the design and construction of the Improvements. The
undersigned has also been advised that the Lease Documents expressly provide
that third parties (including the undersigned) are not intended as beneficiaries
of the Lease Documents and, thus, will have no standing to enforce any
obligations of Ross or BNPPLC under the Lease Documents, including any such
obligation that BNPPLC may have to provide the construction allowance. The
undersigned understands that the Lease Documents expressly provide that Ross is
not authorized to enter into any Agreement or other agreement with any third
party in the name of BNPPLC or to otherwise bind BNPPLC to any contract with a
third party.
4
5 A complete and correct copy of the Agreement is attached to this letter.
The Agreement is in full force and effect and has not been modified or amended,
except as provided in any written modifications or amendments which are also
attached to this letter.
6
7 The undersigned has not sent or received any notice of default or any
other notice for the purpose of terminating the Agreement, nor does the
undesigned have knowledge of any existing circumstance or event which, but for
the elapse of time or otherwise, would constitute a default by the undersigned
or by Ross under the Agreement.
The undersigned acknowledges and agrees that:
a) BNPPLC shall not be liable for, and the undersigned shall not assert,
any claims, demands or liabilities against BNPPLC arising under or in any way
relating to the Agreement; provided, this paragraph will not (1) be construed as
a waiver of any statutory mechanic's or materialmen's liens against the
interests of Ross in and to the Land or the improvements thereon that may
otherwise exist or arise in favor of the undersigned, or (2) prohibit the
undersigned from
1
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asserting any claims or making demands against BNPPLC under the Agreement if
BNPPLC elects in writing, pursuant to paragraph b) below, to assume the
Agreement in the event Ross's right to possession of the Land is terminated, it
being understood that in the event of such an assumption BNPPLC shall be liable
for the unpaid balance of the fees for services of the undersigned, payable
pursuant to (and subject to the terms and conditions set forth for the benefit
of the owner in) the Agreement, but in no event shall BNPPLC otherwise be
personally liable for any acts or omissions on the part of Ross.
b) Upon any termination of Ross's right to possession of the Project under
the Lease Documents, including any eviction of Ross resulting from an Event of
Default (as defined in the Lease Documents), BNPPLC shall be entitled (but not
obligated), by notice to the undersigned and without the necessity of the
execution of any other document, to assume Ross's rights and obligations under
the Agreement, cure any defaults by Ross thereunder and enforce the Agreement
and all rights of Ross thereunder. Within ten days of receiving notice from
BNPPLC that Ross's right to possession has been terminated, the undersigned
shall send to BNPPLC a written estoppel letter stating: (i) that the undersigned
has not performed any act or executed any other instrument which invalidates or
modifies the Agreement in whole or in part (or, if so, the nature of such
modification); (ii) that the Agreement is valid and subsisting and in full force
and effect; (iii) that there are no defaults or events of default then existing
under the Agreement and no event has occurred which with the passage of time or
the giving of notice, or both, would constitute such a default or event of
default (or, if there is a default, the nature of such default in detail);
(iv) that the services contemplated by the Agreement are proceeding in a
satisfactory manner in all material respects (or if not, a detailed description
of all significant problems with the progress of services); (v) a reasonably
detailed report of the then critical dates projected by the undersigned for
services required to complete the Project; (vi) the total amount received by the
undersigned for services through the date of the letter; (vii) the estimated
total cost of completing such services as of the date of the letter, together
with a current payment schedule; and (viii) any other information BNPPLC may
request to allow it to decide whether to assume the Agreement. BNPPLC shall have
seven days from receipt of such written certificate containing all such
requested information to decide whether to assume the Agreement. If BNPPLC fails
to assume the Agreement within such time, the undersigned agrees that BNPPLC
shall not be liable (and the undersigned shall not assert or bring any action
against BNPPLC or, except to enforce statutory lien rights, if any, of the
undersigned against the Land or improvements on the Land) for any damages or
other amounts resulting from the breach or termination of the Agreement or under
any other theory of liability of any kind or nature, but rather the undersigned
shall look solely to Ross (and statutory lien rights, if any, of the undersigned
against the Land and any improvements thereon) for the recovery of any such
damages or other amounts.
c) If BNPPLC notifies the undersigned that BNPPLC shall not assume the
Agreement pursuant to the preceding paragraph following the termination of
Ross's right to possession of the Project under the Lease Documents, the
undersigned shall immediately deliver and assign to BNPPLC the following:
(1) copies of all plans and specifications for the Project or any component
thereof previously generated by or delivered to the undersigned, (2) any other
contract documents previously delivered to the undersigned (except that the
undersigned may keep an original set of the Agreement and other contract
documents executed by Ross), (3) any other material relating to the services
provided under the Agreement, and (4) to the extent available to the undersigned
all papers and documents relating to governmental permits, orders placed, bills
and invoices, lien releases and financial management under the Agreement.
Notwithstanding the undersigned's receipt of any notice from BNPPLC that BNPPLC
declines to assume the Agreement, the undersigned shall for a period not to
exceed thirty days after receipt of such notice take such steps, at BNPPLC's
expense, as are reasonably necessary to preserve the utility and value of
2
--------------------------------------------------------------------------------
services completed and in progress and to protect plans and specifications and
other materials described in the preceding sentence.
d) If the Agreement is terminated by Ross before BNPPLC is given the
opportunity to elect whether or not to assume the Agreement as provided herein,
BNPPLC shall nonetheless have the right hereunder to assume the Agreement, as if
it had not been terminated, upon any termination of Ross's right to possession
of the Project under the Lease Documents; provided, however, that if the
services of the undersigned under the Agreement has been disrupted because of
Ross's termination of the Agreement, the undersigned shall be entitled to an
equitable adjustment to the price of the Agreement, following any assumption
thereof by BNPPLC, for the additional costs incurred by the undersigned
attributable to the disruption; and, provided further, that if BNPPLC does
assume the Agreement, BNPPLC shall receive a credit against the price of the
Agreement for any consideration paid to the undersigned by Ross because of
Ross's prior termination of the Agreement (whether such consideration is
designated a termination fee, settlement payment or otherwise).
e) No action taken by BNPPLC or the undersigned with respect to the
Agreement shall prejudice any other rights or remedies of BNPPLC or the
undersigned provided by law, by the Lease Documents, by the Agreement or
otherwise against Ross.
f) The undersigned agrees promptly to notify BNPPLC of any material default
or claimed material default by Ross under the Agreement of which the undersigned
is aware, describing with particularity the default and the action the
undersigned believes is necessary to cure the same. The undersigned will send
any such notice to BNPPLC prominently marked "URGENT—NOTICE OF ROSS'S DEFAULT
UNDER DESIGN AGREEMENT WITH ROSS STORES, INC.—FORT MILL, SOUTH CAROLINA" at the
address specified for notice below (or at such other addresses as BNPPLC shall
designate in notice sent to the undersigned), by certified or registered mail,
return receipt requested. Following receipt of such notice, the undersigned will
permit BNPPLC or its designee to cure any such default within the time period
reasonably required for such cure, but in no event less than thirty days.
g) Any notice or communication required or permitted hereunder shall be
given in writing, sent by (a) personal delivery or (b) expedited delivery
service with proof of delivery or (c) United States mail, postage prepaid,
registered or certified mail or (d) telegram, telex or telecopy, addressed as
follows:
To the undersigned:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Telecopy: ( ) -
To BNPPLC:
BNP Paribas Leasing Corporation
12201 Merit Drive, Suite 860
Dallas, Texas 75251
Attention: Lloyd G. Cox
Telecopy: (972) 788-9191
A copy of any such notice or communication will also be sent to Ross by
(a) personal delivery or (b) expedited delivery service with proof of delivery
or (c) United States mail, postage prepaid, registered or certified mail or
(d) telegram, telex or telecopy, addressed as follows:
Ross Stores, Inc.
8333 Central Avenue
Newark, California 94560
Telecopy: ( ) -
3
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h) The undersigned acknowledges that it has all requisite authority to
execute this letter. The undersigned further acknowledges that BNPPLC has
requested this letter, and is relying on the truth and accuracy of the
representations made herein, in connection with BNPPLC's decision to advance
funds for design services under the Lease Documents with Ross.
Very truly yours,
By:
--------------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------------
Ross joins in the execution of this letter solely for the purpose of
evidencing its consent hereto, including its consent to the provisions that
would allow, but not require, BNPPLC to assume the Agreement in the event Ross
is evicted from the Project.
Ross Stores, Inc.
By:
--------------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------------
Title:
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4
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Exhibit
Construction Advance Request Form
BNP Paribas Leasing Corporation
12201 Merit Drive, Suite 860
Dallas, Texas 75251
Attention: Lloyd G. Cox
Re: Construction Management Agreement dated as of May 10, 2001 (the
"Construction Management Agreement"), between Ross Stores, Inc. ("Ross") and BNP
Paribas Leasing Corporation ("BNPPLC")
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings
assigned to them in the Construction Management Agreement or in the Common
Definitions and Provisions Agreement referenced in the Construction Management
Agreement. This letter shall constitute a Construction Advance Request,
requesting a Construction Advance of:
$ ,
on the Advance Date that will occur on:
, 20 .
To induce BNPPLC to make such Construction Advance, Ross represents and
warrants as follows:
I. Calculation of limit imposed by Subparagraph of the Construction Management
Agreement:
(1) Ross has paid or incurred bona fide Reimbursable Construction-Period
Costs other than for Work (e.g., property taxes) of no less
than $
(2) Ross has paid or incurred bona fide Reimbursable Construction-Period
Costs for Prior Work of no less than $
(3) Ross has received prior Construction Advances of no more
than $
LIMIT (1 + 2 - 3) $
II. Projected Cost Overruns:
Ross [check one: does / does not ] believe that Projected
Construction Overruns are more likely than not. [If Ross does believe that
Projected Cost Overruns are more likely than not, and if Ross believes that the
amount of such Projected Construction Overruns can be reasonably estimated, Ross
estimates the same at $ .]
Note: The Construction Management Agreement defines Projected Construction
Overruns as the excess, if any, of (1) the total of projected Reimbursable
Construction-Period Costs yet to be incurred or for which Ross has yet to be
reimbursed hereunder (including projected Reimbursable Construction-Period Costs
for Future Work), over (2) the balance of the remaining Construction Allowance
projected to be available to cover such costs.
III. Absence of Certain CMA Suspension Events:
A. The Construction Project is progressing without significant interruption
in a good and workmanlike manner and substantially in accordance with Applicable
Laws, with Permitted
1
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Encumbrances, with Development Documents and with the requirements of the
Construction Management Agreement, except as follows:(if there are no
exceptions, insert "No Exceptions")
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
B. If Ross has received notice of any Defective Work, Ross has promptly
corrected or is diligently pursuing the correction of such Defective Work,
except as follows: (if there are no exceptions, insert "No Exceptions")
--------------------------------------------------------------------------------
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IV. Equipment
Attached hereto as Schedule I is a list describing in detail each fixture or
piece of equipment (whether or not such equipment will be permanently attached
to the Land or Property) that will cost in excess of $50,000 and that will be
purchased or acquired from the proceeds of the Construction Advance herein
requested.
ROSS ACKNOWLEDGES THAT IF ANY REPRESENTATION ABOVE IS NOT TRUE, THEN ROSS'S
OBLIGATION TO INDEMNIFY AGAINST LOSSES SUSTAINED BY BNPPLC OR ANY OTHER
INTERESTED PARTY BECAUSE OF ITS RELIANCE ON THIS LETTER SHALL CONSTITUTE
ABSOLUTE CONSTRUCTION OBLIGATIONS UNDER THE CONSTRUCTION MANAGEMENT AGREEMENT
AND THE LEASE.
2
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Executed this day of , 20 .
ROSS STORES, INC.
Name:
--------------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------------
[cc all Participants]
3
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Exhibit
Notice of Voluntary Ross Construction Contribution
BNP Paribas Leasing Corporation
12201 Merit Drive, Suite 860
Dallas, Texas 75251
Attention: Lloyd G. Cox
Re: Construction Management Agreement dated as of May 10, 2001 (the
"Construction Management Agreement"), between Ross Stores, Inc. ("Ross") and BNP
Paribas Leasing Corporation ("BNPPLC")
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings
assigned to them in the Construction Management Agreement or in the Common
Definitions and Provisions Agreement referenced in the Construction Management
Agreement. This letter shall constitute notice, given as described in
subparagraph of the Construction Management Agreement, that Ross is paying with
this letter, or unconditionally and irrevocably committing to pay as described
below, a Voluntary Ross Construction Contribution in the amount of
$ .
Such payment by Ross will be in addition to any Voluntary Ross Construction
Contributions required by other notices given by Ross as described in
subparagraph of the Construction Management Agreement.
Further, if the Voluntary Ross Construction Contribution required by this
letter is not being delivered to BNPPLC by Ross contemporaneously with this
letter, then at such time as BNPPLC's obligation to fund additional Construction
Advances is excused by any of the terms and conditions set forth in the
Construction Management Agreement, Ross shall be obligated to deliver such
Voluntary Ross Construction Contribution as required to eliminate (or reduce to
the maximum extent possible) Projected Cost Overruns, including any Projected
Cost Overruns caused by the accrual of Carrying Costs under and as described in
the Lease referenced in the Construction Management Agreement.
Executed this day of , 20 .
ROSS STORES, INC.
Name:
--------------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------------
[cc all Participants]
1
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Exhibit
Notice of Termination by Ross
BNP Paribas Leasing Corporation
12201 Merit Drive, Suite 860
Dallas, Texas 75251
Attention: Lloyd G. Cox
Re: Construction Management Agreement dated as of May 10, 2001 (the
"Construction Management Agreement"), between Ross Stores, Inc. ("Ross") and BNP
Paribas Leasing Corporation ("BNPPLC")
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings
assigned to them in the Construction Management Agreement referenced above or in
the Common Definitions and Provisions Agreement referenced in the Construction
Management Agreement.
Ross has determined that (1) the Construction Advances to be provided to it
under the Construction Management Agreement will not be sufficient to cover all
Reimbursable Construction-Period Costs, whether because the cost of the Work
exceeds budgeted expectations (resulting in Projected Cost Overruns) or because
Ross can no longer satisfy conditions to BNPPLC's obligation to provide
Construction Advances in the Construction Management Agreement, or (2) the
Construction Project cannot be substantially completed before the Base Rent
Commencement Date for reasons other than a breach by Ross of the Construction
Management Agreement. Accordingly, this letter shall constitute a Notice of
Ross's Election to Terminate the Construction Management Agreement, given as
provided in subparagraph of the Construction Management Agreement.
Ross irrevocably and unconditionally elects to terminate the Construction
Management Agreement effective as of the following date (which, as required by
subparagraph thereof is a date not less than thirty days after the date this
notice is given):
, 20
Ross acknowledges that the election made by Ross described above constitutes
an Issue 97-10 Election under and as defined in the Operative Documents.
Executed this day of , 20 .
ROSS STORES, INC.
Name:
--------------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------------
[cc all Participants]
1
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CLOSING CERTIFICATE
AND
AGREEMENT
BETWEEN
ROSS STORES, INC.,
("Ross")
AND
BNP PARIBAS LEASING CORPORATION
("BNPPLC")
May 10, 2001
(Fort Mill, South Carolina)
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
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1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF ROSS CONCERNING THE PROPERTY
1 (A) Condition of the Land 1 (B) Title to the Property 2
(D) Environmental Representations 2 (E) Cooperation by Ross and its
Affiliates 3
2
OTHER REPRESENTATIONS, WARRANTIES, COVENANTS AND ACKNOWLEDGMENTS OF ROSS
3 (A) No Default or Violation of Other Agreements 3 (B) No Suits
3 (C) Enforceability 3 (D) Solvency 4 (E) Organization 4
(F) Existence 4 (G) Not a Foreign Person 4 (H) Investment
Company Act 4 (I) ERISA 5 (J) Use of Proceeds 5 (K)
Omissions 5 (L) Further Assurances 5 (M) No Implied
Representations or Promises by BNPPLC 6
3.
LIMITED COVENANTS AND REPRESENTATIONS BY BNPPLC
6 (A) Cooperation of BNPPLC to Facilitate Construction and Development 6
(B) Actions Permitted by Ross Without BNPPLC's Consent 8 (C)
Waiver of Landlord's Liens 8 (D) Estoppel Letter 8 (E) Limited
Representations by BNPPLC Concerning Accounting Matters 8 (F) Other
Limited Representations by BNPPLC 9 (1) No Default or Violation 10
(2) No Suits. 10 (3) Enforceability 10 (4)
Organization 10 (5) Existence 10 (6) Not a Foreign
Person 10 (7) Bankruptcy 10 (G) Increase in the Maximum
Construction Allowance 11
4
OBLIGATIONS OF ROSS UNDER OTHER OPERATIVE DOCUMENTS NOT LIMITED BY THIS
AGREEMENT
11
5
OBLIGATIONS OF ROSS HEREUNDER NOT LIMITED BY OTHER OPERATIVE DOCUMENTS
11
6
WAIVER OF JURY TRIAL
11
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Exhibits and Schedules
A Exhibit Legal Description A Exhibit Permitted Encumbrance List A Exhibit
Development Document List A Exhibit Standard Notice of Request for Action by
BNPPLC
--------------------------------------------------------------------------------
CLOSING CERTIFICATE AND AGREEMENT
This CLOSING CERTIFICATE AND AGREEMENT (this "Agreement"), by and between
ROSS STORES, INC., a Delaware corporation ("Ross"), and BNP PARIBAS LEASING
CORPORATION, a Delaware corporation ("BNPPLC"), is made and dated as of May 10,
2001 (the "Effective Date").
RECITALS
A. Contemporaneously with the execution of this Agreement, BNPPLC and Ross
are executing a Common Definitions and Provisions Agreement (the "CDPA"), which
is dated as of the Effective Date and which is incorporated into and made a part
of this Agreement for all purposes. Capitalized terms defined in the CDPA and
used but not otherwise defined herein are intended in this Agreement to have the
respective meanings ascribed to them in the CDPA. As used in this Agreement,
"Property" is intended to mean the Property as defined in the CDPA. As used in
this Agreement, "Operative Documents" is intended to mean the Operative
Documents as defined in the CDPA.
B. At the request of Ross and to facilitate the transactions contemplated
in the other Operative Documents, BNPPLC is acquiring the Land described in
Exhibit A attached hereto from Seller and any existing improvements thereon,
subject to the Permitted Encumbrances described in Exhibit attached hereto and
with the understanding that development and use of such Land may be subject to
or benefitted by the Development Documents described in Exhibit attached hereto.
C. As a condition to its acquisition of the Land and execution of the other
Operative Documents, BNPPLC requires the representations, warranties and
covenants of Ross set out below.
NOW, THEREFORE, in consideration of the above recitals and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF ROSS CONCERNING THE
PROPERTY. Ross represents, warrants and covenants as follows:
2
(A) Condition of the Land. Tract 1 of the Land as described in Exhibit is
the same as the 107.816 acre tract shown on the plat prepared by Henry W.
Murray, PLS # 17930, of Land Design Surveying, Inc. dated 3/23/01, which plat
was delivered to BNPPLC at the request of Ross. All material improvements on the
Land as of the date hereof are as shown on that survey, and except as shown on
that survey there are no easements or encroachments visible or apparent from an
inspection of the Land. Adequate provision has been made (or can be made at a
cost that is reasonable in connection with future development of the Land) for
the Land to be served by electric, gas, storm and sanitary sewers, sanitary
water supply, telephone and other utilities required for the use thereof. All
streets, alleys and easements necessary to serve the Land and Improvements
contemplated by the Lease and the Construction Management Agreement have been
completed and are serviceable (or can be completed at a cost that is reasonable
in connection with future development of the Land). No extraordinary
circumstances (including any use of the Land as a habitat for endangered
species) exists that would materially and adversely affect the future
development of the Land, other than the need to mitigate the disturbance of
wetlands on the Land as described below in this subparagraph. Further, Ross is
not aware of any latent or patent material defects or deficiencies in the Land
that, either individually or in the aggregate, could materially and adversely
affect the use or occupancy of the Land or the construction of Improvements as
permitted by the Lease and Construction Management Agreement or could reasonably
be anticipated to endanger life or limb. No part of the Land is within a flood
plain as designated by any governmental authority.
1
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Ross represents and warrants to BNPPLC that the disturbance of wetlands on
the Land required to accomodate the construction contemplated in the
Construction Managment Agreement will be lawful, subject to the conditions set
forth in the Department of Army Permit issued to Seller (Permit No: 2001-1A-003)
(the "404 Permit") or to such alternative conditions that may hereafter be
established under permits or other written arrangments obtained or made by Ross
and approved by the Army Corp of Engineers (as the case may be, the "404 Permit
Conditions"). Ross further represents and warrants that it has thoroughly
investigated the cost of satisfying the 404 Permit Conditions (the "Wetland
Mitigation Costs") and that a reasonable estimate of the total Wetland
Mitigation Costs is $113,200 (the "Projected Wetland Mitigation Costs"). Ross
also agrees that if the actual Wetland Mitigation Costs should for any reason
exceed an amount equal to twice the Projected Wetland Mitigation Costs, BNPPLC
shall be entitled to decline to pay for or reimburse the excess from
Construction Advances, and any such excess that are not covered by Construction
Advances will constitute Environmental Losses which qualify Absolute
Construction Obligations for purposes of the Lease.
Ross will execute the 404 Permit as a transferee from Seller
contemporaneously with the execution of this Certificate and Agreement. If
requested by BNPPLC at any time thereafter, Ross will execute a transfer of the
404 Permit to BNPPLC or to any Affiliate of BNPPLC or other party that BNPPLC
may designate, together with any other documents needed or helpful to effectuate
such a transfer as determined by BNPPLC. Ross shall also cooperate with BNPPLC
in any other way that BNPPLC may request and that is necessary or helpful to
effectuate such a trnasfer.
(A) Title to the Property. The deed that Seller is executing in favor of
BNPPLC pursuant to the Acquisition Contract shall vest in BNPPLC good and
marketable title to the Land and existing Improvements thereon, subject only to
the Permitted Encumbrances, the Development Documents and any Liens Removable by
BNPPLC. Ross shall not, without the prior consent of BNPPLC, create, place or
authorize, or through any act or failure to act, acquiesce in the placing of,
any deed of trust, mortgage or other Lien, whether statutory, constitutional or
contractual against or covering the Property or any part thereof (other than
Permitted Encumbrances and Liens Removable by BNPPLC), regardless of whether the
same are expressly or otherwise subordinate to the Operative Documents or
BNPPLC's interest in the Property.
(B)
(C) Title Insurance. Without limiting Ross's obligations under the
preceding subparagraph, contemporaneously with the execution of this Agreement
Ross shall provide to BNPPLC a title insurance policy (or binder committing the
applicable title insurer to issue a title insurance policy, without the payment
of further premiums) in the amount of no less than $40,000,000, in form and
substance satisfactory to BNPPLC, written by one or more title insurance
companies satisfactory to BNPPLC and insuring BNPPLC's fee estate in the Land.
(D)
(E) Environmental Representations. To the knowledge of Ross except as
otherwise disclosed in the Environmental Report: (i) no Hazardous Substances
Activity has occurred prior to the Effective Date; (ii) no owner or operator of
the Property has reported or been required to report any release of any
Hazardous Substances on or from the Property pursuant to any Environmental Law;
and (iii) no owner or operator of the Property has received from any federal,
state or local governmental authority any warning, citation, notice of violation
or other communication regarding a suspected or known release or discharge of
Hazardous Substances on or from the Property or regarding a suspected or known
violation of Environmental Laws concerning the Property. Further, Ross
represents that to its knowledge, the Environmental Report taken as a whole is
not misleading or inaccurate in any material respect.
2
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(F)
(G) Cooperation by Ross and its Affiliates. If neither Ross nor an
Applicable Purchaser purchases the Property pursuant to the Purchase Agreement
on the Designated Sale Date, then after the Designated Sale Date:
(H)
(1) if a use of the Property by BNPPLC or any removal or modification of
Improvements proposed by BNPPLC would violate any Permitted Encumbrance,
Development Document or Applicable Law unless Ross or any of its Affiliates, as
an owner of adjacent property or otherwise, gave its consent or approval thereto
or agreed to join in a modification of a Permitted Encumbrance or Development
Document, then Ross shall, to the extent it can without violating Applicable
Law, give and cause its Affiliates to give such consent or approval or join in
such modification;
(1) to the extent, if any, that any Permitted Encumbrance, Development
Document or Applicable Law requires the consent or approval of Ross or any of
its Affiliates or of the City of Fort Mill, South Carolina or any other Person
to a transfer of any interest in the Property by BNPPLC or its successors or
assigns, Ross will without charge give and cause its Affiliates to give such
consent or approval and will cooperate in any way reasonably requested by BNPPLC
to assist BNPPLC to obtain such consent or approval from the City or any other
Person.
Ross's obligations under this subparagraph shall be binding upon any
successor or assign of Ross with respect to the Land and other properties
encumbered by the Permitted Encumbrances or subject to the Development
Documents.
1 OTHER REPRESENTATIONS, WARRANTIES, COVENANTS AND ACKNOWLEDGMENTS OF
ROSS. Ross represents, warrants, covenants and acknowledges as follows:
3
(A) No Default or Violation of Other Agreements. The execution, delivery
and performance by Ross of this Agreement and the other Operative Documents do
not and will not constitute a breach or default under any other material
agreement or contract to which Ross is a party or by which Ross is bound or
which affects the Property, and do not violate or contravene any law, order,
decree, rule or regulation to which Ross is subject, and such execution,
delivery and performance by Ross will not result in the creation or imposition
of (or the obligation to create or impose) any lien, charge or encumbrance on,
or security interest in, Ross's property pursuant to the provisions of any such
other material agreement.
(B)
(C) No Suits. There are no judicial or administrative actions, suits,
proceedings or investigations pending or, to Ross's knowledge, threatened that
will adversely affect the Property or the validity or enforceability or priority
of this Agreement or any other Operative Document, and Ross is not in default
with respect to any order, writ, injunction, decree or demand of any court or
other governmental or regulatory authority that could materially and adversely
affect the use, occupancy or operation of the Property for the purposes
contemplated in the Lease. No condemnation or other like proceedings are pending
or, to Ross's knowledge, threatened against the Property.
(D)
(E) Enforceability. The execution, delivery and performance of each of the
Operative Documents by Ross are duly authorized, are not in contravention of or
conflict with any term or provision of Ross's articles of incorporation or
bylaws and do not, to Ross's knowledge, conflict with any Applicable Laws or
require the consent or approval of any governmental body or other regulatory
3
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authority that has not heretofore been obtained; provided, some consents or
approvals which are readily obtainable and which are required for Ross's
performance under the Operative Documents (for example, building permits
required for construction of the Construction Project) may not have been
heretofore obtained, but Ross shall obtain such consents or approvals as
required in connection with its performance of the Operative Documents. Each of
the Operative Documents are valid, binding and legally enforceable obligations
of Ross except as such enforcement is affected by bankruptcy, insolvency and
similar laws affecting the rights of creditors, generally, and equitable
principles of general application.
(F)
(G) Solvency. Ross is not "insolvent" on the date hereof (that is, the sum
of Ross's absolute and contingent liabilities—including the obligations of Ross
under this Agreement and the other Operative Documents—does not exceed the fair
market value of Ross's assets) and has no outstanding liens, suits, garnishments
or court actions which could render Ross insolvent or bankrupt. Ross's capital
is adequate for the businesses in which Ross is engaged and intends to be
engaged. Ross has not incurred (whether hereby or otherwise), nor does Ross
intend to incur or believe that it will incur, debts which will be beyond its
ability to pay as such debts mature. There has not been filed by or, to Ross's
knowledge, against Ross a petition in bankruptcy or a petition or answer seeking
an assignment for the benefit of creditors, the appointment of a receiver,
trustee, custodian or liquidator with respect to Ross or any significant portion
of Ross's property, reorganization, arrangement, rearrangement, composition,
extension, liquidation or dissolution or similar relief under the federal
Bankruptcy Code or any state law. The financial statements and all financial
data heretofore delivered to BNPPLC relating to Ross are true, correct and
complete in all material respects. No material adverse change has occurred in
the financial position of Ross as reflected in Ross's financial statements
covering the fiscal period ended September 30, 2000.
(H)
(I) Organization. Ross is duly incorporated and legally existing under the
laws of the State of Delaware. Ross has all requisite corporate power and has
procured or will procure on a timely basis all governmental certificates of
authority, licenses, permits, qualifications and similar documentation required
to fulfill its obligations under this Agreement and the other Operative
Documents. Further, Ross has the corporate power and adequate authority, rights
and franchises to own Ross's property and to carry on Ross's business as now
conducted and is duly qualified and in good standing in each state in which the
character of Ross's business makes such qualification necessary (including the
State of South Carolina) or, if it is not so qualified in a state other than
South Carolina, such failure does not have a material adverse effect on the
properties, assets, operations or businesses of Ross and its Subsidiaries, taken
as a whole.
(J)
(K) Existence. During the Term, Ross shall continuously maintain its
existence and its qualification to do business in the State of South Carolina.
(L)
(M) Not a Foreign Person. Ross is not a "foreign person" within the
meaning of Sections 1445 and 7701 of the Code (i.e. Ross is not a non-resident
alien, foreign corporation, foreign partnership, foreign trust or foreign estate
as those terms are defined in the Code and regulations promulgated thereunder).
(N)
(O) Investment Company Act. Ross is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
4
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(P)
(Q) ERISA. Ross is not and will not become an "employee benefit plan" (as
defined in Section 3(3) of ERISA) which is subject to Title I of ERISA. The
assets of Ross do not and will not in the future constitute "plan assets" of one
or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. Ross is
not and will not become a "governmental plan" within the meaning of
Section 3(32) of ERISA. Transactions by or with Ross are not subject to state
statutes regulating investments of and fiduciary obligations with respect to
governmental plans. Each Plan and, to the knowledge of Ross, any Multiemployer
Plan, is in compliance with, and has been administered in compliance with, the
applicable provisions of ERISA, the Code and any other applicable Federal or
state law in all respects, the failure to comply with which would have a
material adverse effect upon the properties, assets, operations or businesses of
Ross and its Subsidiaries taken as a whole. As of the date hereof no event or
condition is occurring or exists which would require a notice from Ross under
subparagraph 15(c)(vi) of the Lease.
(R)
(S) Use of Proceeds. In no event shall the funds from the Initial Funding
Advance be used directly or indirectly for personal, family, household or
agricultural purposes or for the purpose, whether immediate, incidental or
ultimate, of purchasing, acquiring or carrying any "margin stock" or any "margin
securities" (as such terms are defined respectively in Regulation U and
Regulation G promulgated by the Board of Governors of the Federal Reserve
System) or to extend credit to others directly or indirectly for the purpose of
purchasing or carrying any such margin stock or margin securities. Ross
represents and warrants that Ross is not engaged principally, or as one of
Ross's important activities, in the business of extending credit to others for
the purpose of purchasing or carrying such margin stock or margin securities.
(T)
(U) Omissions. None of Ross's representations or warranties contained in
this Agreement or any other Operative Document or in any other document,
certificate or written statement furnished to BNPPLC by or on behalf of Ross
contains any untrue statement of a material fact or omits a material fact
necessary in order to make the statements contained herein or therein (when
taken in their entireties) not misleading.
(V)
(W) Further Assurances. Ross shall, on request of BNPPLC, (i) execute,
acknowledge, deliver and record or file such further instruments and do such
further acts as may be necessary, desirable or proper to carry out more
effectively the purposes of this Agreement or any other Operative Document and
to subject to this Agreement or any other Operative Document any property
intended by the terms hereof or thereof to be covered hereby or thereby,
including specifically, but without limitation, any renewals, additions,
substitutions, replacements or appurtenances to the Property; (ii) execute,
acknowledge, deliver, procure and record or file any document or instrument
deemed advisable by BNPPLC to protect its rights in and to the Property against
the rights or interests of third persons; and (iii) provide such certificates,
documents, reports, information, affidavits and other instruments and do such
further acts as may be necessary, desirable or proper in the reasonable
determination of BNPPLC to enable BNPPLC to comply with the requirements or
requests of any agency or authority having jurisdiction over it.
(X)
(Y) Ross will also actively assist BNPPLC and BNPPLC's Parent in completing
a "syndication" of the transactions contemplated in the Lease and other
Operative Documents. Such assistance shall include (a) using Ross's best efforts
to ensure that the syndication effort benefits from the existing
5
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banking relationships of Ross, (b) making senior management and representatives
of Ross available to participate in information meetings with potential
Participants at such times and places as BNPPLC or BNPPLC's Parent may
reasonably request, (c) assisting in the preparation of any confidential
information memorandum or other marketing materials to be used in connection
with the syndication, (d) hosting (with BNPPLC's Parent) one or more meetings of
prospective Participants, and (e) taking such other actions as BNPPLC or
BNPPLC's Parent may reasonably request relating to the syndication effort. Ross
will also promptly prepare and provide to BNPPLC and BNPPLC's Parent any
information, including financial information and projections with respect to
Ross and its subsidiaries and any information regarding the Property, as BNPPLC
or BNPPLC's Parent may reasonably deem necessary in facilitate the syndication
effort. Ross will also supplement such information from time to time so long as
the syndication effort continues so that such information remains up to date.
Finally, Ross will promptly approve any bank suggested by BNPPLC as a
Participant, to allow such bank to qualify as a Participant under and as defined
in the Common Definitions and Provisions Agreement and other Operative
Documents, so long as the bank has net worth of no less than seven and one half
percent (7.5%) of its total assets and has total assets of no less than
$10,000,000,000.00 (all according to then recent audited financial statements);
however, this covenant to approve a bank as a Participant will not be construed
to require Ross to agree to any change in the Spread or other terms and
conditions of the Operative Documents in order to satisfy such bank.
(Z)
(AA) No Implied Representations or Promises by BNPPLC. BNPPLC AND BNPPLC'S
AGENTS HAVE MADE NO REPRESENTATIONS OR PROMISES WITH RESPECT TO THE PROPERTY
EXCEPT AS EXPRESSLY SET FORTH IN THE OTHER OPERATIVE DOCUMENTS, AND NO RIGHTS,
EASEMENTS OR LICENSES ARE BEING ACQUIRED BY ROSS BY IMPLICATION OR OTHERWISE
EXCEPT AS EXPRESSLY SET FORTH IN THE OTHER OPERATIVE DOCUMENTS.
1 LIMITED COVENANTS AND REPRESENTATIONS BY BNPPLC.
2
(A) Cooperation of BNPPLC to Facilitate Construction and
Development. During the Term of the Lease BNPPLC shall take any action
reasonably requested by Ross to facilitate the construction or use of the
Property permitted by the Lease; provided, however, that:
(1) This subparagraph shall not impose upon BNPPLC the obligation to take
any action that can be taken by Ross, Ross's Affiliates or anyone else other
than BNPPLC as the owner of the Property.
(1) BNPPLC shall not be required by this subparagraph to make any payment to
another Person unless BNPPLC shall first have received funds from Ross, in
excess of any other amounts due from Ross under any of the Operative Documents,
sufficient to make the payment. (This clause (ii) will not be construed as
limiting the right of Ross to obtain additional Construction Advances, on and
subject to the terms and conditions set forth in the Construction Management
Agreement, for payments Ross itself may pay or incur an obligation to pay to
another Person.)
(1) BNPPLC shall have no obligations whatsoever under this subparagraph at
any time after a CMA Termination Event or when an Event of Default shall have
occurred and be continuing.
(1) Ross must request any action to be taken by BNPPLC pursuant to this
subparagraph, and such request must be specific and in writing, if required by
BNPPLC at the time the request is made. A suggested form for such a request is
attached as Exhibit.
6
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(1) No action may be required of BNPPLC pursuant to this subparagraph that
could constitute a violation of any Applicable Laws or compromise or constitute
a waiver of BNPPLC's rights under other provisions of this Agreement or any of
the other Operative Documents or that for any other reason is reasonably
objectionable to BNPPLC.
The actions BNPPLC shall take pursuant to this subparagraph if reasonably
requested by Ross will include, subject to the conditions listed in the proviso
above, executing or consenting to, or exercising or assisting Ross to exercise
rights under any (I) grant of easements, licenses, rights of way, and other
rights in the nature of easements encumbering the Land or the Improvements,
(II) release or termination of easements, licenses, rights of way or other
rights in the nature of easements which are for the benefit of the Land or
Improvements or any portion thereof, (III) dedication or transfer of portions of
the Land not improved with a building, for road, highway or other public
purposes, (IV) agreements (other than with Ross or its Affiliates) for the use
and maintenance of common areas, for reciprocal rights of parking, ingress and
egress and amendments to any covenants and restrictions affecting the Land or
any portion thereof, (V) documents required to create or administer a
governmental special benefit district or assessment district for public
improvements and collection of special assessments, (VI) instruments necessary
or desirable for the exercise or enforcement of rights or performance of
obligations under any Permitted Encumbrance or any contract, permit, license,
franchise or other right included within the term "Property" (including, without
limitation, under the Development Contracts), (VII) modifications of Permitted
Encumbrances (including any Development Contracts), (VIII) permit applications
or other documents required to accommodate the Construction Project,
(IX) confirmations of Ross's rights under any particular provisions of the
Operative Documents which Ross may wish to provide to a third party, (X) plat or
parcel map to be recorded for purposes of lawfully subdividing the Land into
lots or parcels, or (XI) documents that are needed to allow Ross to qualify for
ad valorem tax abatement or reductions under any state law that permits such tax
abatement or reductions (including any such agreements that may involve a
transfer of the Property or any part thereof by BNPPLC to a public or
quasi-public entity, if coupled with a lease back from such entity and a right
in favor of BNPPLC to repurchase from such entity at any time for a nominal
price). However, the determination of whether any such action is reasonably
requested or reasonably objectionable to BNPPLC may depend in whole or in part
upon the extent to which the requested action shall result in a lien to secure
payment or performance obligations against BNPPLC's interest in the Property,
shall cause a decrease in the value of the Property to less than forty-five
percent (45%) of Stipulated Loss Value after any Qualified Prepayments that may
result from such action are taken into account, or shall impose upon BNPPLC any
present or future obligations greater than the obligations BNPPLC is willing to
accept in reliance on the indemnifications provided by Ross under the Operative
Documents.
Any Losses incurred by BNPPLC because of any action taken pursuant to this
subparagraph shall be covered by the indemnification set forth in
subparagraph 5(c) of the Lease. Further, for purposes of such indemnification,
any action taken by BNPPLC will be deemed to have been made at the request of
Ross if made pursuant to any request of counsel to or any officer of Ross (or
with their knowledge, and without their objection) in connection with the
execution or administration of the Lease or the other Operative Documents.
7
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(A) Actions Permitted by Ross Without BNPPLC's Consent. No refusal by
BNPPLC to execute or join in the execution of any agreement, application or
other document requested by Ross pursuant to the preceding subparagraph shall
preclude Ross from itself executing such agreement, application or other
document; provided, that in doing so Ross is not purporting to act for BNPPLC
and does not thereby create or expand any obligations or restrictions that
encumber BNPPLC's title to the Property. Further, subject to the other terms and
conditions of the Lease and other Operative Documents, Ross shall be entitled to
do any of the following in Ross's own name and to the exclusion of BNPPLC during
the Term without any notice to or consent of BNPPLC so long as no CMA
Termination Event has occurred, so long as no Event of Default has occurred and
is continuing and so long as Ross is not purporting to act for BNPPLC and does
not thereby create or expand any obligations or restrictions that encumber
BNPPLC's title to the Property:
(1) perform obligations arising under and exercise and enforce the rights of
Ross or the owner of the Property under the Development Documents and Permitted
Encumbrances;
(1) perform obligations arising under and exercise and enforce the rights of
Ross or the owner of the Property with respect to any other contracts or
documents (such as building permits) included within the Personal Property; and
(1) recover and retain any monetary damages or other benefit inuring to Ross
or the owner of the Property through the enforcement of any rights, contracts or
other documents included within the Personal Property (including the Development
Documents and Permitted Encumbrances); provided, that to the extent any such
monetary damages may become payable as compensation for an adverse impact on
value of the Property, the rights of BNPPLC and Ross hereunder with respect to
the collection and application of such monetary damages shall be the same as for
condemnation proceeds payable because of a taking of all or any part of the
Property.
(A) Waiver of Landlord's Liens. BNPPLC waives any security interest,
statutory landlord's lien or other interest BNPPLC may have in or against
computer equipment and other tangible personal property placed on the Land from
time to time that Ross or its Affiliates own or lease from other lessors;
provided, however, that BNPPLC does not waive its interest in or rights with
respect to equipment or other property included within the "Property" as
described in Paragraph 7 of the Lease. Although computer equipment or other
tangible personal property may be "bolted down" or otherwise firmly affixed to
Improvements, it shall not by reason thereof become part of the Improvements if
it can be removed without causing structural or other material damage to the
Improvements and without rendering HVAC or other major building systems
inoperative and if it does not otherwise constitute "Property" as provided in
Paragraph 7 of the Lease.
(B)
(C) Estoppel Letter. Upon thirty days written request by Ross at any time
and from time to time prior to the Designated Sale Date, BNPPLC shall provide a
statement in writing certifying that the Operative Documents are unmodified and
in full effect (or, if there have been modifications, that the Operative
Documents are in full effect as modified, and setting forth such modifications),
certifying the dates to which the Base Rent payable by Ross under the Lease has
been paid, stating whether BNPPLC is aware of any default by Ross that may exist
under the Lease and confirming BNPPLC's agreements concerning landlord's liens
and other matters set forth in subparagraph. It being intended that any such
statement by BNPPLC may be relied upon by anyone with whom Ross may intend to
enter into an agreement for construction of the Improvements or other
significant agreements concerning the Property.
(D)
(E) Limited Representations by BNPPLC Concerning Accounting
Matters. BNPPLC is not expected or required to represent or warrant that the
Lease or the Purchase Agreement will qualify for
8
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any particular accounting treatment under GAAP. However, to permit Ross to
determine for itself the appropriate accounting for the Lease and the Purchase
Agreement, BNPPLC does represent to Ross the following as of the Effective Date:
(F)
(1) Equity capital invested in BNPPLC is greater than three percent (3%) of
the aggregate of all lease funding amounts (including participations) of BNPPLC.
Such equity capital investments constitute equity in legal form and are
reflected as shareholders' equity in the financial statements and accounting
records of BNPPLC.
(1) BNPPLC is one hundred percent (100%) owned by French American Bank
Corporation, which is one hundred percent (100%) owned by BNPPLC's Parent.
(1) BNPPLC leases properties of substantial value to more than fifteen
tenants.
(1) All parties to whom BNPPLC has any material obligations known to BNPPLC
are (and are expected to be) Affiliates of BNPPLC's Parent, Participants, or
participants with BNPPLC in other leasing deals or loans made by BNPPLC, or
other tenants or borrowers in such other leasing deals or loans.
(1) BNPPLC has substantial assets in addition to the Property, assets which
BNPPLC believes to have a value far in excess of the value of the Property.
(1) Other than any Funding Advances provided from time to time by
Participants under the Participation Agreement, BNPPLC expects to obtain all
Funding Advances from BNP Paribas or other Affiliates of BNPPLC (including
Funding Advances to cover Carrying Costs and other amounts to be capitalized as
part of the Outstanding Construction Allowance, and assuming that Ross uses the
Maximum Construction Allowance under the Construction Management Agreement), and
to the extent that BNP Paribas or such other Affiliates themselves borrow or
accept bank deposits to obtain the funds needed to provide such Funding
Advances, the obligation to repay such funds shall not be limited, by agreement
or corporate structure, to payments collected from Ross or otherwise recovered
from the Property.
(1) BNPPLC has not obtained residual value insurance or a residual value
guarantee from any third party to ensure the recovery of its investment in the
Property.
(1) BNPPLC does not intend to take any action during the term of the Lease
that would change, or anticipate any change in, any of the facts listed above in
this subparagraph.
Ross shall have the right to ask BNPPLC questions from time to time
concerning BNPPLC's financial condition, concerning matters relevant to the
proper accounting treatment of the Lease on Ross's financial statements and
accounting records (including the amount of BNPPLC's equity capital as a
percentage of the aggregate of all lease funding amounts [including
participations] by BNPPLC) or concerning BNPPLC's ability to perform under the
Lease or the Purchase Agreement, to which questions BNPPLC shall promptly
respond. Such response, however, may be limited to a statement that BNPPLC will
not provide requested information; provided, however, BNPPLC must notify Ross in
writing if at any time during the Term BNPPLC ceases to be 100% owned, directly
or indirectly, by BNP Paribas or if at any time during the Term BNPPLC believes
it could not represent that the statements in clauses (1), (5) and (7) above
continue to be accurate, whether because of a change in the capital structure of
BNPPLC, a purchase of residual value insurance with respect to the Property or
otherwise.
(A) Other Limited Representations by BNPPLC. BNPPLC represents that:
(B)
9
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(1) No Default or Violation. The execution, delivery and performance by
BNPPLC of this Agreement and the other Operative Documents do not and will not
constitute a breach or default under any material contract or agreement to which
BNPPLC is a party or by which BNPPLC is bound and do not, to the knowledge of
BNPPLC, violate or contravene any law, order, decree, rule or regulation to
which BNPPLC is subject. (As used in this subparagraph, "BNPPLC's knowledge"
means the present actual knowledge of Lloyd Cox, the current officer of BNPPLC
having primary responsibility for the negotiation of the Operative Documents.)
(1) No Suits. There are no judicial or administrative actions, suits,
proceedings or investigations pending or, to BNPPLC's knowledge, threatened
against BNPPLC that are reasonably likely to affect BNPPLC's interest in the
Property or the validity, enforceability or priority of the Lease or the
Purchase Agreement, and BNPPLC is not in default with respect to any order,
writ, injunction, decree or demand of any court or other governmental or
regulatory authority that could materially and adversely affect the business or
assets of BNPPLC or its interest in the Property.
(1) Enforceability. The execution, delivery and performance of each of the
Operative Documents by BNPPLC are duly authorized, are not in contravention of
or conflict with any term or provision of BNPPLC's articles of incorporation or
bylaws and do not, to BNPPLC's knowledge, require the consent or approval of any
governmental body or other regulatory authority that has not heretofore been
obtained or conflict with any Applicable Laws. Each of the Operative Documents
are valid, binding and legally enforceable obligations of BNPPLC except as such
enforcement is affected by bankruptcy, insolvency and similar laws affecting the
rights of creditors, generally, and equitable principles of general application;
provided, BNPPLC makes no representation or warranty that conditions imposed by
zoning ordinances or other state or local Applicable Laws to the purchase,
ownership, lease or operation of the Property have been satisfied.
(1) Organization. BNPPLC is duly incorporated and legally existing under
the laws of Delaware and is duly qualified to do business in the State of South
Carolina. BNPPLC has or will obtain on a timely basis, at Ross's expense to the
extent so provided in the Lease, all requisite power and all governmental
certificates of authority, licenses, permits, qualifications and other
documentation necessary to own and lease the Property and to perform its
obligations under the Operative Documents.
(1) Existence. During the Term, BNPPLC shall continuously maintain its
existence and, to the extent required to comply with its obligations under the
Operative Documents, its qualification to do business in the State of South
Carolina.
(1) Not a Foreign Person. BNPPLC is not a "foreign person" within the
meaning of Sections 1445 and 7701 of the Code (i.e., BNPPLC is not a
non-resident alien, foreign corporation, foreign partnership, foreign trust or
foreign estate as those terms are defined in the Code and regulations
promulgated thereunder).
(1) Bankruptcy. BNPPLC's capital is adequate for the businesses in which
BNPPLC is engaged and intends to be engaged. BNPPLC has not incurred (whether
hereby or otherwise), nor does BNPPLC intend to incur or believe that it will
incur, debts which will be beyond its ability to pay as such debts mature. There
has not been filed by or, to BNPPLC's knowledge, against BNPPLC a petition in
bankruptcy or a petition or answer seeking an assignment for the benefit of
creditors, the appointment of a receiver, trustee, custodian or liquidator with
respect to BNPPLC or any significant portion of BNPPLC's property,
reorganization, arrangement, rearrangement, composition, extension, liquidation
or dissolution or similar relief under the federal Bankruptcy Code or any state
law.
10
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(A) Increase in the Maximum Construction Allowance. BNPPLC will direct
BNPPLC's Parent to continue efforts to "syndicate" the transactions contemplated
by the Lease and other Operative Documents, although prospective Participants
have not expressed the level of interest in participating that Ross and BNPPLC
had hoped. Prospective Participants who are not Affiliates of BNPPLC
("Non-affiliate Banks") have now provided tentative commitments to participate
in those transactions at a level not to exceed $40,000,000, and BNPPLC will ask
those prospective Participants to make their commitments binding, on and subject
to the terms of the Participation Agreement, by becoming parties to such
agreement. Also, if Ross convinces any other Non-affiliate Bank to offer to
become a party to the Participation Agreement as a Participant and to thereby
increase the aggregate funding commitments from Non-affiliate Banks under such
agreement, BNPPLC shall consider the offer in good faith. BNPPLC shall not,
however, in any event be liable or suffer any loss of rights or increase in
obligations under the Operative Documents for any failure or refusal of BNPPLC
to persuade or to allow any one or more Non-affiliate Banks to become
Participants. If Non-affiliate Banks do become Participants by becoming parties
to the Participation Agreement, and if the aggregate funding commitments from
Non-affiliate Banks under the Participation Agreement exceed $45,000,000, then
BNPPLC will enter into a modification of the Operative Documents that increases
the Maximum Construction Allowance, if requested to do so by Ross. The amount of
such increase will equal the amount by which the aggregate funding commitments
from Non-affiliate Banks under the Participation Agreement exceed $45,000,000;
provided, however, in no event will BNPPLC be required to increase the Maximum
Construction Allowance pursuant to this provision by more than $15,000,000; and,
provided further, BNPPLC shall have no obligation to increase the Maximum
Construction Allowance at any time when an event has occurred or circumstances
exist that constitute an Event of Default or a CMA Termination Event or that
would, with the giving of notice or passing of time or both, constitute an Event
of Default or a CMA Termination Event.
(B)
2 OBLIGATIONS OF ROSS UNDER OTHER OPERATIVE DOCUMENTS NOT LIMITED BY THIS
AGREEMENT. Nothing contained in this Agreement shall limit, modify or otherwise
affect any of Ross's obligations under the other Operative Documents, which
obligations are intended to be separate, independent and in addition to, and not
in lieu of, those established by this Agreement.
3
4 OBLIGATIONS OF ROSS HEREUNDER NOT LIMITED BY OTHER OPERATIVE DOCUMENTS.
Recognizing that but for this Agreement (including the representations of Ross
set forth in Paragraphs and) BNPPLC would not acquire the Property or enter into
the other Operative Documents, Ross agrees that BNPPLC's rights for any breach
of this Agreement (including a breach of such representations) shall not be
limited by any provision of the other Operative Documents that would limit
Ross's liability thereunder, including any provision therein that would limit
Ross's liability in the event of a termination of the Lease or of any of Ross's
rights or obligations under the Purchase Agreement.
5
6 WAIVER OF JURY TRIAL. BY ITS EXECUTION OF THIS AGREEMENT, EACH OF ROSS AND
BNPPLC HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF THE OPERATIVE DOCUMENTS OR ANY OF THEM OR
ANY OTHER DOCUMENT OR DEALINGS BETWEEN THEM RELATING TO THE PROPERTY. The scope
of this waiver is intended to be all-encompassing of any and all disputes that
may be filed in any court and that relate to the subject matter of this
transaction, including contract claims, tort claims, breach of duty claims, and
all other common law and statutory claims. This waiver is a material inducement
to each of BNPPLC and Ross as they enter into a business relationship; each has
already relied on the waiver in entering into the
11
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Operative Documents; and each will continue to rely on the waiver in their
related future dealings. Ross and BNPPLC, each having reviewed this waiver with
its legal counsel, knowingly and voluntarily waives its jury trial rights
following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
EACH OF THE OPERATIVE DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
TO THE PROPERTY. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
7
8
9
[The signature pages follow.]
12
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IN WITNESS WHEREOF, this Closing Certificate and Agreement is hereby
executed in multiple originals as of the Effective Date above set forth.
"Ross"
ROSS STORES, INC.
By:
/s/ J.Call
--------------------------------------------------------------------------------
John G. Call
Senior Vice President
Chief Financial Officier
[Continuation of signature pages to Closing Certificate and Agreement dated to
be effective as of May 10, 2001]
13
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"BNPPLC"
BNP PARIBAS LEASING CORPORATION
By:
/s/ Lloyd G. Cox
--------------------------------------------------------------------------------
Lloyd G. Cox,
Managing Director
14
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Exhibit A
LEGAL DESCRIPTION
All that certain real property situate in Fort Mill, South Carolina,
described as follows:
[TO BE ADDED]
[[NOTE: PLEASE PROVIDE LEGAL DESCRIPTION]]
TAX MAP NUMBER:
DERIVATION: Deed from to Grantor dated , and
recorded in Deed Book at Page
1
--------------------------------------------------------------------------------
Exhibit B
Permitted Encumbrances
1.County and city taxes for the Fiscal Year 2001, a lien not yet due or payable.
2.[TO BE COMPLETED.]
[[NOTE: WE HAVE NOT YET RECEIVED OR REVIEWED TITLE.]]
1
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Exhibit C
Development Documents
1.[TO BE COMPLETED.]
[[NOTE: WE HAVE NOT YET RECEIVED OR REVIEWED TITLE.]]
2
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Exhibit
Notice of Request For Action by BNPPLC
BNP Paribas Leasing Corporation
12201 Merit Drive
Suite 860
Dallas, Texas 75251
Attention: Lloyd G. Cox
Re: Closing Certificate and Agreement dated as of May 10, 2001, between Ross
Stores, Inc. and BNP Paribas Leasing Corporation
Gentlemen:
Capitalized terms used in this letter are intended to have the meanings
assigned to them in the Closing Certificate and Agreement referenced above.
Pursuant to subparagraph of the Closing Certificate and Agreement, Ross requests
the following of BNPPLC:
[INSERT HERE A SPECIFIC DESCRIPTION OF THE ACTION REQUESTED—e.g., "Please
execute the enclosed Application for Building Permit required by the City of
Fort Mill, South Carolina in connection with construction of certain
Improvements which are part of the Construction Project."]
PLEASE NOTE: SUBPARAGRAPH OF THE CLOSING CERTIFICATE OBLIGATES BNPPLC NOT TO
UNREASONABLY REFUSE TO COMPLY WITH THE FOREGOING REQUEST, SUBJECT TO TERMS AND
CONDITIONS SET FORTH IN THAT SUBPARAGRAPH. ROSS HEREBY CERTIFIES TO BNPPLC THAT
AFTER CAREFUL CONSIDERATION ROSS BELIEVES THAT ALL SUCH TERMS AND CONDITIONS ARE
SATISFIED IN THE CASE OF THE FOREGOING REQUEST, AND ROSS HEREBY RATIFIES AND
CONFIRMS ITS OBLIGATION TO INDEMNIFY BNPPLC AGAINST ANY LOSSES BNPPLC MAY INCUR
OR SUFFER BECAUSE OF ITS COMPLIANCE WITH SUCH REQUEST AS PROVIDED IN
SUBPARAGRAPH 5(c) OF THE LEASE.
Ross respectfully requests that BNPPLC respond to this notice as soon as
reasonably possible.
Executed this day of , 20 .
ROSS STORES, INC.
By:
--------------------------------------------------------------------------------
Name: Title:
2
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QuickLinks
EXHIBIT 10.5
TABLE OF CONTENTS
Exhibits and Schedules
Excerpts from Existing Credit Agreement
ARTICLE VII NEGATIVE COVENANTS
Fixed Rate Lock Notice , 200
Notice of Base Rent Period Election
Schedule 1 FINANCIAL COVENANTS FINANCIAL COVENANTS AND CREDIT PROVISIONS
Part I—Defined Terms
Part II—Financial Covenants for Lease Agreement
Part III—Tests to Establish Spread
COMMON DEFINITIONS AND PROVISIONS AGREEMENT
RECITALS
AGREEMENTS ARTICLE I—LIST OF DEFINED TERMS
ARTICLE II—RULES OF INTERPRETATION
TABLE OF CONTENTS
Exhibits
CONSTRUCTION MANAGEMENT AGREEMENT
RECITALS
CONSENT AND AUTHORIZATION
GENERAL TERMS AND CONDITIONS
Exhibit Legal Description
Exhibit Description of the Construction Project
Exhibit Estoppel From Contractor
Exhibit Estoppel From Design Professionals , 20
Exhibit Construction Advance Request Form
Exhibit Notice of Voluntary Ross Construction Contribution
Exhibit Notice of Termination by Ross
TABLE OF CONTENTS
Exhibits and Schedules
Exhibit A LEGAL DESCRIPTION
Exhibit B Permitted Encumbrances
Exhibit C Development Documents
Exhibit Notice of Request For Action by BNPPLC
|
QuickLinks -- Click here to rapidly navigate through this document
EXHIBIT 10.65
AMENDMENT NUMBER FIVE TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER FIVE TO LOAN AND SECURITY AGREEMENT (this
"Amendment"), is entered into as of August , 2001, between FOOTHILL CAPITAL
CORPORATION, a California corporation, ("Foothill"), and NETWORK COMPUTING
DEVICES, INC., a Delaware corporation ("Borrower"), with reference to the
following facts:
WHEREAS, Foothill and Borrower are parties to that certain Loan and Security
Agreement, dated as of March 30, 2000 (as amended, restated, or modified from
time to time, the "Agreement");
WHEREAS, Borrower has requested that Foothill make certain changes to the
Agreement; and
WHEREAS, Foothill is willing to consent to these certain changes and take
other actions with respect to the Agreement, all on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the above recitals and the mutual
promises contained herein, Foothill and Borrower hereby agree as follows:
1. Defined Terms. All capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Agreement, as amended
hereby.
2. Amendments to the Agreement.
a. Section 1.1 of the Agreement hereby is amended by adding or amending and
restating, as applicable, the following defined terms in the proper alphabetical
order:
"Fifth Amendment" means that certain Amendment Number Five to Loan and
Security Agreement, dated as of August , 2001, between Borrower and Foothill.
"Fifth Amendment Closing Date" means the date that all conditions set forth
in Section 5 of the Fifth Amendment have been satisfied.
"Maximum Amount" means $3,250,000.
b. Section 3.4 of the Agreement is hereby amended by deleting the first
sentence thereof and inserting the following in place thereof:
"This Agreement shall become effective upon the execution and delivery
hereof by Borrower and Foothill and shall continue in full force and effect for
a term ending on September 15, 2001 (the "Maturity Date")."
3. Representations and Warranties. Borrower hereby represents and warrants to
Foothill that:
(a) the execution, delivery, and performance of this Amendment and of the
Agreement, as amended by this Amendment, are within its corporate powers, have
been duly authorized by all necessary corporate action, and are not in
contravention of any law, rule, or regulation, or any order, judgment, decree,
writ, injunction, or award of any arbitrator, court, or governmental authority,
or of the terms of its charter or bylaws, or of any contract or undertaking to
which it is a party or by which any of its properties may be bound or affected,
(b) this Amendment and the Agreement, as amended by this Amendment,
constitute Borrower's legal, valid, and binding obligation, enforceable against
Borrower in accordance with its terms, and
(c) this Amendment has been duly executed and delivered by Borrower.
4. Conditions Precedent to Amendment. The satisfaction of each of the
following shall constitute conditions precedent to the effectiveness of this
Amendment:
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(a) Borrower shall have retained the services of a crisis management
consultant (a "Crisis Management Consultant"), satisfactory to Foothill in its
sole discretion. Such Crisis Management Consultant may be chosen from the list
of consultants included on Exhibit A hereto. Borrower shall cause the Crisis
Management Consultant to communicate directly with Foothill regarding the status
of such Crisis Management Consultant's review of Borrower's current financial
position and prospects and such other matters as Foothill shall request, with
such regularity as Foothill shall request.
(b) Foothill shall have received the reaffirmation and consent attached
hereto as Exhibit B, duly executed and delivered by an authorized officer of
each Guarantor;
(c) The representations and warranties in this Amendment, the Agreement as
amended by this Amendment and any other amendments thereto, and the other Loan
Documents shall be true and correct in all respects on and as of the date
hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date);
(d) No Event of Default or event which with the giving of notice or passage
of time would constitute an Event of Default shall have occurred and be
continuing on the date hereof, nor shall result from the consummation of the
transactions contemplated herein;
(e) No injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any
governmental authority against Borrower or Foothill; and
(f) All other documents and legal matters in connection with the
transactions contemplated by this Amendment shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to Foothill
and its counsel.
5. Miscellaneous.
(a) Upon the effectiveness of this Amendment, each reference in the
Agreement to "this Agreement", "hereunder", "herein", "hereof" or words of like
import referring to the Agreement shall mean and refer to the Agreement as
amended by this Amendment.
(b) Upon the effectiveness of this Amendment, each reference in the Loan
Documents to the "Loan Agreement", "thereunder", "therein", "thereof" or words
of like import referring to the Agreement shall mean and refer to the Agreement
as amended by this Amendment.
(c) This Amendment shall be governed by and construed in accordance with the
laws of the State of California.
(d) This Amendment may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Amendment. Delivery of an
executed counterpart of this Amendment by telefacsimile shall be equally as
effective as delivery of a manually executed counterpart of this Amendment. Any
party delivering an executed counterpart of this Amendment by telefacsimile also
shall deliver a manually executed counterpart of this Amendment but the failure
to deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Amendment.
[Remainder of page left intentionally blank]
2
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first written above.
NETWORK COMPUTING DEVICES, INC.,
a Delaware corporation
By:
--------------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By:
--------------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------------
3
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Exhibit A
Mr. Andrew Hinkelman
Pricewaterhouse Coopers LLP
Telephone: (415) 498-6526
Mr. Dave Prolman
Prolman Associates
Telephone: (800) 300-1887
Mr. John L. Davidson
Inverness Partners, Inc.
Telephone: (503) 638-8848
A–1
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Exhibit B
REAFFIRMATION AND CONSENT
All capitalized terms used herein but not otherwise defined herein shall have
the meanings ascribed to them in that certain Amendment Number Five to Loan and
Security Agreement, dated as of August , 2001 (the "Amendment"). The
undersigned hereby (a) represents and warrants to Foothill that the execution,
delivery, and performance of this Reaffirmation and Consent are within its
corporate powers, have been duly authorized by all necessary corporate action,
and are not in contravention of any law, rule, or regulation, or any order,
judgment, decree, writ, injunction, or award of any arbitrator, court, or
governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its properties
may be bound or affected; (b) consents to the amendment of the Agreement by the
Amendment and to the transactions described therein; (c) acknowledges and
reaffirms its obligations owing to Foothill under the Guaranty and any other
Loan Documents to which it is a party; and (d) agrees that each of the Guaranty
and any other Loan Documents to which it is a party is and shall remain in full
force and effect. Although the undersigned has been informed of the matters set
forth herein and has acknowledged and agreed to same, it understands that
Foothill has no obligations to inform it of such matters in the future or to
seek its acknowledgement or agreement to future amendments, and nothing herein
shall create such a duty. Delivery of an executed counterpart of this
Reaffirmation and Consent by telefacsimile shall be equally as effective as
delivery of an original executed counterpart of this Reaffirmation and Consent.
Any party delivering an executed counterpart of this Reaffirmation and Consent
by telefacsimile also shall deliver an original executed counterpart of this
Reaffirmation and Consent but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Reaffirmation and Consent. This Reaffirmation and Consent shall be governed
by the laws of the State of California.
AUSTRALIA, NETWORK COMPUTING DEVICES (BENELUX) B.V., a company organized under
the laws of
The Netherlands
By:
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Name:
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Title:
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NETWORK COMPUTING DEVICES (CANADA), INC.,
a corporation organized under the laws of Canada
By:
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Name:
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Title:
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A–2
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NETWORK COMPUTING DEVICES (FRANCE) S.A.R.L.,
a company organized under the laws of France
By:
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Name:
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Title:
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NETWORK COMPUTING DEVICES, GMBH, a company organized under the laws of Germany
By:
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Name:
--------------------------------------------------------------------------------
Title:
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NCD GRAPHIC SOFTWARE CORPORATION,
an Oregon corporation
By:
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Name:
--------------------------------------------------------------------------------
Title:
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NETWORK COMPUTING DEVICES (FSC), INC.,
a Guam corporation
By:
--------------------------------------------------------------------------------
Name:
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Title:
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NCD ACQUISITION CORP., an Indiana corporation
By:
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Name:
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Title:
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NETWORK COMPUTING DEVICES (UK), LTD., a company organized under the laws of
England
By:
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Name:
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Title:
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A–3
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NETWORK COMPUTING DEVICES SCANDINAVIA AB,
a company organized under the laws of Sweden
By:
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Name:
--------------------------------------------------------------------------------
Title:
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A–4
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QuickLinks
AMENDMENT NUMBER FIVE TO LOAN AND SECURITY AGREEMENT
Exhibit A
Exhibit B
|
__________________
Exhibit 10(ii)
As amended as of January 18, 2001
FAMILY DOLLAR 2000
OUTSIDE DIRECTORS PLAN
SECTION 1. GENERAL
1.1 Purpose. The Family Dollar 2000 Outside Directors Plan (the
"Plan") has been established by Family Dollar Stores, Inc. (the "Company") to
promote the interests of the Company and its shareholders by enhancing the
Company's ability to attract and retain the services of experienced and
knowledgeable directors and by encouraging such directors to acquire an
increased proprietary interest in the Company.
1.2 Operation and Administration. The operation and administration
of the Plan shall be subject to the provisions of Section 3. Capitalized terms
in the Plan shall be defined as set forth in Section 5 or elsewhere in the Plan.
SECTION 2. AWARDS
2.1 General.
(a) For each Plan Year, each Director who is an Eligible Director
on the first day of that Plan Year shall be granted a "Retainer
Award" for the year, which shall be in the form of shares of
Stock having a Fair Market Value of $10,000. Except as
otherwise provided in this subsection 2.1, the Retainer Award
for any Plan Year shall be made as of the first business day of
that Plan Year (the "Award Date" for that Retainer Award), and
the Fair Market Value of the Stock so awarded shall be
determined as of that date.
(b) If a Director becomes an Eligible Director during a Plan Year,
on a date other than the first day of the Plan Year, he or she
shall be granted a Retainer Award for the year, which shall be
in the form of shares of Stock having a Fair Market Value equal
to $10,000, subject to a pro-rata reduction to reflect the
portion of the Plan Year prior to the date on which he or she
becomes an Eligible Director. A Director's Retainer Award under
this paragraph (b) shall be made on the first business day on
which he or she is an Eligible Director (the "Award Date" for
that Retainer Award), and the Fair Market Value of the Stock so
awarded shall be determined as of that date.
2.2 Fractional Shares. If the Retainer Award that would otherwise be
made to a Participant as of any Award Date under paragraph 2.1 is not a whole
number, then the number of shares otherwise awardable shall be increased to the
next highest whole number.
SECTION 3. OPERATION AND ADMINISTRATION
3.1 Effective Date. The Plan shall be effective as of the Effective
Date and shall be unlimited in duration; provided, however, that no new Awards
shall be made under the Plan after the fifteenth anniversary of the Effective
Date.
3.2 Shares Subject to Plan. The shares of Stock with respect to
which Awards may be made under the Plan shall be shares currently authorized but
not outstanding shares which are held in the treasury stock account of the
Company. The number of shares of Stock available for Awards under the Plan
during any fiscal year of the Company shall equal:
(a) 0.2% of the adjusted average of the outstanding Stock, as that number is
determined by the Company to calculate fully diluted earnings per share
for the preceding fiscal year;
REDUCED BY
(b) any shares of Stock granted pursuant to Awards under the Plan.
3.3 Adjustments to Shares.
(a) The existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Company or its shareholders
to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or
its business, any merger or consolidation of the Company, any issue of
bonds, debentures, preferred or prior preference stocks ahead of or
affecting the Company's Stock or the rights thereof, the dissolution or
liquidation of the Company, any sale or transfer of all or any part of
its assets or business, or any other corporate act or proceeding,
whether of a similar character of otherwise.
3.4 Limit on Distribution. Distribution of shares of Stock or other
amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall have
no liability to issue any shares of Stock under the Plan or make any
other distribution of benefits under the Plan unless such delivery or
distribution would comply with all applicable laws and the applicable
requirements of any securities exchange or similar entity.
(b) The Board shall add such conditions and limitations to any Award to any
Participant who is subject to Section 16(a) and 16(b) of the Securities
Exchange Act of 1934, as is necessary to comply with Section 16(a) or
16(b) and the rules and regulations thereunder or to obtain any
exemption therefrom.
(c) To the extent that the Plan provides for issuance of certificates to
reflect the transfer of shares of Stock, the transfer of such shares
may, at the direction of the Board, be effected on a non-certificated
basis, to the extent not prohibited by the provisions of Rule 16b-3,
applicable local law, the applicable rules of any stock exchange, or any
other applicable rules.
3.5 Taxes. All Awards and other payments under the Plan are subject
to all applicable taxes.
3.6 Administration. The authority to control and manage the
operation and administration of the Plan shall be vested in the Board.
3.7 Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
3.8 Action by Company. Any action required or permitted to be taken
by the Company shall be by resolution of the Board, or by action of one or more
members of the Board (including a committee of the Board) who are duly
authorized to act for the Board, by a duly authorized officer of the Board, or
(except to the extent prohibited by the provisions of SEC Rule 16b-3, applicable
local law, the applicable rules of any stock exchange, or any other applicable
rules) by a duly authorized officer of the Company.
SECTION 4. AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, provided that,
subject to subsection 3.3 (relating to certain adjustments to shares), no
amendment or termination may adversely affect the rights of any Participant or
beneficiary under any Award made under the Plan prior to the date such amendment
is adopted by the Board. Notwithstanding the provisions of this Section 4, in no
event shall the provisions of the Plan relating to Awards under the Plan be
amended more than once every six months, other than to comport with changes in
the Internal Revenue Code, the Employment Retirement Income Security Act, or the
rules thereunder; provided, however, that the limitation set forth in this
sentence shall be applied only to the extent required under SEC Rule 16b-3(d) or
any successor provision thereof.
SECTION 5. DEFINED TERMS
For purposes of the Plan, the terms listed below shall be defined as
follows:
(a) Award. The term "Award" shall mean the Retainer Award granted to any
person under the Plan.
(b) Board. The term "Board" shall mean the Board of Directors of the
Company.
(c) Director. The term "Director" means a member of the Board.
(d) Dollars. As used in the Plan, the term "dollars" or numbers preceded
by the symbol "$" shall mean amounts in United States Dollars.
(e) Effective Date. The "Effective Date" means the date on which
Directors begin their yearly term of office on the Board following their
election at the Company's 2000 annual shareholders meeting.
(f) Eligible Director. Each Director who is not an employee of the
Company or any Related Company shall be an "Eligible Director".
(g) Fair Market Value. The "Fair Market Value" of a share of Stock of
the Company as of any date shall be the closing market composite price
for such Stock as reported for the New York Stock Exchange - Composite
Transactions on that date or, if Stock is not traded on that date, on
the next preceding date on which Stock was traded.
(h) Participant. A "Participant" is any person who has received an Award
under the Plan.
(i) Plan Year. The term "Plan Year" means the period (i) beginning on
the date on which members of the Board begin their yearly term as Board
members following the election of Directors at the Company's annual
shareholders meeting and (ii)ending on the day immediately prior to the
first day of the following Plan Year. The first Plan Year shall begin on
the Effective Date.
(j) Related Company. The term "Related Company" means any company during
any period in which it is a "subsidiary corporation" (as that term is
defined in Code section 424(f) with respect to the Company).
(k) SEC. "SEC" shall mean the Securities and Exchange Commission.
(l) Stock. The term "Stock" shall mean shares of common stock of the
Company.
|
Exhibit 10.29
FULL-RECOURSE PROMISSORY NOTE
$ 460,244.25
Sunnyvale, California
Dated as of December 28, 2000
FOR VALUE RECEIVED, the undersigned, Charles E. Shalvoy, promises to pay to
the order of Conductus, Inc., a Delaware corporation (the "Company"), the
principal sum of four hundred thousand two hundred forty-four dollars and
twenty-five cents ($460,244.25) with interest from the date hereof on the unpaid
principal as specified herein. The entire unpaid balance of principal and
interest shall be due and payable on the earlier to occur of (l) December 28,
2005or (2) termination of employment with the Company.
The interest rate on this note shall be an annual rate of interest equal to
five and eighty-seven hundredths percent (5.87%). Interest shall be computed on
the basis of a year of 365 days and the actual number of days elapsed, except
that interest shall not be computed on the day of full repayment of this note.
Interest not paid when due shall earn interest at the rate specified above.
If payment is not made when due, and if action is instituted on this note,
the undersigned agrees to pay the Company reasonable attorneys' fees and costs
of suit, as fixed by court.
The undersigned shall have the right to prepay all or any part of the unpaid
principal amount of this note, without premium, at any time prior to the
maturity hereof.
This note is a full-recourse note originally secured by a pledge of shares
of Common Stock of the Company pursuant to a Security Agreement of even date
herewith, which is on file with the Secretary of the Company.
This note shall be governed by and construed in accordance with the laws of
the State of California without regard to California choice of law provisions.
IN WITNESS WHEREOF, the undersigned has signed, dated and delivered this
note as of the date and year first above written.
/s/ CHARLES E. SHALVOY
--------------------------------------------------------------------------------
Signature
1
--------------------------------------------------------------------------------
|
Exhibit 10.12
AMENDED AND RESTATED
LEASE AGREEMENT
by and between
COUSINS PROPERTIES INCORPORATED
("Landlord")
and
INDUS INTERNATIONAL, INC.
("Tenant")
dated
August 1, 2000
for
107,200 square feet of Rentable Floor Area
Term: 140 months
3301 Windy Ridge Parkway
Atlanta, Georgia 30339
TABLE OF CONTENTS
1
. Certain Definitions
1
2. Lease of Premises
3
3. Term
4
4. Possession
4
5. Rental Payments
4
6. Base Rental
5
7. Rent Escalation
5
8. Additional Rental
7
9. Operating Expenses
8
10. Tenant Taxes
13
11.
Payments
13
12. Late Charges
13
13. Use Rules
14
14. A1terations
14
15. Repairs and Maintenance
14
16. Landlord's Right of Entry
16
17. Insurance
17
18. Waiver of Subrogation
18
19. Default
18
20. Waiver of Breach
21
21. Assignment and Subletting
21
22. Destruction
23
23. Landlord's Lien
24
24. Services by Landlord
24
25. Attorneys' Fees and Homestead
24
2
6. Time
25
27. Subordination and Attornment
25
28. Estoppel Certificates
27
29. No Estate
27
30. Cumulative Rights
28
31. Holding Over
28
32. Surrender of Premises
28
33. Notices
29
34. Damage or Theft of Personal Property
29
35. Eminent Domain
29
36. Parties
31
37 .Indemnities
31
38. Intentionally Deleted
31
39. Force Majeure
32
40. Landlord's Liability
32
41. Landlord's Covenant of Quiet Enjoyment
33
43. Hazardous Substances
33
44. Submission of Lease
34
45. Severability
34
46. Entire Agreement
34
47. Headings
35
48. Broker
35
49. Governing Law
36
50. Special Stipulations
36
51. Authority
36
52. Joint and Several Liability
36
ATLOI/IO756990v6
Rules and Regulations
Exhibit "A" ________________
Legal Description
Exhibit "B" ________________
Floor Plans
Exhibit "C" ________________
Supplemental Notice
Exhibit "D" ________________
Construction Work
Exhibit "D-l" ______________
Landlord's Preferred Subcontrators
Exhibit "D-2" ______________
Landlord's Coordination Services
Exhibit "E" ________________
Building Standard Services
Exhibit "F" ________________
Parking Area Re-Striping Plan
Exhibit "G" ________________
Special Stipulations
Exhibit "G-l" ______________
Location of Proposed Deck
Exhibit "H" ________________
Form of Declaration of Easements
ATLOI/IO756990v6
ii
AMENDED AND RESTATED LEASE AGREEMENT
THIS AMENDED AND RESTATED LEASE AGREEMENT ("Lease"), is made and entered into as
of the 1st day of August, 2000 ("Effective Date"), by and between Landlord and
Tenant.
RECITALS
Landlord and The System Works, Inc. ("System Works") entered into that certain
Lease Agreement, dated June 8, 1993 ("Lease Agreement"), which Lease Agreement
was subsequently amended by First Amendment to Lease between Landlord and System
Works, dated July 11, 1994, by Second Amendment to Lease between TSW
International, Inc. ("TSW") (as successor to System Works by name change), dated
August 31, 1996, and by Third Amendment to Lease between Landlord and TSW, dated
August 31, 1997 (the Lease Agreement, as so amended, is hereinafter referred to
as the "Original Lease"). Tenant is the successor to System Works and TSW by
name change and is the current holder of all of the interest of Tenant under the
Original Lease.
Landlord and Tenant have agreed to extend the Lease Term and to modify and
restate all of the provisions of the Original Lease as set forth in this Amended
and Restated Lease Agreement. Accordingly, notwithstanding the fact that the
Lease Term under the Original Lease is not scheduled to expire until December
31, 2003, Landlord and Tenant do hereby agree that the Original Lease is
amended, modified, replaced and completely restated as of the date of this Lease
as set forth herein. From and after the date of this Lease, Tenant's occupancy
of the Leased Premises, as described herein, and the relationship of landlord
and tenant between Landlord and Tenant shall be governed solely by the
provisions of this Amended and Restated Lease Agreement which shall completely
supercede the Original Lease as of the date hereof. Landlord and Tenant each
acknowledge and agree that there are no unperformed obligations of either party
under the Original Lease. From and after the date of this Lease all of the
rights, duties and obligations of Landlord and Tenant with respect to the
Demised Premises and the Building shall be governed solely by the terms of this
Lease. Notwithstanding the forgoing, all indemnity obligations set forth in the
Original Lease which expressly survive the termination thereof, shall remain in
full force and effect as if the Original Lease had been terminated.
1. Certain Definitions. For purposes of this Lease, the following terms shall
have the meanings hereinafter ascribed thereto:
(a) Landlord: COUSINS PROPERTIES INCORPORATED, a Georgia corporation
(b) Landlord's Address:
2500 Windy Ridge Parkway
Suite 1600
Atlanta, Georgia 30339
Attn: Corporate Secretary
(c) Tenant: INDUS INTERNATIONAL, INC
(d) Tenant's Address:
Suite 500
3301 Windy Ridge Parkway
Atlanta, Georgia 30339
(e) Building Address:
3301 Windy Ridge Parkway
Atlanta, Georgia 30339
(f) Suite Number: 500
(g) Rentable Floor Area of Demised Premises:
107,200 square feet, which amount is conclusively agreed by the parties hereto
to be correct. The parties further agree conclusively that the Rentable Floor
Area of each of the respective floors of the Demised Premises is as follows:
Lower Level Floor 9,856
1st Floor 17,686
2nd Floor 18,015
3rd Floor 19,909
4th Floor 20,403
5th Floor 21,331
TOTAL 107,200
(h) Rentable Floor Area of Building:
107,200 square feet, which amount is conclusively agreed by the parties hereto
to be correct.
(i) Lease Term: 140 months, beginning on the Effective Date and ending on March
31, 2012
(j) Base Rental Rate: The amounts per annum per square foot of Rentable Floor
Area of Demised Premises set forth in Article 7 below.
2
(k) Rental Commencement Date The Effective Date of this Lease.
(i) New Rate Rental Commencement Date: The earlier of (i) the date upon which
any of Tenant's personnel reoccupies a floor of the Demised Premises for the
conduct of Tenant's business (after the applicable floor has been vacated for at
least sixty (60) days while Tenant performs alterations and improvements
therein); provided, however, that moving in, installing equipment and
furnishings and other preparation of the applicable floor of the Demised
Premises for occupancy shall not be deemed to constitute conduct of Tenant's
business, or (ii) the following dates for each of the floors of the Demised
Premises:
4th Floor - February 1,2001;
5th Floor - May 1,2001;
2nd Floor - August 1, 2001;
3rd Floor - November 1,2001;
1st Floor - February 1, 2002; and
LL Floor - April 1, 2002
(m) Construction Allowance: $2,747,004.00, plus an amount of $112,192.50
("Sprinkler Allowance"), in total, to reimburse Tenant for costs to complete the
Base Building fire sprinkler system on floors 1,2,3, and 4.
(n) Security Deposit: None
(o) Broker(s): Cousins Real Estate Corporation and Cushman & Wakefield of
Georgia, Inc.
2. Lease of Premises. Landlord, in consideration of the covenants and agreements
to be performed by Tenant, and upon the terms and conditions hereinafter stated,
does hereby rent and lease unto Tenant, and Tenant does hereby rent and lease
from Landlord, certain premises (the "Demised Premises") in the building
(hereinafter referred to as "Building") located on that certain tract of land
(the "Land") more particularly described on "Exhibit " A" attached hereto and by
this reference made a part hereof, which Demised Premises are crosshatched on
the floor plans attached hereto as Exhibit "B" and by this reference made a part
hereof, with no easement for light, view or air included in the Demised Premises
or being granted hereunder. The "Project" is comprised of the Building, the
Land, the Building's parking facilities, any walkways, covered walkways, tunnels
or other means of access to the Building and the Building's parking facilities,
all common areas, including any lobbies or plazas, and any other improvements or
landscaping on the Land. The Project is located in the development known as
"Wildwood Office Park". The Demised Premises shall include the full use of the
Building (except portions thereof reserved solely to Landlord for the delivery
of services to the Building, such as mechanical, electrical and plumbing rooms
and facilities and except for the roof, with respect to which Tenant's rights
are as described in Paragraph 7 of Exhibit "G" to this Lease.), including the
first and second floor general building lobby and entrance, Building stairs,
first floor patio, elevators,
3
loading dock, the Building's parking facilities and other areas of the Building
designated by Landlord as "common areas" from time to time (sometimes herein
referred to as "common areas"). All windows and outside walls of the Building
and any space in the Demised Premises used for shafts, sinks, pipes, conduits,
ducts, telephone ducts and equipment, electric or other utilities or other
similar Building facilities, and the use thereof and access thereto through the
Demised Premises for the purposes of operation, maintenance, reasonable
inspection, display and repairs, as expressly permitted hereunder, are reserved
to Landlord.
3. Term The term of this Lease ("Lease Term") shall commence on the Effective
Date, and, unless sooner terminated or extended as provided in this Lease, shall
end on March 31,2012. Promptly after the New Rate Rental Commencement Date has
occurred for all of the floors of the Demised Premises, Landlord shall send to
Tenant a Supplemental Notice in the form of Exhibit "C" attached hereto and by
this reference made a part hereof, specifying the New Rate Rental Commencement
Date for each of the floors of the Demised Premises and certain other matters as
therein set forth.
4. Possession The obligations of Landlord and Tenant, with respect to certain
renovations to be made to the Building common areas by Landlord and with respect
to the initial leasehold improvements and renovations to be made to the Demised
Premises by Tenant, are set forth in Exhibit "D" attached hereto and by this
reference made a part hereof. Tenant acknowledges that Tenant is in possession
of the Demised Premises as of the date of this Lease and is fully aware of the
condition of the Demised Premises. Tenant accepts the Premises ''as-is,
where-is" and acknowledges that, except for Landlord's obligation to perform
certain renovations to the common areas of the Building (as more particularly
described in Exhibit "D"), Landlord shall have no obligation whatsoever to
construct alterations or improvements to the Demised Premises or the Building.
5 Rental Payments.
(a) Commencing on the Rental Commencement Date, and continuing thereafter
throughout the Lease Term, Tenant hereby agrees to pay all Rent due and payable
under this Lease. As used in this Lease, the term "Rent" shall mean the Base
Rental, Tenant's Forecast Additional Rental, Tenant's Additional Rental, and any
other amounts that Tenant assumes or agrees to pay under the provisions of this
Lease that are owed to Landlord, including without limitation any and all other
sums that may become due by reason of any default of Tenant or failure on
Tenant's part to comply with the agreements, terms, covenants and conditions of
this Lease to be performed by Tenant. Base Rental together with Tenant's
Forecast Additional Rental shall be due and payable in twelve (12) equal
installments on the first day of each calendar month, commencing on the Rental
Commencement Date and continuing thereafter throughout the Lease Term and any
extensions or renewals thereof, and Tenant hereby agrees to pay such Rent to
Landlord at Landlord's address as provided herein ( or such other address as may
be designated by Landlord from time to time) monthly in advance. Tenant shall
pay all Rent and other sums of money as shall become due from and payable by
Tenant to Landlord under this Lease at the times and in the manner provided in
this Lease, without demand, set-off or counterclaim, except as otherwise
provided herein. If for any reason services to
4
ATLOI/IO756990v6
at least 10% of the Demised Premises, which are provided by, through or under
Landlord are interrupted other than as a result of the actions of Tenant or its
employees, contractors, agents and invitees, such interruption of services is of
a nature that it materially interferes with Tenant's use, occupancy and
enjoyment of the Demised Premises or the portion thereof, as applicable, and the
provision of such service (and the interruption thereof) is within the
reasonable control of Landlord, then if such interruption lasts in excess of
eight (8) consecutive business days after receipt by Landlord of written notice
from Tenant, Tenant may abate payments of its Rent for the portion of the
Demised Premises in question after said eighth (8th) consecutive business day
until such service is once again provided to the portion of the Demised Premises
in question at a level which does not materially interfere with Tenant's use,
occupancy and enjoyment of the portion of the Demised Premises in question.
(b) If the Rental Commencement Date is other than the first day of a calendar
month or if this Lease terminates on other than the last day of a calendar
month, then the installments of Base Rental and Tenant's Forecast Additional
Rental for such month or months shall be prorated on a daily basis and the
installment or installments so prorated shall be paid in advance. Also, if the
Rental Commencement Date occurs during a calendar year, or if this Lease expires
or is terminated during a calendar year, Tenant's Additional Rental shall be
determined by reference to Operating Expenses for said calendar year multiplied
by a fraction, the numerator of which shall be the number of days of the Lease
Term during the said calendar year, and the denominator of which shall be 365,
and, in the case of the termination year the calculation described in Article 8
hereof shall be made as soon as possible after the expiration or termination of
this Lease, Landlord and Tenant hereby agreeing that the provisions relating to
said calculation shall survive the expiration or termination of this Lease.
6. Base Rental. Subject to adjustments in accordance with Article 7 below, from
and after the Rental Commencement Date, Tenant shall pay to Landlord a base
annual rental (herein called "Base Rental") equal to the Base Rental Rate
described in Article 7 below multiplied by the Rentable Floor Area of Demised
Premises set forth in Article I(g) above.
7. Base Rental Calculation
(a) From the Rental Commencement Date hereunder until the day immediately prior
to the New Rate Commencement Date applicable to each respective floor of the
Demised Premises, Tenant shall continue to pay Base Rental at the per square
foot rate that would have been in effect pursuant to the provisions of Article 7
of the Original Lease, subject to escalation from time to time as of the
beginning of each Lease Year (as defined in Article 7 of the Original Lease)
pursuant to the provisions of Article 7 of the Original Lease. Landlord and
Tenant acknowledge and agree that the current Base Rental rate under the terms
of Article 7 of the Original Lease is $7.25 per annum, per square foot of
Rentable Floor Area of the Demised Premises and that the next date for
adjustment of that Base Rental rate under the terms of Article 7 of the Original
Lease is January 1,2001.
5
ATLOI/IO756990v6
(b) Beginning on the New Rate Rental Commencement Date for each floor of the
Demised Premises, Tenant shall pay Base Rental based on a Base Rental Rate per
annum, per square foot of Rentable Floor Area of the Demised Premises determined
pursuant to the remaining provisions hereinafter set forth in this Article 7. As
used in the remaining sections of this Article 7, the term "Lease Year" shall
mean the one year period commencing on April 1, 2003 (which shall be the first
Lease Year), and each successive one- year period beginning on each April 1 st
thereafter during the Lease Term. The term "Subsequent Year" shall mean each
Lease Year of the Lease Term following the first Lease Year .The term "Prior Y
ear" shall mean the Lease Year prior to each Subsequent Year. The term "Index"
shall mean the Consumer Price Index for all Urban Consumers (U.S. City Average;
Base 1982-84=100), published by the Bureau of Labor Statistics of the United
States Department of Labor. The term "Base Month" shall mean August, 2000. The
term "Comparison Month" shall mean the calendar month which is two months prior
to the first full month of each Subsequent Year in question.
( c ) On the first day of each Subsequent Year , the Base Rental Rate for such
Subsequent Year shall be increased to an amount equal to the Base Rental Rate
for the first Lease Year (to wit $13.797), plus an amount equal to the product
of fifteen ( 15) times the percentage increase in the Index for the Comparison
Month as compared to the Index for the Base Month multiplied by the Base Rental
Rate for the First Lease Year (to wit, $13.82). Notwithstanding the foregoing,
in no event shall the Base Rental Rate for any Subsequent Year be less than the
Base Rental Rate applicable to the Prior Year and in no event shall the Base
Rental Rate for any Subsequent Year be greater than the following amounts shown
for the applicable Subsequent Year:
[image127.gif]
( d) If the Bureau of Labor Statistics should discontinue the publication of the
Index, or publish the same less frequently, or alter the same in some manner,
then Landlord shall adopt a substitute Index or substitute procedure which
reasonably reflects and monitors consumer prices.
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8. Additional Rental
(a) For purposes of this Lease, "Tenant's Forecast Additional Rental" shall mean
Landlord's reasonable estimate of Tenant's Additional Rental for the coming
calendar year or portion thereof. If at any time it appears to Landlord that
Tenant's Additional Rental for the current calendar year will vary from
Landlord's estimate by more than five percent (5%), Landlord shall have the
right to revise, by notice to Tenant, its estimate for such year, and subsequent
payments by Tenant for such year shall be based upon such revised estimate of
Tenant's Additional Rental. Failure to make a revision contemplated by the
immediately preceding sentence shall not prejudice Landlord's right to collect
the full amount of Tenant's Additional Rental. Prior to the Rental Commencement
Date and thereafter prior to the beginning of each calendar year during the
Lease Term, including any extensions thereof, Landlord shall present to Tenant a
statement of Tenant's Forecast Additional Rental for such calendar year;
provided, however, that if such statement is not given prior to the beginning of
any calendar year as aforesaid, Tenant shall continue to pay during the next
ensuing calendar year on the basis of the amount of Tenant's Forecast Additional
Rental payable during the calendar year just ended until the month after such
statement is delivered to Tenant.
(b) For purposes of this Lease, "Tenant's Additional Rental" shall mean for each
calendar year the Operating Expense Amount (defined below) multiplied by the
number of square feet of Rentable Floor Area of Demised Premises. As used
herein, "Operating Expense Amount" shall mean an amount equal to (i) plus (ii),
where:
(i) equals the amount of Operating Expenses (as defined below) for such calendar
year; and
(ii) equals a management fee contribution equal to three percent (3%) of the sum
of the Base Rental plus the amount due under item (i) above.
Notwithstanding anything to the contrary set forth in item (ii) above, for the
period beginning on the Effective Date and ending on August 31,2001, Tenant's
management fee contribution shall continue to be calculated as provided in the
Original Lease (i.e., $.34 per square foot of Rentable Floor Area of Demised
Premises for calendar year 2000, and $.35 per square foot of Rentable Floor Area
of Demised Premises for the applicable portion of calendar year 2001) and the
three percent (3%) management fee contribution described in item (ii) above
shall become effective as of September 1,2001. Tenant's management fee
contribution for calendar year 2001 shall be appropriately pro-rated as of
September 1, 2001.
(c) Within one hundred fifty (150) days after the end of the calendar year in
which the Rental Commencement Date occurs and of each calendar year thereafter
during the Lease Term, Landlord shall provide Tenant a statement showing the
Operating Expenses (including components thereof in reasonable detail) for said
calendar year, and a statement prepared by Landlord comparing Tenant's Forecast
Additional Rental with
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Tenant's Additional Rental. In the event Tenant's Forecast Additional Rental
exceeds Tenant's Additional Rental for said calendar year, Landlord shall credit
such amount against Rent next due hereunder or, if the Lease Term has expired or
is about to expire, refund such excess to Tenant if there is not an event of
default on the part of Tenant under this Lease (in the instance of an event of
default such excess shall be held as additional security for Tenant's
performance, may be applied by Landlord to cure any such event of default, and
shall not be refunded until any such event of default is cured). In the event
that the Tenant's Additional Rental exceeds Tenant's Forecast Additional Rental
for said calendar year, Tenant shall pay Landlord, within thirty (30) days of
receipt of the statement, an amount equal to such difference. The provisions of
this Lease concerning the payment of Tenant's Additional Rental shall survive
the expiration or earlier termination of this Lease.
( d) Landlord's books and records pertaining to the calculation of Operating
Expenses for any calendar year within the Lease Term may be audited by Tenant or
its representatives at Tenant's expense, at any time within twelve (12) months
after the end of each such calendar year; provided that Tenant shall give
Landlord not less than thirty (30) days' prior written notice of any such audit.
If Landlord agrees that Tenant's audit establishes that Landlord's final
statement of Operating Expenses for the year in question was overstated by more
than five percent (5%) (or if a final, unappealable judgement from a court of
competent jurisdiction establishes that fact), Landlord shall reimburse Tenant,
within thirty (30) days of Tenant's written demand therefor, for the reasonable
costs and expenses of Tenant's audit. If Landlord's calculation of Tenant's
Additional Rental for the audited calendar year was incorrect, then Tenant shall
be entitled to a prompt refund of any overpayment or Tenant shall promptly pay
to Landlord the amount of any underpayment, as the case may be.
9. Operating Expenses.
(a) For the purposes of this Lease, "Operating Expenses" shall mean all
expenses, costs and disbursements of every kind and nature, computed on the
accrual basis, relating to or incurred or paid in connection with the ownership,
management operation. repair and maintenance of the Project, including but not
limited to, the following:
(I) reasonable wages, salaries and other costs of all on-site and off-site
employees engaged either full or part-time in the operation, management,
maintenance or access control of the Project, including taxes, insurance and
benefits relating to such employees, allocated based upon the time such
employees are engaged directly in providing such services;
(2) the reasonable cost of all supplies, tools, equipment and materials used in
the operation, management, maintenance and access control of the Project;
(3) the cost of all utilities for the Project, including but not limited to the
cost of electricity, gas, water, sewer services and power for heating, lighting,
air conditioning and ventilating;
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( 4) the cost of all maintenance and service agreements for the Project and the
equipment therein, including but not limited to security service, garage
operators, window cleaning, elevator maintenance, HV AC maintenance, janitorial
service, landscaping maintenance and customary landscaping replacement;
(5) the reasonable cost of repairs and general maintenance of the Project,
including all costs incurred by Landlord under Article 15 hereof;
(6) amortization (together with reasonable financing charges, whether or not
actually incurred) of the cost of acquisition and/or installation of capital
investment items (including security equipment), amortized over their respective
useful lives, which are installed for the purpose of reducing operating expenses
(but only to the extent of reasonably expected cost savings), promoting safety
(but any costs related to safety within or on the Building will be included
herein only if Tenant has consented to the expenditure, but Tenant shall have no
right to refuse to consent if such expenditure is necessary in order for
Landlord to continue to be able to obtain insurance at commercially reasonable
rates), complying with governmental requirements imposed or determined to be
applicable after the date of this Lease, or maintaining the first-class nature
of the Project;
(7) the cost of casualty, rental loss, liability and other insurance applicable
to the Project and Landlord's personal property used in connection therewith,
including insurance required to be carried by Landlord under Article 17;
(8) the reasonable cost of trash and garbage removal, vermin extermination, and
snow, ice and debris removal;
(9) the cost of legal and accounting services incurred by Landlord in connection
with the management, maintenance, operation and repair of the Project, excluding
the owner's or Landlord's general accounting, such as partnership statements and
tax returns, and excluding services described in Article 9(b)(14) below;
(10) all taxes, assessments and governmental charges, incurred by Landlord,
whether federal, state, county, community improvement district or municipal and
whether they be by taxing districts or authorities presently taxing the Project
or by others subsequently created or otherwise, and any other taxes and
assessments attributable to the Project or its operation (and the costs of
contesting any of the same), including business license taxes and fees,
excluding, however, taxes and assessments imposed on the personal property of
the tenants of the Project, federal and state taxes on income, death taxes,
franchise taxes, and any taxes (other than business license taxes and fees)
imposed or measured on or by the income of Landlord from the operation of the
Project; provided, however, that if at any time during the Lease Term, the
present method of taxation or assessment shall be so changed that the whole or
any part of the taxes, assessments, levies, impositions or charges now levied,
assessed or imposed on real estate and the improvements thereon shall be
discontinued and as a substitute therefor, or in lieu of or in addition thereto,
taxes, assessments, levies, impositions or charges shall be levied, assessed
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and/or imposed wholly or partially as a capital levy or otherwise on the rents
received from the Project or the rents reserved herein or any part thereof, then
such substitute or additional taxes, assessments, levies, impositions or
charges, to the extent so levied, assessed or imposed, shall be deemed to be
included within the Operating Expenses to the extent that such substitute or
additional tax would be payable if the Project were the only property of the
Landlord subject to such tax; and it is agreed that Tenant will be responsible
for ad valorem taxes on its personal property and on the value of the leasehold
improvements in the Demised Premises to the extent that the same relate to
improvements made after the occupancy of any portion of the Demised Premises, if
said taxes are based upon an assessment which includes the cost of such
leasehold improvements (and if the taxing authorities do not separately assess
Tenant's leasehold improvements, Landlord may make an appropriate allocation of
the ad valorem taxes allocated to the Project to give effect to this sentence).
If Landlord receives a refund of any portion of taxes that were included in the
Operating Costs paid by Tenant, Landlord shall reimburse Tenant its prorata
share of the refunded taxes, less any expenses that Landlord reasonably incurred
to obtain the refund;
(11) the reasonable cost of operating the management office for the Project and
an equitable portion of the cost of operating the management office for Wildwood
Office Park, including in each case the cost of office supplies, postage,
telephone expenses, maintenance and repair of office equipment, non-capital
investment equipment, amortization (together with reasonable financing charges)
of the cost of capital investment equipment, and rent; and
(12) the pro rata share applicable to the Project of the sum of (i) the costs of
operation, maintenance, repair and replacement of the landscaping and irrigation
systems now or hereafter located along Windy Ridge Parkway, Windy Hill Road,
Wildwood Parkway, Wildwood Plaza, the right-of-way areas of Powers Ferry Road
adjoining Wildwood Office Park, and all future roadways, whether public or
private, constructed in Wildwood Office Park, together with the landscaped
median strips and shoulders of such roadways (but not including the landscaping
and irrigation system located on the shoulder of any roadway contiguous to a
site upon which construction of improvements has commenced) and any and all
light systems located on or in any rights-of-way for private roads; (ii) ad
valorem taxes on any private roadways now or hereafter located within Wildwood
Office Park and on any medians adjacent to public roads if such medians are not
included in public road rights-of-way; (iii) the costs of ownership, operation,
maintenance, repair and replacement of office park signage for Wildwood Office
Park (excluding leasing, building and office park monumental signage) and any
underground sanitary sewer lines, storm water drainage lines, electric lines,
gas lines, water lines, telephone lines and communication lines located across,
through and under any public or private roadways now or hereafter located within
Wildwood Office Park, except for any such utility facilities serving solely
another project within Wildwood Office Park; (iv) the costs of ownership,
operation, maintenance, repair and replacement of any private transportation
system and equipment from time to time provided or made available to the
developed portions of Wildwood Office Park, including but not limited to ad
valorem taxes on personal property or equipment, electricity, fuel, painting and
cleaning
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costs; (v) the costs and expenses of ownership and operation of any security
patrols or services, if any, from time to time provided to Wildwood Office Park
in general, but excluding any such security patrols or services provided solely
to another project within Wildwood Office Park; (vi) from and after the date the
Driveway Area (as defined therein) is separated from the Land and added to the
Powers Ferry Property (as defined therein) the costs which the owner of the 3301
Property (as defined therein) will be obligated to pay pursuant to the terms of
a Declaration of Easements, in the form of that attached hereto as Exhibit "H",
which will be recorded in the Cobb County, Georgia records at that time and
which will encumber the 3301 Property and the Powers Ferry Property; and (vii)
such other costs and expenses incurred by Landlord as "Owner" of the Project
under and pursuant to that certain Master Declaration of Covenants and
Cross-Easements for Wildwood Office Park dated as of January 23, 1991, recorded
in Deed Book 5992, page 430, Cobb County, Georgia records, as modified, amended
or supplemented from time to time (the "Master Declaration"). The share of the
costs described in items (i) -(v) and item (vii) which are applicable to the
Project shall be determined in accordance with the Master Declaration. Tenant
agrees, upon written request of Landlord, to enter into an amendment to this
Lease to delete the Driveway Area from the Land.
(b) For purposes of this Lease, and notwithstanding anything in any other
provision of this Lease to the contrary , "Operating Expenses" shall not include
the following:
( 1) the cost of installing, operating and maintaining any specialty service,
such as an observatory , broadcasting facility, luncheon club, restaurant,
cafeteria, retail store, sundry shop, newsstand, or concession, but only to the
extent such costs exceed those which would normally be expected to be incurred
had such space been general office space;
(2) the cost of correcting defects in construction;
(3) compensation paid to officers and executives of Landlord (but it is
understood that the office park manager, the on-site building manager and other
on-site employees below the grade of building manager may carry a title such as
vice president and the salaries and related benefits of these officers/employees
of Landlord would be allowable Operating Expenses under Article 9[a][1] above);
(4) the cost of any items for which Landlord is reimbursed by insurance,
condemnation or otherwise, except for costs reimbursed pursuant to provisions
similar to Articles 8 and 9 hereof,
(5) the cost of repairs incurred by reason of fire or other casualty other than
cornrnercially reasonable deductible amounts which may be included in Operating
Expenses;
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(6) insurance premiums to the extent Landlord may be directly reimbursed
therefor, except for premiums reimbursed pursuant to provisions similar to
Articles 8 and 9 hereof;
(7) interest on debt or amortization payments on any mortgage or deed to secure
debt (except to the extent specifically permitted by Article 9[a]) and rental
under any ground lease or other underlying lease;
(8) any real estate brokerage commissions or other costs incurred in procuring
tenants or any fee in lieu of any such commission;
(9) any advertising expenses incurred in connection with the marketing of any
rentable space;
(10) the costs of labor and materials to remove and remediate any Hazardous
Materials (as that term is defined under CERCLA as of the Effective Date of this
Lease) in or around the Building Common Area or Property, including any
Hazardous Materials in the soil or ground water, except to the extent such
abatement or remediation is related to the normal and customary repair and
maintenance of the Building, Common Area, or Property and except to the extent
any such Hazardous Materials are present in or around the Building, Common
Areas, or Property as a result of the act or omission of Tenant, its agents,
contractors, employees, or invitees.
(11) rental payments for base building equipment such as HVAC equipment and
elevators;
(12) any expenses for repairs or maintenance which are covered by warranties and
service contracts, to the extent such maintenance and repairs are made at no
cost to Landlord;
(13) legal expenses arising out of the construction of the improvements on the
Land or in connection with the enforcement of the provisions of any lease
affecting the Land or Building, including, without limitation, this Lease;
(14) management fees (Tenant's obligation for a management fee contribution is
set forth in Article 8[b][ii] above);
(15) the purchase price of capital items, provided, however that the provisions
of Articles 9(a)(6), 9(a)(II) and 9(a)(12) shall not be affected by the
exclusion;
(16) depreciation, except as expressly allowed in Article 9(a)(6), 9(a)(11) and
9(a)(12);
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(17) legal, accounting and other professional fees incurred by Landlord arising
from a sale or financing of the Building or the Project;
(18) the cost of membership in any political organization;
(19) the cost of any political or campaign contributions;
(20) costs incurred due to Landlord's failure to timely comply with or pay
amounts due with respect to a contractual, legal or governmental requirement,
provided, however, this exclusion shall not be applicable if Landlord has filed
a timely good faith protest or dispute of the charge in question or if the
failure results from Landlord's good faith interpretation of the applicable
contractual, legal or governmental requirement; and
(21) costs or fees paid to entities or individuals related to or affiliated with
Landlord to the extent such costs or fees exceed the fair market value for the
services rendered by that entity or individual.
10. Tenant Taxes. Tenant shall pay promptly when due all taxes directly or
indirectly imposed or assessed upon Tenant's gross sales, business operations,
machinery, equipment, trade fixtures and other personal property or assets,
whether such taxes are assessed against Tenant, Landlord or the Building. In the
event that such taxes are imposed or assessed against Landlord or the Building,
Landlord shall furnish Tenant with all applicable tax bills, public charges and
other assessments or impositions and Tenant shall forthwith pay the same either
directly to the taxing authority or, at Landlord's option, to Landlord.
11. Payments. All payments of Rent and other payments to be made to Landlord
shall be made on a timely basis and shall be payable to Landlord or as Landlord
may otherwise designate. All such payments shall be mailed or delivered to
Landlord's Address designated in Article l(b) above or at such other place as
Landlord may designate from time to time in writing. If mailed, all payments
shall be mailed in sufficient time and with adequate postage thereon to be
received in Landlord's account by no later than the due date for such payment.
Tenant agrees to pay to Landlord Fifty Dollars ($50.00) for each check presented
to Landlord in payment of any obligation of Tenant which is not paid by the bank
on which it is drawn, together with interest from and after the due date for
such payment at the rate of eighteen percent (18%) per annum on the amount due.
12. Late Charges. Any Rent or other amounts payable to Landlord under this
Lease, if not paid by the fifth day of the month for which such Rent is due, or
by the due date specified on any invoices from Landlord for any other amounts
payable hereunder, shall incur a late charge of Fifty Dollars ($50.00) for
Landlord's administrative expense in processing such delinquent payment and in
addition thereto shall bear interest at the rate of eighteen percent (18%) per
annum from and after the due date for such payment. In no event shall the rate
of interest payable on any late payment exceed the legal limits for such
interest enforceable under applicable law.
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13. Use: Rules. The Demised Premises shall be used for general offices,
executive offices, sales offices, accounting offices, training center, computer
and computer software development center, computer operations center, kitchen
facilities related to each of the foregoing uses and all functions and purposes
now or hereafter incidental to the foregoing uses and the operation of a full
service computer software firm and no other purposes and in accordance with all
applicable laws, ordinances, rules and regulations of governmental authorities
and the Rules and Regulations attached hereto and made a part hereof. Landlord
warrants that applicable laws, ordinances, regulations, and restrictive
covenants permit the Demised Premises to be used for general office and
executive office uses and purposes. Tenant covenants and agrees to abide by the
Rules and Regulations in all respects as now set forth and attached hereto or as
hereafter promulgated by Landlord. Landlord shall have the right at all times
during the Lease Term to publish and promulgate and thereafter enforce such
rules and regulations or changes in the existing Rules and Regulations as it may
reasonably deem necessary in its sole discretion to protect the tenantability,
safety, operation, and welfare of the Demised Premises, the Project and Wildwood
Office Park. Landlord shall apply and enforce the Rules and Regulations in a
nondiscriminatory fashion.
14. Alterations. Except for any initial improvement of the Demised Premises
pursuant to Exhibit "D", which shall be governed by the provisions of said
Exhibit "D", Tenant shall not make, suffer or permit to be made any alterations,
additions or improvements to or of the Demised Premises or any part thereof, or
attach any fixtures or equipment thereto, without first obtaining Landlord's
written consent, which consent shall not be unreasonably withheld, conditioned
or delayed by Landlord. Any such alterations, additions or improvements to the
Demised Premises consented to by Landlord shall be made by Tenant, under
Landlord's supervision, and Tenant shall reimburse Landlord (or Landlord's
designated agent) for construction coordination fees, in the amount of3% of the
cost of the work, within ten (10) days after receipt of a statement. This
provision shall not apply to basic, non-material work within the Demised
Premises, such as, by way of illustration but not limitation, picture hanging,
furniture installation, installation of low voltage cabling for phones and
computers, and the rearranging of offices within the Demised Premises, and
Tenant may cause such tasks to be performed without the prior consent of
Landlord. All such alterations, additions and improvements shall become
Landlord's property at the expiration or earlier termination of the Lease Term
and shall remain on the Demised Premises without compensation to Tenant unless
Landlord elects by notice to Tenant, at the time the applicable alterations,
additions or improvements are approved, to have Tenant remove such alterations,
additions and improvements upon the expiration or termination of this Lease, in
which event, notwithstanding any contrary provisions respecting such
alterations, additions and improvements contained in Article 32 hereof, Tenant
shall promptly restore, at its sole cost and expense, the Demised Premises to
its condition prior to the installation of such alterations, additions and
improvements excepting only (i) reasonable wear and tear and (ii) casualty
damage and condemnation.
15. Repairs and Maintenance.
(a) Landlord shall maintain in good order and repair, subject to normal wear and
tear and subject to casualty and condemnation, the Building (excluding the
Demised Premises and other portions of the Building leased to other tenants),
the Building parking
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facilities, the public areas and the, landscaped areas. Such maintenance shall
be in a manner comparable to other buildings in Wildwood Office Park and shall
include, without limitation, the "Maintenance Services", as defined below.
Notwithstanding the foregoing obligation, the cost of any repairs or maintenance
to the foregoing necessitated by the intentional acts or negligence of Tenant or
its agents, contractors, employees, invitees, licensees, tenants or assigns,
shall be borne solely by Tenant and shall be deemed Rent hereunder and shall be
reimbursed by Tenant to Landlord within fifteen (15) days after demand. Landlord
shall not be required to make any repairs or improvements to the Demised
Premises except structural repairs necessary for safety and tenantability and
material repairs necessitated by damage caused by Landlord, its agents or
employees acting within the scope of their agency or employment. The term
Maintenance Services shall include (i) maintaining the exterior walls, exterior
windows, exterior doors and roof of the Building, common areas, public
corridors, stairs, elevators, storage rooms, restrooms, the heating, ventilating
and air conditioning systems, electrical and plumbing systems of the Building,
the walks, paving and landscaping surrounding the Building, (ii) grounds care,
including, but not limited to, the sweeping of walks and parking areas and
maintenance of landscaping in an attractive manner, illumination, snow removal,
deicing and lawn care, all consistent with the grounds care of Wildwood Office
Park, (iii) general maintenance, including supervision, inspections and
management functions as typically carried out in Wildwood Office Park, and (iv)
extermination and pest control services for the Building (and common areas
herein) and parking deck for the Building when necessary. Notwithstanding any
other term of this Lease, if Landlord has requested that Tenant consent to a
capital investment intended to promote safety and, pursuant to the terms of
Article 9(a)(6) Tenant has not consented to the expenditure ("Unapproved Safety
Expenditure"), Landlord shall have no obligation to make such expenditure.
Furthermore, Tenant for itself and its employees hereby waives and releases
Landlord from and agrees to hold Landlord harmless against any and all
liability, loss, cost, damage or expense, including without limitation, court
costs and reasonable attorneys fees, incurred or suffered by Tenant or its
employees arising out of or resulting from the failure to make an Unapproved
Safety Expenditure or to undertake actions that would have been made possible by
such expenditure.
(b) Tenant covenants and agrees that it will take good care of the Demised
Premises and all alterations, additions and improvements thereto and will keep
and maintain the same in good condition and repair, except for (i) normal wear
and tear and (ii) casualty damage and condemnation. Tenant shall at once report,
in writing, to Landlord any defective or dangerous condition known to Tenant. To
the fullest extent permitted by law, Tenant hereby waives all rights to make
repairs at the expense of Landlord or in lieu thereof to vacate the Demised
Premises as may be provided by any law, statute or ordinance now or hereafter in
effect. Landlord has no obligation and has made no promise to alter, remodel,
improve, repair, decorate or paint the Demised Premises or any part thereof,
except as specifically and expressly herein set forth.
(c) If Landlord fails to keep or perform any of its obligations under the Lease
with respect to repairs and maintenance of the Demised Premises or Building
required under the Lease to be made by Landlord, if such failure materially and
adversely affects
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Tenant's ability to use the Demised Premises for normal business operations; or
if Landlord fails to keep the common areas of the Building and Project in a
condition at least comparable to the upkeep of other first class buildings in
the area of the Building, and if either such failure materially and adversely
affects Tenant's ability to use the Demised Premises for normal business
operations; then, upon the continuance of such failure on Landlord's part for
thirty (30) days after the receipt by Landlord and any mortgagee of notice from
Tenant indicating with specificity the nature of the failure (or , in the case
of any such failure which cannot reasonably be cured within thirty (30) days,
within such additional period, if any, as may be reasonably required by Landlord
to cure such failure with due diligence), and without waiving or releasing
Landlord from any obligation, then (i) Tenant may undertake to perform such
obligation, and all sums actually paid or incurred by Tenant and all necessary
and incidental costs and expenses (but not costs to improve the Building,
Demised Premises or other facilities beyond rectifying Landlord's failure),
including reasonable attorney's fees and expenses paid to legal counsel,
incurred by Tenant in making such payment or performing such obligation,
together with interest thereon at the prime rate of interest quoted from time to
time by SunTrust Bank, N.A., main branch, Atlanta, Georgia, plus one percent
(1%) interest per annum, from the date the payment in question is received by
Tenant, shall be paid by Landlord to Tenant within thirty (30) days after
demand, or (ii) Tenant may pursue any other remedies available to Tenant at law
or in equity to collect payment and/or cause Landlord to cure such failure.
Notwithstanding anything to the contrary set forth hereinabove, Tenant shall be
entitled to perform any such obligations of Landlord only within the Demised
Premises or in the elevator lobbies on floors occupied solely by Tenant and
Tenant shall not be entitled to perform such obligations with respect to any
portions of the Building systems or facilities that serve any other tenant's
space. Any contractors employed by Tenant to cure a Landlord failure hereunder
shall be reputable contractors and Tenant upon completion of such work shall
provide appropriate lien waivers to Landlord. In effectuating a cure in
connection with Tenant's self-help or cure rights hereunder, Tenant shall take
precautions that a. reasonable building manager would undertake to avoid
unreasonable interference with other tenants in the Building or the Building
systems (such as electrical or mechanical systems).
16. Landlord's Right of Entry. Landlord shall retain duplicate keys to all doors
of the Demised Premises and Landlord and its agents, employees and independent
contractors shall have the right to enter the Demised Premises at reasonable
hours to inspect and examine same, to make repairs, additions, alterations, and
improvements, to exhibit the Demised Premises to mortgagees, prospective
mortgagees, purchasers or tenants, and to inspect the Demised Premises to
ascertain that Tenant is complying with all of its covenants and obligations
hereunder, all without being liable to Tenant in any manner whatsoever for any
damages arising therefrom; provided, however, that Landlord shall, except in
case of emergency, afford Tenant such prior notification of an entry into the
Demised Premises as shall be reasonably practicable under the circumstances and
shall use all reasonable efforts to avoid causing any disruption of the Demised
Premises. Landlord shall be allowed to take into and through the Demised
Premises any and all materials that may be required to make such repairs,
additions, alterations or improvements. During such time as such work is being
carried on in or about the Demised Premises, the Rent provided herein shall not
abate, and Tenant waives any claim or cause of action against Landlord for
damages by reason of interruption of Tenant's business or loss of profits
therefrom because of
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the prosecution of any such work or any part thereof Notwithstanding any other
provisions of this Lease to the contrary, Tenant shall be permitted to designate
not more than 10,000 square feet of the Demised Premises as safe or confidential
areas or locked computer rooms to be known as "Locked Documentation Rooms", to
which Landlord shall have no access, unless accompanied by Tenant's authorized
representatives. Tenant must designate such spaces as "Locked Documentation
Rooms' by written notice to Landlord, and such status shall only be effective
after receipt by Landlord of such written notice. Landlord, when accompanied by
Tenant's representative may inspect any Locked Documentation Rooms during
Tenant's normal business hours after giving Tenant reasonable prior notice
requesting such an inspection. In emergency where immediate access to such rooms
is necessary, Landlord may, after being unable to locate an employee of Tenant
using all reasonable means, gain access to a Locked Documentation Room by using
force. Landlord shall not be responsible for providing janitorial services with
respect to any Locked Documentation Room. Landlord shall not receive copies of
keys, pass cards or cipher lock combinations to Locked Documentation Rooms.
17. Insurance
(a) Tenant shall procure at its expense and maintain throughout the Lease Term a
policy or policies of "all risks" fire and extended coverage insurance insuring
the full replacement cost of its furniture, equipment, supplies, and other
property owned, leased, held or possessed by it and contained in the Demised
Premises, together with the excess value of the improvements to the Demised
Premises over the Construction Allowance, and workmen's compensation insurance
as required by applicable law. Tenant shall also procure at its expense and
maintain throughout the Lease Term a policy or policies of commercial general
liability insurance, insuring Tenant, Landlord and any other person designated
by Landlord, against any and all liability for injury to or death of a person or
persons and for damage to property occasioned by or arising out of any
construction work being done on the Demised Premises, or arising out of the
condition, use, or occupancy of the Demised Premises, or in any way occasioned
by or arising out of the activities of Tenant, its agents, contractors,
employees, guests, or licensees in the Demised Premises, or other portions of
the Building, the Project or Wildwood Office Park, the limits of such policy or
policies to be in combined single limits for both damage to property and
personal injury and in amounts not less than Three Million Dollars ($3,000,000)
for each occurrence, with annual general aggregate limits of not less than Five
Million Dollars ($5,000,000), provided, however, that said $3,000,000 and
$5,000,000 limits shall be adjusted (x) as of the end of the fifth anniversary
of the Effective Date by multiplying said limits by a fraction whose numerator
is the Index as defined in Article 7) for the month which is two months prior to
said fifth anniversary and whose denominator is the Index for May, 2000 and (y)
as of the end of the tenth (l0th) anniversary of the Effective Date by
multiplying said limits by a fraction whose numerator is the Index for the month
two (2) months prior to such tenth (l0th) anniversary and whose denominator is
the Index for May, 2000. Such insurance shall, in addition, extend to any
liability of Tenant arising out of the indemnities provided for in this Lease.
All insurance policies procured and maintained by Tenant pursuant to this
Article 17 shall name Landlord and the building manager (said building manager
at the time of execution of this Lease being the Landlord and Landlord will
notify Tenant in writing of any change in the building manager) as
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additional insured, shall be carried with companies licensed to do business in
the State of Georgia reasonably satisfactory to Landlord and shall be
non-cancelable and not subject to material change except after twenty (20) days'
written notice to Landlord. Copies of policies and duly executed certificates of
insurance with respect thereto, shall be delivered to Landlord prior to the
Rental Commencement Date, and copies of policies and certificates evidencing
renewals of such policies shall be delivered to Landlord at least twenty (20)
days prior to the expiration of each respective policy term (but if copies of
such policies are not available by such date, such copies will be submitted as
soon as they are available). Any insurance required by the terms of this Lease
to be carried by Tenant may be under a blanket policy (or policies) covering
other properties of Tenant and/or its related or affiliated business entities,
provided that the policies otherwise comply with the provisions of this Lease
and allocate to Tenant's property at the Demised Premises the specified
coverage, without possibility of reduction or co-insurance by reason of, or
damage to, any other property named therein. If such insurance is maintained
under a blanket policy, Tenant shall procure and deliver to Landlord a statement
from the insurer or general agent of the insurer setting forth the coverage
maintained, which shall be sufficient to meet the requirements of this Lease,
and the amounts thereof allocated to the risks intended to be insured hereunder.
(b) Landlord shall procure at its expense and maintain throughout the Lease Term
a policy of fire and extended coverage insurance insuring an amount equal to the
greater of ninety (90%) of the replacement value of the Building or the amount
required by landlord's mortgagee, if any. Landlord shall also procure at its
expense and maintain throughout the Lease Term a liability insurance policy with
respect to the common areas of the Building, in commercially reasonable amounts
and with commercially reasonable deductibles. All such costs shall be included
in Operating Expenses.
18. Waiver of Subrogation. Landlord and Tenant shall each have included in all
policies of fire, extended coverage, business interruption and other insurance
respectively obtained by them covering the Demised Premises, the Building and
contents therein, a waiver by the insurer of all right of subrogation against
the other in connection with any loss or damage thereby insured against. Any
additional premium for such waiver shall be paid by the primary insured. To the
full extent permitted by law, Landlord and Tenant each waives all right of
recovery against the other for, and agrees to release the other from liability
for, loss or damage to the extent such loss or damage is covered by valid and
collectible insurance in effect at the time of such loss or damage or would be
covered by the insurance required to be maintained under this Lease by the party
seeking recovery .
19. Default
(a) The following events shall be deemed to be events of default by Tenant under
this Lease: (i) Tenant shall fail to pay any installment of Rent or any other
charge or assessment against Tenant pursuant to the terms hereof within five (5)
business days after the "Default Date" for such payment, the "Default Date"
being (x) if all payments previously due from Tenant in the current calendar
year, or if all except one or two of such payments, have been paid by their
respective due dates, the Default Date for the
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payment in question shall be the date notice is given by Landlord that the
payment has not been received by its due date and (y) in all other cases, the
Default Date shall be the due date of the payment; (ii) Tenant shall fail to
comply with any term, provision, covenant or warranty made under this Lease by
Tenant, other than the payment of the Rent or any other charge or assessment
payable by Tenant, and (x) shall not cure such failure within thirty (30) days
after notice thereof to Tenant, or (y) if Tenant notifies Landlord that said
cure will take more than thirty (30) days and Tenant provides evidence that it
is diligently pursuing said cure, Tenant shall not cure such failure within a
reasonable time, not to exceed sixty (60) days; (iii) Tenant or any guarantor of
this Lease shall make a general assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a petition in bankruptcy, or shall be adjudicated as bankrupt or
insolvent, or shall file a petition in any proceeding seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future statute, law or regulation, or
shall file an answer admitting or fail timely to contest the material
allegations of a petition filed against it in any such proceeding; (iv) a
proceeding is commenced against Tenant or any guarantor of this Lease seeking
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, and such proceeding shall not have been dismissed within forty-five
(45) days after the commencement thereof; (v) a receiver or trustee shall be
appointed for the Demised Premises or for all or substantially all of the assets
of Tenant or of any guarantor of this Lease; (vi) Tenant shall do or permit to
be done anything which creates a lien upon the Demised Premises or the Project
and such lien is not removed or discharged within fifteen (15) days after the
filing thereof, (vii) Tenant shall fail to return a properly executed instrument
to Landlord in accordance with the provisions of Article 27 hereof within the
time period provided for such return following Landlord's request for same as
provided in Article 27 and, further fails to return such instrument within five
(5) business days following Landlord's second written request therefore; or
(viii) Tenant shall fail to return a properly executed estoppel certificate to
Landlord in accordance with the provisions of Article 28 hereof within the time
period provided for such return following Landlord's request for same as
provided in Article 28 and further fails to return such certificate within five
(5) business days following Landlord's second written request therefore.
(b ) Upon the occurrence of any of the aforesaid events of default, Landlord
shall have the option to pursue anyone or more of the following remedies without
any notice or demand whatsoever: (i) terminate this Lease, in which event Tenant
shall immediately surrender the Demised Premises to Landlord and if Tenant fails
to do so, Landlord may without prejudice to any other remedy which it may have
for possession or arrearages in Rent, enter upon and take possession of the
Demised Premises and expel or remove Tenant and any other person who may be
occupying said Demised Premises or any part thereof, by force, if necessary,
without being liable for prosecution or any claim of damages therefor; Tenant
hereby agreeing to pay to Landlord on demand the amount of all loss and damage
which Landlord may suffer by reason of such termination, whether through
inability to relet the Demised Premises on satisfactory terms or otherwise; (ii)
terminate Tenant's right of possession (but not this Lease) and enter upon and
take
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possession of the Demised Premises and expel or remove Tenant and any other
person who may be occupying-said Demised Premises or any part thereof, by entry,
dispossessory suit or otherwise, without thereby releasing Tenant from any
liability hereunder, without terminating this Lease, and without being liable
for prosecution or any claim of damages therefor and, if Landlord so elects,
make such alterations, redecorations and repairs as, in Landlord's judgment, may
be necessary to relet the Demised Premises, and Landlord may, but shall be under
no obligation to do so, relet the Demised Premises or any portion thereof in
Landlord's or Tenant's name, but for the account of Tenant, for such term or
terms (which may be for a term extending beyond the Lease Term.) and at such
rental or rentals and upon such other terms as Landlord may deem advisable, with
or without advertisement, and by private negotiations, and receive the rent
therefor, Tenant hereby agreeing to pay to Landlord the deficiency, if any,
between all Rent reserved hereunder and the total rental applicable to the Lease
Term hereof obtained by Landlord re-letting, and Tenant shall be liable for
Landlord's expenses in redecorating and restoring the Demised Premises and all
costs incident to such re-letting, including broker's commissions and lease
assumptions, and in no event shall Tenant be entitled to any rentals received by
Landlord in excess of the amounts due by Tenant hereunder; or (iii) enter upon
the Demised Premises, without being liable for prosecution or any claim of
damages therefor, and do whatever Tenant is obligated to do under the terms of
this Lease; and Tenant agrees to reimburse Landlord on demand for any reasonable
expenses including, without limitation, reasonable attorneys' fees which
Landlord may incur in thus effecting compliance with Tenant's obligations under
this Lease. If this Lease is terminated by Landlord as a result of the
occurrence of an event of default, Landlord may declare to be due and payable
immediately, the present value (calculated with a discount factor of eight
percent [8%] per annum) of the difference between (x) the entire amount of Rent
and other charges and assessments which in Landlord's reasonable determination
would become due and payable during the remainder of the Lease Term determined
as though this Lease had not been terminated (including, but not limited to,
increases in Rent pursuant to Article 7 hereof), and (y) the then fair market
rental value of the Demised Premises for the remainder of the Lease Term. Upon
the acceleration of such amounts, Tenant agrees to pay the same at once,
together with all Rent and other charges and assessments theretofore due, at
Landlord's address as provided herein, it being agreed that such payment shall
not constitute a penalty or forfeiture but shall constitute liquidated damages
for Tenant's failure to comply with the terms and provisions of this Lease
(Landlord and Tenant agreeing that Landlord's actual damages in such event are
impossible to ascertain and that the amount set forth above is a reasonable
estimate thereof).
(c) Pursuit of any of the foregoing remedies shall not preclude pursuit of any
other remedy herein provided or any other remedy provided by law or at equity,
nor shall pursuit of any remedy herein provided constitute an election of
remedies thereby excluding the later election of an alternate remedy, or a
forfeiture or waiver of any Rent or other charges and assessments payable by
Tenant and due to Landlord hereunder or of any damages accruing to Landlord by
reason of violation of any of the terms, covenants, warranties and provisions
herein contained. No reentry or taking possession of the Demised Premises by
Landlord or any other action taken by or on behalf of Landlord
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shall be construed to be an acceptance of a surrender of this Lease or an
election by Landlord to terminate this Lease unless written notice of such
intention is given to Tenant. Forbearance by Landlord to enforce one or more of
the remedies herein provided upon an event of default shall not be deemed or
construed to constitute a waiver of such default. In determining the amount of
loss or damage which Landlord may suffer by reason of termination of this Lease
or the deficiency arising by reason of any reletting of the Demised Premises by
Landlord as above provided, allowance shall be made for the expense of
repossession. Tenant agrees to pay to Landlord all costs and expenses incurred
by Landlord in the enforcement of this Lease, including, without limitation, the
fees of Landlord's attorneys as provided in Article 25 hereof
20. Waiver of Breach. No waiver of any breach of the covenants, warranties,
agreements, provisions, or conditions contained in this Lease shall be construed
as a waiver of said covenant, warranty, provision, agreement or condition or of
any subsequent breach thereof, and if any breach shall occur and afterwards be
compromised, settled or adjusted, this Lease shall continue in full force and
effect as if no breach had occurred.
21. Assignment and Subletting. Tenant shall not, without the prior written
consent of Landlord, assign this Lease or any interest herein or in the Demised
Premises, or mortgage, pledge, encumber, hypothecate or otherwise transfer or
sublet the Demised Premises or any part thereof or permit the use of the Demised
Premises by any party other than Tenant. Landlord shall not have the right to
terminate this Lease or to recapture any portion of the Demised Premises as a
result of an assignment or subletting request by Tenant. Consent to one or more
such transfers or subleases shall not destroy or waive this provision, and all
subsequent transfers and subleases shall likewise be made only upon obtaining
the prior written consent of Landlord. Sublessees or transferees of the Demised
Premises for the balance of the Lease Term shall become directly liable to
Landlord for an obligation of Tenant hereunder, without relieving Tenant (or any
guarantor of Tenant's obligations hereunder) of any liability therefor, and
Tenant shall remain obligated for all liability to Landlord arising under this
Lease during the entire remaining Lease Term including any extensions thereof,
whether or not authorized herein. If Tenant is a partnership, a withdrawal or
change, whether voluntary, involuntary or by operation of law, of partners
owning a controlling interest in the Tenant shall be deemed a voluntary
assignment of this Lease and subject to the foregoing provisions. If Tenant is a
corporation, any dissolution, merger, consolidation or other reorganization of
Tenant, or the sale or transfer of a controlling interest in the capital stock
of Tenant, shall be deemed a voluntary assignment of this Lease and subject to
the foregoing provisions. Landlord may, as a prior condition to considering any
request for consent to an assignment or sublease, require Tenant to obtain and
submit current financial statements of any proposed subtenant or assignee. In
the event Landlord consents to an assignment or sublease, Tenant shall pay to
Landlord a reasonable fee to cover Landlord's accounting costs plus any
reasonable legal fees incurred by Landlord as a result of the assignment or
sublease. Fifty percent (50%) of any "profit" (as defined below) resulting from
any assignment or subletting shall be promptly remitted by Tenant to Landlord,
when received by Tenant, as additional rent hereunder. The term "profit" shall
mean the gross revenue received by Tenant from any assignee or sublessee minus
(i) the Rent paid by Tenant to Landlord during the period of time covered by the
sublease or assignment; (ii) any improvement allowance or any other economic
concession (planning allowance, moving expenses, etc.) paid by Tenant to the
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sublessee or assignee; (iii) brokerage commissions paid by Tenant in connection
with the assignment or sublease; (iv) attorney's fees paid by Tenant in
connection with the preparation and negotiation of the assignment or sublease;
(v) lease take-over payments; and (vi) cost of advertising the space for
sublease or assignment. In determining any profit, the revenue received in
connection with any sublease of less than the entire Demised Premises shall be
compared to the Rent due for the applicable portion of the Demised Premises on a
per rentable square foot basis. In addition, in determining profit, any and all
of the payments described hereinabove which are deducted from the gross revenue
shall be deemed amortized over the entire term of the assignment or sublease in
equal monthly installments. No assignment of this Lease consented to by Landlord
shall be effective unless and until Landlord shall receive an original
assignment and assumption agreement, in form and substance satisfactory to
Landlord, signed by Tenant and Tenant's proposed assignee, whereby the assignee
assumes due performance of this Lease to be done and performed for the entire
term of the assignment. No subletting of the Demised Premises, or any part
thereof, shall be effective unless and until there shall have been delivered to
Landlord an agreement, in form and substance satisfactory to Landlord, signed by
Tenant and the proposed sublessee, whereby the sublessee acknowledges the right
of Landlord to continue or terminate any sublease, in Landlord's sole
discretion, upon termination of this Lease, and such sublessee agrees to
recognize and attorn to Landlord in the event that Landlord elects under such
circumstances to continue such sublease.
Notwithstanding any provision to the contrary contained in Article 21 of this
Lease Agreement Landlord's consent under Article 21 to an assignment or
subletting of this Lease Agreement or any interest herein or in the Demised
Premises shall not be unreasonably withheld and Landlord shall be obligated to
respond to any assignment or subletting request within ten (10) business days
following receipt of Landlord's receipt of Tenant's written request. Landlord
and Tenant agree that Landlord may withhold its consent to any proposed
assignment of this Lease Agreement or subletting of all or any portion of the
Demised Premises, and such withholding of consent by Landlord will not be deemed
to be unreasonable if either (i) the proposed assignee or sublessee is not a
reputable business entity or individual, (ii) is a governmental or
quasi-governmental entity, (iii) is a party who would ( or whose use would)
detract from the character of the Building as a first-class office building,
such as, without limitation, a dental, medical or chiropractic office or (iv) is
an existing tenant of Wildwood Office Park or is a party who has solicited a
proposal from Landlord for space in Wildwood Office Park and, in either event,
for whom Landlord has adequate space available in Wildwood Office Park.
Sublessee or transferees of the Demised Premises for the balance of the Lease
Term shall become directly liable to Landlord for all obligations of Tenant
hereunder, without relieving Tenant (or any guarantor of Tenant's obligations
hereunder) of any liability therefor, and Tenant shall remain obligated for all
liability to Landlord arising under this Lease during the entire remaining Lease
Term including any extensions thereof, whether or not authorized herein.
Notwithstanding any provision to the contrary in Article 21 of this Lease,
Tenant may assign this Lease or sublease any or all of the Demised Premises to
an Affiliate (as defined below) without the consent of Landlord. The term
"Affiliate" shall mean any entity, as of the Effective Date (i) in which Tenant,
directly or indirectly owns a controlling interest, or (ii) in which the
controlling interest is owned by the party owning a controlling interest in
Tenant, or (iii) which directly or indirectly, owns controlling interest in
Tenant. Any such sublease shall
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only be effective upon Tenant providing evidence reasonably satisfactory to
Landlord that demonstrates that such sublessee is an Affiliate. Sublessees of
the Demised Premises for the balance of the Lease Term shall become directly
liable to Landlord for all obligations of Tenant hereunder, without relieving
Tenant (or any guarantor of Tenant's obligations hereunder) of any liability
therefor, and Tenant shall remain obligated for all liability to Landlord
arising under this Lease during the entire remaining Lease Term including any
extensions thereof, whether or not authorized herein.
Notwithstanding any provision to the contrary contained in Article 21 of this
Lease, a merger of Tenant with another corporation or the sale or transfer of a
controlling interest in the capital stock of Tenant or the acquisition of
substantially all of the assets of Tenant shall not be deemed to be an
assignment of this Lease which requires the consent of Landlord if Tenant
establishes to the reasonable satisfaction of Landlord that the surviving entity
will have either (i) a net worth and earning potential at least equivalent to
that of Tenant, or (ii) a debt rating issued by a nationally recognized debt
rating company (such as Moody's or Standard & Poor's) equal to or better than
that of Tenant.
22. Destruction.
(a) If the Demised Premises are damaged by fire or other casualty, the same
shall be repaired or rebuilt as speedily as practical under the circumstances at
the expense of the Landlord, unless this Lease is terminated as provided in this
Article 22, and during the period required for restoration, a just and
proportionate part of Base and Additional Rental shall be abated until the
Demised Premises are repaired or rebuilt.
(b) If the Demised Premises are (i) damaged to such an extent that repairs
cannot, in Landlord's judgment, be completed within one hundred eighty (180)
days after the date of the casualty or (ii) damaged or destroyed as a result of
a risk which is not insured under standard fire insurance policies with extended
coverage endorsement, or (iii) damaged or destroyed during the last eighteen
(18) months of the Lease Term, or if the Building is damaged in whole or in part
(whether or not the Demised Premises are damaged), to such an extent that the
Building cannot, in Landlord's judgment, be operated economically as an integral
unit, then and in any such event Landlord may at its option terminate this Lease
by notice in writing to the Tenant within sixty (60) days after the date of such
occurrence, provided, however, Landlord will use its best efforts to attempt to
provide such notice within thirty (30), days of such occurrence. If the Demised
Premises are damaged to such an extent that repairs cannot, in Landlord's
judgment, be completed within one hundred eighty (180) days after the date of
the casualty or if the Demised Premises are substantially damaged during the
last eighteen (18) months of the Lease Term, then in either such event Tenant
may elect to terminate this Lease by notice in writing to Landlord within
fifteen (15) days after the date of such occurrence. Unless Landlord or Tenant
elects to terminate this Lease as hereinabove provided, this Lease will remain
in full force and effect and Landlord shall repair such damage at its expense to
the extent required under subparagraph (c) below as expeditiously as possible
under the circumstances.
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(c) If Landlord should elect or be obligated pursuant to subparagraph (a) above
to repair or rebuild because of any damage or destruction, Landlord's obligation
shall be limited to the original Building and any other work or improvements
which were originally performed or installed at Landlord's expense as described
in Exhibit "D" hereto or with the proceeds of the Construction Allowance. If the
cost of performing such repairs exceeds the actual proceeds of insurance paid or
payable to Landlord on account of such casualty, or if Landlord's mortgagee or
the lessor under a ground or underlying lease shall require that any insurance
proceeds from a casualty loss be paid to it, Landlord may terminate this Lease
unless Tenant, within fifteen (15) days after demand therefor, deposits with
Landlord a sum of money sufficient to pay the difference between the cost of
repair and the proceeds of the insurance available to Landlord for such purpose.
( d) In no event shall Landlord be liable for any loss or damage sustained by
Tenant by reason of casualties mentioned hereinabove or any other accidental
casualty unless such loss or damage is not insured and was caused by the gross
negligence or willful misconduct of Landlord.
23 .Landlord's Lien. Notwithstanding any other provision of this Lease or of
applicable law to the contrary, Landlord's lien rights and right of distraint
with respect to the personal property of Tenant, in the case of an event of
default of Tenant or otherwise, if any, shall not apply to any computer
software, computer tapes, computer program tapes, computer program disks,
computer program documentation and manuals, computer program codes, computers,
customer lists or other proprietary information which is the property of Tenant
or in the possession of Tenant.
24. Services by Landlord. Landlord shall provide the Building Standard Services
described on Exhibit "E" attached hereto and by reference made a part hereof.
25. Attorneys' Fees and Homestead. If any Rent or other debt owing by Tenant to
Landlord hereunder is collected by or through an attorney-at-law, Tenant agrees
to pay an additional amount equal to fifteen percent (15%) of such sum as
attorney's fees. If Landlord uses the services of any attorney in order to
secure compliance with any other provisions of this Lease, to recover damages
for any breach or default of any other provisions of this Lease, or to terminate
this Lease or evict Tenant, Tenant shall reimburse Landlord upon demand for any
and all attorney's fees and expenses so incurred by Landlord. Tenant waives all
homestead rights and exemptions which it may have under any law as against any
obligation owing under this Lease, and assigns to Landlord its homestead and
exemptions to the extent necessary to secure payment and performance of its
covenants and agreements hereunder. If there is a law suit or court action
between Landlord and Tenant arising out of or under this Lease or the terms and
conditions stated herein, the prevailing party in such law suit or court action
shall be entitled to and shall collect from the non-prevailing party the
reasonable attorney's fees and court costs actually incurred by the prevailing
party with respect to said lawsuit or court action.
26. Time. Time is of the essence of this Lease and whenever a certain day is
stated for payment or performance of any obligation of Tenant or Landlord, the
same enters into and becomes a part of the consideration hereof.
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27. Subordination and Attornment.
(a) Provided that Landlord obtains a commercially reasonable and customary
non-disturbance agreement from the applicable ground lessor or the applicable
holder of the mortgage, Tenant agrees that this Lease and all rights of Tenant
hereunder are and shall be subject and subordinate to any ground or underlying
lease which may now or hereafter be in effect regarding the Project or any
component thereof, to any mortgage now or hereafter encumbering the Demised
Premises or the Project or any component thereof, to all advances made or
hereafter to be made upon the security of such mortgage, to all amendments,
modifications, renewals, consolidations, extensions, and restatements of such
mortgage, and to any replacements and substitutions for such mortgage. Tenant
hereby acknowledges and agrees that a non-disturbance agreement which contains
the exceptions to the ground lessor's/mortgagee's assumption of liability which
are described in items (i) -(vi) of subparagraph (c) below, will be a
commercially reasonable and customary non-disturbance agreement. However, the
non-disturbance agreement must also provide that if any portion of the
Construction Allowance is due and payable under the Lease but has not yet been
paid by Landlord, Tenant may offset the unfunded portion of the Construction
Allowance against the installments of Base Rental and Additional Rental next due
under this Lease. The terms of this provision shall be self-operative and no
further instrument of subordination shall be required. Tenant, however, upon
request of any party in interest, shall execute promptly such instrument or
certificates as may be reasonably required to carry out the intent hereof,
whether said requirement is that of Landlord or any other party in interest,
including, without limitation, any mortgagee. Landlord is hereby irrevocably
vested with full power and authority as attorney-in-fact for Tenant and in
Tenant's name, place and stead, to, subordinate Tenant's interest under this
Lease to the lien or security title of any mortgage and to any future instrument
amending, modifying, renewing, consolidating, extending, restating, replacing or
substituting any such mortgage.
(b ) If any mortgagee or lessee under a ground or underlying lease elects to
have this Lease superior to its mortgage or lease and signifies its election in
the instrument creating its lien or lease or by separate recorded instrument,
then this Lease shall be superior to such mortgage or lease, as the case may be.
In such case, Tenant shall deliver to any such mortgagee within ten (10) days of
a written request an attornment agreement whose terms are consistent with the
provisions of Article 27(c), providing that Tenant shall continue to abide by
and comply with the terms and conditions of this Lease in the event such
mortgagee takes title to the Property, so long as the mortgagee delivers to
Tenant a nondisturbance agreement (which non-disturbance agreement may be a part
of the above mentioned attornment agreement), which non-disturbance agreement
shall provide that so long as Tenant continues to abide by and comply with the
terms and conditions of this Lease, mortgagee will permit Tenant to continue to
occupy the Demised Premises. The term "mortgage", as used in this Lease,
includes any deed to secure debt, deed of trust or security deed and any other
instrument creating a lien in connection with any other method of financing or
refinancing. The term "mortgagee", as used in this Lease, refers to the
holder(s) of the indebtedness secured by a mortgage.
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( c) In the event any proceedings are brought for the foreclosure of, or in the
event of exercise of the power of sale under, any mortgage covering the Demised
Premises or the Project, or in the event the interests of Landlord under this
Lease shall be transferred by reason of deed in lieu of foreclosure or other
legal proceedings, or in the event of termination of any lease under which
Landlord may hold title, Tenant shall, at the option of the transferee or
purchaser at foreclosure or under power of sale, or the lessor of the Landlord
upon such lease termination, as the case may be (sometimes hereinafter called It
such person"), attorn to such person and shall recognize and be bound and
obligated hereunder to such person as the Landlord under this Lease provided
that such person delivers a non-disturbance agreement (which may be a part of
the attornment agreement), which non-disturbance agreement provides that so long
as Tenant continues to abide by and comply with the terms and conditions of this
Lease (subject to the provisions and conditions immediately below), such person
will continue to allow the Tenant to occupy the Demised Premises; and further
provided, however, that no such person shall be (i) bound by any payment of Rent
for more than one (I) month in advance, except prepayments in the nature of
security for the performance by Tenant of its obligations under this Lease (and
then only if such prepayments have been deposited with and are under the control
of such person); (ii) bound by any amendment or modification of this Lease made
without the express written consent of the mortgagee or lessor of the Landlord,
as the case may be; (iii) obligated to cure any defaults under this Lease of any
prior landlord (including Landlord); (iv) liable for any act or omission of any
prior landlord (including Landlord); (v) subject to any offsets or defenses
which Tenant might have against any prior landlord (including Landlord); or (vi)
bound by any warranty or representation of any prior landlord (including
Landlord) relating to work performed by any prior landlord (including Landlord)
under this Lease. Tenant agrees to execute any attornment agreement not in
conflict herewith requested by Landlord, the mortgagee or such person. Tenant's
obligation to attorn to such person shall survive the exercise of any such power
of sale, foreclosure or other proceeding. Tenant agrees that the institution of
any suit, action or other proceeding by any mortgagee to realize on Landlord's
interest in the Demised Premises or the Building pursuant to the powers granted
to a mortgagee under its mortgage, shall not, by operation of law or otherwise,
result in the cancellation or termination of the obligations of the Tenant
hereunder. Landlord and Tenant agree that notwithstanding that this Lease is
expressly subject and subordinate to any mortgages, any mortgagee, its
successors and assigns, or other holder of a mortgage or of a note secured
thereby, may sell the Demised Premises or the Building, in the manner provided
in the mortgage and may, at the option of such mortgagee, its successors and
assigns, or other holder of the mortgage or note secured thereby, make such sale
of the Demised Premises or Building subject to this Lease.
(d) Landlord hereby represents that, as of the date of this Lease, there are no
mortgages, security deeds, deeds of trust or other security interests
encumbering the Land or the Building.
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28. Estoppel Certificates
(a) Within ten (10) days after request therefor by Landlord, Tenant agrees to
execute and deliver to Landlord in recordable form an estoppel certificate
addressed to Landlord, any mortgagee or assignee of Landlord's interest in, or
purchaser of, the Demised Premises or the Building or any part thereof,
certifying (if such be the case) that this Lease is unmodified and is in full
force and effect (and if there have been modifications, that the same is in full
force and effect as modified and stating said modifications); that there are no
defenses or offsets against the enforcement thereof or stating those claimed by
Tenant; and stating the date to which Rent and other charges have been paid.
Such certificate shall also include such other information as may reasonably be
required by such mortgagee, proposed mortgagee, assignee, purchaser or Landlord.
Any such certificate may be relied upon by Landlord, any mortgagee, proposed
mortgagee, assignee, purchaser and any other party to whom such certificate is
addressed.
(b ) If Landlord has consented to an assignment or sublease of this Lease as
provided herein, Landlord shall, within twenty (20.) days of the request by
Tenant, execute, acknowledge and deliver to Tenant or the prospective assignee
or any prospective subtenant an Estoppel Certificate in recordable form, or in
such other form as Tenant may from time to time require, evidencing whether or
not (i) this Lease is in full force and effect; (ii) this Lease has been amended
in any way; (iii) there are no existing defaults on the part of Tenant hereunder
or defenses or offsets against the enforcement of this Lease to knowledge of
Landlord (specifying the nature of such defaults, defenses or offsets, if any);
(iv) the date to which Base Rent and other amounts due hereunder, if any, have
been paid; and (v) any such other information as may be reasonably requested by
Tenant. Landlord shall also deliver such an Estoppel Certificate if Tenant so
requests and Tenant has entered into a legitimate business transaction in which
such a certificate is normally and customarily required. Each certificate
delivered pursuant to this Paragraph may be relied on by Tenant, the prospective
assignee of Tenant's interest hereunder and any other intended recipient. If
Landlord fails to deliver an Estoppel Certificate that it is required to deliver
within the time required, and further fails to deliver such certificate within
five (5) business days after a second written request, Landlord shall be deemed
to have delivered a certificate which indicated that, to the best of Landlord's
knowledge, there were no events of default, amendments, defenses or offsets and
that all payments currently due from Tenant had been paid. Notwithstanding the
foregoing, if such a certificate is deemed delivered, Landlord shall riot be
deemed to have waived any subsequent or ongoing events of default or any rights,
including rights to receive payments due under the Lease.
29 .No Estate. This Lease shall create the relationship of landlord and tenant
only between Landlord and Tenant and no estate shall pass out of Landlord.
Tenant shall have only an usufruct, not subject to levy and sale and not
assignable in whole or in part by Tenant except as herein provided.
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30. Cumulative Rights. All rights, powers and privileges conferred hereunder
upon the parties hereto shall be cumulative to, but not restrictive of, or in
lieu of those conferred by law.
31. Holding Over. If Tenant remains in possession after expiration or
termination of the Lease Term with or without Landlord's written consent, Tenant
shall become a tenant-at-sufferance, and there shall be no renewal of this Lease
by operation of law. During the period of any such holding over, all provisions
of this Lease shall be and remain in effect, except that the monthly rental
shall be double the amount of Base Rent (including any adjustments as provided
herein) payable for the last full calendar month of the Lease Term including
renewals or extensions plus, for each month or portion thereof after the
expiration of the Lease Term, an amount equal to Tenant's Additional Rental for
the last full calendar month of the Lease Term. Notwithstanding the foregoing,
if Tenant has exercised its renewal option as set forth in Paragraph 5 of
Exhibit "G", the Base Rental component of the rent for the holding over period
shall be one hundred fifty percent (150%) of the Base Rent for the last full
calendar month of the Renewal Term (not "double") plus an amount equal to
Tenant's Additional Rental for the last full calendar month of the Renewal Term.
The inclusion of the preceding sentence in this Lease shall not be construed as
Landlord's consent for Tenant to hold over.
32. Surrender of Premises. Upon the expiration or other termination of this
Lease, Tenant shall quit and surrender to Landlord the Demised Premises and
every part thereof and all alterations, additions and improvements thereto,
broom clean and in good condition and state of repair, excepting only (i)
reasonable wear and tear and (ii) casualty damage and condemnation loss,
reasonable wear and tear only excepted. If Tenant is not then in default, Tenant
shall remove all personal property and equipment not attached to the Demised
Premises which it has placed upon the Demised Premises including any signage
installed by Tenant, computers and related equipment including peripheral
equipment and tape and disk vaults, all projectors and projection screens and
related equipment, blackboards, whiteboards, tackboards, and other display
units, telephone systems, cipher locks and electronic security systems, paging
systems, kitchen equipment, including but not limited to any refrigerators,
microwave ovens, dishwasher, disposal, trash compactor, or other built-in
kitchen equipment, phone system equipment including patch panel and subfeed
panel locations for such phone system, fire suppression systems, CRT patch
panels, all data, computer and telecommunication wiring and cabling (but
Landlord may require Tenant to remove wiring and cabling only if Landlord
notifies Tenant, in writing, at least twelve (12) months prior to the expiration
of the Lease Term [or promptly upon the termination of this Lease, if this Lease
is terminated early]), and Tenant shall restore the Demised Premises to the
condition immediately preceding the time of placement thereof excepting only (i)
reasonable wear and tear and (ii) casualty damage and condemnation loss. If
Tenant shall fail or refuse to remove all of Tenant's effects, personal property
and equipment from the Demised Premises upon the expiration or termination of
this Lease for any cause whatsoever or upon the Tenant being dispossessed by
process of law or otherwise, such effects, personal property and equipment shall
be deemed conclusively to be abandoned and may be appropriated, sold, stored,
destroyed or otherwise disposed of by Landlord without written notice to Tenant
or any other party and without obligation to account for them. Tenant shall pay
Landlord on demand any and all reasonable expenses incurred by Landlord in the
removal of such property, including, without limitation, the cost of repairing
any damage to the Building or Project caused by the removal of
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such property and storage charges (if Landlord elects to store such property).
The covenants and conditions of this Article 32 shall survive any expiration or
termination of this Lease.
33. Notices. All notices required or permitted to be given hereunder shall be in
writing and may be delivered in person to either party or may be sent by courier
or by United States Mail, certified, return receipt requested, postage prepaid.
Any such notice shall be deemed received by the party to whom it was sent (i) in
the case of personal delivery or courier delivery, on the date of delivery to
such party, and (ii) in the case or certified mail, the date receipt is
acknowledged on the return receipt for such notice or, if delivery is rejected
or refused or the U.S. Postal Service is unable to deliver same because of
changed address of which no notice was given pursuant hereto, the first date of
such rejection, refusal or inability to deliver. All such notices shall be
addressed to Landlord or Tenant at their respective address set forth
hereinabove or at such other address as either party shall have theretofore
given to the other by notice as herein provided. Tenant hereby designates and
appoints as its agent to receive notice of all distraint proceedings and all
other notices called for or required under this Lease, the person in charge of
the Demised Premises at the time said notice is given or occupying said Demised
Premises at said time; and, if no person is in charge of or occupying the said
Demised Premises, then such service or notice may be made by attaching the same,
in lieu of mailing, on the main entrance to the Demised Premises.
34. Damage or Theft of Personal Property. All personal property brought into
Demised Premises by Tenant, or Tenant's employees or business visitors, shall be
at the risk of Tenant only, and Landlord shall not be liable for theft thereof
or any damage thereto occasioned by any act of co-tenants, occupants, invitees
or other users of the Building or any other person unless caused by the gross
negligence or willful misconduct of Landlord. Landlord shall not at any time be
liable for damage to any property in or upon the Demised Premises, which results
from power surges or other deviations from the constancy of electrical service
or from gas, smoke, water, rain, ice or snow which issues or leaks from or forms
upon any part of the Building or from the pipes or plumbing work of the same, or
from any other place whatsoever unless caused by the gross negligence or willful
misconduct of Landlord.
35. Eminent Domain
(a) If all or part of the Demised Premises shall be taken for any public or
quasi-public use by virtue of the exercise of the power of eminent domain or by
private purchase in lieu thereof, this Lease shall terminate as to the part so
taken as of the date of taking, and, in the case of a partial taking, and if the
taking is of a material portion of the Demised Premises, Tenant shall have the
right to terminate this Lease as to the balance of the Demised Premises, as of
the date the condemning authority actually takes possession of the part so
condemned or purchased, by written notice to Landlord within thirty (30) days
after notice of the taking is received by both parties; provided, however, that
a condition to the exercise by Tenant of such right to terminate shall be that
the portion of the Demised Premises taken shall be of such extent and nature as
substantially to handicap, impede or impair Tenant's use of the balance of the
Demised Premises. If title to so much of the Building is taken that a reasonable
amount of reconstruction thereof will not in Landlord's sole discretion result
in the Building being a practical improvement
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and reasonably suitable for use for the purpose for which it is designed, then,
by written notice to Tenant within thirty (30) days after notice of the taking
is received by both parties, Landlord shall have the right to terminate this
Lease, as of the date that the condemning authority actually takes possession of
the part so condemned or purchased.
(b) If this Lease is terminated under the provisions of this Article 35, Rent
shall be apportioned and adjusted as of the date of termination. Tenant shall
have no claim against Landlord or against the condemning authority for the value
of any leasehold estate or for the value of the unexpired Lease Term provided
that the foregoing shall not preclude any claim that Tenant may have against the
condemning authority for the unamortized cost of leasehold improvements, to the
extent the same were installed at Tenant's expense (and not with the proceeds of
the Construction Allowance), or for loss of business, moving expenses or other
consequential damages, in accordance with subparagraph (d) below.
(c) If there is a partial taking of the Building and this Lease is not thereupon
terminated under the provisions of this Article 35, then this Lease shall remain
in full force and effect, and Landlord shall, within a reasonable time
thereafter, repair or reconstruct the remaining portion of the Building to the
extent necessary to make the same a complete architectural unit; provided that
in complying with its obligations hereunder Landlord shall not be required to
expend more than the net proceeds of the condemnation award which are paid to
Landlord.
(d) All compensation awarded or paid to Landlord upon a total or partial taking
of the Demised Premises or the Building shall belong to and be the property of
Landlord without any participation by Tenant. Nothing herein shall be construed
to preclude Tenant from prosecuting any claim directly against the condemning
authority for loss of business, for damage to, and cost of removal of, trade
fixtures, furniture and other personal property belonging to Tenant, and for the
unamortized cost of leasehold improvements to the extent same were installed at
Tenant's expense (and not with the proceeds of the Construction Allowance),
provided, however, that no such claim shall diminish or adversely affect
Landlord's award. In no event shall Tenant have or assert a claim for the value
of any unexpired term of this Lease. Subject to the foregoing provisions of this
subparagraph ( d), Tenant hereby assigns to Landlord any and all of its right,
title and interest in or to any compensation awarded or paid as a result of any
such taking.
(e) Notwithstanding anything to the contrary contained in this Article 35, if,
during the Lease Term, the use or occupancy of any part of the Building or the
Demised Premises shall be taken or appropriated temporarily for any public or
quasi-public use under any governmental law, ordinance, or regulations, or by
right of eminent domain, this Lease shall be and remain unaffected by such
taking or appropriation and Tenant shall continue to pay in full all Rent
payable hereunder by Tenant during the Lease Term. In the event of any such
temporary appropriation or taking, Tenant shall be entitled to receive that
portion of any award which represents compensation for the loss of use or
occupancy of the Demised Premises during the Lease Term, and Landlord shall be
30
ATLOI/IO756990v6
entitled to receive that portion of any award which represents the cost of
restoration and compensation for the loss of use or occupancy of the Demised
Premises after the end of the Lease Term.
36. Parties. The term "Landlord", as used in this Lease, shall include Landlord
and its assigns and successors. It is hereby covenanted and agreed by Tenant
that should Landlord's interest in the Demised Premises cease to exist for any
reason during the Lease Term, then notwithstanding the happening of such event,
this Lease nevertheless shall remain in full force and effect, and Tenant hereby
agrees to attorn to the then owner of the Demised Premises. The term "Tenant"
shall include Tenant and its heirs, legal representatives and successors, and
shall also include Tenant's assignees and sublessees, if this Lease shall be
validly assigned or the Demised Premises sublet for the balance of the Lease
Term or any renewals or extensions thereof. In addition, Landlord and Tenant
covenant and agree that Landlord's right to transfer or assign Landlord's
interest in and to the Demised Premises, or any part or parts thereof, shall be
unrestricted, and that in the event of any such transfer or assignment by
Landlord which includes the Demised Premises and there is an assumption of such
obligations by the transferee or assignee, Landlord's obligations to Tenant
hereunder shall cease and terminate, and Tenant shall look only and solely to
Landlord's assignee or transferee for performance thereof.
37. Indemnities. Subject to Article 18 above, Tenant hereby indemnifies Landlord
from and agrees to hold Landlord harmless against any and all liability, loss,
cost, damage or expense, including, without limitation, court costs and
reasonable attorneys' fees, incurred or suffered by Landlord arising out of or
resulting from (i) any negligence or willful misconduct of Tenant, its agents,
contractors or employees acting within the scope of their agency or employment,
or (ii) any damage to any property or injury or death to any person in or upon
the Demised-Premises regardless of cause (unless caused by the negligence or
willful misconduct of Landlord or Landlord's agents, contractors or employees
acting within the scope of their agency or employment or the breach by Landlord
of its obligations hereunder). Subject to the provisions of Articles 18, 34 and
40 and subparagraph (e) of Exhibit "E" attached hereto and any other provision
herein that expressly limits Landlord's liability, Landlord hereby indemnifies
Tenant from and agrees to hold Tenant harmless against an, and all liability,
loss, cost, damage or expense, including without limitation, court costs and
reasonable attorneys fees, incurred or suffered by Tenant arising out of or
resulting from (i) any negligence or willful misconduct of Landlord, its agents,
contractors or employees acting within the scope of their agency or employment
or (ii) any damage to property or injury or death to any person occurring
outside the Demised Premises regardless of cause (unless caused by the
negligence or willful misconduct of Tenant, its agents, contractors or employees
acting within the scope of their agency or employment) or by the breach by
Tenant of its obligations hereunder. The provisions of this Article 37 shall
survive any termination of this Lease with respect to any damage, injury or
death prior to such termination.
38. Intentionally Deleted.
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39. Force Majeure. In the event of strike, lockout, labor trouble, civil
commotion, Act of God, or any other cause beyond a party's control (
collectively "force majeure") resulting in the Landlord's inability to supply
the services or perform the other obligations required of Landlord hereunder,
this Lease shall not terminate and Tenant's obligation to pay Rent and all other
charges and sums due and payable by Tenant shall not be affected or excused and
Landlord shall not be considered to be in default under this Lease. If, as a
result of force majeure, Tenant is delayed in performing any of its obligations
under this Lease, other than Tenant's obligation to take possession of the
Demised Premises on or before the Rental Commencement Date and to pay Rent and
all other charges and sums payable by Tenant hereunder, Tenant's performance
shall be excused for a period equal to such delay and Tenant shall not during
such period be considered to be in default under this Lease with respect to the
obligation, performance of which has thus been delayed.
40. Landlord's Liability
(a) Except as provided in Articles 40(b) and 40(c) below, Landlord shall have no
personal liability with respect to any of the provisions of this Lease. Except
as provided in Articles 40(b ) and 40( c ) below, if Landlord is in default with
respect to its obligations under this Lease, Tenant shall look solely to the
equity of Landlord in and to the Building and the Land described in Exhibit " A"
hereto for satisfaction of Tenant's remedies, if any. Except as provided in
Articles 40(b) and 40(c) below, it is expressly understood and agreed that
Landlord's liability under the terms of this Lease shall in no event exceed the
amount of its interest in and to said Land and Building. In no event shall any
partner of Landlord nor any joint venturer in Landlord, nor any officer,
director or shareholder of Landlord or any such partner or joint venturer of
Landlord be personally liable with respect to any of the provisions of this
Lease.
(b ) If a court issues a final and unappealable order, ordering Landlord to pay
Tenant a money judgement because of Landlord's default, then except in those
instances listed in Article 40(c) below, Tenant's sole remedy to satisfy the
judgement shall be from:
(i) Landlord's interest in the Building and Land including the rental income
(but only rental income not applied to Operating Expenses or debt service on the
Building) and proceeds from sale accruing or received after the date the
judgement becomes final and unappealable; and
(ii) any insurance or condemnation proceeds received because of damage or
condemnation to, or of, the Building or Land that become available after the
judgement becomes final and unappealable and are not applied to restore the
Building or Land.
(c) Notwithstanding the foregoing Landlord will have personal liability when and
to the extent provided below:
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ATLOI/IO756990v6
(i) Landlord has failed to apply insurance or condemnation proceeds as required
by the Lease, but only to the extent of such misappropriation of proceeds;
(ii) Landlord misappropriated the funds of Tenant or escrow funds, but only to
the extent of such misappropriation of proceeds; or
(iii) Landlord has failed to carry insurance required by Article 17(b), but only
to the extent of insurance proceeds that would have been available after the
date the judgement becomes final and unappealable but for such failure.
Nothing in this Article 40 shall be interpreted to mean that Tenant cannot be
awarded specific performance, an injunction or other equitable relief.
41. Landlord's Covenant of Quiet Enjoyment. Provided Tenant performs the terms,
conditions and covenants of this Lease, and subject to the terms and provisions
hereof, Landlord covenants and agrees to provide for the benefit of Tenant the
quiet and peaceful possession of the Demised Premises, for the Lease Term,
without hindrance, claim or molestation by Landlord or any other person lawfully
claiming under Landlord.
42. Intentionally Deleted
43. Hazardous Substances.
(a) Tenant hereby covenants and agrees that Tenant shall not cause or permit any
"Hazardous Substances" (as hereinafter defined) to be generated, placed, held,
stored, used, located or disposed of at the Project or any part thereof, except
for Hazardous Substances as are commonly and legally used or stored as a
consequence of using the Demised Premises for general office and administrative
purposes, but only so long as the quantities thereof do not pose a threat to
public health or to the environment or would necessitate a "response action", as
that term is defined in CERCLA (as hereinafter defined), and so long as Tenant
strictly complies or causes compliance with all applicable governmental rules
and regulations concerning the use, storage, production, transportation and
disposal of such Hazardous Substances. Promptly upon receipt of Landlord's
request, Tenant shall submit to Landlord true and correct copies of any reports
filed by Tenant with any governmental or quasi-governmental authority regarding
the generation, placement, storage, use, treatment or disposal of Hazardous
Substances on or about the Demised Premises. For purposes of this Article 43,
"Hazardous Substances" shall mean and include those elements or compounds which
are contained in the list of Hazardous Substances adopted by the United States
Environmental Protection Agency (EP A) or in any list of toxic pollutants
designated by Congress or the EP A or which are defined as hazardous, toxic,
pollutant, infectious or radioactive by any other federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability (including, without limitation, strict
liability) or standards of conduct concerning, any hazardous, toxic or dangerous
waste, substance or material, as
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ATU>I/IO756990v6
now or at any time hereinafter in effect (collectively "Environmental Laws").
Tenant hereby agrees to indemnify Landlord and hold Landlord harmless from and
against any and all losses, liabilities, including strict liability, damages,
injuries, expenses, including reasonable attorneys' fees, costs of settlement or
judgment and claims of any and every kind whatsoever paid, incurred or suffered
by, or asserted against, Landlord by any person, entity or governmental agency
for, with respect to, or as a direct or indirect result of, the presence in, or
the escape, leakage, spillage, discharge, emission or release from, the Demised
Premises of any Hazardous Substances by or through Tenant or its employees,
agents, contractors or invitees (including, without limitation, any losses,
liabilities, including strict liability, damages, injuries, expenses, including
reasonable attorneys' fees, costs of any settlement or judgment or claims
asserted or arising under the Comprehensive Environmental Response, Compensation
and Liability Act ["CERCLA"], any so-called federal, state or local "Superfund"
or "Superlien" laws or any other Environmental Law); provided, however, that the
foregoing indemnity is limited to matters arising solely from Tenant's violation
of the covenant contained in this Article. The obligations of Tenant under this
Article shall survive any expiration or termination of this Lease.
(b ) Landlord covenants and agrees that if any Hazardous Substances other than
"Permitted Hazardous Substances" as defined below are found in the Project in
such amounts and locations as would require Landlord to remove such materials as
a matter of law, then Landlord shall remove or cause to be removed such
Hazardous Substances. Such removal shall be accomplished in a manner that does
not cause an unreasonable disruption to Tenant's operations in the Demised
Premises. The term "Permitted Hazardous Substances" shall mean such Hazardous
Substances as are commonly and legally used or stored as a consequence of using,
maintaining or operating the Project, but only so long as the quantities thereof
do not pose a threat to public health or to the environment or would necessitate
a "response action" as that term is defined in CERCLA, and so long as Landlord
strictly complies or causes compliance with all applicable governmental rules
and regulations concerning the use, storage, production, transportation and
disposal of such Hazardous Substances.
44. Submission of Lease. The submission of this Lease for examination does not
constitute an offer to lease and this Lease shall be effective only upon
execution hereof by Landlord and Tenant.
45. Severability. If any clause or provision of the Lease is illegal, invalid or
unenforceable under present or future laws, the remainder of this Lease shall
not be affected thereby, and in lieu of each clause or provision of this Lease
which is illegal, invalid or unenforceable, there shall be added as a part of
this Lease a clause or provision as nearly identical to the said clause or
provision as may be legal, valid and enforceable.
46. Entire Agreement. This Lease contains the entire agreement of the parties
and no representations, inducements, promises or agreements, oral or otherwise,
between the parties not embodied herein shall be of any force or effect. No
failure of Landlord to exercise any power given Landlord hereunder, or to insist
upon strict compliance by Tenant with any obligation of
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Tenant hereunder, and no custom or practice of the parties at variance with the
terms hereof, shall constitute a waiver of Landlord's right to demand exact
compliance with the terms hereof. This Lease may not be altered, waived, amended
or extended except by an instrument in writing signed by Landlord and Tenant.
This Lease is not in recordable form, and Tenant agrees not to record or cause
to be recorded this Lease or any short form or memorandum thereof.
47. Headings. The use of headings herein is solely for the convenience of
indexing the various paragraphs hereof and shall in no event be considered in
construing or interpreting any provision of this Lease.
48. Broker. Broker(s) (as defined in Article 1[0]) is (are) entitled to a
leasing commission from Landlord by virtue of this Lease, which leasing
commission shall be paid by Landlord to Broker(s) in accordance with the terms
of a separate agreement between Landlord and Broker(s). Tenant hereby authorizes
Broker(s) and Landlord to identify Tenant as a tenant of the Building and to
state the amount of space leased by Tenant in advertisements and promotional
materials relating to the Building. Tenant represents and warrants to Landlord
that (except with respect to any Broker[s] identified in Article 1[0]
hereinabove) no broker, agent, commission salesperson, or other person has
represented Tenant in the negotiations for and procurement of this Lease and of
the Demised Premises and that ( except with respect to any Broker[ s] identified
in Article 1 [ 0] hereinabove) no commissions, fees, or compensation of any kind
are due and payable in connection herewith to any broker, agent, commission
salesperson, or other person as a result of any act or agreement of Tenant.
Tenant agrees to indemnify and hold Landlord harmless from all loss, liability,
damage, claim, judgment, cost or expense (including reasonable attorneys' fees
and court costs) suffered or incurred by Landlord as a result of a breach by
Tenant of the representation and warranty contained in the immediately preceding
sentence or as a result of Tenant's failure to pay commissions, fees, or
compensation due to any broker who represented Tenant, whether or not disclosed,
or as a result of any claim for any fee, commission or similar compensation with
respect to this Lease made by any broker, agent or finder ( other than the
Broker[ s] identified in Article 1 [ o] hereinabove) claiming to have dealt with
Tenant, whether or not such, claim is meritorious. Tenant hereby represents and
warrants to Landlord that (i) neither Griffin Management Services, Inc. d/b/a/
The Griffin Company nor any successor thereto, nor any individuals now or
formerly associated with such company or any successor thereto, has represented
Tenant in connection with this transaction and (ii) that Cushman & Wakefield of
Georgia, Inc. is Tenant's designated Broker in this transaction. Landlord
represents and warrants to Tenant that (except with respect to any Broker(s)
identified in Article 1(o) hereinabove) no broker, agent, commission
salesperson, or other person has represented Landlord in the negotiations for
and procurement of this Lease and of the Demised Premises and that (except with
respect to any Broker(s) identified in Article 1(0) hereinabove) no commissions,
fees, or compensation of any kind are due and payable in connection herewith to
any broker, agent, commission salesperson, or other person as result of any act
or agreement of Landlord., Landlord agrees to indemnify and hold Tenant harmless
from all loss, liability, damage, claim, judgement, cost or expense (including
reasonable attorneys fees and court costs) suffered or incurred by Tenant as a
result of a breach by Landlord of the representation and warranty contained in
the immediately preceding sentence or as a result of Landlord's failure to pay
commissions, fees, or compensation due to any broker who represented Landlord,
whether or not disclosed, or as a result of any claim for any fee, commission or
similar compensation with
35
ATLO\110756990v6
respect to this Lease made by any broker, agent or finder (other than the
Broker(s) identified in Article 1(0) hereinabove) claiming to have dealt with
Landlord, whether or not such claim is meritorious.
49. Governing Law. The laws of the State of Georgia shall govern the validity,
performance and enforcement of this Lease.
50. Special Stipulations. The special stipulations attached hereto as Exhibit
"G" are hereby incorporated herein by this reference as though fully set forth.
In the event of any conflict between the terms of the Lease and such Special
Stipulations, the Special Stipulations shall control.
51. Authority. If Tenant executes this Lease as a corporation, each of the
persons executing this Lease on behalf of Tenant does hereby personally
represent and warrant that Tenant is a duly incorporated or a duly qualified (if
a foreign corporation) corporation and is fully authorized and qualified to do
business in the State in which the Demised Premises are located, that the
corporation has full right and authority to enter into this Lease, and that each
person signing on behalf of the corporation is an officer of the corporation and
is authorized to sign on behalf of the corporation. If Tenant signs as a
partnership, joint venture, or sole proprietorship or other business entity (
each being herein called "Entity"), each of the persons executing on behalf of
Tenant does hereby covenant and warrant that Tenant is a duly authorized and
existing Entity, that Tenant has full right and authority to enter into this
Lease, that all persons executing this Lease on behalf of the Entity are
authorized to do so on behalf of the Entity, and that such execution is fully
binding upon the Entity and its partners, joint venturers, or principal, as the
case may be. Upon the request of Landlord, Tenant shall deliver to Landlord
documentation satisfactory to Landlord evidencing Tenant's compliance with this
Article, and Tenant agrees to promptly execute all necessary and reasonable
applications or documents as reasonably requested by Landlord, required by the
jurisdiction in which the Demised Premises is located, to permit the issuance of
necessary permits and certificates for Tenant's use and occupancy of the Demised
Premises.
52. Joint and Several Liability. If Tenant comprises more than one person,
corporation, partnership or other entity, the liability hereunder of all such
persons, corporations, partnerships or other entities shall be joint and
several.
36
ATLO1/IO756990v6
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as of
the day, month and year first above written.
"LANDLORD"'
COUSINS PROPERTIES INCORPORATED,
a Georgia corporation
By:
Its:
(CORPORATE SEAL)
"TENANT"
INDUS INTERNATIONAL,
INC., a Delaware corporation
By:
Its:
Attest
Its:
(CORPORATE SEAL)
37
RULES AND REGULATIONS
1. No sign, picture, advertisement or notice visible from the exterior of the
Demised Premises shall be installed, affixed, inscribed, painted or otherwise
displayed by Tenant on any part of the Demised Premises or the Building unless
the same is first approved by Landlord. Any such sign, picture, advertisement or
notice approved by Landlord shall be painted or installed for Tenant at Tenant's
cost by Landlord or by a party approved by Landlord. No awnings, curtains,
blinds, shades or screens shall be attached to or hung in, or used in connection
with any window or door of the Demised Premises without the prior consent of the
Landlord, including approval by the Landlord of the quality, type, design, color
and manner of attachment.
2. Tenant agrees that its use of electrical current shall never exceed the
capacity of existing feeders, risers or wiring installation.
3. The Demised Premises shall not be used for storage of merchandise held for
sale to the general public. Tenant shall not do or permit to be done in or about
the Demised Premises or "Building anything which shall increase the rate of
insurance on said Building or obstruct or interfere with the rights of other
lessees of Landlord or annoy them in any way, including, but not limited to,
using any musical instrument, making loud or unseemly noises, or singing, etc.
The Demised Premises shall not be used for sleeping or lodging. No cooking or
related activities shall be done or permitted by Tenant in the Demised Premises
Except with permission of Landlord. Tenant will be permitted to use for its own
employees within the Demised Premises a small microwave oven and Underwriters'
Laboratory approved equipment for brewing coffee, tea, hot chocolate and similar
beverages, provided that such use is in accordance with all applicable federal,
state, county and city laws, codes, ordinances, rules and regulations. No
vending machines of any kind will be installed, permitted or used on any part of
the Demised Premises without the prior consent of Landlord, except for those
installed for use by Tenant or its employees, guests or invitees. No part of
said Building or Demised Premises shall be used for gambling, immoral or other
unlawful purposes. No intoxicating beverage shall be sold in said Building or
Demised Premises without prior written consent of the Landlord. No area outside
of the Demised Premises shall be used for storage purposes at any time.
4. Except as provided in this Paragraph 4, no birds or animals of any kind shall
be brought into the Building. Trained seeing-eye dogs required to be used by the
visually impaired and fish in aquariums whose weight does not exceed floor load
limits are permissible. However, Tenant assumes all liability for damage
resulting from or related to the presence of the aquariums in the Demised
Premises. No bicycles, motorcycles or other motorized vehicles shall be brought
into the Building.
5. The sidewalks, entrances, passages, corridors, halls, elevators, and
stairways in the Building shall not be obstructed by Tenant or used for any
purposes other than those for which same were intended as ingress and egress. No
windows, floors or skylights that reflect or admit light into the Building shall
be covered or obstructed by Tenant. Toilets, wash basins and sinks shall not be
used for any purpose other than those for which they were constructed, and no
sweeping, rubbish, or other obstructing or improper substances shall be thrown
therein. Any damage resulting to them, or to heating apparatus, from misuse by
Tenant or its employees, shall be borne by Tenant.
6. Only two (2) keys to the Building will be furnished Tenant without charge.
Landlord may make a reasonable charge for any additional keys. Except as
provided in Article 16, no additional lock, latch or bolt of any kind shall be
placed upon any door nor shall any changes be made in existing locks without
written consent of Landlord and Tenant shall in each such case furnish Landlord
with a key for any such lock. At the termination of the Lease, Tenant shall
return to Landlord all keys furnished to Tenant by Landlord, or otherwise
procured by Tenant, and in the event of loss of any keys so furnished, Tenant
shall pay to Landlord the cost thereof.
7. Landlord shall have the right to prescribe the weight, position and manner of
installation of heavy articles such as safes, machines and other equipment
brought into the Building. No safes, furniture, boxes, large parcels or other
kind of freight shall be taken to or from the Demised Premises or allowed in any
elevator, hall or corridor except at times allowed by Landlord. Tenant shall
make prior arrangements with Landlord for use of freight elevator for the
purpose of transporting such articles and such articles may be taken in or out
of said Building only between or during such hours as may be arranged with and
designated by Landlord. The persons employed to move the same must be approved
by Landlord. In no event shall any weight be placed upon any floor by Tenant so
as to exceed the design conditions of the floors at the applicable locations.
8. Tenant shall not cause or permit any gases, liquids or odors to be produced
upon or permeate from the Demised Premises, and no flammable, combustible or
explosive fluid, chemical or substance, except those substances normally,
customarily and legally used in connection with general office operations, shall
be brought into the Building.
9. During a period other than the Sole Tenancy Period, (i). every person,
including Tenant, its employees and visitors, entering and leaving the Building
may be questioned by a watchman as to that person's business therein and may be
required to sign such person's name on a form provided by Landlord for
registering such person; provided that, except for emergencies or other
extraordinary circumstances, such procedures shall not be required between the
hours of 7:00 a.m. and 6:00 p.m., on all days except Saturdays, Sundays and
Holidays, (ii) Landlord may also implement a card access security system to
control access during such other times, (iii) Landlord shall not be liable for
excluding any person from the Building during such other times, or for admission
of any person to the Building at any time, or for damages or loss for theft
resulting therefrom to any person, including Tenant. Notwithstanding the
foregoing, Landlord shall not have any obligation to implement any such security
procedures in the Building. Tenant, its permitted subtenants and their
employees, invitees, licensees and guests, shall have access to the Building and
Demised Premises at all times, 24 hours per day, every day of the year, subject
to casualty and condemnation.
10. If Tenant elects to provide its own cleaning service, Landlord shall have
the right to approve of such service, which approval will not be unreasonably
withheld or delayed. When Landlord provides cleaning service, such service will
not be furnished on nights when rooms are occupied after 6:30 p.m., unless, by
agreement in writing, service is extended to a later hour for specifically
designated rooms. Landlord shall not be responsible for any loss, theft,
mysterious disappearance of or damage to, any property, unless occurring as a
result of or in connection with Landlord's gross negligence or willful
misconduct.
11. No connection shall be made to the electric wires or gas or electric
fixtures, without the consent in writing on each occasion of Landlord, which
consent shall not be unreasonably withheld, conditioned or delayed. All glass,
locks and trimmings in or upon the doors and windows of the Demised Premises
shall be kept whole and in good repair. Tenant shall not injure, overload or
deface the Building, the woodwork or the walls of the Demised Premises, nor
permit upon the Demised Premises any noisome, noxious, noisy or offensive
business.
12. Except as permitted by Article 14 of the Lease, if Tenant requires wiring,
no outside wiring men shall be allowed to do work of this kind unless by the
written permission of Landlord or its representatives, such written permission
not to be unreasonably withheld or delayed. Except as permitted by Article 14 of
the Lease, if telegraph or telephonic service is desired, the wiring for same
shall be approved by Landlord, and no boring or cutting for wiring shall be done
unless approved by Landlord or its representatives, as stated, which approval
shall not be unreasonably withheld or delayed.
13. Tenant and its employees and invitees shall observe and obey all parking and
traffic regulations as imposed by Landlord. All vehicles shall be parked only in
areas designated therefor by Landlord.
14. Canvassing, peddling, soliciting and distribution of handbills or any other
written materials in the Building are prohibited, and Tenant shall cooperate to
prevent the same.
15.Landlord shall have no right to change the street address of the Building,
unless the change is required by governmental authority.
16.Landlord may waive anyone or more of these Rules and Regulations for the
benefit of any particular lessee, but no such waiver by Landlord shall be
construed as a waiver of such Rules and Regulations in favor of any other
lessee, nor prevent Landlord from thereafter enforcing any such Rules and
Regulations against any or all of the other lessees of the Building.
17. These Rules and Regulations are supplemental to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, covenants,
agreements and conditions of any lease of any premises in the Building.
18. Landlord reserves the right to make such other and reasonable Rules and
Regulations as in its judgment may from time to time be needed for the safety,
care and cleanliness of the Building, the Land and Wildwood Office Park, and for
the preservation of good order therein.
EXHIBIT "A"
LEGAL DESCRIPTION
All that tract of land lying and being in Land Lot 1007 and 1008, 17th District,
2nd Section, Cobb County, Georgia, and being described as follows:
Commence at the intersection of the southeast corner of Land Lot 9~0, the
northeast corner of Land Lot 9~1, the southwest corner of Land .Lot 987 and the
northwest corner of Land Lot 986, said District and Section, thence,
northwesterly, along the north Land Lot Line of said Land Lot 941, North 89
degrees 36 minutes 00 seconds West, a distance of 527.94 feet to a point;
thence, leaving said Land Lot Line, South 11 degrees 36 minutes 00 seconds East,
a distance of 730.00 feet to a point, said point being located on the north
right-of-way of Windy Hill Road; thence, South 07 degrees 01 minutes 30 seconds
East, a distance of 119.65 feet to a point, said point being located on the
south right-of-way of said Windy Hill Road; thence, northwesterly, along said
Windy Hill Road right-of-way, North 88 degrees 33 minutes 25 seconds West, a
distance of 6.24 feet to a point; thence, along an arc of curve to the left
(which has a radius of 575.00 feet and a chord distance of 239.92 feet, along a
bearing of South 79 degrees 24 minutes 05 seconds West), an arc distance of
241.70 feet to a point; thence, South 67 degrees 21 minutes 30 seconds West, a
distance of 177.79 feet to a point, said point
being the intersection of said right-of-way and the northeast right-of-way of
Powers Ferry Road, having a varying right-of-way; thence, southeasterly, along
said Powers Ferry Road right-of-way, South 24 degrees 26 minutes 42 seconds
West, a distance of 26.1~ feet to a point; thence, along an arc of curve to the
left (which has a radius of 730.00 feet and a chord distance of 337.27 feet,
along a bearing of South 52 degrees 50 minutes 42 seconds East), an arc distance
of 340.34 feet to a point; thence, along an arc of curve to the left (which has
a radius of 8,034.00 feet and a chord distance of 347.28 feet, along a bearing
of South 64 degrees 58 minutes 00 seconds East), an arc distance of 347.31 feet
to a point; thence, South 65 degrees 29 minutes 16 seconds East, a distance of
211..:30 feet to a point; thence, South 63 degrees 11 minutes 16 seconds East, a
distance of 189.28 feet to a point; thence, South 63 degrees 02 minutes 00
seconds East, a distance of 46.56 feet to a point; thence, South 61 degrees 34
minutes 40 seconds East, a distance of 7.23 feet to a point; thence, South 61
degrees 34 minutes 40 seconds East, a distance of 232.82 feet to a point;
thence, along an arc of curve to the left (which has a radius of 5,516.00 feet
and a chord distance of 149.99 feet, along a bearing of South 61 degrees 52
minutes. 52 seconds East), an arc-distance of 150.00 feet to a point; thence,
North 74 degrees 53 minutes 44 seconds East, a distance of 35.89
1 of 2
feet to a point, said point being the intersection of said Powers Ferry Road
right-of-way and the northwest right-of-way of Windy Ridge Parkway, having a
varying right-of-way; thence, leaving said Powers Ferry Road right-of-way,
northeasterly, along said Windy Ridge Parkway, North 30 degrees 46 minutes 00
seconds East, a distance of 98.57 feet to a point; thence, along an arc of curve
to the right (which has a radius of 139.00 feet and a chord distance of 191.66
feet, along a bearing of North 74 degrees 21 minutes 00 seconds East), an arc
distance of 211.47 feet to a point; thence, South 62 degrees 04 minutes 00
seconds East, a distance of 87.00 feet to a point; thence, along an arc of curve
to 'the left (which has a radius of 301.00 feet and a chord distance of 389.37
feet, along a bearing of North 77 degrees 38 minutes 00 seconds East), an arc
distance of 423.43 feet to a point; thence, North, 37 degrees 20 minutes 00
seconds East, a distance of 67.69 feet to a point; thence, along an arc of curve
- to the right (which has a radius of 274.00 feet-and a chord distance of 324.28
feet, along a bearing of North 73 degrees 36 minutes 56 seconds East), an arc
distance of 347.01 feet to a point, and THE TRUE POINT OF BEGINNING. Thence,
leaving said Windy Ridge Parkway right-of-way, North 35 degrees 01 minutes 18
seconds East, a distance of 310.20 feet to a point; thence, North 76 degrees 58
minutes 30 seconds East, a distance of 500.00 feet to a point; thence, South 41
degrees 57 minutes 00 seconds East, a distance of 340.20 feet to a point;
thence, South 58 degrees 58 minutes 30 seconds East, a distance of 289.80 feet
to a point; thence, South 71 degrees 00 minutes 00 seconds West, a distance of
199.90 feet to a point; thence, South 45 degrees 02 minutes 00 seconds West, a
distance of 223.00 feet to a point; thence, North 32 degrees 16 minutes 21
seconds West, a distance of 145.00 feet to a point; thence, South 57 degrees 43
minutes 39 seconds West, a distance of 217.00 feet to a point; thence, North 83
degrees 54 minutes 18 seconds West, a distance of 61.50 feet to a point; thence,
South 59 degrees 43 minutes 39 seconds West, a distance of 277.84 feet to a
point; thence, North 75 degrees 58 minutes 00 seconds West, a distance of 72.02
feet to a point; said point being located on the southeast right-of-way of the
aforementioned Windy Ridge Parkway; thence, North 13 degrees 20 minutes 29
seconds East, a distance of 48.10 feet to a point; thence, along an arc of curve
to the left (which has a radius of 274.00 feet and a chord distance of 364.70
feet, along a bearing of North 28 degrees 22 minutes 51 seconds West), an arc
distance of 399.05 feet to a point, and THE TRUE POINT OF BEGINNING.
Said tract of land containing 453,843 square feet, or 10.419 acres, more or
less, as shown on a survey for Wildwood Associates, prepared by Engineering &
Inspection Systems, Inc., dated April 21, 1993.
2 of 2
EXHIBIT "G"
SPECIAL STIPULATIONS
1. Parking
(a) Landlord shall maintain the existing unreserved parking facilities adjacent
to the Building (which contain 336 parking spaces) for the purpose of
accommodating Tenant, Tenant's invitees and employees, and other tenants, their
invitees and employees, subject to such reasonable limitations and conditions as
from time to time are imposed by Landlord, but at no additional charge or rent
for such use due from Tenant. Tenant will have the exclusive use of the Building
parking facilities.
(b) By written notice to Landlord on or before September I, 2000, Tenant shall
have the right to require Landlord to re-stripe the existing parking facilities
pursuant to the re-striping plan attached to this Lease as Exhibit "F"
("Re-striping Plan"). If Tenant so notifies Landlord on or before September I,
2000, Landlord shall promptly cause the parking facilities to be re-striped in
accordance with the Re- striping Plan and the cost of such re-striping shall be
included in the Building Operating Expenses. If Tenant fails to notify Landlord
on or before September I, 2000, Landlord will re-stripe the parking facilities
in their current manner with the existing number of parking spaces (336 spaces).
(c) Landlord shall provide periodic motorized patrol security for the parking
area in a method and manner which is reasonable, and not materially less than
the security provided for Wildwood Office Park. Landlord shall keep the parking
area clean and well-lighted in a reasonable and safe manner. The cost of such
security shall be included in Operating Expenses as defined in Article 9.
(d) So long as no uncured event of default exists under this Lease and so long
as Landlord ( or Landlord's affiliate Wildwood Associates) continues to own the
building located at 2500 Windy Ridge Parkway ("2500 Building"), Tenant shall
have the right, at any time during the Lease Term, to elect to use up to one
hundred and fourteen (114) parking spaces in the 2500 Building parking
facilities. Tenant must provide Landlord written notice at least thirty (30)
days prior to Tenant beginning to use any parking spaces in the 2500 Building
parking facilities. The cost for the use of any parking spaces in the 2500
Building parking facilities will initially be $20.00 per space, per month for
calendar year, 2000, with such rate increasing 2.75% on January 1 of each
succeeding calendar year thereafter. The parking spaces to which Tenant will be
entitled in the 2500 Building parking facilities will be unassigned, unreserved
parking spaces. Landlord shall have the right to restrict Tenant's parking
spaces to any specified level or levels of the 2500 Building parking facilities.
Notwithstanding anything to the contrary set forth hereinabove, Tenant shall
have no right to use parking spaces in the 2500 Building parking facilities if,
prior to the date Tenant exercises such right, Landlord, or Landlord's affiliate
Wildwood Associates, has either sold
ATLOI/IO756990v6
the 2500 Building or has allocated those parking spaces to a Tenant of the 2500
Building. In addition, at any time after Tenant exercises its rights hereunder
to use parking spaces in the 2500 Building parking facilities, Landlord may
terminate Tenant's rights to use such parking spaces upon not less than fourteen
(14) months prior written notice to Tenant, but Landlord may only exercise such
termination right if Landlord has either sold the 2500 Building or if Landlord
has agreed to allocate the parking spaces to a Tenant of the 2500 Building.
There shall be no restriction on the parking ratio provided by Landlord to any
Tenant of the 2500 Building.
(e) By written notice to Landlord on or before June 30, 2006 and provided no
uncured event of default then exists under this Lease, Tenant will have the
option to cause Landlord to construct a new parking deck on the Project.
Landlord believes that the deck would be located approximately as shown on
Exhibit "G-l " to this Lease, but Landlord reserves the right to place the deck
(if Tenant exercises this right) anywhere on the Project. If Tenant exercises
this right, Landlord and Tenant will enter into an amendment to this Lease to
set forth the exact terms and conditions on which such parking deck will be
constructed by Landlord. Such amendment will include the obligation for Tenant
to pay Landlord, as Additional Rental, a monthly amount determined by
multiplying the "total costs" to construct such parking deck, by 11% and then
dividing the resulting product by 12. The term "total costs" shall mean any and
all costs incurred by Landlord in connection with the design and construction of
the parking deck including, but not limited to, architectural and engineering
fees, or construction costs, consultants fees, legal fees, permit fees,
landscaping costs and inspection fees (together with interest on all such costs
at the rate of 11% per annum from the date each cost is paid by Landlord until
the date the first monthly installment is due and payable under the amendment),
but shall not include any separate developer fee to Landlord.
2. Renewal Options. Provided no uncured event of default exists at the time of
exercise or as of the commencement date of the Renewal Term (as defined below),
Tenant shall have the right to extend the Lease Term for one (I) period of five
(5) years ("Renewal Term ") with respect to all, or any lesser portion of the
Demised Premises (but, if Tenant does not renew with respect to the entire
Demised Premises, the renewed portions must all be full floors and Tenant must
remove all personal property from all Building lobbies and restore all damage
caused by the removal), upon all of the following terms and conditions:
(a) Tenant must provide Landlord notice of its intent to exercise of the option
for the applicable Renewal Term not less than fourteen (14) months prior to the
expiration date of the Lease Term.
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ATLO1/IO756990v6
(b) The Base Rental for the Renewal Term shall be the Market Rental Rate (as
defined below) .The term " Market Rental Rate " shall mean the then prevailing
market rental rate, as of the date of Tenant's notice, on a per rentable square
foot basis, taking into account all relevant factors, including, without
limitation, size of space, age, location and quality of building, length of
term, method of paying operating costs, services provided, and including a
determination of the improvement allowances, brokerage commissions or other
concessions then being provided as part of a market rate transaction.
(c) If Tenant exercises its renewal option for the Renewal Term by written
notice to Landlord as provided above, Landlord and Tenant shall meet during the
period between the date which is fourteen ( 14) months prior to the expiration
date of the Lease ("Last Notice Date") and the date which is twelve (12) months
prior to the expiration date of the Lease and shall negotiate, in good faith, to
reach agreement on the Market Rental Rate..
(d) If Landlord and Tenant are unable to agree on the Market Rental Rate, then,
within seventy-five (75) days of the Last Notice Date, Landlord and Tenant shall
each designate a commercial real estate broker who has had at least ten (10)
years experience, immediately prior to the date in question, evaluating Market
Rental Rates for similar real estate in the North Atlanta, Georgia suburban
market. The brokers designated by the parties shall mutually agree on a third
qualified broker to serve with them. If the two (2) designated brokers are
unable to agree on a third broker, the brokers shall ask the commercial division
of the Atlanta Board of Realtors to designate a third broker. The brokers so
selected are hereinafter referred to as the "Brokers" .Within ten (10) business
days after the Brokers have been agreed upon or appointed, Landlord and Tenant
shall each deliver to the Brokers in writing their respective written
determinations of the Market Rental Rate. Within thirty (30) days after receipt
of the final written determinations, the Brokers shall, by majority vote, select
either Landlord's determination or Tenant's determination, but no other amount,
as the Market Rental Rate. The Broker shall promptly notify Landlord and Tenant
which party's determination of the Market Rental Rate has been selected. The
fees and expenses of each party's designated Broker shall be borne by that party
and the fees and expenses of the third Broker shall be borne equally by Landlord
and Tenant.
(e) The determination of the Market Rental Rate as provided above shall be the
Base Rental for the Renewal Term and shall be final, binding and conclusive on
both Landlord and Tenant, shall be considered a final award pursuant to the
rules of the American Arbitration Association and any applicable state or
federal law and judgment may be had on the award in any court of competent
jurisdiction.
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ATUJI/IO756990v6
(f) Except for Market Rental Rate determined as described above, all of the
terms and conditions of the Lease shall remain the same and shall remain in full
force and effect throughout the Renewal Term; provided, however, that any free
rent, improvement allowances, moving allowances, lease assumption payments, plan
design allowances (or payments) or other similar concessions provided for in the
Lease shall not apply during the Renewal Term.
3. Audited Financial Statements of Tenant. Promptly following Landlord's written
request, Tenant must provide to Landlord (i) audited financial statements of
Tenant as soon as such statements are available for each year ending during the
Lease Term and (ii) interim financial statements if Landlord has a reasonable
need therefore and requests such statements describing the basis for such need
in the request. Landlord will maintain the confidentiality of said statements,
provided, however, that Landlord's employees, accountants, advisors, consultants
and prospective lenders may have access to such statements.
4. Tenant's Security. Tenant shall be authorized and entitled to provide
Tenant's own security for the Building and Project, at Tenant's sole cost and
expense, subject to and conditioned upon the following terms and conditions:
(a) Landlord and its agents shall have access to the Demised Premises at all
times (subject to the terms, conditions and limitations of Article 16 herein),
notwithstanding Tenant's security system, and Tenant shall make all arrangements
necessary so that Landlord and its agents have reasonable access; and
(b) Tenant's security, may, at Tenant's option, include Tenant's own security
guards which may patrol the Building and parking facilities. The rights of
Tenant to utilize Tenant's own security service and guards shall be further
subject to and conditioned upon the following:
(i) Tenant's security guards shall in all instances be subject to the direction
and authority of Landlord's building management and security guards for the
Project, and Tenant shall so notify Tenant's security guards;
(ii) Landlord shall have the right to approve Tenant's security service, which
approval shall not be unreasonably withheld, conditioned or delayed. Tenant
shall cause such security service to post a roster and list of the persons which
will be working as Tenant's security guards with the building management,
indicating the people which will be working on behalf of Tenant, and the exact
times at which such people will be working.
(iii) Tenant shall cause its security service to provide liability insurance in
amounts which Tenant and Landlord agree are reasonable, and such insurance shall
be written with companies licensed to write insurance in the State of Georgia
which are otherwise satisfactory to Tenant and
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ATLO1/IO756990v6
Landlord, and Tenant shall cause the insurer to name Tenant, Landlord and any
mortgagee as additional named insureds on any such insurance policies, and shall
cause the insurer to issue insurance certificates to Landlord and mortgagee, and
no such insurance may be modified or cancelled on less than thirty (30) days'
notice to Tenant, Landlord and any mortgagee;
(iv) Tenant's security guards shall not in any manner interfere with any other
tenants in Wildwood Office Park, or the employees, agents or invitees of such
tenants;
(v) During the period in which Tenant provides security services under this
paragraph, Landlord shall have no obligation to provide security for the
Building, Landlord's sole security obligation being to provide security services
for the parking facilities as described in paragraph 4 of this Exhibit "G"; and
(vi) If Tenant desires to provide security services under this paragraph, Tenant
shall give sixty (60) days written notice to Landlord, which notice identifies
the security service to be used by Tenant.
5. Building Directory and Signage. Landlord, at its expense, shall provide and
maintain a Building directory in the lobby of the Building for Tenant. Tenant
may install, on the existing monument sign located between the entrance to the
Building and Windy Ridge Parkway, Tenant's name or initials and logo. The cost
of Tenant's entry on the sign and the design and materials will be paid by
Tenant and may be funded out of the Construction Allowance, to the extent
available. All aspects of the size, materials, design, graphics, lighting, and
location of Tenant's entry on the monument sign shall be subject to Landlord's
reasonable prior approval. Tenant shall be obligated, at Tenant's expense, to
remove such sign at the expiration or termination of this Lease, if so directed
by Landlord.
6. Construction Allowance. Landlord will provide Tenant with an allowance
("Construction Allowance") in an amount up to $2,747,004.00 to be applied by
Tenant to the cost of Tenant's Work pursuant to Exhibit "D". The Construction
Allowance may be applied by Tenant only to the cost of Tenant's Work and to the
cost of designing Tenant's Plans; provided, however, that Tenant may use up to
an aggregate total of $214,038.00 of the Construction Allowance for cabling
costs and moving expenses. Otherwise, if the Construction Allowance is not fully
expended by Tenant by December 31, 2004 for the payment of costs incurred for
Tenant's Work or to design Tenant's Plans, the remaining unused amount shall be
retained by Landlord and Tenant shall have no further rights whatsoever with
respect thereto.
7. Satellite Dishes/ Antennas. In addition to the other rights granted by this
Agreement, Tenant shall have the non-exclusive right, but not the obligation,
for the duration of the Lease Term, to install, maintain and operate up to a
total of two (2) satellite dishes and
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antennas, for transmission and reception of communications (including but not
limited to data and voice), mounted on non-penetrating structures, and related
plenum-rated cabling (collectively, " Antennas"), on the roof of the Building
(the "Roof"). The locations for any such Antennas shall be subject to Landlord's
approval, which approval Landlord agrees not to unreasonably withhold, condition
or delay. Tenant must obtain the prior approval of Landlord of the type and size
of any Antenna (no Antenna may be in excess of five feet in diameter), of the
plans and specifications for the connections to the Demised Premises, and of the
plans for the installation (including screening) of any Antenna, which approvals
Landlord agrees not to unreasonably withhold, condition or delay, except with
respect to the screening of any such Antenna, which approval may be granted or
withheld in Landlord's sole, absolute discretion. All costs of installation,
upgrading, maintenance, security and removal (Tenant shall always have the right
to remove the Antennas; Landlord may require that Tenant remove an Antenna upon
expiration or termination of this Lease) and any required repairs to the
Building, due to the installation or removal of any Antenna, shall be paid by
Tenant. Tenant may only enter the Roof to install or maintain any Antenna with
the accompaniment of a Building engineer (but if Landlord fails to make such
engineer available promptly, Tenant may enter without accompaniment and Tenant
may perform the initial installation without accompaniment, subject to
reasonable periodic inspections and Landlord's reasonable rules and
regulations). Tenant's right to install any Antenna pursuant to this provision
is non-exclusive and Landlord may use any other portion of the Roof for its own
communication equipment or may allow other tenants or third parties to use any
other portion of the Roof, so long as such other equipment does not interfere
with the operation of Tenant's Antennas. No Antenna shall interfere with the
operation of any other telecommunication equipment existing on the Roof or
elsewhere in the Project ( or any telecommunication equipment planned for
installation on the Roof or elsewhere in the Project) at the time such Antenna
is installed, so long as Landlord provides Tenant with a description of the
type, location and function of such existing or planned equipment at the time of
Tenant ' s request for approval of such Antenna. Subject to the waivers
contained in this Lease, Tenant hereby indemnifies Landlord from all claims,
damages, costs and expenses arising out of the installation, maintenance, use or
removal of the Antenna by Tenant. Tenant acknowledges that Landlord is not
obligated to provide security for any Antenna and Tenant hereby waives any and
all claims against Landlord arising out of damage, destruction or theft of any
Antenna or any portion thereof, resulting from any cause whatsoever other than
the gross negligence or willful misconduct of Landlord or an employee of
Landlord acting within the scope of his/her employment. Tenant may also use the
risers, conduits and towers in the Building, subject to reasonable space
limitations and Landlord's reasonable requirements for use of such areas and
subject to Landlord's prior approval of the installation and exact location
thereof (which approval Landlord agrees not to unreasonably withhold, condition
or delay), for purposes of installing cabling from the Antenna to the Demised
Premises in the interior of the Building. Landlord reserves the right to require
Tenant to relocate any Antenna temporarily to a location providing Tenant
comparable reception and transmission capabilities if necessary in connection
with repairs, replacement, alterations or improvements to the Roof; provided,
however, that with respect to relocation on account of Landlord' s discretionary
alterations, within fifteen (15) days after receipt of Tenant's invoice
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therefor, Landlord shall reimburse Tenant for all costs and expenses incurred by
Tenant in connection with such relocation (including without limitation moving
back to the original location).
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EXHIBIT "H"
FORM OF DECLARATION OF EASEMENTS
DECLARATION OF EASEMENTS
This Declaration of Easements (the "Declaration"), made this -day of , 2000, by
COUSINS PROPERTIES INCORPORATED, a Georgia corporation (hereinafter referred to
as "Declarant").
WITNESSETH:
WHEREAS, Declarant is the owner of that certain real property located in Cobb
County, Georgia, which is more particularly described on Exhibit" A" attached
hereto and by reference made a part hereof(hereinafter referred to as the "330l
Property"); and
WHEREAS, Declarant is also the owner of that certain real property located in
Cobb County, Georgia, which is more particularly described on Exhibit "B"
attached hereto and by reference made a part hereof (hereinafter referred to as
the "Powers Ferry Property"); and
WHEREAS, the 3301 Property and the Powers Ferry Property are adjacent tracts of
land;
and
WHEREAS, Declarant has determined the desirability of the creation and
establishment of a perpetual, non-exclusive easement for the benefit of the 3301
Property over, under, through and across that certain portion of the Powers
Ferry Property which is described on Exhibit "C" attached hereto and by
reference made a part hereof (hereinafter referred to as the "Driveway Area ")
for the purposes of pedestrian and vehicular access, ingress and egress and for
the purposes of maintaining, repairing and replacing the driveway improvements
located within such Driveway Area; and
WHEREAS, Declarant has also determined the desirability of the creation and
establishment of a perpetual, non-exclusive easement for the passing,
collecting, retaining and discharging of surface and subsurface waters over,
under, through and across that certain portion of the Powers Ferry Property
described on Exhibit "D" attached hereto and by reference made a part hereof
(hereinafter referred to as the "Drainage and Water Retention Area ") for the
benefit of the 3301 Property.
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ATLOI f1O756990v6
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereinafter
acknowledged, the following declarations are made:
1. Driveway Area Easement.
(a) Declaration of Easement over Driveway Area. Declarant, as owner of the
Driveway Area, for itself and its successors and assigns, does hereby declare,
create and establish, for the benefit of and as an appurtenance to the 3301
Property and as a burden upon the Driveway Area, a perpetual, non-exclusive
easement, right and privilege, over, upon, under, across and through the
Driveway Area, together with the curb cut for such Driveway Area to Windy Ridge
Parkway. Such easement shall be for the purpose of pedestrian and vehicular
access, ingress and egress (for the use by Declarant as owner of the 3301
Property, its tenants and subtenants and their respective agents, contractors,
employees, licensees, concessionaires, vendors, suppliers, customers, and
visitors, in common with other entitled to use the same), and for the further
purposes of maintaining, repairing and replacing the driveway improvements
located within such Driveway Area and for constructing and installing
alterations to such driveway improvements from time to time as provided herein.
(b ) Alteration of Driveway Improvements within Driveway Area. The owner of the
Powers Ferry Property and the owner of the 3301 Property shall each have the
right to initiate alterations to the existing driveway improvements within the
Driveway Area by giving written notice thereof to the other owner. No such
alterations to the then existing driveway improvements within the Driveway Area
shall be made unless plans and specifications for such alterations are prepared
by a qualified engineer and are approved by the non-constructing owner, which
approval shall not be unreasonably withheld. Any such plans and specifications
for alterations to the then existing driveway improvements must provide for the
construction of such alterations in accordance with the standards of a
first-class office development and in accordance with all applicable laws,
codes, statutes, permits, and regulations of the applicable governmental
authorities. The non-construction owner shall approve or disapprove such plans
and specifications in writing, stating the reasons for any disapproval, within
twenty (20) business days after the date the non-constructing owner receives the
proposed plans and specifications with respect to such alterations. The
non-construction owner shall approve or disapprove any revisions to such
proposed plans and specifications within seven (7) business days after the date
the non-constructing owner receives any such revised plans. In the event the
non-constructing owner shall fail to respond to such plans and specifications
submitted pursuant hereto within the aforesaid time periods, such plans and
specifications or revisions thereto, as the case may be, shall be deemed to be
approved by the non-constructing owner. Following the approval of the plans and
specifications for any such alterations to the driveway improvements within the
Driveway Area, the constructing owner shall cause a reputable, qualified and
financially capable contractor to construct and install such alterations, with
such construction to commence promptly and to be prosecuted diligently and
continuously until the completion thereof The constructing owner shall bear all
costs and expenses of any such alterations to the driveway improvements within
the Driveway Area.
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( c ) Maintenance and Rel2air of Driveway Iml2rovements within the Driveway
Area. As of the date of this Declaration, the Powers Ferry Property has not been
improved with any building. Prior to the commencement of construction of a
building on the Powers Ferry Property, the owner of the 3301 Property shall be
responsible for maintaining and repairing the driveway improvements within the
Driveway Area in good order, condition and state of repair at the sole cost and
expense of the owner of the 3301 Property. After the commencement of
construction ofa building on the Powers Ferry Property, the owner of the Powers
Ferry Property shall be responsible for maintaining and repairing in good order,
condition and state of repair the driveway improvements within the Driveway
Area, and the cost of maintaining and repairing such driveway improvements shall
be shared equally by the owner of the Powers Ferry Property and the owner of the
3301 Property. Upon each instance of maintenance or repair of the driveway
improvements within the Driveway Area, the owner of the Powers Ferry Property
shall submit a bill to the owner of the 3301 Property for its share of such
costs. Such billing shall be accompanied by copies of paid invoices, receipts
and other materials as are reasonably necessary for the owner of the 3301
Property to determine the accuracy of the bill. If the driveway improvements
within the Driveway Area are maintained or repaired in conjunction with other
improvements, the owner of the Powers Ferry Property shall advise its contractor
to separately allocate on a fair and reasonable basis the costs of maintaining
and repairing the driveway improvements within the Driveway Area so that
appropriate payment can by made by the owner of the Powers Ferry Property of its
share of such costs. In the event that the owner of the Powers Ferry Property
shall fail to maintain and repair the driveway improvements within the Driveway
Area as required hereunder, and upon the continuation of such failure for a
period of thirty (30) days after written notice of such failure to the owner of
the Powers Ferry Property, the owner of the 3301 Property may perform such
maintenance and repair of the driveway improvements within the Driveway Area. In
such event, the owner of the 3301 Property shall be entitled to reimbursement
from the owner of the Powers Ferry Property for one-half (1/2) of the cost
incurred in connection with the maintenance and repair of such driveway
improvements. The billing of such costs shall be submitted together with copies
of paid invoices, receipts and other materials as are reasonably necessary for
the owner of the Powers Ferry Property to determine the accuracy of the bill.
(d) Manner of Performing Work. Any alterations to the existing driveway
improvements within the Driveway Area and any maintenance, repairs or
replacements of such driveway improvements shall be performed in a good and
workmanlike manner and in accordance with all applicable laws, codes, statutes,
permits and regulations of governmental authorities having jurisdiction thereof.
Such work shall be carried out in such manner so as to cause the least amount of
disruption of any business operations conducted on the 3301 Property and the
Powers Ferry Property as reasonably practicable, without creating unreasonable
increase in the cost of doing the applicable work.
2. Drainage and Water Retention Area Easement.
(a) Declaration of Easement over Drainage and Water Retention Area. Declarant,
as owner of the Drainage and Water Retention Area, for itself and its successors
and assigns, does hereby declare, create and establish, for the benefit of the
3301 Property, a perpetual, non- exclusive easement over, under, through and
across the Drainage and Water Retention Area for
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the purposes of passing, collecting, retaining and discharging surface and
subsurface waters from the 3301 Property, and for the purposes of constructing,
maintaining, repairing and replacing pipes, headwalls, retention pond or area
and other facilities related thereto, and any slopes necessary for the proper
construction and creation of such retention pond or area.
(b ) Relocation and/or Expansion of Drainage and Water Retention Area. Declarant
as owner of the Powers Ferry Property hereby reserves the right to alter,
change, improve, expand and/or relocate the Drainage and Water Retention Area
and facilities related thereto within the Powers Ferry Property at any time or
from time to time upon thirty (30) days prior written notice given to the owner
of the 3301 Property, provided that any such alteration, change, improvement,
expansion, or relocation of such Drainage and Water Retention Area and
facilities related thereto (i) shall not reduce or reasonably impair the
usefulness or function of or service provided to the 3301 Property by such
Drainage and Water Retention Area and facilities related thereto, (ii) shall be
performed without cost or expense to the owner of the 3301 Property, (iii) shall
have been approved by the appropriate governmental or quasi-governmental
authorities having jurisdiction thereover.
( c ) Maintenance of Drainage and Water Retention Area. The cost of maintaining
and repairing the water retention and related facilities within the Drainage and
Water Retention Area shall be borne solely by the owner of the 3301 Property;
provided, however, in the event that the owner of the Powers Ferry Property
shall elect to alter, change, improve or expand the water retention and related
facilities within the Drainage and Water Retention Area so as to accommodate
therein an increase in the surface and subsurface water from the Powers Ferry
Property resulting from the construction of improvements upon the Powers Ferry
Property, the costs of maintaining and repairing the water retention and related
facilities within the Drainage and Water Retention Area shall be shared equally
by the owner of the Powers Ferry Property and the owner of the 3301 Property.
Upon each instance of maintenance or repair of the water retention and related
facilities within the Drainage and Water Retention Area, the owner performing
such maintenance and repair shall submit a bill to the other owner for its share
of such costs. Such billing shall be accompanied by copies of paid invoices,
receipts and other materials as are reasonably necessary for such other owner to
determine the accuracy of the bill. Any maintenance or repairs shall be
performed in a good and workmanlike manner and in accordance with all
applicable, laws, codes, statutes, permits and regulations of governmental
authorities having jurisdiction thereof Such work shall be carried out in such
manner so as to cause the least amount of disruption of any business operations
conducted on the 3301 Property and the Power Ferry Property as reasonably
practicable, without creating unreasonable increase in the cost of doing the
applicable work.
3 .Default Interest and Lien Rights. In the event that any amount required to be
paid or reimbursed by an owner under this Declaration is not paid within thirty
(30) days after the receipt by such owner of a bill therefor and related back-up
information, the amount due shall bear interest from the thirtieth (30th) day
after receipt of such bill until it is paid at the lesser of (i) two percent
(2%) in excess of the prime rate from time to time publicly announced by Bank of
America, N.A., or its successor, or (ii) the maximum rate permitted by law. Any
payments which are delinquent pursuant to this Paragraph 3, together with
interest as aforesaid, shall constitute a lien against the property (either the
3301 Property or the Powers Ferry Property, as
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the case may be) owned by the party failing to make such payment; provided,
however, that such lien shall not attach or take effect until such time as a
claim of lien has been filed for record in the Office of the Clerk of the
Superior Court of Cobb County, Georgia, specifying therein at a minimum (w) the
name of the lien claimant, (x) the basis for the claim and the amount thereof,
(y) the name of the owner of, and a description of, the property against which
the lien is claimed, and (z) a statement that the lien is claimed pursuant to
this Declaration and reciting the book and page and recordation of this
Declaration. Any lien so claimed shall attach from the date of recordation
solely in the amount claimed therein and may be enforced in any judicial
proceedings allowed by law, including, without limitation, suit in the nature of
suit to foreclose a mortgage or a mechanics lien under the applicable provisions
of the laws of the State of Georgia.
4. Status Reports. Recognizing that the owners of the 3301 Property and the
Powers Ferry Property may find it necessary from time to time to establish to
third parties, such as existing or prospective tenants, lenders, purchasers, or
the like, the then current status of an owner's performance under this
Declaration, upon the written request of such owner made to the other owner from
time to time, the other owner agrees to furnish promptly a written statement
certifying (i) the amount of any payment(s) then due by the requesting owner
under this Declaration, and (ii) whether to the best of responding owner's
knowledge, such requesting owner is in default of any of its other duties or
obligations under this Declaration.
5. Covenants Running with the Land. This Declaration shall inure to the benefit
and be binding upon Declarant and Declarant's successors and assigns. The
easements, benefits and covenants contained herein shall run with and bind the
land.
6. Constructive Notice and AcceQtance. Every person or entity which now has or
hereafter acquires any right, title, estate or interest in or to the 3301
Property or the Powers Ferry Property is and shall conclusively be deemed to
have consented and agreed to be bound by the covenants and agreements contained
herein applicable to such property whether or not any reference to this
Declaration is contained in the instrument by which such person or entity
acquires its interest in said property.
7. Limitation of Liability. Neither the owner of the 3301 Property nor the owner
of the Powers Ferry Property shall have any corporate or personal liability with
respect to any of the provisions of this Declaration. In seeking any recovery
against a defaulting owner, anyother owner shall look solely to the interest of
the defaulting owner and the defaulting owner's successors and assigns, in the
defaulting owner's real property (the 3301 Property or the Powers Ferry
Property, as the case may be) and the improvements thereon and the rents and
other income derived therefrom.
8. Amendments. This Declaration may be modified only by the recordation in the
Office of the Clerk of the Superior Court of Cobb County, Georgia, of a written
instrument setting forth such modification or amendment and executed by the
owner or owners of fee simple title to the 3301 Property and the Powers Ferry
Property.
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9 .Governing Laws. Severability .This Declaration shall be governed by and
construed in accordance with the laws of the State of Georgia. If any provision
of this Declaration or the application thereof shall to any extent be invalid or
unenforceable, the remainder of this Declaration or the application of any such
other provision or portion thereof shall not be affected thereby, and each
provision of this Declaration shall be valid and enforceable to the fullest
extent permitted by law.
10. Captions. The captions of the paragraphs of this Declaration are for
convenience only and shall not be construed or referred to in resolving
questions of interpretation and instruction.
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EXHIBIT 10.6
PREVIEW SYSTEMS, INC.
OFFICER RETENTION, SEVERANCE, OPTIONS GRANT, AND ACCELERATED
VESTING AGREEMENT
Name: Ed Wholihan
Date: April 5, 2001
Preview Systems wishes to provide you with an incentive to continue
in the service of the Company through certain potential transactions and for a
reasonable period of time thereafter. If you wish to receive the benefits of
the Retention Bonus, Severance and Accelerated Vesting Agreement, please sign
the bottom of this letter indicating your acknowledgement and agreement to the
terms described in this letter, and return it to HR no later than 5:00 p.m. on
April 12, 2001.
Retention Bonus Amount:
Lump sum payment equal to nine months of your base salary plus 75% of your
target bonus for this year, reduced by applicable withholding taxes.
Severance Amount:
Lump sum payment equal to three months of your base salary plus 25% of your
target bonus for this year, reduced by applicable withholding taxes.
New Option Grant: 40,000 shares of Preview Systems common stock at a price per
share of $2.6562
Accelerated Vesting:
• 100% of the new grant (described above) • 100% of 1998 grant numbers
144, 145, 62, and 68 • 50% of other previously unvested options or
unvested stock subject to repurchase
Conditions for Receipt of the Retention Bonus: You will receive the Retention
Bonus if
One of the following circumstances applies to you:
• You continue in the active full time employment of Preview until June 30,
2001; or • You are terminated from your employment by Preview other than
for cause before June 30, 2001; or • You accept an offer of employment
with an acquiring company by June 30, 2001, providing for base salary at least
equal to your current base salary and not requiring a change in location of your
place of work in excess of 50 miles from your current place of work.
And you meet each of the following conditions:
• You maintain the confidentiality of this Retention Bonus offer. •
You sign and return a general release of claims in a form provided by Preview
Systems (a copy of which is attached) within the time frame described on the
release.
Conditions for Receipt of the Severance Amount:
• Your employment with the Company is terminated by the Company other than for
cause.*
And you meet each of the following conditions:
• You maintain the confidentiality of this Severance offer. • You sign
and return a general release of claims in a form provided by Preview Systems (a
copy of which is attached) within the time frame described on the release.
* Your employment with the Company will be terminated on or before June 30,
2001at the discretion of the Company.
Condition for Receipt of Accelerated Vesting: You will receive the Acceleration
of Vesting on the earlier of the following events:
• You are employed by the Company immediately prior to the closing of a
transaction involving the sale of substantially all of the Company’s assets or
the acquisition of more than 50% of the voting shares of the Company’s stock.
• Termination of your employment other than for cause, and you sign and
return a general release of claims.
Preview Systems, Inc. By:
--------------------------------------------------------------------------------
Title: President & CEO ACKNOWLEDGED AND ACCEPTED: Date:
--------------------------------------------------------------------------------
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|
EXECUTIVE STOCK PLEDGE, SECURITY AND RETENTION AGREEMENT
THIS EXECUTIVE STOCK PLEDGE, SECURITY AND RETENTION AGREEMENT (as
amended, supplemented or otherwise modified from time to time this "Agreement")
is made as of April 18, 2001, between Kevin G. Kerns ("Pledgor"), and Apropos
Technology, Inc., an Illinois corporation (the "Company").
Contemporaneously with the execution of this Agreement, Pledgor has
executed a promissory note (as amended, supplemented or otherwise modified from
time to time the "Note") to the order of the Company to evidence a loan by the
Company, being made to fund certain alternative minimum tax obligations of
Pledgor.
The Pledgor has agreed to pledge to the Company, to secure payment
on the Note, 311,111 Common Shares of the Company (the "Common Shares"),
identified on Exhibit A (the "Initial Pledged Shares," and together with any
other Common Shares pledged hereunder from time to time, the "Pledged Shares")
and to grant a security interest in all of his future federal and state income
tax refunds to secure payment on the Note (to the extent of any and all “AMT
Recoveries” as defined under the Note).
In consideration of the promises contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to induce the Company to make the loan represented by
the Note, Pledgor and the Company hereby agree as follows:
1. Incorporation of Recitals. The above recitals are
incorporated into this Agreement.
2. Pledge. Pledgor hereby pledges to the Company, and
grants to the Company a security interest in, all of the following, whether now
owned or hereafter acquired: (i) the Initial Pledged Shares, (ii) the
"Additional Pledged Shares," (iii) distributions in respect of, in substitution
for, or in exchange for any of the Pledged Shares (including by way of stock
dividend, asset distributions or otherwise), as security for the prompt and
complete payment when due of the unpaid principal of, and unpaid interest on,
the Note, (iv) all of Pledgor’s federal and state income tax refunds arising
from AMT Recoveries, and (v) all proceeds of the foregoing. Commencing on the
date one year from the date hereof, in the event that at any time thereafter the
"Fair Market Value" of the Pledged Shares is less than the outstanding principal
amount of the Note and accrued and unpaid interest (the "Loan Balance") at such
time, Pledgor shall deposit with the Company, within 10 business days,
additional certificates representing Common Shares of the Company (the
"Additional Pledged Shares"), together with executed stock powers in the form
attached hereto as Exhibit B, such that the aggregate Fair Market Value of the
Pledged Shares, including the Additional Pledged Shares at the time of the
additional deposit, is no less than 110% of the then outstanding Loan Balance.
The Company's sole remedy for a failure to comply with the preceding sentence
shall be to declare a Default under Section 7 of this Agreement and exercise its
remedies thereunder. At any time of determination of the "Fair Market Value" of
Common Shares, such value shall be deemed to be the average of the per share
closing price of the Common Shares on the principal market on which such shares
are traded for the previous ten trading days, unless trading is suspended in
which case the value shall be determined in good faith by the Board of Directors
of the Company.
3. Delivery of Pledged Shares. Upon the execution of this
Agreement, Pledgor shall deliver to the Company the certificate(s) representing
the Initial Pledged Shares, together with duly executed stock powers in
substantially the form attached hereto as Exhibit B, and a duly executed power
of attorney in substantially the form attached hereto as Exhibit C. The Pledgor
represents that the Initial Pledged Shares represent the lesser of (i) Common
Shares with a Fair Market Value equal to 1.5 times the principal amount of the
Note, or (ii) all of the Common Shares of the Company owned by the Executive.
The Company covenants that the stock powers and power of attorney shall be
utilized solely in connection with any applicable surrender of Pledgor's shares
pursuant to the exercise of the Company's rights under Sections 7(a) or 7(b) of
this Agreement.
4. Voting Rights. Notwithstanding anything to the
contrary contained herein, during the "Term of this Agreement" (as defined in
Section 8 below) and until such time as there exists a "Default" (as defined in
Section 7 below) under the Note or under this Agreement, Pledgor shall be
entitled to all voting rights with respect to the Pledged Shares. During the
continuance of any such Default, any officer or director of the Company (other
than Pledgor), as directed by the Board of Directors shall have the right to
vote the Pledged Shares.
5. Stock Dividends; Distributions, etc. If, during the
Term of this Agreement, Pledgor becomes entitled to receive, or receives, any
securities or other property in respect of, in substitution of, or in exchange
for any of the Pledged Shares or any other pledged collateral (whether as a
distribution in connection with any recapitalization, reorganization or
reclassification, a stock dividend or otherwise), Pledgor shall accept such
securities or other property on behalf of, and for the benefit of, the Company
as additional security for Pledgor's unpaid indebtedness under the Note and
shall promptly deliver such additional security to the Company, together with
duly executed forms of assignment, and such additional security shall be deemed
to be part of the collateral pledged hereunder.
6. Substitution of Collateral. With the consent of the
Company, which shall be given or withheld in the Company's sole and absolute
discretion, Pledgor shall be entitled to the release of all or a portion of the
Pledged Shares (the "Released Shares"); provided that Pledgor substitutes, for
such Released Shares, collateral of such value and liquidity as the Company
deems appropriate, accompanied by appropriate forms of assignment and other
documentation, all to the Company's sole satisfaction. Upon such substitution
of collateral, the Company shall promptly surrender the Released Shares to
Pledgor, together with all forms of assignment relating thereto, and shall
promptly execute and deliver such other and further documents as may be
necessary to evidence its full and complete release of any security interest in
the Released Shares. Any reference in this Agreement to the Pledged Shares
shall be to the Pledged Shares, if any, remaining after the release of Released
Shares pursuant to this Section 6.
7. Default.
(a) In the event (i) Pledgor fails to pay any portion of
the principal or interest under the Note when it becomes due, and such failure
or breach is not cured by Pledgor within five days of written notice thereof
from the Company, (ii) any representation of Pledgor in the Note or this Pledge
Agreement was incorrect in any material respect when made, (iii) Pledgor
otherwise breaches this Agreement or the Note in any manner, which breach is not
cured within five days of written notice from the Company, or (iv) the Pledgor
files a petition or otherwise seeks relief under any bankruptcy, insolvency or
similar law ("Insolvency Law") or a receiver, conservator, custodian or similar
person is appointed by court order, or an order for relief is entered under
federal or other applicable bankruptcy laws with respect to Pledgor, or a
petition is filed against Pledgor under any Insolvency Law, or Pledgor makes an
assignment for the benefit of creditors (any such event in (i)-(iv) being a
"Default"), then the Company may exercise any and all rights, powers and
remedies of any owner of the Pledged Shares or other pledged collateral in
furtherance of this Agreement and shall have, and may exercise without demand,
any and all of the rights and remedies granted to a secured party upon default
under the Uniform Commercial Code of Illinois or otherwise available to the
Company under applicable law. Without limiting the foregoing, the Company is
authorized to sell, assign and deliver at its discretion, from time to time
during any period after a Default, all or any part of the Pledged Shares and
other pledged collateral for the account of Pledgor at any private sale or
public auction, on not less than ten days' written notice to Pledgor, at such
price or prices and upon such terms as the Company may reasonably deem
advisable. Pledgor shall have no right to redeem any Pledged Shares or other
pledged collateral thus sold or auctioned. At any such sale or auction, the
Company may bid for, and become the purchaser of, the whole or any part of the
Pledged Shares or other collateral offered for sale. In case of any such sale
or auction, after deducting the costs, attorneys' fees and other expenses of
sale and delivery, the remaining proceeds of such sale shall be applied to the
due and unpaid principal of, and due and unpaid accrued interest on, the Note;
provided that promptly after payment in full of the indebtedness evidenced by
the Note, the balance of the proceeds of sale or auction then remaining shall be
paid to Pledgor and Pledgor shall be entitled to the prompt return of any of the
Pledged Shares or other collateral remaining in the hands of the Company.
Pledgor shall be liable for any deficiency if the remaining proceeds are
insufficient to pay the indebtedness under the Note in full only to the extent,
and in the circumstances, set forth in the Note.
(b) In addition to and not in lieu of the remedies set forth
in Section 7(a), so long as Common Shares of the Company of the same class as
the Pledged Shares are publicly traded, the Pledgor agrees that the Company
shall not be obligated to sell the Pledged Shares pursuant to Section 7(a), but
may instead, at its option, purchase all or any part of the Pledged Shares at
the Fair Market Value at the date of purchase, and may apply the proceeds
thereof to the Loan Balance.
8. Payment of Indebtedness; Release of Pledged Shares on
Sale; Term. Upon payment in full of the indebtedness evidenced by this Note,
the Company shall promptly surrender the Pledged Shares and any other collateral
pledged pursuant to this Agreement to Pledgor, together with all forms of
assignment, and shall promptly execute and deliver such other and further
documents as may be reasonably necessary to evidence its full and complete
release of any security interest in such Pledged Shares and pledged collateral.
Prior to a Default, upon the receipt, by the Company of an irrevocable letter of
direction from the Pledgor to a broker, with an acknowledgment from the broker,
in form and substance satisfactory to the Company, to sell certain Pledged
Shares and remit the proceeds, net of the Associated Tax Liability (as defined
in the Note) directly to the Company, the Company shall promptly surrender such
Pledged Shares to such broker. The "Term of this Agreement" shall begin as of
the date first set forth above and shall expire when all indebtedness evidenced
by the Note shall have been paid in full.
9. No Other Liens; No Sales or Transfers. Pledgor hereby
represents and warrants that he has good and valid title to all of the Pledged
Shares and will have good and valid title to any Additional Pledged Shares, free
and clear of all liens, security interests and other encumbrances, and Pledgor
hereby covenants that, until such time as all of the outstanding principal of
and interest on the Note has been repaid, Pledgor shall not (i) create, incur,
assume or suffer to exist any pledge, security interest, encumbrance, lien or
charge of any kind against the Pledged Shares or against Pledgor's rights as a
holder thereof, other than pursuant to this Agreement and/or (ii) sell or
otherwise transfer any Pledged Shares or any interest therein, except as
expressly permitted herein.
10. Further Assurances. Pledgor agrees that, at any time
and from time to time upon the written request of the Company, Pledgor shall, at
the Company's sole expense, execute and deliver such further documents
(including UCC financing statements), and do such further acts and things, as
the Company may reasonably request in order to effect the purposes of this
Agreement.
11. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. No Waiver; Cumulative Remedies. Neither Party shall by
any act, delay, omission or otherwise be deemed to have waived any of such
Party's rights or remedies hereunder, and no waiver shall be valid unless in
writing, signed by the waiving Party, and then only to the extent therein set
forth. A waiver by either Party of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy that such Party
would otherwise have on any future occasion. No failure to exercise, nor any
delay in exercising, on the part of either Party, any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
are cumulative and may be exercised singly or concurrently, and are not
exclusive of any rights or remedies provided by law.
13. Care of Collateral. The Company has no obligations to
(i) initiate any actions with respect to or otherwise inform Pledgor of any
offer or right relating to the collateral, or (ii) protect the collateral
against declines in market value or otherwise. 14.
Miscellaneous. None of the terms or provisions of this Agreement may be
altered, modified or amended except by an instrument in writing, duly executed
by the Parties. This Agreement and all rights, remedies and obligations of the
Parties shall inure to the benefit of and be binding upon the Parties and their
respective successors and assigns. This Agreement may be transferred or
assigned by the Company, in whole or in part. This Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of
Illinois without regard to principles of conflicts of law.
15. Notice. All notices and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given when delivered in person or when dispatched by electronic facsimile (if
confirmed in writing by mail simultaneously dispatched) or one business day
after having been dispatched by a nationally recognized overnight courier
service to, in the case of the Company, the Company's principal place of
business, and in the case of the Pledgor, the Pledgor's contact information set
forth in the Company's records.
IN WITNESS WHEREOF, this Agreement has been executed as of the
date first above written.
APROPOS TECHNOLOGY, INC. /s/ Kevin G. Kerns /s/Frank Leonard
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Pledgor By: Frank Leonard
--------------------------------------------------------------------------------
Its: Chief Financial Officer
--------------------------------------------------------------------------------
EXHIBIT A
PLEDGED SHARES
Certificate No. Number of Shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
311,111
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
ASSIGNMENT OF STOCK
FOR VALUE RECEIVED, Kevin G. Kerns does hereby assign and transfer
to____________________ , Three Hundred Eleven Thousand One Hundred Eleven
(311,111) of Common Shares of APROPOS TECHNOLOGY, INC., an Illinois corporation,
standing in the name of ________________ on the books of the corporation
represented by Certificate No. ____, and does hereby irrevocably constitute and
appoint any officer to transfer said stock on the books of the corporation with
full power of substitution in the premises.
Dated: ______________, _______
/s/ Kevin G. Kerns
--------------------------------------------------------------------------------
EXHIBIT C
POWER OF ATTORNEY MADE April 18, 2001.
1. I, Kevin G.
Kerns______________________________________________________________________________________
(insert name
and address of principal)
hereby appoint: Apropos Technology, Inc. and each of its officers, including
but not limited to Kevin G. Kerns and Francis J. Leonard, One Tower Lane,
Oakbrook Terrace, Illinois 60181
(insert name
and address of agent)
as my attorney-in-fact (my "agent") to act for me and in my name (in any way I
could act in person) with respect to 311,111 Common Shares owned by me and any
additional property distributed to me as dividends, stock-splits or otherwise in
respect to those shares (collectively, the "Property"), but only and solely with
respect to effecting a transfer of the Property in accordance with Sections 7(a)
and/or 7(b) of the Executive Stock Pledge Agreement dated April 18, 2001.
My agent shall have the right by written instrument to delegate any
or all of the foregoing powers (subject to its limitations) to any person or
persons whom my agent may select, but such delegation may be amended or revoked
by any agent (including any successor) named by me who is acting under this
power of attorney at the time of reference.
This power of attorney shall become effective immediately.
This power of attorney is irrevocable and shall to the extent
permissible by law survive my death and be binding on my legal representatives.
I am fully informed as to all the contents of this form and
understand the full import of this grant of powers to my agent.
Signed /s/ Kevin G. Kerns
--------------------------------------------------------------------------------
Type Principal Name State of _______________________ ) )SS. County
of _______________________ )
The undersigned, a notary public in and for the above county and
state, certifies that _____________, known to me to be the same person whose
name is subscribed as principal to the foregoing power of attorney, appeared
before me and the additional witnesses in person and acknowledged signing and
delivering the instrument as the free and voluntary act of the principal, for
the uses and purposes therein set forth
Dated:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Notary Public (SEAL) My commission expires
--------------------------------------------------------------------------------
EACH OF THE UNDERSIGNED WITNESSES CERTIFIES THAT ___________________ KNOWN TO ME
TO BE THE SAME PERSON WHOSE NAME IS SUBSCRIBED AS PRINCIPAL TO THE FOREGOING
POWER OF ATTORNEY, APPEARED BEFORE ME AND THE NOTARY PUBLIC AND ACKNOWLEDGED
SIGNING AND DELIVERING THE INSTRUMENT AS THE FREE AND VOLUNTARY ACT OF THE
PRINCIPAL, FOR THE USES AND PURPOSES THEREIN SET FORTH. EACH OF THE UNDERSIGNED
WITNESSES BELIEVES THE PRINCIPAL TO BE OF SOUND MIND AND MEMORY.
Dated:
--------------------------------------------------------------------------------
Residing at:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(witness) Residing at:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(witness)
|
SECOND SUPPLEMENTAL AGREEMENT
BETWEEN
TRICO SHIPPING AS
(as BORROWER)
AND
NEDSHIP BANK N.V.
acting through its Norwegian branch
Nedship Bank (Nordic)
UNIBANK OF DENMARK (UNIBANK A/S) Singapore Branch
DEN NORSKE BANK ASA
(as BANKS)
AND
DEN NORSKE BANK ASA
(as AGENT)
Dated 21 December 2000
THIS SECOND SUPPLEMENTAL AGREEMENT
(hereinafter called the "Second Supplemental Agreement") IS MADE THE 21 DECEMBER
2000
BETWEEN:
1. TRICO SHIPPING AS
P.O.Box 85
6090 Fosnavag
Norway
Telephone No. + 47 70 08 10 20
Telefax No. + 47 70 08 93 27
(hereinafter called the "Borrower")
and
2. THE BANKS AND FINANCIAL INSTITUTIONS
which names and addresses are listed in Appendix 9 to the Loan Agreement (as
defined below)
and
3. DEN NORSKE BANK ASA
P.O.Box 7100
Lars Hillesgt. 30
5020 Bergen
Norway
Telephone No. + 47 55 21 10 00
Telefax No. + 47 55 21 19 24
(as "Agent")
WHEREAS:
A.
The Banks have granted the Borrower a reducing revolving credit facility in the
amount of NOK 650,000,000.- pursuant to a reducing revolving credit facility
agreement dated 23 June 1998 as supplemented and amended by i.a. (i) a letter
dated 21 April 1999 and (ii) a supplemental agreement dated 13 April 2000
(hereinafter together referred to as the "Loan Agreement") entered into between
the Borrower, the Banks and the Agent;
B.
The Borrower has requested the Banks' consent to (i) release the Guarantor from
all its obligations and liabilities under the Guarantee and (ii) change registry
for the vessel "Northern Corona" (both as defined in the Loan Agreement) from
the Bahamian Ship Register to the Norwegian Ship Register;
C.
By a letter dated 12 December 2000 the Agent, on behalf of the Banks, has
consented to the requested changes set forth above subject to the terms and
conditions set forth in this Second Supplemental Agreement;
D.
This Second Supplemental Agreement shall be construed as being in all respect
supplemental to the Loan Agreement.
> >
NOW IT IS HEREBY AGREED AS FOLLOWS:
> >
1. Definitions
1.01
In this Second Supplemental Agreement, unless the context otherwise requires,
terms defined in the Loan Agreement shall bear the same meaning when used
herein. In addition, the Loan Agreement means the Loan Agreement as supplemented
and amended by this Second Supplemental Agreement.
1.02
In this Second Supplemental Agreement the following words and expressions shall
have the meaning set opposite them below;
"Addendum"
an addendum to the Fleet Mortgage whereby the Fleet Mortgage is extended to
include the vessel "Northern Corona", substantially in the terms and form as set
out in Appendix ( ) hereto.
"New Declaration
of Pledge" a declaration of pledge executed by the Borrower in favour of the
Agent on behalf of the Banks in respect of the Fleet Mortgage and the Clipper
Mortgage, substantially in the terms and form as set out in Appendix ( ) hereto
"Effective Date"
the day when all conditions set forth in Clause 3.01 (i) below are fulfilled by
the Borrower.
2. Representation and Warranties
2.01
The Borrower shall by signing this Second Supplemental Agreement be deemed to
have made to the Agent and the Banks the representations and warranties as set
out in Clause 3.01 of the Loan Agreement as amended by this Second Supplemental
Agreement.
3. Conditions
3.01
The obligations of the Banks to accept (i) the Borrower's request to release the
Guarantee and (ii) the Borrower's request to change flag for the vessel
"Northern Corona", shall be subject to the condition that the Agent on behalf of
the Banks has received the following documents in a form satisfactory to the
Agent and its legal advisers;
> > > a. an executed copy of this Second Supplemental Agreement, and
> > >
> > > b.
> > >
> > > an updated Company Certificate in respect of the Borrower with attached
> > > copies of the Articles of Association of the Borrower, and
> > >
> > >
> > >
> > > c.
> > >
> > > confirmation that the vessel "Northern Corona" is registered in the name
> > > of the Borrower in NOR,
> > >
> > >
> > >
> > > d.
> > >
> > > confirmation from the insurance companies that all insurances taken out on
> > > the vessel "Northern Corona" will be maintained in their present form and
> > > with the Agent on behalf of the Banks noted as mortgagees, and
> > >
> > >
> > >
> > > e.
> > >
> > > evidence that the Fleet Mortgage (as defined below) has been or will upon
> > > the Effective Date be registered against the vessel "Northern Corona" with
> > > first priority, and
> > >
> > >
> > >
> > > f.
> > >
> > > the New Declaration of Pledge, and
> > >
> > >
> > >
> > > g.
> > >
> > > the Addendum.
3.02
Further the obligation of the Banks to accept the release of the Guarantor and
the change of flag for the vessel "Northern Corona" shall be subject to that the
Borrower shall pay to the Agent on behalf of the Banks on demand all cost,
expenses and disbursement (including, but not limited to legal fees and
printing, publication and travelling expenses) incurred by the Agent and/or the
Banks in the negotiation, preparation and completion of this Second Supplemental
Agreement and the maintenance, protection and enforcement of any of their rights
hereunder.
Furthermore the Borrower shall pay a handling fee of USD 3,000.00 to each of the
Banks.
4. Release of the Guarantor
4.01
With effect from the Effective Date the Agent on behalf of the Banks hereby
releases the Guarantor from all its obligations and liabilities under the
Guarantee, the Guarantor's Declaration and the Guarantor's Confirmation (as
defined in the Loan Agreement).
5. Amendments to the Loan Agreement
With effect on and from the Effective Date, the Loan Agreement shall be amended
in the following respect:-
5.01
Clause 2 (Definitions) of the Loan Agreement
A.
The definition of "Corona", "Corona Deed of Covenants", "Corona Mortgage",
"Second Corona Mortgage" and "Second Corona Deed of Covenants" in Clause 2 and
throughout the Loan Agreement to be deleted.
B.
The definitions of "Guarantee", "Guarantor" and "Guarantor's Declaration" in
Clause 2 and throughout the Loan Agreement to be deleted.
C.
The definitions of "Addendum" to be inserted in Clause 2 of the Loan Agreement.
D.
The definition of "Declaration of Pledge" in Clause 2 and throughout the Loan
Agreement do be deleted and replaced by the definition of the "New Declaration
of Pledge".
E.
The following definitions in Clause 2 of the Loan Agreement shall be amended and
read as follows:
> > "Fleet Mortgage"
a first priority mortgage on each of the Vessels (save for Supporter) in the
amount of NOK 715.000.000,- as amended by the Addendum executed by the Borrower
in favour of the Agent on behalf of the Banks, substantially in the terms and
form as set out in Appendix ( ) hereto.
"Security
Documents" the Fleet Mortgage, the Clipper Mortgage, the Assignment of Earnings,
the New Declaration of Pledge, the Assignment of Insurances, the Supporter
Mortgage and the Supporter Deed of Covenants.
5.02
Clause 3 (Representation and Warranties) of the Loan Agreement
A.
Clause 3.01 b) to be deleted.
B.
Clause 3.01 c) shall be amended and read as follows:
> > "The Borrower will as from the first Drawdown Date be a wholly owned
> > subsidiary of Trico Supply ASA which is a wholly owned subsidiary of Trico
> > International Holdings B.V. which is again a wholly owned subsidiary of
> > Trico."
C.
Clause 3.01 e) to be deleted.
D.
Clause 3.01 j) (i) shall be amended and read as follows:
> > "in the absolute and (save as the Fleet Mortgage and the Supporter Mortgage)
> > unencumbered ownership of the Borrower".
5.03
Clause 8 (Reduction of the facility amount) of the Loan Agreement
Clause 8.03 shall be amended and read as follows:
> > "The Banks shall have the right to demand the Facility Amount to be repaid
> > in full in one (1) amount if any shareholder in Trico Supply ASA other than
> > Trico Marine Services Inc. including subsidiaries owns and/or controls fifty
> > per cent (50%) or more of the voting shares in Trico Supply ASA. Repayment
> > to be made at the latest six (6) months after such demand has been made by
> > the Banks."
5.04
Clause 11 (Security) of the Loan Agreement
Clause 11.01 shall be amended and read as follows:
"The Loan together with all unpaid interest and costs payable hereunder shall be
secured by:
> > (i) the Fleet Mortgage, and
> > (ii) the Clipper Mortgage, and
> > (iii) the Assignment of Earnings, and
> > (iv) the New Declaration of Pledge, and
> > (v) the Assignment of Insurances, and
> > (vi) the Supporter Mortgage, and
> > (vii) the Supporter Deed of Covenants."
5.05
Clause 13 (Covenants) of the Loan Agreement
A.
Clause 13.01 c) shall be amended and read as follows:
> > "furnish the Agent on behalf of the Banks with the following in respect of
> > the Borrower and Trico Supply ASA:"
> > Remainder of Clause 13.01 c) unchanged.
B.
Clause 13.01 n) shall be amended and read as follows:
> > "not obtain any loans from Trico Supply ASA and/or subsidiaries of Trico
> > Supply ASA unless such loan(s) are subordinated to the Loan from an Event of
> > Default."
C.
A new Clause 13.01 w) to be inserted and shall read as follows:
> > "not make payments of dividends or any other capital distributions to Trico
> > Supply ASA or other parties without the prior written consent of the Banks."
5.06
Clause 14 (Events of Default) of the Loan Agreement
A.
Clause 14.01 j) to be deleted.
B.
Clause 14.01 k) shall be amended and read as follows:
> > "the Borrower has Value Adjusted Equity of less than twenty-five percent
> > (25%) of the Value Adjusted Assets, or"
C.
Clause 14.01 l) shall be amended and read as follows:
> > "the Borrower has a negative working capital (current assets less current
> > liabilities (next years instalments on long term debt is not to be included
> > in the short time liabilities)), or"
D.
Clause 14.01 m) shall be amended and read as follows:
> > "the Borrower has a free liquidity available to the Borrower (including
> > undrawn portion of any drawing facility) at any time in the Loan Period of
> > less than NOK 50.000.000,-, or"
E.
Clause 14.01 p) shall be amended and read as follows:
> > "a demand for payment is made under any guarantee executed or to be executed
> > by the Borrower in favour of financial creditors to Trico and/or
> > subsidiaries, or"
F.
Clause 14.01 q) shall be amended and read as follows:
> > "Trico Supply ASA ceases to be directly or indirectly subsidiary of Trico as
> > long as there are guarantees from the Borrower and/or Trico Supply ASA in
> > favour of Trico's financial creditors, or."
5.07
Appendix 2
By the Addendum the Fleet Mortgage to be extended and include the vessel
"Northern Corona".
5.08
Appendix 8, Part 1
The Official Number 732217 for the vessel "Northern Corona" shall be replaced by
Call Signal [ ].
Appendix 8, Part 2
Appendix 8, Part 2 Negative Pledge Vessels shall be amended and read as follows:
"NEGATIVE PLEDGE Vessels
Owner: Trico Shipping AS
> > Vessels:
> >
> > NORTHERN MARINER
Built: 1986
Class: +1A1 Supply Vessel EO
Official No.: 701187
Dwt.: 2100
NORTHERN QUEEN
Built: 1982
Class: +1A1, Supply Vessel, SF, LFL*, EO
Official No.: 705528
Dwt.: 2972
NORTHERN SEA
Built: 1977
Class: +1A1 Supply Vessel
Official No.: 377305
Dwt.: 1914
NORTHERN SEEKER
Built: 1975
Class: +1A1 Supply Vessel
Official No.: 399200
Dwt.: 2081
NORTHERN VIKING
Built: 1976
Class: +1A1 EO
Official No.: 709583
Dwt.: 2215
5.09
Subject only to the modifications set out in this Second Supplemental Agreement,
the terms and conditions of the Loan Agreement shall remain in full force and
effect and binding upon the Agent, the Banks and the Borrower.
6. Applicable law
This Second Supplemental Agreement shall be governed by and construed in
accordance with Norwegian law. The Borrower accepts Bergen Town Court as none
exclusive venue. This choice shall not prevent the Agent on behalf of the Banks
to enforce any of the Security Documents against each of the Vessels and Clipper
respectively wherever such vessel may be found.
IN WITNESS WHEREOF
the parties hereto have caused this Second Supplemental Agreement to be duly
executed the day and year above written.
For and on behalf of
TRICO SHIPPING AS
p.p. DEN NORSKE BANK ASA
as Agent |
EXECUTION COPY
HISTORICAL ADVANCE PURCHASE AGREEMENT
between
AAMES CAPITAL CORPORATION
as Seller,
and
STEAMBOAT FINANCIAL PARTNERSHIP I, L.P.
as Buyer
Dated as of January 5, 2001
--------------------------------------------------------------------------------
HISTORICAL ADVANCE PURCHASE AGREEMENT
This HISTORICAL ADVANCE PURCHASE AGREEMENT, dated as of January 5, 2001 (as
amended, supplemented or otherwise modified and in effect from time to time,
this "Agreement"), is made by and between STEAMBOAT FINANCIAL PARTNERSHIP I,
L.P., a Delaware limited partnership, as buyer (the "Buyer"), and AAMES CAPITAL
CORPORATION, a California corporation, as seller (the "Seller").
R E C I T A L S
:
WHEREAS, in the ordinary course of the Seller's business, the Seller enters into
servicing agreements, which include the Scheduled Pooling and Servicing
Agreements (as defined below), pursuant to which the Seller acts as servicer of
portfolios of mortgage loans;
WHEREAS, pursuant to the Scheduled Pooling and Servicing Agreements, the Seller
has made Historical Advances (as defined below) which, subject to the terms and
conditions of this Agreement, the Seller now wishes to sell to the Buyer, and
the Buyer wishes to purchase from the Seller, on the Closing Date; and
WHEREAS, concurrently with the sale contemplated herein, Schedule A to each of
the Scheduled Pooling and Servicing Agreements is being supplemented to reflect
the conveyance of the Historical Advances to Buyer, as Limited Servicer, and
thereby to provide for the direct payment by the trustee under each Scheduled
Pooling and Servicing Agreement to the Buyer with respect to such Historical
Advances;
NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein, and for good and sufficient consideration, the parties hereto, intending
to be legally bound, do hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms. All capitalized terms used herein and not
otherwise defined herein shall have the meaning ascribed to them in the
Scheduled Pooling and Servicing Agreements, and, to the extent not inconsistent
therewith, in the Limited Partnership Agreement, and the following capitalized
terms shall have the following meanings:
"Affiliate" shall mean, with respect to a Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with, such Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
2
--------------------------------------------------------------------------------
"Business Day" shall mean any day other than (i) a Saturday or Sunday or (ii)
any other day on which banking institutions are authorized or required by law,
executive order or governmental decree to be closed in the States of Delaware,
New York or California.
"Buyer" shall have the meaning set forth in the recitals hereto.
"Certificate Insurer" shall mean the "Financial Guaranty Insurer" or the
"Certificate Insurer" as the case may be, in each case as defined in each
Scheduled Pooling and Servicing Agreement.
"Chief Executive Office" shall mean, with respect to the Seller or the Buyer,
the place where the Seller or the Buyer, as the case may be, is located, within
the meaning of Section 9-103(3)(d), or any analogous provision, of the UCC, in
effect in the jurisdiction whose Law governs the perfection of the Buyer's
ownership of any of the Historical Advances.
"Closing Date" shall mean January 5, 2001.
"Collection Policy" shall mean the Seller's policies regarding the collection
and remittance of monies due under Historical Advances as promptly as is
reasonably practical and in accordance with the provisions of the Scheduled
Pooling and Servicing Agreements.
"Cut-off Date" shall mean November 30, 2000.
"GAAP" shall mean generally accepted accounting principles in the United States
of America, applied on a consistent basis and applied to both classification of
items and amounts, and shall include, without limitation, the official
interpretations thereof by the Financial Accounting Standards Board, its
predecessors and successors.
"Historical Advances" shall mean, with respect to the Scheduled Pooling and
Servicing Agreements, the Monthly Advances and Servicing Advances made by the
Servicer, including all rights to repayment and reimbursement with respect
thereto, which remain unreimbursed as of the Cut-off Date, having an aggregate
balance of $10,000,003.65 as of the Cut-off Date, and the proceeds thereof, as
defined in the Relevant UCC, listed on Schedule 1 hereto.
"Indemnified Parties" shall have the meaning specified in Section 7.1 hereof.
"Law" shall mean any law (including common law), constitution, statute, treaty,
regulation, rule, ordinance, order, injunction, writ, decree or award of any
Official Body.
"Lien", in respect of the property of any Person, shall mean any ownership
interest of any other Person, any mortgage, deed of trust, hypothecation,
pledge, lien, security interest, financing statement, or charge or other
encumbrance or security arrangement of any nature whatsoever, including, without
limitation, any conditional sale or title retention arrangement, and any
assignment, deposit arrangement, consignment or lease intended as, or having the
effect of, security.
2
--------------------------------------------------------------------------------
"Limited Partnership Agreement"
shall mean the Limited Partnership Agreement of Steamboat Financial Partnership
I, L.P., dated as of June 10, 1999, as amended by that certain Amendment No. 1
To Limited Partnership Agreement dated as of February 24, 2000 and Amendment No.
2 To Limited Partnership Agreement dated as of February 24, 2000, as further
amended or modified from time to time.
"Official Body" shall mean any government or political subdivision or any
agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"Outstanding Balance" of any Historical Advance shall mean, at any time, the
then outstanding amount thereof.
"Person" shall mean an individual, corporation, limited liability company,
partnership (general or limited), trust, business trust, unincorporated
association, joint venture, joint-stock company, Official Body or any other
entity of whatever nature.
"Purchase" shall mean the purchase by the Buyer from the Seller of an undivided
ownership interest in the Historical Advances pursuant to Sections 2.1 and 2.2
hereof.
"Purchase Price" shall have the meaning specified in Section 2.2(c) hereof.
"Records" shall mean correspondence, memoranda, computer programs, tapes, discs,
papers, books or other documents or transcribed information of any type whether
expressed in ordinary or machine readable language.
"Relevant UCC" shall mean the UCC as in effect in the State of California and in
the jurisdiction whose Law governs the perfection of the Buyer's ownership
interests in the Historical Advances.
"Repurchase Event" shall mean, with respect to any Historical Advance sold by
the Seller to the Buyer pursuant to this Agreement, either (i) any
representation or warranty made by the Seller in Section 3.2 of this Agreement
with respect to such Historical Advance proves to have been false or misleading;
or (ii) the failure of the Buyer to have a perfected ownership interest in such
Historical Advance, free and clear of any Lien imposed by or in respect of
Seller.
"Responsible Officer" shall mean, with respect to the Seller or the Buyer, the
chief executive officer, chief financial officer, or treasurer of such Person
and any other Person designated as a Responsible Officer by any such officers,
identified on the List of Responsible Officers attached as Exhibit D hereto (as
such list may be amended or supplemented from time to time) and agreed to by the
Seller and Buyer.
"Scheduled Pooling and Servicing Agreements" shall mean, collectively, those
pooling and servicing agreements described on Schedule 2 attached hereto to
which the Seller is a party, pursuant to which the Seller acts as the servicer
of portfolios of mortgage loans, or by which Seller's servicing obligations are
governed. For all purposes of this Agreement, the term
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"Scheduled Pooling and Servicing Agreements" shall include the Scheduled
Supplements thereto, and any and all instruments, agreements, invoices or other
writings, which give rise to or otherwise evidence any of the Historical
Advances. Schedule A to the Scheduled Pooling and Servicing Agreements has been
supplemented to reflect the purchase by Buyer of the Historical Advances.
"Scheduled Supplements"
shall mean, collectively, those supplements to each Scheduled Pooling and
Servicing Agreement, as restated and amended as of June 10, 1999 and as further
amended or modified from time to time.
"Scheduled Trustee"
shall mean each "Trustee" under each Scheduled Pooling and Servicing Agreement.
"Seller" shall have the meaning set forth in the recitals hereto.
"UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial Code,
or any successor statute, or any comparable law, as the same may from time to
time be amended, supplemented or otherwise modified and in effect in such
jurisdiction.
SECTION 1.2 Interpretation and Construction. Unless the context of this
Agreement otherwise clearly requires, references to the plural include the
singular, the singular the plural and the part the whole. References in this
Agreement to "determination", "determine" and "determined" by the Buyer shall be
conclusive absent manifest error and include good faith estimates by the Buyer
(in the case of quantitative determinations), and the good faith belief of the
Buyer (in the case of qualitative determinations). The words "hereof", "herein",
"hereunder" and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Unless otherwise
stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding." The
section and other headings contained in this Agreement are for reference
purposes only and shall not control or affect the construction of this Agreement
or the interpretation hereof in any respect. Section, subsection and exhibit
references are to this Agreement unless otherwise specified. As used in this
Agreement, the masculine, feminine or neuter gender shall each be deemed to
include the others whenever the context so indicates. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. Terms
not otherwise defined herein which are defined in the UCC as in effect in the
State of California on the date hereof shall have the respective meanings
ascribed to such terms therein unless the context otherwise clearly requires.
ARTICLE II
SALES AND TRANSFERS; SETTLEMENTS
SECTION 2.1 General Terms. On the terms and conditions hereinafter set forth, on
the Closing Date, the Seller shall sell to the Buyer, and the Buyer shall
purchase from the Seller, without recourse, except as specifically set forth
herein, all right, title and interest of the Seller in, to and under the
Historical Advances.
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SECTION 2.2 Purchase and Sale.
(a) The Seller hereby irrevocably sells, sets over, assigns, transfers and
conveys to the Buyer and its successors and assigns, without recourse, except as
specifically set forth herein, and the Buyer hereby accepts, purchases and
receives from the Seller, all of the Seller's right, title, and interest in and
to the Historical Advances, together with all monies due or to become due in
respect thereof.
(b) The purchase price (the "Purchase Price") for the Historical Advances shall
be $10,000,003.65. The Buyer shall pay and transfer to the Seller on the Closing
Date the Purchase Price, by wire transfer of immediately available funds.
(c) The Purchase shall be made, and the Purchase Price paid as set forth above,
provided that all conditions precedent to the Purchase specified in Section 4.1
shall have been satisfied.
SECTION 2.3 Intended as Sale.
(a) It is the intention of the parties hereto that the Purchase shall
constitute a sale and assignment, which sale and assignment shall be absolute,
irrevocable and without recourse except as specifically provided herein and
shall provide the Buyer with the full benefits of ownership of the Historical
Advances. In the event that the Purchase is deemed by a court contrary to the
express intent of the parties to constitute a pledge rather than a sale and
assignment of the Historical Advances, the Buyer shall be treated as having a
first-priority, perfected security interest in and to, and lien on, the
Historical Advances. The possession by the Buyer or its agent of notes and such
other goods, money or documents related thereto, and the filing of Form UCC-1,
shall be deemed to be "possession by the secured party" and "perfection by
filing", respectively, for purposes of perfecting such security interest
pursuant to the Relevant UCC. The sale and conveyance hereunder of the
Historical Advances does not constitute an assumption by the Buyer or its
successors and assigns of any obligations of the Seller to any Person in
connection with the Historical Advances or under any Scheduled Pooling and
Servicing Agreement or any other agreement or instrument relating to the
Historical Advances.
(b) In connection with the Purchase, and to reflect the sale of the Historical
Advances by the Seller, the Seller agrees to record and file on or prior to the
Closing Date, at its own expense, financing statements with respect to the
Historical Advances, suitable to reflect the transfer of accounts and general
intangibles (each as defined in Article 9 of the Relevant UCC) and meeting the
requirements of applicable state Law in such manner and in such jurisdictions as
are necessary to perfect the sale, transfer and assignment of the Historical
Advances from the Seller to the Buyer, and to deliver file-stamped copies of
such financing statements or other evidence of such filing satisfactory to the
Buyer on the Closing Date or the day thereafter. In addition to, and without
limiting the foregoing, the Seller shall, upon the request of the Buyer, in
order to accurately reflect this transaction, execute and file such financing or
continuation statements or amendments thereto or assignments thereof (as
permitted pursuant to Section 8.8 hereof) as may be reasonably requested by the
Buyer.
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(c) The Seller shall maintain its books and records, including but not limited
to any computer files and master data processing records, so that such records
that refer to Historical Advances sold hereunder shall indicate clearly that the
Seller's right, title and interest in such Historical Advances has been sold to
the Buyer. Indication of the Buyer's interest in Historical Advances shall be
deleted from or modified on the Seller's records when, and only when, the
Historical Advances shall have been paid in full or the Buyer's interest in such
Historical Advances shall have been repurchased or repaid by the Seller
hereunder.
SECTION 2.4 Protection of Ownership of the Buyer.
(a) The Seller agrees that from time to time, at its expense, it shall promptly
execute and deliver all additional instruments and documents and take all
additional action that the Buyer may reasonably request in order to perfect the
interests of the Buyer in, to and under, or to protect, the Historical Advances,
or to enable the Buyer to exercise or enforce any of its rights or remedies
hereunder. To the fullest extent permitted by applicable Law, the Buyer and its
successor and assigns shall be permitted to sign and file continuation
statements and amendments thereto without the Seller's signature if the Seller
shall have failed to sign such continuation statements, amendments or
assignments within five (5) Business Days after receipt of a request for such
execution from the Buyer. The Seller hereby irrevocably consents to Buyer's
execution in Seller's name of continuation statements, amendments or
assignments.
(b) At any reasonable time and from time to time at the Buyer's reasonable
request and upon seven days' prior notice to the Seller, for so long as Seller
is the Servicer under the Scheduled Pooling and Servicing Agreements, the Seller
shall permit such Person as the Buyer may designate to conduct audits or visit
and inspect the Chief Executive Office of the Seller to examine the Records,
internal controls and procedures maintained by the Seller with respect to the
Historical Advances and take copies and extracts therefrom, and to discuss the
Seller's affairs with its officers, employees and, upon notice to the Seller,
independent accountants. The Seller hereby authorizes such officers, employees
and independent accountants to discuss with the Buyer or its designee the
affairs of the Seller. Any audit provided for herein shall be conducted in
accordance with Seller's rules respecting safety and security on its premises
and without materially disrupting operations.
(c) If the Seller shall receive any payments with respect to Historical
Advances, the Seller shall hold such payments in trust and shall pay such
amounts to the applicable Scheduled Trustee in accordance with the terms of the
applicable Scheduled Pooling and Servicing Agreements.
(d) The Buyer shall have the right to do all such acts and things as it may deem
reasonably necessary to protect its interests hereunder, including, without
limitation, confirmation and verification of the existence, amount and status of
the Historical Advances.
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SECTION 2.5 Mandatory Repurchase Under Certain Circumstances.
(a) The Seller shall promptly repurchase from the Buyer all of the Historical
Advances for a repurchase price equal to the aggregate Outstanding Balance of
all of the Historical Advances, if, at any time, the Buyer shall cease to have a
perfected ownership interest in all of the Historical Advances purchased
hereunder, free and clear of any Lien imposed by or in respect of Seller, or if
any of the representations or warranties made by the Seller in Sections 3.1(b),
(c), (f) and (i) prove to have been false or misleading in any material respect
as of the date on which they were made, except that, with respect to the
representations and warranties in Section 3.1(f), Seller shall be obligated to
repurchase the Historical Advances as provided herein only if the failure of
such representation and warranty results in any Form UCC-1 filed with respect to
the Historical Advances not having been filed in a location effective to perfect
a security interest (with respect to general intangibles) against the Seller
under the Relevant UCC.
(b) If a Repurchase Event occurs with respect to any particular Historical
Advance, the Seller shall promptly repurchase such Historical Advance from the
Buyer for a purchase price equal to the then Outstanding Balance of such
Historical Advance.
(c) Each of the Seller and the Buyer shall promptly notify the other if it
becomes aware of or receives notice of any fact or circumstance that could or
would cause the Seller to be obligated to repurchase any Historical Advance
pursuant to this Section 2.5 or any Historical Advance is not otherwise
recoverable. The repurchase price of any Historical Advances purchased hereunder
shall be deposited by Seller into an account designated by Buyer within two (2)
Business Days of Buyer notifying Seller that a Repurchase Event has occurred, or
of Seller becoming aware that such Repurchase Event has occurred.
(d) Upon receipt by the Buyer of the Outstanding Balance of any Historical
Advance required to be repurchased by the Seller pursuant to this Section 2.5,
the Buyer shall automatically and without further action, be deemed to sell,
transfer, assign, set-over and otherwise convey to the Seller, without recourse,
representation or warranty, all the right, title and interest of the Buyer in
and to such Historical Advance and all monies due or to become due with respect
thereto; and such repurchased Historical Advance shall be treated by the Buyer
as collected in full as of the date on which it was transferred. The Buyer shall
execute such documents and instruments of transfer or assignment and take such
other actions as shall reasonably be requested by the Seller to effect the
conveyance of such Historical Advance and all monies due or to become due with
respect thereto, pursuant to this Section 2.5. Promptly following any such
repurchase, the Seller shall update Schedule 1 to remove therefrom such
repurchased Historical Advance, and deliver the same to the Buyer as so updated.
SECTION 2.6 Transfers by Buyer. The Seller acknowledges and agrees that the
Buyer may sell, assign, encumber or otherwise dispose of the Historical
Advances.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of Seller. The Seller hereby
represents and warrants to the Buyer on and as of the Closing Date that:
(a) Organization and Qualification. The Seller is a corporation duly organized,
validly existing and in good standing under the Laws of its jurisdiction of
incorporation. The Seller is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction in which the ownership of its
properties or the nature of its activities (including transactions giving rise
to Historical Advances), or both, requires it to be so qualified or, if not so
qualified, the failure to so qualify would not have a material adverse effect on
its financial condition or results of operations.
(b) Authority. The Seller has the corporate power and authority to execute and
deliver this Agreement, to make the sales provided for herein and to perform its
obligations under this Agreement.
(c) Execution and Binding Effect. This Agreement has been duly executed and
delivered by the Seller and, assuming the due and valid execution and delivery
hereof by the Buyer, constitutes the legal, valid and binding obligation of the
Seller, enforceable against the Seller in accordance with its terms, except as
the enforceability hereof may be limited by bankruptcy, insolvency,
reorganization or other similar Laws of general application relating to or
affecting the enforcement of creditors' rights generally or by general
principles of equity and will vest absolutely and unconditionally in the Buyer a
valid undivided ownership interest in the Historical Advances purported to be
assigned hereby, subject to no Liens whatsoever. Upon the filing of the
necessary financing statements under the UCC or under applicable Law as in
effect in the jurisdiction whose Law governs the perfection of the Buyer's
ownership interests in the Historical Advances, the Buyer's ownership interests
therein will be perfected under Article 9 of such UCC or under applicable Law,
prior to and enforceable against all creditors of and purchasers from the Seller
and all other Persons whatsoever (other than the Buyer and its successors and
assigns).
(d) Authorizations and Filings. No authorization, consent, approval, license,
exemption or other action by, and no registration, qualification, designation,
declaration or filing with, any Official Body is or will be necessary or, in the
opinion of the Seller, advisable in connection with the execution and delivery
by the Seller of this Agreement, the consummation by the Seller of the
transactions herein contemplated or the performance by the Seller of or the
compliance by the Seller with the terms and conditions hereof, to ensure the
legality, validity or enforceability hereof, or to ensure that the Buyer will
have a valid undivided ownership interest in and to the Historical Advances
which is perfected and prior to all other Liens (including competing ownership
interests), other than the filing of financing statements under the UCC in the
jurisdiction of the Seller's Chief Executive Office.
(e) Absence of Conflicts. Neither the execution and delivery by the Seller of
this Agreement, nor the consummation by the Seller of the transactions herein
contemplated, nor the performance by the Seller of or the compliance by the
Seller with the terms and conditions
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hereof, will (i) violate any Law or (ii) conflict with or result in a breach of
or a (with due notice or lapse of time or both) default under (A) the
Certificate of Incorporation or By-laws of the Seller or (B) any agreement or
instrument, including, without limitation, any and all indentures, debentures,
loans, credit agreements or other agreements to which the Seller is a party or
by which it or any of its properties (now owned or hereafter acquired) may be
subject or bound (including, without limitation, the Scheduled Pooling and
Servicing Agreements). The Seller has not entered into any agreement with any
Person prohibiting, restricting or conditioning the assignment of any portion of
the Historical Advances.
(f) Location of Chief Executive Office, etc. As of the date hereof: (i) the
Seller's Chief Executive Office is located at 350 South Grand Avenue, Los
Angeles, California, 90071; (ii) the offices where the Seller keeps all of its
material Records are listed on Exhibit B hereto; and (iii) the Seller has,
within the last 5 years, operated only under the trade names identified in
Exhibit C hereto, and, within the last 5 years, has not changed its name, merged
or consolidated with any other corporation with assets over $1,000,000 or been
the subject of any proceeding under Title 11, United States Code (Bankruptcy),
except as disclosed in Exhibit C hereto.
(g) Accurate and Complete Disclosure. No information furnished in writing by the
Seller to the Buyer pursuant to or in connection with this Agreement is false or
misleading in any material respect as of the date of which such information was
furnished (including by omission of material information necessary to make such
information not misleading).
(h) No Proceedings. There are no proceedings or investigations pending, or to
the knowledge of the Seller threatened, before any Official Body (A) asserting
the invalidity of this Agreement, (B) seeking to prevent the consummation of any
of the transactions contemplated by this Agreement, or (C) seeking any
determination or ruling that might materially and adversely affect (i) the
performance by the Seller of its obligations under this Agreement or (ii) the
validity or enforceability of this Agreement, the Scheduled Pooling and
Servicing Agreements, or any of the Historical Advances.
(i) Litigation. No injunction, decree or other decision has been issued or made
by any Official Body that prevents, and to the knowledge of the Seller, no
threat by any Person has been made to attempt to obtain any such decision that
would have a material adverse impact on the value of the Historical Advances or
the performance of the Seller's obligations and the exercise of its rights under
the Scheduled Pooling and Servicing Agreements, or that would materially
adversely affect the collectibility of the Historical Advances as a whole,
except as set forth on Exhibit A hereto.
(j) Taxes. No Lien has been filed against the Seller on all or any material
portion of its property or assets in respect of any unpaid federal, state or
local taxes.
(k) Books and Records The Seller has clearly indicated on its books and records
(including any computer files) that the Historical Advances have been sold to
the Buyer. For accounting and tax purposes, the Seller shall treat the sale of
the Historical Advances hereunder as a sale. The Seller maintains at one or more
of the offices listed on Exhibit B hereto the complete records for the
Historical Advances.
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(l) Investment Company. The Seller is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(m) No Fraudulent Conveyance. The transactions contemplated by this Agreement
are being consummated by the Seller in furtherance of the Seller's ordinary
business, with no contemplation of insolvency and with no intent to hinder,
delay or defraud any of its present or future creditors. By its receipt of the
Purchase Price hereunder, the Seller shall have received reasonably equivalent
value for the Historical Advances sold or otherwise conveyed to the Buyer under
this Agreement.
(n) Solvency. The Seller is solvent and will not be rendered insolvent by the
transactions contemplated herein.
SECTION 3.2 Representations and Warranties of the Seller With Respect to the
Sale of the Historical Advances. By selling Historical Advances to the Buyer on
the Closing Date, the Seller represents and warrants to the Buyer as of the
Closing Date (in addition to its other representations and warranties contained
herein or made pursuant hereto) that:
(a) Scheduled Pooling and Servicing Agreements. All of the Scheduled Pooling and
Servicing Agreements are in full force and effect and the Seller as Servicer
thereunder has not been terminated. Other than each Certificate Insurer's right
to terminate the applicable Scheduled Pooling and Servicing Agreements based on
Seller's failure to achieve certain delinquency and/or loss targets, no event
has occurred that would give any party to any Scheduled Pooling and Servicing
Agreement the right (including with notice or lapse of time or both) to
terminate the Seller for cause as the Servicer or Sub-Servicer under any
Scheduled Pooling and Servicing Agreement, and the Seller does not have actual
knowledge of any pending or threatened action to terminate the Seller as
Servicer or Sub-Servicer under any of the Scheduled Pooling and Servicing
Agreements.
(b) Assignment. Subject to the execution and delivery by Greenwich Capital
Financial Products, Inc. ("Greenwich") and by Capital Z Financial Services Fund
II, L.P. ("Capital Z") of those certain Release of Collateral each dated as of
the Closing Date and executed by Greenwich and by Capital Z, releasing their
respective Liens on the Historical Advances and this Agreement (the "Release"),
and the execution, delivery and filing by Greenwich and by Capital Z of the
UCC-2s related to such Release, this Agreement vests in the Buyer all of the
right, title and interest in and to the Historical Advances, and constitutes a
valid sale of the Historical Advances, enforceable against, and creating an
interest prior in right to, all creditors of and purchasers from the Seller.
(c) No Liens. Subject to the execution and delivery by Greenwich and by Capital
Z of the Release and the execution, delivery and filing by Greenwich and by
Capital Z of the UCC-2s related to such Release, each Historical Advance is
owned by the Seller free and clear of any Lien (except any Lien of the Trust
under the relevant Scheduled Pooling and Servicing Agreement), except as
provided herein, and is not subject to any dispute or other adverse claim,
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except as provided herein. When the Buyer purchases the Historical Advances, it
shall acquire ownership of the Historical Advances, free and clear of any Lien,
except as provided herein.
(d) Filings. Subject to the execution and delivery by Greenwich and by Capital Z
of the Release and the execution, delivery and filing by Greenwich and by
Capital Z of the UCC-2s related to such Release, on or prior to the Closing
Date, all financing statements and other documents required to be recorded or
filed in order to perfect and protect the Historical Advances against all
creditors of, and purchasers from, the Seller and all other Persons whatsoever
have been duly filed in each filing office necessary for such purpose and all
filing fees and taxes, if any, payable in connection with such filings have been
paid in full and all documents required to be filed to release any Liens on the
Historical Advances shall have been filed.
(e) Collection Policy. The Seller has complied in all material respects with the
Collection Policy in regard to each Historical Advance and the related Scheduled
Pooling and Servicing Agreement. The Seller has not extended or modified the
terms of any Historical Advance or the related Scheduled Pooling and Servicing
Agreement except in accordance with the Collection Policy.
(f) Bona Fide Historical Advance. Each Historical Advance is an obligation
arising out of the making of a Monthly Advance or Servicing Advance by the
Seller or a predecessor servicer, in its capacity as a servicer of a portfolio
of mortgage loans, pursuant to a Scheduled Pooling and Servicing Agreement. Each
Historical Advance relates to a Monthly Advance or Servicing Advance that has
been made in accordance with the terms of the related Scheduled Pooling and
Servicing Agreement. Subject to the execution and delivery by Greenwich of the
Release and the execution, delivery and filing by Greenwich and by Capital Z of
the UCC-2s related to such Release, the Seller has no knowledge of any fact that
has led it to expect that such Historical Advance will not be fully recoverable
when the related mortgage loan is brought current or is liquidated and the
Seller had a good faith basis, at the time each Historical Advance was made, to
believe that such Historical Advance would be fully recoverable.
(g) Accuracy of Schedule. The information set forth in Schedule 1 and in
Schedule 2 hereto with respect to the Historical Advances and the Scheduled
Pooling and Servicing Agreements is true and correct in all material respects as
of the date hereof.
(h) Creditor Approval. Subject to the execution and delivery by Greenwich and by
Capital Z of the Release and the execution, delivery and filing by Greenwich and
by Capital Z of the UCC-2s related to such Release, the Seller has obtained from
each Person that may have an interest in the Historical Advances (i) all
approvals that are necessary to sell and assign the Historical Advances in the
manner contemplated by this Agreement and (ii) releases of any security
interests in the Historical Advances.
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ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 Conditions to Closing. On the Closing Date, as a condition precedent
to the Buyer's obligations hereunder, all of the representations and warranties
of the Seller made herein shall be true and correct, the Seller shall not be in
breach of any of the agreements made herein, and the Seller shall deliver to the
Buyer the following documents and instruments, all of which shall be in form and
substance acceptable to the Buyer:
(a) A copy of the resolutions of the Board of Directors of the Seller, certified
as of the Closing Date by its secretary or assistant secretary authorizing the
execution, delivery and performance of this Agreement by the Seller and
approving the transactions contemplated hereby;
(b) The Certificate of Incorporation of the Seller, certified as of a date
reasonably near the Closing Date by the Secretary of State or other similar
official of the Seller's jurisdiction of incorporation;
(c) A good standing certificate for the Seller issued by the Secretary of State
or other similar official of the Seller's jurisdiction of incorporation,
certificates of qualification as a foreign corporation issued by the Secretaries
of State or other similar officials of each jurisdiction where such
qualification is material to the transactions contemplated by this Agreement and
certificates of the appropriate state official in each jurisdiction specified by
the Buyer as to the absence of any tax Liens against the Seller under the Laws
of such jurisdiction, each such certificate to be dated a date reasonably near
the Closing Date;
(d) A certificate of the secretary or an assistant secretary of the Seller dated
as of the Closing Date, certifying (i) the names and signatures of the officers
authorized on the Seller's behalf to execute, and the officers and other
employees authorized to perform, this Agreement by the Seller and (ii) a copy of
the Seller's By-laws;
(e) Executed copies of proper financing statements (Form UCC-l) naming the
Seller as seller/debtor in respect of the Historical Advances, and the Buyer, as
the purchaser/secured party, together with evidence of filing thereof in the
appropriate jurisdictions; or other similar instruments or documents as may be
necessary or, in the opinion of the Buyer, desirable under the UCC of all
appropriate jurisdictions to evidence or perfect the Buyer's ownership interests
in all of the Historical Advances;
(f) Executed copies of proper financing statements (Form UCC-3 or UCC-2), if
any, necessary under the Laws of all appropriate jurisdictions to release all
security interests and other Liens or rights of any person in Historical
Advances previously granted by the Seller (except the Lien of a Trust under the
relevant Scheduled Pooling and Servicing Agreement);
(g) Certified copies of lien search reports dated a date reasonably near the
Closing Date listing all effective financing statements that name the Seller
(under its present name and any previous name or any trade names or "d.b.a."
name) as debtor and which are filed in jurisdictions in which the filings were
made pursuant to paragraph (e) above, together with copies of such financing
statements (none of which shall cover any of the Historical Advances, the
Scheduled Pooling and Servicing Agreements or any related rights);
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(h) A favorable opinion or opinions of the Seller's in-house counsel, dated the
date hereof and addressed to the Buyer relating to corporate matters, legality
and validity of this Agreement, and a favorable opinion or opinions of O'Melveny
& Myers LLP, counsel to the Seller, dated the date hereof and addressed to Buyer
relating to the characterization of the transfer of the Historical Advances in a
bankruptcy case as an absolute transfer, enforceability of this Agreement and of
the Scheduled Supplements, the perfection of the Buyer's ownership interests in
the Historical Advances and such other matters as the Buyer may reasonably
request;
(i) An officer's certificate dated as of the Closing Date in a form reasonably
acceptable to the Buyer executed by a Responsible Officer of the Seller to the
effect that (i) all representations and warranties are true and correct as of
the Closing Date and (ii) all terms, covenants agreements and conditions
required to be complied with or performed on or prior to the Closing Date have
been complied with or performed on or prior to the Closing Date;
(j) An officer's certificate dated as of the Closing Date in a form reasonably
acceptable to the Buyer executed by a Responsible Officer of the Seller to the
effect that (i) all executed Scheduled Pooling and Servicing Agreements and (ii)
all Scheduled Supplements certified as of February 24, 2000 are in full force
and effect and have not been amended, supplemented or modified since February
24, 2000 other than by the modification as of the Closing Date of Schedule A to
each Supplement to identify Historical Advances transferred to Steamboat
pursuant to this Agreement; and
(k) A true, complete, and correct list (which shall be in paper form and may
also be in the form of a computer file or tape) of the Historical Advances, each
of which shall be identified by the related Scheduled Pooling and Servicing
Agreement, loan number and Outstanding Balance, in the form of Schedule 1 to
this Agreement.
ARTICLE V
COVENANTS
SECTION 5.1 Covenants of the Seller. At all times during the term of this
Agreement, unless the Buyer shall otherwise consent in writing:
(a) Enforceability of Obligations; Reimbursements. The Seller shall take such
actions as are reasonable and within its power to ensure that, with respect to
each Historical Advance, that Buyer will receive reimbursements with respect to
such Historical Advance as promptly as practicable; provided however, that this
subsection shall not constitute a guarantee of payment or collection. The Seller
shall enforce the right to receive reimbursement for each Historical Advance
against any and all parties to a Scheduled Pooling and Servicing Agreement, if
its usual and customary procedures do not result in such reimbursement.
(b) Fulfillment of Obligations. The Seller shall duly observe and perform, or
cause to be observed or performed, all material obligations and undertakings on
its part to be observed and performed under or in connection with this
Agreement, the Collection Policies and the Scheduled Pooling and Servicing
Agreements; shall do nothing to impair the rights, title and
14
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interest of the Buyer in and to the Historical Advances or the right or ability
of the Seller or the Buyer to realize thereon.
(c) Notice of Relocation. The Seller shall give the Buyer thirty (30) days'
prior written notice of any relocation of its Chief Executive Office if, as a
result of such relocation, the applicable provisions of the UCC of any
applicable jurisdiction or other applicable Laws would require the filing of any
amendment of any previously filed financing statement or continuation statement
or of any new financing statement. The Seller will at all times maintain its
Chief Executive Office within a jurisdiction in the United States in which
Article 9 of the UCC (1972 or later revision) is in effect as of the date hereof
or the date of any such relocation.
(d) Further Information. The Seller shall furnish or cause to be furnished to
the Buyer such other information as promptly as practicable, and in such form
and detail, as the Buyer may reasonably request.
(e) Fees, Taxes and Expenses. The Seller shall pay all filing fees, stamp taxes,
other taxes and expenses that are incurred or assessed on account of or arise
out of this Agreement and the documents and transactions entered into pursuant
to this Agreement.
SECTION 5.2 Negative Covenants of the Seller. At all times during the term of
this Agreement, unless the Buyer shall otherwise consent in writing:
(a) No Changes. The Seller shall not change its name, identity or corporate
structure in any manner which would make any financing statement or continuation
statement filed in connection with this Agreement or the transactions
contemplated hereby misleading within the meaning of Section 9-402(7) of the UCC
of any applicable jurisdiction or other applicable Laws unless it shall have
given the Buyer at least thirty (30) days' prior written notice thereof and
unless prior thereto it shall have caused such financing statement or
continuation statement to be amended or a new financing statement to be filed
such that such financing statement or continuation statement would not be
misleading.
(b) Collection Policy. The Seller shall not make, allow or consent to any
material change in its Collection Policy without prior written notification to
the Buyer.
ARTICLE VI
TERMINATION
SECTION 6.1 Termination. The Seller's obligations under this Agreement shall
continue in full force and effect until all Historical Advances have been paid
or liquidated; provided, however, that the indemnification and payment
provisions set forth in Article VII hereof shall be continuing and shall survive
termination of this Agreement.
15
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ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Indemnity.
(a) The Seller agrees to indemnify, defend and save harmless the Buyer and any
of its successors or permitted assignees (each, an "Indemnified Party" and
collectively, the "Indemnified Parties"), other than for the Indemnified Party's
own gross negligence or willful misconduct, forthwith on demand, from and
against any and all losses, claims, damages, liabilities, costs and expenses
(including, without limitation, all reasonable attorneys' fees and expenses,
expenses incurred by an Indemnified Party (or any successors thereto) and
expenses of settlement, litigation or preparation therefor) which any
Indemnified Party may incur or which may be asserted against any Indemnified
Party by any Person (whether on its own behalf or derivatively on behalf of the
Seller) arising from or incurred in connection with (i) any breach of a
representation, warranty or covenant by the Seller made or deemed made hereunder
or in connection herewith or the transactions contemplated hereby or (ii) any
action taken or, if the Seller is otherwise obligated to take action, failed to
be taken, by the Seller with respect to the Historical Advances or any of its
obligations hereunder including, without limitation, the Seller's failure to
comply with an applicable Law or regulation
(b) Promptly upon receipt by any Indemnified Party under this Section 7.1 of
notice of the commencement of any suit, action, claim, proceeding or
governmental investigation against such Indemnified Party, such Indemnified
Party shall, if a claim in respect thereof is to be made against the Seller
hereunder, notify the Seller in writing of the commencement thereof. The Seller
may participate in and assume the defense and settlement of any such suit,
action, claim, proceeding or investigation at its expense, and no settlement
thereof shall be made without the approval of the Seller and the Indemnified
Party. The approval of either party will not be unreasonably withheld or
delayed.
(c) Each Indemnified Party shall use its good faith efforts to mitigate, reduce
or eliminate any losses, expenses or claims for indemnification.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Survival. The indemnification and payment provisions of Article VII
shall be continuing and shall survive any termination of this Agreement, subject
to applicable statutes of limitation; provided, however, that any such
indemnification or payment claim must be presented to the Seller within thirty
(30) Business Days after the Person making such claim receives notice or
otherwise becomes aware of such claim, provided, further, however, that any
failure to give such notice shall not prejudice the rights of any Indemnified
Party except to the extent Seller is actually prejudiced by such failure to give
notice.
SECTION 8.2 Amendments. Any provision of this Agreement may be waived or amended
only in a writing signed by the parties hereto.
SECTION 8.3 Notices. Except as provided below, all communications and notices
provided for hereunder shall be in writing (including bank wire, telecopy or
electronic
16
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facsimile transmission or similar writing) and shall be given to the other party
at its address or telecopy number set forth hereunder or at such other address
or telecopy number as such party may hereafter specify for the purposes of
notice to such party. Each such notice or other communication shall be effective
if given by facsimile, when such facsimile is transmitted to the facsimile
number specified in this Section 8.3 and the appropriate written confirmation is
received or, if given by any other means, when received at the address specified
in this Section 8.3. Each party further agrees to deliver promptly to the other
party a written confirmation of each telephonic notice signed by an authorized
officer of the Seller. However, the absence of such confirmation shall not
affect the validity of such notice.
If to the Buyer:
Steamboat Financial Partnership I, L.P.
c/o Random Properties Acquisition Corp. IV
600 Steamboat Road
Greenwich, CT 06830
Attn: John Anderson
Telephone: (203) 625-7941
Facsimile: (203) 618-2135
with a copy to:
Sheldon Goldfarb, Esq.
General Counsel
c/o Steamboat Financial, Inc.
600 Steamboat Road
Greenwich, CT 06830
Telephone: (203) 625-6065
Facsimile: (203) 618-2132
If to the Seller:
Aames Capital Corporation
Attention: Chief Financial Officer
350 South Grand Avenue
Los Angeles, CA 90071
Telephone: (323) 210-5276
Facsimile: (323) 210-5551
with a copy to:
Attention: General Counsel
350 South Grand Avenue
Los Angeles, CA 90071
Telephone: (323) 210-4871
Facsimile: (323) 210-5026
17
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SECTION 8.4 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial;
Process Agent. (a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The Seller and the Buyer
hereby submit to the nonexclusive jurisdiction of courts of the State of New
York located in the Borough of Manhattan and the United States District Court
for the Southern District of New York for purposes of adjudicating any claim or
controversy arising in connection with this Agreement or any of the transactions
contemplated hereby. The Seller and the Buyer hereby irrevocably waive, to the
fullest extent they may lawfully do so, any objection which they may now or
hereafter have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum. Nothing in this Section 8.4 shall affect the
right of any Person to bring any action or proceeding against the Seller or the
Buyer or their respective properties in the courts of other jurisdictions. EACH
PARTY HERETO HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO ANY RELATIONSHIP ESTABLISHED IN
CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
(b) THE SELLER HEREBY IRREVOCABLY DESIGNATES CT CORPORATION AS ITS DESIGNEE,
APPOINTEE AND AGENT TO RECEIVE, FOR AND ON BEHALF OF IT, SERVICE OF PROCESS IN
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT. THE SELLER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO CT CORPORATION,
1633 BROADWAY, NEW YORK, NEW YORK, OR TO ITS ADDRESS FOR NOTICES IN SECTION 8.3,
WHICH SERVICE SHALL BECOME EFFECTIVE THREE (3) BUSINESS DAYS AFTER DEPOSIT IN
THE MAIL AND SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE BUYER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE SELLER IN
ANY OTHER JURISDICTION.
SECTION 8.5 No Implied Waiver; Cumulative Remedies. No course of dealing and no
delay or failure of the Buyer in exercising any right, power or privilege under
this Agreement shall affect any other or future exercise thereof or the exercise
of any other right, power or privilege; nor shall any single or partial exercise
of any such right, power or privilege or any abandonment or discontinuance of
steps to enforce such a right, power or privilege preclude any further exercise
thereof or of any other right, power or privilege. The rights and remedies of
the Buyer under this Agreement are cumulative and not exclusive of any rights or
remedies which the Buyer would otherwise have.
18
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SECTION 8.6 No Discharge. The obligations of the Seller under this Agreement
shall be absolute and unconditional and shall remain in full force and effect
without regard to, and shall not be released, discharged or in any way affected
by (a) any exercise or nonexercise of any right, remedy, power or privilege
under or in respect of this Agreement or applicable Law, including, without
limitation, any failure to set-off or release in whole or in part by the Buyer
of any balance of any deposit account or credit on its books in favor of the
Buyer or any waiver, consent, extension, indulgence or other action or inaction
in respect of any thereof, or (b) any other act or thing or omission or delay to
do any other act or thing which would operate as a discharge of the Buyer as a
matter of law.
SECTION 8.7 Prior Understandings. This Agreement sets forth the entire
understanding of the parties relating to the subject matter hereof and thereof,
and supersede all prior understandings and agreements, whether written or oral
with respect to the subject matter hereof and thereof.
SECTION 8.8 Successors and Assigns. This Agreement shall be binding on the
parties hereto and their respective successors and assigns; provided, however,
that the Seller may not assign any of its rights or delegate any of its duties
hereunder without the prior written consent of the Buyer. No provision of this
Agreement shall in any manner restrict the ability of the Buyer to assign,
participate, grant security interests in, or otherwise transfer any portion of
the Historical Advances owned by the Buyer. The Seller further agrees that
notwithstanding any claim, counterclaim, right of setoff or defense which it may
have against the Buyer due to a breach by the Buyer of this Agreement or for any
other reason, and notwithstanding the bankruptcy of the Buyer or any other event
whatsoever, the Seller's sole remedy shall be a claim against the Buyer for
money damages, and in no event shall the Seller assert any claim on or any
interest in the Historical Advances or take any action which would reduce or
delay receipt of collections with respect to the Historical Advances.
SECTION 8.09 Severability; Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which when taken together shall constitute one and the same Agreement. Any
provisions of this Agreement which are prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable any other provision in
such jurisdiction or such provision in any other jurisdiction.
SECTION 8.10 Expenses. Seller shall pay Buyer's costs and expenses reasonably
incurred in connection with Buyer's negotiation, preparation, execution and
delivery of this Agreement, including the fees and out-of-pocket expenses of
Buyer's counsel, and Buyer's costs and expenses incurred in seeking enforcement
of any of Seller's obligations hereunder.
[Signature Page Follows]
19
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above set
forth.
AAMES CAPITAL CORPORATION,
as Seller
By: ___________________________
Name:
Title:
STEAMBOAT FINANCIAL PARTNERSHIP I, L.P.,
as Buyer
By: RANDOM PROPERTIES ACQUISITION CORP. IV
its general partner
By: ___________________________
Name:
Title:
[HISTORICAL ADVANCE PURCHASE AGREEMENT]
20
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EXHIBIT A
SCHEDULE OF LITIGATION
None
A-1
--------------------------------------------------------------------------------
EXHIBIT B
SCHEDULE OF LOCATION OF RECORDS
Seller: 350 South Grand Avenue
Los Angeles, CA 90071
B-1
--------------------------------------------------------------------------------
EXHIBIT C
SCHEDULE OF CORPORATE NAMES,
TRADE NAMES OR ASSUMED NAMES AND SUBSIDIARIES
Corporate Name: Aames Capital Corp.
Trade Names: Aames Home Loan
Assumed Names: None
Subsidiaries: None
C-1
--------------------------------------------------------------------------------
EXHIBIT D
LIST OF RESPONSIBLE OFFICERS
Responsible Officers of Seller: A. Jay Meyerson
James Huston
Jon D. Van Deuren
Steven Naberhaus
Fred Mahintorabi
John Madden
Responsible Officers of Buyer: Robert J. McGinnis
Joseph Walsh III
Michael Florio
D-1
--------------------------------------------------------------------------------
Schedule 1
SCHEDULE OF HISTORICAL ADVANCES
(As of the Cut-off Date)
S1-1
--------------------------------------------------------------------------------
Schedule 2
SCHEDULED POOLING AND SERVICING AGREEMENTS
Series
Effective Date
Parties
Series 1993-A
12/1/93
Aames Capital Corporation as Seller & Servicer
Bankers Trust Company of California, N.A. as Trustee
Series 1994-A
3/1/94
same as above
Series 1994-B
6/1/94
same as above
Series 1994-C
9/1/94
same as above
Series 1994-D
12/1/94
same as above
Series 1995-A
3/1/95
same as above
Series 1995-B
5/12/95
same as above
Series 1995-C
9/1/95
same as above
Series 1995-D
12/1/95
same as above
Series 1996-A
3/1/96
same as above
Series 1996-B
6/1/96
same as above
Series 1996-C
9/1/96
same as above
Series 1997-A
3/1/97
same as above
Series 1997-B
Amendment #1
6/1/97
11/1/98
same as above
same as above
Series 1997-C
Amendment #1
9/1/97
11/1/98
same as above
same as above
Series 1997-D
Amendment #1
12/1/97
12/1/97
same as above
same as above
Series 1998-A
Amendment #1
3/1/98
11/1/98
same as above
same as above
S2-1
--------------------------------------------------------------------------------
Series 1998-B
Amendment #1
6/1/98
11/1/98
Aames Capital Acceptance Corp. as Transferor
Aames Capital Corporation as Servicer
Bankers Trust Company of California, N.A. as Trustee
same as above
Series 1998-C
9/1/98
Aames Capital Corporation as Seller & Servicer
Bankers Trust Company of California, N.A. as Trustee
Series 1999-1
7/1/99
same as above
Series 1999-2
11/1/99
same as above
S2-2 |
Exhibit 10.6
FIRST AMENDMENT
TO
FIRST AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
This First Amendment ("Amendment") to the Amended and Restated Stockholders'
Agreement is made and entered into as the 28th day of February, 2001 by and
among the signatories hereto in order to amend the Harold's Stores, Inc. First
Amended and Restated Stockholders' Agreement dated June 15, 1998 (the
"Stockholders' Agreement").
WITNESSETH:
WHEREAS, Harold's Stores, Inc. (the "Company") has entered into a Series 2001-A
Preferred Stock Purchase Agreement dated February 23, 2001 (the "Preferred Stock
Purchase Agreement") whereby the Company will sell to the Investor named therein
(the "Investor") 300,000 shares of Series 2001-A Preferred Stock of the Company;
WHEREAS, in connection with the Preferred Stock Purchase Agreement the parties
hereto propose to enter into with the Investor a Voting Agreement (the "Voting
Agreement") and a Right of First Refusal Agreement (the "Right of First Refusal
Agreement");
WHEREAS, in connection with the execution and delivery of the Voting Agreement
and the Right of First Refusal Agreement, the parties hereto desire to enter
into this Amendment to provide for certain amendments to Stockholders' Agreement
in order to permit, and to eliminate any conflicts with, the covenants,
agreements and transactions provided for in the Voting Agreement and the Right
of First Refusal Agreement; and
WHEREAS, the parties hereto hold more than the minimum number of shares subject
to the Stockholders' Agreement that are required in order to amend the
Stockholders' Agreement pursuant to Section 9 thereof.
NOW, THEREFORE, in consideration of the recitals and agreements contained herein
and the benefits to be derived from the mutual observance of the provisions of
this Amendment and the Stockholders' Agreement, the parties agree as follows:
1. Effective Date. This Amendment and the matters provided for herein shall
become effective only upon the closing under the Preferred Stock Purchase
Agreement and the execution and delivery of the Voting Agreement and Right of
First Refusal Agreement in connection therewith (such time being referred to
herein as the "Effective Date").
2. Voting. The Stockholders' Agreement is hereby amended effective as of the
Effective Date to eliminate in its entirety Section 4 of the Stockholders'
Agreement pertaining to the voting of the shares that are subject to the
Stockholders' Agreement, and the Stockholders' Agreement shall no longer affect
the voting of, or expression of written consent with respect to, any of such
shares in any manner whatsoever. Any and all proxies previously granted in
connection with and pursuant to the Stockholders' Agreement shall be
automatically revoked and shall be of no further force or effect.
3. Right to Sell Stock. Nothing in this Amendment or the Right of First Refusal
Agreement shall relieve any Stockholder from compliance with the Stockholders'
Agreement in connection with the disposition of any shares that are subject to
the Stockholders' Agreement; provided, however, that in the event of any
conflict between the Right of First Refusal Agreement and the Stockholders
Agreement, the Right of First Refusal Agreement shall control. Any shares
acquired by the "Series A Holders" (as defined in the Right of First Refusal
Agreement") pursuant to and in accordance with Section 1 of the Right of First
Refusal Agreement shall cease to be subject to or bound by the restrictions of
this Agreement. In addition, without limiting the foregoing, any shares that are
first offered to the Stockholders pursuant to Section 5 of the Stockholders'
Agreement (which offer if accepted would constitute a "non-applicable" transfer
pursuant to Section 2.1(a) of the Right of First Refusal Agreement) and then
offered to the Series A Holders pursuant to Section 1 of the Right of First
Refusal Agreement and that are not purchased initially by the Stockholders or
subsequently by the Series A Holders may be disposed of in accordance with the
provisions of Section 1 of the Right of First Refusal Agreement in the manner
and within the time periods permitted thereby and the provisions of Section 5.2
(b) of the Stockholders' Agreement shall be deemed to be amended to so permit.
Any of such shares not sold in such manner shall again become subject to the
restrictions of the Stockholders Agreement.
4. Defined Terms. Capitalized terms used but not otherwise defined herein shall
have the respective meanings ascribed to them in the Stockholders' Agreement.
5. Other Terms of Stockholder's Agreement. Except for the amendments set forth
herein, all other provisions of the Stockholder's Agreement shall remain in full
force and effect and shall be otherwise unaffected hereby.
6. Counterpart Execution. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.
7. Applicable Law. This Agreement shall be construed and enforced in accordance
with the laws of the State of Oklahoma.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
day and year first above written.
/s/ H. Rainey Powell, Attorney-In-Fact for Harold G. Powell
Harold G. Powell, individually and as Trustee under the Harold G. Powell Family
Revocable Trust, UA dated 9/7/93, and under the Harold G. Powell Revocable Trust
dated 9/8/93
/s/ H. Rainey Powell, Attorney-In-Fact for Anna M. Powell
Anna M. Powell, individually and as Trustee under the Harold G. Powell Revocable
Trust dated 9/8/93
/s/ Rebecca Powell Casey
Rebecca Powell Casey, individually and as custodian for Meredith M. Casey,
Lindsey M. Casey and Bryan A. Casey under the Texas UGMA
/s/ Michael T. Casey
Michael T. Casey, individually and as Trustee under the H. Rainey Powell and
Mary U. Powell 1997 Irrevocable Trust
/s/ H. Rainey Powell
H. Rainey Powell, individually and as custodian for Elizabeth M. Powell and Alex
M. Powell under the Oklahoma UTMA
/s/ Mary U. Powell
Mary U. Powell
/s/ Lisa Powell Hunt
Lisa Powell Hunt, individually and as custodian for Miles M. Hunt, Patrick M.
Hunt and Hayden E. Hunt under the Texas UGMA
/s/ Clay M. Hunt
Clay M. Hunt
Arvest Trust Company, N.A., as Trustee*
By: /s/ Lewis W. Beckett
Name: Lewis W. Beckett
Title: Sr. Vice President
*Executed as Trustee with respect to:
Elizabeth M. Powell Trust A
Elizabeth M. Powell Trust B
934682 |
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EXHIBIT 10.1
FIRST AMENDMENT
TO LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "First Amendment")
is made as of December 13, 2001, by and between FOOTHILL CAPITAL CORPORATION, a
California corporation ("Lender"), and QAD INC., a Delaware corporation
("Borrower"), with reference to the following facts:
A. The parties hereto have entered into that certain Loan and Security
Agreement, dated as of September 8, 2000, as amended by letter agreements dated
January 23, 2001, and November 21, 2001 (as amended, the "Loan Agreement"), and
other Loan Documents. (Capitalized terms, which are used herein but not defined
herein, shall have the meanings ascribed to them in the Loan Agreement.)
B. The parties wish to make certain modifications to the Loan Documents,
all on the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendments to Loan Agreement. Effective as of the Effective Date, the
Loan Agreement shall be amended as follows:
1.1 The following definition is added to Section 1.1 of the Loan Agreement:
"Tangible Net Worth" means, as of the date of calculation: (a) Net Worth,
plus (b) the then outstanding principal balance of Indebtedness subordinated to
the Obligations pursuant to a subordination agreement acceptable to Lender in
its sole and absolute discretion, less (c) such of Borrower's assets as are
treated as intangible pursuant to GAAP, including: (i) obligations in excess of
$500,000 in the aggregate owing by officers, directors, shareholders, employees,
Subsidiaries, Affiliates or any other Person in which any such officer,
director, shareholder, employee, Subsidiary or Affiliate owns any interest and
(ii) any asset which is intangible or lacks intrinsic or marketable value or
collectibility, including deferred maintenance; prepaid expenses; deferred
income taxes; capitalized research and development costs; goodwill;
noncompetition agreements; the Intellectual Property; any other patents,
trademarks, trade names, copyrights, patents, patent rights or licenses; and
franchises."
1.2 The definition of Amortization Reserve in Section 1.1 of the Loan
Agreement is deleted.
1.3 Section 2.2(b) of the Loan Agreement is deleted and replaced by the
following:
"The Term Loan shall be repaid in equal quarterly principal installments of
$750,000, commencing January 31, 2002; provided, however, that if on the
applicable quarterly payment date, Borrower's aggregate unrestricted cash and
Cash Equivalents is:
"(i) Greater than $40,000,000, then the applicable quarterly principal
payment shall be $375,000; or
"(ii) Less than $40,000,000 but greater than $30,000,000, then the
applicable quarterly principal payment shall be $500,000."
1.4 Sections 2.2(c) and 2.2(d) of the Loan Agreement are deleted.
1
--------------------------------------------------------------------------------
1.5 Section 7.20(a)(i) of the Loan Agreement is deleted and replaced by the
following:
"Minimum EBITDA. EBITDA, measured on a fiscal quarter-end basis, of not less
than the required amount set forth in the following table for the applicable
period set forth opposite thereto:
Applicable Amount
--------------------------------------------------------------------------------
Applicable Period
--------------------------------------------------------------------------------
$9,500,000 For the 12 month period
ending January 31, 2002 $10,300,000 For the 12 month period
ending April 30, 2002 $12,000,000 For the 12 month period
ending July 31, 2002 $13,600,000 For the 12 month period
ending October 31, 2002 $14,900,000 For the 12 month period
ending January 31, 2003"
1.6 Section 7.20(a)(ii) of the Loan Agreement is deleted and replaced by the
following:
"Tangible Net Worth. Tangible Net Worth of at least the required amount set
forth in the following table as of the applicable date set forth opposite
thereto:
Applicable Amount
--------------------------------------------------------------------------------
Applicable Date
--------------------------------------------------------------------------------
$11,840,000 January 31, 2002 $13,520,000 April 30, 2002 $14,640,000 July
31, 2002 $15,920,000 October 31, 2002 $17,360,000 January 31, 2003"
1.7 The Compliance Certificate, the form of which is attached to the Loan
Agreement as Exhibit C-1, is replaced by Exhibit C-1 hereto.
2. Intellectual Property. Borrower confirms that it is current in its
obligations under the Loan Documents with respect to the Intellectual Property,
including reports to Foothill and registration of copyrights. Without limiting
the foregoing, Borrower confirms that it has complied with: (x) Section 6.4 of
the Loan Agreement; and (y) Section 1(e) of the Intellectual Property Security
Agreement.
3. Conditions to Effectiveness. The effectiveness of this First Amendment
is subject to the receipt by Lender of the following, and the date on which
Lender receives all of the following shall be the "Effective Date:"
3.1 Counterparts of this First Amendment, executed by each of the parties
hereto; and
3.2 Borrower has paid Lender all of Lender's attorneys' fees and costs as
described in Section 4.8 hereof.
4. Miscellaneous.
4.1 Loan Documents Confirmed. Except as expressly amended hereby, the Loan
Agreement and the other Loan Documents shall remain unchanged and in full force
and effect. This First Amendment is hereby incorporated into the Loan Agreement.
4.2 Choice of Law. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED, THIS FIRST
AMENDMENT AND ALL OTHER DOCUMENTS BEING EXECUTED CONCURRENTLY HEREWITH SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
2
--------------------------------------------------------------------------------
THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES.
4.3 Sole Parties. This First Amendment is made exclusively for the benefit
of and solely for the protection of the parties hereto, and no other person or
persons shall have the right to enforce the provisions hereof by action or legal
proceedings or otherwise.
4.4 Interpretation. Whenever the context so requires, all words used in
the singular will be construed to have been used in the plural, and vice versa,
and each gender will include any other gender. The headings used in this First
Amendment are inserted solely for the convenience of reference and are not part
of, nor intended to govern, limit or aid in the construction of, any term or
provision hereof.
4.5 Counterparts. This First Amendment may be executed in one or more
counterparts, each of which shall be an original but all of which shall
constitute one and the same instrument.
4.6 Further Assurances. From time to time, each party will execute and
deliver in recordable form, if necessary, such further instruments and will take
such other action as the other party reasonably may request in order to
discharge and perform their obligations and agreements under this First
Amendment.
4.7 Time of Essence. Time is of the essence in this First Amendment.
4.8 Attorneys' Fees and Costs. The Borrower agrees that all of Lender's
attorneys' fees and costs in drafting and negotiating this First Amendment are
part of the Obligations and are payable on demand.
IN WITNESS WHEREOF, the parties have executed this First Amendment as of the
date first written above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By:
/s/ JOHN NOCITA
--------------------------------------------------------------------------------
Title: Vice President
--------------------------------------------------------------------------------
QAD INC.,
a Delaware corporation
By:
/s/ KATHLEEN M. FISHER
--------------------------------------------------------------------------------
Title: Executive Vice President and
Chief Financial Officer
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3
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EXHIBIT C-1
Amended Compliance Certificate
FORM OF AMENDED COMPLIANCE CERTIFICATE
[on Borrower's letterhead]
To: Foothill Capital Corporation
2450 Colorado Avenue, Suite 3000 West
Santa Monica, California 90404
Attn: Business Finance Division Manager
Re: Compliance Certificate dated ___________________________
Ladies and Gentlemen:
Reference is made to that certain Loan and Security Agreement, dated as of
September 8, 2000, as amended (the "Loan Agreement") between QAD Inc., a
Delaware corporation ("Borrower") and Foothill Capital Corporation, a California
corporation ("Lender"). Capitalized terms used in this Compliance Certificate
have the meanings set forth in the Loan Agreement unless specifically defined
herein.
Pursuant to Section 6.3 of the Loan Agreement, the undersigned officer of
Borrower hereby certifies that:
1. The financial information of Borrower furnished in Schedule 1 attached
hereto, has been prepared in accordance with GAAP (except for year-end
adjustments and the lack of footnotes, in the case of financial statements
delivered under Section 6.3(a) of the Loan Agreement) and fairly presents the
financial condition of Borrower.
2. Such officer has reviewed the terms of the Loan Agreement and has made,
or caused to be made under his/her supervision, a review in reasonable detail of
the transactions and condition of Borrower during the accounting period covered
by the financial statements delivered pursuant to Section 6.3 of the Loan
Agreement.
3. Such review has not disclosed the existence on and as of the date
hereof, and the undersigned does not have knowledge of the existence as of the
date hereof, of any event or condition that constitutes a Default or Event of
Default, except for such conditions or events listed on Schedule 2 attached
hereto, specifying the nature and period of existence thereof and what action
Borrower has taken, is taking, or proposes to take with respect thereto.
4. Borrower is in timely compliance with all representations, warranties,
and covenants set forth in the Loan Agreement and the other Loan Documents,
except as set forth on Schedule 2 attached hereto. Without limiting the
generality of the foregoing, Borrower is in compliance with the covenants
contained in Section 7.20 of the Loan Agreement as demonstrated on Schedule 3
hereof.
IN WITNESS WHEREOF, this Compliance Certificate is executed by the
undersigned this _____ day of ____________, 20___.
QAD Inc., a Delaware corporation as Borrower
By:
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Name:
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Title:
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4
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SCHEDULE 1
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SCHEDULE 2
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SCHEDULE 3
1. Minimum EBITDA.
Borrower's EBITDA for the __________________ ending __________________,
__________________ is $_______, which amount [is/is not] greater than or equal
to the amount set forth in Section 7.20(a)(i) of the Loan Agreement for the
corresponding period.
2. Minimum Tangible Net Worth.
(a) The Tangible Net Worth of Borrower, as of the last day of the fiscal
quarter ending __________________, __________________, is $_______, which amount
[is/is not] greater than or equal to the amount set forth in
Section 7.20(a)(ii) of the Loan Agreement for the corresponding period.
3. Maximum Deferred Maintenance Revenue.
The ratio of (A) consolidated Deferred Maintenance Revenue of Borrower and
its Subsidiaries to (B) Borrower's and the Subsidiaries' consolidated
Maintenance Revenue as of the fiscal quarter ended _______, is _______:1.0,
which [is/is not] greater than or equal to the ratio set forth in
Section 7.20(a)(iii) of the Loan Agreement for the corresponding period.
4. Maximum Covered Revenues.
(a) The Revenues of Borrower derived from software owned by Borrower, for
which copyright registrations have been made with the Copyright Office and for
which copies thereof have been delivered to Lender, as of the last day of the
fiscal quarter ending __________________, ________, is calculated as follows:
(i) Borrower's License Revenues derived from software owned by Borrower:
$__________________
(ii) Borrower's License Revenues derived from software owned by Borrower,
for which copyright registrations have been made with the Copyright Office and
for which copies thereof have been delivered to Lender:
$__________________
(iii) Item (ii) divided by Item (i) ("Ratio")
_____%
(b) The Ratio set forth above [is/is not] greater than or equal to the
percentage set forth in Section 7.20(a)(iv) of the Loan Agreement.
5. Maximum Capital Expenditures.
(a) The aggregate amount of capital expenditures made or committed to be
made to date in the current fiscal year is $__________________.
(b) The aggregate amount set forth above [is/is not] less than or equal to
the amount set forth in Section 7.20(b)(i) of the Loan Agreement for the
corresponding period.
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QuickLinks
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
|
Exhibit 10.31
MCMS, INC.
CIC SEVERANCE PLAN
FOR ELIGIBLE KEY EMPLOYEES
June 1, 2001
MCMS, Inc.,
a Delaware corporation
16399 Franklin Road
Nampa, Idaho 83687
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TABLE OF CONTENTS
Page
ARTICLE 1
41
Effective Date; Plan Year; ERISA
41
1.01 Effective Date
41
1.02 Plan Year
41
1.03 ERISA
41
ARTICLE 2
42
Application to Company or Affiliates
42
2.01 Eligible Employers
42
2.02 Adoption Procedure
42
ARTICLE 3
42
Eligibility and Participation
42
3.01 Eligible Key Employees
42
3.02 Participation
42
3.03 Determination of Eligibility and Participation
42
ARTICLE 4
43
CIC Severance Benefits
43
4.01 Entitlement to CIC Severance Benefits
43
4.02 CIC Severance Pay
43
4.03 Rehire
44
4.04 Time and Manner of Payment
44
4.05 Forfeitability of Severance Benefits
44
ARTICLE 5
45
Administration
45
5.01 Administrator
45
5.02 The Administrator's Powers and Duties
45
5.03 The Company and Employer Functions
45
5.04 Claims Procedures
45
5.05 Indemnity and Bonding
46
5.06 Expenses
46
ARTICLE 6
46
General Provisions
46
6.01 Enforceability and Exclusive Benefit
46
6.02 Amendment
46
6.03 Not Contract of Employment
46
6.04 Unfunded
47
6.05 Nonassignment
47
6.06 Applicable Law
47
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INDEX OF TERMS
Term
Section Page
Administrator
5.01
7
Affiliate
2.01-2
2
Alternative Benefits
4.06
6
Cause
4.01-5(b)
5
Change in Control
4.01-4
4
CIC Severance Plan
Preamble
1
Code
2.01-2
2
Company
Preamble
1
Constructive Termination
4.01-2
3
Effective Date
1.01
1
Eligible Key Employee
3.01
2
Employer
2.01-3
2
ERISA
1.03-1
2
Involuntary Termination
4.01-3
4
Participant
3.02-1
3
Plan Year
1.02
1
Regular Pay
4.02-2
6
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MCMS, INC.
CIC SEVERANCE PLAN FOR ELIGIBLE KEY EMPLOYEES
June 1, 2001
MCMS, Inc.,
Delaware corporation
6399 Franklin Road
ampa, Idaho 83687
MCMS, Inc. (the "Company") recognizes that, due to market conditions and
the financial performance of the Company, the possibility of a change in control
may exist, and that the uncertainty and questions which such possibility may
raise among management may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders. In addition, the
Company has undertaken significant workforce reductions which have caused
uncertainty in the remaining workforce. The Company believes it is imperative
and in the best interests of the Company to be able to rely upon management's
continuance and leadership and that appropriate steps should be taken to
reinforce and encourage that continuance and leadership and to reward the
management's essential service. Therefore, the Company has adopted this CIC
Severance Plan for Eligible Key Employees (the "CIC Severance Plan") effective
June 1, 2001 to provide an orderly and ongoing system of severance benefits to
be paid to Eligible Key Employees in appropriate situations related to a change
in control of the Company. This CIC Severance Plan supersedes and replaces any
plans, policies, resolutions or agreements maintained or made by the Company or
any adopting affiliate which provides for the payment or provision of pay or
benefits in the event of a Change in Control of the Company covering its
Eligible Key Employees, except for employment and other agreements entered into
by the Company with its officers.
ARTICLE 1
Effective Date; Plan Year; ERISA
1.01 Effective Date
The effective date of this CIC Severance Plan is June 1, 2001. The
Change in Control severance benefits of Eligible Key Employees who receive
notice of termination from employment on or after that date shall be determined
under this CIC Severance Plan.
1.02 Plan Year
The initial plan year shall be a short year beginning on June 1, 2001
and ending on December 31, 2001. Thereafter, the plan year shall be a calendar
year.
1.03 ERISA
1.03-1
The CIC Severance Plan is intended to be and shall be administered and
maintained as a welfare benefit plan under section 3(1) of the Employee
Retirement Income Security Act of 1974 ("ERISA"), providing certain benefits to
participants on certain severances from employment.
1.03-2
The CIC Severance Plan is not intended to be a pension plan under section
3(2)(A) of ERISA and shall be maintained and administered so as not to be such a
plan. The CIC Severance Plan is intended to come within, and shall be
administered and maintained to come within, the severance pay plan exception
thereto in Department of Labor regulations section 2510.3-2(b).
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ARTICLE 2
Application to Company or Affiliates
2.01 Eligible Employers
2.01-1
The Company maintains the CIC Severance Plan for its Eligible Key Employees. Any
Affiliate approved by the Company may adopt and maintain the CIC Severance Plan
for its Eligible Key Employees or other designated class of employees.
2.01-2
"Affiliate" means a corporation, person or other entity that is a member, with
an Employer, of a controlled or affiliated service group under section 414(b),
(c), (m) or (o) of the Internal Revenue Code of 1986 (the "Code").
2.01-3
"Employer" means the Company and any adopting Affiliate, and any successors in
interest thereof. The CIC Severance Plan is a single plan maintained by the
Company and any adopting Affiliate.
2.02 Adoption Procedure
An adopting Employer shall execute an adoption statement that shall include the
effective date, date of adoption and any special provisions that are to be
applicable only to employees of the Affiliate.
ARTICLE 3
Eligibility and Participation
3.01 Eligible Key Employees
3.01-1 Eligible Key Employees are employees (including officers
of the Company) who are employed by Employer as of the date of a Change in
Control, and have been designated by the Compensation Committee of the Company's
Board of Directors to be eligible to participate in this Plan. Officers of the
Company who have severance benefits under employment or other agreements and who
become entitled to receive benefits under such agreements and this CIC Severance
Plan shall be permitted, at their sole option, to receive benefits under the
terms of such agreements or this CIC Severance Plan.
3.01-2 The Compensation Committee shall designate each Eligible
Key Employee as a Level 1, Level 2, Level 3, or Level 4 employee under the Plan.
3.01-3 On or after the date of a Change in Control, the
Compensation Committee may not change the designation of any employee who was
designated prior to the Change in Control as an Eligible Key Employee under
3.01-1 in any manner that would deny or reduce the amount of severance benefits
that such employee might otherwise become entitled to under this Plan.
3.02 Participation
3.02-1
Any Eligible Key Employee who becomes entitled to severance benefits under 4.01
is a Participant in the CIC Severance Plan. A Participant must satisfy the
requirements of 4.01 to be entitled to severance benefits under the CIC
Severance Plan.
3.02-2
An Eligible Key Employee shall not participate in any other MCMS severance plan.
3.03 Determination of Eligibility and Participation
All questions of eligibility and participation of employees shall be determined
by the Administrator, whose decision shall be final.
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ARTICLE 4
CIC Severance Benefits
4.01 Entitlement to CIC Severance Benefits
4.01-1
Subject to 4.01-5, an Eligible Key Employee is entitled to CIC Severance
Benefits if all of the following apply:
(a) The employee receives notice of a separation of employment which qualifies
as a Constructive Termination or Involuntary Termination with Employer.
(b) The employee receives the notice of separation of employment within twelve
(12) months following a Change in Control under 4.01-4 and on or after the
effective date of the CIC Severance Plan.
4.01-2
For the purposes of this Severance Plan, "Constructive Termination" shall occur
when an Eligible Key Employee is involuntarily subjected to any of the
following:
(a) A reduction in job responsibility that renders his/her position with the
Company substantially different from what it was just prior to the Change in
Control.
(b) A reduction in base salary, hours of work, or benefits (unless such benefits
reduction affects Company employees generally).
(c) A change in work location requiring a significantly longer commute (greater
than 30 miles more than the present commute).
4.01-3 For the purposes of this Severance Plan, "Involuntary
Termination" means a termination of employment other than for Cause, retirement,
death or disability.
4.01-4
A "Change in Control" means the occurrence of any of the following events:
(a) Any "person" (as such term is used Sections 13(d) and 14(d) of the
Securities and Exchange Act of 1934, as amended) becomes the "beneficial owner"
(as defined in Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the total voting
power represented by the Company's then outstanding voting securities,
(b) A merger or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least fifty-one percent (51%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or
(c) A sale or disposition by the Company of all or substantially all of the
Company's assets.
4.01-5
Unless otherwise specified by Employer in writing, a Participant shall not be
entitled to receive payment of severance benefits under the CIC Severance Plan
if any of the following occur:
(a) The Participant fails to waive any other severance or other separation
benefits under any agreement, plan, or arrangement with Employer or any
Affiliate or any voluntary early retirement program maintained by Employer.
(b) The Participant's employment is involuntarily terminated for Cause. For the
purposes of this Severance Plan, "Cause" shall mean the Employee's misconduct,
including, but not limited to, fraud, misappropriation, embezzlement, violation
of Company policy, or a substantial and repeated failure to perform according to
the expectations set by Employee's supervisor.
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(c) The Participant fails to execute a waiver and release of claims against
Employer and Affiliates in the form provided by Employer within the specified
consideration period or revokes a prior waiver and release of claims form within
the revocation period stated therein.
(d) The Participant terminates employment voluntarily (i) before the Eligible
Key Employee has received notice of Change in Control, or (ii) after receipt of
notice of a Change in Control but before the date specified for termination by
Employer. Solely with respect to clause (i) above, a termination is voluntary
even if continued employment depends on relocation to another job site or
acceptance of a position with a different base or variable compensation, title
or responsibilities.
(e) The Participant fails to execute any other agreement required by the Company
including but not limited to those relating to confidentiality, noncompetition,
nonsolicitation, nondisparagement and assistance to the Company in defense of
litigation or administrative or other claims. The Company shall determine the
terms of any agreement on a discretionary basis with respect to each individual
participant. In the event a noncompetition agreement is required by the Company,
the duration of such agreement will not be longer than the number of months of
severance to be paid to the Eligible Key Employee.
4.02 CIC Severance Pay
4.02-1
Subject to 4.04, Participants who are eligible for CIC severance benefits under
4.01 shall be entitled to receive CIC severance pay equal to a number of months
of regular pay as follows:
CIC SEVERANCE PAY
Eligible Key Employees
Class Designation
Number
of Months
Level 1
3
Level 2
4
Level 3
6
Level 4
8
Level 5
12
4.02-2
For the purposes of 4.02-1, "regular pay" means base pay on the date of
termination, excluding any overtime, severance pay, bonuses, commissions,
reimbursements, any other allowances and any other type of extra or variable
compensation.
4.03 Rehire
A Participant who has received CIC severance pay and who is rehired by Employer
or is hired by any Affiliate shall not be required to repay any severance pay
received as of the date of hire or rehire.
4.04 Time and Manner of Payment
4.04-1
Employer shall determine, in its sole discretion, the time and manner of payment
of any severance pay. Unless the Employer exercises its discretion to pay
severance pay in installments, severance pay shall be paid in a lump sum cash
payment within a reasonable time after the date the Participant may no longer
revoke a waiver and release of claims required under4.01-5(c).
4.04-2
Employer may withhold from any amounts paid under the CIC Severance Plan any
income tax or other amounts as allowed or required by law.
4.05 Forfeitability of Severance Benefits
Any right to severance benefits shall be forfeitable until the Eligible Key
Employee has become entitled to CIC Severance Benefits under 4.01. No payment
shall be made to any Participant to whom any of the events in 4.01-5 applies.
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4.06 Alternative Benefits
At any time before the date of a Change in Control, the chief executive officer
of the Company shall retain complete discretion to add levels of class
designations for Eligible Key Employees and to specify the CIC Severance pay
applicable to any additional levels under 4.02-1.
ARTICLE 5
Administration
5.01 Administrator
5.01-1
The CIC Severance Plan shall be administered by the chief executive officer of
the Company.
5.01-2
The Administrator may resign on 15 days' notice to the Compensation Committee.
The Compensation Committee may remove the Administrator without having to show
cause. The vacancy shall be filled as soon as reasonably practicable. Until a
new appointment is made, the Company shall act as the Administrator.
5.02 The Administrator's Powers and Duties
5.02-1
The Administrator shall interpret the CIC Severance Plan, decide any questions
about the rights of Participants and in general administer the CIC Severance
Plan. Any decision by the Administrator shall be final and bind all parties. The
Administrator shall have absolute discretion to carry out the Administrator's
responsibilities under this section.
5.02-2
The Administrator may delegate all or part of the administrative duties to one
or more agents and may retain advisors and agents for assistance. The
Administrator may consult with, and rely upon the advice of counsel, who may be
counsel for the Company or any Affiliate.
5.02-3
The Administrator shall be the plan administrator under federal laws and
regulations applicable to plan administration and shall comply with such laws
and regulations. The Administrator shall be the agent for service of process on
the CIC Severance Plan at the Company's address.
5.03 Company and Employer Functions
5.03-1
Except as provided in 5.03-2, all authority of the Company or Employer,
including, in the case of the Company, the power to amend or terminate the CIC
Severance Plan, shall be exercised by the Compensation Committee or Board of
Directors, as applicable, who may delegate some or all of the authority to any
officer.
5.03-2
The chief executive officer of the Company or delegate may amend the CIC
Severance Plan in writing, on advice of counsel, to make technical,
administrative or editorial changes to comply with applicable law or to simplify
or clarify the CIC Severance Plan.
5.03-3
The Board of Directors of the Company or any other Employer shall have no
administrative authority or function with respect to the CIC Severance Plan.
Being a member of the Board shall not, in itself, make a person a plan
fiduciary.
5.04 Claims Procedures
5.04-1
Any person claiming a benefit or requesting information, an interpretation or a
ruling under the CIC Severance Plan shall present the request in writing to the
Administrator. The Administrator or delegate will respond in writing as soon as
practicable.
5.04-2
If the claim or request is denied, the written notice of denial shall state:
(a) The reasons for denial, with specific reference to the terms of the written
document on which denial is based.
--------------------------------------------------------------------------------
(b) A description of any additional material or information required for review
of the claim and an explanation of why it is necessary.
(c) An explanation of the CIC Severance Plan's claims review procedure.
5.04-3
Any person whose claim or request is denied, or who has not received a response
within 90 days, may request review by notice in writing to the Administrator.
The original decision will be reviewed by the Administrator or delegate, who
may, but shall not be required to, grant the claimant a hearing. On review,
whether or not there is a hearing, the claimant may have representation, examine
pertinent documents and submit issues and comments in writing.
5.04-4
The decision on review shall normally be made within 60 days. If an extension of
time is required for a hearing or other special circumstances, the Participant
shall be so notified and the time limit shall be 120 days. The decision shall be
in writing and shall state the reasons and the relevant plan provisions. All
decisions on review shall be final and binding on all parties concerned. If the
Participant does not receive a decision within the time limit, the claim shall
be considered wholly denied on review.
5.05 Indemnity and Bonding
5.05-1
The Company shall indemnify and defend any CIC Severance Plan fiduciary who is
an officer, director or employee of the Company against any claim or liability
that arises from any action or inaction in connection with the CIC Severance
Plan, subject to the following rules:
(a) Coverage shall be limited to actions taken in good faith that the fiduciary
reasonably believed were not opposed to the best interest of the CIC Severance
Plan.
(b) Negligence by the fiduciary shall be covered to the fullest extent permitted
by law.
(c) Coverage shall be reduced to the extent of any insurance coverage.
5.05-2
The CIC Severance Plan fiduciaries shall be bonded to the extent required by
applicable law.
5.06 Expenses
5.06-1
An Administrator who is employed full-time by Employer shall not be separately
compensated for services as the Administrator. The Administrator shall be
reimbursed by the Company for all expenses incurred while acting as the
Administrator.
5.06-2
The Company may allocate the cost of any administrative fees or expenses among
Employers. Otherwise, all expenses and fees shall be paid by the Company.
ARTICLE 6
General Provisions
6.01 Enforceability and Exclusive Benefit
The Company and Employers intend the terms of the CIC Severance Plan, including
those relating to the coverage and benefits, to be legally enforceable. The
Company and Employers further intend that the CIC Severance Plan be maintained
for the exclusive benefit of Eligible Key Employees of Employers.
6.02 Amendment and Termination
The Company may amend or terminate the CIC Severance Plan at any time before the
effective date of closing for any Change in Control. No amendment or termination
under this 6.02 shall affect the right of any Eligible Key Employee to severance
benefits that have become nonforfeitable under 4.05.
--------------------------------------------------------------------------------
6.03 Not Contract of Employment
Nothing in the CIC Severance Plan shall give any employee the right to continue
employment. The CIC Severance Plan shall not prevent discharge of any employee
at any time for any reason. The foregoing shall not apply to officers of the
Company whom have employment or other agreements with the Company.
6.04 Unfunded
All benefits payable under the CIC Severance Plan shall be unfunded and shall be
payable only from the general assets of Employer. The Participants shall have no
interest in any assets of Employer and shall have no rights greater than the
rights of any unsecured general creditor of Employer.
6.05 Nonassignment
The rights of a Participant under the CIC Severance Plan are personal. No
interest of a Participant under the CIC Severance Plan may be assigned,
transferred, seized by legal process or subjected to the claims of creditors in
any way. A Participant's rights under the CIC Severance Plan are not subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge or
encumbrance.
6.06 Applicable Law
The CIC Severance Plan shall be construed according to the laws of the State of
Idaho, except as preempted by federal law.
Adopted:
Company
MCMS, INC.
By
Executed:
|
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Exhibit 10.7
AMENDED AND RESTATED
1997 STOCK INCENTIVE PLAN OF
NANOGEN, INC.
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
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ARTICLE 1. INTRODUCTION 1
ARTICLE 2.
ADMINISTRATION
1 2.1 Committee Composition 1 2.2 Committee Responsibilities 1
ARTICLE 3.
SHARES AVAILABLE FOR GRANTS
2 3.1 Basic Limitation 2 3.2 Additional Shares 2 3.3 Dividend
Equivalents 2
ARTICLE 4.
ELIGIBILITY
2 4.1 General Rules 2 4.2 Outside Directors 2 4.3 Incentive Stock
Options 2
ARTICLE 5.
OPTIONS
2 5.1 Stock Option Agreement 2 5.2 Number of Shares 3 5.3 Exercise
Price 3 5.4 Exercisability and Term 3 5.5 Effect of Change in Control
3 5.6 Modification or Assumption of Options 3 5.7 Other Requirements Prior
to Company's Initial Public Offering 3
ARTICLE 6.
PAYMENT FOR OPTION SHARES
3 6.1 General Rule 3 6.2 Surrender of Stock 4 6.3 Exercise/Sale 4
6.4 Exercise/Pledge 4 6.5 Promissory Note 4 6.6 Other Forms of Payment
4
ARTICLE 7.
STOCK APPRECIATION RIGHTS
4 7.1 SAR Agreement 4 7.2 Number of Shares 4 7.3 Exercise Price 4
7.4 Exercisability and Term 4 7.5 Effect of Change in Control 5 7.6
Exercise of SARs 5 7.7 Modification or Assumption of SARs 5
ARTICLE 8.
RESTRICTED SHARES AND STOCK UNITS
5 8.1 Time, Amount and Form of Awards 5 8.2 Payment for Awards 5 8.3
Vesting Conditions 5 8.4 Form and Time of Settlement of Stock Units 5 8.5
Death of Recipient 6 8.6 Creditors' Rights 6
ARTICLE 9.
VOTING AND DIVIDEND RIGHTS
6 9.1 Restricted Shares 6 9.2 Stock Units 6
ARTICLE 10.
PROTECTION AGAINST DILUTION
6 10.1 Adjustments 6 10.2 Reorganizations 6
ARTICLE 11.
AWARDS UNDER OTHER PLANS
7
i
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ARTICLE 12.
PAYMENT OF DIRECTOR'S FEES IN SECURITIES
7 12.1 Effective Date 7 12.2 Elections to Receive NSOs, Restricted Shares
or Stock Units 7 12.3 Number and Terms of NSOs, Restricted Shares or Stock
Units 7
ARTICLE 13.
LIMITATION ON RIGHTS
7 13.1 Retention Rights 7 13.2 Stockholders' Rights 7 13.3 Regulatory
Requirements 7
ARTICLE 14.
LIMITATION ON PAYMENTS
8 14.1 Gross-Up Payment 8 14.2 Determination by Accountant 8 14.3
Underpayments and Overpayments 8 14.4 Related Corporations 8
ARTICLE 15
WITHHOLDING TAXES
9 15.1 General 9 15.2 Share Withholding 9
ARTICLE 16.
ASSIGNMENT OR TRANSFER OF AWARDS
9 16.1 General 9 16.2 Trusts 9
ARTICLE 17.
FUTURE OF THE PLAN
9 17.1 Term of the Plan 9 17.2 Amendment or Termination 9
ARTICLE 18.
DEFINITIONS
9
ARTICLE 19.
EXECUTION
12
ii
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AMENDED AND RESTATED
1997 STOCK INCENTIVE PLAN OF
NANOGEN, INC.
ARTICLE 1. INTRODUCTION
The Plan was adopted by the Board effective as of August 1, 1997, and was
approved by the Company's stockholders as of August 1, 1997. The Plan is
effective as of August 1, 1997. However, Articles 7, 8 and 9 shall not apply
prior to the Company's initial public offering on April 14, 1998. The Plan was
subsequently (a) amended and restated on June 30, 1999 to increase the number of
shares available for issuance under the Plan in Section 3.1; (b) amended on
April 14, 2000 for options issued on and after that date, to increase the period
during which such options may be exercised after the death or disability of a
Plan Participant to twelve months in Section 5.4; (c) amended and restated on
June 6, 2000 to increase the number of shares available for issuance under the
Plan in Section 3.1 to 4,508,760; and (d) amended and restated on June 13, 2001
to increase the number of shares available for issuance under the Plan in
Section 3.1 to its current number.
The purpose of the Plan is to promote the long-term success of the Company
and the creation of stockholder value by (a) encouraging Key Employees to focus
on critical long-range objectives, (b) encouraging the attraction and retention
of Key Employees with exceptional qualifications and (c) linking Key Employees
directly to stockholder interests through increased stock ownership. The Plan
seeks to achieve this purpose by providing for Awards in the form of Restricted
Shares, Stock Units, Options (which may constitute incentive stock options or
nonstatutory stock options) or stock appreciation rights.
The Plan shall be governed by, and construed in accordance with, the laws of
the State of California.
ARTICLE 2. ADMINISTRATION
2.1 Committee Composition. The Plan shall be administered by the
Committee. Except as provided below, the Committee shall consist exclusively of
directors of the Company, who shall be appointed by the Board. In addition, the
composition of the Committee shall satisfy:
(a) Such requirements, if any, as the Securities and Exchange Commission may
establish for administrators acting under plans intended to qualify for
exemption under Rule 16b-3 (or its successor) under the Exchange Act; and
(b) Such requirements as the Internal Revenue Service may establish for
outside directors acting under plans intended to qualify for exemption under
section 162(m)(4)(C) of the Code.
The Board may act on its own behalf with respect to Outside Directors and may
also appoint one or more separate committees composed of one or more officers of
the Company who need not be directors of the Company and who need not satisfy
the foregoing requirements, who may administer the Plan with respect to Key
Employees who are not "covered employees" under section 162(m)(3) of the Code
and who are not required to report pursuant to § 16(a) of the Exchange Act.
2.2 Committee Responsibilities. The Committee shall (a) select the Key
Employees who are to receive Awards under the Plan, (b) determine the type,
number, vesting requirements and other features and conditions of such Awards,
(c) interpret the Plan and (d) make all other decisions relating to the
operation of the Plan. The Committee may adopt such rules or guidelines as it
deems appropriate to implement the Plan. The Committee's determinations under
the Plan shall be final and binding on all persons.
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ARTICLE 3. SHARES AVAILABLE FOR GRANTS
3.1 Basic Limitation. Common Shares issued pursuant to the Plan may be
authorized but unissued shares or treasury shares. The aggregate number of
Common Shares available for Restricted Shares, Stock Units, Options and SARs
awarded under the Plan shall not exceed 6,008,760. Of the Common Shares
available hereunder, no more than 25% in aggregate shall be available with
respect to Outside Directors. The limitation of this Section 3.1 shall be
subject to adjustment pursuant to Article 10. The number of Common Shares
available under this Plan shall be increased by unexercised or forfeited Common
Shares under the Company's 1993 and 1995 Stock Plans.
3.2 Additional Shares. If Stock Units, Options or SARs are forfeited or if
Options or SARs terminate for any other reason before being exercised, then the
corresponding Common Shares shall again become available for Awards under the
Plan. If Restricted Shares are forfeited before any dividends have been paid
with respect to such Shares, then such Shares shall again become available for
Awards under the Plan. If Stock Units are settled, then only the number of
Common Shares (if any) actually issued in settlement of such Stock Units shall
reduce the number available under Section 3.1 and the balance shall again become
available for Awards under the Plan. If SARs are exercised, then only the number
of Common Shares (if any) actually issued in settlement of such SARs shall
reduce the number available under Section 3.1 and the balance shall again become
available for Awards under the Plan.
3.3 Dividend Equivalents. Any dividend equivalents distributed under the
Plan shall not be applied against the number of Restricted Shares, Stock Units,
Options or SARs available for Awards, whether or not such dividend equivalents
are converted into Stock Units.
ARTICLE 4. ELIGIBILITY
4.1 General Rules. Only Key Employees (including, without limitation,
independent contractors who are not members of the Board) shall be eligible for
designation as Participants by the Committee.
4.2 Outside Directors. The Committee may provide that the NSOs that
otherwise would be granted to an Outside Director under this Plan shall instead
be granted to an affiliate of such Outside Director. Such affiliate shall then
be deemed to be an Outside Director for purposes of the Plan, provided that the
service-related vesting and termination provisions pertaining to the NSOs shall
be applied with regard to the service of the Outside Director.
4.3 Incentive Stock Options. Only Key Employees who are common-law
employees of the Company, a Parent or a Subsidiary shall be eligible for the
grant of ISOs. In addition, a Key Employee who owns more than 10% of the total
combined voting power of all classes of outstanding stock of the Company or any
of its Parents or Subsidiaries shall not be eligible for the grant of an ISO
unless the requirements set forth in section 422(c)(6) of the Code are
satisfied.
ARTICLE 5. OPTIONS
5.1 Stock Option Agreement. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The Stock
Option Agreement shall specify whether the Option is an ISO or an NSO. The
provisions of the various Stock Option Agreements entered into under the Plan
need not be identical. Options shall be granted in consideration of services
rendered to the Company or a Subsidiary. A Stock Option Agreement may provide
that a new Option will be granted automatically to the Optionee when he or she
exercises a prior Option and pays the Exercise Price in the form described in
Section 6.2.
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5.2 Number of Shares. Each Stock Option Agreement shall specify the number
of Common Shares subject to the Option and shall provide for the adjustment of
such number in accordance with Article 10. Options granted to any Optionee in a
single calendar year shall in no event cover more than 750,000 Common Shares,
subject to adjustment in accordance with Article 10.
5.3 Exercise Price. Each Stock Option Agreement shall specify the Exercise
Price; provided that the Exercise Price under an ISO shall in no event be less
than 100% of the Fair Market Value of a Common Share on the date of grant and
the Exercise Price under an NSO shall in no event be less than the par value of
the Common Shares subject to such NSO. In the case of an NSO, a Stock Option
Agreement may specify an Exercise Price that varies in accordance with a
predetermined formula while the NSO is outstanding, provided that prior to the
Company's initial public offering, the NSO Exercise Price shall be at least 85%
(110% for 10% shareholders) of the Fair Market Value of a Common Share of Stock
on the date of grant.
5.4 Exercisability and Term. Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to become exercisable,
provided that prior to the Company's initial public offering, Options shall
become exercisable pursuant to a schedule providing for at least 20% vesting per
year over a five-year period (or, in the case of performance options, to the
extent permitted under applicable regulations of the California Department of
Corporations). The Stock Option Agreement shall also specify the term of the
Option; provided that the term of an ISO shall in no event exceed 10 years from
the date of grant. A Stock Option Agreement may provide for accelerated
exercisability in the event of the Optionee's death, disability or retirement or
other events and may provide for expiration prior to the end of its term in the
event of the termination of the Optionee's service.
Options may be awarded in combination with SARs, and such an Award may
provide that the Options will not be exercisable unless the related SARs are
forfeited. NSOs may also be awarded in combination with Restricted Shares or
Stock Units, and such an Award may provide that the NSOs will not be exercisable
unless the related Restricted Shares or Stock Units are forfeited.
Options must be exercised within 90 days of the termination of employment
(twelve months for termination on account of death or disability).
5.5 Effect of Change in Control. The Committee may determine, at the time
of granting an Option or thereafter, that such Option shall become fully
exercisable as to all Common Shares subject to such Option in the event that a
Change in Control occurs with respect to the Company.
5.6 Modification or Assumption of Options. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding options or may
accept the cancellation of outstanding options (whether granted by the Company
or by another issuer) in return for the grant of new options for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair his or her rights or obligations under
such Option.
5.7 Other Requirements Prior to Company's Initial Public Offering. Prior
to the Company's initial public offering, Optionees shall receive Company
financial statements at least annually.
ARTICLE 6. PAYMENT FOR OPTION SHARES
6.1 General Rule. The entire Exercise Price of Common Shares issued upon
exercise of Options shall be payable in cash at the time when such Common Shares
are purchased, except as follows:
(a) In the case of an ISO granted under the Plan, payment shall be made only
pursuant to the express provisions of the applicable Stock Option Agreement. The
Stock Option Agreement may specify that payment may be made in any form(s)
described in this Article 6.
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(b) In the case of an NSO, the Committee may at any time accept payment in
any form(s) described in this Article 6.
6.2 Surrender of Stock. To the extent that this Section 6.2 is applicable,
payment for all or any part of the Exercise Price may be made with Common Shares
which have already been owned by the Optionee for more than six months. Such
Common Shares shall be valued at their Fair Market Value on the date when the
new Common Shares are purchased under the Plan.
6.3 Exercise/Sale. To the extent that this Section 6.3 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell
Common Shares and to deliver all or part of the sales proceeds to the Company in
payment of all or part of the Exercise Price and any withholding taxes.
6.4 Exercise/Pledge. To the extent that this Section 6.4 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Common Shares to a securities broker or lender
approved by the Company, as security for a loan, and to deliver all or part of
the loan proceeds to the Company in payment of all or part of the Exercise Price
and any withholding taxes.
6.5 Promissory Note. To the extent that this Section 6.5 is applicable,
payment may be made with a full-recourse promissory note; provided that the par
value of the Common Shares shall be paid in cash.
6.6 Other Forms of Payment. To the extent that this Section 6.6 is
applicable, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 SAR Agreement. Each grant of an SAR under the Plan shall be evidenced
by an SAR Agreement between the Optionee and the Company. Such SAR shall be
subject to all applicable terms of the Plan and may be subject to any other
terms that are not inconsistent with the Plan. The provisions of the various SAR
Agreements entered into under the Plan need not be identical. SARs may be
granted in consideration of a reduction in the Optionee's other compensation.
7.2 Number of Shares. Each SAR Agreement shall specify the number of
Common Shares to which the SAR pertains and shall provide for the adjustment of
such number in accordance with Article 10. SARs granted to any Optionee in a
single calendar year shall in no event pertain to more than 300,000 Common
Shares, subject to adjustment in accordance with Article 10.
7.3 Exercise Price. Each SAR Agreement shall specify the Exercise Price.
An SAR Agreement may specify an Exercise Price that varies in accordance with a
predetermined formula while the SAR is outstanding.
7.4 Exercisability and Term. Each SAR Agreement shall specify the date
when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. An SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may
also be awarded in combination with Options, Restricted Shares or Stock Units,
and such an Award may provide that the SARs will not be exercisable unless the
related Options, Restricted Shares or Stock Units are forfeited. An SAR may be
included in an ISO only at the time of grant but may be included in an NSO at
the time of grant or thereafter. An SAR granted under the Plan may provide that
it will be exercisable only in the event of a Change in Control.
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7.5 Effect of Change in Control. The Committee may determine, at the time
of granting an SAR or thereafter, that such SAR shall become fully exercisable
as to all Common Shares subject to such SAR in the event that a Change in
Control occurs with respect to the Company.
7.6 Exercise of SARs. The exercise of an SAR shall be subject to the
restrictions imposed by Rule 16b-3 (or its successor) under the Exchange Act, if
applicable. If, on the date when an SAR expires, the Exercise Price under such
SAR is less than the Fair Market Value on such date but any portion of such SAR
has not been exercised or surrendered, then such SAR shall automatically be
deemed to be exercised as of such date with respect to such portion. Upon
exercise of an SAR, the Optionee (or any person having the right to exercise the
SAR after his or her death) shall receive from the Company (a) Common Shares,
(b) cash or (c) a combination of Common Shares and cash, as the Committee shall
determine. The amount of cash and/or the Fair Market Value of Common Shares
received upon exercise of SARs shall, in the aggregate, be equal to the amount
by which the Fair Market Value (on the date of surrender) of the Common Shares
subject to the SARs exceeds the Exercise Price.
7.7 Modification or Assumption of SARs. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding SARs or may accept
the cancellation of outstanding SARs (whether granted by the Company or by
another issuer) in return for the grant of new SARs for the same or a different
number of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of an SAR shall, without the consent of the
Optionee, alter or impair his or her rights or obligations under such SAR.
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS
8.1 Time, Amount and Form of Awards. Awards under the Plan may be granted
in the form of Restricted Shares, in the form of Stock Units, or in any
combination of both. Restricted Shares or Stock Units may also be awarded in
combination with NSOs or SARs, and such an Award may provide that the Restricted
Shares or Stock Units will be forfeited in the event that the related NSOs or
SARs are exercised.
8.2 Payment for Awards. To the extent that an Award is granted in the form
of newly issued Restricted Shares, the Award recipient, as a condition to the
grant of such Award, shall be required to pay the Company in cash an amount
equal to the par value of such Restricted Shares. To the extent that an Award is
granted in the form of Restricted Shares from the Company's treasury or in the
form of Stock Units, no cash consideration shall be required of the Award
recipients.
8.3 Vesting Conditions. Each Award of Restricted Shares or Stock Units
shall become vested, in full or in installments, upon satisfaction of the
conditions specified in the Stock Award Agreement. A Stock Award Agreement may
provide for accelerated vesting in the event of the Participant's death,
disability or retirement or other events. The Committee may determine, at the
time of making an Award or thereafter, that such Award shall become fully vested
in the event that a Change in Control occurs with respect to the Company.
8.4 Form and Time of Settlement of Stock Units. Settlement of vested Stock
Units may be made in the form of (a) cash, (b) Common Shares or (c) any
combination of both, as determined by the Committee. The actual number of Stock
Units eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors. Methods of
converting Stock Units into cash may include (without limitation) a method based
on the average Fair Market Value of Common Shares over a series of trading days.
Vested Stock Units may be settled in a lump sum or in installments. The
distribution may occur or commence when all vesting conditions applicable to the
Stock Units have been satisfied or have lapsed, or it may be deferred to any
later date. The amount of a deferred distribution may be increased by an
interest factor or by dividend
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equivalents. Until an Award of Stock Units is settled, the number of such Stock
Units shall be subject to adjustment pursuant to Article 10.
8.5 Death of Recipient. Any Stock Units Award that becomes payable after
the recipient's death shall be distributed to the recipient's beneficiary or
beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.
8.6 Creditors' Rights. A holder of Stock Units shall have no rights other
than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Award Agreement.
ARTICLE 9. VOTING AND DIVIDEND RIGHTS
9.1 Restricted Shares. The holders of Restricted Shares awarded under the
Plan shall have the same voting, dividend and other rights as the Company's
other stockholders. A Stock Award Agreement, however, may require that the
holders of Restricted Shares invest any cash dividends received in additional
Restricted Shares. Such additional Restricted Shares shall be subject to the
same conditions and restrictions as the Award with respect to which the
dividends were paid. Such additional Restricted Shares shall not reduce the
number of Common Shares available under Article 3.
9.2 Stock Units. The holders of Stock Units shall have no voting rights.
Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at
the Committee's discretion, carry with it a right to dividend equivalents. Such
right entitles the holder to be credited with an amount equal to all cash
dividends paid on one Common Share while the Stock Unit is outstanding. Dividend
equivalents may be converted into additional Stock Units. Settlement of dividend
equivalents may be made in the form of cash, in the form of Common Shares, or in
a combination of both. Prior to distribution, any dividend equivalents which are
not paid shall be subject to the same conditions and restrictions as the Stock
Units to which they attach.
ARTICLE 10. PROTECTION AGAINST DILUTION
10.1 Adjustments. In the event of a subdivision of the outstanding Common
Shares, a declaration of a dividend payable in Common Shares, a declaration of a
dividend payable in a form other than Common Shares in an amount that has a
material effect on the price of Common Shares, a combination or consolidation of
the outstanding Common Shares (by reclassification or otherwise) into a lesser
number of Common Shares, a recapitalization, a spinoff or a similar occurrence,
the Committee shall make such adjustments as it, in its sole discretion, deems
appropriate in one or more of (a) the number of Options, SARs, Restricted Shares
and Stock Units available for future Awards under Article 3, (b) the limitations
set forth in Sections 5.2 and 7.2, (c) the number of NSOs to be granted to
Outside Directors under Section 4.2, (d) the number of Stock Units included in
any prior Award which has not yet been settled, (e) the number of Common Shares
covered by each outstanding Option and SAR or (f) the Exercise Price under each
outstanding Option and SAR. Except as provided in this Article 10, a Participant
shall have no rights by reason of any issue by the Company of stock of any class
or securities convertible into stock of any class, any subdivision or
consolidation of shares of stock of any class, the payment of any stock dividend
or any other increase or decrease in the number of shares of stock of any class.
10.2 Reorganizations. In the event that the Company is a party to a merger
or other reorganization, outstanding Options, SARs, Restricted Shares and Stock
Units shall be subject to the agreement of merger or reorganization. Such
agreement may provide, without limitation, for the
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assumption of outstanding Awards by the surviving corporation or its parent, for
their continuation by the Company (if the Company is a surviving corporation),
for accelerated vesting and accelerated expiration (provided the Company has
previously had its initial public offering), or for settlement in cash.
ARTICLE 11. AWARDS UNDER OTHER PLANS
The Company may grant awards under other plans or programs. Such awards may
be settled in the form of Common Shares issued under this Plan. Such Common
Shares shall be treated for all purposes under the Plan like Common Shares
issued in settlement of Stock Units and shall, when issued, reduce the number of
Common Shares available under Article 3.
ARTICLE 12. PAYMENT OF DIRECTOR'S FEES IN SECURITIES
12.1 Effective Date. No provision of this Article 12 shall be effective
unless and until the Board has determined to implement such provision.
12.2 Elections to Receive NSOs, Restricted Shares or Stock Units. An
Outside Director may elect to receive his or her annual retainer payments and
meeting fees from the Company in the form of cash, NSOs, Restricted Shares,
Stock Units, or a combination thereof, as determined by the Board. Such NSOs,
Restricted Shares and Stock Units shall be issued under the Plan. An election
under this Article 12 shall be filed with the Company on the prescribed form.
12.3 Number and Terms of NSOs, Restricted Shares or Stock Units. The
number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board. The terms
of such NSOs, Restricted Shares or Stock Units shall also be determined by the
Board.
ARTICLE 13. LIMITATION ON RIGHTS
13.1 Retention Rights. Neither the Plan nor any Award granted under the
Plan shall be deemed to give any individual a right to remain an employee,
consultant or director of the Company, a Parent or a Subsidiary. The Company and
its Parents and Subsidiaries reserve the right to terminate the service of any
employee, consultant or director at any time, with or without cause, subject to
applicable laws, the Company's certificate of incorporation and by-laws and a
written employment agreement (if any).
13.2 Stockholders' Rights. A Participant shall have no dividend rights,
voting rights or other rights as a stockholder with respect to any Common Shares
covered by his or her Award prior to the issuance of a stock certificate for
such Common Shares. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date when such certificate is
issued, except as expressly provided in Articles 8, 9 and 10.
13.3 Regulatory Requirements. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the
Plan shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares pursuant
to any Award prior to the satisfaction of all legal requirements relating to the
issuance of such Common Shares, to their registration, qualification or listing
or to an exemption from registration, qualification or listing.
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ARTICLE 14. LIMITATION ON PAYMENTS
14.1 Gross-Up Payment. In the event that it is determined that any payment
or transfer by the Company under the Plan to or for the benefit of (the
"Payment") would be subject to the excise tax imposed by section 4999 of the
Code or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest or penalties, are collectively referred to
as the "Excise Tax"), then the Participant shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount that shall fund the
payment by the Participant of any Excise Tax on the Payment as well as all
income taxes imposed on the Gross-Up Payment, any Excise Tax imposed on the
Gross-Up Payment and any interest or penalties imposed with respect to taxes on
the Gross-Up Payment or any Excise Tax.
14.2 Determination by Accountant. All mathematical determinations and all
determinations of whether any of the Payments are "parachute payments" (within
the meaning of section 280G of the Code) including all determinations of whether
a Gross-Up Payment is required, of the amount of such Gross-Up Payment and of
amounts determined under § 14.3 shall be made by the independent auditors most
recently selected by the Board (the "Auditors"), which shall provide its
determination (the "Determination"), together with detailed supporting
calculations regarding the amount of any Gross-Up Payment and any other relevant
matters, both to the Company and to the Participant within seven business days
of the Participant's termination date, if applicable, or such earlier time as is
requested by the Company or by the Participant (if the Participant reasonably
believes that any of the Total Payments may be subject to the Excise Tax). If
the Accounting Firm determines that no Excise Tax is payable by the Participant,
it shall furnish the Participant with a written statement that the Auditors have
concluded that no Excise Tax is payable (including the reasons therefor) and
that the Participant has substantial authority not to report any Excise Tax on
the Participant's federal income tax return. If a Gross-Up Payment is determined
to be payable, it shall be paid to the Participant within five business days
after the Determination is delivered to the Company or the Participant. Any
determination by the Auditors shall be binding upon the Company and the
Participant, absent manifest error.
14.3 Underpayments and Overpayments. As a result of uncertainty in the
application of section 4999 of the Code at the time of the initial determination
by the Auditors hereunder, it is possible that Gross-Up Payments not made by the
Company should have been made ("Underpayments") or that Gross-Up Payments will
have been made by the Company which should not have been made ("Overpayments").
In either event, the Auditors shall determine the amount of the Underpayment or
Overpayment that has occurred. In the case of an Underpayment, the amount of
such Underpayment shall promptly be paid by the Company to or for the benefit of
the Employee. In the case of an Overpayment, the Employee shall, at the
direction and expense of the Company, take such steps as are reasonably
necessary (including the filing of returns and claims for refund), follow
reasonable instructions from, and procedures established by, the Company and
otherwise reasonably cooperate with the Company to correct such Overpayment;
provided, however, that (i) the Employee shall in no event be obligated to
return to the Company an amount greater than the net after-tax portion of the
Overpayment that the Employee has retained or has recovered as a refund from the
applicable taxing authorities and (ii) this provision shall be interpreted in a
manner consistent with the intent of this Article 14, which is to make the
Employee whole, on an after-tax basis, for the application of the Excise Tax, it
being understood that the correction of an Overpayment may result in the
Employee's repaying to the Company an amount which is less than the Overpayment.
14.4 Related Corporations. For purposes of this Article 14, the term
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with section 280G(d)(5) of the Code.
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ARTICLE 15. WITHHOLDING TAXES
15.1 General. To the extent required by applicable federal, state, local
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.
15.2 Share Withholding. The Committee may permit a Participant to satisfy
all or part of his or her withholding or income tax obligations by having the
Company withhold all or a portion of any Common Shares that otherwise would be
issued to him or her or by surrendering all or a portion of any Common Shares
that he or she previously acquired. Such Common Shares shall be valued at their
Fair Market Value on the date when taxes otherwise would be withheld in cash.
Any payment of taxes by assigning Common Shares to the Company may be subject to
restrictions, including any restrictions required by rules of the Securities and
Exchange Commission.
ARTICLE 16. ASSIGNMENT OR TRANSFER OF AWARDS
16.1 General. An Award granted under the Plan shall not be anticipated,
assigned, attached, garnished, optioned, transferred or made subject to any
creditor's process, whether voluntarily, involuntarily or by operation of law,
except as approved by the Committee. Notwithstanding the foregoing, ISOs and,
prior to the Company's initial public offering, NSOs may not be transferable.
However, this Article 16 shall not preclude a Participant from designating a
beneficiary who will receive any outstanding Awards in the event of the
Participant's death, nor shall it preclude a transfer of Awards by will or by
the laws of descent and distribution.
16.2 Trusts. Neither this Article 16 nor any other provision of the Plan
shall preclude a Participant from transferring or assigning Restricted Shares to
(a) the trustee of a trust that is revocable by such Participant alone, both at
the time of the transfer or assignment and at all times thereafter prior to such
Participant's death, or (b) the trustee of any other trust to the extent
approved in advance by the Committee in writing. A transfer or assignment of
Restricted Shares from such trustee to any person other than such Participant
shall be permitted only to the extent approved in advance by the Committee in
writing, and Restricted Shares held by such trustee shall be subject to all of
the conditions and restrictions set forth in the Plan and in the applicable
Stock Award Agreement, as if such trustee were a party to such Agreement.
ARTICLE 17. FUTURE OF THE PLAN
17.1 Term of the Plan. The Plan, as set forth herein, was adopted as of
August 1, 1997, and became effective August 1, 1997, except that Articles 7, 8
and 9 shall not be effective prior to the date of the Company's initial public
offering on April 14, 1998. The Plan shall remain in effect until it is
terminated under Section 17.2, except that no ISOs shall be granted after
July 31, 2007.
17.2 Amendment or Termination. The Board may, at any time and for any
reason, amend or terminate the Plan. An amendment of the Plan shall be subject
to the approval of the Company's stockholders only to the extent required by
applicable laws, regulations or rules. No Awards shall be granted under the Plan
after the termination thereof. The termination of the Plan, or any amendment
thereof, shall not affect any Award previously granted under the Plan.
ARTICLE 18. DEFINITIONS
18.1 "Award" means any award of an Option, an SAR, a Restricted Share or a
Stock Unit under the Plan.
18.2 "Board" means the Company's Board of Directors, as constituted from
time to time.
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18.3 "Change in Control" shall mean the occurrence of any of the following
events:
(a) The consummation of a merger or consolidation of the Company with or
into another entity or any other corporate reorganization, if more than 50% of
the combined voting power of the continuing or surviving entity's securities
outstanding immediately after such merger, consolidation or other reorganization
is owned by persons who were not stockholders of the Company immediately prior
to such merger, consolidation or other reorganization;
(b) A change in the composition of the Board, as a result of which fewer
than one-half of the incumbent directors are directors who either:
(A) Had been directors of the Company 24 months prior to such change; or
(B) Were elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the directors who had been directors
of the Company 24 months prior to such change and who were still in office at
the time of the election or nomination; or
(c) Any "person" (as such term is used in sections 13(d) and 14(d) of the
Exchange Act) by the acquisition or aggregation of securities is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors (the "Base
Capital Stock"); except that any change in the relative beneficial ownership of
the Company's securities by any person resulting solely from a reduction in the
aggregate number of outstanding shares of Base Capital Stock, and any decrease
thereafter in such person's ownership of securities, shall be disregarded until
such person increases in any manner, directly or indirectly, such person's
beneficial ownership of any securities of the Company. Thus, for example, any
person who owns less than 50% of the Company's outstanding shares, shall cause a
Change in Control to occur as of any subsequent date if such person then
acquires an additional interest in the Company which, when added to the person's
previous holdings, causes the person to hold more than 50% of the Company's
outstanding shares.
The term "Change in Control" shall not include the Company's initial public
offering or a transaction, the sole purpose of which is to change the state of
the Company's incorporation.
18.4 "Code" means the Internal Revenue Code of 1986, as amended.
18.5 "Committee" means a committee of the Board, as described in Article 2.
18.6 "Common Share" means one share of the common stock of the Company.
18.7 "Company" means Nanogen, Inc., a Delaware corporation.
18.8 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
18.9 "Exercise Price," in the case of an Option, means the amount for which
one Common Share may be purchased upon exercise of such Option, as specified in
the applicable Stock Option Agreement. "Exercise Price," in the case of an SAR,
means an amount, as specified in the applicable SAR Agreement, which is
subtracted from the Fair Market Value of one Common Share in determining the
amount payable upon exercise of such SAR.
18.10 "Fair Market Value" means the market price of Common Shares,
determined by the Committee as follows:
(a) If the Common Shares were traded over-the-counter on the date in
question but was not traded on the Nasdaq Stock Market or the Nasdaq National
Market, then the Fair Market Value shall be equal to the mean between the last
reported representative bid and asked prices quoted for such date by the
principal automated inter-dealer quotation system on which the Common
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Shares are quoted or, if the Common Shares are not quoted on any such system, by
the "Pink Sheets" published by the National Quotation Bureau, Inc.;
(b) If the Common Shares were traded over-the-counter on the date in
question and were traded on the Nasdaq Stock Market or the Nasdaq National
Market, then the Fair Market Value shall be equal to the last-transaction price
quoted for such date by the Nasdaq Stock Market or the Nasdaq National Market;
(c) If the Common Shares were traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing price
reported by the applicable composite transactions report for such date; and
(d) If none of the foregoing provisions is applicable, then the Fair Market
Value shall be determined by the Committee in good faith on such basis as it
deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall
be based on the prices reported in the Western Edition of The Wall Street
Journal. Such determination shall be conclusive and binding on all persons.
18.11 "ISO" means an incentive stock option described in section 422(b) of
the Code.
18.12 "Key Employee" means (a) a common-law employee of the Company, a
Parent or a Subsidiary, (b) an Outside Director and (c) a consultant or adviser
who provides services to the Company, a Parent or a Subsidiary as an independent
contractor. Service as an Outside Director or as an independent contractor shall
be considered employment for all purposes of the Plan, except as provided in
Sections 4.2 and 4.3.
18.13 "NSO" means a stock option not described in sections 422 or 423 of
the Code.
18.14 "Option" means an ISO or NSO granted under the Plan and entitling the
holder to purchase one Common Share.
18.15 "Optionee" means an individual or estate who holds an Option or SAR.
18.16 "Outside Director" shall mean a member of the Board who is not a
common-law employee of the Company, a Parent or a Subsidiary.
18.17 "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be considered a Parent commencing as
of such date.
18.18 "Participant" means an individual or estate who holds an Award.
18.19 "Plan" means this 1997 Stock Incentive Plan of Nanogen, Inc., as
amended from time to time.
18.20 "Restricted Share" means a Common Share awarded under the Plan.
18.21 "SAR" means a stock appreciation right granted under the Plan.
18.22 "SAR Agreement" means the agreement between the Company and an
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.
18.23 "Stock Award Agreement" means the agreement between the Company and
the recipient of a Restricted Share or Stock Unit which contains the terms,
conditions and restrictions pertaining to such Restricted Share or Stock Unit.
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18.24 "Stock Option Agreement" means the agreement between the Company and
an Optionee which contains the terms, conditions and restrictions pertaining to
his or her Option.
18.25 "Stock Unit" means a bookkeeping entry representing the equivalent of
one Common Share, as awarded under the Plan.
18.26 "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
ARTICLE 19. EXECUTION
To record the adoption of the Plan by the Board, the Company has caused its
duly authorized officer to affix the corporate name and seal hereto.
NANOGEN, INC.
By:
/S/ VERA P. PARDEE
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Vera P. Pardee, Esq.
Vice President, General Counsel and Secretary
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ADDENDUM TO NANOGEN, INC. 1997 STOCK INCENTIVE PLAN
For Option Agreements entered into with Participants who are either resident
in the United Kingdom or employed by a United Kingdom subsidiary of
Nanogen, Inc., the following provisions are in addition to Article 15
("Withholding Taxes"):
15.3(a) Compliance with United Kingdom Tax Laws. In addition to the tax
withholding requirements set forth in clause 15.1 above, the Participant will be
subject to the deduction, withholding and payment of all amounts required to be
deducted in the United Kingdom under the provisions of the Pay As You Earn
scheme (PAYE) and National Insurance. The Participant herby agrees that (a) the
Participant is solely responsible for any (i) employee taxes to Inland Revenue,
(ii) employer taxes to National Insurance, and (iii) any other taxes due to any
other United Kingdom taxing authority in connection with any stock options the
Participant may receive as a result of employment with Nanogen, whether upon
receipt of options, vesting, exercise or sale of stock; (b) Nanogen may withhold
and pay any such taxes pursuant to Article 15.1; (c) the Participant will
indemnify Nanogen in connection with any such payments; and (d) Nanogen may
retain or delay transfer of any shares and/or options under Article 15.1 until
the Participant has confirmed the payment of all taxes due.
15.3(b) Survival. The above Article 15.3 (a) and sub-clauses shall
(a) survive the Participant's employment by Nanogen; (b) inure to the benefit of
successors and assigns of Nanogen; and (c) be binding upon the Participant's
heirs and legal representatives for the relevant statutory period for payment of
such taxes.
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QuickLinks
Exhibit 10.7
TABLE OF CONTENTS
AMENDED AND RESTATED 1997 STOCK INCENTIVE PLAN OF NANOGEN, INC.
ADDENDUM TO NANOGEN, INC. 1997 STOCK INCENTIVE PLAN
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FOURTH AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FOURTH AMENDMENT TO EMPLOYMENT AGREEMENT is made this 29th day of December,
2000, effective as of January 1, 2000, between SED INTERNATIONAL, INC., a
Georgia corporation (the "Subsidiary") and a wholly-owned subsidiary of SED
INTERNATIONAL HOLDINGS, INC., a Georgia corporation, and Gerald Diamond, an
individual resident of the State of Georgia (the "Employee").
W I T N E S S E T H:
WHEREAS, on November 7, 1989, Employee and the Subsidiary entered into an
Employment Agreement (the "Agreement") setting forth the terms and conditions of
Employee's employment with the Subsidiary; and
WHEREAS, effective July 1, 1991, Employee and the Subsidiary entered into the
First Amendment to the Employment Agreement, modifying certain terms and
conditions of Employee's employment with the Subsidiary; and
WHEREAS, effective July 1, 1998, Employee and the Subsidiary entered into the
Second Amendment to the Employment Agreement, modifying certain terms and
conditions of Employee's employment with the Subsidiary; and
WHEREAS, effective July 1, 1999, Employee and Subsidiary entered into the Third
Amendment to the Employment Agreement, modifying certain terms and conditions of
Employee's employment with the Subsidiary;
WHEREAS, the Subsidiary and Employee agree that it is in the best interest of
both parties to make certain further modifications to the terms and conditions
of Employee's employment with the Subsidiary.
NOW, THEREFORE, in consideration of the foregoing, the continued employment of
the Employee, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows :
1. Amendment to Section 3(h) of the Agreement . Pursuant to Section 15(d) of the
Agreement, Section 3(h), as subsequently amended, is hereby deleted in its
entirety and replaced by the following paragraphs:
(h) If a Change of Control occurs while the Employee is employed by the
Subsidiary during the term of this Agreement, or during any extension thereof,
and:
(1) the Employee's employment is terminated involuntarily, or voluntarily by the
Employee based on (i) material changes in the nature or scope of the Employee's
duties or employment, (ii) a reduction in compensation of the Employee made
without the Employee's consent, (iii) a relocation of the Subsidiary's executive
offices other than in compliance with the provisions of Section 2(b) of this
Agreement, or (iv) a good faith determination made by the Employee, upon
consultation with the Board of Directors of the Subsidiary, that it is necessary
or appropriate for the Employee to relocate from the Atlanta, Georgia
Metropolitan Area to enable Employee to perform his duties hereunder, the
Employee may, in his sole discretion, give written notice within thirty (30)
days after the date of termination of employment to the Secretary or Assistant
Secretary of the Subsidiary that he is exercising his rights hereunder and
requests payment of the amounts provided for under this Section 3(h); or
(2) the Employee gives written notice of his termination of employment for any
reason concurrently with the time a Change of Control occurs or any time within
thirty (30) days after the date the Change of Control becomes effective to the
Secretary or Assistant Secretary of the Subsidiary, he may exercise his rights
hereunder and request payment of the amounts provided for under this Section
3(h) (the notice provided pursuant to Subsection 3(h)(1) or Subsection 3(h)(2)
is referred to as the "Notice of Exercise").
If the Employee gives a Notice of Exercise to receive the payments provided for
hereunder, the Subsidiary shall pay to or for the benefit of the Employee,
immediately upon the Subsidiary's receipt of the Notice of Exercise, a single
cash payment for damages suffered by the Employee by reason of the Change in
Control in an amount equal to three times the "Executive Payment." The term
"Executive Payment" as used herein shall mean the sum of all annual salary,
Bonuses and other benefits owing to Employee (as determined in accordance with
Section 280G(d)(4) of the Code) for the period from Employee's date of
termination hereunder through the remainder of the Initial Term of this
Agreement, as may be extended. In the event the period from the date of
Employee's termination hereunder through the remainder of the Initial Term of
this Agreement, as may be extended, is less than twelve (12) months, then the
Employee shall receive three times the "Executive Payment" computed as follows:
(i) the current annual salary and the value of all other benefits payable to the
Employee annualized for a twelve (12) month period, and (ii) an amount equal to
any Bonus that would have been paid for such period of less than twelve (12)
months based on an extrapolation of SEC's Pretax Adjusted Annual Income for the
full quarterly periods from the end of the most recent fiscal year to the date
of termination (all as determined in accordance with Section 280G(d)(4) of the
Code), provided, however, that if Employee's termination of employment hereunder
occurs in the first fiscal quarter of a fiscal year, then the Bonus shall be
based on SEC's Pretax Adjusted Annual Income for the immediately preceding
fiscal year.
The Executive Payment shall be in addition to and shall not be offset or reduced
by (i) any other amounts that have been earned or accrued or that have otherwise
become payable or will become payable to the Employee or his beneficiaries, but
have not been paid by SEC or the Subsidiary at the time the Employee gives the
Notice of Exercise including, without limitation, salary, bonuses, severance
pay, consulting fees, disability benefits, termination benefits, retirement
benefits, life and health insurance benefits or any other compensation or
benefit payment that is part of any previous, current or future contract, plan
or agreement, written or oral, and (ii) any indemnification payments that may
have accrued but not paid or that may thereafter become payable to the Employee
pursuant to the provisions of SEC's and the Subsidiary's Articles of
Incorporation, Bylaws or similar policies, plans or agreements relating to
indemnification of directors and officers of SEC and the Subsidiary under
certain circumstances. The Executive Payment shall not be reduced by any present
value calculations.
In the event the Employee dies during the term of this Agreement, the Employee's
legal representative shall be entitled to receive the Executive Payment,
provided that the Notice of Exercise has been or is given either by the Employee
or his legal representative, as the case may be.
2. Other Provisions of the Agreement. Capitalized terms shall have the same
meaning as defined in the Agreement, and except as otherwise provided herein,
all other provisions of the Agreement shall remain in full force and effect and
Employee's employment thereunder shall continue on the terms described therein
throughout the term of the Agreement, as amended hereby.
IN WITNESS WHEREOF, the parties have duly executed and delivered this Fourth
Amendment to Employment Agreement as of the day and year first indicated above.
SED INTERNATIONAL, INC.
By: /s/ Mark Diamond
Name: Mark Diamond
Title: President
/s/ Gerald Diamond (SEAL)
Gerald Diamond (Employee)
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FOURTH AMENDMENT TO CREDIT AGREEMENT
This FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), made and
entered into as of September 28, 2001, is by and among MATRIX FINANCIAL SERVICES
CORPORATION, an Arizona corporation (the "Borrower"), the lenders from time to
time party to the Credit Agreement referred to below (each a "Lender" and
collectively, the "Lenders"), and U.S. BANK NATIONAL ASSOCIATION ("U.S. Bank"),
as agent for the Lenders (in such capacity, together with any successor agents
appointed hereunder, the "Agent").
RECITALS
A. The Borrower, the Lenders and U.S. Bank National Association, in its
capacities as a Lender and as Agent, entered into a Credit Agreement dated as of
September 29, 2000, as amended by that First Amendment to Credit Agreement dated
as of March 5, 2001, that Second Amendment to Credit Agreement dated as of April
11, 2001 and that Third Amendment to Credit Agreement dated as of June 29, 2001
(as amended, the "Credit Agreement"); and
B. The Borrower desires to amend certain provisions of the Credit
Agreement, and the Lenders and the Agent have agreed to make such amendments,
subject to the terms and conditions set forth in this Amendment.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby covenant
and agree to be bound as follows:
Section 1. CAPITALIZED TERMS. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the Credit
Agreement, unless the context shall otherwise require.
Section 2. AMENDMENTS TO CREDIT AGREEMENT.
2.1 SECTION 1.01. The Credit Agreement is hereby amended by amending
the definition of "SWINGLINE FACILITY AMOUNT" and "TERMINATION DATE"
contained in Section 1.01 of the Credit Agreement to read in its entirety
as follows:
"SWINGLINE FACILITY AMOUNT": $48,000,000.
"TERMINATION DATE": the earliest of (a) November 30, 2001, (b)
the date on which the Commitments are terminated or reduced to zero
pursuant to Section 2.01(g), or (c) the date on which the Commitments
are terminated pursuant to Section 6.02.
2.2 SECTION 2.02. The Credit Agreement is hereby amended by adding the
following sentence to the end of Section 2.02(b)(i) (Payment of Interest):
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Payments of interest required pursuant to this Section 2.02 to a
Lender may be reduced by reference to excess balances the Borrower may
keep with a Lender, with such reductions made pursuant to, and under
the terms of, a separate agreement to be executed by such Lender and
the Borrower, and provided to the Agent.
2.3 SCHEDULE 1.01(A). Schedule 1.01(a) to the Credit Agreement is
hereby amended in its entirety to read as set forth in Schedule 1.01(a)
attached to this Amendment, which is made a part of the Credit Agreement as
Schedule 1.01(a) thereto.
Section 3. EFFECTIVENESS OF AMENDMENTS. The amendments contained in this
Amendment shall become effective provided the Agent shall have received at least
five (5) counterparts of this Amendment, duly executed by the Company and all of
the Lenders, and the Agent shall have received the following, each duly executed
or certified:
(a) This Amendment, duly executed by the Borrower.
(b) A copy of the resolutions of the Board of Directors of the
Borrower authorizing the execution, delivery and performance of this
Amendment certified as true and accurate by its Secretary or Assistant
Secretary, along with a certification by such Secretary or Assistant
Secretary (i) certifying that there has been no amendment to the
Certificate of Incorporation or Bylaws of the Borrower since true and
accurate copies of the same were delivered to the Lender with a certificate
of the Secretary of the Borrower dated September 29, 2000, and (ii)
identifying each officer of the Borrower authorized to execute this
Amendment and any other instrument or agreement executed by the Borrower in
connection with this Amendment (collectively, the "Amendment Documents"),
and certifying as to specimens of such officer's signature and such
officer's incumbency in such offices as such officer holds.
(c) Certified copies of all documents evidencing any necessary
corporate action, consent or governmental or regulatory approval (if any)
with respect to this Amendment.
(d) The Consent and Reaffirmation of Guaranty, duly executed by the
Guarantor.
(e) The Borrower shall have satisfied such other conditions as
specified by the Agent and the Lenders, including payment of all unpaid
legal fees and expenses incurred by the Agent through the date of this
Amendment in connection with the Credit Agreement and the Amendment
Documents.
Section 4. REPRESENTATIONS, WARRANTIES, AUTHORITY, NO ADVERSE CLAIM.
4.1 REASSERTION OF REPRESENTATIONS AND WARRANTIES, NO DEFAULT. The
Borrower hereby represents that on and as of the date hereof and after
giving effect to this Amendment (a) all of the representations and
warranties contained in the Credit Agreement are true, correct and complete
in all respects as of the date hereof as though made on and as of such
date, except for changes permitted by the terms of the Credit
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Agreement, and (b) there will exist no Unmatured Event of Default or Event
of Default under the Credit Agreement as amended by this Amendment on such
date which has not been waived by the Agent and the Lenders.
4.2 AUTHORITY, NO CONFLICT, NO CONSENT REQUIRED. The Borrower
represents and warrants that the Borrower has the power and legal right and
authority to enter into the Amendment Documents and has duly authorized as
appropriate the execution and delivery of the Amendment Documents and other
agreements and documents executed and delivered by the Borrower in
connection herewith or therewith by proper corporate, and none of the
Amendment Documents nor the agreements contained herein or therein
contravenes or constitutes a default under any agreement, instrument or
indenture to which the Borrower is a party or a signatory or a provision of
the Borrower's Certificate of Incorporation, Bylaws or any other agreement
or requirement of law in which the consequences of such default or
violation could have a material adverse effect on the business, operations,
properties, assets or condition (financial or otherwise) of the Borrower
and its Subsidiaries taken as a whole, or result in the imposition of any
Lien on any of its property under any agreement binding on or applicable to
the Borrower or any of its property except, if any, in favor of the Agent
on behalf of the Lenders. The Borrower represents and warrants that no
consent, approval or authorization of or registration or declaration with
any Person, including but not limited to any governmental authority, is
required in connection with the execution and delivery by the Borrower of
the Amendment Documents or other agreements and documents executed and
delivered by the Borrower in connection therewith or the performance of
obligations of the Borrower therein described, except for those which the
Borrower has obtained or provided and as to which the Borrower has
delivered certified copies of documents evidencing each such action to the
Agent.
4.3 NO ADVERSE CLAIM. The Borrower warrants, acknowledges and agrees
that no events have taken place and no circumstances exist at the date
hereof which would give the Borrower a basis to assert a defense, offset or
counterclaim to any claim of the Agent or the Lenders with respect to the
Obligations or the Borrower's obligations under the Credit Agreement as
amended by this Amendment.
Section 5. AFFIRMATION OF CREDIT AGREEMENT AND PLEDGE AGREEMENT, FURTHER
REFERENCES. The Agent, the Lenders, and the Borrower each acknowledge and affirm
that the Credit Agreement, as hereby amended, is hereby ratified and confirmed
in all respects and all terms, conditions and provisions of the Credit
Agreement, except as amended by this Amendment, shall remain unmodified and in
full force and effect. The Borrower confirms to the Agent and the Lenders that
the Borrower's obligations under the Credit Agreement, as amended by this
Amendment, are and continue to be secured by the security interest granted by
the Borrower in favor of the Agent and the Lenders under the Pledge Agreement
and all of the terms, conditions, provisions, agreements, requirements,
promises, obligations, duties, covenants and representations of the Borrower
under such document and any and all other documents and agreements entered into
with respect to the obligations under the Agreement are incorporated herein by
reference and are hereby ratified and affirmed in all respect by the Borrower.
All references in any document or instrument to the Credit Agreement are hereby
amended and shall refer to the Credit Agreement as amended by this Amendment.
All of the terms, conditions,
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provisions, agreements, requirements, promises, obligations, duties, covenants
and representations of the Borrower under such documents and any and all other
documents and agreements entered into with respect to the obligations under the
Credit Agreement are incorporated herein by reference and are hereby ratified
and affirmed in all respects by the Borrower.
Section 6. MERGER AND INTEGRATION, SUPERSEDING EFFECT. This Amendment, from
and after the date hereof, embodies the entire agreement and understanding
between the parties hereto and supersedes and has merged into this Amendment all
prior oral and written agreements on the same subjects by and between the
parties hereto with the effect that this Amendment, shall control with respect
to the specific subjects hereof and thereof.
Section 7. SEVERABILITY. Whenever possible, each provision of this
Amendment and the other Amendment Documents and any other statement, instrument
or transaction contemplated hereby or thereby or relating hereto or thereto
shall be interpreted in such manner as to be effective, valid and enforceable
under the applicable law of any jurisdiction, but, if any provision of this
Amendment, the other Amendment Documents or any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto shall
be held to be prohibited, invalid or unenforceable under the applicable law,
such provision shall be ineffective in such jurisdiction only to the extent of
such prohibition, invalidity or unenforceability, without invalidating or
rendering unenforceable the remainder of such provision or the remaining
provisions of this Amendment, the other Amendment Documents or any other
statement, instrument or transaction contemplated hereby or thereby or relating
hereto or thereto in such jurisdiction, or affecting the effectiveness, validity
or enforceability of such provision in any other jurisdiction.
Section 8. SUCCESSORS. The Amendment Documents shall be binding upon the
Borrower, the Lenders, and the Agent and their respective successors and
assigns, and shall inure to the benefit of the Borrower, the Lenders, and the
Agent and the successors and assigns of the Lenders and the Agent.
Section 9. LEGAL EXPENSES. As provided in Section 8.03 of the Credit
Agreement, the Borrower agrees to reimburse the Agent, upon execution of this
Amendment, for all reasonable out-of-pocket expenses (including attorney' fees
and legal expenses of Dorsey & Whitney LLP, counsel for the Agent) incurred in
connection with the Credit Agreement, including in connection with the
negotiation, preparation and execution of the Amendment Documents and all other
documents negotiated, prepared and executed in connection with the Amendment
Documents, and in enforcing the obligations of the Borrower under the Amendment
Documents, and to pay and save the Agent and the Lenders harmless from all
liability for, any stamp or other taxes which may be payable with respect to the
execution or delivery of the Amendment Documents, which obligations of the
Borrower shall survive any termination of the Credit Agreement.
Section 10. HEADINGS. The headings of various sections of this Amendment
have been inserted for reference only and shall not be deemed to be a part of
this Amendment.
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Section 11. COUNTERPARTS. The Amendment Documents may be executed in
several counterparts as deemed necessary or convenient, each of which, when so
executed, shall be deemed an original, provided that all such counterparts shall
be regarded as one and the same document, and either party to the Amendment
Documents may execute any such agreement by executing a counterpart of such
agreement.
Section 12. GOVERNING LAW. THE AMENDMENT DOCUMENTS SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF
LAW PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS, THEIR HOLDING COMPANIES AND THEIR AFFILIATES. [THE REMAINDER OF THIS PAGE
IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date and year first above written.
MATRIX FINANCIAL SERVICES CORPORATION
By /S/
----------------------------------------
Its
---------------------------------------
ADDRESS FOR NOTICES:
-------------------
2133 West Peoria
Phoenix, Arizona 85029-4928
Attention: James K. Munford, President
Telecopier Number: (602) 749-2200
U.S. BANK NATIONAL ASSOCIATION
By /S/
----------------------------------------
Its
---------------------------------------
ADDRESS FOR NOTICES:
-------------------
601 South Second Street
Minneapolis, Minnesota 55402
Attention: Randall Baker
Telecopier Number: (612) 973-0826
RESIDENTIAL FUNDING CORPORATION
By /S/
----------------------------------------
Its
---------------------------------------
ADDRESS FOR NOTICES:
-------------------
1646 North California Boulevard
Suite 400
Walnut Creek, California 94596
ATTN: Mitchell Nomura
Telecopier Number: (925) 935-6424
[Signature Page to Third Amendment to Credit Agreement]
S-1
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T A B L E O F C O N T E N T S
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms.
SECTION 1.02. Computation of Time Periods. SECTION 1.03. Accounting Terms.
ARTICLE 2 AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The Advances. SECTION
2.02. Making the Advances. SECTION 2.03. Certain Fees. SECTION 2.04. Reduction
and Extensions of the Commitments. SECTION 2.05. Repayment; Term-Out Option.
SECTION 2.06. Interest. SECTION 2.07. Additional Interest on Eurodollar Rate
Advances. SECTION 2.08. Interest Rate Determinations; Changes in Rating Systems.
SECTION 2.09. Voluntary Conversion and Continuation of Advances. SECTION 2.10.
Prepayments of Advances. SECTION 2.11. Increased Costs. SECTION 2.12.
Illegality. SECTION 2.13. Payments and Computations. SECTION 2.14. Taxes.
SECTION 2.15. Set-Off; Sharing of Payments, Etc. SECTION 2.16. Right to Replace
a Lender. SECTION 2.17. Evidence of Indebtedness. ARTICLE 3 CONDITIONS OF
LENDING SECTION 3.01. Conditions Precedent to Initial Borrowing. SECTION 3.02.
Conditions Precedent to Each Borrowing. ARTICLE 4 REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. ARTICLE 5
COVENANTS OF THE BORROWER SECTION 5.01. Covenants. ARTICLE 6 EVENTS OF DEFAULT
SECTION 6.01. Events of Default. ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION
7.01. Authorization and Action. SECTION 7.02. Administrative Agent's Reliance,
Etc. SECTION 7.03. Citibank and Affiliates. SECTION 7.04. Lender Credit
Decision. SECTION 7.05. Indemnification. SECTION 7.06. Successor Administrative
Agent. SECTION 7.07. Advisor, Sole Arranger and Book Manager, Syndication Agent
and Documentation Agent. ARTICLE 8 MISCELLANEOUS SECTION 8.01. Amendments, Etc.
SECTION 8.03. No Waiver; Remedies. SECTION 8.04. Costs, Expenses and
Indemnification. SECTION 8.05. Binding Effect. SECTION 8.06. Assignments and
Participations. SECTION 8.07. Governing Law; Submission to Jurisdiction. SECTION
8.08. Severability. SECTION 8.09. Execution in Counterparts. SECTION 8.10.
Survival. SECTION 8.11. Waiver of Jury Trial. SECTION 8.12. Confidentiality.
SECTION 8.13. Nonliability of Lenders. SECTION 8.14. Existing Credit Agreement.
SCHEDULES SCHEDULE I - Banks and Commitments SCHEDULE II - Existing Liens
EXHIBITS EXHIBIT A - Form of Notice of Borrowing EXHIBIT B - Form of Assignment
and Acceptance EXHIBIT C - Form of Opinion of Counsel of the Borrower EXHIBIT D
- Form of Opinion of Special New York Counsel to the Administrative Agent
EXHIBIT E - Form of Compliance Certificate of Borrower Three Year Credit
Agreement [c63821ex10-12.htm] No. 364-Day Credit Agreement [c63821ex10-13.htm]
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CREDIT AGREEMENT dated as of April 30, 2001 among CNA FINANCIAL
CORPORATION, a corporation organized under the laws of Delaware (the
“Borrower”), the banks (each a “Bank” and, collectively, the “Banks”) listed on
the signature pages hereof, and CITIBANK, N.A., a national banking association,
as administrative agent (in such capacity, the “Administrative Agent”).
The Borrower has requested that the Lenders (as hereinafter
defined) make loans to it in an aggregate principal amount not exceeding
$250,000,000 at any one time outstanding for the general corporate purposes of
the Borrower (including to support the Borrower's commercial paper program and
to finance Acquisitions), and the Lenders are prepared to make such loans upon
the terms and conditions hereof. Accordingly, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in
this Agreement, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
“Acquisition” means any transaction, or any series of related
transactions, consummated after the date of this Agreement, by which the
Borrower and/or any of its Subsidiaries (i) acquires any Person or all or
substantially all of the assets of any Person, whether through the purchase of
assets, merger or otherwise, (ii) directly or indirectly acquires (in one
transaction or as the most recent transaction in a series of transactions)
control of at least a majority of Voting Stock of another Person or (iii)
directly or indirectly acquires control of a 50% ownership interest in any
partnership, joint venture or other entity, or of any general partnership (or
equivalent) interest in any such entity.
“Administrative Questionnaire” means an administrative
questionnaire in a form supplied by the Administrative Agent.
“Advance” means an advance by a Lender to the Borrower as part of
a Borrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance, and
shall include each Term Loan.
“Affiliate” means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person.
“Aggregate Specified Indebtedness” means the aggregate Specified
Indebtedness of the Borrower and its Subsidiaries determined on a Consolidated
basis in accordance, subject to the provisos of the definition of Specified
Indebtedness, with GAAP; provided that Qualifying SPV Indebtedness of all
Qualifying SPVs (and Contingent Obligations of the Borrower and its Subsidiaries
which are not Qualifying SPVs in respect of such Qualifying SPV Indebtedness)
shall only be included in the calculation of Aggregate Specified Indebtedness at
any time to the extent that it constitutes Qualifying SPV Net Indebtedness at
such time.
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“Annual Statement” means the annual statutory financial statement
of any Insurance Subsidiary required to be filed with the insurance commissioner
(or similar authority) of its jurisdiction of incorporation, which statement
shall be in the form required by such Insurance Subsidiary's jurisdiction of
incorporation or, if no specific form is so required, in the form of financial
statements recommended by the NAIC to be used for filing annual statutory
financial statements and shall contain the type of information recommended by
the NAIC to be disclosed therein, together with all exhibits or schedules filed
therewith.
“Applicable Facility Fee Rate” means, for any Rating Level Period,
the rate set forth below opposite the reference to such Rating Level Period:
Rating Level Period
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Applicable Facility Fee Rate
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Rating Level 1 Period 0.075% Rating Level 2 Period 0.100% Rating Level 3 Period
0.125% Rating Level 4 Period 0.150% Rating Level 5 Period 0.200%
Each change in the Applicable Facility Fee Rate resulting from a Rating Level
Change shall be effective on the effective date of such Rating Level Change.
“Applicable Lending Office” means, with respect to any Lender,
such Lender's Domestic Lending Office in the case of a Base Rate Advance and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Advance.
“Applicable Margin” means:
(a) for any Advance that is a Base Rate Advance, 0.000%
per annum; and
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(b) for any Advance that is a Eurodollar Rate Advance for
any Rating Level Period, the rate set forth below opposite the reference to such
Rating Level Period:
Rating Level Period
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Applicable Margin (p.a.)
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Rating Level 1 Period 0.350% Rating Level 2 Period 0.400% Rating Level 3 Period
0.500% Rating Level 4 Period 0.600% Rating Level 5 Period 0.800%
Each change in the Applicable Margin resulting from a Rating Level Change shall
be effective on the effective date of such Rating Level Change.
“Applicable Utilization Fee Rate” means, for any Rating Level
Period, the rate set forth below opposite the reference to such Rating Level
Period:
Rating Level Period
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Applicable Utilization Fee Rate
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Rating Level 1 Period 0.125% Rating Level 2 Period 0.125% Rating Level 3 Period
0.125% Rating Level 4 Period 0.125% Rating Level 5 Period 0.125%
Each change in the Applicable Utilization Fee Rate resulting from a Rating Level
Change shall be effective on the effective date of such Rating Level Change.
“Assignment and Acceptance” means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Administrative Agent, in substantially the form of Exhibit B hereto.
“Base Rate” means, for any period, a fluctuating interest rate per
annum in effect from time to time, which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest announced publicly by Citibank in
New York, New York from time to time as Citibank's base rate; and
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(b) 1/2 of one percent per annum above the Federal Funds
Rate for such period.
“Base Rate Advance” means an Advance which bears interest at rates
based upon the Base Rate.
“Bloomberg Page BBAL” means the display designated as page “BBAL”
on the Bloomberg Service or, if unavailable, such other page as may replace page
“BBAL” on that service or such other service as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
British Bankers' Association Interest Settlement Rates for U.S. dollar deposits.
“Borrowing” means a borrowing consisting of simultaneous Advances
of the same Type made by each of the Lenders pursuant to Section 2.01.
“Business Day” means a day of the year on which banks are not
required or authorized to close in New York City and, if the applicable Business
Day relates to any Eurodollar Rate Advance, on which dealings are carried on in
the London interbank market.
“CAC” means Continental Assurance Company, an Illinois insurance
company.
“Capitalized Lease” of a Person means any lease of Property by
such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with GAAP.
“Capitalized Lease Obligations” of a Person means the amount of
the obligations of such Person under Capitalized Leases which would be shown as
a liability on a balance sheet of such Person prepared in accordance with GAAP.
“CCC” means Continental Casualty Company, an Illinois insurance
company.
“Change in Control” means Loews shall cease to own beneficially
and of record, free and clear of all Liens, other encumbrances, or voting
agreements, restrictions or trusts of any kind at least 51% of the outstanding
shares of capital stock of the Borrower on a fully diluted basis and shares
representing the right to elect a majority of the directors of the Borrower;
provided, however, that a Change in Control shall not be deemed to have occurred
at any time (a) Loews owns more of the capital stock of the Borrower than any
other Person (including Persons acting in concert with such Person), (b) Loews
owns beneficially and of record, free and clear of all Liens, other encumbrances
or voting agreements, restrictions or trusts of any kind at least 35% of the
outstanding shares of capital stock of the Borrower on a fully diluted basis and
(c) a majority of the members of the Borrower's Board of Directors are officers
or designees of Loews or the Borrower or any Significant Subsidiary.
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“Chase” means The Chase Manhattan Bank.
“CIC” means Continental Insurance Company, a New Hampshire
insurance company.
“Citibank” means Citibank, N.A., a national banking association.
“Code” means the Internal Revenue Code of 1986, as amended from
time to time.
“Commitment” has the meaning specified in Section 2.01(a).
“Commitment Termination Date” means April 29, 2002 or, in the case
of any Lender whose Commitment is extended pursuant to Section 2.04(b), the date
to which such Commitment is extended; provided in each case that if any such
date is not a Business Day, the relevant Commitment Termination Date of such
Lender shall be the immediately preceding Business Day. When the term
“Commitment Termination Date” is used herein without reference to any particular
Lender, such term shall, in such instance, be deemed to be a reference to the
latest Commitment Termination Date of any of the Lenders then in effect
hereunder.
“Consolidated” refers to the consolidation of accounts of the
Borrower and its Subsidiaries in accordance with GAAP.
“Consolidated Net Worth” means, at any date of determination, the
amount of consolidated common and preferred shareholders' equity of the Borrower
and its Subsidiaries, determined as at such date in accordance with GAAP;
provided, however, that unrealized appreciation and depreciation of securities
which are classified as available for sale and are subject to FASB 115 shall be
excluded when computing Consolidated Net Worth; provided further that for
purposes of calculating Consolidated Net Worth, such calculation shall (a)
include Qualifying SPV Net Asset Value of all Qualifying SPVs in lieu of
Qualifying SPV Asset Value for such Qualifying SPVs and (b) subtract Qualifying
SPV Net Indebtedness of all Qualifying SPVs in lieu of Qualifying SPV
Indebtedness for such Qualifying SPVs.
“Contingent Obligation” of a Person means any agreement,
undertaking or arrangement by which such Person assumes, guarantees, endorses,
contingently agrees to purchase or provide funds for the payment of, or
otherwise becomes or is contingently liable upon, the financial obligation or
liability of any other Person, or agrees to maintain the net worth or working
capital or other financial condition of any other Person, or otherwise assures
any creditor of such other Person against loss, including, without limitation,
any comfort letter, operating agreement, take-or-pay contract or application for
a Letter of Credit, but excluding (a) the endorsement of instruments for deposit
or collection in the ordinary course of business and (b) obligations incurred by
any Insurance Subsidiary in the ordinary course of its financial guaranty or
other business.
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“Continuation”, “Continue” and “Continued” each refers to a
continuation of Eurodollar Rate Advances from one Interest Period to the next
Interest Period pursuant to Section 2.09(b).
“Controlled Group” means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
“Convert”, “Conversion” and “Converted” each refers to a
conversion of Advances of one Type into Advances of the other Type pursuant to
Section 2.08 or Section 2.09(a).
“Default” means an event that, with notice or lapse of time or
both, would become an Event of Default.
“Domestic Lending Office” means, with respect to any Lender, the
office of such Lender specified as its “Domestic Lending Office” in the
Administrative Questionnaire of such Bank or in the Assignment and Acceptance
pursuant to which it became a Lender, or such other office of such Lender as
such Lender may from time to time specify to the Borrower and the Administrative
Agent.
“Effective Date” means the earliest date as of which the
conditions precedent to effectiveness set forth in Section 3.01 shall have been
satisfied or waived.
“Eligible Assignee” means:
(a) a Lender and any Affiliate of such Lender (excluding
any such Affiliate primarily engaged in the insurance or mutual fund business);
(b) a commercial bank organized under the laws of the
United States, or any State thereof, and having total assets in excess of
$1,000,000,000;
(c) a savings bank organized under the laws of the United
States, or any State thereof, and having total assets in excess of $500,000,000;
(d) a commercial bank organized under the laws of any other
country which is a member of the OECD or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000; and
(e) a finance company or other financial institution or
fund (whether a corporation, partnership or other Person, but excluding any
corporation, partnership or other Person primarily engaged in the insurance or
mutual fund business) which is engaged in making, purchasing or otherwise
investing in commercial loans in the ordinary course of its business, and having
total assets in excess of $500,000,000.
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“Environmental Law” means any federal, state or local governmental
law, rule, regulation, order, writ, judgment, injunction or decree relating to
pollution or protection of the environment or the treatment, storage, disposal,
release, threatened release or handling of Hazardous Materials, including,
without limitation, Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Resource Conservation and Recovery Act, the Hazardous
Materials Transportation Act, the Clean Water Act, the Toxic Substances Control
Act, the Clean Air Act, the Safe Drinking Water Act, the Atomic Energy Act and
the Federal Insecticide, Fungicide and Rodenticide Act, in each case, as amended
from time to time.
“ERISA” means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings issued
thereunder.
“Eurocurrency Liabilities” has the meaning assigned to that term
in Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
“Eurodollar Lending Office” means, with respect to any Lender, the
office of such Lender specified as its “Eurodollar Lending Office” in the
Administrative Questionnaire of such Lender or in the Assignment and Acceptance
pursuant to which it became a Lender (or, if no such office is specified, its
Domestic Lending Office), or such other office of such Lender as such Lender may
from time to time specify to the Borrower and the Administrative Agent.
“Eurodollar Rate” means, for any Interest Period for each
Eurodollar Rate Advance, the rate per annum (rounded upward, if necessary, to
the nearest whole multiple of 1/16 of 1% per annum) appearing on Bloomberg Page
BBAL as of 11:00 A.M. (London time) on the date (as to any Interest Period, the
“Determination Date”) that is two Business Days before the first day of such
Interest Period, as LIBOR for a period equal to such Interest Period. In the
event that Bloomberg Page BBAL shall cease to report such LIBOR or, in the
reasonable judgement of the Majority Lenders, shall cease to accurately reflect
such LIBOR, then the “Eurodollar Rate” with respect to such Interest Period for
such Eurodollar Rate Advance shall be the rate per annum equal to the average of
the rate per annum at which deposits in U.S. dollars are offered by the
principal office of each of the Reference Banks in London, England to leading
banks in the London interbank market at 11:00 A.M. (London time) on the
Determination Date in an amount substantially equal to such Reference Bank's
Eurodollar Rate Advance comprising part of the related Borrowing and for a
period equal to such Interest Period. The Eurodollar Rate for any Interest
Period for each Eurodollar Rate Advance shall be determined by the
Administrative Agent on the basis of the applicable rate appearing on Bloomberg
Page BBAL as aforesaid (or the applicable rates furnished to and received by the
Administrative Agent from the Reference Banks) on the Determination Date for
such Interest Period, subject, however, to the provisions of Section 2.08.
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“Eurodollar Rate Advance” means an Advance which bears interest at
rates based upon the Eurodollar Rate.
“Eurodollar Rate Reserve Percentage” of any Lender for any
Interest Period for any Eurodollar Rate Advance means the reserve percentage
applicable during such Interest Period (or if more than one such percentage
shall be so applicable, the daily average of such percentages for those days in
such Interest Period during which any such percentage shall be so applicable)
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for such Lender with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities having a term equal
to such Interest Period.
“Events of Default” has the meaning specified in Section 6.01.
“Exchange Act” means the Securities Exchange Act of 1934, as
amended from time to time.
“Excluded Representations” means the representations and
warranties set forth in clause (v) of Section 4.01(e) and in Section 4.01(f).
“Existing Credit Agreement” means the Amended and Restated Credit
Agreement dated as of July 26, 1996 among the Borrower, the lenders party
thereto and The First National Bank of Chicago, as administrative agent, as
amended and/or restated through the date hereof.
“Existing Commitment Termination Date” has the meaning specified
in Section 2.04(b)(i).
“Exposure” means, with respect to any Lender at any time, the sum
of the outstanding principal amount of such Lender's Advances.
“Facility Fee” has the meaning specified in Section 2.03(a).
“Federal Funds Rate” means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
“Fleet” means Fleet National Bank.
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“GAAP” means generally accepted accounting principles in the
United States of America as in effect from time to time.
“Governmental Authority” means the federal government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government including, without limitation, any board of insurance, insurance
department or insurance commissioner.
“Hazardous Materials” means (a) petroleum or petroleum products,
natural or synthetic gas, asbestos in any form that is or could become friable,
and radon gas, (b) any substances defined as or included in the definition of
“hazardous substances”, “hazardous wastes”, “hazardous materials”, “extremely
hazardous wastes”, “restricted hazardous wastes”, “toxic substances”, “toxic
pollutants”, “contaminants” or “pollutants”, or words of similar meaning and
regulatory effect, under any Environmental Law and (c) any other substance
exposure to which is regulated under any Environmental Law.
“Hostile Acquisition” means an Acquisition that has not been
approved by the board of directors of the target company prior to the
commencement of a tender offer, proxy contest or the like in respect thereof.
“Indebtedness” of a Person means, without duplication, such
Person's (a) obligations for borrowed money, (b) obligations representing the
deferred purchase price of Property or services (excluding accounts payable
arising in the ordinary course of such Person's business payable on terms
customary in the trade), (c) obligations, whether or not assumed, secured by
Liens or payable out of the proceeds or production from Property now or
hereafter owned or acquired by such Person, (d) obligations which are evidenced
by notes, acceptances, or similar instruments, (e) Capitalized Lease
Obligations, (f) net Rate Hedging Obligations, (g) Contingent Obligations, (h)
obligations for which such Person is obligated pursuant to or in respect of a
Letter of Credit and (i) repurchase obligations or liabilities of such Person
with respect to accounts, notes receivable or securities sold by such Person
(but excluding the obligations of any Insurance Subsidiary in respect of the
repurchase of securities pursuant to Repurchase Agreements or the lending of
securities pursuant to securities lending arrangements, in each case, entered
into in the ordinary course of business).
“Insurance Regulatory Authority” means, for the Borrower or any
Insurance Subsidiary, the insurance department or similar administrative
authority or agency located in the state in which the Borrower or such Insurance
Subsidiary is domiciled.
“Insurance Subsidiary” means a Subsidiary of the Borrower which is
engaged in any insurance business.
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“Interest Period” means, with respect to any Eurodollar Rate
Advance, the period beginning on the date such Eurodollar Rate Advance is made
or Continued, or Converted from a Base Rate Advance, and ending on the last day
of the period selected by the Borrower pursuant to the provisions below. The
duration of each Interest Period shall be one, two, three or six months, as the
Borrower may, upon notice received by the Administrative Agent not later than
12:00 P.M. (New York City time) on the third Business Day prior to the first day
of such Interest Period, select; provided that:
(i) the Borrower may not select any Interest Period that
ends after the Commitment Termination Date;
(ii) if an Interest Period in respect of a Term Loan would
otherwise commence before and end after the Maturity Date, such Interest Period
shall end on the Maturity Date;
(iii) each Interest Period that begins on the last Business
Day of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on the
last Business Day of the appropriate subsequent calendar month; and
(iv) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day,
provided that, if such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day.
“Invested Assets” means, as of the end of any calendar year, the
sum of total investments, cash and cash equivalents, accrued investment income
and receivables for securities sold, all calculated consistently with the
calculation of such items in the audited consolidated balance sheet of the
Borrower and its Subsidiaries for such calendar year.
“Lenders” means the Banks listed on the signature pages hereof and
each Person that shall become a party hereto pursuant to Sections 8.06(a), (b)
and (c).
“Letter of Credit” of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
“LIBOR” means the rate at which deposits in U.S. dollars are
offered to leading banks in the London interbank market.
“License” means any license, certificate of authority, permit or
other authorization which is required to be obtained from the Governmental
Authority in connection with the operation, ownership or transaction of
insurance business.
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“Lien” means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement having
substantially the same effect as a lien, including, without limitation, the lien
or retained security title of a conditional vendor.
“Loews” means Loews Corporation, a Delaware corporation.
“Majority Lenders” means, at any time, Lenders having Exposures
and unused Commitments representing more than 50% of the sum of the total
Exposures and unused Commitments at such time.
“Margin Stock” means margin stock within the meaning of
Regulation U.
“Material Adverse Effect” means a material adverse effect on (i)
the business, condition (financial or otherwise), results of operations or
prospects of the Borrower and its Subsidiaries, taken as a whole, (ii) the
legality, validity or enforceability of this Agreement or (iii) the ability of
the Borrower to pay and perform its obligations hereunder.
“Maturity Date” has the meaning specified in Section 2.05(b).
“Moody's” means Moody's Investors Service, Inc. and its
successors.
“Moody's Rating” means, at any time, the rating of the Borrower's
unsecured, unguaranteed senior long-term debt obligations then outstanding most
recently announced by Moody's.
“Multiemployer Plan” means a Plan maintained pursuant to a
collective bargaining agreement or any other arrangement to which the Borrower
or any member of the Controlled Group is a party to which more than one employer
is obligated to make contributions.
“Municipal Bond” means direct obligations of, and obligations for
which the timely payment of principal of and interest is fully and expressly
guaranteed by, any state, local government, municipality or other political
subdivision of any state of the United States of America.
“NAIC” means the National Association of Insurance Commissioners
or any successor thereto, or in lieu thereof, any other association, agency or
other organization performing advisory, coordination or other like functions
among insurance departments, insurance commissions and similar Governmental
Authorities of the various states of the United States of America toward the
promotion of uniformity in the practices of such Governmental Authorities.
“Notice of Borrowing” has the meaning specified in Section
2.02(a).
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“OECD” means the Organization for Economic Cooperation and
Development.
“PBGC” means the Pension Benefit Guaranty Corporation or any
successor.
“Permitted Securitization Transaction” shall mean any
Securitization Transaction provided that the aggregate “capital”, facility limit
or other principal equivalent amount of such Securitization Transactions which
the Borrower and its Subsidiaries may enter into (measured in the case of
revolving Securitization Transactions by the maximum capital, facility limit or
other principal equivalent amount which may be outstanding at any time) shall
not exceed at any time 10 percent of the Invested Assets of the Borrower and its
Subsidiaries on a consolidated basis in accordance with GAAP as of the end of
the preceding calendar year.
“Person” means an individual, partnership, corporation (including
a business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
“Plan” means an employee pension benefit plan, as defined in
Section 3(2) of ERISA, maintained, sponsored or contributed to by the Borrower
or any of its Subsidiaries or, with respect to such a plan that is subject to
Title IV of ERISA, by any member of the Controlled Group.
“Property” of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
“Qualifying SPV” means any Person which is formed by the Borrower
as a special purpose entity for the primary purpose of holding Qualifying SPV
Assets in the ordinary course of investment activities and issuing Indebtedness
secured by such Qualifying SPV Assets.
“Qualifying SPV Asset Value” means the fair market value of all
Qualifying SPV Assets.
“Qualifying SPV Assets” means Municipal Bonds and other financial
assets which are owned by a Qualifying SPV.
“Qualifying SPV Indebtedness” means Indebtedness for borrowed
money of all Qualifying SPVs.
“Qualifying SPV Net Asset Value” means, at any time of
calculation, the excess, if any, at such time of (a) Qualifying SPV Asset Value
over (b) Qualifying SPV Indebtedness.
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“Qualifying SPV Net Indebtedness” means, at any time of
calculation, the excess, if any, at such time of (a) Qualifying SPV Indebtedness
over (b) Qualifying SPV Asset Value.
“Quarterly Statement” means the quarterly statutory financial
statement of any Insurance Subsidiary required to be filed with the insurance
commissioner (or similar authority) of its jurisdiction of incorporation, which
statement shall be in the form required by such Insurance Subsidiary's
jurisdiction of incorporation or, if no specific form is so required, in the
form of financial statements recommended by the NAIC to be used for filing
quarterly statutory financial statements and shall contain the type of
information recommended by the NAIC to be disclosed therein, together with all
exhibits or schedules filed therewith.
“Rate Hedging Obligations” of a Person means any and all
obligations of such Person, whether absolute or contingent and howsoever and
whensoever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor), under (a) any
and all agreements, devices or arrangements designed to protect at least one of
the parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (b) any and all
cancellations, buybacks, reversals, terminations or assignments of any of the
foregoing.
“Rating Level Change” means a change in the Moody's Rating or the
Standard & Poor's Rating (other than as a result of a change in the rating
system of such rating agency) that results in the change from one Rating Level
Period to another, which Rating Level Change shall be effective on the date on
which the relevant change in such rating is first announced by Moody's or
Standard & Poor's, as the case may be.
“Rating Level Period” means a Rating Level 1 Period, a Rating
Level 2 Period, a Rating Level 3 Period, a Rating Level 4 Period or a Rating
Level 5 Period; provided that:
(i) “Rating Level 1 Period” means a period during which the
Moody's Rating is at or above A2 or the Standard & Poor's Rating is at or above
A;
(ii) “Rating Level 2 Period” means a period that is not a Rating
Level 1 Period during which the Moody's Rating is at or above A3 or the
Standards & Poor's Rating is at or above A-;
(iii) “Rating Level 3 Period” means a period that is not a Rating
Level 1 Period or a Rating Level 2 Period during which Moody's Rating is at or
above Baa1 or the Standard & Poor's Rating is at or above BBB+;
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(iv) “Rating Level 4 Period” means a period that is not a Rating
Level 1 Period, a Rating Level 2 Period or a Rating Level 3 Period during which
the Moody's Rating is at or above Baa2 or the Standard & Poor's Rating is at or
above BBB; and
(v) “Rating Level 5 Period” means a period that is not a Rating
Level 1 Period, a Rating Level 2 Period, a Rating level 3 Period or a Rating
Level 4 Period, during which the Moody's Rating is at or above Baa3 and the
Standard & Poor's Rating is at or above BBB-;
and provided further that if the Moody's Rating and the Standard & Poor's Rating
differ by more than one rating level, then the Rating Level Period shall be one
Rating Level Period higher than the Rating Level Period resulting from the
application of the lower of such ratings (for which purpose Rating Level Period
1 is the highest Rating Level Period and Rating Level 5 is the lowest Rating
Level Period).
“Receivables” means accounts receivable, premiums, reinsurance
payments or other present or future rights to payment.
“Receivables Related Assets” shall mean in connection with any
Securitization Transaction the collective reference to (a) any rights arising
under the documentation governing or relating to such Receivables covered by
such Securitization Transaction (including rights in respect of Liens securing
such Receivables and other credit support in respect of such Receivables), (b)
any proceeds of such Receivables and any lockboxes or accounts in which such
proceeds are deposited, (c) spread accounts and other similar accounts (and any
amounts on deposit therein) established in connection with such securitization
or asset-backed financing and (d) any warranty, indemnity, dilution and other
intercompany claim arising out of the documentation evidencing such
securitization or asset-backed financing.
“Reference Banks” means the principal London offices of Citibank,
Chase and Fleet.
“Register” has the meaning specified in Section 8.06(d).
“Regulations T, U and X” means Regulations T, U and X issued by
the Board of Governors of the Federal Reserve System, as from time to time
amended.
“Reportable Event” means a reportable event as defined in Section
4043 of ERISA and the regulations issued under such section, with respect to a
Plan, excluding, however, such events as to which the PBGC has by regulation
waived the requirement of Section 4043(a) of ERISA that it be notified within 30
days of the occurrence of such event, provided, however, that a failure to meet
the minimum funding standard of Section 412 of the Code and of Section 302 of
ERISA shall be a Reportable Event regardless of the issuance of any such waiver
of the notice requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code.
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“Repurchase Agreements” means reverse repurchase arrangements with
respect to securities and financial instruments.
“Responsible Officer” of the Borrower means the Chief Executive
Officer, the Treasurer, the Secretary, any Executive Vice President, any Senior
Vice President, any Group Vice President, any Vice President or any Director of
the Borrower.
“SAP” means the accounting procedures and practices prescribed or
permitted by the applicable Insurance Regulatory Authority.
“Securitization Transaction” means any transaction in which the
Borrower or any of its Subsidiaries sells or otherwise transfers an interest in
Receivables and Receivables Related Assets to (i) a special purpose entity that
borrows against such Receivables and Receivables Related Assets or (ii) sells
such Receivables and Receivables Related Assets to one or more third party
purchasers.
“Significant Insurance Subsidiary” means any Significant
Subsidiary which is an Insurance Subsidiary.
“Significant Subsidiary” of a Person means a “significant
subsidiary” as defined in Rule 1-02(w) of Regulation S-X of the Securities and
Exchange Commission (17 CFR Part 210). Unless otherwise expressly provided, all
references herein to a “Significant Subsidiary” shall mean a Significant
Subsidiary of the Borrower.
“Single Employer Plan” means a Plan subject to Title IV of ERISA
maintained by the Borrower or any member of the Controlled Group for employees
of the Borrower or any member of the Controlled Group, other than a
Multiemployer Plan.
“Specified Indebtedness” means (a) Indebtedness for money borrowed
and (b) Contingent Obligations in respect of Indebtedness for money borrowed,
excluding such Contingent Obligations incurred by any Insurance Subsidiary in
the ordinary course of its financial guaranty or other business; provided that
there shall be included in any computation of Specified Indebtedness described
in (b) the entire principal amount of the Contingent Obligation; provided
further that Specified Indebtedness shall not include (i) Indebtedness for money
borrowed or (ii) Contingent Obligations, in each case, incurred in connection
with any Permitted Securitization Transaction.
“Standard & Poor's” means Standard & Poor's Ratings Service,
presently a division of The McGraw-Hill Companies, Inc., and its successors.
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“Standard & Poor's Rating” means, at any time, the rating of the
Borrower's unsecured, unguaranteed senior long-term debt obligations then
outstanding most recently announced by Standard & Poor's.
“Subsidiary” means, with respect to any Person, any corporation,
partnership, limited liability company or other entity of which at least a
majority of the securities or other ownership interests having by the terms
thereof ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions of such corporation, partnership,
limited liability company or other entity (irrespective of whether or not at the
time securities or other ownership interests of any other class or classes of
such corporation, partnership, limited liability company or other entity shall
have or might have voting power by reason of the happening of any contingency)
is at the time directly or indirectly owned or controlled by such Person or one
or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person.
“Substantial Portion” means, with respect to the Property of the
Borrower and its Subsidiaries, Property which represents more than 10% of the
consolidated assets of the Borrower and its Subsidiaries as would be shown in
the consolidated statements of the Borrowers and its Subsidiaries as at the
beginning of the twelve-month period ending with the month in which such
determination is made.
“Surplus as Regards Policyholders” means, with respect to any
Insurance Subsidiary at any time, the surplus as regards policyholders of such
Insurance Subsidiary, as determined in accordance with SAP as at the last day
of the fiscal quarter of the Borrower ending on or most recently ended prior to
such date.
“Term Loan” and “Term Loans” have the meanings specified in
Section 2.05(b).
“Term-Out Option” means the right of the Borrower to convert
outstanding Advances into Term Loans on and subject to the terms and conditions
of Section 2.05(b).
“Termination Event” means, with respect to a Plan which is subject
to Title IV of ERISA, (a) a Reportable Event, (b) the withdrawal of the Borrower
or any other member of the Controlled Group from such Plan during a plan year in
which the Borrower or any other member of the Controlled Group was a
“substantial employer” as defined in Section 4001(a)(2) of ERISA or was deemed
such under Section 4068(f) of ERISA, (c) the termination of such Plan, the
filing of a notice of intent to terminate such Plan or the treatment of an
amendment of such Plan as a termination under Section 4041 of ERISA or (d) the
institution by the PBGC of proceedings to terminate such Plan, in each case
which could reasonably be expected to have a Material Adverse Effect.
“Type” refers to whether an Advance is a Base Rate Advance or a
Eurodollar Rate Advance.
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“Unfunded Liabilities” means the amount (if any) by which the
present value of all vested and unvested accrued benefits under a Single
Employer Plan exceeds the fair market value of assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using the PBGC actuarial assumptions utilized for purposes of determining
the current liability for purposes of such valuation.
“Utilization Fee” has the meaning specified in Section 2.03(b).
“Voting Stock” means, for any Person at any time, the outstanding
securities of such Person entitled to vote generally in an election of directors
of such Person.
“Wholly-Owned Subsidiary” of a Person means (a) any Subsidiary all
of the outstanding voting securities of which (other than directors' qualifying
shares) shall at the time be owned or controlled, directly or indirectly, 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, or (b) any
partnership, association, joint venture or similar business organization 100% of
the ownership interests having ordinary voting power of which shall at the time
be so owned or controlled. Unless otherwise expressly provided, all references
herein to a “Wholly-Owned Subsidiary” shall mean a Wholly-Owned Subsidiary of
the Borrower.
SECTION 1.02. Computation of Time Periods. In this
Agreement in the computation of periods of time from a specified date to a later
specified date, the word “from” means “from and including” and the words “to”
and “until” mean “to but excluding”.
SECTION 1.03. Accounting Terms. All accounting
terms not specifically defined herein shall be construed in accordance with
generally accepted accounting principles or statutory accounting principals, as
the case may be, consistent with those applied in the preparation of the
financial statements referred to in Section 4.01(e).
ARTICLE 2
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances.
(a) Each Lender severally agrees, on the
terms and conditions hereinafter set forth, to make Advances to the Borrower
from time to time on any Business Day during the period from the Effective Date
until the Commitment Termination Date in an aggregate amount not to exceed at
any time outstanding the amount set opposite such Lender's name on Schedule I
hereto or, if such Lender has entered into an Assignment and Acceptance, set
forth for such Lender in the Register, as such amount may be reduced pursuant to
Section 2.04(a) (such Lender's “Commitment”).
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(b) Each Borrowing and each Conversion or
Continuation thereof (i) shall (except as otherwise provided in Sections 2.08(f)
and (g)) be in an aggregate amount not less than $10,000,000 or an integral
multiple of $1,000,000 in excess thereof and (ii) shall consist of Advances of
the same Type (and, if such Advances are Eurodollar Rate Advances, having the
same Interest Period) made, Continued or Converted on the same day by the
Lenders ratably according to their respective Commitments. Within the limits of
each Lender's Commitment, the Borrower may from time to time borrow, prepay
pursuant to Section 2.10(b) and reborrow under this Section 2.01.
SECTION 2.02. Making the Advances.
(a) (i) Each Borrowing shall be made on notice, given not later
than 12:00 P.M. (New York City time) on the third Business Day prior to the date
of such Borrowing (in the case of a Borrowing consisting of Eurodollar Rate
Advances) or given not later than 12:00 P.M. (New York City time) on the
Business Day of such Borrowing (in the case of a Borrowing consisting of Base
Rate Advances), by the Borrower to the Administrative Agent, which shall give to
each Lender prompt notice thereof.
(ii) Each such notice of a Borrowing (a “Notice of
Borrowing”) shall be in writing in substantially the form of Exhibit A hereto,
specifying therein the requested (i) date of such Borrowing, (ii) Type of
Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing,
and (iv) in the case of a Borrowing consisting of Eurodollar Rate Advances,
initial Interest Period for each such Advance.
(iii) Each Lender shall, before 1:00 P.M. (New York City
time) on the date of such Borrowing, make available for the account of its
Applicable Lending Office to the Administrative Agent at its address referred to
in Section 8.02, in same day funds, such Lender's ratable portion of such
Borrowing; provided that, with respect to a Borrowing of a Eurodollar Rate
Advance, no Lender having a Commitment Termination Date prior to the last day of
the initial Interest Period for such Eurodollar Rate Advance shall participate
in such Borrowing.
(iv) After the Administrative Agent's receipt of such funds
and upon fulfillment of the applicable conditions set forth in Article 3, the
Administrative Agent will make such funds available to the Borrower at the
Administrative Agent's aforesaid address.
(b) Anything in subsection (a) above to the
contrary notwithstanding, the Borrower may select Eurodollar Rate Advances for
any Borrowing only in an aggregate amount of $10,000,000 or an integral multiple
of $1,000,000 in excess thereof.
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(c) Each Notice of Borrowing shall be
irrevocable and binding on the Borrower. In the case of any Borrowing which the
related Notice of Borrowing specifies is to be comprised of Eurodollar Rate
Advances, the Borrower shall indemnify each Lender against any loss, cost or
expense (excluding loss of profit) reasonably incurred by such Lender as a
result of any failure to make such Borrowing (including, without limitation, as
a result of any failure to fulfill, on or before the date specified in such
Notice of Borrowing, the applicable conditions set forth in Article 3) and the
liquidation or reemployment of deposits or other funds acquired by such Lender
to fund the Advance to be made by such Lender as part of such Borrowing. A
certificate as to the amount of such losses, costs and expenses, submitted to
the Borrower and the Administrative Agent by such Lender, shall be conclusive
and binding for all purposes, absent manifest error.
(d) Unless the Administrative Agent shall have
received notice from a Lender prior to the date of any Borrowing that such
Lender will not make available to the Administrative Agent such Lender's ratable
portion of such Borrowing, the Administrative Agent may assume that such Lender
has made such portion available to the Administrative Agent on the date of such
Borrowing in accordance with subsection (a) of this Section 2.02 and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the extent that
such Lender shall not have so made such ratable portion available to the
Administrative Agent, such Lender and the Borrower severally agree to repay to
the Administrative Agent forthwith on demand (but without duplication) such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent, at (i) in the case of the Borrower, the
interest rate applicable at the time to Advances comprising such Borrowing and
(ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall
repay to the Administrative Agent such corresponding amount, such amount so
repaid shall constitute such Lender's Advance as part of such Borrowing for
purposes of this Agreement (and such Advance shall be deemed to have been made
by such Lender on the date on which such amount is so repaid to the
Administrative Agent).
(e) The failure of any Lender to make the
Advance to be made by it as part of any Borrowing shall not relieve the other
Lenders of their obligations hereunder to make an Advance on the date of such
Borrowing, and no Lender shall be responsible for the failure of any other
Lender to make the Advance to be made by such other Lender on the date of any
Borrowing.
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(f) Notwithstanding anything in this
Agreement to the contrary, no Lender whose Commitment Termination Date falls
prior to the last day of any Interest Period for any Eurodollar Rate Advance (a
“Terminating Lender”) shall participate in such Advance. Without limiting the
generality of the foregoing, no Terminating Lender shall (i) participate in a
Borrowing of any Eurodollar Rate Advance having an initial Interest Period
ending after such Lender's Commitment Termination Date, (ii) have any
outstanding Eurodollar Rate Advance Continued for a subsequent Interest Period
if such subsequent Interest Period would end after such Lender's Commitment
Termination Date or (iii) have any outstanding Base Rate Advance Converted into
a Eurodollar Rate Advance if such Eurodollar Rate Advance would have an initial
Interest Period ending after such Lender's Commitment Termination Date. If any
Terminating Lender has outstanding a Eurodollar Rate Advance that cannot be
Continued for a subsequent Interest Period pursuant to clause (ii) above or has
outstanding a Base Rate Advance that cannot be Converted into a Eurodollar Rate
Advance pursuant to clause (iii) above, such Lender's ratable share of such
Eurodollar Rate Advance (in the case of said clause (ii)) shall be repaid by the
Borrower on the last day of its then current Interest Period and such Lender's
ratable share of such Base Rate Advance (in the case of said clause (iii)) shall
be repaid by the Borrower on the day on which the Advances of Lenders unaffected
by said clause (iii) are so Converted.
SECTION 2.03. Certain Fees.
(a) Facility Fee. The Borrower agrees to pay
to the Administrative Agent for the account of each Lender a facility fee (the
“Facility Fee”) on the average daily amount (whether used or unused) of such
Lender's Commitment from the date hereof (in the case of each Bank) and from the
effective date specified in the Assignment and Acceptance pursuant to which it
became a Lender (in the case of each such Lender) until the Commitment
Termination Date of such Lender at a rate per annum equal to the Applicable
Facility Fee Rate. The Facility Fee shall be payable quarterly in arrears on
the last Business Day of each March, June, September and December and, for each
Lender, on the Commitment Termination Date of such Lender; provided, however
that the Facility Fee will not be payable with respect to any period during
which a Term-Out Option is in effect.
(b) Utilization Fee. For each day on which
the aggregate principal amount of Advances outstanding exceeds 50% of the
aggregate Commitments, the Borrower agrees to pay to the Administrative Agent
for the account of each Lender a utilization fee (the “Utilization Fee”) on the
aggregate principal amount of the Advances of such Lender outstanding on such
day at a rate per annum equal to the Applicable Utilization Fee Rate. The
Utilization Fee will be payable in respect of each Advance on each date on which
interest is payable on such Advance, as specified in Section 2.06(a) hereof.
(c) Administrative Agent's Fee. The Borrower
agrees to pay to the Administrative Agent, for the Administrative Agent's own
account, an administrative agency fee at the times and in the amounts heretofore
agreed between the Borrower and the Administrative Agent.
SECTION 2.04. Reduction and Extensions of the
Commitments.
(a) Commitment Reductions.
(i) The Commitment of each Lender shall be
automatically reduced to zero on the Commitment Termination Date of such Lender.
(ii) In addition, the Borrower shall have the
right, upon at least three Business Days' notice to the Administrative Agent, to
terminate in whole or reduce ratably in part the unused portions of the
respective Commitments of the Lenders; provided that the aggregate amount of the
Commitments of the Lenders shall not be reduced to an amount which is less than
the aggregate principal amount of the Advances then outstanding; and provided
further that each partial reduction shall be in an aggregate amount of
$10,000,000 or an integral multiple of $1,000,000 in excess thereof. Once
reduced or terminated, the Commitments may not be reinstated.
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(b) Commitment Extensions.
(i) The Borrower may, by notice to the
Administrative Agent (which shall promptly notify the Lenders) not more than 45
days and not less than 30 days prior to the Commitment Termination Date then in
effect hereunder (the “Existing Commitment Termination Date”), request that each
Lender extend such Lender's Commitment Termination Date for an additional 364
days from the Existing Commitment Termination Date.
(ii) Each Lender, acting in its sole and
individual discretion, shall, by notice to the Administrative Agent given not
more than 30 days immediately prior to the Existing Commitment Termination Date
but in any event no later than the date (the “Notice Date”) 20 days prior to the
Existing Commitment Termination Date, advise the Administrative Agent whether or
not such Lender agrees to such extension (and each Lender that determines not to
so extend its Commitment Termination Date (a “Non-Extending Lender”) shall
notify the Administrative Agent (which shall notify the other Lenders) of such
fact promptly after such determination (but in any event no later than the
Notice Date) and any Lender that does not so advise the Administrative Agent on
or before the Notice Date shall be deemed to be a Non-Extending Lender. The
election of any Lender to agree to such extension shall not obligate any other
Lender to so agree.
(iii) The Administrative Agent shall notify
the Borrower of each Lender's determination under this Section 2.04(b) no later
than the date 15 days prior to the Existing Commitment Termination Date (or, if
such date is not a Business Day, on the next preceding Business Day).
(iv) The Borrower shall have the right on or
before the Existing Commitment Termination Date to replace each Non-Extending
Lender with, and add as “Lenders” under this Agreement in place thereof, one or
more Eligible Assignees (each, an “Additional Commitment Lender”) with the
approval of the Administrative Agent (which approval shall not be unreasonably
withheld), each of which Additional Commitment Lenders shall have entered into
an agreement in form and substance satisfactory to the Borrower and the
Administrative Agent pursuant to which such Additional Commitment Lender shall,
effective as of the Existing Commitment Termination Date, undertake a Commitment
(and, if any such Additional Commitment Lender is already a Lender, its
Commitment shall be in addition to such Lender's Commitment hereunder on such
date); provided that prior to replacing any Non-Extending Lender with any
Additional Commitment Lender, the Borrower shall have given each Lender which
has agreed to extend its Commitment Termination Date an opportunity to increase
its Commitment by all or a portion of the Non-Extending Lenders' Commitments.
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(v) If (and only if) the total of the
Commitments of the Lenders that have agreed so to extend their Commitment
Termination Date and the additional Commitments of the Additional Commitment
Lenders shall be more than 50% of the aggregate amount of the Commitments in
effect immediately prior to the Existing Commitment Termination Date, then,
effective as of the Existing Commitment Termination Date, the Commitment
Termination Date of each Extending Lender and of each Additional Commitment
Lender shall be extended to the date falling 364 days after the Existing
Commitment Termination Date (except that, if such date is not a Business Day,
such Commitment Termination Date as so extended shall be the next preceding
Business Day) and each Additional Commitment Lender shall thereupon become a
“Lender” for all purposes of this Agreement.
(vi) Notwithstanding the foregoing, the
extension of the Commitment Termination Date pursuant to this Section 2.04(b)
shall be effective with respect to any Lender only if:
(x) no Default or Event of Default shall have occurred and
be continuing on the date of the notice requesting such extension or on the
Existing Commitment Termination Date and the representations and warranties set
forth in Section 4.01 shall be true and correct on and as of each of said dates
as if made on and as of said dates; and
(y) the Borrower shall have paid in full all amounts owing
to each Non-Extending Lender hereunder on or before the Commitment Termination
Date of such Lender.
SECTION 2.05. Repayment; Term-Out Option.
(a) Repayment. Subject to the provisions of Section
2.05(b), the Borrower shall repay the then unpaid principal amount of each
Advance made by each Lender, and each Advance made by such Lender shall mature,
on the Commitment Termination Date of such Lender.
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(b) Term-Out Option. If the Commitment Termination
Date is not extended pursuant to Section 2.04(b), the Borrower may, by notice to
the Administrative Agent not less than eight days prior to the Existing
Commitment Termination Date, subject to the conditions set forth below in this
Section 2.05(b), elect to convert the aggregate outstanding principal amount of
the Advances of each Lender as of such Existing Commitment Termination Date to a
term loan of such Lender in said amount (each, a “Term Loan” and collectively,
the “Term Loans”). Each Term Loan shall bear interest, from and including such
Existing Commitment Termination Date until the payment thereof in full, at the
rates provided for in Section 2.06 and shall otherwise constitute an Advance for
all purposes of this Agreement. The Borrower agrees to repay to the
Administrative Agent for account of the Lenders the unpaid principal amount of
the Term Loans on the date one year after such Existing Commitment Termination
Date or, if such date is not a Business Day, the immediately preceding Business
Day (the “Maturity Date”) (and any outstanding Note shall be deemed amended
accordingly). Anything in this Section 2.05(b) to the contrary notwithstanding,
any such conversion shall be subject to the conditions precedent that (i) no
Default or Event of Default shall have occurred and be continuing on such
Existing Commitment Termination Date and (ii) the representations and warranties
made by the Borrower in Section 4.01 shall be true on and as of such Existing
Commitment Termination Date with the same force and effect as if made on and as
of such date (it being understood and agreed that any representation and
warranty which by its terms is made as of a specified date shall be required to
be true and correct only as of such specified date). Each notice of conversion
delivered by the Borrower in accordance with this Section 2.05(b) shall
constitute a certification by the Borrower to the effect set forth in the
preceding sentence (both as of the date of such notice and, unless the Borrower,
after delivery of such notice, otherwise notifies the Administrative Agent prior
to such Existing Commitment Termination Date, as of such date).
SECTION 2.06. Interest.
(a) Ordinary Interest. The Borrower shall
pay interest on the unpaid principal amount of each Advance made by each Lender,
from the date of such Advance until such principal amount shall be paid in full,
at the following rates per annum:
(i) Base Rate Advances. While such Advance is a Base
Rate Advance, a rate per annum equal to the Base Rate in effect from time to
time plus the Applicable Margin for Base Rate Advances as in effect from time to
time, payable quarterly in arrears on the last Business Day of each March, June,
September and December and on the date such Base Rate Advance shall be Converted
or paid in full.
(ii) Eurodollar Rate Advances. While such Advance is a
Eurodollar Rate Advance, a rate per annum for each Interest Period for such
Advance equal to the sum of the Eurodollar Rate for such Interest Period plus
the Applicable Margin for Eurodollar Rate Advances as in effect from time to
time, payable on the last day of such Interest Period and, if such Interest
Period has a duration of more than three months, on each day which occurs at
three-month intervals after the first day of such Interest Period, and on each
date on which such Eurodollar Rate Advance shall be Continued, Converted or paid
in full.
(b) Default Interest. Notwithstanding the
foregoing, if any Event of Default shall have occurred and be continuing, the
Borrower shall pay interest on:
(i) the unpaid principal amount of each Advance owing to
each Lender, payable on demand (and in any event in arrears on the dates
referred to in Section 2.06(a)(i) or (a)(ii) above), at a rate per annum equal
at all times to two percent (2%) per annum above the rate per annum required to
be paid on such Advance pursuant to said Section 2.06(a)(i) or (a)(ii), as
applicable; provided that if such Event of Default shall be continuing at the
end of any Interest Period for any Eurodollar Rate Advance, such Advance shall
forthwith be Converted to a Base Rate Advance bearing interest as aforesaid in
this Section 2.06(b)(i); and
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(ii) the amount of any interest, fee or other amount
payable hereunder that is not paid when due, from the date such amount shall be
due until such amount shall be paid in full, payable on demand (and in any event
in arrears on the date such amount shall be paid in full), at a rate per annum
equal at all times to two percent (2%) per annum above the rate per annum
required to be paid on Base Rate Advances pursuant to Section 2.06(a)(i) above.
SECTION 2.07. Additional Interest on Eurodollar Rate
Advances. The Borrower shall pay to each Lender additional interest on the
unpaid principal amount of each Eurodollar Rate Advance of such Lender, from the
date of such Advance until such principal amount is paid in full, at an interest
rate per annum equal at all times to the remainder obtained by subtracting
(i) the Eurodollar Rate for each Interest Period for such Advance from (ii) the
rate obtained by dividing such Eurodollar Rate by a percentage equal to 100%
minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest
Period, payable on each date on which interest is payable on such Advance. Such
additional interest shall be determined by such Lender and notified to the
Borrower through the Administrative Agent.
SECTION 2.08. Interest Rate Determinations; Changes
in Rating Systems.
(a) Each Reference Bank agrees, upon the
request of the Administrative Agent, to furnish to the Administrative Agent
timely information for the purpose of determining each Eurodollar Rate. If any
one or more of the Reference Banks shall not furnish such timely information to
the Administrative Agent for the purpose of determining any such interest rate,
the Administrative Agent shall determine such interest rate on the basis of
timely information furnished by the remaining Reference Banks (subject to the
provisions set forth in the definition of “Eurodollar Rate” in Section 1.01 and
to clause (c) below).
(b) The Administrative Agent shall give prompt
notice to the Borrower and the Lenders of the applicable interest rates
determined by the Administrative Agent for the purposes of Section 2.06.
(c) If (1) fewer than two Reference Banks
furnish timely information to the Administrative Agent for determining the
Eurodollar Rate for any Interest Period for any Eurodollar Rate Advances and (2)
the relevant rates do not appear on Bloomberg Page BBAL,
(i) the Administrative Agent shall forthwith notify the
Borrower and the Lenders that the interest rate cannot be determined for such
Eurodollar Rate Advances for such Interest Period,
(ii) each Eurodollar Rate Advance will automatically, on
the last day of the then existing Interest Period therefor, Convert into a Base
Rate Advance, and
(iii) the obligation of the Lenders to make or Continue, or
to Convert Advances into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
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(d) If, with respect to any Eurodollar Rate
Advances, the Majority Lenders notify the Administrative Agent showing
calculations in reasonable detail that the Eurodollar Rate for any Interest
Period for such Advances will not adequately reflect the cost to such Majority
Lenders of making, funding or maintaining their respective Eurodollar Rate
Advances for such Interest Period, the Administrative Agent shall forthwith so
notify the Borrower and the Lenders, whereupon:
(i) each Eurodollar Rate Advance will automatically, on
the last day of the then existing Interest Period therefor, Convert into a Base
Rate Advance, and
(ii) the obligation of the Lenders to make or Continue, or
to Convert Advances into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower and such Lenders that the
circumstances causing such suspension no longer exist.
(e) If the Borrower shall fail to select the
duration of any Interest Period for any Eurodollar Rate Advances in accordance
with the provisions contained in the definition of “Interest Period” in Section
1.01, the Administrative Agent will forthwith so notify the Borrower and the
Lenders and such Advances will automatically, on the last day of the then
existing Interest Period therefor, Convert into Base Rate Advances.
(f) On the date on which the aggregate unpaid
principal amount of Eurodollar Rate Advances comprising any Borrowing shall be
reduced, by payment or prepayment or otherwise, to less than $10,000,000, such
Advances shall automatically Convert into Base Rate Advances.
(g) Upon the occurrence and during the
continuance of any Event of Default, (x) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (y) the obligation of the Lenders to make
or Continue, or to Convert Advances into, Eurodollar Rate Advances shall be
suspended.
(h) If the rating system of either Moody's or
Standard & Poor's shall change, or if either such rating agency shall cease to
be in the business of rating corporate debt obligations, the Borrower and the
Administrative Agent (on behalf of the Lenders) shall negotiate in good faith to
amend the references to specific ratings in this Agreement to reflect such
changed rating system or the non-availability of ratings from such rating agency
(provided that any such amendment to such specific ratings shall in no event be
effective without the approval of the Majority Lenders).
SECTION 2.09. Voluntary Conversion and Continuation
of Advances.
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(a) Optional Conversion. The Borrower may on
any Business Day, upon notice given to the Administrative Agent not later than
12:00 P.M. (New York City time) on the third Business Day prior to the date of
the proposed Conversion and subject to the provisions of Sections 2.08 and 2.12,
Convert all or any portion of the outstanding Advances of one Type comprising
part of the same Borrowing into Advances of the other Type; provided that
(i) any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be
in an amount not less than the minimum amount specified in Section 2.02(b) and
(ii) in the case of any such Conversion of a Eurodollar Rate Advance into a Base
Rate Advance on a day other than the last day of an Interest Period therefor,
the Borrower shall reimburse the Lenders in respect thereof pursuant to Section
8.04(c). Each such notice of a Conversion shall, within the restrictions
specified above, specify (x) the date of such Conversion, (y) the Advances to be
Converted, and (z) if such Conversion is into Eurodollar Rate Advances, the
duration of the initial Interest Period for each such Advance. Each notice of
Conversion shall be irrevocable and binding on the Borrower.
(b) Continuations. The Borrower may, on any
Business Day, upon notice given to the Administrative Agent not later than 12:00
P.M. (New York City time) on the third Business Day prior to the date of the
proposed Continuation and subject to the provisions of Sections 2.08 and 2.12,
Continue all or any portion of the outstanding Eurodollar Rate Advances
comprising part of the same Borrowing for one or more Interest Periods; provided
that (i) Eurodollar Rate Advances so Continued and having the same Interest
Period shall be in an amount not less than the minimum amount specified in
Section 2.02(b) and (ii) in the case of any such Continuation on a day other
than the last day of an Interest Period therefor, the Borrower shall reimburse
the Lenders in respect thereof pursuant to Section 8.04(c). Each such notice of
a Continuation shall, within the restrictions specified above, specify (x) the
date of such Continuation, (y) the Eurodollar Rate Advances to be Continued and
(y) the duration of the initial Interest Period (or Interest Periods) for the
Eurodollar Rate Advances subject to such Continuation. Each notice of
Continuation shall be irrevocable and binding on the Borrower.
SECTION 2.10. Prepayments of Advances.
(a) The Borrower shall have no right to
prepay any principal amount of any Advances other than as provided in subsection
(b) below.
(b) The Borrower may, on notice given not
later than 12:00 P.M. (New York City time) on the second Business Day prior to
the date of the proposed prepayment of Advances (in the case of an Eurodollar
Rate Advances) or given not later than 12:00 P.M. (New York City time) on the
Business Day of the proposed prepayment of Advances (in the case of Base Rate
Advances), stating the proposed date and aggregate principal amount of the
prepayment, and if such notice is given the Borrower shall, prepay the
outstanding principal amounts of the Advances comprising part of the same
Borrowing in whole or ratably in part, together with accrued interest to the
date of such prepayment on the principal amount prepaid; provided, however, that
(x) each partial prepayment shall be in an aggregate principal amount not less
than $10,000,000 or integral multiples of $1,000,000 in excess thereof and (y)
in the case of any such prepayment of a Eurodollar Rate Advance on a day other
than the last day of an Interest Period therefor, the Borrower shall reimburse
the Lenders in respect thereof pursuant to Section 8.04(c).
SECTION 2.11. Increased Costs.
(a) If, due to either (i) the introduction of
or any change (other than any change by way of imposition or increase of reserve
requirements included in the Eurodollar Rate Reserve Percentage) in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
cost to any Lender of agreeing to make or making, funding or maintaining
Eurodollar Rate Advances, then the Borrower shall from time to time, upon demand
by such Lender (with a copy of such demand to the Administrative Agent), pay to
the Administrative Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A certificate as
to the amount of such increased cost, submitted to the Borrower and the
Administrative Agent by such Lender, shall be conclusive and binding for all
purposes, absent manifest error.
(b) If any Lender determines that compliance
with any law or regulation or any guideline or request from any central bank or
other governmental authority (whether or not having the force of law) affects or
would affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend hereunder and other commitments of this type, then, upon demand by such
Lender (with a copy of such demand to the Administrative Agent), the Borrower
shall immediately pay to the Administrative Agent for the account of such
Lender, from time to time as specified by such Lender, additional amounts
sufficient to compensate such Lender or such corporation in the light of such
circumstances, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the existence of such Lender's commitment
to lend hereunder. A certificate as to such amounts submitted to the Borrower
and the Administrative Agent by such Lender shall be conclusive and binding for
all purposes, absent manifest error.
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SECTION 2.12. Illegality. Notwithstanding any other
provision of this Agreement, if any Lender shall notify the Administrative Agent
that the introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for such Lender or its Eurodollar Lending
Office to perform its obligations hereunder to make or Continue Eurodollar Rate
Advances or to fund or otherwise maintain Eurodollar Rate Advances hereunder,
(i) the obligation of such Lender to make or Continue, or to Convert Advances
into, Eurodollar Rate Advances shall be suspended until the Administrative Agent
shall notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist and (ii) each Eurodollar Rate Advance of such Lender
shall convert into a Base Rate Advance at the end of the then current Interest
Period for such Eurodollar Rate Advance.
SECTION 2.13. Payments and Computations.
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(a) The Borrower shall make each payment
hereunder without set-off or counterclaim not later than 12:00 P.M. (New York
City time) on the day when due in U.S. dollars to the Administrative Agent at
its address referred to in Section 8.02 in same day funds. The Administrative
Agent will promptly thereafter cause to be distributed like funds relating to
the payment of principal, interest, Facility Fee or Utilization Fee ratably
(other than amounts payable pursuant to Section 2.02(c), 2.11, 2.14 or 8.04(c))
to the Lenders for the account of their respective Applicable Lending Offices,
and like funds relating to the payment of any other amount payable to any Lender
to such Lender for the account of its Applicable Lending Office, in each case to
be applied in accordance with the terms of this Agreement. Upon its acceptance
of an Assignment and Acceptance and recording of the information contained
therein in the Register pursuant to Section 8.06(d), from and after the
effective date specified in such Assignment and Acceptance, the Administrative
Agent shall make all payments hereunder in respect of the interest assigned
thereby to the Lender assignee thereunder, and the parties to such Assignment
and Acceptance shall make all appropriate adjustments in such payments for
periods prior to such effective date directly between themselves.
(b) All computations of interest based on
Citibank's base rate shall be made by the Administrative Agent on the basis of a
year of 365 or 366 days, as the case may be, for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest is payable. All computations of interest based on the
Eurodollar Rate or the Federal Funds Rate and of the Facility Fee and the
Utilization Fee shall be made by the Administrative Agent, and all computations
of interest pursuant to Section 2.07 shall be made by a Lender, on the basis of
a year of 360 days, for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest or fee
is payable. Each determination by the Administrative Agent of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(c) Whenever any payment hereunder would be
due on a day other than a Business Day, such due date shall be extended to the
next succeeding Business Day, and any such extension of such due date shall in
such case be included in the computation of payment of interest, Facility Fee or
Utilization Fee, as the case may be; provided however that if such extension
would cause payment of interest on or principal of Eurodollar Rate Advances to
be made in the next following calendar month, such payment shall be made on the
next preceding Business Day.
(d) Unless the Administrative Agent shall have
received notice from the Borrower prior to the date on which any payment is due
to the Lenders hereunder that the Borrower will not make such payment in full,
the Administrative Agent may assume that the Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent may,
in reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent that the Borrower shall not have so made such payment in full to the
Administrative Agent, each Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
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SECTION 2.14. Taxes.
(a) Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 2.13, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender and the Administrative Agent, taxes
imposed on its income, and franchise taxes imposed on it, by the jurisdiction
under the laws of which such Lender or the Administrative Agent (as the case may
be) is organized or any political subdivision thereof and, in the case of each
Lender, taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction of such Lender's Applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as
“Taxes”). If the Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder to any Lender or the Administrative
Agent, (i) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.14) such Lender or the Administrative Agent
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay
any present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made hereunder or
from the execution, delivery or registration of, or otherwise with respect to,
this Agreement (hereinafter referred to as “Other Taxes”).
(c) The Borrower will indemnify each Lender
and the Administrative Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes and Other Taxes imposed by any
jurisdiction on amounts payable under this Section 2.14) paid by such Lender or
the Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
This indemnification shall be made within 30 days from the date such Lender or
the Administrative Agent (as the case may be) makes written demand therefor. A
certificate as to the amount of such Taxes and Other Taxes, submitted to the
Borrower and the Administrative Agent by such Lender, shall be conclusive and
binding (as between the Borrower, the Lenders and the Administrative Agent) for
all purposes, absent manifest error.
(d) Within 30 days after the date of any
payment of Taxes, the Borrower will furnish to the Administrative Agent, at its
address referred to in Section 8.02, the original or a certified copy of a
receipt evidencing payment thereof or other proof of payment of such Taxes
reasonably satisfactory to the relevant Lender(s). If no Taxes are payable in
respect of any payment hereunder, upon the request of the Administrative Agent
the Borrower will furnish to the Administrative Agent, at such address, a
statement to such effect with respect to each jurisdiction designated by the
Administrative Agent.
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(e) Each Lender organized under the laws of a
jurisdiction outside the United States, on or prior to the date of its execution
and delivery of this Agreement (in the case of each Bank) and on the date of the
Assignment and Acceptance pursuant to which it becomes a Lender (in the case of
each other Lender), and from time to time thereafter if requested in writing by
the Borrower (but only so long as such Lender remains lawfully able to do so),
shall provide the Borrower with Internal Revenue Service form W-8BEN or W-8ECI,
as appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Lender is entitled to benefits under an income tax
treaty to which the United States is a party which reduces the rate of
withholding tax on payments of interest or certifying that the income receivable
pursuant to this Agreement is effectively connected with the conduct of a trade
or business in the United States. If the form provided by a Lender at the time
such Lender first becomes a party to this Agreement indicates a United States
interest withholding tax rate in excess of zero, withholding tax at such rate
shall be considered excluded from “Taxes” as defined in Section 2.15(a).
(f) For any period with respect to which a
Lender has failed to provide the Borrower with the appropriate form described in
Section 2.14(e) (other than if such failure is due to a change in law occurring
subsequent to the date on which a form originally was required to be provided,
or if such form otherwise is not required under the first sentence of
subsection (e) above), such Lender shall not be entitled to indemnification
under Section 2.14(a) or (c) with respect to Taxes imposed by the United States;
provided however that should a Lender become subject to Taxes because of its
failure to deliver a form required hereunder, the Borrower shall take such steps
as the Lender shall reasonably request to assist the Lender to recover such
Taxes.
(g) Any Lender claiming any additional amounts
payable pursuant to this Section 2.14 shall use reasonable efforts (consistent
with its internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Applicable Lending Office(s) if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender.
SECTION 2.15. Set-Off; Sharing of Payments, Etc.
(a) Without limiting any of the obligations of the
Borrower or the rights of the Lenders hereunder, if the Borrower shall fail to
pay when due (whether at stated maturity, by acceleration or otherwise) any
amount payable by it hereunder or under any Note each Lender may, without prior
notice to the Borrower (which notice is expressly waived by it to the fullest
extent permitted by applicable law), set off and appropriate and apply against
such amount any and all deposits (general or special, time or demand,
provisional or final, in any currency, matured or unmatured) and other
obligations and liabilities at any time held or owing by such Lender or any
branch or agency thereof to or for the credit or account of the Borrower. Each
Lender shall promptly provide notice of such set-off to the Borrower, provided
that failure by such Lender to provide such notice shall not give the Borrower
any cause of action or right to damages or affect the validity of such set-off
and application.
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(b) If any Lender shall obtain any payment (whether
voluntary, involuntary, through the exercise of any right of set-off, or
otherwise) on account of the Advances made by it (other than pursuant to Section
2.02(c), 2.11, 2.14 or 8.04(c)) in excess of its ratable share of payments on
account of the Advances obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in the Advances made by them
as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; provided however that if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.15 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
SECTION 2.16. Right to Replace a Lender. If the
Borrower is required to make any additional payment pursuant to Section 2.11 or
2.14 to any Lender or if any Lender's obligation to make or Continue, or to
Convert Advances into, Eurodollar Rate Advances shall be suspended pursuant to
Section 2.12 (in each case, such Lender being an “Affected Person”), the
Borrower may elect, if such amounts continue to be charged or such suspension is
still effective, to replace such Affected Person as a party to this Agreement;
provided that, no Default or Event of Default shall have occurred and be
continuing at the time of such replacement; and provided further that,
concurrently with such replacement, (i) another financial institution which is
an Eligible Assignee and is reasonably satisfactory to the Borrower and the
Administrative Agent shall agree, as of such date, to purchase for cash the
Advances of the Affected Person pursuant to an Assignment and Acceptance and to
become a Lender for all purposes under this Agreement and to assume all
obligations (including all outstanding Advances) of the Affected Person to be
terminated as of such date and to comply with the requirements of Section 8.06
applicable to assignments, and (ii) the Borrower shall pay to such Affected
Person in same day funds on the day of such replacement all interest, fees and
other amounts then due and owing to such Affected Person by the Borrower
hereunder to and including the date of termination, including without limitation
payments due such Affected Person under Section 2.11 and 2.14.
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SECTION 2.17. Evidence of Indebtedness. (a) Each
Lender shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of the Borrower to such Lender resulting
from each Advance made by such Lender, including the amounts of principal and
interest payable and paid to such Lender from time to time hereunder.
(b) The Administrative Agent shall maintain accounts
in which it shall record (i) the date, amount, Type, interest rate and duration
of Interest Period (if applicable) of each Advance made hereunder, (ii) the
amount of any principal or interest due and payable or to become due and payable
from the Borrower to each Lender hereunder and (iii) the amount of any sum
received by the Administrative Agent hereunder for the account of the Lenders
and each Lender's share thereof.
(c) The entries made in the accounts maintained
pursuant to clause (a) or (b) of this Section 2.17 shall be prima facie evidence
of the existence and amounts of the obligations recorded therein; provided that
the failure of any Lender or the Administrative Agent to maintain such accounts
or any error therein shall not in any manner affect the obligation of the
Borrower to repay the Advances in accordance with the terms of this Agreement.
ARTICLE 3
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Initial
Borrowing. The obligation of each Lender to make an Advance on the occasion of
the initial Borrowing is subject to the condition precedent that the
Administrative Agent shall have received the following, each (unless otherwise
specified below) dated the Effective Date, in form and substance satisfactory to
the Administrative Agent and (except for the items in clauses (a), (b), (c) and
(d)) in sufficient copies for each Lender:
(a) Certified copies of (x) the charter and by-laws of the
Borrower, (y) the resolutions of the Board of Directors of the Borrower
authorizing and approving this Agreement and the transactions contemplated
hereby, and (z) all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Agreement.
(b) A certificate of the Secretary or an Assistant
Secretary of the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign this Agreement and the other
documents to be delivered hereunder.
(c) A certificate from the Secretary of State of the State
of Delaware dated a date reasonably close to the date hereof as to the good
standing of and charter documents filed by the Borrower.
(d) A favorable opinion of Jonathan D. Kantor, Esq.,
in-house counsel to the Borrower, substantially in the form of Exhibit C hereto.
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(e) A favorable opinion of Milbank, Tweed, Hadley & McCloy
LLP, special New York counsel to the Administrative Agent, substantially in the
form of Exhibit D hereto.
(f) A certificate of a Responsible Officer of the Borrower
certifying that (i) no Default or Event of Default as of the date thereof has
occurred and is continuing, and (ii) the representations and warranties
contained in Section 4.01 are true and correct on and as of the date thereof as
if made on and as of such date.
(g) Evidence of (x) the termination of the commitment of
each lender and (y) the payment by the Borrower of all amounts whatsoever
payable to each of the lenders, in each case under the Existing Credit
Agreement.
(h) Such other approvals, opinions and documents relating
to this Agreement and the transactions contemplated hereby as the Administrative
Agent or any Lender may, through the Administrative Agent, reasonably request.
SECTION 3.02. Conditions Precedent to Each
Borrowing. The obligation of each Lender to make an Advance on the occasion of
each Borrowing (including the initial Borrowing) shall be subject to the further
conditions precedent that on the date of such Borrowing the following statements
shall be true (and each of the giving of the applicable Notice of Borrowing and
the acceptance by the Borrower of the proceeds of such Borrowing shall
constitute a representation and warranty by the Borrower that on the date of
such Borrowing such statements are true):
(a) the representations and warranties contained in
Section 4.01 (not including, in the case of any Borrowing after the initial
Borrowing, the Excluded Representations) are true and correct in all material
respects on and as of the date of such Borrowing, before and after giving effect
to such Borrowing and to the application of the proceeds therefrom, as though
made on and as of such date; and
(b) No Event of Default or event, which, with the giving of
notice or the passage of time or both, would be an Event of Default, has
occurred and is continuing, or would result from such Borrowing or from the
application of the proceeds.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Borrower. The Borrower represents, warrants and agrees as follows:
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(a) The Borrower and each of its Significant Subsidiaries
(i) is duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization, (ii) is duly qualified and in good standing as
a foreign corporation in each other jurisdiction in which it owns or leases
property or in which the conduct of its business requires it to so qualify or be
licensed and where, in each case, failure so to qualify and be in good standing
could have a Material Adverse Effect and (iii) has all requisite corporate power
and authority to own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be conducted.
(b) The execution, delivery and performance by the Borrower
of this Agreement are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action, and do not (i) contravene the
Borrower's charter, by-laws or other organizational documents, (ii) contravene
any contractual restriction binding on the Borrower or (iii) violate any law,
rule or regulation (including, without limitation, the Securities Act of 1933
and the Exchange Act and the regulations thereunder, and Regulations U and X
issued by the Board of Governors of the Federal Reserve System, each as amended
from time to time), or order, writ, judgment, injunction, decree, determination
or award. The Borrower is not in violation of any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award or in breach
of any contractual restriction binding upon it, except for such violation or
breach which would not have a Material Adverse Effect.
(c) No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory body is
required (other than those which have been obtained) for the due execution,
delivery and performance by the Borrower of this Agreement.
(d) This Agreement is a legal, valid and binding obligation
of the Borrower enforceable against the Borrower in accordance with their
respective terms.
(e) (i) if available on or prior to the date hereof, the
Borrower shall have heretofore furnished to each of the Lenders its unaudited
Consolidated balance sheet and statements of earnings, equity and cash flows as
at and for the three-month period ended March 31, 2001, and such financial
statements fairly present, in all material respects, the Consolidated financial
condition and results of operations of the Borrower and its Subsidiaries as at
the date thereof and for such three-month period, all in accordance with GAAP
(subject, in the case of such financial statements as at March 31, 2001, to
normal year-end audit adjustments), (ii) the Borrower has heretofore furnished
to each of the Lenders its audited Consolidated balance sheet and statements of
earnings, equity and cash flows as at and for the fiscal year ended December 31,
2000, and such financial statements fairly present, in all material respects,
the Consolidated financial condition and results of operations of the Borrower
and its Subsidiaries as at the date thereof and for such fiscal year, all in
accordance with GAAP; (iii) if available on or prior to the date hereof, the
Borrower shall have heretofore furnished to each of the Lenders the Quarterly
Statement as of March 31, 2001, of each of CAC, CCC and CIC, as filed, in each
case, with the applicable Insurance Regulatory Authority, and such Statements
present fairly, in all material respects, such condition and affairs as of such
date, in accordance with SAP; (iv) the Borrower has heretofore furnished to each
of the Lenders the Annual Statement of each of CAC, CCC and CIC for the fiscal
year ended December 31, 2000, as filed, in each case, with the applicable
Insurance Regulatory Authority, and such Annual Statements present fairly, in
all material respects, the financial condition of CAC, CCC and CIC, as
applicable, as at, and the results of operations for the fiscal year ended
December 31, 2000, in accordance with SAP as in effect on December 31, 2000; and
(v) since December 31, 2000, there has been no material adverse change in the
business, condition (financial or otherwise) results of operations or prospects
of the Borrower and its Subsidiaries, taken as a whole.
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(f) Other than as disclosed in filings of the Borrower
with the Securities and Exchange Commission, there is no action pending or
threatened in writing or proceeding affecting the Borrower or any of its
Subsidiaries before any court, governmental agency or arbitrator which (i) is
reasonably likely to have a Material Adverse Effect or (ii) purports to affect
this Agreement or the transactions contemplated hereby.
(g) The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying Margin Stock, and no
proceeds of any Advance will be used for the purpose, whether immediate,
incidental or ultimate, of buying or carrying Margin Stock. The Borrower is,
and after applying the proceeds of each Advance, will be in compliance with its
obligations under Section 5.01(b). If requested by any Lender or the
Administrative Agent, the Borrower will furnish to the Administrative Agent and
each Lender a statement in conformity with the requirements of Federal Reserve
Form U-1 referred to in Regulation U, the statements made in which shall be
such, in the opinion of each Lender, as to permit the transactions contemplated
hereby in accordance with Regulation U. No portion of any Advance under this
Agreement shall be used by the Borrower in violation of Regulation T, Regulation
U or Regulation X of the Board of Governors of the Federal Reserve System or any
other Regulation of such Board, as in effect on the date or dates of such
Advance and such use of proceeds.
(h) The Borrower is not an “investment company”, or a
Person “controlled by” an “investment company”, as such terms are defined in the
Investment Company Act of 1940, as amended.
(i) All information that has been made available by the
Borrower or any of its representatives to the Administrative Agent or any Lender
in connection with the negotiation of this Agreement was, on or as of the dates
on which such information was made available, complete and correct in all
material respects and did not contain any untrue statement of a material fact or
omit to state a fact necessary to make the statements contained therein not
misleading in light of the time and circumstances under which such statements
were made. All financial projections that have been prepared by the Borrower
and made available to the Administrative Agent or any Lender in connection with
the negotiation of this Agreement have been prepared in good faith based upon
reasonable assumptions. There is no fact known to the Borrower (other than
matters of a general economic nature) that has had, or could reasonably be
expected to have, a Material Adverse Effect and that has not been disclosed
herein or in such other documents, certificates and statements furnished to the
Lenders for use in connection with the transactions contemplated by this
Agreement.
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(j) Neither the Borrower nor any other member of the
Controlled Group maintains, or is obligated to contribute to, any Multiemployer
Plan or has incurred, or is reasonably expected to incur, any withdrawal
liability to any Multiemployer Plan. Each Plan complies in all material respects
with all applicable requirements of law and regulations, except where
noncompliance would not have a Material Adverse Effect. Neither the Borrower nor
any member of the Controlled Group has, with respect to any Plan, failed to make
any material contribution or pay any material amount required under Section 412
of the Code or Section 302 of ERISA or the terms of such Plan. The Borrower has
not engaged in any prohibited transaction (as defined in Section 4975 of the
Code or Section 406 of ERISA) in connection with any Plan which may reasonably
be expected to have a Material Adverse Effect. Within the last five years
neither the Borrower nor any member of the Controlled Group has engaged in a
transaction which resulted in a Single Employer Plan with an Unfunded Liability
being transferred out of the Controlled Group. No Termination Event has occurred
or is reasonably expected to occur with respect to any Plan which is subject to
Title IV of ERISA.
(k) The Borrower and each of its Subsidiaries is in
compliance with all laws, statutes, rules, regulations and orders binding on or
applicable to the Borrower (including, without limitation, all Environmental
Laws), its Subsidiaries and all of their respective properties, except to the
extent failure to so comply could not (either individually or in the aggregate)
reasonably be expected to have a Material Adverse Effect.
(l) There is no indenture, agreement or other contractual
arrangement to which the Borrower or any Significant Subsidiary is a party that,
directly or indirectly, prohibits or restrains, or has the effect of prohibiting
or restraining, or imposing any condition upon, the declaration or payment of
dividends or other distributions on any class of stock of any Subsidiary of the
Borrower, other than such prohibitions, restraints and conditions which are
disclosed in filings of the Borrower with the Securities and Exchange
Commission.
ARTICLE 5
COVENANTS OF THE BORROWER
SECTION 5.01. Covenants. During the term of this
Agreement, unless the Required Lenders shall otherwise consent in writing:
(a) Financial Reporting. The Borrower will furnish to the
Lenders:
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(i) As soon as practicable and in any event within 120 days after the
close of each of its fiscal years, an audit report which is not qualified as to
going concern or access or in any other material respect and which is certified
by independent certified public accountants, acceptable to the Lenders, prepared
in accordance with GAAP on a consolidated basis for itself and its Subsidiaries,
including balance sheets as of the end of such period and related income and
cash flow statements accompanied by a certificate of said accountants that, in
the course of the examination necessary for their certification of the
foregoing, they have obtained no knowledge of any Default or Event of Default in
respect of Section 5.01(m) or (n), or if, in the opinion of such accountants,
any Default or Event of Default in respect of Section 5.01(m) or (n) shall
exist, stating the nature and status thereof.
(ii) As soon as practicable and in any event within 75 days after the
close of each quarterly period (other than the fourth quarterly period) of each
of its fiscal years, for itself and its Subsidiaries, a consolidated unaudited
balance sheet as at the close of each such period and consolidated income and
cash flow statements for the period from the beginning of such fiscal year to
the end of such quarter, all certified by its chief financial officer.
(iii) Together with the financial statements required by clauses (i) and
(ii), a compliance certificate in substantially the form of Exhibit E hereto
signed by the chief financial officer of the Borrower showing the calculations
necessary to determine compliance with the financial covenants contained in this
Agreement and stating that no Default or Event of Default exists, or if any
Default or Event of Default exists, stating the nature and status thereof.
(iv) Upon the earlier of (i) ten (10) days after the regulatory filing
date or (ii) 75 days after the close of each of the first three fiscal quarters
of each fiscal year of each Significant Insurance Subsidiary, copies of the
Quarterly Statement of such Significant Insurance Subsidiary, certified by such
officers as shall be required by SAP of such Significant Insurance Subsidiary,
all such statements to be prepared in accordance with SAP consistently applied
through the period reflected therein.
(v) Upon the earlier of (i) fifteen days after the regulatory filing
date or (ii) 90 days after the close of each fiscal year of each Significant
Insurance Subsidiary, copies of the Annual Statement of such Significant
Insurance Subsidiary for such fiscal year, as certified by such officers as
shall be required by SAP for such Significant Insurance Subsidiary and prepared
on the NAIC annual statement blanks (or such other form as shall be required by
the jurisdiction of incorporation of each such Insurance Subsidiary), all such
statements to be prepared in accordance with SAP consistently applied throughout
the periods reflected therein.
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(vi) As soon as available and only to the extent such an audited
statement is required to be prepared by any Governmental Authority, a copy of
the audited annual statement of each of CCC and CAC on a consolidated basis and
CIC on a combined basis (with the other Insurance Subsidiaries in the same
insurance pool) for the preceding year, as certified by such officers as shall
be required by SAP for such entities and prepared on the form as shall be
required by the jurisdictions in which they are filed, all such statements to be
prepared in accordance with SAP consistently applied throughout the periods
reflected therein and to be certified by independent certified public
accountants of recognized national standing reasonably acceptable to the
Administrative Agent.
(vii) Within 150 days after the close of each of its fiscal years, annual
statutory statements for the Borrower's Insurance Subsidiaries on a consolidated
or combined basis, certified by such officers as shall be required by SAP, such
statements to be prepared in accordance with SAP consistently applied throughout
the periods reflected therein.
(viii) As soon as possible and in any event within 20 days after the
Borrower knows that any Termination Event has occurred with respect to any Plan,
a statement, signed by the chief financial officer of the Borrower, describing
said Termination Event and the action which the Borrower proposes to take with
respect thereto.
(ix) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports which the
Borrower or any of its Significant Insurance Subsidiaries files with the
Securities and Exchange Commission or any securities exchange.
(x) Such other information (including, without limitation, non-financial
information) as the Administrative Agent or any Lender may from time to time
reasonably request.
(b) Use of Proceeds. The Borrower will, and will cause
each Subsidiary to, use the proceeds of the Advances for general corporate
purposes (including to support the commercial paper program of the Borrower and
to finance Acquisitions); provided that the Borrower will not use any of the
proceeds of any Advance for the purpose of financing a Hostile Acquisition;
provided further that neither the Administrative Agent nor any Lender shall have
any responsibility as to the use of any such proceeds.
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(c) Certain Notices. The Borrower will give prompt notice
in writing to the Administrative Agent and the Lenders of (i) the occurrence of
any Default or Event of Default, (ii) any other development, financial or
otherwise, relating specifically to the Borrower which could reasonably be
expected to have a Material Adverse Effect, (iii) the receipt of any notice from
any Governmental Authority of the expiration without renewal, revocation or
suspension of, or the institution of any proceedings to revoke or suspend, any
License now or hereafter held by any Significant Insurance Subsidiary which is
required to conduct insurance business in compliance with all applicable laws
and regulations, other than such expiration, revocation or suspension which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, (iv) the receipt of any notice from any Governmental
Authority of the institution of any disciplinary proceedings against or in
respect of any Significant Insurance Subsidiary, or the issuance of any order,
the taking of any action or any request for an extraordinary audit for cause by
any Governmental Authority which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect, (v) any judicial or administrative
order limiting or controlling the insurance business of any Significant
Insurance Subsidiary (and not the insurance industry generally) which has been
issued or adopted and which could reasonably be expected to have a Material
Adverse Effect or (vi) any change in the rating of the unsecured, unguaranteed
senior long-term debt obligations of the Borrower by Moody's or S&P.
(d) Conduct of Business. The Borrower will, and will cause
each Significant Subsidiary to, do all things necessary (if applicable) to
remain duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted except where such failure to remain in good standing or to maintain
such authority may not reasonably be expected to have a Material Adverse Effect.
The Borrower will cause each Significant Insurance Subsidiary to (a) carry on or
otherwise be associated with the business of a licensed insurance carrier and
(b) do all things necessary to renew, extend and continue in effect all Licenses
which may at any time and from time to time be necessary for such Significant
Insurance Subsidiary to operate its insurance business in compliance with all
applicable laws and regulations; provided, however, that any such Significant
Insurance Subsidiary may withdraw from one or more states as an admitted
insurer, change the state of its domicile or fail to keep in effect any License
if such withdrawal, change or failure is in the best interests of the Borrower
and such Significant Insurance Subsidiary and could not reasonably be expected
to have a Material Adverse Effect.
(e) Taxes. The Borrower will, and will cause each
Subsidiary to, pay when due all material taxes, assessments and governmental
charges and levies upon it or its income, profits or Property, except those
which are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been set aside.
(f) Insurance. The Borrower will, and will cause each
Significant Subsidiary to, maintain with financially sound and reputable
insurance companies insurance on all or substantially all of its Property, or
shall maintain self-insurance, in such amounts and covering such risks as is
consistent with sound business practice for Persons in substantially the same
industry as the Borrower or such Subsidiary, and the Borrower will furnish to
any Lender upon request full information as to the insurance carried.
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(g) Compliance with Laws. The Borrower will, and will
cause each Subsidiary to, comply with all laws, rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may be subject
(including ERISA and applicable Environmental Laws), except where the failure to
so comply could not reasonably be expected to have a Material Adverse Effect.
(h) Maintenance of Properties. The Borrower will, and will
cause each Significant Subsidiary to, do all things necessary to maintain,
preserve, protect and keep its Property in good repair, working order and
condition, and make all necessary and proper repairs, renewals and replacements
so that its business carried on in connection therewith may be properly
conducted at all times, except where the failure to so maintain, preserve,
protect and repair could not reasonably be expected to have a Material Adverse
Effect.
(i) Inspection. The Borrower will, and will cause each
Subsidiary to, permit the Administrative Agent and the Lenders (coordinated
through the Administrative Agent), by their respective representatives and
agents, to inspect any of the Property, corporate books and financial records of
the Borrower and each Subsidiary, to examine and make copies of the books of
accounts and other financial records of the Borrower and each Subsidiary, and to
discuss the affairs, finances and accounts of the Borrower and each Subsidiary
with, and to be advised as to the same by, their respective officers upon
reasonable notice and at such reasonable times and intervals as the Lenders may
designate.
(j) Merger. The Borrower will not, nor will it permit
any Significant Subsidiary to, merge or consolidate with or into any other
Person, except that (a) a Significant Subsidiary may merge into the Borrower or
a Wholly Owned Subsidiary and (b) the Borrower or any Significant Subsidiary may
merge or consolidate with any other Person provided that the Borrower or such
Significant Subsidiary shall be the continuing or surviving corporation and,
prior to and after giving effect to such merger or consolidation, no Default or
Event of Default shall exist.
(k) Sale of Assets. The Borrower will not, nor will it
permit any Subsidiary to, lease, sell or otherwise dispose of a Substantial
Portion of Property of the Borrower and its Subsidiaries on a Consolidated basis
to any other Person(s) in any twelve month period; provided, however, that
Subsidiaries shall be permitted to sell assets for fair market value in
arm's-length transactions (as determined, in transactions out of the ordinary
course of business, by the Board of Directors of the selling Subsidiary acting
in good faith).
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(l) Liens. The Borrower will not, nor will it permit any
Subsidiary to, create, incur, or suffer to exist any Lien in or on the Property
of the Borrower or any of its Subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges
or levies on its Property if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are not material and are paid
promptly upon receipt of notice of nonpayment, or are being contested in good
faith and by appropriate proceedings and for which adequate reserves in
accordance with generally accepted principles of accounting shall have been set
aside on its books;
(ii) Liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations not more than 60
days past due or which are being contested in good faith by appropriate
proceedings and for which adequate reserves shall have been set aside on its
books;
(iii) Liens arising out of pledges or deposits under
worker's compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation, including,
without limitation, statutory deposits under applicable insurance laws;
(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not in
any material way affect the marketability of the same or interfere with the use
thereof in the business of the Borrower or the Subsidiaries;
(v) Liens existing on the Closing Date and, in the case of Liens
upon Property of the Borrower, described in Schedule II hereto;
(vi) Liens upon the Property of Insurance Subsidiaries incurred in
the ordinary course of their business;
(vii) Liens on Qualifying SPV Assets securing Qualifying SPV
Indebtedness, which Qualifying SPV Assets shall have a fair market value not in
excess of 25% of the fair market value of the Invested Assets of the Borrower
and its Subsidiaries on a consolidated basis in accordance with GAAP as of the
end of the preceding calendar year;
(viii) Liens on Receivables and Receivables Related Assets in
connection with Permitted Securitization Transactions; and
(ix) Other Liens securing Indebtedness for borrowed money
(including Qualifying SPV Indebtedness) not exceeding at any time $500,000,000
in aggregate principal amount.
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(m) Consolidated Capitalization. The Borrower will
maintain at all times a ratio of (a) Aggregate Specified Indebtedness to (b) the
sum of (i) Aggregate Specified Indebtedness plus (ii) Consolidated Net Worth of
not greater than 0.35 to 1.0.
(n) Insurance Company Surplus. The Borrower shall cause
the combined Surplus as Regards Policyholders of CCC on a consolidated basis and
CIC on a combined basis (with the other Insurance Subsidiaries in the same
insurance pool) to be at all times at least equal to $4.5 billion.
(o) Limitation on Qualifying SPV Assets. The Borrower will
not at any time permit the aggregate fair market value of all Qualifying SPV
Assets at such time to exceed 25% of the fair market value of the Invested
Assets of the Borrower and its Subsidiaries on a consolidated basis in
accordance with GAAP as of the end of the preceding calendar year.
ARTICLE 6
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the
following events (“Events of Default”) shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any
Advance when the same becomes due and payable; or the Borrower shall fail to pay
any interest on any Advance or any Facility Fee or Utilization Fee or any other
amount payable hereunder when due and such failure remains unremedied for three
Business Days; or
(b) Any representation or warranty made by the Borrower
herein or by the Borrower (or any of its officers) in connection with this
Agreement shall prove to have been incorrect in any material respect when made
or deemed made; or
(c) (i) The Borrower shall fail to perform or observe any
term, covenant or agreement contained in Sections 5.01(b), (c)(i), (j), (k),
(l), (m) or (n) or (ii) the Borrower shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement on its part to be
performed or observed, and such failure remains unremedied for 30 days after
notice thereof shall have been given to the Borrower by the Administrative Agent
or the Administrative Agent on behalf of any Lender; or
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(d) The Borrower or any of its Subsidiaries shall fail to
pay any principal of any other Indebtedness of the Borrower which is outstanding
in an aggregate principal amount of at least $20,000,000, or its equivalent in
other currencies (in this clause (d) called “Material Indebtedness”), in the
aggregate when the same becomes due and payable (whether at scheduled maturity,
by required prepayment, acceleration, demand or otherwise); or any other event
shall occur or condition shall exist under any agreement or instrument relating
to any Material Indebtedness and shall continue after the applicable grace
period, if any, specified in such agreement or instrument, if the effect of such
event or condition is to accelerate, or to permit the acceleration of, the
maturity of any Material Indebtedness, or to require the same to be prepaid or
defeased (other than by a regularly required payment); or
(e) The Borrower or any of its Significant Subsidiaries
shall generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be instituted
by or against the Borrower or any of its Significant Subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property and, in the case of any such
proceeding instituted against the Borrower or any of its Significant
Subsidiaries, such proceeding shall remain undismissed or unstayed for a period
of 60 days; or the Borrower or any of its Significant Subsidiaries shall take
any corporate action to authorize any of the actions set forth above in this
subsection (e) (provided that, for purposes of this subsection (e); or
(f) In connection with the actual or alleged insolvency of
any of CAC, CCC or CIC or any other Insurance Subsidiary, any Insurance
Regulatory Authority shall appoint a rehabilitator, receiver, custodian,
trustee, conservator or liquidator or the like (collectively, a “conservator”)
for CAC, CCC, CIC or such other Insurance Subsidiary, or cause possession of all
or any substantial portion of the property of CAC, CCC, CIC or such other
Insurance Subsidiary to be taken by any conservator (or any Insurance Regulatory
Authority shall commence any action to effect any of the foregoing); or
(g) A Change in Control shall occur; or
(h) The Borrower or any of its Subsidiaries shall fail
within 30 days to pay, bond or otherwise discharge any judgment or order for the
payment of money, either singly or in the aggregate, in excess of $20,000,000,
which is not stayed on appeal or otherwise being appropriately contested in good
faith; or
(i) The Borrower shall terminate, or the PBGC shall
institute proceedings under Title IV of ERISA to terminate, or to impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or to cause a trustee to be appointed to administer, any Single Employer Plan
having Unfunded Liabilities in excess of $20,000,000;
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then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the request, or
may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the Advances, all interest thereon and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon the Advances, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower; provided, however, that in the
event of an Event of Default with respect to the Borrower of the kind referred
to in clause (e) above or with respect to any of CAC, CCC or CIC of the kind
referred to in clause (f) above, (A) the obligation of each Lender to make
Advances shall automatically be terminated and (B) the Advances, all such
interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrower.
ARTICLE 7
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action. Each Lender
hereby appoints and authorizes the Administrative Agent to take such action as
administrative agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement (including, without
limitation, enforcement or collection of the Advances), the Administrative Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Majority Lenders,
and such instructions shall be binding upon all Lenders; provided, however, that
the Administrative Agent shall not be required to take any action which exposes
the Administrative Agent to personal liability or which is contrary to this
Agreement or applicable law. The Administrative Agent agrees to give to each
Lender prompt notice of each notice given to it by the Borrower pursuant to the
terms of this Agreement.
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SECTION 7.02. Administrative Agent's Reliance, Etc.
Neither the Administrative Agent nor any of its directors, officers, agents or
employees shall be liable to the Lenders for any action taken or omitted to be
taken by it or them under or in connection with this Agreement, except for its
or their own gross negligence or willful misconduct. Without limitation of the
generality of the foregoing, the Administrative Agent: (i) may consult with
legal counsel (including counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable to the
Lenders for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (ii) makes
no warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement; (iii) shall not have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of this Agreement on the part of the Borrower
or to inspect the property (including the books and records) of the Borrower or
any of its Subsidiaries; (iv) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other instrument or document furnished pursuant hereto;
and (v) shall incur no liability to the Lenders under or in respect of this
Agreement by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telecopier, telegram, cable or telex) believed by it to
be genuine and signed or sent by the proper party or parties.
SECTION 7.03. Citibank and Affiliates. With respect
to its Commitment and the Advances made by it, Citibank shall have the same
rights and powers under this Agreement as any other Lender and may exercise the
same as though it were not the Administrative Agent; and the term “Lender” or
“Lenders” shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any kind
of business with, the Borrower, any of its Subsidiaries and any Person who may
do business with or own securities of the Borrower or any such Subsidiary, all
as if Citibank were not the Administrative Agent and without any duty to account
therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender
acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender and based on the financial statements
referred to in Section 4.01 and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.
SECTION 7.05. Indemnification The Lenders agree to
indemnify the Administrative Agent (to the extent not reimbursed by the
Borrower), ratably according to the respective amounts of their Commitments,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against the Administrative Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by the Administrative Agent under this
Agreement, provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements found in a final-non-appealable judgment by a
court of competent jurisdiction to have resulted from the Administrative Agent's
gross negligence or willful misconduct. Without limiting the foregoing, each
Lender agrees to reimburse the Administrative Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including counsel fees) incurred by
the Administrative Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, to the extent that
the Administrative Agent is not reimbursed for such expenses by the Borrower.
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SECTION 7.06. Successor Administrative Agent. The
Administrative Agent may resign at any time by giving written notice thereof to
the Lenders and the Borrower and may be removed at any time with or without
cause by the Majority Lenders. Upon any such resignation or removal, the
Majority Lenders shall have the right to appoint a successor Administrative
Agent that, unless a Default or Event of Default shall have occurred and then be
continuing, is reasonably acceptable to the Borrower. If no successor
Administrative Agent shall have been so appointed by the Majority Lenders, and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Majority Lenders'
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Lenders, appoint a successor Administrative Agent,
which shall be a commercial bank organized under the laws of the United States
of America or of any State thereof and having total assets of at least
$1,000,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent, the provisions of this Article 7
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement.
SECTION 7.07. Advisor, Sole Arranger and Book
Manager, Syndication Agent and Documentation Agent.
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The Advisor, Sole Arranger and Book Manager, the Syndication Agent and the
Documentation Agent named on the cover page of this Agreement, in their
capacities as such, shall have no obligation, responsibility or required
performance hereunder and shall not become liable in any manner hereunder to any
party hereto.
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or
waiver of any provision of this Agreement, nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Borrower and the Majority Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all the Lenders, do any of the
following: (a) increase or extend the Commitments of such Lenders, (b) reduce
the principal of, or interest on, the Notes or any fees (other than the
Administrative Agent's fee referred to in Section 2.03(c)) or other amounts
payable hereunder, (c) postpone any date fixed for any payment of principal of,
or interest on, the Advances or any fees (other than the Administrative Agent's
fee referred to in Section 2.03(c)) or other amounts payable hereunder,
(d) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Advances, or the number of Lenders, which shall be
required for the Lenders or any of them to take any action hereunder or
(e) amend this Section 8.01; provided further that no amendment, waiver or
consent shall, unless in writing and signed by the Administrative Agent in
addition to the Lenders required above to take such action, affect the rights or
duties of the Administrative Agent under this Agreement. This Agreement and the
agreement referred to in Section 2.03(c) constitute the entire agreement of the
parties with respect to the subject matter hereof and thereof.
SECTION 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including telecopier)
and mailed, telecopied or delivered by hand:
(a) if to the Borrower:
CNA Financial Corporation
CNA Plaza
Chicago, Illinois 60685
Attention: Treasurer, 23 South
Telephone No.: 312-822-4161
Telecopier No.: 312-755-3692
(b) if to the Administrative Agent:
Citibank, N.A.
Two Penns Way, Suite 200
New Castle, Delaware 19720
Attention: Lee Ocasil
Telephone No.: 302-894-6065
Telecopier No.: 302-894-6120
(c) if to any Lender, at the Domestic Lending Office
specified in the Administrative Questionnaire of such Lender;
or, as to the Borrower or the Administrative Agent, at such other address as
shall be designated by such party in a written notice to the other parties and,
as to each other party, at such other address as shall be designated by such
party in a written notice to the Borrower and the Administrative Agent. All
such notices and communications shall be deemed to have been duly given or made
(i) in the case of hand deliveries, when delivered by hand, (ii) in the case of
mailed notices, three Business Days after being deposited in the mail, postage
prepaid, and (iii) in the case of telecopier notice, when transmitted and
confirmed during normal business hours (or, if delivered after the close of
normal business hours, at the beginning of business hours on the next Business
Day), except that notices and communications to the Administrative Agent
pursuant to Article 2 or 7 shall not be effective until received by the
Administrative Agent.
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SECTION 8.03. No Waiver; Remedies. No failure on
the part of any Lender or the Administrative Agent to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs, Expenses and Indemnification.
(a) The Borrower agrees to pay and reimburse
on demand all reasonable costs and expenses of the Administrative Agent and the
Arranger in connection with the preparation, execution, delivery,
administration, modification and amendment of this Agreement and the other
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Administrative
Agent with respect thereto and with respect to advising the Administrative Agent
as to its rights and responsibilities under this Agreement. The Borrower
further agrees to pay on demand all costs and expenses, if any (including,
without limitation, reasonable counsel fees and expenses of the Administrative
Agent and each of the Lenders), incurred by the Administrative Agent or any
Lender in connection with the enforcement (whether through negotiations, legal
proceedings or otherwise) of this Agreement and the other documents to be
delivered hereunder, including, without limitation, reasonable counsel fees and
expenses in connection with the enforcement of rights under this Section
8.04(a). Such reasonable fees and out-of-pocket expenses shall be reimbursed by
the Borrower upon presentation to the Borrower of a statement of account,
regardless of whether this Agreement is executed and delivered by the parties
hereto or the transactions contemplated by this Agreement are consummated.
(b) The Borrower hereby agrees to indemnify
the Administrative Agent, Salomon Smith Barney Inc., each Lender and each of
their respective Affiliates and their respective officers, directors, employees,
agents, advisors and representatives (each, an “Indemnified Party”) from and
against any and all direct claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and disbursements of counsel),
joint or several, that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or relating
to any investigation, litigation or proceeding or the preparation of any defense
with respect thereto arising out of or in connection with or relating to this
Agreement or the transactions contemplated hereby or thereby or any use made or
proposed to be made with the proceeds of the Advances, whether or not such
investigation, litigation or proceeding is brought by the Borrower, any of its
shareholders or creditors, an Indemnified Party or any other Person, or an
Indemnified Party is otherwise a party thereto, and whether or not any of the
conditions precedent set forth in Article 3 are satisfied or the other
transactions contemplated by this Agreement are consummated, except to the
extent such direct claim, damage, loss, liability or expense is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct.
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The Borrower hereby further agrees that no
Indemnified Party shall have any liability (whether direct or indirect, in
contract, tort or otherwise) to the Borrower for or in connection with or
relating to this Agreement or the transactions contemplated hereby or thereby or
any use made or proposed to be made with the proceeds of the Advances, except to
the extent such liability is found in a final, non-appealable judgment by a
court of competent jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct.
(c) If any payment of principal of, or
Conversion or Continuation of, any Eurodollar Rate Advance is made other than on
the last day of an Interest Period for such Advance as a result of any optional
or mandatory prepayment, acceleration of the maturity of the Advances pursuant
to Section 6.01 or for any other reason, the Borrower shall pay to the
Administrative Agent for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs or expenses (other than
loss of profit) which it may reasonably incur as a result of such payment,
Continuation or Conversion and the liquidation or reemployment of deposits or
other funds acquired by any Lender to fund or maintain such Advance. A
certificate as to the amount of such losses, costs and expenses, submitted to
the Borrower and the Administrative Agent by such Lender, shall be conclusive
and binding for all purposes, absent manifest error.
SECTION 8.05. Binding Effect. This Agreement shall
become effective when it shall have been executed by the Borrower and the
Administrative Agent and when the Administrative Agent shall have been notified
by each Bank that such Bank has executed it and thereafter shall be binding upon
and inure to the benefit of the Borrower, the Administrative Agent and each
Lender and their respective successors and permitted assigns, except that the
Borrower shall not have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Lenders.
SECTION 8.06. Assignments and Participations.
(a) Each Lender may, with notice to and the
consent of the Administrative Agent and, unless an Event of Default shall have
occurred and be continuing, the Borrower (such consents not to be unreasonably
withheld), assign to one or more banks or other entities all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment and the Advances owing to it); provided that:
(i) each such assignment shall be of a constant, and not
a varying, percentage of all rights and obligations of the assigning Lender
under this Agreement,
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(ii) except in the case of an assignment by a Lender to
one of its Affiliates or to another Lender, the amount of the Commitment of the
assigning Lender being assigned pursuant to each such assignment (determined as
of the date of the Assignment and Acceptance with respect to such assignment)
shall in no event (unless the Borrower and the Administrative Agent otherwise
agree) be less than the lesser of (x) such Lender's Commitment hereunder and
(y) $10,000,000 or an integral multiple of $1,000,000 in excess thereof,
(iii) each such assignment shall be to an Eligible
Assignee,
(iv) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, and
(v) the parties to each such assignment (other than the
Borrower) shall deliver to the Administrative Agent a processing and recordation
fee of $3,000.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment
and Acceptance, the Lender assignor thereunder and the assignee thereunder
confirm to and agree with each other and the other parties hereto as follows:
(i) other than as provided in such Assignment and Acceptance, such assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; (ii) such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Borrower or the performance or observance by
the Borrower of any of its obligations under this Agreement or any other
instrument or document furnished pursuant hereto; (iii) such assignee confirms
that it has received a copy of this Agreement, together with copies of the
financial statements referred to in Section 4.01 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Administrative Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Administrative Agent to take such action as administrative agent on its behalf
and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
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(c) Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an assignee representing that it
is an Eligible Assignee, the Administrative Agent shall, if such Assignment and
Acceptance has been completed (and the Borrower and the Administrative Agent
shall have consented to the relevant assignment) and is in substantially the
form of Exhibit B hereto, (i) accept such Assignment and Acceptance, (ii) record
the information contained therein in the Register and (iii) give prompt notice
thereof to the Borrower.
(d) The Administrative Agent shall maintain at
its address referred to in Section 8.02 a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation of the names
and addresses of each of the Lenders and, with respect to Lenders, the
Commitment of, and principal amount of the Advances owing to, each such Lender
from time to time (the “Register”). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for the purposes of this
Agreement. The Register shall be available for inspection by the Borrower or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Each Lender may sell participations to
one or more Persons (excluding any Persons primarily engaged in the insurance or
mutual fund business) in or to all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitment and the Advances owing to it); provided, however, that (i) such
Lender's obligations under this Agreement (including, without limitation, its
Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) the Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, (iv)
in any proceeding under the Federal Bankruptcy Code in respect of the Borrower,
such Lender shall remain and be, to the fullest extent permitted by law, the
sole representative with respect to the rights and obligations held in the name
of such Lender (whether such rights or obligations are for such Lender's own
account or for the account of any participant) and (v) no participant under any
such participation agreement shall have any right to approve any amendment or
waiver of any provision of this Agreement, or to consent to any departure by the
Borrower therefrom, except to the extent that any such amendment, waiver or
consent would (x) reduce the principal of, or interest on, the Notes, in each
case to the extent the same are subject to such participation, or (y) postpone
any date fixed for the payment of principal of, or interest on, the Advances, in
each case to the extent the same are subject to such participation.
(f) Any Lender may, in connection with any
permitted assignment or participation or proposed assignment or participation
pursuant to this Section 8.06 and subject to the provisions of Section 8.12,
disclose to the assignee or participant or proposed assignee or participant any
information relating to the Borrower or any of its Subsidiaries or Affiliates
furnished to such Lender by or on behalf of the Borrower.
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(g) Notwithstanding any other provision set
forth in this Agreement, any Lender may at any time, without the consent of the
Administrative Agent or the Borrower, create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it) in favor of any Federal Reserve Bank in accordance with
Regulation A of the Board of Governors of the Federal Reserve System.
(h) Notwithstanding any other provision set
forth in this Agreement, any Lender may at any time, without the consent of the
Administrative Agent or the Borrower, assign to an Affiliate of such Lender
(excluding any Affiliate of such Lender primarily engaged in the insurance or
mutual fund business) all or any portion of its rights (but not its obligations)
under this Agreement.
SECTION 8.07. Governing Law; Submission to
Jurisdiction. This Agreement shall be governed by, and construed in accordance
with, the law of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York state court sitting in New York City
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Borrower irrevocably
waives, to the fullest extent permitted by applicable law, any objection that it
may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
SECTION 8.08. Severability. In case any provision
in this Agreement shall be held to be invalid, illegal or unenforceable, such
provision shall be severable from the rest of this Agreement, as the case may
be, and the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
SECTION 8.09. Execution in Counterparts. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement. Any counterpart hereof may be executed and delivered via
telecopier, and each such counterpart so executed and delivered shall have the
same force and effect as an originally executed and delivered counterpart
hereof.
SECTION 8.10. Survival. The obligations of the
Borrower under Sections 2.02(c), 2.07, 2.11, 2.14 and 8.04, and the obligations
of the Lenders under Section 7.05, shall survive the repayment of the Advances
and the termination of the Commitments. In addition, each representation and
warranty made, or deemed to be made by any Notice of Borrowing, herein or
pursuant hereto shall survive the making of such representation and warranty,
and no Lender shall be deemed to have waived, by reason of making any Advance,
any Default or Event of Default that may arise by reason of such representation
or warranty proving to have been false or misleading, notwithstanding that such
Lender or the Administrative Agent may have had notice or knowledge or reason to
believe that such representation or warranty was false or misleading at the time
such extension of credit was made.
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SECTION 8.11. Waiver of Jury Trial. EACH OF THE
BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 8.12. Confidentiality. Each Lender agrees
to hold any confidential information which it may receive from the Borrower or
any of its Subsidiaries or Affiliates pursuant to this Agreement in confidence
and for use in connection with this Agreement, including without limitation, for
use in connection with its rights and remedies hereunder, except for disclosure
(a) to other Lenders and their respective Affiliates, (b) to legal counsel,
accountants, and other professional advisors to such Lender, (c) to regulatory
officials, (d) as requested pursuant to or as required by law, regulation, or
legal process, (e) in connection with any legal proceeding to which such Lender
is a party and (f) to a proposed assignee or participant permitted under Section
8.06 which shall have agreed in writing for the benefit of the Borrower and its
Subsidiaries and Affiliates to keep such disclosed confidential information
confidential in accordance with this Section.
SECTION 8.13. Nonliability of Lenders. The
relationship between the Borrower and the Lenders and the Administrative Agent
shall be solely that of borrower and lender. Neither the Administrative Agent
nor any Lender shall have any fiduciary responsibilities to the Borrower.
Neither the Administrative Agent nor any Lender undertakes any responsibility to
the Borrower to review or inform the Borrower of any matter in connection with
any phase of the Borrower's business or operations.
SECTION 8.14. Existing Credit Agreement. On the
Effective Date, the commitment of each lender under the Existing Credit
Agreement shall automatically terminate.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
Borrower
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CNA FINANCIAL CORPORATION By /s/ DONALD P. LOFE JR.
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Name: Donald P. Lofe Jr. Title: Group Vice President Corporate Finance
Administrative Agent
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CITIBANK, N.A., as Administrative Agent By
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Name: Title: Banks
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CITIBANK, N.A. By
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Name: Title:
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FLEET NATIONAL BANK By
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Name: Title:
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THE CHASE MANHATTAN BANK By
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Name: Title:
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BANK OF AMERICA, N.A. By
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Name: Title:
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BANK ONE NA By
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Name: Title:
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MELLON BANK, N.A. By
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Name: Title:
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WELLS FARGO BANK, NATIONAL ASSOCIATION By
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Name: Title:
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THE BANK OF TOKYO - MITSUBISHI, LTD., CHICAGO BRANCH By
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Name: Title:
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THE NORTHERN TRUST COMPANY By
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Name: Title:
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WACHOVIA BANK, N.A. By
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Name: Title:
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FIRSTAR BANK, N.A. By
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Name: Title:
SCHEDULE I
Banks and Commitments
Bank
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Commitment
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Citibank, N.A. $35,000,000 Fleet National Bank $30,000,000 The Chase
Manhattan Bank $30,000,000 Bank of America $22,500,000 Bank One, N.A.
$22,500,000 Mellon Bank, N.A. $22,500,000 Wells Fargo Bank, N.A. $22,500,000
Bank of Tokyo - Mitsubishi Ltd. $17,500,000 Northern Trust Bank $17,500,000
Wachovia Bank, N.A. $17,500,000 Firstar Bank N.A.
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$12,500,000
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Total $250,000,000
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SCHEDULE II
Existing Liens
None
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EXHIBIT A
NOTICE OF BORROWING
Citibank, N.A., as Administrative
Agent for the Lenders parties
to the Credit Agreement
referred to below
Two Penns Ways, Suite 200
New Castle, Delaware 19720
Attention: Lee Ocasil
[Date]
Ladies and Gentlemen:
The undersigned, CNA Financial Corporation (the “Borrower”), refers
to the 364-Day Credit Agreement, dated as of April 30, 2001 (as from time to
time amended, the “Credit Agreement”, the terms defined therein being used
herein as therein defined), among the undersigned, certain Lenders parties
thereto and Citibank, N.A., as Administrative Agent for said Lenders, and hereby
gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement
that the undersigned hereby requests a Borrowing under the Credit Agreement, and
in that connection sets forth below the information relating to such Borrowing
(the “Proposed Borrowing”) as required by Section 2.02(a) of the Credit
Agreement:
(i) The Business Day of the Proposed Borrowing is
___________ __, _____.
(ii) The Type of Advances initially comprising the
Proposed Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].
(iii) The aggregate amount of the Proposed Borrowing is
$___________.
[(iv) The initial Interest Period for each Advance made as
part of the Proposed Borrowing is ______ month[s]]1.
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1 For Eurodollar Rate Advances only.
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed Borrowing:
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(a) the representations and warranties contained in
Section 4.01 (not including, in the case of a Borrowing after the initial
Borrowing, the Excluded Representations) are correct in all material respects,
before and after giving effect to the Proposed Borrowing and to the application
of the proceeds therefrom, as though made on and as of such date;
(b) no event has occurred and is continuing, or would
result from such Proposed Borrowing or from the application of the proceeds
therefrom, which constitutes an Event of Default or, to the best of the
undersigned's knowledge, a Default.
Very truly yours, CNA FINANCIAL CORPORATION By
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Title:
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EXHIBIT B
ASSIGNMENT AND ACCEPTANCE
Dated ____________ __, _____
Reference is made to the 364-Day Credit Agreement
dated as of April 30, 2001 (as from time to time amended, the “Credit
Agreement”) among CNA Financial Corporation, a Delaware corporation (the
“Borrower”), the Lenders (as defined in the Credit Agreement) and Citibank,
N.A., as Administrative Agent for the Lenders (the “Administrative Agent”).
Terms defined in the Credit Agreement are used herein with the same meaning.
_____________ (the “Assignor”) and _____________ (the
“Assignee”) agree as follows:
1. The Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
that interest in and to all of the Assignor's rights and obligations under the
Credit Agreement as of the date hereof which represents the percentage interest
specified on Schedule 1 of all outstanding rights and obligations under the
Credit Agreement, including, without limitation, such interest in the Assignor's
Commitment and the Advances owing to the Assignor. After giving effect to such
sale and assignment, the Assignee's Commitment and the amount of the Advances
owing to the Assignee will be as set forth in Schedule 1.
2. The Assignor (i) represents and warrants
that it is the legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any adverse claim; (ii)
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto.
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3. The Assignee (i) confirms that it has
received a copy of the Credit Agreement, together with copies of the financial
statements referred to in Section 4.01 thereof and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (ii) agrees that it will,
independently and without reliance upon the Administrative Agent, the Assignor
or any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iii) confirms that it is an
Eligible Assignee; (iv) appoints and authorizes the Administrative Agent to take
such action as administrative agent on its behalf and to exercise such powers
under the Credit Agreement as are delegated to the Administrative Agent by the
terms thereof, together with such powers as are reasonably incidental thereto;
(v) agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender; [and] (vi) specifies as its Domestic Lending Office
(and address for notices) and Eurodollar Lending Office the offices set forth
beneath its name on the signature pages hereof [and (vii) attaches the forms
prescribed by the Internal Revenue Service of the United States certifying as to
the Assignee's status for purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to the Assignee under
the Credit Agreement or such other documents as are necessary to indicate that
all such payments are subject to such rates at a rate reduced by an applicable
tax treaty].1
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1 If the Assignee is organized under the laws of a jurisdiction outside
the United States.
4. Following the execution of this
Assignment and Acceptance by the Assignor and the Assignee and the consent of
the Borrower, it will be delivered to the Administrative Agent for acceptance
and recording by the Administrative Agent. The effective date of this
Assignment and Acceptance shall be the date of acceptance thereof by the
Administrative Agent, unless otherwise specified on Schedule 1 hereto (the
“Effective Date”).
5. Upon such acceptance and recording by the
Administrative Agent, as of the Effective Date, (i) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
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6. Upon such acceptance and recording by the
Administrative Agent, from and after the Effective Date, the Administrative
Agent shall make all payments under the Credit Agreement in respect of the
interest assigned hereby (including, without limitation, all payments of
principal, interest, Facility Fee and Utilization Fee with respect thereto) to
the Assignee. The Assignor and Assignee shall make all appropriate adjustments
in payments under the Credit Agreement for periods prior to the Effective Date
directly between themselves.
7. This Assignment and Acceptance shall be
governed by, and construed in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused
this Assignment and Acceptance to be executed by their respective officers
thereunto duly authorized, as of the date first above written, such execution
being made on Schedule 1 hereto.
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SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
Percentage assigned to Assignee _______________%
Assignee's Commitment $______________
Aggregate outstanding principal
amount of Advances assigned $______________
Effective Date (if other than
date of acceptance by
Administrative Agent)* __________ __, _____ [NAME OF ASSIGNOR], as
Assignor By
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Title:
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[NAME OF ASSIGNEE], as Assignee By:
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Title: Domestic Lending Office: Eurodollar Lending Office:
* This date should be no earlier than the date of acceptance by the
Administrative Agent.
Accepted this ____ day
of _______, _____
CITIBANK, N.A., as
Administrative Agent
By_____________________
Title:
CONSENTED TO:
CNA FINANCIAL CORPORATION
By_____________________
Title:
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EXHIBIT C
[Form of Opinion of Counsel of the Borrower]
[date]
To the Banks party to the
Credit Agreement referred to
below
Citibank, N.A., as Administrative
Agent
Two Penns Way, Suite 200
New Castle, Delaware 19720
Ladies and Gentlemen:
I have acted as counsel to CNA Financial Corporation
(the “Borrower”) in connection with the 364-Day Credit Agreement (the “Credit
Agreement”) dated as of April 30, 2001, among the Borrower, the lenders named
therein and Citibank, N.A., as Administrative Agent, providing for loans to be
made by said lenders to the Borrower in an aggregate principal amount not
exceeding $250,000,000. Terms defined in the Credit Agreement are used in this
opinion letter as defined therein. This opinion letter is being delivered
pursuant to Section 3.01(d) of the Credit Agreement.
In rendering the opinion expressed below, I, or
attorneys under my supervision, have examined the following agreements,
instruments and other documents:
(a) the Credit Agreement; and
(b) such corporate records of the Borrower and such other
documents as I have deemed necessary as a basis for the opinions expressed
below.
In my examination, I have assumed the genuineness of
all signatures (other than those of the Borrower), the authenticity of all
documents submitted to me as originals and the conformity with authentic
original documents of all documents submitted to me as copies. When relevant
facts were not independently established, I have relied upon certificates of
governmental officials and appropriate representatives of the Borrower and upon
representations made in or pursuant to the Credit Agreement.
In rendering the opinions expressed below, I have
assumed, with respect to all of the documents referred to in this opinion
letter, that (except, to the extent set forth in the opinions expressed below,
as to the Borrower):
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(i) such documents have been duly authorized by, have been
duly executed and delivered by, and constitute legal, valid, binding and
enforceable obligations of, all of the parties to such documents;
(ii) all signatories to such documents have been duly
authorized; and
(iii) all of the parties to such documents are duly
organized and validly existing and have the power and authority (corporate or
other) to execute, deliver and perform such documents.
Based upon and subject to the foregoing and subject
also to the comments and qualifications set forth below, and having considered
such questions of law as I have deemed necessary as a basis for the opinions
expressed below, I am of the opinion that:
1. The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
2. The Borrower has all requisite corporate power to
execute and deliver, and to perform its obligations and to incur liabilities
under, the Credit Agreement.
3. The execution, delivery and performance by the
Borrower of, and the incurrence by the Borrower of liabilities under, the Credit
Agreement has been duly authorized by all necessary corporate action on the part
of the Borrower.
4. The Credit Agreement has been duly executed and
delivered by the Borrower.
5. The Credit Agreement constitutes the legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors generally and except as the enforceability of the Credit
Agreement is subject to the application of general principles of equity
(regardless of whether considered in a proceeding in equity or at law),
including, without limitation, (a) the possible unavailability of specific
performance, injunctive relief or any other equitable remedy and (b) concepts of
materiality, reasonableness, good faith and fair dealing.
6. No authorization, approval or consent of, and no
filing or registration with, any governmental or regulatory authority or agency
of the United States of America or the State of New York is required on the part
of the Borrower for the execution, delivery or performance by the Borrower of,
or for the incurrence by the Borrower of any liabilities under, the Credit
Agreement.
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7. The execution, delivery and performance by the
Borrower of, and the consummation by the Borrower of the transactions
contemplated by, the Credit Agreement do not and will not (a) violate any
provision of the charter or by-laws of the Borrower, (b) violate any applicable
law, rule or regulation of the United States of America (including, without
limitation, Regulations T, U and X issued by the Board of Governors of the
Federal Reserve System, as amended) or the State of New York, (c) violate any
order, writ, injunction or decree of any court or governmental authority or
agency or any arbitral award applicable to the Borrower and its Subsidiaries of
which I have knowledge (after due inquiry) or (d) result in a breach of,
constitute a default under, require any consent under, or result in the
acceleration or required prepayment of any indebtedness pursuant to the terms
of, any agreement or instrument of which I have knowledge (after due inquiry) to
which the Borrower and its Subsidiaries is a party or by which any of them is
bound or to which any of them is subject, or result in the creation or
imposition of any Lien upon any property of the Borrower pursuant to the terms
of any such agreement or instrument.
8. Other than as disclosed in filings of the Borrower
with the Securities and Exchange Commission, I have no knowledge (after due
inquiry) of any legal or arbitral proceedings, or any proceedings by or before
any governmental or regulatory authority or agency, now pending or threatened
against or affecting the Borrower or any of its Subsidiaries or any of their
respective Properties that, if adversely determined, could have a Material
Adverse Effect.
9. The Borrower is not an “investment company”, or a
Person “controlled by” an “investment company”, as such terms are defined in the
Investment Company Act of 1940, as amended.
The foregoing opinions are subject to the following comments and
qualifications:
(a) The enforceability of Section 8.04(b) of the Credit
Agreement may be limited by laws limiting the enforceability of provisions
exculpating or exempting a party from, or requiring indemnification of a party
for, its own action or inaction, to the extent such action or inaction involves
gross negligence, recklessness or willful or unlawful conduct.
(b) The enforceability of provisions in the Credit
Agreement to the effect that terms may not be waived or modified except in
writing may be limited under certain circumstances.
(c) I express no opinion as to (i) the effect of the laws
of any jurisdiction in which any Lender is located (other than the State of New
York) that limit the interest, fees or other charges such Lender may impose,
(ii) Section 2.15 of the Credit Agreement, (iii) the second sentence of
Section 8.07 of the Credit Agreement, insofar as such sentence relates to the
subject matter jurisdiction of the United States District Court for the Southern
District of New York to adjudicate any controversy related to the Credit
Agreement, (iv) the waiver of inconvenient forum set forth in Section 8.07 of
the Credit Agreement with respect to proceedings in the United States District
Court for the Southern District of New York and (v) Section 8.08 of the Credit
Agreement.
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The foregoing opinions are limited to matters
involving the Federal laws of the United States, the law of the State of New
York and the General Corporation Law of the State of Delaware, and I do not
express any opinion as to the laws of any other jurisdiction.
At the request of the Borrower, this opinion letter
is, pursuant to Section 3.01(d) of the Credit Agreement, provided to you by me
in my capacity as Counsel of the Borrower and may not be relied upon by any
Person for any purpose other than in connection with the transactions
contemplated by the Credit Agreement without, in each instance, my prior written
consent.
Very truly yours,
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EXHIBIT D
[Form of Opinion of Special New York
Counsel to the Administrative Agent]
[date]
To the Banks party to the
Credit Agreement referred to
below
Citibank, N.A., as Administrative
Agent
399 Park Avenue
New York, New York 10043
Ladies and Gentlemen:
We have acted as special New York counsel to
Citibank, N.A. (the “Administrative Agent”), as Administrative Agent, in
connection with the 364-Day Credit Agreement dated as of April 30, 2001 (the
“Credit Agreement”) among CNA Financial Corporation (the “Borrower”), the
lenders named therein and the Administrative Agent, providing for loans to be
made by said lenders to the Borrower in an aggregate principal amount not
exceeding $250,000,000. Terms defined in the Credit Agreement are used herein
as defined therein. This opinion is being delivered pursuant to Section 3.01(e)
of the Credit Agreement.
In rendering the opinions expressed below, we have
examined the Credit Agreement. In our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with authentic original documents of all
documents submitted to us as copies.
In rendering the opinions expressed below, we have
assumed, with respect to the Credit Agreement, that:
(i) the Credit Agreement has been duly authorized by, have been duly
executed and delivered by, and (except to the extent set forth in the opinions
below as to the Borrower) constitutes legal, valid, binding and enforceable
obligations of, all of the parties thereto;
(ii) all signatories to the Credit Agreement have been duly authorized;
and
(iii) all of the parties to the Credit Agreement are duly organized and
validly existing and have the power and authority (corporate or other) to
execute, deliver and perform the Credit Agreement.
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Based upon and subject to the foregoing and subject
also to the comments and qualifications set forth below, and having considered
such questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that the Credit Agreement constitutes the
legal, valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally and except as the enforceability of
the Credit Agreement is subject to the application of general principles of
equity (regardless of whether considered in a proceeding in equity or at law),
including, without limitation, (a) the possible unavailability of specific
performance, injunctive relief or any other equitable remedy and (b) concepts of
materiality, reasonableness, good faith and fair dealing.
The foregoing opinions are subject to the following comments and
qualifications:
(a) The enforceability of Section 8.04(b) of the Credit
Agreement may be limited by laws limiting the enforceability of provisions
exculpating or exempting a party from, or requiring indemnification of a party
for, its own action or inaction, to the extent such action or inaction involves
gross negligence, recklessness or willful or unlawful conduct.
(b) The enforceability of provisions in the Credit
Agreement to the effect that terms may not be waived or modified except in
writing may be limited under certain circumstances.
(c) We express no opinion as to (i) the effect of the laws
of any jurisdiction in which any Lender is located (other than the State of New
York) that limit the interest, fees or other charges such Lender may impose,
(ii) Section 2.15 of the Credit Agreement, (iii) the second sentence of
Section 8.07 of the Credit Agreement, insofar as such sentence relates to the
subject matter jurisdiction of the United States District Court for the Southern
District of New York to adjudicate any controversy related to the Credit
Agreement, (iv) the waiver of inconvenient forum set forth in Section 8.07 of
the Credit Agreement with respect to proceedings in the United States District
Court for the Southern District of New York and (v) Section 8.08 of the Credit
Agreement.
The foregoing opinions are limited to matters involving the Federal
laws of the United States and the law of the State of New York, and we do not
express any opinion as to the laws of any other jurisdiction.
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This opinion letter is, pursuant to Section 3.01(e) of the Credit
Agreement, provided to you by us in our capacity as special New York counsel to
the Administrative Agent and may not be relied upon by any Person for any
purpose other than in connection with the transactions contemplated by the
Credit Agreement without, in each instance, our prior written consent.
Very truly yours,
WFC
[File No. 26653-37500]
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EXHIBIT E
COMPLIANCE CERTIFICATE
To: The Lenders parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to
that certain 364-Day Credit Agreement dated as of April 30, 2001 (as amended,
modified, renewed or extended from time to time, the “Agreement”) among the
Borrower, the banks named therein, Salomon Smith Barney Inc., as Advisor, Sole
Arranger and Book Manager, Fleet National Bank as Syndication Agent, The Chase
Manhattan Bank, as Documentation Agent and Citibank, N.A., as Administrative
Agent for the Lenders. Unless otherwise defined herein, capitalized terms used
in this Compliance Certificate have the meanings ascribed thereto in the
Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected Chief Financial Officer of the
Borrower;
2. I have reviewed the terms of the Agreement and I have
made, or have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Borrower and its Subsidiaries during the
accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not
disclose, and I have no knowledge of, the existence of any condition or event
which constitutes a Default or an Event of Default during or at the end of the
accounting period covered by the attached financial statements or as of the date
of this Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data
and computations evidencing the Borrower's compliance with certain covenants of
the Agreement, all of which data and computations are true, complete and
correct.
Described below are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which the Borrower has taken, is taking, or
proposes to take with respect to each such condition or event:
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The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this ___ day of_________, 20__.
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SCHEDULE I TO COMPLIANCE CERTIFICATE
Schedule of Compliance as of [_____________] with
Provisions of Sections 5.01(m), 5.01(n) and 5.01(o) of
the Agreement
1. Section 5.01(m) - Consolidated Capitalization
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A. Aggregate Specified Indebtedness $__________ B.
Consolidated Capitalization (i) Aggregate Specified Indebtedness
$__________ (ii) Consolidated Net Worth $__________
(iii) Sum of (i) and (ii) $__________ C. Ratio of A to B ____:1.0
D. Permitted Ratio Not greater than 0.35:1.0 Complies ____
Does Not Comply _____ 2. Section 5.01(n) - Insurance Company Surplus
as Regards Policyholders
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A. Surplus as Regards Policyholders of Continental Casualty Company
(on a consolidated basis): $__________ B. Surplus as Regards
Policyholders of Continental Insurance Company (on a combined, without
duplication, basis with the other Insurance Subsidiaries in the same insurance
pool): $__________ C. Total of A and B: $__________ D.
Minimum Combined Surplus as Regards Policyholders per Covenant $4,500,000,000
Complies ____ Does Not Comply _____ 3. Section 5.01(o) -
Limitation on Qualifying SPV Assets
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A. Aggregate Fair Market Value of Invested Assets of $________
Borrower and its Subsidiaries on a consolidated basis in accordance with
GAAP as of the end of the preceding calendar year. B.
Aggregate Fair Market Value of Qualifying SPV Assets $________ C.
Ratio of B over A as a Percentage _________% D. Permitted Percentage
Not greater than 25% Complies ____ Does Not Comply _____
|
CONSULTING AGREEMENT
Employment Agreement dated as of January 1, 2001, between Mr. I. Roy Cohen
("Consultant"), an individual residing at Gracemere, Tarrytown, New York 10591,
and Alpharma Inc., a Delaware corporation (the "Company") the principal place of
business of which is One Executive Drive, Fort Lee, New Jersey 07024.
WHEREAS, Consultant has for many years served the Company, formerly as the chief
executive officer and continuing as a consultant, and has contributed to the
growth of the Company;
WHEREAS, the Company desires to assure itself of the continued valuable services
of Consultant and Consultant desires to provide such services to the Company,
all on the terms and conditions set forth herein:
NOW THEREFORE, it is mutually agreed as follows:
General Agreement.
Consultant agrees that during the term of this Agreement (the "Term") he will
continue to provide services to the Company and its subsidiaries and will
refrain from providing services to or assisting any other competitor of the
Company or its subsidiaries, all as herein provided; and, as consideration
therefore, the Company agrees to pay the compensation and fees, and provide the
benefits, to Consultant (or, in the event of the death of Consultant, to the
persons named in section 6 below) herein provided.
During the Term hereof Consultant shall, as an independent contractor and not as
an employee, be a special consultant to the Company. In such capacity,
Consultant will make himself available to provide at least ten (10) days of
consultation to the Company during each year of the Term. The Company's Chief
Executive Officer may request, that Consultant provide more than ten (10) days
of consultancy services during each year of the Term. If the Consultant agrees
to provide such additional services, all of the terms and conditions of this
Agreement, including the payment required by Section 3(a) shall apply.
The amount, timing and location of Consultant's services shall be mutually
acceptable to Consultant and the Company's then Chief Executive Officer, each of
whom shall use reasonable efforts to accommodate the requests and needs of the
other person. Consultant agrees, if elected as such, to serve as a director for
the Company and/or Chairman of the Executive Committee and/or such other
committee position to which he may be elected to during the Term and, if so
elected, shall receive the normal compensation related to such positions in
addition to the fees payable to him hereunder as a consultant.
Duration of Term.
The Term hereof shall commence on the date hereof and continue through December
31, 2001 and, if extended pursuant to the terms hereof, from year to year
thereafter. For one or more years after 2001, either party hereto may indicate
that it desires to extend the Term of this Agreement for an additional year by
giving the other party written notice of such desire at least sixty (60) days
prior to the end of the Term ("Extension Notice"). The Term shall be so extended
for an additional year unless the party receiving the Extension Notice gives the
other party written notice that it does not desire to extend the Term.
Compensation.
As consideration for Consultant's services and non-competition agreement during
the Term, the Company shall pay Consultant (pursuant to the payment schedule
referred to below) consideration of $3,775 for each day the Consultant provides
services hereunder. Such consideration shall be paid to Consultant from time to
time during the Term no later than thirty (30) days after the performance of
services hereunder.
For purposes of section 3(a) hereof a "day" shall refer to any day during which
Consultant performs any consulting service to the Company; without regard to the
actual number of hours of consultation; provided that any day during which
Consultant is requested or required to travel in connection with performing
consulting services to the Company shall be considered a day of availability,
without regard to whether consulting services are actually performed on that
day. For purposes of this section 3(b) and section 1(b) "consultation" may
encompass any of the duties or responsibilities expected of an executive of the
Company (including business entertainment), and shall not necessarily be limited
to activities conventionally viewed as constituting "consulting".
During the CEO Term and, except to the extent that independent contractors or
retired employees would then be precluded by law from receiving stock options or
similar benefits, during the Consultant Term, Consultant shall be entitled to
receive such bonuses, stock options, stock option equivalents or similar
benefits as are from time to time awarded by the Board of Directors of the
Company in recognition of the services, efforts and contributions of Consultant
and the income and prospects of the Company.
4. Benefits. During the Term, the Company shall provide Consultant with:
An automobile allowance of $27,230 per annum;
Reimbursement for reasonable expenses of having his spouse accompany him on any
international or extended domestic business travel on behalf of the Company, it
being understood that Consultant shall not be required to travel outside the
United States more than four (4) or five (5) times a year;
Medical and hospitalization insurance coverage (whether under the group or
Company program or by separate coverage, if necessary) not less favorable to
Consultant than that provided to the Company's other senior executives at the
date of this Agreement;
An allowance of $10,000 per annum for financial planning services.
Reimbursement for all business expenses reasonably incurred in performing his
responsibilities hereunder, subject to such documentation as the Company shall
reasonably request.
5. Termination by the Company; Disability; Death. If the termination, death or
disability of Consultant occurs during the Term, the Company shall continue to
make the remaining payments to Consultant (or, unless he shall otherwise have
advised the Company in writing, his wife, Joan Allen Cohen) in accordance with
section 3(a) above.
Termination by Consultant.
Consultant shall have the right to terminate the Term upon six (6) months
written notice to the Company. Upon termination of the Term, each party's
obligations hereunder shall terminate, except that the provisions of sections 5
and 7 shall continue in full force and effect.
Trade Secrets and Non-Competition.
Other than as required to perform his duties in accordance with this Agreement
and for purposes of furthering the business of the Company, consultant shall not
at any time during or after the Term of this Agreement use or cause to be used,
or disclose to any person, any customer list, trade secret or other confidential
information of the Company or any subsidiary of the Company obtained by him as a
result of his employment with or relationship to the Company or any subsidiary
of the Company. Prior to the end of the Term of this Agreement Consultant shall
not engage or participate, directly or indirectly, in any manner (whether as
owner, stockholder, employee, director, consultant, agent or otherwise) in any
business or businesses which (i) manufactures or markets any products which are
competitive with any products manufactured or marketed by the Company or a
subsidiary of the Company over which Consultant has executive or supervisory
authority at any time during the CEO Term in any country where the Company or a
subsidiary of the Company engaged in business during the CEO Term or (ii)
manufactures or markets any products, or renders any service, with respect to
which Consultant has provided consulting services during the Consultant Term
(provided Consultant may own publicly traded debt securities or less than 5% of
the equity securities of any publicly traded corporation). Consultant agrees
that any breach, violation or evasion by Consultant of the terms of this section
8 will result in immediate and irreparable injury and harm to the Company, and
will cause damage to the Company in amounts difficult to ascertain. Accordingly,
the company shall be entitled to the remedies of injunction and specific
performance, as well as other legal or equitable remedies, in the event
Consultant materially breaches this section 7. In addition, to such other legal
rights and remedies as the Company may have, any material breach of this section
shall terminate any remaining obligation of the Company to make any payments
hereunder, other than payments due under section 3(d).
Miscellaneous.
Assignability.
This Agreement may not be assigned by the Company except to the successor of the
Company's business substantially as a whole. Such assignment will not relieve
the Company from any of the obligations under this Agreement.
Governing Law.
This Agreement shall be construed as having been entered into by the laws of the
State of New Jersey.
Severability.
In case this Agreement, or any one or more of the provisions hereof, shall be
held to be invalid, illegal or unenforceable within any governmental
jurisdiction or subdivision thereof, the Agreement or any such provision or
provisions shall not as a consequence thereof be deemed to be invalid, illegal
or unenforceable in any other governmental jurisdiction or subdivision thereof.
In case any one or more of the provisions contained in this Agreement shall for
any reason be held to be invalid, illegal or unenforceable in any other respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, but this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein and
there shall be deemed substituted such other provision as will most nearly
accomplish the intent of the parties to the extent permitted by applicable law.
Authorization.
This Agreement, and the payments and relationships contemplated hereby, have
been properly authorized by the Compensation Committee of the Board of Directors
of the Company pursuant to the resolutions attached hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the day and year first above written.
Alpharma Inc.
Date: _________________ By : _________________________
Ingrid Wiik
President & Chief Executive Officer
Date : _________________ ______________________________
I. Roy Cohen
|
Exhibit 10.2
TECHNOLOGY LICENSE
AND
DISTRIBUTION AGREEMENT
This Technology License and Distribution Agreement (the “Agreement”)
is entered into this 31 day of October, 1995 (the “Effective Date”) between Sun
Microsystems, Inc., acting by and through its Java Products Group (“SUN”) with
its principal place of business at 2550 Garcia Avenue, Mountain View, California
94043 and Borland International, Inc. a Delaware corporation with its principal
place of business at 100 Borland Way, Scotts Valley, California 95066-3249
(“Licensee”).
RECITALS
WHEREAS SUN wishes to license its JAVA™ programming language and
HOTJAVA™ Browser and related technology, while maintaining compatibility among
JAVA language based products; and
WHEREAS SUN wishes to protect and promote certain trademarks used in connection
with JAVA technology; and
WHEREAS Licensee wishes to develop and distribute products based upon Sun's JAVA
technology;
NOW THEREFORE, Sun and Licensee enter into this Technology Licensing and
Distribution Agreement (“TLDA”) on the following terms.
1.0
DEFINITIONS
1.1 “Applet Application Programming Interface or AAPI” means
the public application programming interface to the Technology, including all
public class libraries and interfaces.
1.2 “Applet” means a Java application which runs on the AAPI.
1.3 “Applet Classes” means the Java classes listed in Exhibit
A.
1.4 “Documentation” means users’ manuals and programmers’ and
system guides which SUN provides for use with the Technology and which are more
particularly identified in Exhibit A.
1.5 “Derivative Work(s)” means: (i) for material subject to
copyright or mask work right protection, any work which is based upon one or
more pre-existing works of the Technology, such as a revision, modification,
translation, abridgement, condensation, expansion, collection, compilation or
any other form in which such pre-existing works may be recast, transformed or
adapted, (ii) for patentable or patented materials, any adaptation, subset,
addition, improvement or combination of the Technology, and (iii) for material
subject to trade secret protection, any new material, information or data
relating to and derived from the Technology, including new material which may be
protectable by copyright, patent or other proprietary rights, and, with respect
to each of the above, the preparation, use and/or distribution of which, in the
absence of this Agreement or other authorization from the owner, would
constitute infringement under applicable law. Derivative Works specifically
excludes Product(s), Value Added Open Packages, Licensee Software, and
Licensee-implemented modifications to (i) the Platform-Dependent Part of the
Java Runtime Interpreter and (ii) the HotJava Browser.
1.6 “Intellectual Property Rights” means all intellectual
property rights worldwide arising under statutory or common law, and whether or
not perfected, including, without limitation, all (i) patents, patent
applications and patent rights; (ii) rights associated with works of authorship
including copyrights, copyright applications, copyright registrations, mask work
rights, mask work applications, mask work registrations; (iii) rights relating
to the protection of trade secrets and confidential
1
--------------------------------------------------------------------------------
information; (iv) any right analogous to those set forth in this Section 1.6 and
any other proprietary rights relating to intangible property (other than
trademark, trade dress, or service mark rights); and (v) divisions,
continuations, renewals, reissues and extensions of the foregoing (as and to the
extent applicable) now existing, hereafter filed, issued or acquired.
1.7 “Java Runtime Interpreter” means the program which
implements the Java Virtual Machine, as specified in the Java Virtual Machine
Specification. The Java Runtime Interpreter consists of the Shared Part and the
Platform-Dependent Part.
1.8 “Licensee Software” means any software developed by
Licensee which is not a Derivative Work of the Technology and which is designed
to run on Technology or any portions thereof.
1.9 “Platform Dependent Part” means those source code files of
the Technology which are not in a “share” directory or subdirectory thereof as
provided by SUN and which must be compiled with the “share” files to produce the
Java Runtime Interpreter.
1.10 “Product(s)” means Licensee’s current and future
product(s) which implement, integrate and/or embody, in whole or in part, the
Technology and/or Licensee-developed Derivative Works thereof, and which are
more particularly identified in Exhibit B. Licensee may amend Exhibit B to add
Product(s) from time to time. “Product” must represent a significant functional
and value enhancement to the Technology such that the primary reason for a
customer to license such Product is other than the right to receive a license to
the Technology. “Product” must operate in conjunction with the Technology and
shall not include other technology which interprets Java bytecodes which
replaces or substitutes for the Technology.
1.11 “Shared Part” means those source code files of the
Technology which are in any “share” directory or subdirectory thereof as
provided by SUN which must be compiled with the Platform Dependent Part to
produce the Java Runtime Interpreter.
1.12 “Source Code” means the human readable version, in whole
or in part, of the Technology supplied to Licensee and any corresponding
comments and annotations.
1.13 “Technology” means the Java Runtime Interpreter, Java
Compiler, HotJava Browser, and the Applet Classes developed by SUN, as more
particularly identified in Exhibit A, and Upgrades thereto.
1.14 “Trademarks” means all names, logos, designs, characters,
and other designations or brands used by SUN in connection with the Technology.
1.15 “Upgrades” means any bug fixes, modifications, variations,
enhancements, or revisions of the Technology for the platforms specified in
Exhibit C which SUN generally licenses as part of the Technology. The term
“Upgrades” does not include ports of the Technology to additional platforms.
1.16 “Value Added Open Packages” means additional Java classes
developed by Licensee which represent extensions to the AAPI, and which are made
available to third parties in either source or binary form to use in the
development of additional Java-based software.
1.17 “HotJava Browser” means the Java classes more particularly
identified as “Technology: HotJava Browser” in Exhibit A.
1.18 “Java Compiler” means the Java programs more particularly
identified as “Technology: Compiler” in Exhibit A.
2.0
LICENSE GRANTS
2.1 Source Code License
a. Subject to the terms and conditions contained in this Agreement and
subject to payment to SUN of the applicable license fees specified in Exhibit C,
SUN hereby grants to Licensee, and Licensee hereby accepts, under the
Intellectual Property Rights of SUN, a worldwide, non-exclusive,
non-transferable license, without the right to sublicense (except as specified
in Sections 2.1b (iii) and 2.2 (b) below), to access, use, modify, reproduce and
view the
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Technology in Source Code form, solely for the purpose(s) of porting,
developing, compiling to binary form and supporting Product(s), Licensee
Software, Value Added Open Packages, and Licensee-implemented modifications to
the Platform Dependent Part. Licensee shall have no right to modify the
interface or the functional behavior of the Java Runtime Interpreter or the
Applet Classes and explicitly shall not have the right to modify or create a
subset of the AAPI.
Except as specified in Section 2.1b (iii), Licensee shall have no right to
distribute the Source Code of the Technology or of Derivative Works, whether
alone or as incorporated with Product(s), Licensee Software, Value Added Open
Packages, Licensee-implemented modifications to the Platform Dependent Part, or
Upgrades.
b. Porting.
(i) Licensee may port the Platform Dependent Part to platforms other
than those specified in Exhibit C. Licensee may use the Source Code of the
Shared Part of the Java Runtime Interpreter to develop Products, *****, and
Licensee-implemented modifications to the Platform Dependent Part, but if it
uses such Source Code, it must use all of it without modification.
(ii) SUN will work with Licensee to identify any changes which are
necessary to the Shared Part of the Technology to allow porting, optimization,
or other platform-specific modifications thereto in accordance with the
procedure specified below:
Licensee may at any time during the term of this Agreement provide SUN
with a detailed written request that a specifically identified portion of the
Shared Part of the Technology be modified, including the reason(s) for such
proposed modification and support for their belief that compatibility will not
be compromised by such modification. SUN will respond to Licensee’s request
*****, indicating whether, in SUN’s sole discretion, the portion of the Shared
Part that is the subject of Licensee’s request will be moved into the Platform
Dependent Part of the Technology. If SUN informs Licensee that such portions
will be moved from the Shared Part, Licensee may make such modifications,
subject to its obligation to maintain compatibility hereunder.
If SUN determines that such portions may not be moved from the Shared
Part, SUN may offer to make the modifications to the Shared Part in a timely
fashion, or authorize Licensee to make such modifications. If Licensee makes
such modifications, the changes can be made only for the purpose and platform
specified, and only as long as compatibility with the Virtual Machine
specification and with then-current test suites (or a new test suite created
expressly for such modifications) is maintained. Any additional test suites
which may be provided by SUN shall not count against the limitation of four (4)
test suites per year specified in Section 2.4. The changes shall be considered
Derivative Works, and SUN shall have no obligation to incorporate such changes
into any future releases of the Technology.
(iii) Licensee may sublicense and deliver a copy of the Source Code of
the Technology to third parties only in association with the delivery and
sublicensing of Licensee Products, and solely for the purpose of enabling such
third party to port or localize Products for Licensee. Any such sublicense shall
be made subject to terms and conditions relating to ownership, use, and
confidentiality of the Technology substantially similar to those contained
herein.
(iv) Licensee may localize the Technology to support distribution of
Licensee's First Customer Shipment (“FCS”) versions of the Product(s).
Licensee's modifications for the purpose of localization shall be considered
Derivative Works. The parties understand that SUN intends to support
localization in the Technology, and Licensee agrees to follow SUN’s standard
localization strategy.
c. Bug Fixes. Licensee will inform SUN promptly, and no later than it
informs any third party, of any bugs in and bug fixes for the Technology, and
Licensee will make such bug fixes available to SUN free of all restrictions
promptly as they are identified.
*****
Confidential treatment has been requested for the redacted portions. The
confidential redacted portions have been filed separately with the Securities
and Exchange Commission.
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2.2 Binary Code License.
a. SUN hereby grants and Licensee hereby accepts a non-exclusive, worldwide,
fully paid up license to use an unlimited number of copies of the Technology in
binary form, for Licensee’s internal use during the term of this Agreement.
b. Worldwide Distribution. Licensee may distribute the Product(s), Licensee
Software, Value Added Open Packages, Licensee-implemented modifications to the
Platform Dependent Part, Upgrades and associated Documentation provided to
Licensee by SUN in binary form worldwide and may use such distribution channels
as Licensee deems appropriate, including distributors, ISVs, resellers, dealers
and sales representatives (collectively, “Distributors”), provided, however,
that such Distributors shall not modify the Technology or any portions thereof.
2.3 Documentation.
a. SUN hereby grants to Licensee, and Licensee hereby accepts, under SUN’s
Intellectual Property Rights, a non-exclusive, non-transferable license (i) to
use and distribute the unmodified Documentation, (ii) to use and modify the
Documentation to create technically accurate unaltered subsets of the
documentation which shall include all the relevant SUN copyrights, notices, and
marks, (iii) to translate the Documentation into other languages for use and
distribution with non-U.S. versions of Product(s), and (iv) to distribute such
modified and/or translated Documentation. Licensee may also use a pointer to the
SUN Documentation on the Internet in connection with distribution of the
Product(s).
2.4 Compatibility
a. Java Compatibility
(i) Initially, the AAPI shall be that which is reflected in the
Technology as identified in Exhibit A, by the bytecode specification in the
Documentation entitled “Java Virtual Machine Specification” and by the Java
language specification in the Documentation entitled “Java Language
Specification.” Subsequently, the AAPI may be modified by SUN and SUN will give
Licensee written notice thereof.
(ii) From time to time, SUN shall supply Licensee with test suites at no
cost for validating that the portion of Licensee’s Product which interprets Java
bytecodes complies with the then-current specification of the AAPI as defined by
SUN as of the date of that test suite (“Java Test Suite”). Without the consent
of Licensee, which consent shall not be unreasonably delayed or denied, SUN
shall not supply more than four (4) versions of such Java Test Suites in any one
(1) calendar year. SUN shall use reasonable efforts to review any changes to
such Java Test Suites as much in advance as possible with Licensee, but failure
of SUN to do so shall not constitute a breach of this Agreement and shall not
invalidate any such Java Test Suite supplied by SUN. Changes to Java Test Suites
to correct errors shall not be counted against the limitation to four (4).
(iii) Each revision of a Product released by Licensee must pass the Java
Test Suite that was current one hundred twenty (120) days before First Customer
Shipment of such Product. Licensee shall not release or distribute to any third
party the portion of Licensee’s Product that interprets Java bytecodes, which
does not successfully pass such Java Test Suite. If Licensee provides SUN with a
copy of an existing publicly-available Applet which Licensee in good faith
believes cannot be made to operate using best engineering efforts under any Java
Runtime Interpreter which successfully passes the Java Test Suite, then Licensee
shall be released from compatibility with the minimum portion of the Java Test
Suite necessary to cause that application to be able to operate until such time
as SUN provides to Licensee a corrected or new Java Test Suite, and a
demonstration and technical description adequate for implementation of a system
which both runs the application and such Java Test Suite.
(iv) Licensee shall promptly announce and use best efforts to ship
Product(s) based on Upgrades to the Technology (excluding solely
HotJava-specific Upgrades) as delivered by
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SUN during the term of this Agreement. Licensee shall use best efforts to
correct any incompatibility with the AAPI, as determined by the applicable Java
Test Suite, which arises from integrating such Upgrade, whether such
incompatibility is detected before or after FCS of the affected Product(s).
(v) Branding and Trademarks. Licensee shall use a logo specified by SUN
that indicates compatibility with the Java Test Suites (the “Java Compatibility
Logo”) in a trademark manner on all Licensee Product(s) distributed hereunder.
The terms and conditions governing the parties’ agreement as to trademarks,
logos, and branding shall be governed by the Trademark License entered into
herewith, attached as Exhibit G hereto, and incorporated by reference herein.
b. HotJava Compatibility
(i) The HotJava Browser code can only be used and/or shipped with Java
implementations that are AAPI compliant, as tested by the then-current Java Test
Suite from SUN, under the same rules as described in Sections 2.4(a).
(ii) Any works derived from the HotJava Browser source which has the
capability to browse the World Wide Web must support execution of AAPI-compliant
applications using the standard Applet tag as defined in Exhibit F.
(iii) From time to time SUN shall supply Licensee with test suites at no
cost for validating that software which is derived from the HotJava Browser is
compatible with the then-current base implementation of the HotJava Browser as
defined by SUN as of the date of that test suite (“HotJava Test Suite”). Without
the consent of Licensee, which consent shall not be unreasonably delayed or
denied, SUN shall not supply more than four (4) versions of such Test Suites in
any one (1) calendar year. SUN shall use reasonable efforts to review any
changes to such HotJava Test Suites as much in advance as possible with
Licensee, but failure of SUN to do shall not constitute a breach of this
Agreement and shall not invalidate any such HotJava Test Suite supplied by SUN.
Changes to HotJava Test Suites to correct errors shall not be counted against
the limitation to four (4).
(iv) Licensee shall make reasonable commercial efforts to conform any
work derived from the HotJava Browser to the HotJava Test Suite most recently
supplied by SUN. Licensee shall be allowed to use the logo specified by SUN that
indicates compatibility with the HotJava Test Suites (the “HotJava Compatibility
Logo”) on derived work only if it passes such HotJava Test Suites and if
Licensee commits its intent to conform to future such test suites. Licensee may
create and distribute Product(s) derived from the HotJava Browser which do not
pass the HotJava Test Suite, provided that the HotJava Compatibility Logo is not
used in conjunction with such Product(s), and such Product(s) are Java
Compatible as specified in Section 2.4(a).
c. Compiler Compatibility
(i) Any Product(s) that performs compiling function must continue to
compile the complete Java language as described in the Java Language
Specification, and be able to generate fully-interpretable machine-independent
bytecodes for the Java Virtual Machine.
(ii) From time to time, SUN shall supply Licensee with test suites at no
cost for validating that the portion of Licensee’s Product which interprets Java
bytecodes complies with the then-current specification of the AAPI as defined by
SUN as of the date of that test suite (“Java Language Test Suite”). Without the
consent of Licensee, which consent shall not be unreasonably delayed or denied,
SUN shall not supply more than four (4) versions of such Java Language Test
Suites in any one (1) calendar year. SUN shall use reasonable efforts to review
any changes to such Java Language Test Suites as much in advance as possible
with Licensee, but failure of SUN to do so shall not constitute a breach of this
Agreement and shall not invalidate any such Java Language Test Suite supplied by
SUN. Changes to Java Language Test Suites to correct errors shall not be counted
against the limitation to four (4).
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(iii) Licensee shall promptly announce and use best efforts to ship
Product(s) based on Upgrades to the Technology as delivered by SUN during the
term of this Agreement. Licensee shall use best efforts to correct any
incompatibility with the AAPI, as determined by the applicable Java Language
Test Suite, which arises from integrating such Upgrade, whether such
incompatibility is detected before or after FCS of the affected Product(s).
2.5. Value Added Open Packages
(i) Licensee shall deliver to SUN free of all restrictions the
specification for the application programming interface for Value Added Open
Package as early as is reasonably possible but in no event later than the date
on which it first provides such specification or an implementation thereof to
any third party. Included in such specification shall be an appropriate test
suite sufficiently detailed to allow SUN and third parties to produce compatible
implementations of the specification. Licensee shall use its reasonable
commercial efforts to clarify and correct the specification or the test suite
upon written request by SUN and failure to do so within sixty (60) days after
such request shall constitute breach of this Agreement.
(ii) Licensee shall notify SUN as soon as it has made any general
disclosure (i.e., not subject to confidentiality obligations) of such
specification, or first releases a Product implementing such specification,
after which SUN shall have no obligation of confidentiality whatsoever with
respect to such specification, and Licensee agrees that it will take no steps
whatsoever to prevent SUN or any third party from creating implementations based
on such specification, provided that such implementations do not violate
Licensee’s patents, copyrights (except that Licensee agrees that it will not
enforce copyright claims that relate to interface or compatibility) or trade
secrets in the implementation of the Value Added Open Packages.
(iii) Licensee shall confine the names of all Value Added Open Packages
to names beginning with “COM.Licensee” or such other convention as SUN may
reasonably require and shall not modify or extend the names of public class or
interface declarations whose names begin with “java”, “COM.sun” or their
equivalents in any subsequent naming convention. Licensee will make reasonable
commercial efforts to ensure that other commercial software packages which it
redistributes conform to this convention.
(iv) Licensee hereby grants and SUN hereby accepts a non-exclusive,
worldwide, fully-paid-up license to use an unlimited number of copies of the
Value Added Open Packages, in binary form, for SUN’s internal use, such use
including but not limited to demonstration rights. Licensee agrees to reasonably
negotiate in good faith with SUN the terms of a commercial license for the
source code of the Value Added Open Packages. The parties agree that the fees
and other terms and conditions of this Agreement are a reasonable standard
against which to judge such a license on a proportionate basis comparing the
scope and complexity of the portion of the Value Added Open Package being
licensed to the scope and complexity of the Technology.
2.6 Ownership
a. Ownership by SUN. SUN retains all right, title and interest in the
Technology, including Derivative Works, Documentation, Upgrades, bug fixes, and
Trademarks, and associated Intellectual Property Rights, but excluding
Product(s), Value Added Open Packages, Licensee Software, and
Licensee-implemented modifications to the Platform-Dependent Part of the Java
Runtime Interpreter and modifications to the HotJava Browser, and associated
Intellectual Property Rights (subject to SUN’s underlying rights in the
Technology and associated Intellectual Property). Licensee agrees to execute (in
recordable form where appropriate) any instruments and/or documents as SUN may
reasonably request to verify and maintain SUN’s ownership rights, or to transfer
any part of the same which may vest in Licensee for any reason. Licensee further
agrees to promptly deliver to SUN any Derivative Works of the Technology created
by Licensee pursuant to and during the term of this Agreement. SUN shall have no
obligations of confidentiality to Licensee for such Derivative
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Works, nor shall SUN be obligated to incorporate any such Derivative Works into
the Technology.
b. Ownership by Licensee. Licensee retains all right, title and interest in
the Product(s), Value Added Open Packages, Licensee Software, and
Licensee-implemented modifications to the Platform-Dependent Part of the Java
Runtime Interpreter and modifications to the HotJava Browser, created by
Licensee pursuant to and during the term of this Agreement, subject to SUN’s
underlying rights in the Technology and associated Intellectual Property Rights
identified in Section 2.6a. In the event that the parties desire to undertake
joint development activities, the parties agree to negotiate and enter into a
separate joint development agreement for such activities.
2.7 Protection of SUN’s Rights. Licensee shall use, modify and
practice the Technology and manufacture, market, distribute and sell Product(s),
Value Added Open Packages, Licensee Software, and Licensee-implemented
modifications to the Platform-Dependent Part of the Java Runtime Interpreter
only in a manner consistent with the terms of this Agreement, and only in a
manner reasonably designed not to jeopardize or prejudice SUN’s Intellectual
Property Rights, including trademarks, trade dress and service marks, and other
proprietary rights.
2.8 No Right To Sublicense or Transfer. Except as specifically
provided in Sections 2.1b(iii) and Section 2.2 above, Licensee shall have no
right to sublicense or transfer any of the rights or licenses granted in this
Agreement.
2.9 No Other Grant. Each party agrees that this Agreement does
not grant any right or license, under any Intellectual Property Rights of the
other party, or otherwise, except as expressly provided in this Agreement, and
no other right or license is to be implied by or inferred from any provision of
this Agreement or by the conduct of the parties.
2.10 Contractors. Licensee may retain third parties to furnish
services to it in connection with its development and manufacture of Product(s);
provided, however, that all such third parties who perform work in furtherance
of such activities shall execute appropriate documents: (i) acknowledging their
work-made-for-hire status, (ii) effecting assignments of all Intellectual
Property Rights with respect to such work to Licensee or SUN, as appropriate,
and (iii) undertaking obligations of confidentiality respecting such work. SUN
may, upon its request, review any such form documents and agreements proposed
for use by Licensee prior to any such use of contractors for development or
manufacture of the Product(s).
2.11 Value Added Requirement. Licensee will distribute the
Technology only as part of a Product and not on a stand-alone basis.
2.12 Pre-Release. Licensee may release Product(s) based on the
pre-FCS Technology licensed by SUN hereunder only for beta testing purposes.
2.13 Early Access. SUN will provide Licensee with access to
pre-release versions of the Technology at the same time as SUN makes such
versions available to other early access licensees similarly situated. The Java
Products Group intends to treat other SUN engineering groups in the same manner
with respect to delivery of early access versions and Upgrades to the
Technology.
3.0
SUPPORT AND UPGRADES
3.1 During the Support Period (as defined below), SUN shall
provide to Licensee under the terms and conditions of this Agreement, Upgrades
for the platforms specified in Exhibit C when and if any such Upgrades are made
available by SUN to any commercial licensee similarly situated.
3.2 Subject to payment of the fee specified in Exhibit C (3.
b), SUN shall assign, at Sun’s discretion, the equivalent of one (1) half-time
engineer to be available via phone, electronic mail and/or scheduled appointment
during regular business hours to support Licensee, from the Effective Date
through the fifth (5th) anniversary of the SUN FCS Date (as defined below) (the
“Support Period”). Licensee may designate a maximum of three (3) contacts to
interface with the SUN support engineer.
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3.3 Upon the request of Licensee, SUN agrees to reasonably
negotiate in good faith for additional support through a separate support
agreement.
4.0
PAYMENT
4.1 License Fees. In consideration of the rights granted
Licensee in this Agreement, Licensee shall pay to SUN the fees and royalties set
forth in Exhibit C. Payment of fees shall be made within thirty (30) days from
the Effective Date of this Agreement, unless otherwise specified in Exhibit C.
Payment of royalties shall be made quarterly, shall be due thirty (30) days
following the end of the calendar quarter to which they relate and shall be
submitted with a written statement certifying the number of Products sold and
showing the calculation of royalties due. Licensee agrees that it shall be
obligated to create and distribute FCS versions of the Product(s) identified in
Exhibit B under this Agreement. The parties agree that the upfront source
license fees specified in Exhibit C shall be waived by SUN in exchange for
Licensee’s best efforts to distribute the FCS versions of the specific
Product(s) listed in Exhibit B no later than March 31, 1996. If Licensee is late
distributing such Product(s) by six (6) months, Licensee shall be required to
pay the entire upfront fees to SUN, except if Licensee is unable to distribute,
or distribution is delayed because Licensee is unable to create functional
Product(s) due solely to SUN’s refusal to make changes to the Technology under
Section 5.7.
4.2 Support and Upgrade Fees Upon receipt of the FCS version
of any of the platforms identified in Exhibit C (the “SUN FCS Date”), Licensee
shall pay to SUN the Support and/or Upgrade Fee as specified in Exhibit C (3).
Thereafter, within ninety (90) days prior to the anniversary of the SUN FCS
Date, Licensee shall notify SUN which option it wishes to select for the
upcoming year: (i) Upgrades-only as described in Exhibit C (3b); (ii) Upgrades
and Support as described in Exhibit C (3); or (iii) any newly available support
options which SUN may offer to licensees of the Technology, and shall pay the
corresponding fees on or before the anniversary of the SUN FCS Date. The parties
agree that the annual support fee specified in Exhibit C3 shall be waived during
the term of this Agreement only to the extent Licensee provides equivalent
levels of engineering support and expertise to SUN in the areas of Windows
programming and OLE development.
4.3 Taxes. All payments required by this Agreement shall be
made in United States dollars, are exclusive of taxes, and Licensee agrees to
bear and be responsible for the payment of all such taxes, including, but not
limited to, all sales, use, rental receipt, personal property or other taxes and
their equivalents which may be levied or assessed in connection with this
Agreement (excluding only taxes based on Sun’s net income).
4.4 Records. Licensee shall maintain account books and records
consistent with Generally Accepted Accounting Principles appropriate to
Licensee’s domicile, as may be in effect from time to time, sufficient to allow
the correctness of the royalties required to be paid pursuant to this Agreement
to be determined.
4.5 Audit Rights. SUN shall have the right to audit such
accounts upon reasonable prior notice. The right to audit may be exercised
through an independent auditor of SUN’s choice (the “Auditor”). The Auditor
shall be bound to keep confidential the details of the business affairs of
Licensee and to limit disclosure of the results of any audit to only the
sufficiency of the accounts and the amount, if any, of any additional payment or
other payment adjustment that should be made. Such audits shall not occur more
than once each year (unless discrepancies are discovered in excess of the five
percent (5%) threshold set forth in Section 4.6, in which case two consecutive
quarters per year may be audited). Except as set forth in Section 4.6 below, SUN
shall bear all costs and expenses associated with the exercise of its rights to
audit.
4.6 Payment Errors. In the event that any errors in payments
shall be determined, such errors shall be corrected by appropriate adjustment in
payment for the quarterly period during which the error is discovered. In the
event of an underpayment of more than five percent (5%) of the proper amount
owed, upon such underpayment being properly determined by the Auditor, Licensee
shall reimburse SUN the amount of said underpayment and the reasonable charges
of the Auditor in performing the audit that identified said underpayment, and
interest on the overdue amount at the maximum allowable interest rate from the
date of accrual of such obligation.
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5.0
ADDITIONAL AGREEMENT OF PARTIES
5.1 Notice of Breach or Infringement. Each party shall notify
the other immediately in writing when it becomes aware of any breach or
violation of the terms of this Agreement, or when Licensee becomes aware of any
potential or actual infringement by a third party of the Technology or SUN’s
Intellectual Property Rights therein.
5.2 Notices. Licensee shall not remove any copyright notices,
trademark notices or other proprietary legends of SUN or its suppliers contained
on or in the Technology or Documentation. Each unit of Product(s) containing the
Technology distributed by Licensee shall include in Licensee’s documentation, or
in other terms and conditions of sale, notices substantially similar to those
contained on and in the Technology. Licensee or its Distributors shall require
an end user license agreement for each unit of Product(s) shipped and Licensee
shall provide SUN with a copy of such form agreement for review and approval. If
Licensee or its Distributors use a package design or label for the Product(s),
such package design or label shall include an acknowledgement of SUN as the
source of the Technology and such other notices as specified in Exhibit G. In
addition, Licensee shall comply with all reasonable requests by SUN to include
SUN’s copyright and/or other proprietary rights notices on the Product(s),
documentation or related materials, including but not limited to the notices and
acknowledgements as specified in Exhibit G.
5.3 Applet Tags. Applets in any hypertext markup language
(HTML) or standard generalized markup language (SGML) -based browser which is
shipped as a Product from Licensee shall use the Document Type Definition
(“DTD”) as specified in Exhibit F.
5.4 End User Support. Licensee is not authorized to make any
representation or warranty on behalf of SUN to its end users or third parties.
Licensee shall provide technical and maintenance support service for its
distributors and end user customers in accordance with Licensee’s standard
support practices. SUN shall not be responsible for providing any support to
Licensee’s distributors or customers for the Technology or the Product(s).
5.5 Marketing. Licensee will cooperate with SUN on mutually
agreeable marketing activities relating to the Technology and also as specified
in Exhibit D.
5.6 Use of Licensee’s name. Licensee hereby authorizes SUN to
use Licensee’s name in advertising, marketing, collateral, customer lists and
customer success stories prepared by or on behalf of SUN for the Technology,
provided that Licensee will have the right to approve the use of its name, such
approval not to be unreasonably withheld or delayed.
5.7 Quarterly Reviews. The parties agree to conduct quarterly
reviews of the Technology by their respective engineering staffs for the purpose
of providing feedback and suggestions for requirements and features in future
releases of the Technology by SUN. In the event Licensee desires to propose
changes or extensions to the AAPI of the Technology which are, in Licensee’s
reasonable business judgement, necessary for successfully developing the
Product(s) hereunder, such changes shall be submitted to SUN in writing at such
reviews. SUN agrees to evaluate such changes and respond to Licensee within
sixty (60) days with a decision. In the event Licensee wishes to escalate such
decision, it shall do so within ten (10) days to the SUN and Licensee
representatives specified below, provided, however, that the decision of SUN’s
designated executive will be final.
6.0
LIMITED WARRANTY AND DISCLAIMER
6.1 Limited Warranty. SUN represents and warrants that the
media on which the Technology is recorded will be free from defects in materials
and workmanship for a period of ninety (90) days after delivery. SUN’s sole
liability with respect to breach of this warranty is to replace the defective
media. Except as expressly provided in this Section 6.1, SUN licenses the
Technology and Documentation to Licensee on an “AS IS” basis.
6.2 Disclaimer. EXCEPT AS SPECIFIED IN THIS AGREEMENT, ALL
EXPRESS OR IMPLIED REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT, ARE HEREBY DISCLAIMED.
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6.3 Limitation. The warranties set forth in this Article 6.0
are expressly subject to Section 9.0 (Limitation of Liability).
7.0
CONFIDENTIAL INFORMATION
7.1 Confidential Information. For the purposes of this
Agreement, “Confidential Information” means the Technology and that information
which relates to (i) SUN hardware or software, (ii) Licensee hardware or
software, (iii) the customer lists, business plans and related information of
either party, and (iv) any other technical or business information of the
parties, including the terms and conditions of this Agreement. In all cases,
information which a party wishes to be treated as “Confidential Information”
shall be marked as “confidential” or “proprietary” (or with words of similar
import) in writing by the disclosing party on any tangible manifestation of the
information transmitted in connection with the disclosure, or, if disclosed
orally, designated as “confidential” or “proprietary” (or with words of similar
import) at the time of disclosure. SUN has no obligation of confidentiality to
Licensee with respect to Derivative Works and the specifications of the Value
Added Open Packages.
7.2 Preservation of Confidentiality. The parties agree that
all disclosures of Confidential Information (as defined under Section 7.1 above)
shall be governed by and treated in accordance with the terms of the
Confidential Disclosure Agreement (the “CDA”) attached hereto as Exhibit E and
incorporated herein by reference, modified as follows:
(a)
the definition of “Confidential Information” shall be as set forth in Section
7.1 above notwithstanding any definition set forth in the CDA;
(b)
the use of Confidential Information shall be limited to the scope of the
licenses provided in this Agreement; and
(c)
the obligations of confidentiality expressed in the CDA shall extend three (3)
years beyond termination of this Agreement, except with respect to Sun Source
Code which shall be held confidential in perpetuity.
8.0
LIMITED INDEMNITY
8.1 The parties acknowledge that the Technology is in
pre-release form and that SUN shall not be liable for any defects or
deficiencies in the Technology or in any Product, process or design created by,
with or in connection with the Technology whether or not such defects and/or
deficiencies are caused, in whole or in part, by defects or deficiencies in the
design or implementation of the Technology. Upon FCS of the Technology by SUN,
Sun will provide to Licensee a limited indemnity as described in Sections
8.2-8.5 below.
8.2 SUN will defend, at its expense, any legal proceeding
brought against Licensee, to the extent it is based on a claim that use of the
FCS version of the Technology (“FCS Technology”) is a direct infringement of a
Berne Convention copyright, and will pay all damages awarded by a court of
competent jurisdiction attributable to such claim, provided that Licensee: (i)
provides notice of the claim promptly to SUN; (ii) gives SUN sole control of the
defense and settlement of the claim; (iii) provides to SUN, at SUN’s expense,
all available information, assistance and authority to defend; and (iv) has not
compromised or settled such proceeding without SUN’s prior written consent. In
the event that Licensee receives any claim from a third party concerning the
infringement of patents of such third party in connection with Licensee’s use of
the Technology, SUN shall cooperate with Licensee in good faith in accordance
with SUN’s reasonable business judgement, in the defense of such claim upon
written request by Licensee.
8.3 Should any FCS Technology or any portion thereof become,
or in SUN’s opinion be likely to become, the subject of a claim of infringement
for which indemnity is provided under Section 8.2, SUN shall, as Licensee’s sole
and exclusive remedy, elect to: (i) obtain for Licensee the right to use such
FCS Technology; (ii) replace or modify the FCS Technology so that it becomes
non-infringing; or (iii) accept the return of the Technology and grant Licensee
a refund of the License Fee, as depreciated on a five year straight-line basis.
8.4 SUN shall have no liability for any infringement or claim
which results from: (i) use of other than a current unaltered version of the FCS
Technology, if such version was made available to
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Licensee; (ii) use of the FCS Technology in combination with any
non-Sun-provided equipment, software or data; or (iii) SUN’s compliance with
designs or specifications of Licensee.
8.5 THIS ARTICLE STATES THE ENTIRE LIABILITY OF SUN WITH
RESPECT TO INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS BY THE TECHNOLOGY.
SUN SHALL HAVE NO LIABILITY WITH RESPECT TO INFRINGEMENT OF INTELLECTUAL
PROPERTY RIGHTS OF LICENSEE OR ANY THIRD PARTY AS A RESULT OF USE, LICENSE, OR
SALE OF TECHNOLOGY.
8.6 Indemnity by Licensee. Licensee shall defend and indemnify
SUN from any and all claims brought against SUN by third parties, and shall hold
SUN harmless from all corresponding damages, liabilities, costs and expenses,
(including reasonable attorneys’ fees) incurred by SUN arising out of or in
connection with Licensee’s use, reproduction or distribution of the Technology
or Product(s).
9.0
LIMITATION OF LIABILITY
9.1 Limitation of SUN’s Liability. IN NO EVENT WILL SUN BE
LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES
IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT (INCLUDING LOSS OF PROFITS,
USE, DATA, OR OTHER ECONOMIC ADVANTAGE), NO MATTER WHAT THEORY OF LIABILITY,
EVEN IF THE EXCLUSIVE REMEDIES PROVIDED FOR IN THIS AGREEMENT FAIL OF THEIR
ESSENTIAL PURPOSE AND EVEN IF SUN HAS BEEN ADVISED OF THE POSSIBILITY OR
PROBABILITY OF SUCH DAMAGES. SUN’S TOTAL LIABILITY TO LICENSEE FOR DIRECT
DAMAGES SHALL NOT EXCEED THE AMOUNT OF FEES PAID BY LICENSEE FOR THE TECHNOLOGY
HEREUNDER. The provisions of this Section 9.0 allocate the risks under this
Agreement between SUN and Licensee and SUN has relied upon the limitations set
forth herein in determining whether to enter into this Agreement.
9.2 Limitation of Licensee’s Liability. IN NO EVENT WILL
LICENSEE BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR
PUNITIVE DAMAGES IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT (INCLUDING
LOSS OF PROFITS, USE, DATA, OR OTHER ECONOMIC ADVANTAGE), NO MATTER WHAT THEORY
OF LIABILITY, EVEN IF LICENSEE HAS BEEN ADVISED OF THE POSSIBILITY OR
PROBABILITY OF SUCH DAMAGES; PROVIDED THAT LICENSEE EXPRESSLY AGREES THAT SUCH
LIMITATIONS SHALL NOT APPLY TO ITS OBLIGATIONS TO PROTECT SUN’S SOURCE CODE
DISCLOSED UNDER SECTION 7.0, OR TO ITS OBLIGATIONS UNDER SECTIONS 2.1, 2.2, 2.3
2.5, 2.6, 2.8, 2.9, 2.11, 5.2, 9.3, OR 10.7 OF THIS AGREEMENT. The provisions of
this Section 9.0 allocate the risks under this Agreement between SUN and
Licensee and Licensee has relied upon the limitations set forth herein in
determining whether to enter into this Agreement.
9.3 High Risk Activities. The Technology is not fault-tolerant
and is not designed, manufactured or intended for use or resale as on-line
control equipment in hazardous environments requiring fail-safe performance,
such as in the operation of nuclear facilities, aircraft navigation or
communication systems, air traffic control, direct life support machines, or
weapons systems, in which the failure of the Technology or Products could lead
directly to death, personal injury, or severe physical or environmental damage
(“High Risk Activities”). SUN specifically disclaims any express or implied
warranty of fitness for High Risk Activities. Licensee will not knowingly use,
distribute or resell the Technology or Products for High Risk Activities and
will ensure that its customers and end-users of its Products are provided with a
copy of the notice specified in the first sentence of this Section 9.3. In
determining whether Licensee has “knowingly” provided Technology for High Risk
Activities, Licensee shall not be required to exert greater efforts to ascertain
a customer’s intended use that SUN itself does. SUN acknowledges that Licensee
will use the Technology in software development tools and that the publishers of
such tools do not generally have control over the applications developed with
such tools.
10.0
TERM AND TERMINATION
10.1 Term. The term of this Agreement shall begin on the
Effective Date and shall continue for a period of five (5) years, or until
terminated as provided below. The Agreement may be renewed by
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Licensee for successive one (1) year terms up to a maximum of five (5) years,
provided Licensee is in full compliance with the then-current terms and
conditions for Technology licensing. Termination is permitted either for breach
of this Agreement, upon thirty (30) days written notice to the other party and
an opportunity to cure within such thirty (30) day period, or upon any action
for infringement of Intellectual Property Rights relating to the Technology by
Licensee against SUN or any of SUN’s licensees of the Technology.
10.2 Effect of Expiration. Upon expiration of this Agreement,
SUN shall retain use, under the terms of this Agreement, of the Intellectual
Property Rights received hereunder, and Licensee shall be authorized to: (i)
distribute the then-current Product(s) containing the version of the Technology
incorporated therein at the time of expiration, subejct to payment of royalties
and (ii) continue using the Technology to support customers having copies of
Product(s) distributed by Licensee prior to the expiration hereof. All other
rights of Licensee shall terminate upon such expiration.
10.3 Effect of Termination. In the event of termination of this
Agreement by SUN in accordance with Section 10.1 above, Licensee shall promptly:
(i) return to SUN all copies of the Technology and Derivative Works thereof in
tangible or electronic form, Documentation, and Confidential Information
(collectively “SUN Property”) (excluding Licensee Software, Value Added Open
Packages, and Licensee-implemented modifications to the Platform Dependent Part)
in Licensee’s possession or control; or (ii) permanently destroy or disable all
copies of the SUN Property in Licensee’s possession or control, except as
specifically permitted in writing by SUN; and (iii) provide SUN with a written
statement certifying that Licensee has complied with the foregoing obligations.
10.4 No Liability for Expiration or Lawful Termination. Neither
party shall have the right to recover damages or to indemnification of any
nature, whether by way of lost profits, expenditures for promotion, payment for
goodwill or otherwise made in connection with the business contemplated by this
Agreement, due to the expiration or permitted or lawful termination of this
Agreement. EACH PARTY WAIVES AND RELEASES THE OTHER FROM ANY CLAIM TO
COMPENSATION OR INDEMNITY FOR TERMINATION OF THE BUSINESS RELATIONSHIP UNLESS
TERMINATION IS IN MATERIAL BREACH OF THIS AGREEMENT.
10.5 No Waiver. The failure of either party to enforce any
provision of this Agreement shall not be deemed a waiver of that provision. The
rights of SUN under this Section 10.0 are in addition to any other rights and
remedies permitted by law or under this Agreement.
10.6 Survival. The parties’ rights and obligations under
Sections 2.0, 3.0, 5.2, 6.0, 7.0, 8.0, 9.0,10.0, and 11.0 shall survive
expiration or termination of this Agreement.
10.7 Irreparable Harm. The parties acknowledge that breach of
Sections 2.0, 5.2, 7, 9.3, or 11.6 may cause irreparable harm, the extent of
which would be difficult to ascertain. Accordingly, they agree that, in addition
to any other legal remedies to which a non-breaching party might be entitled,
such party may seek immediate injunctive relief in the event of a breach of the
provisions of such Articles.
10.8 Cure. In the event of a breach of Section 2.4, Licensee
shall have sixty (60) days from (i) receipt of notice from SUN, or (ii) Licensee
knowledge of the release of an FCS version of an incompatible Product, in which
to cure all incompatibilities known to exist in such Product. Licensee shall
have an additional thirty (30) days to complete such sure in the event that
substantial progress toward effecting cure has been accomplished in the original
sixty (60) day cure period. For all other breaches of this Agreement which are
by their nature curable, the breaching party shall have thirty (30) days from
receipt of notice in which to cure all breaches identified in such notice.
11.0
MISCELLANEOUS
11.1 Notices. All notices must be in writing and delivered
either in person or by certified mail or registered mail, postage prepaid,
return receipt requested, to the person(s) and address specified below. Such
notice will be effective upon receipt.
SUN Licensee
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Sun Microsystems, Inc. Borland International, Inc. 2550 Garcia Avenue MS
29-233 100 Borland Way Mountain View, California 94043 Scotts Valley,
California 95066-3249 Attn: Associate General Counsel Attn: General Counsel
11.2 Partial Invalidity. If any term or provision of this
Agreement is found to be invalid under any applicable statute or rule of law
then, that provision notwithstanding, this Agreement shall remain in full force
and effect and such provision shall be deleted unless such a deletion would
frustrate the intent of the parties with respect to any material aspect of the
relationship established hereby, in which case, this Agreement and the licenses
and rights granted hereunder shall terminate.
11.3 Complete Understanding. This Agreement and the Exhibits
hereto constitute and express the final, complete and exclusive agreement and
understanding between the parties with respect to its subject matter and
supersede all previous communications, representations or agreements, whether
written or oral, with respect to the subject matter hereof. No terms of any
purchase order or similar document issued by Licensee shall be deemed to add to,
delete or modify the terms and conditions of this Agreement. This Agreement may
not be modified, amended, rescinded, canceled or waived, in whole or part,
except by a written instrument signed by the parties.
11.4 Language. This Agreement is in the English language only,
which language shall be controlling in all respects, and all versions of this
Agreement in any other language shall be for accommodation only and shall not be
binding on the parties to this Agreement. All communications and notices made or
given pursuant to this Agreement, and all documentation and support to be
provided, unless otherwise noted, shall be in the English language.
11.5 Governing Law. This Agreement is made under and shall be
governed by and construed under the laws of the State of California, regardless
of its choice of laws provisions.
11.6 Compliance with Laws. The Technology, including technical
data, is subject to U.S. export control laws, including the U.S. Export
Administration Act and its associated regulations, and may be subject to export
or import regulations in other countries. Licensee agrees to comply strictly
with all such regulations and acknowledges that it has the responsibility to
obtain such licenses to export, re-export or import the Technology or Product(s)
as may be required after delivery to Licensee.
Licensee shall make reasonable efforts to notify and inform its
employees having access to the Technology of Licensee’s obligation to comply
with the requirements stated in this Article.
11.7 Disclaimer of Agency. The relationship created hereby is
that of licensor and licensee and the parties hereby acknowledge and agree that
nothing herein shall be deemed to constitute Licensee as a franchisee of SUN.
Licensee hereby waives the benefit of any state or federal statutes dealing with
the establishment and regulation of franchises.
11.8 Delivery. As soon as practicable after the Effective Date,
SUN shall deliver to Licensee one (1) copy of each of the deliverables set forth
in Exhibit A. Licensee acknowledges that certain of the deliverables are in
various stages of completion and agrees to accept the deliverables as and to the
extent completed as of the date of delivery and “AS IS.” In the event any
deliverable is already in the possession or custody of Licensee, such item(s)
shall, to the extent used in connection with the rights granted in Section 2.0
above, be subject to the terms of this Agreement, notwithstanding any
pre-existing agreement or understanding between Licensee and SUN with respect to
such items.
11.9 Assignment and Change in Control. This Agreement may not
be assigned by either party without the prior written consent of the other
party, which consent shall not be unreasonably withheld or delayed, except that
SUN may assign this Agreement to a majority-owned subsidiary. However, this
Agreement may be assigned to a purchaser of all or substantially all of
Licensee’s assets, provided such purchaser agrees in writing to be bound by the
terms of this Agreement.
11.10 Construction. This Agreement has been negotiated by SUN
and Licensee and by their respective counsel. This Agreement will be fairly
interpreted in accordance with its terms and without any strict construction in
favor of or against either party.
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11.11 Force Majeure. Except for the obligation to pay money,
neither party shall be liable to the other party for non-performance of this
Agreement, if the non-performance is caused by events or conditions beyond that
party’s control and the party gives prompt notice under Section 11.1 and makes
all reasonable efforts to perform.
11.12 Exhibits.
The following are included herein by reference as integral parts of
this Agreement:
* Exhibit A -Description of Technology and Documentation
* Exhibit B -Description of Licensee Product(s)
* Exhibit C -Schedule of Fees and Royalties
* Exhibit D -Advertising and Promotion
* Exhibit E -Confidential Disclosure Agreement
* Exhibit F -Document Type Definition
* Exhibit G Trademark License
11.13 Section References. Any reference contained herein to an
article of this agreement shall be meant to refer to all subsections of the
article.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
SUN: Licensee: Sun Microsystems, Inc.: By: /s/ Eric Schmidt By:
/s/ WH Jordan
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Name: Eric Schmidt Name: WH JORDAN
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(Print or Type) (Print or Type) Title: Vice President Title: VP
BUSINESS DEVELOPMENT
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Date: Novemeber 7, 1995 Date: 11/7/95
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EXHIBIT A
DESCRIPTION OF TECHNOLOGY AND DOCUMENTATION
To the extent that SUN has not already delivered any of the following listed
items to Licensee as of the Effective Date of the Agreement to which this
Exhibit A is attached, SUN shall deliver each of the following items to Licensee
under the terms of the Agreement.
I. Technology: Java Applet Environment—The Java Applet Environment consists of
the following source code:
A. All the .java files from the following Java Applet Classes: java.lang
Language Classes java.io Stream I/O java.net Networking Classes
java.util General utilities java.applet Applet Classes java.awt
Abstract Window Toolkit java.awt.image Image Handling Classes
java.awt.peer Implementation Classes for awt java.misc Miscellaneous helper
classes
B. The source code for the Java Runtime Interpreter, which implements the Java
Virtual Machine, consisting of the Shared Part, identified as those files which
are in any “share” directory or subdirectory thereof, and the Platform-Dependent
Part, identified as other files which are compiled with the “share” files to
produce the Runtime Interpreter program.
C. Technology: HotJava Browser—The HotJava Browser consists of the following:
1) All the .java files from the following Java packages:
sun.hotjava
sun.hotjava.doc
sun.hotjava.misc
sun.hot.java.tags
sun.hotjava.ui
2) Configuration files for the HotJava Browser properties
SUN may from time to time, modify the description of the HotJava Browser by
notifying Licensee.
D. Technology: Compiler—The compiler consists of the following source code:
java.tools.asm Assembler java.tools.debug Debugging Classes
java.tools.java Parser helper Classes java.tools.javac Compiler
java.tools.javadoc Documentation Generator java.tools.tree Parse Tree
Classes java.tools.tty TTY Access to the Debugger
II. Documentation:
Java Language Specification
Java API Documentation
Java Virtual Machine Specification
HotJava Browser Online Documentation
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EXHIBIT B
DESCRIPTION OF LICENSEE PRODUCT(S)
The IDE for Java
The JIT compiler for Java
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EXHIBIT C
SCHEDULE OF FEES AND ROYALTIES
1) License Fees: Subject to the provisions of Section 4.1, Licensee shall pay to
SUN as a source license fee for the Technology, the nonrefundable sums specified
below:
Java Applet Environment (Exhibit A 1A, B):
*****
HotJava Browser (Exhibit A 1 C):
*****
Compiler (Ex A 1 D):
*****
Per Copy and Per Subscription Royalties
a per copy or per subscription royalty of ***** for Product(s)
distributed by or for Licensee with a retail price of *****, and
a per copy or per subscription royalty of ***** for Product(s)
distributed by or for Licensee with a retail price of less that *****.
As used in this Exhibit C for purposes of calculating Royalties, the term
“Product” means any software which includes the Java Virtual Machine and/or the
Applet Classes.
Net Revenue Royalties: Notwithstanding the per copy royalties specified above,
should Licensee distribute the Product(s) where the fees payable to Licensee are
not calculable on a per copy basis, then the royalty for the Product(s) shall be
***** of the Net Revenues received by Licensee for such distribution, or the Per
Copy Royalty divided by the Average Selling Price (“ASP”) of the Product(s),
multiplied by the Net Revenues received by Licensee for such distribution,
whichever is greater. Net Revenues means monies received by Licensee in
connection with the distribution of Product(s), exclusive of credits, returns,
refunds or rebates paid by Licensee, separately stated shipping and/or handling
costs, and taxes (excluding taxes based on Licensee’s net income).
In the event Licensee distributes a Product in conjunction with or bundled with
one or more works in a compilation or collective work (“Compilation”), then the
amounts payable to SUN hereunder for such Compilation shall be the royalty for
the stand-alone Product (as calculated above) multiplied by a fraction in which
the numerator is the ASP of the stand-alone Product and the denominator is the
ASP of the Compilation.
Upgrade Royalties:
a royalty of ***** of the Per Copy or Per Subscription Royalties and
Net Revenue Royalties specified above for Upgrades to the Product(s) distributed
by Licensee, provided that no royalties shall be due for Licensee’s distribution
of patches or add-ons to Product(s) which do not incorporate the Technology or
any portion thereof.
2) Platforms: (check applicable platforms)
*****
Confidential treatment has been requested for the redacted portions. The
confidential redacted portions have been filed separately with the Securities
and Exchange Commission.
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SPARC/Solaris
___________
Win32
___________
MacOS (68K, PowerPC)
___________
Where such versions are not complete as of the Effective Date, the fee covers
the first commercial version shipped by SUN for that platform.
3) Support and/or Upgrade Fees: Subject to the provisions of Section 4.2,
Licensee shall pay to SUN
(a) the sum of ***** per year for Upgrades only for WIN and WIN NT
platforms and ***** for each additional platform,
-or -
(b) the sum of ***** per year for Support (as defined in Section
3.2) and Upgrades.
*****
Confidential treatment has been requested for the redacted portions. The
confidential redacted portions have been filed separately with the Securities
and Exchange Commission.
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EXHIBIT D
ADVERTISING AND PROMOTION
Advertising and Promotion:
1. Tradeshows, Seminars, Presentations and Demos
Licensee must acknowledge the presence of Technology in its Product(s) at all
tradeshows, seminars, presentations, and demos at which Licensee demonstrates
such Product(s). Acknowledgment must include the Java Compatibility Logo as
supplied by SUN, subject to the Trademark Agreement, Exhibit G.
SUN has the right to demonstrate Licensee Product(s) that incorporate the
Technology at any tradeshow, seminar, or presentation as SUN sees fit, without
prior approval from Licensee, including the right to use the Licensee name in
signage and promotional materials associated with the demonstration. Licensee’s
logo’s will be used in accordance with Licensee’s published guidelines for Logo
use.
2. Press Announcements
Licensee agrees to support SUN’s press activities, including press
announcements, media interviews, and associated media events as reasonably
requested.
SUN requires prior review of statements regarding the Technology in press
releases produced by Licensee.
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EXHIBIT E
Confidential Disclosure Agreement
(to be attached)
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EXHIBIT F
DOCUMENT TYPE DEFINITION
In order to ensure interoperability between all Java compliant browsers we need
to define the exact notation of applets in HTML documents. The format of the
APPLET tag is chosen to be implementation language independent and SGML
compliant. SGML compliance is important if the APPLET tag is to be accepted as
part of the HTML standard in the future.
Example:
<applet codebase="http://java.sun.com/people/avh/classes"
code="Bounceltem.java" width=400 height=300>
</applet>
The applet tag has the following attributes:
CODEBASE
The base url of the applet. The applet’s code is located relative to this URL.
If this
attribute is not specified, it defaults to the document’s URL.
CODE
The file in which the applet is located. This file is relative to base url of
the applet, It
cannot be absolute.
ALT
Alternate text which can be displayed by text only browsers.
NAME
The symbolic name of the applet. This name can be used by applets in the same
page to locate each other.
WIDTH
Required attribute which specifies the initial width of the applet in pixels.
HEIGHT
Required attribute which specifies the initial height of the applet in pixels.
ALIGN
The alignment of the applet, similar to the img tag.
VSPACE
The vertical space around the applet, similar to the img tag.
HSPACE
The horizontal space around the applet, similar to the img tag.
Note that the position of the applet in the page is determined by the width,
height, align, vspace and hspace attributes just like the img tag.
Applets can access the above attributes using the getParameter() method call
defined in the Applet class. All attribute/parameter names are automatically
folded to lower case. Applets that require parameters in addition to the
predefined ones need to use the param tag. It is unfortunately not legal in SGML
for a tag to have an arbitrary list of attributes. That is why you have to name
additional applet parameters explicitly using the PARAM tag. For example:
<applet code="Dateltem.class" alt="The Date" width=200 height=40>
<param name="speaker" value="avh">
<param name="translator" value="DutchTime">
</applet>
In addition to the ALT tag you can include additional text and markup before the
applet end tag. Java compliant browsers will ignore this text, but browsers that
do not understand the applet tag will display it instead of the applet. For
example:
<applet codebase=classes code=lmageLoop.class width=100 height=100>
<param name=imgs value="images/duke">
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If you were using a Java enabled browser, you would see an animation instead of
this static image.
<p>
<img src=images/duke/T1.gif">
</applet>
Below is the formal SGML DTD for the APPLET and PARAM tags.
<!ELEMENT APPLET – – (PARAM*, (%text;)*)>
<!ATTLIST APPLET
CODEBASE CDATA #IMPLIED
--code base--
CODE CDATA #REQUIRED
--code file--
ALT CDATA #IMPLIED
--alternative string--
NAME CDATA #IMPLIED
--the applet name--
HEIGHT NUMBER #REQUIRED
ALIGN(left|right|top|texttop|middle|absmiddle|baseline|bottom|absbottom)
baseline
VSPACE NUMBER #IMPLIED
HSPACE NUMBER #IMPLIED
>
<!ELEMENT PARAM - O EMPTY>
<!ATTLIST PARAM
NAME NAME #REQUIRED
--The name of the parameter--
VALUE CDATA #IMPLIED
--The value of the parameter--
>
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EXHIBIT G
TRADEMARK LICENSE
JAVA-Compatible Logo
HOTJAVA-Compatible Logo
LICENSOR
SUN MICROSYSTEMS, INC.
2550 Garcia Avenue
Mountain View, CA 94303
U.S.A.
(415) 960-1300
LlCENSEE
BORLAND INTERNATIONAL, INC.
100 Borland Way
Scotts Valley, California 95066
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TRADEMARK LICENSE
The following terms and conditions governing Java and HotJava compatibility
branding and trademarks generally (“License”) are incorporated by reference into
the Technology License and Distribution Agreement (“TLDA”) between Sun and
Licensee, attached hereto. Where this License is more specific than or
inconsistent with the TLDA, the terms of this License shall govern. Otherwise,
the TLDA shall apply. The parties agree that:
1. DEFINITIONS
1.1 “Branded Product” means all online software or tangible
copies or units of any version of Licensee’s Products being distributed in
association with any Compatibility Logo.
1.2 “Compatibility Logo” means the Java-compatible or
HotJava-compatible logo, whichever is applicable to Licensee’s Products,
supplied by Sun to Licensee from time-to-time. The current versions of the logos
are depicted at the end of this License.
1.3 “Licensee’s Products” means only the products described in
Exhibit B of the TLDA.
2. GRANT OF LICENSE
Sun grants to Licensee a non-exclusive, non-transferable, personal, paid-up,
royalty-free license, within the Territory in Section 3, to use the applicable
Compatibility Logo (“License”) as provided herein with respect to each of
Licensee’s Products that fully meet the certification requirements of Section 4.
Licensee is granted no other right, title, or license to the Compatibility Logos
or any other Sun trademark, and is specifically granted no right or license to
sublicense the Compatibility Logos or any other Sun trademarks. This License
shall apply and pass through to Licensee’s distributors who distribute
Licensee’s Products under Licensee’s name and as transferred by Licensee (i.e.,
without any modifications to the Product, product packaging, documentation or
other materials) (“Distributors”). Licensee shall provide notice of this License
to and enforce its terms with Distributors. Sun shall be entitled to enforce the
terms of this License directly against any Distributor in the event Licensee
fails to do so. All subsequent references herein to “Licensee” shall include and
apply to “Distributors”. This License shall not apply to any distributor that
does not distribute Licensee’s Products under Licensee’s name.
3. TERRITORY
Licensee shall not use any Compatibility Logo on or in Licensee’s Products
distributed via tangible media (e.g., CD or diskettes) or on any other tangible
materials (e.g., user documentation) in countries other than those listed below
(“Territory”), unless Sun expressly agrees in writing beforehand to extend the
Territory (which Sun may refuse to do in its sole discretion). This territorial
restriction shall not apply to on-line distribution of Licensee’s Products over
the Internet. Licensee shall pay all costs, including fees for legal services,
registrations, recordals, and foreign language translations associated with any
extension of the Territory requested by Licensee. Sun may eliminate any country
from the Territory if it determines in its sole judgment that use or continued
use of the Compatibility Logos in such country may subject Sun or any third
party to legal liability, or may jeopardize the Compatibility Logos or any Sun
trademark in that or any other country. In such event, Licensee shall promptly
cease all use of the Compatibility Logos in such countries upon written notice
from Sun.
Australia
Austria
Belgium
Benin
Netherlands
Luxembourg
Brazil
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Burkino Faso
Cameroon
Canada
Cen. African Rep.
Chad
Chile
China (P.R.C.)
Columbia
Congo
Czech Repub.
Denmark
Egypt
France
Gabon
Germany
Greece
Guinea
Hong Kong
Hungary
India
Indonesia
Israel
Italy
Ivory Coast
Japan
Mali
Malaysia
Mauritania
Mexico
New Zealand
Niger
Norway
Philippines
Portugal
Russia
Senegal
Singapore
South Korea
Spain
Sweden
Switzerland
Taiwan
Thailand
Togo
Turkey
Ukraine
UAE
U.K.
United States
Venezuela
4. CERTIFICATION
License applies only to versions of Licensee’s Products that have successfully
passed the compatibility Test Suites provided by Sun to Licensee pursuant to the
TLDA, and which otherwise fully comply with all other compatibility and
certification requirements of the TLDA. Upon thirty (30)
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days written notice by Sun no more than two (2) times per calendar year,
Licensee shall permit Sun to inspect and test any Branded Products at a
mutually-agreeable location to ensure that they meet the compatibility
requirements of the TLDA. Upon request by Sun, Licensee shall promptly make any
modifications to any version of a Branded Product necessary for it to meet such
compatibility requirements.
5. LOGO AND TRADEMARK USAGE
Licensee shall use the Compatibility Logos only as specified in any guidelines
or policies made by Sun concerning the appearance, placement or use of the
Compatibility Logos (“Logo Guidelines”), including those set forth in Exhibit D
of the TLDA. Licensee shall: (i) use only approved logo artwork provided by Sun,
(ii) for tangible media, display the Compatibility Logos on external product
packaging, documentation, and media (disk, CD-ROM, tape, etc.); (iii) for online
versions of Licensee’s Product, display Compatibility Logos on web pages
featuring information about the Product in gifs that point to the current Sun
Java page (http://java.sun.com) via hypertext link; (iv) for both tangible-media
and online versions, display Compatibility Logos on “splashscreens” appearing
upon launch of Licensee’s Product, if any, and in general product information
screens (e.g., “About”, “Help”, “Info”); (v) display the Compatibility Logos on
tangible marketing collateral featuring Licensee’s Products, including
advertisements and datasheets; and (vi) not display Compatibility Logos more
prominently or larger than Licensee’s company name/logo and product name/logo,
wherever displayed.
Licensee shall comply with the current versions of the Sun Trademark & Logo
Policies and the Java/HotJava Trademark Guidelines
[http://java.sun.com/tm_guidelines.html], including but not limited to using the
Java and HotJava marks as adjectives followed by generic descriptors, marking
the Java/HotJava marks with ™ symbols, and attributing the Java/HotJava marks as
trademarks of Sun Microsystems, Inc. in a legend on packaging, splashscreens,
web page, and other collateral and materials. Licensee may not include any Sun
trademark (e.g., Sun, Java, HotJava, Solaris, etc.) in Licensee’s company,
business or subsidiary names, or in the name of any of Licensee’s products,
technologies, or web pages. Licensee shall promptly modify any usage and any
material that does not conform to the Logo Guidelines, the Sun Trademark & Logo
Policies, or the Java/HotJava Trademark Guidelines upon notice from Sun
specifying the non-conformance. Licensee shall notify its distributors and
customers of any such non-conformance as to materials or products already
distributed, as may be reasonably requested by Sun.
6. PROTECTION OF TRADEMARKS AND LOGOS
Sun is the sole owner of the Compatibility Logos (including the marks depicted
therein) and all goodwill associated therewith. Licensee’s use of the
Compatibility Logos inures solely to the benefit of Sun. Licensee shall not do
anything that might harm the reputation or goodwill of the Compatibility Logo.
Licensee shall not challenge Sun’s rights in or attempt to register the
Compatibility Logo, or any other name or mark owned by Sun or substantially
similar thereto. Licensee shall take no action inconsistent with Sun’s rights in
the Compatibility Logo. If it at any time Licensee acquires any rights in, or
registrations or applications for, the Compatibility Logo by operation of law or
otherwise, it will immediately upon request by Sun and at no expense to Sun,
assign such rights, registrations, or applications to Sun, along with any and
all associated goodwill. Licensee shall assist Sun to the extent reasonably
necessary to protect and maintain the Compatibility Logo worldwide, including
but not limited to giving prompt notice to Sun of any known or potential
infringement of the Compatibility Logo, and cooperating with Sun in the
preparation and execution of any documents necessary to record this License as
may be required by the laws or rules of any country. Sun may at its option
commence, prosecute or defend any action or claim concerning the Compatibility
Logo in the name of Sun or Licensee, or join Licensee as a party thereto. Sun
shall have the right to control any such litigation. Licensee shall not commence
any action regarding the Compatibility Logo. Sun shall
26
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reimburse Licensee for the reasonable costs associated with providing such
assistance, except to the extent that any such costs result from a breach of the
License by Licensee.
7. DISCLAIMER OF WARRANTIES
SUN MAKES NO WARRANTIES OF ANY KIND RESPECTING THE COMPATIBILITY LOGO, INCLUDING
THE VALIDITY OF SUN’S RIGHTS IN THE COMPATIBILITY LOGO IN ANY COUNTRY, AND
DISCLAIMS ANY AND ALL WARRANTIES THAT MIGHT OTHERWISE BE IMPLIED BY APPLICABLE
LAW, INCLUDING WARRANTIES AGAINST INFRINGEMENT OF THIRD PARTY TRADEMARKS.
8. LIMITATION OF LlABILITY.
IN NO EVENT SHALL SUN BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, OR SPECIAL
DAMAGES (INCLUDING WITHOUT LIMITATION LOSS OF PROFITS) ARISING FROM OR RELATED
TO LICENSEE’S USE OF THE COMPATIBILITY LOGO, EVEN IF SUN HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
9. TERM AND TERMINATION
The term of this License shall be for the same term as the TLDA, unless earlier
terminated as provided herein. Those rights and obligations that by their nature
extend beyond the term of this License, including those in Sections 6, 7, 8, 9,
and 10, shall survive any termination or expiration of this License. Upon
termination or expiration, Licensee shall immediately cease all use of the
Compatibility Logo. This License may be terminated: (i) by either party for
breach of any material provision of the TLDA or this License which goes
unremedied more than thirty days after giving notice of such breach; (ii) by Sun
immediately upon notice to Licensee if Sun determines in its judgment that any
Branded Product is being, or may imminently be, used in High Risk Activities as
defined in the TLDA; (iii) by Sun immediately upon notice to Licensee if any
government agency or court finds that any Branded Product is materially
defective in any manner; or (iv) by Sun immediately upon notice to Licensee if
Sun determines in its sole judgment that any actual adverse publicity concerning
Licensee or any Branded Product may materially affect SUN’s trademark rights or
the Compatibility Logo.
27
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10. DISPUTE RESOLUTION
Any action relating to this Agreement will be governed by the law of California,
U.S.A., notwithstanding the contrary application of the choice of law rules of
any jurisdiction or country. The parties hereby submit exclusively to the
personal jurisdiction and venue of the United States District Court for the
Northern District of California and the California Superior Court of the County
of Santa Clara. The parties agree that a material breach of the obligations in
Sections 2, 3, 4, 5 and 6 of this Agreement is likely to cause irreparable harm
such that, upon an adequate showing of material breach and without further proof
of irreparable harm other than this acknowledgement, the injured party shall be
entitled to a temporary restraining order or preliminary or permanent
injunction. The prevailing party in any action for breach of or to enforce or
interpret this Agreement shall be entitled to recover from the other party its
reasonable attorneys’ fees and expert witness fees incurred therein. The court
shall determine the prevailing party.
IN WITNESS WHEREOF, the parties hereby execute this Agreement through the
authorized representatives whose names appear below.
SUN MICROSYSTEMS, INC. LICENSEE By: /s/ Eric Schmidt By: /s/ WH
Jordan
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Name: Eric Schmidt Name: WH JORDAN
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(Print or Type) (Print or Type) Title: Vice President Title: VP
BUSINESS DEVELOPMENT
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Date: Novemeber 7, 1995 Date: 11/7/95
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COMPATIBILITY LOGOS LICENSED HEREUNDER
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|
ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement (the "Agreement") is made and
entered into this 22st day of November 2000, by and between Penn Virginia Oil &
Gas Corporation, a Virginia corporation ("Seller"), and Energy Corporation of
America, a West Virginia corporation ("Buyer") or its designated affiliate.
BACKGROUND
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, the Assets (as defined in Section 1 hereof) in accordance with the
terms and conditions set forth herein.
NOW THEREFORE, in consideration of the premises and mutual covenants and
conditions contained herein, the parties hereto, intending to be legally bound
hereby, agree as follows:
Sale and Purchase of the Assets
. On the Closing Date (as defined in Section 11 hereof), Seller shall sell,
assign, convey and deliver to Buyer, and Buyer shall purchase and acquire from
Seller, all of Seller's right, title and interest in and to the following assets
(collectively, the "Assets"):
Oil and Gas Leases
. The oil, gas and mineral leases and the leasehold estates created thereby,
described on Schedule 1(a) hereto (collectively, the "Leases"), insofar as the
Leases cover and relate to the land and depths described therein (the "Lands"),
together with corresponding interests in and to all the property and rights
incident thereto, including all rights in any royalties other than those
described on Schedule 1(a)(1), overriding royalties, pooled or unitized acreage
by virtue of the Lands being a part thereof, all production from the pool or
unit allocated to any such Lands, and all interests in any Wells (as defined in
Section 1(b) hereof) within the pool or unit associated with the Lands;
Wells
. All producing, non-producing and shut-in oil and gas wells, injection wells
and water wells located on the Lands, or lands pooled or unitized therewith,
which wells are described in Schedule 1(b) hereto (collectively, the "Wells"),
and all personal property, equipment, fixtures, and improvements located on and
appurtenant to the Lands insofar as they are used or were obtained in connection
with the operation of the Leases insofar as they cover the Lands or relate to
the exploration for, development, production, treatment, transportation, sale or
disposal of hydrocarbons or water produced therefrom or attributable thereto;
Pipelines
. All of those certain pipelines and related separating equipment and meter
stations, compressors and compressor stations, valves, pumps, and other
equipment, personal property and fixtures described on Schedule 1(c) hereto
(collectively the "Pipelines");
Contracts
. All contracts and contractual rights, obligations and interests, including all
farmout and farmin agreements, operating agreements, production sales and
purchase contracts, surface leases, gas purchase agreements, transportation
agreements, gathering agreements, marketing agreements and other similar
agreements, and other contracts or agreements covering or affecting any or all
of the Assets, including the Pipelines, which contracts and agreements are
described in Schedule 1(d) hereto;
Certain Partnership Interests
. All of the general partnership, limited partnership and other interests of
Seller in those partnerships and other entities described in Schedule 1(e)
hereto;
Rights - of - Way
. All of the rights-of-way, easements, surface deeds, surface use agreements and
other similar agreements described on Schedule 1(f) hereto;
Records
. All books, files, records, maps, correspondence, studies, surveys, reports and
other data in the possession of Seller and relating to the Assets (the
"Records") as described in Section 18 hereof;
Section 29 Tax Credits
. All of Seller's interest and rights to Section 29 Tax Credits relating to the
Assets; and
C
ertain Fee Interests
. Those certain oil and gas fee estates and surface fee estates described on
Schedule 1(i) hereto.
Purchase Price
. The total purchase price for the Assets shall be (a) Fifty-Eight Million Six
Hundred Thousand Dollars ($58,600,000.00) payable in cash plus (b) the
assumption by Buyer of all of Seller's obligations under that certain Agreement
(the "Roberts Project Agreement") dated January 11, 1993 between Seller (as
successor to C. D. & G. Development Company) and C. D. Roberts, d/b/a The
Roberts Project (the "Purchase Price"), subject to any applicable adjustments as
hereinafter provided. The parties agree that the Purchase Price shall be
allocated among the Assets in the manner described on Schedule 2 hereto.
Deposit
. Upon execution of this Agreement, Buyer shall tender to Seller by wire
transfer into an interest bearing joint control account to be established at
Suntrust Bank, East Tennessee, N.A. (the "Bank") styled "Penn Virginia/Energy
Corp Account" that amount equal to 10% of the cash portion of the Purchase Price
as a performance deposit (the "Deposit"). In the event the transaction
contemplated hereby is consummated in accordance with the terms hereof, the
Deposit, including interest, shall be applied to the Purchase Price to be paid
by Buyer at the Closing (as defined in Section 11 hereof). In the event this
Agreement is terminated, the Deposit, including interest, shall be returned to
Buyer or retained by Seller as provided in Sections 9(f) or 16 hereof.
Adjustments to Purchase Price
. The Purchase Price shall be increased or decreased, as the case may be, in
accordance with the following:
Expenses, Taxes, etc
. Appropriate adjustments shall be made to the Purchase Price so that (A) Buyer
will bear all expenses which are incurred in respect of the Assets after the
Effective Date (as defined in Section 11 hereof) and Buyer will receive all
proceeds in respect of the Assets attributable to the period after the Effective
Date and (B) Seller will bear all expenses which are incurred in respect of the
Assets before the Effective Date, and Seller will receive all proceeds
collectible in respect of the Assets attributable to the period prior to the
Effective Date (regardless of whether such proceeds are received prior to or
after the Effective Date). It is agreed that, in making such adjustments, all
property and other taxes attributable to the Assets shall be apportioned on a
calendar year basis as of the Effective Date based upon 2000 taxes assessed on
the Assets. Furthermore, notwithstanding anything to the contrary set forth in
Section 2(b)(i) hereof, Seller shall retain (A) any administrative cost
reimbursements payable with respect to the Assets at any time prior to Closing,
which reimbursements shall not be less than that amount equal to (x) $150 times
(y) the number of Wells transferred to Buyer in connection herewith times (z)
the number of months, or any portion thereof, existing between the Effective
Date and Closing and (B) any damages or other proceeds payable to Seller in
connection with that certain claim entitled Penn Virginia Oil & Gas Corporation
v. Virginia Gas Exploration Company; and
Title Defects
. Appropriate adjustments shall also be made to the Purchase Price to account
for Title Defects (as defined in Section 9(b)(i) hereof) determined to exist in
accordance with Section 9 hereof.
Assumption of Liabilities
. Buyer shall assume and discharge (a) all liabilities and obligations of Seller
for all currently existing and future liabilities arising with respect to the
Assets under any Environmental Law (as defined in section 9(b)(iv) hereof) and
(b) all liabilities and obligations of Seller pertaining to the Assets which are
attributable to the ownership and/or operation of the Assets from and after the
Effective Date.
Representations and Warranties of Seller
. Seller represents and warrants to Buyer as follows:
Organization
. Seller is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Virginia and is qualified or registered as
a foreign entity in each jurisdiction where it is required to be so qualified
and registered except where the failure to so qualify would not have a material
adverse effect on the Seller's ownership, operation or value of the Assets.
Authority
. Seller has full power and authority and has taken all requisite action,
corporate or otherwise, to authorize Seller to carry on Seller's business as
presently conducted, to own the Assets, to enter into this Agreement and to
perform Seller's obligations under this Agreement. Neither the execution and
delivery of this Agreement nor the performance by Seller of its obligations
hereunder will (i) violate Seller's Articles of Incorporation or Bylaws, (ii)
violate or constitute a default under any law, regulation, contract, agreement,
consent, decree or judicial order by which Seller or any of its officers,
directors or shareholders are bound or (iii) result in the creation of any Title
Defect upon the Assets .
Enforceability
. This Agreement has been duly executed and delivered on behalf of Seller and
constitutes the legal, valid and binding obligation of Seller enforceable in
accordance with its terms, except as limited by bankruptcy or other laws
applicable generally to creditor's rights and as limited by general equitable
principles. At the Closing, all documents required hereunder to be executed and
delivered by Seller shall be duly authorized, executed and delivered and shall
constitute legal, valid and binding obligations of Seller enforceable in
accordance with their respective terms, except as limited by bankruptcy or other
laws applicable generally to creditor's rights and as limited by general
equitable principles.
Contracts
. Schedules 1(a), 1(d), 1(e) and 1(f) contain a list of all material contracts
affecting the Assets. Seller has received no notice of its default under any of
such contracts. Such contracts are in full force and effect and have not been
modified or amended subsequent to the date hereof.
Preferential Purchase Rights/Consents
. Schedule 4(e) sets forth all consents, approvals, waivers and authorizations
(collectively, "Consents"), and all preferential purchase rights required to be
obtained ("Pref Rights"), in connection with the sale of the Assets to Buyer.
Litigation and Claims
. Except as described on Schedule 4(f), no claim, demand, filing, cause of
action, administrative proceeding, lawsuit or other litigation is pending or, to
Seller's knowledge, threatened with respect to Seller or the Assets that could
now or hereafter materially adversely affect the ownership, operation or value
of the Assets.
Finder's Fees.
Seller has not incurred any liability, contingent or otherwise, for brokers' or
finders' fees in respect to this transaction for which Buyer shall have any
responsibility whatsoever.
Compliance with Laws.
Seller has no actual knowledge, and has not received any notice from any
federal, state or municipal authority that the Assets or Seller's use thereof in
its business, are not in material compliance with all laws, rules, regulations
and permits relating to the Assets except for such non-compliance and violations
which, individually or in the aggregate, would not have a material adverse
effect on the ownership, operation or value of the Assets. Seller will promptly
notify Buyer upon receipt of any such notice.
Title
. Seller owns the Assets free and clear of all liens and encumbrances (except as
disclosed in the Schedules hereto) arising by, through or under Seller.
Environmental Issues
.
To the best of its knowledge, Seller has complied in all material respects with
all Environmental Laws (as defined in Section 9(b)(iv) hereof) and with the
terms of all permits, licenses, orders, decrees and agreements thereunder.
Except as set forth in Schedule 4(j), Seller is not aware of, and has not
received notice from any person or entity asserting or alleging (i) any
non-compliance with the Environmental Laws by Seller relating to the operation
and ownership of the Assets; (ii) any liability in connection with the release,
spill, discharge, storage, disposal or presence of any pollutants,
contaminations, chemicals, industrial, toxic or hazardous substances or wastes,
petroleum, petroleum products or wastes and natural gas by-products, liquids or
wastes (collectively, "Hazardous Materials"), including but not limited to
liability under the federal Comprehensive Environmental Response, Compensation
and Liability Act or similar state "Superfund" laws, relating in any way to the
Assets; or (iii) the release, discharge or presence of any Hazardous Materials
at, on, under or from any of the Assets requiring cleanup or other remedial
action pursuant to the Environmental Laws.
Financial Data
. To Seller's knowledge, all financial data provided by Seller to Buyer relating
to the Assets is true and accurate in all material respects.
Representations and Warranties of Buyer
. Buyer represents and warrants to Seller as follows:
Organization
. Buyer is a West Virginia corporation duly organized, validly existing and in
good standing under the laws of the state of its organization and is qualified
or registered as a foreign entity in each jurisdiction where it is required to
be so qualified and registered except where the failure to so qualify would not
have a material adverse effect on Buyer's business.
Authority
. Buyer has full power and authority and has taken all requisite action,
corporate or otherwise, to authorize Buyer to carry on Buyer's business as
presently conducted, to enter into this Agreement, to purchase the Assets on the
terms described in this Agreement and to perform its obligations under this
Agreement. Neither the execution and delivery of this Agreement nor the
performance by Buyer of its obligations hereunder will (i) violate Buyer's
Articles of Incorporation or Bylaws or (ii) violate or constitute a default
under any law, regulation, contract, agreement, consent, decree or judicial
order by which Buyer or any of its directors, officers or shareholders are
bound.
Enforceability
. This Agreement has been duly executed and delivered on behalf of Buyer and
constitutes the legal, valid and binding obligation of Buyer enforceable in
accordance with its terms except as limited by bankruptcy or other laws
applicable generally to creditor's rights and as limited by general equitable
principles. At the Closing, all documents required hereunder to be executed and
delivered by Buyer shall be duly authorized, executed and delivered and shall
constitute legal, valid and binding obligations of Buyer enforceable in
accordance with their respective terms, except as limited by bankruptcy or other
laws applicable generally to creditor's rights and as limited by general
equitable principles.
Status of Buyer
. Buyer represents that by reason of its knowledge and experience in the
evaluation, acquisition, and operation of oil and gas properties, Buyer has
performed, or will perform before Closing, a due diligence review of the Assets
and will have evaluated the merits and risks of purchasing the Assets from
Seller and has formed an opinion as to the value and purchase of the Assets
based solely on Buyer's knowledge and experience and not on any representations
or warranties by Seller except as otherwise provided in this Agreement Buyer is
acquiring the Assets for its own account and without a view to the distribution
thereof within the meaning of the Securities Act of 1933, as amended.
Finder's Fees
. Buyer has not incurred any liability, contingent or otherwise, for brokers' or
finders' fees in respect to this transaction for which Seller shall have any
responsibility whatsoever.
Covenants of Seller
.
Conduct of Business Pending Closing
. Seller covenants that from the date hereof to the Closing Date, Seller will:
Ordinary Course of Business, etc
. Not (A) act in any manner with respect to the Assets other than in the normal,
usual and customary manner, consistent with prior practice; (B) dispose of,
encumber or relinquish any of the Assets (other than in the ordinary course of
business or as a result of the expiration of Leases or other agreements or
contracts that Seller has no right or option to renew); (C) waive, compromise or
settle any material right or claim with respect to any of the Assets; (D) make
capital or workover expenditures with respect to the Assets in an amount which
exceeds $25,000 without Buyer's consent, except when required by an emergency
when there shall have been insufficient time to obtain advance consent; (E)
abandon any Well unless required to do so by a governmental or regulatory agency
or (F) modify or terminate any Lease or other material agreement or contract.
Permits, etc
. Cooperate with Buyer in the notification of all applicable governmental
regulatory authorities of the transactions contemplated hereby and cooperate
with Buyer in obtaining the issuance by each such authority of such permits,
licenses and authorizations as may be necessary for Buyer to own and operate the
Assets following the consummation of the transactions contemplated by this
Agreement.
Preferential Rights and Consents
. Use commercially reasonable efforts, consistent with industry practices in
transactions of this type, to identify, with respect to all material Assets, (i)
all Pref Rights and requirements that Consents be obtained which would be
applicable to the transactions contemplated hereby and (ii) the names and
addresses of parties holding such rights; in attempting to identify such Pref
Rights and Consents, and the names and addresses of such parties holding the
same, Seller shall in no event be obligated to go beyond its own records. Seller
will request, from the parties so identified (and in accordance with the
documents creating such Pref Rights and Consents), execution of Consents and/or
waivers of Pref Rights so identified. If any holder of any right to Consent does
not respond (a "Non-response Consent Holder") to Seller's notice by 15 days
after the date of such notice, the Consent of such holder shall be deemed to
have been obtained on that 15
th
day (a "Non-response Consent").
Access
. Seller shall afford to Buyer and its authorized representatives reasonable
access, at Buyer's sole risk and expense, from the date hereof until the Closing
Date during normal business hours, to (i) the Assets operated by Seller,
provided, however, that Buyer shall indemnify and hold harmless Seller from and
against any and all Damages (as defined in section 14 hereof) arising from
Buyer's inspection of the Assets, and (ii) Seller's Records.
Conditions Precedent to the Obligations of Seller
. The obligations of Seller to be performed at the Closing are subject to the
fulfillment (or waiver by Seller in its sole discretion), before or at the
Closing, of each of the following conditions:
Representations and Warranties
. The representations and warranties by Buyer set forth in this Agreement shall
be true and correct in all material respects at and as of the Closing as though
made at and as of the Closing and Buyer shall have delivered a certificate to
such effect to Seller; and Buyer shall have performed and complied with in all
material respects all covenants and agreements required to be performed and
satisfied by it at or prior to Closing.
No Litigation
. There shall be no suits, actions or other proceedings pending or threatened to
enjoin the consummation of the transactions contemplated by this Agreement or
seeking substantial damages against Seller or Buyer in connection therewith.
Purchase Price
. Buyer shall have delivered the cash portion of the Purchase Price to Seller in
immediately available funds by wire transfer and shall have executed and
delivered to Seller an agreement assuming Seller's obligations under the Roberts
Project Agreement in form mutually acceptable to Seller and Buyer..
Conveyance Documents
. Buyer shall have executed and delivered to Seller (i) instruments of
assignment and deeds in forms mutually acceptable to Buyer and Seller
effectuating the transfer of the Assets as contemplated herein (the "Transfer
Documents"), (ii) division orders, transfer orders or letters in lieu thereof
directing all purchasers of production from the Assets to make payment of
proceeds attributable to such production occurring on or after the Effective
Date to Buyer and (iii) all appropriate state or local forms required to be
executed to effect the administrative change of operator of such Assets from
Seller to Buyer.
Certificates
. Buyer shall deliver to Seller the following certificates:
Secretary's Certificate
. A certificate signed by the Secretary or Assistant Secretary of Buyer
certifying as to the truthfulness, completeness and accuracy of the attached
copies of Buyer's Articles of Incorporation and resolution of its Board of
Directors and, if necessary, shareholders authorizing all actions of Buyer
contemplated hereunder; and
Good Standing Certificate
. A good standing certificate of Buyer issued by the state of Buyer's
incorporation and a certificate of qualification for Buyer to do business in the
states of Kentucky and West Virginia and the Commonwealth of Virginia.
Defect Value
. The adjustments made to the Purchase Price on account of Title Defects, if
any, shall not, in the aggregate, exceed 35% of the Purchase Price.
Conditions Precedent to the Obligations of Buyer
. The obligations of Buyer to be performed at the Closing are subject to the
fulfillment (or waiver by Buyer in its sole discretion), before or at the
Closing, of each of the following conditions:
Representations and Warranties
. The representations and warranties by Seller set forth in this Agreement shall
be true and correct in all material respects at and as of the Closing as though
made at and as of the Closing and Seller shall have delivered a certificate to
such effect to Buyer; and Seller shall have performed and complied with in all
material respects all covenants and agreements required to be performed and
satisfied by it at or prior to Closing.
No Litigation
. There shall be no suits, actions or other proceedings pending or threatened to
enjoin the consummation of the transactions contemplated by this Agreement or
seeking substantial damages against Seller or Buyer in connection therewith.
Conveyance Documents
. Seller shall have executed and delivered to Buyer (i) the Transfer Documents,
(ii) division orders, transfer orders or letters in lieu thereof directing all
purchasers of production from the Assets to make payment of proceeds
attributable to such production occurring on or after the Effective Date to
Buyer and (iii) all appropriate state or local forms required to be executed to
effect the administrative change of operator of such Assets from Seller to
Buyer.
Certificates
. Seller shall deliver to Buyer the following certificates:
Secretary's Certificate
. A certificate signed by the Secretary or Assistant Secretary of Seller
certifying as to the truthfulness, completeness and accuracy of the attached
copies of Seller's Articles of Incorporation and resolution of its Board of
Directors and, if necessary, shareholders authorizing all actions of Seller
contemplated hereunder; and
Good Standing Certificate
. A good standing certificate of Seller issued by the Commonwealth of Virginia
and a certificate of qualification for Seller to do business in the states of
Kentucky and West Virginia and the Commonwealth of Virginia.
Defect Value
. The adjustments made to the Purchase Price on account of Title Defects, if
any, shall not, in the aggregate, exceed 35% of the Purchase Price.
Title Matters
.
Title Adjustment
. Buyer shall notify Seller in writing of any claimed Title Defects promptly
upon Buyer's discovery thereof and in no event later than ten (10) business days
prior to Closing ("Title Defects Notice"). The Title Defects Notice shall set
forth in reasonable detail (i) the Well, Lease or other Asset with respect to
which a claimed Title Defect is made, (ii) the nature of such claimed Title
Defect and (iii) Buyer's calculation of the value of each claimed Title Defect
in accordance with the guidelines set forth in Section 9(d) hereof. Any Title
Defect that is not identified in the Title Defects Notice shall thereafter be
forever waived and expressly assumed by Buyer and shall be deemed to have become
a Permitted Encumbrance; provided, however, that nothing contained herein shall
be deemed to limit Buyer's right to indemnification under Sections 14(b)(ii) and
30 hereof.
Definitions
. The following terms shall have the following meanings for purposes of this
Agreement:
"Title Defect" shall mean, with respect to Seller's interest in each of the
Wells listed on Schedule 1(b) any (A) lien, mortgage, pledge (other than liens,
mortgages and pledges to be released at Closing), claim, charge, option or other
defect which would materially affect or interfere with the operation, use,
ownership or value of such Well other than Permitted Encumbrances and which
results in (1) Seller being entitled to receive a percentage of all proceeds of
production therefrom less than the Net Revenue Interest of Seller set forth on
Schedule 1(b) for such Well, or (2) Seller being obligated to pay costs and
expenses relating to the operations on and the maintenance and development of
such Well in an amount greater than the Working Interest set forth in Schedule
1(b), without a corresponding increase in the Net Revenue Interest for such
Well, (B) any requirement for consent to assignment or other defect which if not
obtained or cured would materially affect or interfere with the operation, use,
ownership or value of such Well or (C) any Adverse Environmental Condition.
"Net Revenue Interest" shall mean Seller's interest in and to all production of
oil, gas and other minerals saved, produced and sold from any Well after giving
effect to all valid lessor's royalties, overriding royalties, production
payments, carried interests, liens and other encumbrances or charges against
production therefrom.
"Working Interest" shall mean, with respect to any Well, Seller's interest in
and to the full and entire leasehold estate created under and by virtue of the
Leases held in connection with such Well and all rights and obligations of every
kind and character appurtenant thereto or arising therefrom, without regard to
any valid lessor's royalty, overriding royalties, production payments, carried
interests, liens, or other encumbrances or charges against production therefrom
insofar as such interest in said leasehold estate is burdened with the
obligation to bear and pay costs of operations.
"Adverse Environmental Condition" shall mean (A) any contamination or condition
exceeding currently-allowed regulatory limits and not otherwise permanently
authorized by permit or law, resulting from any discharge, release, disposal,
production, storage, treatment, seepage, escape, leakage, emission, emptying,
leaching or any other activities on, in or from any of the Lands, or the
migration or transportation from other lands to any of the Lands, prior to the
Effective Date, of any wastes, pollutants, contaminants, hazardous materials or
other materials or substances subject to regulation relating to the protection
of the environment under current or future federal, state or local laws or
statutes ("Environmental Laws") and (B) any such contamination or condition
temporarily authorized by permit, fee agreement or other arrangement.
"Permitted Encumbrances" shall mean:
Lessors' royalties, overriding royalties, reversionary interests and similar
burdens if the cumulative effect of the burdens does not operate to reduce the
interest of Seller with respect to all oil and gas produced from any Well below
the Net Revenue Interest for such Well set forth in Schedule 1(b);
Division orders and sales contracts terminable without penalty upon no more than
90 days notice to the purchaser except as set forth on Schedule 9(d)(v);
Materialman's, mechanic's, repairman's, employee's, contractor's, operator's ,
tax, and other similar liens or charges arising in the ordinary course of
business for obligations that are not delinquent or that will be paid and
discharged in the ordinary course of business or if delinquent, that are being
contested in good faith by appropriate action of which Buyer is notified in
writing before Closing;
All Non-response Consents and all rights to consent by, required notices to,
filings with, or other actions by governmental entities in connection with the
sale or conveyance of oil and gas leases or interests therein if they are
routinely obtained subsequent to the sale or conveyance;
Easements, rights-of-way, servitudes, permits, surface leases and other rights
in respect of surface operations that do not materially interfere with the oil
and gas operations to be conducted with respect to the Assets;
All operating agreements, unit agreements, unit operating agreements, pooling
agreements and pooling designations affecting the Assets;
Conventional rights of reassignment prior to release or surrender requiring
notice to the holders of the rights;
All rights reserved to or vested in any governmental, statutory or public
authority to control or regulate any of the Assets in any manner, and all
applicable laws, rules and orders of governmental authority;
The terms and conditions of the Leases, and of all other agreements affecting
the Assets; and
Any Title Defects Buyer may have expressly waived in writing or which are deemed
to have become Permitted Encumbrances under section 9(a).
Nothing contained in this Section 9(v) shall be deemed to limit Buyer's right to
indemnification under Sections 14(b)(ii) and 30 hereof.
"Defect Value" shall mean the amount which is determined in accordance with
Section 9(d) below with respect to each Title Defect which is accepted by Seller
or determined to be a Title Defect pursuant to section 9(c).
Determination of Title Defects and Defect Values
. Within five (5) business days after Seller's receipt of the Title Defects
Notice, Seller shall notify Buyer whether Seller agrees with Buyer's claimed
Title Defects and/or the proposed Defect Values therefor ("Seller's Response").
If Seller does not agree with any claimed Title Defect and/or the proposed
Defect Value therefor, then the parties shall enter into good faith negotiations
and shall attempt to agree on such matters. If the parties cannot reach
agreement concerning either the existence of a Title Defect or a Defect Value
prior to Closing, upon either party's written request, the parties shall retain
a mutually agreed upon and appropriate independent consultant in the state in
which the Asset affected by the claimed Title Defect is located to resolve all
points of disagreement relating to Title Defects and Defect Values. If within 10
days after the date of such written request, the parties have not chosen such
consultant, each party shall retain such a consultant and those two consultants
shall retain a third such consultant. The cost of any such consultants shall be
borne 50% by Seller and 50% by Buyer. Each party shall present a written
statement of its position on the Title Defect and/or Defect Value in question to
the consultants within five (5) business days after the third consultant is
selected, and the consultants shall make a determination of all points of
disagreement in accordance with the terms and conditions of this Agreement
within ten (10) business days of receipt of such position statements. The
determination by the consultants shall be conclusive and binding on the parties,
and shall be enforceable against any party in any court of competent
jurisdiction. If necessary, the Closing Date shall be deferred only as to those
Assets affected by any unresolved disputes regarding the existence of a Title
Defect and/or the Defect Value until the consultants have made a determination
of the disputed issues with respect thereto; provided, however, that, unless
Seller and Buyer mutually agree to the contrary, the Closing Date shall not be
deferred with respect to any Assets subject to unresolved disputes in any event
for more than thirty (30) days beyond the original Closing Date. All Assets as
to which no such dispute(s) exist shall be conveyed to Buyer subject to the
terms of this Agreement at Closing. Once the consultants' determination has been
expressed to both parties, Seller shall have five (5) business days in which to
advise Buyer in writing which of the options available to Seller under section
9(e) below Seller elects regarding each of the Assets as to which the consultant
has made a determination.
Calculation of Defect Value
.
Different Interests
. If a Title Defect is based upon Buyer's notice that Seller owns a lesser
interest, or the notice is from Seller to Buyer to the effect that Seller owns a
greater interest in any Well than that shown on Schedule 1(b), then the Purchase
Price shall be reduced or increased, as appropriate, by an amount equal to the
product of:
(1) if all of Seller's interests in such Well are affected, the allocated value
of such Well as set forth on Schedule 2 or (2) if less than all of Seller's
interests in such Well are affected, that portion of the allocated value of such
Well as set forth on Schedule 2 as is attributable to the affected interest,
times
a fraction, the numerator of which is the amount of lesser or greater interest
set forth in the notice and the denominator of which is the respective interest
set forth on Schedule 1(b).
Pref Rights; Consents
. In the event a third party exercises an applicable Pref Right or fails to
grant a Consent necessary to transfer the Assets to Buyer, the Purchase Price
shall be reduced by the amount allocated to the affected Asset as set forth on
Schedule 2 or a prorata portion thereof calculated in accordance with Section
9(d)(i) above if the Pref Right affects less than 100% of an Asset.
Liens
. If a Title Defect is a lien, encumbrance or other charge upon an Asset which
is liquidated in amount, then the adjustment shall be the sum necessary to be
paid to the obligee to remove the Title Defect from the affected Asset, and
Seller shall pay such sum to obligee at Closing. However, Seller reserves the
right to retain the obligation of this Title Defect and elect to challenge the
validity of any such Title Defect or any portion thereof, and Buyer shall extend
reasonable cooperation to Seller in such efforts at no risk or expense to Buyer.
If a Title Defect represents an obligation or burden upon the affected Asset for
which the economic detriment to Buyer is not liquidated but can be estimated
with reasonable certainty, the adjustment shall be the sum Seller and Buyer
mutually agree upon as necessary to compensate Buyer at Closing for the adverse
economic effect which such Title Defect will have on the affected Asset.
Adverse Environmental Condition
. If a Title Defect is an Adverse Environmental Condition, the Purchase Price
shall be reduced by the cost to remediate such condition, and any penalties
imposed by any governmental agency payable as a result of such condition.
Remedies for Title Defect
. Seller shall have the right, but not the obligation, to cure any Title Defect
accepted by Seller or determined to be a Title Defect pursuant to Section 9(c)
above. With respect to Title Defects involving lack of a leasehold interest,
such Defect shall be considered cured if Seller acquires the leasehold or rights
to acquire the leasehold by the drilling of a well within a six month period.
With respect to any Title Defect that Seller elects not to cure or that Seller
fails to cure at or prior to Closing, the following shall occur:
Defects other than Adverse Environmental Conditions
. In the event the Title Defect is a defect other than an Adverse Environmental
Condition, Seller shall have the option to:
Exclude Asset
. Exclude the Asset subject to the Title Defect from this Agreement, in which
event the Purchase Price shall be reduced by the value allocated to the affected
Asset as set forth on Schedule 2; or
Sell Asset Subject to Defect
. Sell the Asset subject to such Title Defect to Buyer, in which event the
Purchase Price shall be reduced by the Defect Value for such Title Defect.
Adverse Environmental Conditions
. In the event the Title Defect is an Adverse Environmental Condition, Seller
shall have the option to:
Remediation
. Agree to remediate such Adverse Environmental Condition at Seller's sole cost
in accordance with applicable Environmental Laws, and there shall be no
adjustment to the Purchase Price in respect of the remediation of such Adverse
Environmental Condition and the provisions of section 14(a)(ii) hereof shall
thereafter apply in all respects. If Seller elects this option Seller will
exercise all reasonable efforts and diligence to complete remediation within six
(6) months of the Closing Date, but any failure to complete its efforts by such
time shall not relieve Seller of its duty to satisfy its obligation hereunder.
Buyer shall allow Seller and its agents and representatives such access to the
Assets as is reasonably necessary for performance of remediation work. Seller
will conduct such work so as not to unreasonably interfere with Buyer's
operations;
Reduce Purchase Price
. Reduce the Purchase Price by the applicable Defect Value of the Asset affected
by such Adverse Environmental Condition, in which event Seller shall have no
other or further obligation or liability in respect of such Adverse
Environmental Condition and the provisions of Section 14(a)(ii) shall thereafter
apply in all respects; or
Exclude Asset
. Exclude the Asset which contains the Adverse Environmental Condition from this
Agreement in which event the Purchase Price shall be reduced by the value
allocated to the affected Asset as set forth in Schedule 2.
Notwithstanding the foregoing, no downward adjustment of the Purchase Price on
account of Title Defects shall occur unless the aggregate amount of the Defect
Values determined in accordance with this Section 9 exceeds Three Hundred Fifty
Thousand Dollars ($350,000) ("Title Basket Value"), and the amount of downward
adjustment shall be the aggregate amount of Defect Values counted after reaching
the Title Basket Value.
Termination as a Remedy
. In the event the aggregate sum of the Defect Values exceeds thirty-five
percent (35%) of the Purchase Price, either Buyer or Seller may elect to
terminate this Agreement, in which case neither party shall have any further
liability or obligation to the other hereunder except as to (i) Seller's
obligation to return the Deposit to Buyer and (ii) all obligations of Seller and
Buyer imposed by any confidentiality agreement, which shall survive such
termination and be enforceable in accordance with the terms thereof.
Suspense Funds Held by Seller
. At Closing, Seller shall provide to Buyer a listing showing all proceeds from
production attributable to the Assets that are currently held in suspense and
shall transfer to Buyer all such suspended proceeds. Buyer shall be responsible
for proper distribution of all the suspended proceeds to the parties lawfully
entitled to them, and hereby agrees to indemnify, defend, and hold harmless
Seller from and against any and all losses arising out of or relating to Buyer's
retention or distribution of such suspended proceeds. Seller represents and
warrants that, to its knowledge, the amounts in such suspense accounts are
materially sufficient to cover all claims thereunder.
Closing
.
The purchase and sale of the Assets pursuant to this Agreement shall be
consummated ("Closing") in Duffield, Virginia, at the offices of Seller on
December 29, 2000 (the "Closing Date"), but effective as of October 1, 2000 (the
"Effective Date"). If Closing is not consummated on the Closing Date due to
Buyer's willful failure to satisfy one or more of the conditions to Closing,
Seller's sole remedy shall be to retain the Deposit as liquidated damages. If
the Closing fails to occur for any other reason, Buyer shall be entitled to
receive the Deposit.
Closing Statement and Post-Closing Adjustments
.
Closing Statement
. Seller shall deliver to Buyer, by not later than five (5) days prior to the
Closing Date, a statement (the "Statement") which Seller has prepared in
accordance with this Agreement and with generally accepted accounting principles
consistently applied setting forth each adjustment to the Purchase Price
necessary in accordance herewith and showing the calculation of such adjustments
in accordance with Section 2(b) hereof. By one day prior to the Closing Date,
Buyer shall provide written notice to Seller of any objections of Buyer to any
item on the Statement showing the calculations resulting in such objections.
Buyer and Seller shall attempt in good faith to resolve their differences. If
they are unable to do so, Closing will be based on the Statement and any
disagreements registered by Buyer will be reserved for the Final Settlement
Statement.
Final Settlement Statement
. After the Closing Date, Seller shall prepare, in accordance with this
Agreement and with generally accepted accounting principles consistently
applied, a statement (the "Final Settlement Statement"), a copy of which shall
be delivered by Seller to Buyer no later than one hundred twenty (120) days
after the Closing Date, setting forth each adjustment to the Purchase Price
necessary in accordance herewith and showing the calculation of such adjustments
in accordance with Section 2(b) hereof. Buyer shall have forty-five (45) days
after receipt of the Final Settlement Statement to review such statement and to
provide written notice to Seller of Buyer's objection to any item on the
statement. Buyer's notice shall clearly identify the item(s) objected to and the
reasons and support for the objection(s). If Buyer does not provide written
objection(s) within the 45-day period, the Final Settlement Statement shall be
deemed correct and shall not be subject to further adjustment. If Buyer provides
written objection(s) within the 45-day period, the Final Settlement Statement
shall be deemed correct as to the items with respect to which no objections were
made. Buyer and Seller shall meet to negotiate and resolve the objections within
fifteen (15) days of Buyer's receipt of Seller's objections. If Buyer and Seller
agree on all objections the adjusted Final Settlement Statement shall be deemed
correct and shall not be subject to further adjustment. Any items not agreed to
at the end of the 15-day period may, at either party's request, be resolved by
arbitration in accordance with Section 12 (c) below.
Arbitration
. If Seller and Buyer cannot agree upon the Final Settlement Statement, the
parties shall chose a mutually agreeable big six accounting firm to act as an
arbitrator and decide all points of disagreement with respect to the Final
Settlement Statement by not later than twenty (20) days following the parties
retention of such consultant for such purpose. The decision of such accounting
firm on all such points shall be binding upon the parties. The costs and
expenses of such accounting firm shall be borne 50% by Seller and 50% by Buyer.
Payment of Final Purchase Price
. Any amounts owing from Seller to Buyer or Buyer to Seller as determined by the
Final Settlement Statement shall be paid within five (5) days of the date the
Final Settlement Statement is agreed upon or the final decision of the
accounting firm, as the case may be.
Limitation of Warranties
. Except as otherwise set forth in Section 4 hereof, the Assets constituting
personal property are being sold by Seller to Buyer without recourse, covenant,
or warranty of any kind, express, implied, or statutory. WITHOUT LIMITATION OF
THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE, SELLER CONVEYS such
personal property AS-IS, WHERE-IS AND WITH ALL FAULTS AND EXPRESSLY DISCLAIMS
AND NEGATES (a) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (b) ANY
IMPLED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND (c) ANY
IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS.
SELLER ALSO EXPRESSLY DISCLAIMS AND NEGATES ANY IMPLIED OR EXPRESS WARRANTY AT
COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO THE ACCURACY OF ANY OF THE
INFORMATION FURNISHED WITH RESPECT TO THE EXISTENCE OR EXTENT OF RESERVES OR THE
VALUE OF THE ASSETS BASED THEREON OR THE CONDITION OR STATE OF REPAIR OF ANY OF
THE ASSETS; THIS DISCLAIMER AND DENIAL OF WARRANTY ALSO EXTENDS TO THE EXPRESS
OR IMPLIED REPRESENTATION OR WARRANTY AS TO THE PRICES BUYER AND SELLER ARE OR
WILL BE ENTITLED TO RECEIVE FROM PRODUCTION OF OIL, GAS OR OTHER SUBSTANCES FROM
THE ASSETS, IT BEING UNDERSTOOD THAT ALL RESERVE, PRICE, AND VALUE ESTIMATES
UPON WHICH BUYER HAS RELIED OR IS RELYING HAVE BEEN DERIVED BY THE INDIVIDUAL
EVALUATION OF BUYER.
Indemnification
. Except as expressly limited elsewhere in this Agreement:
Buyer's Indemnification
. Buyer agrees to indemnify and hold harmless Seller, its officers, directors,
employees, shareholders and any entity which controls, is controlled by or is
under common control with Seller and each of their respective successors and
assigns (the "Indemnified Parties") from and against any and all liability,
loss, cost and expense (including, without limitation, court costs and
reasonable attorneys' fees) (collectively, "Damages") incurred by any
Indemnified Party and arising directly or indirectly out of or resulting from:
any liability attributable to the Assets which is incurred with respect to any
period of time after the Effective Date;
any liability resulting from the condition of the Assets arising at any time
prior to or after the Effective Date under any Environmental Law; and/or
any breach by Buyer of any of its representations, warranties, covenants or
agreements hereunder, subject to Section 30 hereof, it being acknowledged that
Seller's right to indemnification for breach of any representation and warranty
of Buyer shall terminate simultaneously with the termination of such
representation and warranty at the time described in Section 30 hereof.
Seller's Indemnification
. Seller agrees to indemnify and hold harmless Buyer, its officers, directors,
employees, shareholders and any entity which controls, is controlled by or is
under common control with Buyer and each of their respective successors and
assigns (the "Buyer Indemnified Parties") from and against any and all Damages
incurred by any Buyer Indemnified Party and arising directly or indirectly out
of or resulting from
any liability (other than a liability from which Seller is indemnified pursuant
to Section 14(a)(ii) hereof) attributable to the Assets which is incurred with
respect to any period of time on or before the Effective Date;
any breach by Seller of any of its representations, warranties, covenants or
agreements hereunder, subject to Section 30 hereof, it being acknowledged that
Buyer's right to indemnification for breach of any representation and warranty
of Seller shall terminate simultaneously with the termination of such
representation and warranty at the time set forth in Section 30 hereof; and
any Damages incurred by Buyer arising directly or indirectly out of or resulting
from Seller's failure to obtain a Consent from any Non-response Consent Holder,
but only if Buyer provides written notice of such Damages to Seller prior to
December 29, 2001.
Limits on Indemnification
. The respective indemnity and hold harmless obligations of the parties hereto
shall be limited as follows: (i) indemnification shall not apply to (A) any
amount that was taken into account as an upward or downward adjustment of the
Purchase Price pursuant to the provisions hereof, but only to the extent of such
adjustments or (B) either party's costs and expenses with respect to the
negotiation and consummation of this Agreement and the purchase and sale of the
Assets; (ii) Buyer shall not be permitted to enforce any claim for
indemnification hereunder until the aggregate amount of all such claims exceeds
One Hundred Fifty Thousand Dollars ($150,000) (the "Deductible Amount"), in
which event Buyer shall be entitled to receive indemnification payments only to
the extent its aggregate Damages exceed the Deductible Amount; (iii) the
aggregate liability of Seller hereunder shall not exceed the Purchase Price; and
(iv) no party hereto shall be liable for consequential or incidental damages
incurred by the other party.
Risk of Loss
. No adjustment to the Purchase Price shall be made if, after the date hereof
and prior to the Closing, any part of the Assets shall be destroyed or harmed by
fire or any other casualty or cause or shall be taken by condemnation or the
exercise of eminent domain, but Buyer shall be entitled to any applicable
insurance proceeds (to the extent actually received by Seller and not payable
from a captive insurance carrier or subject to reimbursement or repayment by
Seller or its affiliates) or condemnation awards.
Termination and Remedies
.
Termination
. If the Closing has not occurred on or prior to the Closing Date on account of
any failure of Buyer to perform its obligations hereunder and Seller has fully
complied and performed pursuant to the provisions of this Agreement, Seller may
terminate this Agreement and retain the Deposit as liquidated damages, in which
case Buyer shall give written instructions to the Bank to deliver the Deposit,
including interest, to Seller. THE PARTIES HEREBY ACKNOWLEDGE THAT THE EXTENT OF
DAMAGES TO SELLER OCCASIONED BY THE FAILURE OF THIS TRANSACTION TO BE
CONSUMMATED WOULD BE IMPOSSIBLE OR EXTREMELY DIFFICULT TO ASCERTAIN AND THAT THE
AMOUNT OF THE DEPOSIT IS A FAIR AND REASONABLE ESTIMATE OF SUCH DAMAGES UNDER
THE CIRCUMSTANCES AND DOES NOT CONSTITUTE A PENALTY.
Sole remedy of Buyer Prior to Closing
. If, any time prior to Closing, it is determined that any of the
representations and warranties made herein by Seller are materially incorrect or
if Seller fails to fully and timely comply with any of Seller's obligations as
set forth herein or as required by applicable law, Buyer's sole and exclusive
remedy against Seller shall be to terminate this Agreement, and within five (5)
business days after Seller receives written notice of such election by Buyer,
Seller shall give written instructions to the Bank to return the Deposit,
including interest, to Buyer.
Further Assurances
. After the Closing, Seller and Buyer shall execute, acknowledge and deliver or
cause to be executed, acknowledged and delivered such instruments and take such
other action as may be necessary or advisable to carry out their obligations
under this Agreement and under any exhibit, document, certificate or other
instrument delivered pursuant hereto.
Access to Records by Seller
. Within thirty (30) days after Closing, Seller shall deliver to Buyer the
originals of all Records, except that Seller
shall
retain (a) the originals of all Records which relate to properties other than
the Assets being sold herein, and (b) the originals of all accounting Records,
subject to the right of Buyer to copy selected portions of such accounting
Records at Buyer's expense and with minimal disruption of Seller's ongoing
business. For a period of six (6) years after the date of Closing, Buyer will
retain the Records delivered to it pursuant hereto and will make such Records
available to Seller upon reasonable notice at Buyer's headquarters at reasonable
times and during office hours. Buyer shall notify Seller in writing within
thirty (30) days of the sale to a third party of all or any part of the Assets
which involves the transfer of any of the Records of the name and address of the
buyer(s) in any such sale. Buyer shall require as part of any such sales
transaction that such third party assume the obligations imposed on Buyer in
this Section.
Notices
. All notices required or permitted under this Agreement shall be in writing and
shall be delivered personally or by certified mail, postage prepaid and return
receipt requested or by telecopier as follows:
Buyer John Mork, President and CEO
Energy Corporation of America
4643 South Ulster Street, Suite 1100
Denver, CO 80237
Telephone: 303-694-2667
Telecopier: 303-694-2763
With copies to:
Thomas R. Goodwin, Esquire
Tammy J. Owen, Esquire
Goodwin & Goodwin, LLP
300 Summers Street, Suite 1500
Charleston, WV 25301
Telephone: 304-346-7000
Telecopier: 304-344-9692
Seller James D. McKinney
Penn Virginia Oil & Gas Corporation
6907 Duff-Patt Road, P.O. Box 386
Duffield, VA 24244
Telephone: 540-431-4511
Telecopier: 540-431-2407; and
With copies to:
James O. Idiaquez
Penn Virginia Oil & Gas Corporation
11757 Katy Freeway, Suite 300
Houston, Texas 77079
Telephone: 281-966-3861
Telecopier: 281-966-3870; and
Nancy M. Snyder
General Counsel
Penn Virginia Corporation
One Radnor Corporate Center, Suite 200
100 Matsonford Road
Radnor, PA 19087
Telephone: (610) 687-8900
Telecopier: (610) 687-3688
or to such other place within the United States of America as either party may
designate as to itself by written notice to the other. All notices given by
personal delivery or mail shall be effective on the date of actual receipt at
the appropriate address. Notices given by telecopier shall be effective upon
actual receipt if received during recipient's normal business hours or at the
beginning of the next business day after receipt if received after the
recipient's normal business hours. All notices by telecopier shall be confirmed
in writing on the day of transmission by either mailing by postage prepaid
certified mail with return receipt requested, or by personal delivery.
Arbitration
. If at any time any dispute shall arise between Buyer and Seller under this
Agreement or under any of the terms and provisions hereof (other than any
dispute to be decided by an accounting firm pursuant to section 9 hereof) which
cannot be agreed upon by the parties hereto, then such dispute shall be referred
to a board of arbitrators (the "Board"). Such Board shall be composed of a
representative of Buyer and a representative of Seller, to be selected by them,
respectively, and a third arbitrator who shall be chosen by the two (2)
arbitrators herein provided for. In case the two (2) arbitrators are unable to
agree within ten (10) days upon a third arbitrator, then the American
Arbitration Association shall designate a disinterested person to act as such
arbitrator; and, in case either of the parties should, for a period of ten (10)
days after receipt of the notice below referred to, fail to select and make
known in writing to the other party the arbitrator selected by it, the said
American Arbitration Association shall designate two (2) disinterested persons,
who together with the person selected by the party desiring the arbitration,
shall constitute the Board. Either party may at any time serve upon the other a
notice setting forth the point or points upon which the decision of said Board
is desired and the other party may, within ten (10) days thereafter, serve a
counter-notice specifying any additional points or differences arbitrable
hereunder upon which such other party may desire a decision. The Board shall
give ten (10) days written notice of the time and place of hearing to the
respective parties, and shall determine questions submitted to it for
arbitration, and make its decision and award in writing. The decision and award
of a majority of the arbitrators shall be final, conclusive and obligatory upon
the parties to this Agreement, their successors and assigns, and without appeal,
and each party hereto agrees to abide by and comply with every such decision and
award. Those costs of any such arbitration shall in the first instance be paid
by the party requesting the same, but if such party substantially prevails
therein it shall be reimbursed therefore by the other party, and this question
of costs shall in each case be determined by the Board when it renders its
decision on the question or questions submitted to it.
Governing Law
. This Agreement shall be governed by and construed in accordance with the laws
of the Commonwealth of Virginia.
Assignment
. This Agreement shall be binding upon and shall inure to the benefit of the
Parties hereto and their respective permitted successors and assigns.
Notwithstanding the preceding sentence, Buyer shall not assign this Agreement or
its rights or obligations hereunder without Seller's written consent which
consent shall not be unreasonably withheld or delayed; provided, however that
Buyer may assign its rights and obligations hereunder to Eastern American Energy
Corporation without such consent.
Entire Agreement; Amendments; Waivers
. This Agreement constitutes the entire Agreement between the parties hereto
with respect to the subject matter hereof, superseding all prior negotiations,
discussions, agreements and understandings, whether oral or written, relating to
such subject matter. This Agreement may not be amended and no rights hereunder
may be waived except by a written document signed by the party to be charged
with such amendment or waiver. No waiver of any of the provisions of the
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
Severability
. If a court of competent jurisdiction determines that any clause or provision
of this Agreement is void, illegal, or unenforceable, the other clauses and
provisions of the Agreement shall remain in full force and effect and the
clauses and provisions which are determined to be void, illegal, or
unenforceable shall be limited so that they shall remain in effect to the extent
permissible by law.
Press Releases
. Seller and Buyer shall consult with each other prior to the issuance of any
press releases or other public announcements concerning this transaction.
Headings
. The headings of the Sections of this Agreement are for guidance and
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions of this Agreement.
Counterparts
. This Agreement may be executed by Buyer and Seller in any number of
counterparts, each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same instrument. This Agreement
will be binding upon the parties who do sign whether or not all parties sign the
Agreement.
Expenses, Fees and Taxes
. Each of the parties hereto shall pay its own fees and expenses incident to the
negotiation and preparation of this Agreement and consummation of the
transactions contemplated hereby, including broker fees. Buyer shall be
responsible for the cost of all fees for the recording of transfer documents.
All other costs shall be borne by the party incurring them. Notwithstanding
anything to the contrary herein, it is acknowledged and agreed by and between
Seller and Buyer that the Purchase Price excludes any sales taxes or other taxes
in connection with the sale of property pursuant to this Agreement. If a
determination is ever made that a sales tax or other transfer tax applies, Buyer
shall be liable for such tax as well as any applicable conveyance, transfer and
recording fees, and real estate transfer stamps or taxes imposed on any transfer
of property pursuant to this Agreement. Buyer shall indemnify and hold Seller
harmless with respect to the payment of any of such taxes, including any
interest or penalties assessed thereon. The indemnity and hold harmless
obligation contained in the preceding sentence shall survive the Closing.
Business Days
. The term "business day" when referred to herein shall mean any day (other than
a day which is a Saturday, Sunday or legal holiday) in the state of Virginia.
Survival of Representations and Warranties. The representations and warranties
included in Sections 4, 5 and 10 hereof shall survive until the Closing Date
except that the representations and warranties included in
Section 4(i) shall survive with respect to any Asset until the later to occur of
(i) the date on which Seller or its permissible assignee ceases to own such
Asset or (ii) December 29, 2005; and
Section 4(j) shall survive until June 29, 2001.
IN WITNESS WHEREOF, the parties hereto have caused their duly elected officers
to execute this Agreement on the date first above written.
PENN VIRGINIA OIL & GAS CORPORATION
By: ____James O. Idiaquez
James O. Idiaquez
Vice President
Energy Corporation of America
By: ___Joseph E. Casabona
Joseph E. Casabona
Executive Vice President
Penn Virginia Oil & Gas Corporation
6907 Duff-Patt Road, P.O. Box 386
Duffield, VA 24244-0387
December 29, 2000
Mr. John Mork
Eastern American Energy Corporation
501 56th Street
Charleston, WV 25301
Re: Amendment to Asset Purchase and Sale Agreement (the "Agreement")
Dated November 22, 2000 Between Penn Virginia Oil & Gas Corporation
("Seller") and Eastern American Energy Corporation as Designated
Assignee of Energy Corporation of America ("Buyer")
Dear Mr. Mork:
The purpose of this letter is to set forth our agreement as follows:
1. Amendment to the Agreement. Section 30(a) of the Agreement shall be
amended and restated in its entirely to read as follows:
"a. Section 4(i) shall survive with respect to any Asset until the
earlier to occur of (i) the date on which Buyer or its permissible
assignee ceases to own such Asset or (ii) December 29, 2005; and"
2. Confirmation. In all respects other than as se forth herein, the
terms and conditions of the Agreement are hereby ratified and
confirmed.
If you agree that this letter accurately sets forth our agreement,
please indicate as much by signing in the space below.
Penn Virginia Oil & Gas Corporation
By: James O. Idiaquez
James O. Idiaquez
Vice President
ACCEPTED and AGREED
this 29th Day of December 2000
EASTERN AMERICAN ENERGY
CORPORATION
Donald C. Supcoe
Donald C. Supcoe
Vice President |
GUARANTY OF LEASE
Guaranty of Lease, dated as of June 28, 2001, by Fluor Corporation,
a Delaware corporation, herein, together with any entity succeeding thereto by
consolidation, merger or acquisition of its assets substantially as an entirety,
called "Guarantor".
Lakepointe Assets LLC, a Delaware limited liability company (herein
together with its successors and assigns as owner of the property hereinafter
described, called "Landlord"), is about to acquire the land described on
Schedule A hereto and the improvements located on said land (collectively, the
"Property") and to lease the Property to Fluor Enterprises, Inc., a California
corporation d/b/a Fluor Signature Services ("Tenant"), pursuant to a lease
between Landlord and Tenant dated as of June 28, 2001 (the "Lease"). Landlord is
unwilling to acquire the Property or enter into the Lease unless the Guarantor
enters into this agreement. Guarantor directly or indirectly owns all the stock
of Tenant. The acquisition by Landlord of the Property and the lease of the
Property to Tenant is of direct benefit to the Guarantor. This Guaranty
reasonably may be expected to benefit, directly or indirectly, Guarantor.
Capitalized terms not otherwise defined herein shall have the meanings given
them in the Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Guarantor, intending to be
legally bound, covenants and agrees with Landlord as follows:
1. The Guarantor unconditionally and irrevocably guarantees to
Landlord that (a) all Basic Rent, Additional Rent and all other sums stated in
the Lease to be payable by the Tenant, whether due by acceleration or otherwise,
including reasonable costs and expenses of collection (collectively, the
"Monetary Obligations") will be promptly paid in full when due, in accordance
with the provisions thereof, and (b) Tenant will perform and observe each and
every covenant, agreement, term and condition of Tenant in the Lease (the
"Performance Obligations"). If for any reason any Monetary Obligation shall not
be paid promptly when due, Guarantor shall, immediately upon demand, pay the
same to Landlord with interest due thereon as stated in the Lease. In addition
to the foregoing, the Guarantor hereby becomes surety to Landlord for the due
and punctual payment and performance of the Monetary Obligations and the
Performance Obligations and the Guarantor hereby waives all defenses of any
nature that may be available to Guarantor as a surety and guarantor or otherwise
other than the defenses of payment of the Monetary Obligations and performance
of the Performance Obligations.
2. Upon the occurrence of an Event of Default under the Lease,
Landlord may enforce this Guaranty without first having recourse against Tenant
or exhausting its rights or remedies under the Lease; provided, that nothing
herein shall prohibit Landlord from exercising its rights against both Guarantor
and Tenant simultaneously. Specifically, but without limitation, Guarantor
hereby waives joinder of Tenant or any other obligor in any suit or action to
enforce this Guaranty, and without in any way limiting the foregoing, Guarantor
hereby waives any right (including, without limitation, each right created by
the provisions of Chapter 34 of the Texas Business & Commerce Code, Chapter 17
of the Texas Civil Practice and Remedies Code, Rule 31 of the Texas Rules of
Civil Procedure or other applicable law) to require Landlord or any other party
entitled to enforce the obligations of Guarantor under this Guaranty to file
suit against Tenant or any other obligor or take any other action against Tenant
or any other obligor as a prerequisite to Landlord's or such other party's
taking any action or bringing any suit against Guarantor under this Guaranty.
This Guaranty and the obligations of the Guarantor hereunder are present,
primary, direct, continuing, unconditional, irrevocable and absolute and
independent of any obligations of Tenant. This Guaranty constitutes the
agreement to pay money and to act in the first instance and is not to be
construed as a contract of indemnity or as a guaranty of collectability.
3. The obligations, covenants, agreements and duties of the
Guarantor under this Guaranty shall in no way be discharged, affected or
impaired by any of the following and Landlord may at any time and from time to
time, with or without consideration, without prejudice to any claim against
Guarantor hereunder, without in any way changing, releasing or discharging
Guarantor from its liabilities and obligations hereunder and without notice to
or the consent of Guarantor waive, release or consent to any of the following:
(a) the waiver by Landlord of the performance or observance by
Tenant of any of the agreements, covenants, terms or conditions contained in
the Lease;
(b) the extension, in whole or in part, of the time for payment
by Tenant of any sums owing or payable under the Lease, or of any other sums or
obligations of Tenant under or arising out of or on account of the Lease, or the
renewal or extension of the Lease;
(c) any sublease of any or all of the Property by Tenant to any
other person;
(d) any assumption by any person of any or all of Tenant's
obligations under, or Tenant's assignment of any or all of its interest in the
Lease;
(e) the waiver or release or modification or amendment (whether
material or otherwise) of any provision of the Lease, and Guarantor hereby
consents to any such waivers, releases, modifications and amendments and to any
future terms or agreements heretofore or hereafter made by Landlord and Tenant
in accordance with the terms of the Lease, provided that Guarantor shall not be
responsible for any increase in the obligations of a tenant under the Lease
resulting solely from an amendment to the Lease made by a tenant which was not,
at the time of such amendment, an affiliate of Guarantor;
(f) any failure, omission or delay on the part of Landlord to
enforce, assert or exercise any right, power or remedy conferred on or available
to Landlord in or by the Lease or this Guaranty, or any action on the part of
Landlord granting indulgence or extension in any form whatsoever;
(g) the voluntary or involuntary liquidation, dissolution, sale
of all or substantially all of the assets, marshaling of assets and liabilities,
receivership, conservatorship, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization or other similar proceeding affecting
Landlord, Tenant or Guarantor or any of their assets or any impairment,
modification, release or limitation of liability of Landlord, Tenant or
Guarantor or any of their estates in bankruptcy or of any remedy for the
enforcement of such liability resulting from the operation of any present or
future provision of the U.S. Bankruptcy Code or other similar statute or from
the decision of any court;
(h) the power or authority or lack thereof of Tenant to execute,
acknowledge or deliver the Lease;
(i) the legality, validity or invalidity of the Lease;
(j) any defenses whatsoever that Tenant may or might have to the
payment of the Monetary Obligations except for the payment thereof actually
received by Landlord or at Landlord's direction, by Lessor's Mortgagee,
Guarantor acknowledging that the Tenant has agreed to pay the Monetary
Obligations under the Lease without setoff;
(k) the existence or non-existence of Tenant as a legal entity
or the existence or non-existence of any corporate or other business
relationship between Tenant and Guarantor;
(l) any sale or assignment by Landlord of this Guaranty and/or
the Lease (including any assignment by Landlord to Lessor's Mortgagee;
(m) any default by Guarantor under this Guaranty or any right of
setoff or counterclaim or defense (other than payment in full of the Monetary
Obligations in accordance with the terms of the Lease) that Guarantor may or
might have to its respective undertakings, liabilities and obligations
hereunder, each and every such defense being hereby waived by Guarantor; or
(n) any other cause, whether similar or dissimilar to any of the
foregoing, that might constitute a legal or equitable discharge of Guarantor
(whether or not Guarantor shall have knowledge or notice thereof) other than
payment in full of the Monetary Obligations.
Without in any way limiting the generality of the foregoing,
Guarantor specifically agrees that if Tenant's obligations under the Lease are
modified or amended with the express written consent of Landlord, this Guaranty
shall extend to such obligations as so amended or modified but shall not extend
to any increase in the obligations of Tenant under the Lease if such
modification or amendment was made by a tenant which was not, at the time of
such modification or amendment, an Affiliate of Guarantor and if Guarantor did
not consent to such modification or amendment.
4. Guarantor hereby waives notice (other than any notice required by
the terms of the Lease), demand, presentment, protest and notice of protest.
5. Guarantor agrees that, in the event of the rejection or
disaffirmance of the Lease by Tenant or Tenant's trustee in bankruptcy pursuant
to bankruptcy law or any other law affecting creditors rights, the Guarantor
shall, if Landlord so requests, assume all obligations and liabilities of Tenant
under the Lease, to the same extent as if the Guarantor was a party to such
document and there had been no such rejection or disaffirmance; and the
Guarantor shall confirm such assumption in writing at the request of Landlord
upon or after such rejection or disaffirmance. The Guarantor, upon such
assumption, shall have all rights of Tenant under the Lease (to the extent
permitted by law). Guarantor further agrees that, to the extent that Tenant or
Guarantor makes a payment or payments to Landlord, which payment or payments or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to Tenant or Guarantor or
their respective estates, trustees, receivers or any other party under any
bankruptcy law or any other law affecting creditors' rights, then to the extent
of such payment or repayment, this Guaranty and the advances or part thereof
which have been paid, reduced or satisfied by such amount shall be reinstated
and shall continue in full force and effect as of the date such initial payment,
reduction or satisfaction occurred.
6. The following events following the expiration of the applicable
cure periods, in this Paragraph are sometimes referred to as an "Event of
Default":
a. If default shall be made in the payment of any sum required
to be paid by Guarantor under this Guaranty;
b. If default shall be made in the observance or performance of
any of the other covenants in this Guaranty (as opposed to obligations under the
Lease which may be imposed on Guarantor pursuant to this Guaranty) which the
Guarantor is required to observe and perform and such default shall continue for
thirty (30) days after written notice to the Guarantor;
c. If any representation or warranty made by Guarantor herein
or in any certificate, demand or request proves to be incorrect in any material
respect when made and the representation or warranty continues to be incorrect
for a period of thirty (30) days after written notice from Landlord, or if the
facts cannot be changed so as to make the representation or warranty correct
within such thirty day period, Guarantor fails to provide Landlord with
protection (including, by way of example, additional collateral or letters of
credit) against loss arising from breach of such representation or warranty,
such protection to be satisfactory to Landlord in its sole discretion;
d. If Guarantor files a petition of bankruptcy or for
reorganization or for an arrangement pursuant to the Bankruptcy Code, or is
adjudicated a bankrupt or becomes insolvent or makes an assignment for the
benefit of its creditors, or admits in writing its inability to pay its debts
generally as they become due, or is dissolved, or suspends payment of its
obligations, or takes any corporate action in furtherance of any of the
foregoing; or
e. If a petition or answer is filed proposing the adjudication
of Guarantor as a bankrupt, or its reorganization pursuant to the Bankruptcy
Code, and (A) Guarantor consents to the filing thereof, or (B) such petition or
answer is not discharged or denied within 90 days after the filing thereof;
f. If a receiver, trustee or liquidator (or other similar
official) is appointed for or takes possession or charge of Guarantor, or if
Guarantor consents to or acquiesces in such appointment;
g. If an Event of Default occurs and is continuing under the
Lease; or
h. If an Event of Default occurs and is continuing under a
Management Agreement.
Upon the occurrence of any such Event of Default, Landlord shall have whatever
rights at law or equity it might have to enforce this Guaranty.
7. Guarantor agrees that any claim or claims or liens or security
interests it may now have or may in the future have against Tenant are or shall
be subordinate to Tenant's obligations to Landlord under the Lease. Guarantor
waives all rights of subrogation against Tenant for any amounts expended by
Guarantor under this Guaranty.
8. If Landlord incurs any expenses in the enforcement of this
Guaranty, including reasonable attorneys' fees and disbursements, whether or not
legal action be instituted, the Guarantor shall pay the same immediately upon
demand by Landlord which shall be accompanied by evidence of such expenses and
any amount due and payable hereunder to Landlord which is not paid when due
shall bear interest from the due date thereof at the Overdue Rate.
9. Landlord shall not by any act of omission or commission be deemed
to waive any of its rights or remedies hereunder unless such waiver be in
writing and signed by Landlord, and then only to the extent specifically set
forth therein; a waiver on one event shall not be construed as continuing or as
a bar to or waiver of such right or remedy on a subsequent event.
10. Guarantor shall deliver to Landlord and Lessor's Mortgagee:
(i) As soon as practicable but in no event later than five (5)
Business Days after the date of filing with Securities and Exchange Commission
or other Governmental Authority, copies of all such financial statements, proxy
statements, notices, other communications, and reports as Guarantor shall send
to its shareholders and other information generally made available to banks and
other lenders (exclusive of proprietary information), provided that Guarantor
need not make such delivery so long as such financial information is posted on
EDGAR, Guarantor's Home Page or other electronic resource generally available to
the public without charge and Guarantor emails notice to Landlord and any
Lessor's Mortgagee (at email addresses supplied by such parties) of the
availability of such information within five (5) Business Days of its posting,
and will provide paper copies of such information upon request and, in any
event, before such information is removed from the above-named electronic
resources;
(ii) For any period that Guarantor is a public company, as soon
as practicable, copies of all regular, current or periodic reports (including
reports on Form 10-K, Form 8-K and Form 10-Q) which Guarantor is or may be
required to file with the Securities and Exchange Commission or any Governmental
Authority succeeding to the functions of the Securities and Exchange Commission,
provided that Guarantor need not make such delivery so long as such financial
information is posted on EDGAR, Guarantor's Home Page or other electronic
resource generally available to the public without charge and Guarantor emails
notice to Landlord and any Lessor's Mortgagee (at email addresses supplied by
such parties) of the availability of such information within five (5) Business
Days of its posting, and will provide paper copies of such information upon
request and, in any event, before such information is removed from the
above-named electronic resources;
(iii) For any period that Guarantor is not a public company
required to file such reports with the Securities and Exchange Commission then
within 120 days after the end of each fiscal year, and within 60 days after the
end of any other fiscal quarter, a consolidated statement of earnings, and a
consolidated statement of changes in financial position, a consolidated
statement of stockholders' equity, and a consolidated balance sheet of such
entity as of the end of each such year or fiscal quarter, setting forth in each
case in comparative form the corresponding consolidated figures from the
preceding annual audit or corresponding fiscal quarter in the prior fiscal year,
as appropriate, all in reasonable detail and satisfactory in scope to Landlord
and Lessor's Mortgagee, and certified as to the annual consolidated statements
by independent public accountants of recognized national standing selected by
Guarantor, whose certificate shall be based upon an examination conducted in
accordance with generally accepted auditing standards and the application of
such tests as said accountants deem necessary under the circumstances; and
(iv) Within ninety (90) days of the end of each calendar year,
an annual statement setting forth the gross revenues derived by Lessee from the
sublease of space in the Leased Property and the Existing Leased Space, the
operating expenses of the Leased Property and the Existing Leased Space, capital
improvement made to the Leased Property and the Existing Leased Property,
together with a projection of such capital improvements for the next calendar
year, such statement to be certified as true and correct in all material
respects by an Executive Officer of Lessee.
Concurrently with the delivery of annual financial statements pursuant to
subparagraph (iii) of this paragraph 10, Guarantor will deliver to Landlord and
Lessor's Mortgagee a certificate by an Executive Officer of Guarantor that to
such officer's Actual Knowledge based on reasonable inquiry, there exists no
Default or Event of Default under the Lease or if any such Default or Event of
Default exists, specifying the nature thereof, the period of existence thereof
and what action Guarantor proposes to take with respect thereto. In addition,
Guarantor agrees upon prior written request to meet with Landlord and its
mortgagee during normal business hours at mutually convenient times, from time
to time, to discuss the Lease and such information about Guarantor's business
and financial condition reasonably requested by Landlord.
Any non-public information delivered to the Landlord pursuant to this paragraph
10, or otherwise, shall be deemed to be confidential. Landlord may share the
information delivered pursuant to this paragraph 10 with Lessor's Mortgagee, the
Certificate Holders, potential mortgagees, potential transferees of the
Certificate Holders, rating agencies, servicers, potential purchasers of the
Leased Property or a beneficial interest therein and all other parties having a
legitimate business purpose for reviewing the same; provided, such parties agree
to hold any non-public information in confidence; and provided, further,
Landlord may disclose such non-public information to regulatory authorities and
in accordance with any judicial or governmental order, or if required by any
law, regulation or stock exchange rule.
Notwithstanding anything to the contrary contained herein, Tenant and Guarantor
shall not be obligated to provide or disclose to Landlord, Lessor's Mortgagee,
any prospective purchaser or mortgagee, or any other Person, any information
relating to Tenant's or Guarantor's financial condition or operations which has
not already been publicly disclosed if Tenant or Guarantor reasonably believes
that providing or disclosing such information would require a separate filing
with the Securities and Exchanges Commission.
11. All communications herein provided for or made pursuant hereto
shall be in writing and shall be sent by (i) registered or certified mail,
return receipt requested, and the giving of such communication shall be deemed
complete on the third Business Day after the same is deposited in a United
States Post Office with postage charges prepaid, (ii) reputable overnight
delivery service with acknowledgment receipt returned, and the giving of such
communication shall be deemed complete on the immediately succeeding Business
Day after the same is timely deposited with such delivery service, or (iii) hand
delivery by reputable delivery service:
To Guarantor:
Fluor Corporation
One Enterprise Drive
Aliso Viejo, CA 92656
Attention: Director of Corporate Real Estate
With a copy to:
Fluor Corporation
One Enterprise Drive
Aliso Viejo, CA 92656
Attention: General Counsel
To Landlord:
Lakepointe Assets LLC
5847 San Felipe Drive, Suite 2600
Houston, Texas 77057
Attention: J. Richard Rosenberg
With a copy to:
Lakepointe Assets LLC
5847 San Felipe Drive, Suite 2600
Houston, Texas 77057
Attention: Erik Eriksson, Jr., Esq.
With a copy to:
Day, Berry & Howard LLP
260 Franklin Street
Boston, Massachusetts 02110
Attention: Lewis A. Burleigh, Esq.
With a copy to:
Legg Mason Mortgage Capital Corporation
100 Light Street
Baltimore, Maryland 21202
Attention: W. Kyle Gore
Any notice, demand, request, approval or consent given in accordance
with the provisions of this paragraph 11 shall be effective on the date of
receipt or delivery or when proper delivery is refused by the addressee.
12. Notice of acceptance of this Guaranty by Landlord and notice of
any obligations or liabilities contracted or incurred by any Tenant under the
Lease are hereby waived by the Guarantor.
13. If Landlord proposes to refinance any mortgage of the Property,
Guarantor shall permit Landlord and the proposed mortgagee, at their expense, to
meet with officers of Guarantor at Guarantor's offices and to discuss the
Guarantor's business and finances. On request of Landlord, Guarantor agrees to
provide any such prospective mortgagee the information to which Landlord is
entitled hereunder, provided that if any such information is not publicly
available, such nonpublic information shall be made available on a confidential
basis substantially equivalent to the basis set forth at the end of Section
10(a) above. Guarantor agrees to execute, acknowledge and deliver, at Landlord's
expense, documents reasonably requested by the prospective mortgagee (such as a
consent to the financing (without encumbering Guarantor's or Tenant's assets), a
consent to assignment of lease and of this Guaranty, estoppel certificate, and a
subordination, non-disturbance and attornment agreement), customary for tenants
under leases such as the Lease and their guarantors to sign in connection with
mortgage loans to landlords, so long as such documents are in form then
customary among institutional lenders (provided the same do not materially and
adversely change Tenant's rights or obligations under the Lease and any related
documents or materially and adversely change Guarantor's rights and obligations
under this Guaranty).
14. This Guaranty shall be governed by and construed in accordance
with the laws of the State of Texas, other than its doctrine regarding conflicts
of laws. Guarantor consents to jurisdiction of the courts of the State of Texas
and of the Federal courts situated in Texas, and consents to venue in Texas, and
Guarantor waives any right to stay, remove, or otherwise directly or indirectly
interfere with such action based on such jurisdiction. The Guarantor hereby
waives any option or objection that it may now or hereafter have to the laying
of venue of any action or proceeding arising under or relating to this Guaranty
in any court located in the State of Texas, waives the right to bring any form
of declaratory judgment action with respect to the subject matter hereof in any
other jurisdiction, and hereby further waives any claim that a court located in
the State of Texas is not a convenient forum for any such action or proceeding.
15. This Guaranty may not be modified or amended except by a written
agreement duly executed by Guarantor and Landlord and Landlord's first mortgagee
from time to time, if any. This Guaranty shall be binding upon the Guarantor and
shall inure to the benefit of Landlord and its successors and assigns as
permitted hereunder, including, without limitation, any mortgagee of Landlord's
interest in the Property. In the event any one or more of the provisions
contained in this Guaranty shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Guaranty, but this Guaranty shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein. As used herein the term "Tenant" includes its successors
and assigns with respect to the Lease.
16. The rights of Landlord under this Guaranty may be assigned in
whole or in part by Landlord, its successors and assigns, whether directly or by
way of a grant of a security interest herein, without the consent of Guarantor.
17. Within 15 days after request by Landlord, Guarantor shall
deliver a certificate confirming that this Guaranty is in full force and effect
and unamended (or, if amended, specifying such amendment), and whether, to the
knowledge of Guarantor (without investigation other than inquiry of Tenant), any
Event of Default exists under the Lease or under this Guaranty.
18. Without the prior written consent of Landlord (which may be
granted or withheld in Landlord's sole discretion), Guarantor will not, directly
or indirectly, consolidate with or merge into any corporation, association,
partnership or other business organization or permit any corporation,
association, partnership or other business organization to consolidate with or
merge into it, or sell or otherwise transfer all or substantially all of its
properties and assets, or acquire all or substantially all of the assets of any
corporation, association, partnership or other business organization or
individual, unless (i) the Guarantor shall be the entity surviving such
consolidation, merger or other action, or the surviving entity or transferee
shall enter into an assumption this Guaranty in form and substance reasonably
satisfactory to Landlord (together with an opinion of independent counsel in
form and substance reasonably satisfactory to Landlord and Lessor's Mortgagee
relating to the due authorization, execution, delivery and enforceability of
such assumption); and (ii) immediately prior to such action, no Event of Default
shall have occurred and be continuing.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed and its corporate seals to be hereunto affixed and attested by its
officers thereunto duly authorized.
Fluor Corporation
By: /s/ J.O. Rollins
Name: J.O. Rollins
Title: Group Executive
|
RESTRICTED UNIT AWARD AGREEMENT
UNDER THE AMENDED AND RESTATED
ALLIANCE PARTNERS COMPENSATION PLAN
You have been granted restricted Units under the Amended and
Restated Alliance Partners Compensation Plan (the “Plan”), as specified below,
in connection with your 2000 award under the Plan:
Participant (“you”): Alfred Harrison
Amount of Award (to be
converted to Restricted Units): $2,000,000.00
Date of Grant: December 31, 2000
Vesting Commencement Date: January 31, 2001
In connection with your grant of restricted Units, you, Alliance
Capital Management Holding L.P. and Alliance Capital Management L.P.
(“Alliance”) agree as set forth in this agreement (the “Agreement”). The Plan
provides a description of the terms and conditions governing restricted Units.
If there is any inconsistency between the terms of this Agreement and the terms
of the Plan, the Plan’s terms completely supersede and replace the conflicting
terms of this Agreement. All capitalized terms have the meanings given them in
the Plan, unless specifically stated otherwise in the Agreement. The restricted
Units granted under this Agreement are referred to in the Agreement as the
“Restricted Units.”
1. Restrictions. Until restrictions lapse as described in
Paragraph 2, you may not sell, transfer, pledge or otherwise assign or dispose
of any Restricted Units.
2. Vesting of Restricted Units. (a) Except as provided in
Paragraph 2(b) below, restrictions will lapse with respect to the Restricted
Units in equal annual installments during the applicable Vesting Period (as
defined below), with restrictions as to the first such installment lapsing on
the first anniversary of the Vesting Commencement Date set forth above, and
restrictions as to the remaining installments lapsing on the subsequent
anniversaries of the Vesting Commencement Date, provided in each case that you
are employed by a Company on such anniversary. The Vesting Period is as set
forth in the following table, based on your age as of December 31, 2000:
Your Age
As of December 31, 2000
--------------------------------------------------------------------------------
Vesting Period
--------------------------------------------------------------------------------
Up to and including 47 8 years 48 7 years 49 6 years 50-57 5 years 58 4 years 59
3 years 60 2 years 61 1 year 62 or older Fully vested at grant
(b) If your employment with the Companies terminates due to death or
Disability, restrictions on any remaining Restricted Units that you hold as of
the date of your termination shall immediately lapse.
3. Forfeitures. If your employment with the Companies
terminates for reasons other than death or Disability, you will immediately
forfeit all of your rights and interests in any Restricted Units as to which
restrictions have not previously lapsed, unless the Committee determines, in its
sole discretion, to accelerate the vesting of those Restricted Units.
4. Unit Certificates. Your Restricted Units will be held for
you by Alliance. After your Restricted Units have vested, a certificate for
those Units will be released to you.
5. Distributions. Any distributions paid by Alliance Capital
Management Holding L. P. in connection with Restricted Units (whether or not
vested) will be paid directly to you.
6. Section 83(b) Election. You agree not to make an election
under section 83(b) of the Code with respect to your Restricted Units unless,
before you file the election with the Internal Revenue Service, you (i) notify
the Committee of your intention to file the election, (ii) furnish the Committee
with a copy of the election to be filed and (iii) pay (or make satisfactory
arrangements for paying) the necessary tax withholding amount to Alliance in
accordance with Section 8.
7. Tax Withholding. If the Committee determines that any
federal, state or local tax or any other charge is required by law to be
withheld with respect to the Restricted Units, the vesting of Restricted Units,
or an election under Section 83(b) of the Code (a “Withholding Amount”) then, in
the discretion of the Committee, either (a) prior to or contemporaneously with
the delivery to you of Restricted Units, you agree to pay the Withholding Amount
to Alliance in cash or in vested Units that you already own (which are not
subject to a pledge or other security interest), or a combination of cash and
such Units, having a total fair market value equal to the Withholding Amount;
(b) Alliance Capital Management Holding L.P. will retain from any vested
Restricted Units to be delivered to you that number of Units having a fair
market value, as determined by the Committee, equal to the necessary Withholding
Amount; or (c) if Restricted Units are delivered without the payment of the
Withholding Amount under either clause (a) or (b) above, you agree promptly to
pay the Withholding Amount to Alliance on at least seven business days notice
from the Committee either in cash or in vested Units that you already own
(which are not subject to a pledge or other security interest), or a combination
of cash and such Units, having a total fair market value equal to the
Withholding Amount. You agree that if you do not pay the Withholding Amount to
Alliance or make satisfactory payment arrangements as described above, Alliance
may withhold any unpaid portion of the Withholding Amount from any amount
otherwise due to you.
8. Adjustments in Authorized Units. In the event of a
partnership restructuring, extraordinary distribution or similar event, the
Committee has the sole discretion to adjust the number of Restricted Units in
accordance with the Plan.
9. Administration. It is expressly understood that the
Committee is authorized to administer, construe, and make all determinations
necessary or appropriate to the administration of the Plan and this Agreement,
all of which shall be binding upon you. The Committee is under no obligation to
treat you or your award consistently with the treatment provided for other
participants in the Plan.
10. Miscellaneous.
(a) This Agreement does not confer upon you any right
to continuation of employment by a Company, nor does this Agreement interfere in
any way with a Company’s right to terminate your employment at any time.
(b) This Agreement will be subject to all applicable
laws, rules, and regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required.
(c) This Agreement will be governed by, and construed
in accordance with, the laws of the state of New York (without regard to
conflict of law provisions).
(d) This Agreement and the Plan constitute the entire
understanding between you and the Companies regarding this award. Any prior
agreements, commitments or negotiations concerning this award are superseded.
This Agreement may be amended only by another written agreement, signed by both
parties.
BY SIGNING BELOW, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS
DESCRIBED ABOVE AND IN THE PLAN.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed effective as of December 31, 2000.
. Alliance Capital Management L.P
By: Alliance Capital Management
Corporation, General Partner
Participant /s/ Alfred Harrison
--------------------------------------------------------------------------------
Alfred Harrison
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Exhibit 10.1
October 24, 2001
Confidential
Heinrich Dreismann, Ph.D.
President and CEO
Roche Molecular Systems, Inc.
4300 Hacienda Drive
Pleasanton, CA 94588
Re: Amendment No. 2 to Letter Agreement
Dear Heiner:
On April 29, 2001, Roche Molecular Systems, Inc., a Delaware corporation
and an affiliate of F. Hoffmann-La Roche, Ltd., a corporation organized under
the laws of Switzerland (“Roche”), and Digene Corporation, a Delaware
corporation (“Digene”), entered into a letter agreement to set forth the
understanding between Roche and Digene regarding the sale, marketing and
distribution of Digene’s Hybrid Capture® HPV products and the negotiation of a
strategic collaboration and relationship, which letter agreement was amended by
the Amendment to the Letter Agreement dated September 7, 2001. The Amendment to
the Letter Agreement dated September 7, 2001 is hereinafter referred to as
Amendment No. 1 and the Letter Agreement dated April 29, 2001 and the Amendment
No. 1 are collectively hereinafter referred to as the “Letter Agreement”. The
purpose of this letter (“Amendment No. 2”) is to amend certain terms of the
Letter Agreement to reflect our current agreements and understandings. Upon
execution of this Amendment No. 2 below, each of Digene and Roche agrees to be
bound by the terms and conditions of this Amendment No. 2. All capitalized terms
used in this Amendment No. 2 without definition have the meanings given to such
terms in the Letter Agreement.
1. Distribution. Paragraph 3(c) of the Letter Agreement is hereby deleted in
its entirety and replaced with the following: “3. Distribution.
(c) Equipment Buy-Back. In the event that no agreement is reached under
paragraph 6(a), then, within 30 days after December 31, 2002, Digene shall have
the option to buy back from Roche equipment purchased by Roche from Digene that
is then owned by Roche and was in use for HPV testing in customers’ laboratories
on June 30, 2002 at [***********************************
--------------------------------------------------------------------------------
THIS EXHIBIT HAS BEEN REDACTED AND IS THE A SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Heinrich Dreismann, Ph.D.
October 24, 2001
Page 2
**************************************************************]. If such
equipment is not purchased by Digene as described above and if Roche has met all
of its obligations under this Agreement (which obligations do not include a
requirement that any agreement be reached under paragraph 6(a)), then Digene
shall extend the wind-down period under paragraph 3(b) by an additional
twenty-four months beginning January 1, 2003 and ending December 31, 2004.”
2. Status of Letter Agreement. On and after the date of this Amendment
No. 2, the terms and provisions of the Letter Agreement, except as amended
hereby, shall continue in full force and effect. If a conflict arises between
the terms of this Amendment No. 2 and the terms of the Letter Agreement, the
terms of this Amendment No. 2 shall control.
Please indicate your agreement with the terms and conditions of this
Amendment No. 2, by executing this Amendment No. 2 in the space provided below
and returning an executed counterpart of this Amendment No. 2 to me.
Best Regards,
DIGENE CORPORATION By: /s/ Evan Jones
--------------------------------------------------------------------------------
Evan Jones
Chief Executive Officer
AGREED TO BY:
ROCHE MOLECULAR SYSTEMS, INC.
By: /s/ Heinrich Dreismann, Ph.D.
--------------------------------------------------------------------------------
Heinrich Dreismann, Ph.D.
President and CEO
cc: Morris Cheston, Jr., Esquire
|
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CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is made on the 19th day of
September 2000 by and among Donald R. Sanders, Ltd., an Illinois corporation
doing business as Center for Clinical Research, whose address is 180 West Park
Avenue, Suite 150, Elmhurst, Illinois 60126 (the "Consultant"), and STAAR
Surgical Company, whose address is 1911 Walker Avenue, Monrovia, California
91016 (the "Company"), in reference to the following:
RECITALS
A. The Company is a developer, manufacturer and global distributor of
products used by ophthalmologists and other eye care professionals to improve or
correct vision in patients suffering from refractive conditions, cataracts and
glaucoma.
B. The Consultant specializes in research relating to the human eye.
C. The Company wishes to retain the Consultant, and the Consultant wishes
to be retained by the Company, to assist the Company in its continued efforts to
enhance its current products and to develop new products.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Consultant
agree as follows:
AGREEMENT
1. Term. The Company retains the Consultant and the Consultant accepts
this appointment with the Company for a period of fifteen (15) months, beginning
on September 1, 2000 and ending on December 31, 2001 (the "Term"). This
Agreement will continue on a month to month basis after December 31, 2001 until
terminated by written notice given by either party at least thirty (30) days
prior to the end of any calendar month. This Agreement supersedes and replaces
any and all other consulting agreements or arrangements entered into by and
between the Company and the Consultant and, upon execution of this Agreement,
any such consulting agreements or arrangements shall have no further force or
effect.
2. Duties of Consultant. The Consultant agrees to perform the services
described in Exhibit "A", attached to this Agreement and made a part of it (the
"Services"). The Consultant will determine the method, details and means of
performing the Services, provided that the Consultant agrees that Donald R.
Sanders, M.D. will supervise the Services.
3. Compensation for Other Staff and Experts. The Company agrees that if
the Consultant's employee, Kim Doney, performs any of the Services, the Company
will compensate the Consultant at the rate of One Hundred Fifty Dollars ($150)
per hour for the time expended by her, in addition to the compensation provided
for in paragraph 4 below. The Consultant will provide a detailed description of
the work performed by Ms. Doney, including the time spent on each project, with
its invoice. The number of hours during any calendar month that Ms. Doney
provides services to the Company shall not exceed ten (10) without the prior
written consent of the Company. The Consultant may, with the prior written
consent of the Company, engage unaffliliated third parties to assist the
Consultant in connection with the Services where the expertise provided by such
third parties is not otherwise available to the Consultant. The Company will be
responsible for compensating any such third parties directly, so long as the
Company approved the engagement in writing.
4. Compensation. The Company shall pay to the Consultant, as compensation
for the Services performed pursuant to this Agreement, the sum of Thirty
Thousand Dollars ($30,000) per month. If this Agreement is terminated by the
Company during the Term due to a Change of Control (as defined in
paragraph 8.1), the Consultant shall receive the balance of the Consultant's
unpaid compensation as
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set forth in this paragraph 4, through the expiration date of the Term, in lieu
of any remedy or damages to which the Consultant may be entitled, at law or in
equity.
5. Bonus.
5.1 Option Grant. On July 7, 2000 the Company authorized, subject to the
conditions set forth herein, a grant to Donald R. Sanders of an option to
purchase Seventy-Five Thousand (75,000) shares of the Company's common stock at
a price of Eleven Dollars and Twenty-Five Cents ($11.25) per share. Said grant
is conditioned upon the receipt by the Company, on or before November 30, 2000,
of a favorable recommendation from the FDA Advisory Panel after its review of
the clinical data relating to the AquaFlow™ Glaucoma Device. If the FDA Advisory
Panel fails to give a favorable recommendation by November 30, 2000, then the
number of shares which the Consultant will have the option to purchase shall be
reduced from Seventy-Five Thousand (75,000) to Twenty-Five Thousand (25,000), so
long as the FDA Advisory Panel review is completed and a favorable
recommendation given to the Company by January 31, 2001. If the FDA Advisory
Panel fails to give a favorable recommendation to the Company by January 31,
2001, the grant of the option shall lapse and shall be of no further force and
effect. The option must be exercised, or it will lapse, by July 31, 2001. The
option discussed herein shall be referred to in this Agreement as the "Bonus
Option".
5.2 Cash Bonus. On July 7, 2000 the Company authorized, subject to the
conditions set forth herein, the payment of a bonus to any five (5) employees
chosen by the Consultant. Said bonus, in the amount of Nine Thousand Dollars
($9,000) per employee, shall be paid upon the receipt by the Company, on or
before November 30, 2000, of a favorable recommendation from the FDA Advisory
Panel after its review of the clinical data relating to the AquaFlow™ Glaucoma
Device. If the FDA Advisory Panel fails to give the Company a favorable
recommendation by November 30, 2000, the bonus shall be reduced to the amount of
Four Thousand Five Hundred Dollars ($4,500) per employee, so long as the FDA
Advisory Panel gives a favorable recommendation to the Company by January 31,
2001. If the FDA Advisory Panel fails to give a favorable recommendation to the
Company by January 31, 2001, the grant of the cash bonus shall lapse and shall
be of no further force and effect.
6. Acceleration of Options in the Possession of the Consultant. As of the
date of this Agreement, Donald R. Sanders, M.D. has options to purchase one
hundred sixty thousand (160,000) shares of the Company's common stock
("Consultant's Options"). (The Consultant's Options do not include the Bonus
Option.) Upon execution of this Agreement by the Consultant and the Company, and
on the condition that the sale of the common stock acquired through exercise of
the Consultant's Options and the Bonus Option is made pursuant to the terms of
this paragraph 6, the Company shall accelerate the vesting date of those of the
Consultant's Options that are unvested, so that they shall be deemed vested on
the date of execution of this Agreement. If Donald R. Sanders, M.D. exercises
some or all of the Consultant's Options, or if the Bonus Option is granted to
Donald R. Sanders, M.D. and he exercises a portion or all of it, Donald R.
Sanders, M.D. agrees that he will sell any of the Company's common stock
acquired through the exercise of the Consultant's Options or the Bonus Option
through the institutional department of CIBC World Markets Corp. The obligations
of Donald R. Sanders, M.D. under this paragraph 6 shall survive the expiration
or termination of this Agreement for a period of thirty-six (36) months.
7. Nondisclosure.
7.1 Property Belonging to Company. The Consultant agrees that all
developments, ideas, devices, improvements, discoveries, apparatus, practices,
processes, methods, concepts and products relating to microsurgical and/or
implantable devices, ("inventions") developed by the Consultant during the term
of this Agreement are the exclusive property of the Company and shall belong to
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the Company. The Consultant agrees to assign all such inventions to the Company,
if the Company so requests.
7.2 Access to Confidential Information. The Consultant agrees that during
the term of the business relationship between the Consultant and the Company,
the Consultant will have access to and become acquainted with confidential
proprietary information that is owned by the Company and is regularly used in
the operation of the Company's business. The Consultant acknowledges that all
files, records, documents, drawings, specifications, equipment and similar items
relating to the business of the Company and to its confidential proprietary
information, whether they are prepared by the Consultant or come into the
Consultant's possession in any other way, shall remain the exclusive property of
the Company.
7.3 No Unfair Use by Consultant. The Consultant promises and agrees that
the Consultant shall not misuse, misappropriate, or disclose in any way to any
person or entity any of the Company's confidential proprietary information,
either directly or indirectly, nor will the Consultant use the confidential
proprietary information in any way or at any time except as required in the
course of the Consultant's business relationship with the Company. The
Consultant agrees that the sale or unauthorized use or disclosure of any of the
Company's confidential proprietary information which is obtained by the
Consultant during the Consultant's business relationship with the Company
constitutes unfair competition. The Consultant promises and agrees not to engage
in any unfair competition with the Company.
7.4 Further Acts. The Consultant agrees that, at any time during the term
of this Agreement or any extension thereof, upon the request of the Company and
without further compensation, but at no expense to the Consultant, the
Consultant shall perform any lawful acts, including the execution of papers and
oaths and the giving of testimony, that in the opinion of the Company, its
successors or assigns, may be necessary or desirable in order to obtain,
sustain, reissue and renew, and in order to enforce, perfect, record and
maintain, patent applications and United States and foreign patents on the
Company's inventions, and copyright registrations on the Company's inventions.
7.5 Obligations Survive Agreement. The Consultant's obligations under this
section 7 shall survive the expiration or termination, for any reason, of this
Agreement.
8. Termination.
8.1 Termination as a Result of a Change of Control. Subject to the payment
required by paragraph 4 above, the Company may terminate this Agreement as a
result of a Change of Control. A "Change of Control" shall be defined as any of
the following events: (i) the sale by the Company of substantially all of its
business or assets, or (ii) the sale of the capital stock of the Company in
connection with the sale or transfer of a controlling interest in the Company to
a third party, or (iii) the merger or consolidation of the Company with another
corporation as part of a sale or transfer of a controlling interest in the
Company to a third party. "A controlling interest" shall be defined as 50% or
more of the common stock of the Company.
8.2 Termination on Default. Should either party default in the performance
of this Agreement or materially breach any of its provisions, the non-breaching
party may terminate this Agreement by giving written notification to the
breaching party. Termination shall be effective immediately on receipt of said
notice. For purposes of this section, material breaches of this Agreement shall
include, but not be limited to, (i) non-payment by the Company of any sum due
the Consultant hereunder which remains unpaid after twenty (20) days written
demand for payment; (ii) the willful and continuing failure of the Consultant to
perform the Services, which failure, if it can be cured, is not cured within
twenty (20) days of the Consultant's receipt from the Company of written notice
thereof, which notice shall specify such failure to perform in detail;
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(iii) the Consultant's commission of acts of dishonesty or fraud; (iv) the
failure by the Consultant to comply in any material respect with any applicable
laws and regulations governing the Consultant's duties under this Agreement; or
(v) the commission by the Consultant of any act that does or will materially
reflect unfavorably on the reputation of the Company. Termination of this
Agreement for cause by the Consultant shall not relieve the Company of its
obligations to make payments to the Consultant for the balance of the Term, or
its obligations under paragraphs 5.1 and 5.2.
8.3 Automatic Termination. This Agreement terminates automatically on the
occurrence of any of the following events: (i) upon the Company's receipt of FDA
approval of both of its Implantable Contact Lens ("ICL") (both for myopia and
hyperopia) and its AQUA-FLOW™ Glaucoma Device; or (ii) the death of Dr. Donald
R. Sanders or a disability sustained by Dr. Donald R. Sanders that prevents him
from rendering the Services required by this Agreement in a timely manner.
8.4 Affect on Options and Other Obligations. Notwithstanding the
expiration or termination of this Agreement, the provisions of paragraph 6 above
shall survive in full force and effect, as shall all options which have
theretofore vested pursuant to paragraph 5.1 above. Further, no such expiration
or termination shall relieve the Company of any accrued but unpaid obligations
under paragraphs 3 and 4 above.
9. Status of Consultant. The Consultant understands and agrees that its
employees are not employees of the Company and that they shall not be entitled
to receive employee benefits from the Company, including, but not limited to,
sick leave, vacation, retirement, death benefits, an automobile, stock in the
Company and/or participation in profits earned by Company. The Consultant shall
be responsible for providing, at the Consultant's expense and in the
Consultant's name, disability, worker's compensation or other insurance as well
as licenses and permits usual or necessary for conducting the Services
hereunder. Furthermore, the Consultant shall pay, when and as due, any and all
taxes incurred as a result of the Consultant's compensation hereunder, including
estimated taxes, and shall provide the Company with proof of said payments, upon
demand. The Consultant hereby agrees to indemnify the Company for any claims,
losses, costs, fees, liabilities, damages or injuries suffered by the Company
arising out of the Consultant's breach of this section.
10. Representations by Consultant. The Consultant represents that the
Consultant has the qualifications and ability to perform the Services in a
professional manner, without the advice, control, or supervision of the Company.
11. Business Expenses. The Company shall reimburse the Consultant for all
reasonable business expenses (which shall include travel expenses) incurred by
the Consultant provided that each such expenditure qualifies as a proper
deduction on the Company's federal and state income tax return. Each such
expenditure shall be reimbursable only if the Consultant furnishes to the
Company adequate records and other documentary evidence required by federal and
state statutes and regulations issued by the appropriate taxing authorities for
the substantiation of that expenditure as an income tax deduction. The
Consultant may not incur any single business expense (exclusive of reasonable
travel expenses) in an amount exceeding Five Hundred Dollars ($500.00) without
the express prior written consent of the Company. The Company shall, in its sole
discretion, reimburse the Consultant or not, for any business expense which
exceeds such amount and which is incurred by the Consultant without the prior
written consent of the Company.
12. Notices. Unless otherwise specifically provided in this Agreement, all
notices or other communications (collectively and severally called "Notices")
required or permitted to be given under this Agreement, shall be in writing, and
shall be given by: (A) personal delivery (which form of Notice shall be deemed
to have been given upon delivery), (B) by telegraph or by private
airborne/overnight delivery service (which forms of Notice shall be deemed to
have been given upon confirmed delivery by
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the delivery agency), or (C) by electronic or facsimile or telephonic
transmission, provided the receiving party has a compatible device or confirms
receipt thereof (which forms of Notice shall be deemed delivered upon confirmed
transmission or confirmation of receipt). Notices shall be addressed to the
address set forth in the introductory section of this Agreement, or to such
other address as the receiving party shall have specified most recently by like
Notice, with a copy to the other party.
13. Other Engagements. The Consultant shall be free to accept other
engagements during the Term so long as they do not interfere with the
Consultant's ability to perform the Services or otherwise comply with the terms
of this Agreement.
14. Choice of Law/Arbitration. This Agreement shall be governed according
to the laws of the state of California. The parties hereby agree that all
controversies, claims and matters of difference shall be resolved by binding
arbitration before the American Arbitration Association (the "AAA") according to
the rules and practices of the AAA from time-to-time in force; provided,
however, that the parties hereto reserve their rights to seek and obtain
injunctive or other equitable relief from a court of competent jurisdiction
without waiving the right to compel such arbitration pursuant to this paragraph.
If the Consultant initiates any proceeding contemplated by the foregoing, it
shall do so in Los Angeles County, California. If the Company initiates any
proceeding contemplated by the foregoing, it shall do so in Cook County,
Illinois. In the event that the Consultant initiates any such proceeding in
order to obtain any compensation, of any form, owed to the Consultant under this
Agreement, and if the Consultant prevails in such proceeding, the Company shall
reimburse the Consultant for all fees and expenses, including, attorneys' and
arbitrators' fees, incurred by the Consultant in connection therewith.
15. Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the services to be rendered by the Consultant to the Company and contains all
of the covenants and agreements between the parties with respect to the services
to be rendered by the Consultant to the Company in any manner whatsoever. Each
party to this agreement acknowledges that no representations, inducements,
promises, or agreements, orally or otherwise, have been made by any party, or
anyone acting on behalf of any party, which are not embodied herein, and that no
other agreement, statement, or promise not contained in this Agreement shall be
valid or binding on either party.
16. Counterparts. This Agreement may be executed manually or by facsimile
signature in two or more counterparts, each of which shall be deemed an
original, and all of which together shall constitute but one and the same
instrument.
17. Severability. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
determined to be invalid, illegal or unenforceable under present or future laws
effective during the term of this Agreement, then and, in that event: (A) the
performance of the offending term or provision (but only to the extent its
application is invalid, illegal or unenforceable) shall be excused as if it had
never been incorporated into this Agreement, and, in lieu of such excused
provision, there shall be added a provision as similar in terms and amount to
such excused provision as may be possible and be legal, valid and enforceable,
and (B) the remaining part of this Agreement (including the application of the
offending term or provision to persons or circumstances other than those as to
which it is held invalid, illegal or unenforceable) shall not be affected
thereby and shall continue in full force and effect to the fullest extent
provided by law.
18. Preparation of Agreement. It is acknowledged by each party that such
party either had separate and independent advice of counsel or the opportunity
to avail itself or himself of same. In light of these facts it is acknowledged
that no party shall be construed to be solely responsible for the drafting
hereof, and therefore any ambiguity shall not be construed against any party as
the alleged draftsman of this Agreement.
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WHEREFORE, the parties have executed this Agreement on the date first
written above.
"CONSULTANT"
Donald R. Sanders, Ltd, d/b/a
Center for Clinical Research
By:
/s/ DONALD R. SANDERS
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Donald R. Sanders, M.D., President
/s/ DONALD R. SANDERS
--------------------------------------------------------------------------------
Donald R. Sanders, M.D.
"COMPANY"
STAAR Surgical Company
By:
/s/ ANDREW F. POLLET
--------------------------------------------------------------------------------
Andrew F. Pollet, Chairman of the Board
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EXHIBIT "A"
DUTIES OF CONSULTANT
The Consultant shall act in conjunction with other physicians in the United
States in making clinical trials of the Company's Implantable Contact Lenses
("ICL") and AQUA-FLOW™ Glaucoma Device. The Consultant, through its President,
shall report on a regular basis to the Company's Chief Executive Officer and/or
Chairman of the Board. In discharging its duties, the Consultant shall be
responsible for:
(1) adjudicating adverse events that relate to the implantation of an ICL;
(2) corresponding with investigational sites regarding protocol and
providing general information updates;
(3) discussing patient care related issues with investigators;
(4) approving secondary procedures on study patients;
(5) managing investigator related issues regarding enrollment in studies,
compliance, data collections, and clinical results;
(6) acting as chairman for investigator meetings in conjunction with the
Director of Clinical Affairs;
(7) coordinating with Promedica issues related to data collection;
(8) coordinating with the Vice President of Regulatory Affairs issues
relating to ICL clinical trials;
(9) providing product education services to physicians;
(10) participating in Company sponsored courses and seminars;
(11) presenting data at peer review conferences and meetings; and
(12) consulting and participating in the development of optometric education
programs.
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CONSULTING AGREEMENT
RECITALS
AGREEMENT
EXHIBIT "A" DUTIES OF CONSULTANT
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April 6, 2000
PERSONAL AND CONFIDENTIAL
Mr. Kevern R. Joyce
Texas-New Mexico Power Company
4100 International Plaza
Fort Worth, Texas 76109
Dear Mr. Joyce:
We are pleased to offer you the position of Chairman, President
and Chief Executive Officer of Texas-New Mexico Power Company (the "Company"),
and a Board Member of TNP Enterprises, Inc. under the terms and conditions
herein indicated. For purposes of this agreement the term "Company" shall also
include any affiliate of Texas-New Mexico Power Company to which you are
transferred during the term of this agreement with your consent.
This agreement is effective as of and only upon the closing (the
"Closing") as defined in the Agreement and Plan of Merger dated as of May 24,
1999 by an among SW Acquisition, L.P., ST Acquisition Corp. and TNP Enterprises,
Inc. The terms and conditions set forth herein shall remain in effect until the
third anniversary of the Closing, except as otherwise noted herein, provided you
remain employed by the Company through such date. This agreement supersedes all
previous agreements relating to your employment with the Company, including, but
not limited to, your Texas-New Mexico Power Company Executive Agreement for
Severance Upon Change in Control dated as of February 16, 1998 and all such
agreements will have no further force and effect.
During the term of this agreement, you will be entitled to annual
compensation of not less than $1,200,000, payable as described below.
1.
Your annual salary will be $1,091,375, comprised of the following components: an
annual Base Salary of $434,500, which shall be payable in accordance with the
Company's customary payroll practices and an annual Bonus of $656,875, payable
to you in a lump sum on each of the first, second and third anniversaries of the
date hereof, provided that you have not terminated your employment with the
Company as of the day immediately prior to the date of payment of such annual
Bonus.
2.
You will be eligible to receive an annual incentive bonus ranging from 0% to
37.5% of your Base Salary if you remain employed by the Company through the end
of each calendar year during the term of this agreement. The amount of your
annual incentive bonus will be based on the attainment of certain
pre-established financial and operational goals of the Company. Your target
annual incentive bonus shall be equal to 25% of your Base Salary.
3.
In the event that the total compensation you receive during any of the three
succeeding 12-month periods commencing on the date hereof, including your Base
Salary, Bonus and incentive bonus, is less than $1,200,000, you shall be
entitled to an additional bonus for such 12-month period equal to the amount of
such shortfall, which amount shall be payable as soon as practicable following
the first, second and third anniversaries of the date hereof, as applicable,
provided that you have not terminated your employment with the Company prior to
the completion of such 12-month period.
You will be eligible for all of the Company's benefits, including
major medical, dental, life, and long-term disability insurance, pension plan
participation, excess benefit plan participation, thrift plan participation,
deferred compensation plan participation, holiday pay and vacation pay, in
accordance with the Company's plans and policies as in effect from time to time.
Notwithstanding any other provision of this agreement, in the
event that during the term of this agreement, your employment with the Company
is terminated by you for Good Reason (as defined below) or by the Company for
any reason other than for Cause (as defined below), you shall be entitled to
receive (a) an amount equal to the product of (i) your average annual Base
Salary received under this agreement prior to the date of your termination, and
(ii) a fraction having a numerator equal to the number of months (or portion
thereof) remaining from the date of such termination of employment until the
third anniversary of the date hereof, and a denominator equal to 12, and (b) an
amount equal to the product of (x) $656,875, and (y) a fraction having a
numerator equal to the number of months (or portion thereof) you were employed
by the Company in the year of your termination of employment, and a denominator
equal to 12.
In addition, if your employment with the Company terminates after
the Closing you (or your estate, in the event of your death) shall be entitled
to receive a special lump sum retirement benefit equal to $3,048,183.
In the event that during the term of this agreement, your
employment with the Company is terminated for Cause, all rights under this
agreement (other than the special retirement benefit provided under the
preceding paragraph) shall cease and you shall not be entitled to any additional
compensation or payments hereunder.
For the purposes of this agreement, Cause shall mean (i) your
willful and continued failure to substantially perform your duties with the
Company (excluding any failure resulting from your disability), subject to any
appeal or grievance procedure set forth in the Company's Personnel Policy
Manual; (ii) your performance of any act or acts constituting a felony involving
moral turpitude and which results or is intended to result in damage or harm to
the Company, whether monetary or otherwise, or which results in or is intended
to result in improper gain or personal enrichment; or (iii) violations of the
Company's Personnel Policy Manual, as constituted at any time prior to the
expiration of this agreement, concerning personal conduct; provided, that the
Company must follow its disciplinary procedures as set forth therein.
For the purposes of this agreement, Good Reason shall mean any of
the following (without your prior express written consent) (i) a material
adverse change in your title, position, duties or responsibilities or you are
assigned any duties or responsibilities materially inconsistent with your duties
or responsibilities immediately prior to the execution of this agreement
(provided, however, that a redesignation of your title, duties or
responsibilities among TNP Enterprises, the Company and its primary affiliates
shall not constitute Good Reason if your overall duties and status among TNP
Enterprises, Inc., the Company and its primary affiliates are not substantially
adversely affected); (ii) your compensation arrangements as provided in this
agreement are decreased by the Company; (iii) your benefits under the employee
benefit plans and programs of the Company are, in the aggregate, materially
decreased; (iv) there is a material adverse change in your reporting rights
and/or obligations; or (v) the Company requires you to relocate to a location
more than sixty-five (65) miles from the location of your office immediately
prior to the execution of this agreement. A termination for Good Reason under
this agreement must occur within thirty (30) days after the event which first
provides a basis for such termination.
The Company's obligation to make the payments provided for in
this agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including without limitation, any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against you or others. In the event that your employment with
the Company is terminated for any reason, other than for Cause, you shall be
under no obligation to seek other employment or take any other action by way of
mitigation of the amounts payable to you under any of the provisions of this
agreement.
In the event that a claim for payment or benefits under this
agreement is disputed, or if the Company commences any proceedings in connection
with your employment, you shall be reimbursed for all attorney fees and expenses
incurred by you in pursuing such claim, provided that you are successful as to
at least part of the disputed claim by reason of litigation, arbitration or
settlement. While such claim or proceeding is pending, the Company will
reimburse you for such attorney fees and expenses on a regular, periodic basis,
within thirty days following receipt by the Company of statements of such
counsel. However, if you are not successful as to at least part of the disputed
claim by reason of litigation, arbitration or settlement, you agree to repay the
Company within 30 days of such determination, an amount equal to the total
amount that the Company has previously reimbursed you for legal fees and
expenses in connection with such claim or proceeding.
The Company shall require any successor to all or substantially
all of its business and/or assets, whether direct or indirect, by purchase,
merger, consolidation, acquisition of stock, or otherwise, to expressly assume
and agree to perform this agreement in the same manner and to the same extent as
the Company would be required to perform if no such succession had taken place.
For purposes of this paragraph, "Company" shall mean both the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this agreement by operation of law
or otherwise.
In the event that during the term of this agreement, your
employment with the Company is terminated by you for Good Reason or by the
Company for any reason other than for Cause, the Company shall pay you an amount
equal to the sum of (i) any excise tax pursuant to Section 4999 of the Internal
Revenue Code of 1988, as amended (the "Code"), incurred by you as a result of
the payment of any amounts under this agreement as a result of your termination
of employment and (ii) any additional federal, state or local income tax
liability (calculated at the highest effective rate applicable to individuals)
and excise tax liability (under Section 4999 of the Code) attributable to
payments made pursuant to this paragraph.
The respective rights and obligations of the parties hereunder
shall survive any termination of this agreement for any reason to the extent
necessary to the intended provision of such rights and the intended performance
of such obligations.
No provisions of this agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by you and the Company. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this agreement.
This agreement shall be governed by and construed in accordance with the laws of
the State of Texas.
If the above terms and conditions meet with your approval, please
so indicate by countersigning this letter in the space provided below, returning
on copy to me. We would be extremely pleased and proud to have you continue as a
member of our TNP team.
Sincerely,
TNP ENTERPRISES, INC.
TEXAS-NEW MEXICO POWER COMPANY
By: \s\ John A. Fanning
Agreed to and accepted this 6th day of April, 2000.
\s\ Kevern R. Joyce
Kevern R. Joyce
|
SANDERS MORRIS HARRIS GROUP INC.
CAPITAL INCENTIVE PROGRAM
(As Amended and Restated Effective November 1, 2001)
TABLE OF CONTENTS
Section 1.
Background and Purpose of the Program
Section 2.
Definitions
(a)
Adopting Employer
(b)
Award Date
(c)
Bonus
(d)
Company
(e)
Consultant
(f)
Elective Deferral Agreement
(g)
Elective Deferral Contribution
(h)
Employment
(i)
Fair Market Value
(j)
Participant
(k)
Payout
(l)
Plan
(m)
Program
(n)
Program Year
(o)
RSA Agreement
(p)
Restricted Period
(q)
Restricted Stock
(r)
Restricted Stock Award
(s)
Salary
(t)
Vesting Date
Section 3.
Eligibility
Section 4.
Elective Deferral Agreement
Section 5.
Revocation of Participant’s Salary or Bonus Deferrals
Section 6.
Restricted Stock Awards
(a)
Authority of Committee
(b)
Number of Restricted Shares Awarded to Employees
(c)
Number of Restricted Shares Awarded to Consultants
(d)
Stock Certificate and Legend
(e)
Restrictions on Stock
(f)
Voting of Restricted Stock
(g)
Post-Termination Forfeiture for Cause
Section 7.
Amendment and Termination
Section 8.
General Provisions
(a)
No Limitation on other Compensation Plans or Employment
(b)
Indemnification
(c)
Assignment
(d)
Tax Withholding
(e)
Severability
(f)
Applicability of Plan
SCHEDULE A
SANDERS MORRIS HARRIS GROUP INC.
CAPITAL INCENTIVE PROGRAM
(As Amended and Restated Effective November 1, 2001)
Section 1. Background and Purpose of the Program.
The name of this program is the SANDERS MORRIS HARRIS GROUP INC. CAPITAL
INCENTIVE PROGRAM (the “Program”). The Program is an amendment and restatement,
effective as of November 1, 2001, of the “Pinnacle Global Group, Inc. Capital
Incentive Program” which was originally effective January 1, 2001. The Program
was amended and restated to (i) reflect the change in the name of the sponsoring
employer from Pinnacle Global Group, Inc. to Sanders Morris Harris Group Inc.
and (ii) allow participation in the Program by Consultants.
The Program permits the grants of Restricted Stock Awards to key Employees and
Consultants. The Program was adopted by the Committee and being made available
pursuant to the authority granted to the Committee under the Pinnacle Global
Group, Inc. 1998 Incentive Plan, as it may be amended from time to time (the
“Plan”), particularly Section 3 of the Plan, “Restricted Stock,” which Plan is
incorporated by reference herein in its entirety.
The purpose of the Program is to enable Sanders Morris Harris Group Inc. (the
“Company”) and its Subsidiaries to attract, retain and motivate key Employees
and Consultants to compensate them for their contributions to the growth and
profits of the Company, and to encourage their ownership of Common Stock in the
Company. The Program provides incentives to participating Employees and
Consultants which are linked directly to increases in stockholder value and
should, therefore, inure to the benefit of the stockholders of the Company.
Section 2. Definitions.
All capitalized terms used in the Program, unless otherwise defined herein,
shall have the meanings ascribed to such terms in the Plan. The Program, in its
entirety, is incorporated by reference into the Plan.
(a) Adopting Employer. “Adopting Employer” means the Company and
each of its Subsidiaries which have been designated by the Committee as an
employer which has adopted the Program.
(b) Award Date. “Award Date” means (i) with respect to a
Restricted Stock Award relating to a Bonus deferral under the Program, the date
during a Program Year on which the Bonus would have been paid absent the
deferral election and (ii) with respect to a Restricted Stock Award relating to
a Salary deferral under the Program; the last day of each quarter during a
Program Year, i.e., March 31, June 30, September 30 and December 31.
(c) Bonus. “Bonus” means any amount attributable to the Employee
during a Program Year which is designated by the Adopting Employer as bonus
compensation. In the event of any disagreement, the Committee, in its sole
discretion, shall determine whether any particular type or item of compensation
shall be deemed a “Bonus” for purposes of the Program.
(d) Company. “Company” means Sanders Morris Harris Group Inc.,
a corporation organized under the laws of the State of Texas, and any successor
in interest thereto.
(e) Consultant. “Consultant” means an independent agent,
consultant, contractor, an individual who has agreed to become an Employee
within the next six months, or any other individual who is not an outside
director or Employee of the Company (or any Parent or Subsidiary) and who, in
the opinion of the Committee, is in a position to contribute to the growth or
financial success of the Company (or any Parent or Subsidiary), (ii) is a
natural person and (iii) provides bona fide services to the Company (or any
Parent or Subsidiary), which services are not in connection with the offer or
sale of securities in a capital raising transaction, and do not directly or
indirectly promote or maintain a market for the Company’s securities.
(f) Elective Deferral Agreement. “Elective Deferral Agreement”
means a written agreement entered into by and between the Adopting Employer and
a Participant for a Program Year, which agreement describes the terms and
conditions of such Participant’s arrangement to defer (i) up to one hundred
percent (100%) of his Bonus that may be awarded with respect to such Program
Year and/or (ii) up to fifty percent (50%) of his Salary that would otherwise be
paid to the Participant during the Program Year absent his deferral election.
The Elective Deferral Agreement shall be executed and dated by the Participant
and shall specify the amount of Bonus and/or Salary, by percentage or dollar
amount, to be deferred under the Program for the Program Year.
(g) Elective Deferral Contribution. “Elective Deferral
Contribution” means any amount of a Participant’s Salary and/or Bonus which he
elects to defer hereunder pursuant to an Elective Deferral Agreement and to have
such deferred amount applied to a Restricted Stock Award pursuant to Section 4.
If an Active Participant is authorized by his Adopting Employer to take a paid
leave of absence from Employment, the Participant shall continue to be
considered in Employment and his Elective Deferral Contributions shall continue
to be withheld during such paid leave of absence.
If an Active Participant is authorized by his Adopting Employer for any reason
to take an unpaid leave of absence from Employment, the Participant shall
continue to be considered in Employment and the Participant shall be excused
from making Elective Deferral Contributions from his Salary until the
Participant returns to a paid Employment status. Upon his return, Elective
Deferral Contributions shall resume for the remaining portion of the Program
Year in which the expiration or return occurs, based on the Participant’s
Elective Deferral Agreement as in effect for that Program Year, i.e., the same
percentage or dollar amount of Salary that was being withheld prior to the
unpaid leave of absence shall resume after return to active service, but no
make-up elective contributions can be made for the leave period. A leave of
absence shall not affect any Bonus deferral election made by the Participant
under his Elective Deferral Agreement.
(h) Employment. “Employment” with respect to an Employee means
employment as an Employee. “Employment” with respect to a Consultant means
active service as a Consultant for an Adopting Employer.
(i) Fair Market Value. “Fair Market Value” means, as determined
by the Committee, the 20-day average of the closing sales prices for a Share of
the Company’s Common Stock, as reported on the National Association of
Securities Dealers Automated Quotation System (“NASDAQ”), ending as of the
business day immediately preceding the date on which the Share is being valued.
(j) Participant. “Participant” means an Employee or Consultant
who has (i) been selected to participate in the Program pursuant to Section 3
and (ii) received a Restricted Stock Award.
(k) Payout. “Payout” means a fee or other form of compensation
that is payable by the Company to a Consultant.
(l) Plan. “Plan” means the Pinnacle Global Group, Inc. 1998
Incentive Plan, as it may be amended from time to time.
(m) Program. “Program” means this Sanders Morris Harris Group
Inc. Capital Incentive Program (fka the Pinnacle Global Group Inc. Capital
Incentive Program) as set forth herein, and as it may be amended from time to
time. The Program is incorporated into the Plan.
(n) Program Year. “Program Year” means the calendar year
commencing on January 1 and ending on December 31, with the first Program Year
commencing on January 1, 2001.
(o) RSA Agreement. “RSA Agreement” means a written agreement
entered into between the Company and the Participant setting forth the terms and
conditions pursuant to which a Restricted Stock Award is granted under the Plan.
(p) Restricted Period. “Restricted Period” means the period of
time determined by the Committee and set forth in the RSA Agreement during which
the transfer of Restricted Stock by the Participant is restricted.
(q) Restricted Stock. “Restricted Stock” means Shares of the
Company’s Common Stock that are granted to a Participant pursuant to a RSA
Agreement and have not yet vested thereunder.
(r) Restricted Stock Award. “Restricted Stock Award” means a
grant of Restricted Stock as evidenced by a RSA Agreement.
(s) Salary. “Salary” means the gross remuneration that is earned
by the Employee or Consultant from an Adopting Employer for compensatory
services as reportable on the Employee’s IRS form W-2 or the Consultant’s Form
1099, as the case may be, for a calendar year, including, without limitation,
commissions, and before such gross remuneration is reduced for (if any) (i)
deductions of payroll taxes and other standard deductions and (ii) Elective
Deferral Contributions hereunder, elective deferrals to a 401(k) plan or a
cafeteria plan, and other employee benefits deductions; provided, however, the
term “Salary” shall exclude any Bonuses (or other extraordinary compensation),
reimbursements of business, moving and other expenses, any income resulting from
stock option exercises, and any distributions from the Program and any other
qualified or non-qualified deferred compensation program. The Committee, in its
discretion, shall determine whether any particular type or item of compensation
shall be deemed “Salary” for purposes of the Program.
(t) Vesting Date. “Vesting Date” means, with respect to a
Participant, the date on which the Restricted Stock Award, or a portion thereof,
becomes vested upon lapse of the Restricted Period.
Section 3. Eligibility.
The Employees and Consultants who receive grants of Restricted Stock Awards
under the Program shall be selected from time to time by the Committee, in its
sole discretion, from among such persons.
This paragraph is only applicable to Employees, and not Consultants, who have
been selected as Participants. Prior to the beginning of each Program Year (or
when an Employee is first designated as a Participant during a Program Year),
the Committee shall notify each designated Employee of his right to authorize
Elective Deferral Contributions for that Program Year (or remaining portion
thereof). Each Employee who has been designated as a Participant for any
Program Year shall automatically remain eligible to authorize Elective Deferral
Contributions in that Program Year and for succeeding Program Years if he
remains an Employee, unless and until it is determined by the Committee, in its
sole discretion, that the Employee is no longer a Participant. An Employee or
former Employee (or in the event of his death, his beneficiary) shall be
considered a Participant hereunder so long as he has a Restricted Stock Award
that has not fully vested.
Section 4. Elective Deferral Agreement.
This Section 4 is only applicable to Employees (and not Consultants) who have
been selected as Participants.
After an Employee has been notified that he is eligible to authorize Elective
Deferral Contributions for a Program Year, such Employee must notify the
Committee (or its delegate) of his deferral election, if any, by completing and
executing an Elective Deferral Agreement. Any Elective Deferral Agreement that
is not completed and signed by the Employee, and received and accepted by the
Committee (or its delegate), on or prior to (a) the last day of the Program Year
immediately preceding the Program Year for which the Elective Deferral Agreement
will be effective, or (b) the first day of the first payroll period for which
the Elective Deferral Agreement will be effective if the Employee first became a
Participant during that Program Year, shall be treated as the Employee’s
election not to defer any Salary or Bonus hereunder for that Program Year.
Notwithstanding the immediately preceding paragraph, if after the commencement
of a Program Year an Employee is designated as a Participant for the first time
then, in order to make a deferral election hereunder, the Participant must
complete and execute an Elective Deferral Agreement and return it to the
Committee (or its delegate) within thirty (30) days from the effective date on
which he first became eligible to participate. Such Elective Deferral Agreement
shall only apply to defer not-yet-earned Salary and Bonus for services to be
performed by the Participant (a) for the remainder of the Program Year and
(b) subsequent to receipt and acceptance of his Elective Deferral Agreement by
the Committee (or its delegate).
The amount of Salary deferred hereunder, pursuant to the Participant’s
authorization in his Elective Deferral Agreement, shall be withheld on a pro
rata basis from the Participant’s regular payments of Salary for each pay period
during the Program Year (or portion thereof during which such Elective Deferral
Agreement is in effect). The dollar amount of a Bonus that the Participant
elects to defer pursuant to his Elective Deferral Agreement shall be deferred in
a lump sum on the date that the deferred portion of the Bonus would have been
paid to the Participant in the absence of his deferral election.
In accordance with this Section 4 and Section 7.6 of the Plan, the Committee
shall permit a Participant to elect, under the procedures described in this
paragraph, to further defer (the “Additional Deferral Election”) the vesting and
receipt of shares of Restricted Stock that would otherwise vest and be issuable
to such Participant. The Additional Deferral Election shall (i) be in writing
and in the form adopted by the Company, (ii) be made by the Participant and
received by the Company, at least one full year and a day, prior to the date
that the vesting restrictions on the shares of Restricted Stock are scheduled to
lapse or any additional one-year extension thereof as described below (the
“Twelve Month Vesting Date”), (iii) apply to all (and not less than all) of the
shares of Restricted Stock scheduled to vest on the Twelve Month Vesting Date
(the “Extended Restricted Shares”), and (iv) have the effect of deferring the
Vesting Date of the Extended Restricted Shares for 12 months after the Twelve
Month Vesting Date (the “Extended Vesting Date”). The Participant shall be
permitted to make successive annual one-year deferral elections with respect to
all (but not less than all) the Extended Restricted Shares provided that each
such election satisfies the requirements described above. Until the Extended
Vesting Date, the Extended Restricted Shares shall be subject to all
restrictions described in the RSA Agreement for unvested shares of Restricted
Stock including, without limitation, all forfeiture provisions.
Section 5. Revocation of Participant’s Salary or Bonus Deferrals.
This Section 5 is only applicable to Employees (and not Consultants) who have
been selected as Participants.
The Participant’s Elective Deferral Agreement, if any, shall continue in effect
during the Program Year while he remains a Participant unless and until he files
with the Committee a written notice of discontinuance of his Elective Deferral
Agreement and such notice is received and accepted by the Committee in its
discretion. The notice of discontinuance must be filed and accepted at least
thirty (30) days prior to the first day of a subsequent month. The revocation
of deferrals shall be effective on the first day of the payroll period beginning
in the designated subsequent month. A notice of discontinuance shall be
effective only with respect to Salary and Bonus amounts (a) attributable to
services not yet performed by the Participant and (b) not earned by the
Participant before the notice of discontinuance becomes effective. This
determination shall be made by the Committee.
If a Participant files a written notice of discontinuance of his Elective
Deferral Agreement, he may not enter into a new Elective Deferral Agreement, and
he cannot revoke such notice of discontinuance, for the remainder of the Program
Year. Such Participant will be eligible to make a new Elective Deferral
Contribution effective as of the first day of the next Program Year if, and only
if, he is designated as a Participant for that Program Year pursuant to Section
3. No such designation of future participation is required to be made by the
Committee pursuant to Section 3. Only a complete and total cessation of
Elective Deferral Contributions shall be permitted hereunder during a Program
Year; therefore, requested changes by a Participant during a Program Year to
either increase or reduce his Elective Deferral Contributions shall not be
permitted (unless the reduction is to zero) if such change is to be effective
before the first day of the next Program Year.
Section 6. Restricted Stock Awards.
(a) Authority of Committee. Restricted Stock Awards shall be
determined by the Committee and granted to Participants at such time or times as
the Committee may determine, in its sole discretion, pursuant to the terms and
conditions of the Program. The Committee shall have the full and unilateral
authority to construe and interpret the Program and make all determinations
hereunder in its discretion.
(b) Number of Restricted Shares Awarded to Employees. The number
of shares of Restricted Stock to be awarded to an Employee who is a Participant
will be determined by a formula or formulas approved by the Committee in its
discretion. The Committee, in its discretion, may change the formula from time
to time. In order to reflect the impact of the restrictions on the value of the
Restricted Stock, as well as the possibility of forfeiture of Restricted Stock,
the Fair Market Value of the Common Stock (determined in the manner described
below) shall be discounted at a rate of thirty-three and one-third percent
(33_%) in determining the number of shares of Restricted Stock to be awarded.
The Committee may, when deemed appropriate in its sole discretion, provide for
an alternative discount rate.
The dollar value of a Restricted Stock Award will be divided by the discounted
Fair Market Value to determine the number of shares of Common Stock in the
Restricted Stock Award. The value of fractional shares will be paid to the
Participant in cash. Unless otherwise determined by the Committee in its
discretion, Restricted Stock Awards shall be granted as of each Award Date based
on the formula prescribed by the Committee pursuant to the foregoing provisions
of this Section 6, and the aggregate amount of the Participant’s Elective
Deferral Contributions that were deferred (i) as of the Award Date with respect
to the Bonus deferral and (ii) as of the quarter ending as of the Award Date
with respect to the Salary deferral.
(c) Number of Restricted Shares Awarded to Consultants. The
number of shares of Restricted Stock to be awarded to a Consultant who is a
Participant, and the terms and conditions of such grant, will be determined by
the Committee in its discretion.
(d) Stock Certificate and Legend. Unless the Committee
determines otherwise, a Participant shall not have any rights with respect to
his Restricted Stock Award, unless and until he has executed a RSA Agreement
and has delivered a fully executed copy thereof to the Company. Each
Participant who is awarded Restricted Stock shall be issued a stock certificate
in respect of such shares of Restricted Stock. Each certificate registered in
the name of a Participant shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Restricted Stock Award,
substantially in the following form:
“The transferability of the certificate and the shares of stock represented
hereby are subject to the terms and conditions (including forfeiture) of the
Pinnacle Global Group Inc. 1998 Incentive Plan and Capital Incentive Program and
a Restricted Stock Award Agreement entered into between the registered owner and
Pinnacle Global Group Inc. Copies of such Plan, Program and Agreement are on
file in the offices of Pinnacle Global Group Inc.”
The Committee shall require that any stock certificate issued in the name of a
Participant evidencing shares of Restricted Stock be held in the custody of the
Company until the restrictions thereon have lapsed and as a condition of such
issuance of a certificate for Restricted Stock, that the Participant deliver a
stock power, endorsed in blank, relating to the shares covered by such
certificate. As soon as practicable after the restrictions have lapsed with
respect to shares of Restricted Stock, the Company shall issue, and deliver to
the Participant, a stock certificate registered in the name of the Participant
free of the restrictive legend set forth above.
(e) Restrictions on Stock. The shares of Restricted Stock
awarded pursuant to this Section 6 shall be subject to the following
restrictions and conditions:
(i) Subject to the provisions of the Program and the RSA
Agreement, during the Restricted Period, the Participant shall not be permitted
to sell, transfer, pledge or assign shares of Restricted Stock awarded under the
Program. The Committee may, in its sole discretion, provide for the lapse of
any such restrictions in installments and accelerate or waive any such
restrictions in whole or in part based on such factors and such circumstances as
the Committee may determine, in its sole discretion, including, but not limited
to, the Participant’s Retirement, termination, death or Disability. The terms,
conditions and restrictions applicable to shares of Restricted Stock granted to
an Employee in the event of the Employee’s termination of Employment, death,
Disability, Retirement, and/or Leave of Absence are set forth on Schedule A
attached hereto and incorporated in its entirety herein by this reference, which
terms, conditions and restrictions remain subject to amendment from time to time
by the Committee in its discretion. With respect to Restricted Stock granted to
a Consultant, the terms, conditions and restrictions applicable to the
Restricted Stock shall be determined by the Committee in its discretion and set
forth in the RSA Agreement.
(ii) Unless the Committee in its sole discretion shall determine
otherwise and so prescribe in the RSA Agreement as of the grant date of any
Restricted Stock Award, the Participant shall have the right to direct the vote
of his shares of Restricted Stock during the Restricted Period, in accordance
with Section 6(f) below. During the Restricted Period, the Participant shall
have the right to receive any regular dividends on such shares of Restricted
Stock. During the Restricted Period, the Committee shall, in its sole
discretion, determine the Participant’s rights with respect to extraordinary
dividends or distributions on the shares of Restricted Stock.
(iii) Shares of Common Stock shall be delivered to the
Participant in certificate form promptly after the Vesting Date.
(f) Voting of Restricted Stock. Unless the Committee, in its
sole discretion, shall determine otherwise at or prior to the grant date of any
Restricted Stock Award, during the Restricted Period the shares of Restricted
Stock shall be voted by the Company’s senior administrative officer in charge of
administering the Plan, or such other person as the Committee may designate (the
“Plan Administrator”), provided that, the Plan Administrator shall vote such
shares in accordance with instructions received from Participants (unless to do
so would constitute a violation of applicable law as determined by the Plan
Administrator). Shares as to which no instructions are received shall be voted
by the Plan Administrator in his sole discretion (unless to do so would
constitute a violation of applicable law as determined by the Plan
Administrator).
(g) Post-Termination Forfeiture for Cause. In any instance where
the vesting of a Restricted Stock Award extends past the termination date of a
Participant’s Employment, either pursuant to the terms of the Program or by
action of the Committee, the non-vested portion of the Restricted Stock Award
shall be forfeited if, in the determination of the Committee, at any time within
such remaining Restricted Period, the Participant engages in any of the conduct
described in the definition of “Cause” under the Plan.
Section 7. Amendment and Termination.
The Program may be amended or terminated at any time and from time to time by
the Committee; provided, however, no amendment shall be permitted to the extent
it conflicts with the Plan as may be determined by the Board; provided, further,
the Program and Plan shall be construed as mutually consistent to the maximum
possible extent.
Section 8. General Provisions.
(a) No Limitation on other Compensation Plans or Employment.
Nothing contained in the Program shall prevent the Adopting Employer from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of the
Program shall not confer upon any Employee or Consultant any right to continued
Employment, nor shall it interfere in any way with the right of an Adopting
Employer to terminate the Employment of such person at any time.
(b) Indemnification. No member of the Board or the Committee,
nor any officer or employee of an Adopting Employer acting on behalf of the
Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Program, and all members of the Board and the Committee and each and any officer
or employee of an Adopting Employer acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in respect
of any such action, determination or interpretation.
(c) Assignment. A Participant’s rights and interest under the
Program may not be assigned or transferred in whole or in part either directly
or by operation of law or otherwise (except in the event of a Participant’s
death or as provided in Section 6(d)) including, without limitation, execution,
levy, garnishment, attachment, pledge, bankruptcy or in any other manner, and no
such right or interest of any Participant shall be subject to any obligation or
liability of such Participant. Upon the death of a Participant, the
Participant’s estate shall succeed to the rights of the Participant with respect
to any Restricted Stock Awards previously granted to such Participant.
(d) Tax Withholding. The Company and its Subsidiaries shall have
the right to deduct from any payment made under the Program any federal, state
or local income or other taxes which are required by law to be withheld with
respect to such payment. It shall be a condition to the obligation of the
Company to issue Common Stock upon the lapse of the Restricted Period that the
Participant (or his beneficiary in the event of death) pay to the Company, upon
its demand, such amount as requested by the Company for the purpose of
satisfying any liability to withhold any taxes. If the amount requested is not
paid, the Company may refuse to issue Shares. Unless the Committee shall in its
sole discretion determine otherwise, payment for taxes required to be withheld
may be made in whole or in part, in accordance with rules adopted by the
Committee from time to time, (i) in cash, in United States dollars, (ii) by
having the Company sell or withhold Shares of Common Stock otherwise issuable
pursuant to the Program having a Fair Market Value equal to such tax liability,
or (iii) by tendering to the Company shares of Common Stock owned by the
Participant (or his beneficiary in the event of his death), including Common
Stock owned jointly with the Participant’s spouse (with spousal consent), and
acquired at least six (6) months prior to such tender (excluding shares of
Restricted Stock awarded hereunder or under any other restricted stock program
of the Company) and having a Fair Market Value equal to such tax liability.
(e) Severability. If any term or provision of this Program or
the application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, then the remainder of the Program, or the application
of such term or provision to persons or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected thereby, and
each term and provision hereof shall be valid and be enforced to the fullest
extent permitted by applicable law.
(f) Applicability of Plan. The terms and provisions of the Plan
shall be applicable to the Program, except to the extent expressly set forth
under this Program and which do not conflict with the Plan; provided, however,
the definitions in Schedule A shall control in the event of any discrepancy with
the terms of the Plan. The Plan, Program and RSA Agreement shall be construed
as mutually consistent to the maximum possible extent. In addition, for
purposes of the Plan, this Program, together with the related RSA Agreement,
shall constitute the “Incentive Agreement.”
IN WITNESS WHEREOF, this amended and restated Program is hereby approved and
executed by each member of the Compensation Committee on this ______ day of
November, 2001, to be effective as of November 1, 2001.
SANDERS MORRIS HARRIS GROUP INC.
COMPENSATION COMMITTEE
W. Blair Waltrip
John H. Styles
SCHEDULE A
to the
SANDERS MORRIS HARRIS GROUP INC.
CAPITAL INCENTIVE PROGRAM
In the event of a Participant’s termination of Employment, death, Disability,
Retirement, Early Retirement, and/or Leave of Absence, the following terms,
conditions and restrictions shall apply to all Restricted Stock Awards granted
to all Employees who are Participants under the Program, except as may be
expressly provided otherwise in the Participant’s RSA Agreement in the sole
discretion of the Committee. Capitalized terms used, but not otherwise defined
below or in Section 2 of the Program, shall have the meanings set forth in the
Plan.
1 Definitions. For purposes of the Program and this Schedule A,
the following terms shall have the following meanings:
(a) “Early Retirement” shall mean no longer being occupied within
one’s business or profession, and terminating active Employment after attaining
at least age fifty-five (55) and having completed at least five (5) years of
service in Employment with the Company and its Subsidiaries.
(b) “Leave of Absence” shall mean a temporary cessation from
active Employment, as authorized in each individual case by the Adopting
Employer, in connection with military leave, personal leave or family and
medical leave, but such term shall not include such a cessation resulting from
or in connection with a Disability.
(c) “Retirement” shall mean no longer being occupied in one’s
business or profession and terminating Employment after attaining a number of
years of service in Employment with the Company and its Subsidiaries which
number, when added together with the Employee’s age, shall not be less than
seventy–five (75).
2 Termination of Employment. The following provisions supplement
and remain subject to the Program:
(a) Voluntary Termination. In the event of a voluntary
termination of Employment, other than pursuant to Retirement, all Shares of
Restricted Stock shall be forfeited to the extent not vested on the termination
date.
(b) Involuntary Termination for Cause. In the event of an
involuntary termination of Employment for Cause, all Shares of Restricted Stock
shall be forfeited to the extent not vested on the termination date.
(c) Involuntary Termination other than for Cause. If a
Participant is involuntarily terminated from Employment other than for Cause,
such Participant shall receive in return the number of shares of unvested
Restricted Stock such that the total number of Shares of Restricted Stock
received by the Participant with respect to the corresponding Restricted Stock
Award (included previously vested shares) shall equal the sum of (i) sixty-six
and two-third percent (66_%) of the total number Shares of Restricted Stock
represented by the Restricted Stock Award and (ii) a pro-rata portion of the
remaining thirty-three and one-third percent (33_%) of the total number of
Shares of Restricted Stock represented by the Restricted Stock Award. For
purposes of this paragraph, a “pro-rata portion” shall mean a fraction, the
numeration of which is the total number of full calendar months of Participant’s
Employment during the three-year Restricted Period related to a given Restricted
Stock Award and the denominor of which is 36. No fractional shares of
Restricted Stock shall be issuable under this paragraph, but rather the value of
such fractional shares shall be paid to the Participant in cash.
(d) Death. Upon the death of a Participant, the Restricted
Period shall immediately lapse and such Shares of Restricted Stock shall become
fully vested.
(e) Disability. In the event of a Participant’s Disability prior
to the termination of Employment, the Restricted Period shall continue as
scheduled in the RSA Agreement provided (i) the Participant continues to meet
the definition of Disability and has not voluntarily terminated his Employment
or (ii) the Disability is discontinued and the Participant resumes active
Employment upon the earlier to occur of (A) the end of the Disability period or
(B) twelve (12) months after the onset of the Disability. If the Disability
continues for more than 12 months and the Participant remains in Employment
during that 12-month period (except for an involuntary termination due to such
Disability), then the Restricted Period shall lapse on the 12-month anniversary
of the onset of the Disability on which date the Restricted Stock shall be fully
vested. In the event that the Participant’s Employment is involuntarily
terminated due to Disability, as determined by the Committee in its discretion,
the Restricted Stock shall be fully vested on his termination date.
(f) Retirement. A Participant who meets the conditions for
Retirement shall become fully vested in his Shares of Restricted Stock upon
lapse of the Restricted Period, i.e., the vesting schedule applicable to such
Shares shall continue to apply as if the Participant was still in active
Employment.
(g) Early Retirement. A Participant who meets the conditions for
Early Retirement shall become fully vested, as of his termination date, in
two-thirds (2/3) of his Shares of Restricted Stock, if any, that were not vested
as of such termination date, and the remaining one-third (1/3) of such
non-vested Shares shall be forfeited as of such date.
(h) Leave of Absence. In the event a Participant takes an
authorized Leave of Absence, the Restricted Period will be extended for a period
equal to the length of the Leave of Absence provided the Participant resumes
active Employment within twelve (12) months of the commencement date of the
Leave of Absence, and remains in active Employment for a period equal to (i)
three (3) months or (ii) the length of the Leave of Absence, whichever is
shorter. If the Participant remains on the Leave of Absence for more than 12
months, all non-vested Shares of Restricted Stock as of the date he began the
Leave of Absence shall be forfeited.
|
October 5, 2001
William M. Carpenter
36 Knollwood Drive
Rochester, NY 14618
Dear Bill:
The purpose of this letter is to summarize the terms and conditions of your
separation of employment from Bausch & Lomb Incorporated ("Bausch & Lomb" or
"the Company") and your resignation as an officer of the company.
1.
Your full time active employment with Bausch & Lomb ceases effective September
1, 2001 ("Separation Date"). Beginning the day after the Separation Date, your
status will be changed to that of an inactive employee, subject to the terms and
conditions hereof, and Bausch & Lomb will pay you an aggregate amount equal to
two times your current annual base salary in substantially equal bi-weekly
installments for thirty six (36) consecutive months commencing on your
Separation Date and ending on August 31, 2004. As you are aware, this amount is
twice that provided for in the Officer Separation Plan. During your Severance
Period (defined below) you will continue to receive benefits and perquisites as
detailed below. For purposes of this letter, the term "Severance Period" will
refer to the twenty-four (24) consecutive months commencing on your Separation
Date and ending on August 31, 2003. You will not accrue or be paid for vacation
time after the Separation Date.
2.
Officer perquisites will continue as follows:
A.
Company Car. You may purchase your company car by November 30, 2001 for a
reasonable depreciated value determined by Bausch & Lomb plus payment of sales
tax on the fair market value of the car as determined by Bausch & Lomb. If not
purchased, the car must be returned to Bausch & Lomb by November 30, 2001.
B.
Financial Counseling. Bausch & Lomb will continue to reimburse you for
reasonable financial planning expenses through the end of the Severance Period
up to an aggregate amount of $46,667 less any 2001 expenses reimbursed prior to
the Separation Date. This reimbursement may include legal services sought in
connection with the negotiation and finalization of this Agreement.
C.
Other. Bausch &Lomb will continue to reimburse or pay existing regular monthly
dues associated with your two current clubs through the end of the Severance
Period.
3.
You may elect to continue your medical, dental and life insurance at the then
current active employee rates from the Separation Date through August 31, 2004.
At the end of that period, you will be eligible for COBRA coverage that allows
you to continue your current medical and dental insurance at the full premium
rates for up to an additional 18 months.
4.
There is no COBRA eligibility for life insurance. However, within 31 days
following the end of the period referred to in Section 3 above, you may elect
(without providing evidence of insurability) an Aetna conversion policy to
replace some or all of your coverage.
5.
Disability coverage ceases on September 1, 2001. There are limited conversion
rights for long term disability. Upon your request, HR will provide you with
more information.
6.
You are fully vested in the Bausch & Lomb Retirement Plan ("Retirement Plan")
and the Supplemental Executive Retirement Plan II ("SERP"). Participation in
SERP continues during the Severance Period and participation in the Retirement
Plan continues through August 31, 2004. You retain through these respective
periods the full rights and privileges under the plans you would have as an
active employee (e.g., your participation continues, and benefit accruals
continue). Within three (3) months after August 31, 2004, you will receive
details on pension options from our Corporate Benefits Department.
7.
Participation in the Bausch & Lomb 401(k) plan continues through August 31, 2004
and you retain through this period the full rights and privileges under the plan
you would have as an active employee (e.g. as applicable, you may continue
contributing, associated Company matching contributions continue to be deposited
on your behalf, etc.). At the end of this period, you may leave your money in
the Bausch & Lomb 401(k) Plan or elect a distribution. Contact InfoExpress at
1-800-479-0557 for account information or to make any future transactions.
8.
You may continue to participate in the Bausch & Lomb Deferred Compensation Plan
through August 31, 2004 and you retain through this period the full rights and
privileges under the plan you would have as an active employee (e.g. as
applicable, you may continue contributing, associated Company matching
contributions continue to be deposited on your behalf, etc.). The investment mix
can be changed at any time prior to payout by contacting EPIC at 1-800-716-3742.
You will continue to receive quarterly statements. Please advise Corporate
Compensation of any address changes.
9.
As a participant in the Stock Option Plan, you have until ninety (90) days after
August 31, 2004 to exercise vested stock options. Subject to Section 10 of this
Agreement, you will continue to vest in your currently unvested options through
August 31, 2004 and you will have until 90 days after August 31, 2004 to
exercise such newly vested options. You are not eligible for any future vesting
of restricted stock, nor will you be eligible for any future company loans in
connection with the exercise of vested options. Any outstanding stock option
loans must be repaid within ninety (90) days after August 31, 2004. Your current
loan balance with the Company under this Plan is $916,529.50. A listing of your
vested and unvested options has been provided to you under separate cover.
10.
Notwithstanding Section 9, if you commit a material breach of this letter on or
before August 31, 2004, you will forfeit (i) any options that have vested and/or
will vest during the period from the Separation Date until August 31, 2004
and/or (ii) any proceeds from the exercise thereof.
11.
You will not be eligible for an EVA bonus for 2001, based on the actual
performance of Bausch & Lomb. Under the EVA Plan, your bank balance from prior
years is zero. You will not vest in Cycle II or in any additional Cycles under
the Cumulative EVA Long Term Incentive Plan.
12.
Bausch & Lomb will assist you in your search for new employment by providing you
with the services of an outplacement organization and/or secretarial and office
support in an amount up to $75,000. You will be provided the names of two
approved outplacement service providers from which you may choose the one you
prefer. All such fees for outplacement and/or secretarial and office support
must be incurred during the Severance Period. Payment for outplacement services
will be made directly by Bausch & Lomb, and reimbursement for secretarial and/or
office support other than through the outplacement provider will be made
directly to you.
13.
You agree that during the Severance Period you will not, directly or indirectly,
(a) compete with any business in which Bausch & Lomb or any of its affiliates is
engaged or actively developing, (b) solicit any person who is a customer of a
business conducted by Bausch & Lomb or any of its affiliates, or (c) induce or
attempt to persuade any employee of Bausch & Lomb or any of its affiliates to
terminate his or her employment relationship with Bausch & Lomb or any of its
affiliates. For purposes of this Agreement, the phrase "compete" shall include
serving as an employee, an officer, a director, an owner, a partner or a five
percent (5%) or more shareholder of any such business or otherwise engaging in
or assisting another to engage in any such business. Without limiting the
foregoing Bausch & Lomb may consider, on an as requested basis, modifications to
your restrictions on competition where management of Bausch & Lomb believes the
competitive impact on Bausch & Lomb to be minimal or otherwise manageable.
14.
As a result of your employment with Bausch & Lomb and as a result of your
position as an officer of Bausch & Lomb, you were obviously privy to sensitive
financial and strategic information, as well as trade secrets which are the
confidential property of Bausch & Lomb, and Company Information (as defined
below). You affirm that, as a former officer of Bausch & Lomb, you have a
fiduciary obligation to maintain Company Information in confidence and not to
disclose it to others. You have returned or will immediately return to Bausch &
Lomb all Company Information that is capable of being returned, including client
lists, files, software, records, computer access codes and instruction manuals
which you have in your possession, and agree not to keep any copies of Company
Information. The term "Company Information" means: (i) confidential information,
including information received from third parties under confidential conditions,
and (ii) other technical, marketing, business or financial information, or
information relating to personnel or former personnel of Bausch & Lomb, the use
or disclosure of which might reasonably be construed to be contrary to the
interest of Bausch & Lomb; provided, however, that the term "Company
Information" shall not include any information that is or became generally known
or available to the public other than as a direct result of a breach of this
Section by you or any action by you prior to the Separation Date which would
have been a breach of your obligations to Bausch & Lomb in effect at such time.
15.
You agree to make yourself reasonably available to Bausch & Lomb to respond to
requests by Bausch & Lomb for information concerning matters involving facts or
events relating to Bausch & Lomb or any of its affiliates that may be within
your knowledge, and to assist Bausch & Lomb and its affiliates as reasonably
requested with respect to pending and future litigations, arbitrations, other
dispute resolutions or other similar matters. Bausch & Lomb will reimburse you
for your reasonable travel expenses and costs incurred as a result of your
assistance under this Section. As you know, the bylaws of Bausch & Lomb provide
for your indemnification, to the fullest extent authorized or permitted by law,
in the event there are claims against you arising out of your actions while an
officer of Bausch & Lomb. The bylaws also provide for the advancement of
expenses incurred in defending any proceeding in advance of its final
disposition. This agreement is not intended to modify or limit those rights in
any manner.
16.
By accepting the package set forth in this Agreement, and except as to the
obligations of Bausch & Lomb set forth in this Agreement, you, for yourself and
your heirs, administrators, representatives, and assigns (collectively, the
"Releasors") hereby release and discharge Bausch & Lomb, and its former and
current affiliates, agents and employees and their successors and assigns
(collectively, the "Releasees"), from any and all claims, causes of action,
liability, damages and/or losses of whatever kind or nature, in law or equity,
known or unknown, which the Releasors ever had, now have, or may have in the
future against the Releasees from the beginning of time through the date of this
Agreement, arising directly or indirectly out of your employment by Bausch &
Lomb or as a result of your separation from employment, including, but not
limited to, any and all claims arising under any local, state or federal
employment discrimination law, including but not limited to the Age
Discrimination in Employment Act, the Older Workers' Benefits Protection Act,
Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities
Act.
17.
You understand that you should consult with your attorney prior to the execution
of this Agreement; that you have been afforded twenty-one (21) days to review
and consider this Agreement; and that such period was a reasonable period of
time for you to do so. You acknowledge that you understand the contents of this
Agreement, and this Agreement is entered into freely and voluntarily, and that
it is not predicated on or influenced by any representations of Bausch & Lomb or
any of its employees.
18.
You understand that you may revoke this Agreement at any time within seven (7)
days of the execution hereof, and that the Agreement will not become effective
or enforceable until the expiration of that period.
19.
The compensation and benefits arrangements set forth in this Agreement supersede
any other agreement between you and Bausch & Lomb, and are in lieu of any rights
or claims that you may have with respect to severance or other benefits, or any
other form of remuneration from Bausch & Lomb and its affiliates, other than
benefits under any tax-qualified employee pension benefit plans subject to the
Employee Retirement Income Security Act of 1974, as amended.
20.
Except as required by law or regulation, neither you nor Bausch & Lomb will
disclose or discuss the terms of this Agreement; provided, that you may disclose
such terms to your financial and legal advisors and your spouse and Bausch &
Lomb may disclose such terms to selected employees, advisors and affiliates on a
"need to know" basis, each of whom shall be instructed by you and Bausch & Lomb,
as the case may be, to maintain the terms of this Agreement in strict confidence
in accordance with the terms hereof. Bausch & Lomb may also disclose the terms
of this Agreement as required by applicable law or regulations.
21.
By this Agreement, you are resigning from all positions and offices held by you
within Bausch & Lomb and its affiliates. You agree that you will, when asked,
execute such further instruments and documents as are necessary to effect this
resignation as to all such Bausch & Lomb affiliates.
22.
You represent and acknowledge that, in executing this Agreement, you have not
relied upon any representation or statement made by Bausch & Lomb or not set
forth herein. This Agreement may not be amended, modified, terminated, or waived
in any part, except by a written instrument signed by the parties.
23.
All payments made to you under this Agreement will be reduced by, or you will
otherwise pay, all income, employment and Medicare taxes required to be withheld
on such payments.
24.
Nothing contained in this Agreement shall be construed in any way as an
admission by you or Bausch & Lomb of any act, practice or policy of
discrimination or breach of contract either in violation of applicable law or
otherwise.
25.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York, without regard to the principles of conflicts of law
thereof, to the extent not superseded by applicable federal law. The parties
hereto hereby agree that any dispute concerning formation, meaning,
applicability or interpretation of this agreement shall be submitted to the
jurisdiction of the courts of the State of New York (including federal courts in
the State of New York), and no other state shall have jurisdiction over such
matters, and further agree to waive all rights to a jury trial with respect to
any such matters.
26.
You acknowledge and agree that Bausch & Lomb's remedy at law for any breach of
your obligations under Sections 13, 14 and 20 of this Agreement would be
inadequate and agree and consent that temporary and permanent injunctive relief
may be granted in any proceeding that may be brought to enforce any provision of
this Section without the necessity of proof of actual damage. With respect to
any provision of Sections 13, 14 and 20 of this Agreement finally determined by
a court of competent jurisdiction to be unenforceable, you and Bausch & Lomb
hereby agree that such court shall have jurisdiction to reform this Agreement or
any provision hereof so that it is enforceable to the maximum extent permitted
by law, and you and Bausch & Lomb agree to abide by such court's determination.
If the terms and conditions are agreeable to you, please indicate your
acceptance of the above in the space provided below and return the enclosed copy
to me.
Sincerely,
/s/ Ian Watkins
Ian Watkins
Agreed to this 15th day of October, 2001
/s/ William M. Carpenter
William M. Carpenter |
Exhibit 10.18
EXHIBIT A
TO FIRST AMENDMENT
REVOLVING CREDIT NOTE
(Second Restated)
$75,000,000.00 July 30, 2001
FOR VALUE RECEIVED, the undersigned, MTR GAMING
GROUP, INC., a Delaware corporation, MOUNTAINEER PARK, INC., a West Virginia
corporation, SPEAKEASY GAMING OF LAS VEGAS, INC., a Nevada corporation,
SPEAKEASY GAMING OF RENO, INC., a Nevada corporation and PRESQUE ISLE DOWNS,
INC., a Pennsylvania corporation (collectively the "Borrowers") jointly and
severally promise to pay to the order of WELLS FARGO BANK, National Association,
as Agent Bank on behalf of itself and the other Lenders as defined and described
in the Credit Agreement described hereinbelow (each, together with their
respective successors and assigns, individually being referred as a "Lender" and
collectively as the "Lenders") such sums as Lenders may hereafter loan or
advance or re-loan to the Borrowers from time to time pursuant to the Credit
Facility as described in the Credit Agreement, hereinafter defined up to the
maximum principal sum of Seventy-Five Million Dollars ($75,000,000.00) (or such
lesser amount of such loans and advances as may be outstanding from time to
time), the unpaid balance of which shall not exceed in the aggregate the Maximum
Permitted Balance at any time, together with interest on the principal balance
outstanding from time to time at the rate or rates set forth in the Credit
Agreement.
A. Incorporation of Credit Agreement.
1. Reference is made
to the Amended and Restated Credit Agreement dated as of August 15, 2000, as
amended by First Amendment to Amended and Restated Credit Agreement dated as of
July 30, 2001 (as may be further amended, modified, extended, renewed or
restated from time to time, the "Credit Agreement"), executed by and among the
Borrowers and the Lenders and Swingline Lender therein named, and Wells Fargo
Bank, National Association, as administrative and collateral agent for itself
and for the Lenders (the "Agent Bank"). Terms defined in the Credit Agreement
and not otherwise defined herein are used herein with the meanings defined for
those terms in the Credit Agreement. This is a restatement of the Amended and
Restated Revolving Credit Promissory Note (the "Prior Note") dated August 15,
2000, for the purpose of evidencing an increase of the Aggregate Commitment from
Sixty Million Dollars ($60,000,000.00) to Sixty-Seven Million Five Hundred
Thousand Dollars ($67,500,000.00) as of the First Amendment Effective Date and,
subject to the occurrence of the Second Increase Effective Date, for the purpose
of evidencing an additional increase of the Aggregate Commitment from
Sixty-Seven Million Five Hundred Thousand Dollars ($67,500,000.00) to
Seventy-Five Million Dollars ($75,000,000.00) and shall constitute the Revolving
Credit Note (Second Restated) ("Revolving Credit Note") referred to in the
Credit Agreement, and any holder hereof (in accordance with the Credit
Agreement) is entitled to all of the rights, remedies, benefits and privileges
provided for in the Credit Agreement as originally executed or as it may from
time to time be supplemented, modified or amended. The Credit Agreement, among
other things, contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events upon the terms and conditions therein
specified.
2. The outstanding
principal indebtedness evidenced by this Revolving Credit Note shall be payable
as provided in the Credit Agreement and in any event on August 15, 2005, the
Maturity Date.
3. Interest shall be
payable on the outstanding daily unpaid principal amount of each Borrowing
hereunder from the date thereof until payment in full and shall accrue and be
payable at the rates and on the dates set forth in the Credit Agreement both
before and after Default and before and after maturity and judgment, with
interest on overdue interest to bear interest at the Default Rate, to the
fullest extent permitted by applicable law.
4. The amount of
each payment hereunder shall be made to the Agent Bank at the Agent Bank's
office as specified in the Credit Agreement for the account of the Lenders at
the time or times set forth therein, in lawful money of the United States of
America and in immediately available funds.
5. Borrowings
hereunder shall be made in accordance with the terms, provisions and procedures
set forth in the Credit Agreement.
B. Default. The "Late Charges and
Default Rate" provisions contained in Section 2.10 and the "Events of Default"
provisions contained in Article VII of the Credit Agreement are hereby
incorporated by this reference as though fully set forth herein. Upon the
occurrence of a Default or Event of Default, Borrowers' right to convert or
exercise its Interest Rate Option for a LIBOR Loan, or the continuation thereof
at the expiration of the then current Interest Period, shall immediately,
without notice or demand, terminate for so long as a Default or Event of Default
is continuing.
C. Waiver. Borrowers waive
diligence, demand, presentment for payment, protest and notice of protest.
D. Collection Costs. In the event of
the occurrence of an Event of Default, the Borrowers agree to pay all reasonable
costs of collection, including reasonable attorneys fees, in addition to and at
the time of the payment of such sum of money and/or the performance of such acts
as may be required to cure such default. In the event legal action is commenced
for the collection of any sums owing hereunder the undersigned agrees that any
judgment issued as a consequence of such action against Borrowers shall bear
interest at a rate equal to the Default Rate until fully paid.
E. Interest Rate Limitation.
Notwithstanding any provision herein or in any document or instrument now or
hereafter securing this Revolving Credit Note, the total liability for payments
in the nature of interest shall not exceed the limits now imposed by the
applicable laws of the State of Nevada or the United States of America.
F. Security. This Revolving Credit
Note is secured by the Security Documentation described in the Credit Agreement.
G. Governing Law. This Revolving
Credit Note has been delivered in Las Vegas, Nevada, and shall be governed by
and construed in accordance with the laws of the State of Nevada.
H. Partial Invalidity. If any
provision of this Revolving Credit Note shall be prohibited by or invalid under
any applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision of any other provision of this Revolving Credit Note.
I. No Conflict with Credit
Agreement. This Revolving Credit Note is issued under, and subject to, the
terms, covenants and conditions of the Credit Agreement, which Credit Agreement
is by this reference incorporated herein and made a part hereof. No reference
herein to the Credit Agreement and no provision of this Revolving Credit Note or
the Credit Agreement shall alter or impair the obligations of Borrowers, which
are absolute and unconditional, to pay the principal of and interest on this
Revolving Credit Note at the place, at the respective times, and in the currency
prescribed in the Credit Agreement. If any provision of this Revolving Credit
Note conflicts or is inconsistent with any provision of the Credit Agreement,
the provisions of the Credit Agreement shall govern.
J. Effective Date. This Revolving
Credit Note shall not be binding upon the Borrowers until the occurrence of the
First Amendment Effective Date, as defined in the Credit Agreement.
K. Restatement of Prior Note. This
Revolving Credit Note is a complete amendment to and restatement of the Prior
Note and shall evidence all Indebtedness evidenced by the Prior Note and upon
the execution and delivery of this Revolving Credit Note to Agent Bank and the
occurrence of the First Amendment Effective Date, the Prior Note shall be of no
further force or effect.
IN WITNESS WHEREOF, this Revolving Credit Note
has been executed as of the date first hereinabove written.
BORROWERS: MTR GAMING GROUP, INC.,
a Delaware corporation By /s/ Edson R. Arneault
--------------------------------------------------------------------------------
Edson R. Arneault, President MOUNTAINEER PARK, INC.,
a West Virginia corporation By /s/ Edson R. Arneault
--------------------------------------------------------------------------------
Edson R. Arneault, President SPEAKEASY GAMING OF LAS VEGAS, INC.,
a Nevada corporation By /s/ Edson R. Arneault
--------------------------------------------------------------------------------
Edson R. Arneault, President SPEAKEASY GAMING OF RENO, INC.,
a Nevada corporation By /s/ Edson R. Arneault
--------------------------------------------------------------------------------
Edson R. Arneault, President PRESQUE ISLE DOWNS, INC.,
a Pennsylvania corporation By /s/ Edson R. Arneault
--------------------------------------------------------------------------------
Edson R. Arneault, President
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[U.S. BANK LOGO]
Exhibit 10.1
PROMISSORY NOTE
Principal
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Loan Date
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Maturity
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Loan No
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Call
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Collateral
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Account
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Officer
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Initials
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$3,500,000.00 05-14-2001 05-01-2002 849-18/26 140 6608780924
SLM52
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: PDS GAMING CORPORATION; ET. AL.
6171 MCLEOD DRIVE
LAS VEGAS, NV 89120 Lender: U.S. BANK NATIONAL ASSOCIATION
Commercial Services Group
2300 W. Sahara, Suite 200
Las Vegas, NV 89102
Principal Amount: $3,500,000.00 Date of Note: May 14, 2001
PROMISE TO PAY. PDS GAMING CORPORATION and PDS GAMING CORPORATION—NEVADA
(referred to in this Note individually and collectively as "Borrower") jointly
and severally promise to pay to U.S. BANK NATIONAL ASSOCIATION ("Lender"), or
order, in lawful money of the United States of America, the principal amount of
Three Million Five Hundred Thousand & 00/100 Dollars ($3,500,000.00) or so much
as may be outstanding, together with interest on the unpaid outstanding
principal balance of each advance. Interest shall be calculated from the date of
each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on May 1, 2002. In addition, Borrower will pay
regular monthly payments of accrued unpaid interest beginning June 15, 2001, and
all subsequent interest payments are due on the same day of each month after
that. The annual interest rate for this Note is computed on a 365/360 basis;
that is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an Index which is the prime rate (the "Index").
The unpaid principal balance will bear interest at an annual rate equal to the
percentage point described below plus the prime rate announced by the Lender.
Lender will tell Borrower the current Index rate upon Borrower's request.
Borrower understands that Lender may make loans based on other rates as well.
The interest rate change will not occur more often than each time that the prime
rate changes. The interest rate to be applied to the unpaid principal balance of
this Note will be at a rate of 0.750 percentage points over the Index. NOTICE:
Under no circumstances will the interest rate on this Note be more than the
maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law.
Except for the foregoing, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments of accrued unpaid interest. Rather, they will reduce the
principal balance due.
DEFAULT. Borrower will be in default if any of the following happens:
(a) Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Borrower is in
default under any other note, security agreement, lease agreement or lease
schedule, loan agreement or other agreement, whether now existing or hereafter
made, between Borrower and U.S. Bancorp or any direct or indirect subsidiary of
U.S. Bancorp. (g) Any creditor tries to take any of Borrower's property on or in
which Lender has a lien or security interest. This includes a garnishment of any
of Borrower's accounts with Lender. (h) Any guarantor dies or any of the other
events described in this default section occurs with respect to any guarantor of
this Note. (i) A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
indebtedness is impaired. (j) Lender in good faith deems itself insecure.
--------------------------------------------------------------------------------
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 5.750
percentage points over the Index. The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender that
amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of Nevada. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of the
courts of Clark County, the State of Nevada (Initial Here MV). Lender and
Borrower hereby waive the right to any jury trial in any action, proceeding, or
counterclaim brought by either Lender or Borrower against the other. This Note
shall be governed by and construed in accordance with the laws of the State of
Nevada.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on this Note against any and all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note, as well as directions for payment from Borrower's accounts, may be
requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender. The unpaid principal balance owing on this Note
at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (a) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (b) Borrower or any guarantor ceases doing business or is
insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any other loan with
Lender; (d) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender; or (e) Lender in good faith
deems itself insecure under this Note or any other agreement between Lender and
Borrower.
LATE CHARGE. If a payment is 15 days or more past due, Borrower will be charged
a late charge of 5% of the delinquent payment.
PRIOR NOTE, RENEWAL AND EXTENSION. This Note is given in renewal and extension
and not in novation of the following described indebtedness: That certain
Promissory Note dated December 19, 2000, in the amount of $3,500,000.00 executed
by Borrower payable to Lender. It is further agreed that all liens and security
interest securing said indebtedness are hereby renewed and extended to secure
the Note and all renewals, extensions and modifications thereof.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Each Borrower understands and
agrees that, with or without notice to Borrower, Lender may with respect to any
other Borrower: (a) make one or more additional secured or unsecured loans or
otherwise extend additional credit; (b) alter, compromise, renew, extend,
accelerate, or otherwise change one or more times the time for payment or other
terms any indebtedness, including increases and decreases of the rate of
interest on the indebtedness; (c) exchange, enforce, waive, subordinate, fail or
decide not to perfect, and release any security, with or without the
substitution of new collateral; (d) apply such security and direct the order or
manner of sale thereof, including without limitation, any nonjudicial sale
permitted by the terms of the controlling security agreements, as Lender in its
discretion may determine; (e) release, substitute, agree not to sue, or deal
with any one or more of Borrower's sureties, endorsers, or other guarantors on
any terms or in any manner Lender may choose; and (f) determine how, when and
what application of payments and credits shall be made on any other indebtedness
owing by such other borrower. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made. The
obligations under this Note are joint and several.
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[TEXT CUT OFF AT TOP OF PAGE]
Loan No 849-18/26 (Continued)
PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. EACH BORROWER
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF
THE NOTE.
BORROWER:
PDS GAMING CORPORATION
By:
/s/ MARTIE VLCEK, CFO
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Authorized Officer, Title
PDS GAMING CORPORATION—NEVADA, Co-Borrower
By:
/s/ MARTIE VLCEK, CFO
--------------------------------------------------------------------------------
Authorized Officer, Title
LENDER:
U.S. BANK NATIONAL ASSOCIATION
By:
/s/ KENT MORISHIGE
--------------------------------------------------------------------------------
Authorized Officer
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Exhibit 10.1
|
EXHIBIT 10.1
AMENDMENT
THIS AMENDMENT (the "Amendment"), dated as of April 23, 2001
to that certain securities purchase agreement dated February 26, 2001 (the
“Agreement”) by and among DAMARK International, Inc., a Minnesota corporation,
with headquarters located at 301 Carlson Parkway, Suite 201, Minneapolis,
Minnesota 55305 (the "Company"), and the investors listed on the signature pages
hereto (individually, a "Buyer" and collectively, the "Buyers") and the Senior
Convertible Notes issued by the Company to the Buyers pursuant to the Agreement.
WHEREAS:
A. All terms defined in the Agreement are used herein
as therein defined.
B. Pursuant to the Agreement, the Company issued $14.2
million of its 10% Senior Convertible Notes due August 26, 2001 (the “Senior
Convertible Notes”) on February 27, 2001 to the Buyers in the respective amounts
listed on the Schedule of Buyers to the Agreement.
C. Pursuant to the terms of the Senior Convertible
Notes, the Company capitalized the interest due on March 31, 2001 pursuant the
Senior Convertible Notes so that as of April 2, 2001 the aggregate outstanding
principal amount of the Senior Convertible Notes was $14,326,222.
D. The Company and the Buyers have agreed to amend
certain provisions of the Senior Convertible Notes to resolve any concerns that
Nasdaq may have with the terms of the transactions contemplated by the
Agreement.
NOW, THEREFORE, the Company and the Buyers hereby agree as
follows:
1. AMENDMENT OF 19.99% LIMITATION PROVISION.
Section 3(a) of the Senior Convertible Notes is hereby
amended by deleting the clause (iii) in the first sentence thereof so that the
sentence ends with clause (ii).
2. REDEMPTION PREMIUM. Section 5(h) of the Senior
Convertible Notes is hereby amended in its entirety to read as follows:
“(h) Acceleration Upon Reaching Common Share Limit. After January
2, 2002, in addition to all other rights of the Holder contained herein
(including, without limitation, the provisions of Section 3), after the Holders
Pro-Rata Common Share Limit has been reached (unless it is no longer applicable
as contemplated by Section 3(a)), the Company shall prepay this Note in an
amount equal to 100% of the then Outstanding Principal Amount plus accrued and
unpaid interest to the date of such prepayment. The provisions of this Section
5(h) shall not be deemed to restrict the ability of the Holder to convert the
Note pursuant to the provisions of Section 3 at any time and from time to time
before the Holders Pro-Rata Common Share Limit is reached or if the Holders
Pro-Rata Common Share Limit is no longer applicable.”
In addition, the definition of “Common Share Limit Acceleration Price” in
Section 1 of the Senior Convertible Notes is hereby deleted.
3. BINDING FORCE AND EFFECT. Except as amended
hereby, the Agreement and the Senior Convertible Notes shall continue in full
force and effect in accordance with their respective provisions as heretofore
amended.
4. COUNTERPARTS. This Amendment may be executed in
two or more identical counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each and delivered to the other party; provided that a facsimile signature shall
be considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
IN WITNESS WHEREOF, the Buyers and the Company have caused
this Waiver and Consent to be duly executed as of the date first written above.
COMPANY: BUYERS: DAMARK INTERNATIONAL, INC. STARK
TRADING By: /s/
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By: /s/
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Name: Name: Its: Its: SHEPHERD INVESTMENTS INTERNATIONAL,
LTD. By: /s/
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Name: Its: WOODVILLE LLC By: /s/
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Name: Its: CALM WATERS PARTNERSHIP By: /s/
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Name: Its:
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ENDORSEMENT NO. 10
Attached to and made a part of
AGREEMENT OF REINSURANCE
NO. 7448
between
GENERAL REINSURANCE CORPORATION
and
PAULA INSURANCE COMPANY
AGRI-COMP INSURANCE COMPANY
IT IS MUTUALLY AGREED that, as respects new and renewal policies of the
Company becoming effective at and after 12:01 a.m., October 1, 1998, this
Agreement is amended as follows:
ISub-paragraph (c) in Article II - GENERAL CONDITIONS, DEFINITIONS AND
INTERPRETATIONS is amended to read as follows:
"(c) Company Retention
The Company and its underlying reinsurers shall retain for its own account the
entire amount set forth as the Company Retention; however, this requirements
shall be satisfied if such amount is retained by the Company or its affiliated
companies under common management or common ownership or both."
IISub-paragraph (c) in Exhibit A is amended to read as follows:
"(c) Net Loss
This term shall mean all payments by the Company, adjusted in accordance with
the section entitled ADJUSTED DOLLAR COVERAGE, in settlement of claims or
losses, payment of compensation or other benefits, or satisfaction of judgments
or awards, after deduction of salvage, and after deduction of amounts due from
all inuring facultative reinsurance, whether collectible or not and shall
exclude adjustment expense and payments or liability in excess of the Company's
policy limit(s); however in the instance of the insolvency of the Company, this
definition shall be modified to the extent set forth in the article entitled
INSOLVENCY OF THE COMPANY."
IIISub-paragraph (c) in Exhibit B is amended to read as follows:
"(c) Net Loss
This term shall mean all payments by the Company, in settlement of claims or
losses, payment of compensation or other benefits, or satisfaction of judgments
or awards, after deduction of salvage, and after deduction of amounts due from
all other reinsurance, except underlying reinsurance, and shall exclude
adjustment expense and payments or liability in excess of the Company's policy
limit(s); however in the instance of the insolvency of the Company, this
definition shall be modified to the extent set forth in the article entitled
INSOLVENCY OF THE COMPANY."
IN WITNESS WHEREOF, the parties hereto have caused this Endorsement to be
executed in duplicate this 26th day of January, 1999.
GENERAL REINSURANCE CORPORATION
/s/ Anthony J. Anastanio
Senior Vice President
Attest: /s/ Melinda Kwan
--------------------------------------------------------------------------------
PAULA INSURANCE COMPANY
AGRI-COMP INSURANCE COMPANY
/s/ Jeffrey A. Snider
Attest: /s/ Bradley K. Servin
-2-
Endorsement No. 10
Agreement No. 7448
--------------------------------------------------------------------------------
ENDORSEMENT NO. 11
Attached to and made a part of
AGREEMENT OF REINSURANCE
NO. 7448
between
GENERAL REINSURANCE CORPORATION
and
PAULA INSURANCE COMPANY
AGRI-COMP INSURANCE COMPANY
IT IS MUTUALLY AGREED, that as respects claims and losses resulting from
accidents taking place at and after 12:01 A.M., July 1, 2000, the first
paragraph of Section 11—ANNUAL AGGREGATE DEDUCTIBLE of Exhibit A of this
Agreement is amended to read:
"In addition to the Company Retention set forth in the section entitled
LIABILITY OF THE REINSURER, the Company shall retain, as respects all accidents
taking place during each Annual Period that this Exhibit is in force, an annual
aggregate deductible equal to 2.0% of the Company's earned premium."
IT IS FURTHER AGREED that, as respects claims and losses resulting from
accidents taking place at and after 12:01 A.M., October 1, 2000, Exhibit A of
this Agreement is amended as follows:
ISub-paragraph (c) in Section 2—DEFINITIONS AND INTERPRETATIONS is amended to
read:
"(c) Net Loss
This term shall mean all payments by the Company, in settlement of claims or
losses, payment of compensation or other benefits, or satisfaction of judgments
or awards, after deduction of salvage, and after deduction of amounts due from
all inuring facultative reinsurance, whether collectible or not and shall
exclude adjustment expense and payments or liability in excess of the Company's
policy limit(s); however in the instance of the insolvency of the Company, this
definition shall be modified to the extent set forth in the article entitled
INSOLVENCY OF THE COMPANY."
IISection 7—ADJUSTED DOLLAR COVERAGE is deleted.
IT IS FURTHER AGREED that as respects new and renewal policies of the
Company becoming effective at and after 12:01 A.M. October 1, 2000, and policies
of the Company in force at 12:01 A.M., October 1, 2000, Section 4 is amended to
read:
"Section 4—REINSURANCE PREMIUM
The Company shall pay to the Reinsurer:
(a)For the First Excess Cover, a net rate of [ ] of the Company's earned
premium for Workers' Compensation and Employers' Liability Business:
(b)For the Second Excess Cover, a net rate of [ ] of the Company's earned
premium for Workers' Compensation and Employers' Liability Business."
IN WITNESS WHEREOF, the parties hereto have caused this Endorsement to be
executed in duplicate this 16th day of October, 2000.
GENERAL REINSURANCE CORPORATION
/s/ Anthony J. Anastanio
Senior Vice President
Attest: /s/ Melinda Kwan
--------------------------------------------------------------------------------
PAULA INSURANCE COMPANY
AGRI-COMP INSURANCE COMPANY
/s/ Jeffrey A. Snider
Attest: /s/ James J. Muza
-2-
Endorsement No. 11
Agreement No. 7448
--------------------------------------------------------------------------------
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ENDORSEMENT NO. 10 Attached to and made a part of AGREEMENT OF REINSURANCE NO.
7448 between GENERAL REINSURANCE CORPORATION and PAULA INSURANCE COMPANY
AGRI-COMP INSURANCE COMPANY
ENDORSEMENT NO. 11 Attached to and made a part of AGREEMENT OF REINSURANCE NO.
7448 between GENERAL REINSURANCE CORPORATION and PAULA INSURANCE COMPANY
AGRI-COMP INSURANCE COMPANY
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EXHIBIT 10.9
NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
as Trustee
(Burlington Coat Factory Warehouse
of New Jersey, Inc. - 1995 Project)
INDENTURE OF TRUST
THIS INDENTURE OF TRUST, dated as of the first day of August, 1995 (the
"Indenture"), by and between the NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY (the
"Authority"), a public body corporate and politic constituting an
instrumentality of the State of New Jersey and Shawmut Bank Connecticut,
National Association, a national banking association duly organized and validly
existing and authorized to accept and execute the trusts of the character
hereinafter set forth under and by virtue of the laws of the United States of
America, with its principal corporate trust office located at Hartford,
Connecticut, as Trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, the New Jersey Economic Development Authority Act, constituting
N.J.S.A. 34:1B-1 et seq., as amended (the "Act"), declares that the legislature
has determined that Department of Labor and Industry statistics of recent years
indicate a continuing decline in manufacturing employment within the State of
New Jersey (the "State") which is a contributing factor to the unemployment
existing within the State, which exceeds the national average, thus adversely
affecting the economy of the State and the prosperity, safety, health and
general welfare of its inhabitants and their standard of living; and that the
availability of financial assistance and suitable facilities are important
inducements to new and varied employment promoting enterprises to locate in the
State, and to existing enterprises to remain and expand in the State; and
WHEREAS, the Authority was created to aid in remedying the aforesaid conditions
and further to implement the purposes of the Act, and the legislature has
determined and declared as a matter of express legislative determination that
the Authority and powers conferred upon the Authority under the Act and the
expenditure of moneys pursuant thereto constitutes a serving of a valid public
purpose and that the enactment of the provisions set forth in the Act is in the
public interest and for the public benefit and good; and
WHEREAS, the Authority, to accomplish the purposes of the Act, is empowered to
extend credit or make loans to any person for the planning, designing,
acquiring, constructing, reconstructing, improving, equipping and furnishing of
a project, for which credits or loans may be secured by loan agreements,
security agreements, mortgages, leases, contracts and any other instruments,
upon such terms and conditions as the Authority shall deem reasonable, and to
require the inclusion in any loan agreement, security agreement, mortgage,
lease, contract, and any other instrument, such provisions for the construction,
use, operation and maintenance and financing of a project as the Authority may
deem necessary or desirable and to enter into contracts with respect to the
improvement, equipping, furnishing, operation and maintenance of a project, for
such consideration and upon such terms and conditions as the Authority may
determine to be reasonable; and
WHEREAS, the Borrower submitted an application (the "Original Application") to
the Authority for financial assistance in the principal amount of $10,000,000
for financing a portion of the costs of a project (the "1985 Project")
consisting of the acquisition of 46.779 acres of land in the Township of
Burlington, Burlington County, New Jersey, the construction of an approximately
500,000 square foot building situate thereon for use as a national distribution
center for the Borrower's products containing about 25,000 square feet of office
space, the equipping of such building with conveyor systems, rolling racks and
automated machinery and the construction of a parking lot adjacent to such
building, and the Authority, by resolution duly adopted July 3, 1985 in
accordance with the Act, accepted the application of the Borrower for assistance
in financing the 1985 Project; and
WHEREAS, the Authority, by resolution duly adopted September 4, 1985 in
accordance with the Act, authorized the issuance of not to exceed $10,000,000
aggregate principal amount of its Economic Development Bonds (Burlington Coat
Factory Warehouse of New Jersey, Inc. - 1985 Project) for the purpose of making
a loan to the Borrower to finance the 1985 Project (the "Original Loan"); and
WHEREAS, on September 20, 1985 the Authority issued $10,000,000 of its Economic
Development Bonds dated September 1, 1985 to finance the 1985 Project (the
"Prior Bonds") pursuant to the provisions of an Indenture of Trust by and
between the Authority and National Westminster Bank, USA, as Trustee, dated as
of September 1, 1985 (the "Prior Indenture"); and
WHEREAS, aforesaid Prior Bonds maturing on or after September 1, 1996 are
subject to redemption prior to maturity, at the option of the Borrower, on any
interest payment date on or after September 1, 1995; and
WHEREAS, the Borrower is desirous of redeeming the Prior Bonds dated September
1, 1985 maturing on or after September 1, 1996 (the "Refunded Bonds") on
September 1, 1995; and
WHEREAS, the Borrower, by letter dated May 10, 1995, has notified the Authority
of its intent to redeem the Refunded Bonds on September 1, 1995 and has
requested the Authority's assistance in the issuance of not to exceed
$10,000,000 aggregate principal amount of bonds to refinance the 1985 Project
and to redeem the Refunded Bonds; and
WHEREAS, on July 11, 1995, the Authority by resolution duly adopted (the
"Resolution"), authorized the issuance of its Economic Development Refunding
Bonds (Burlington Coat Factory Warehouse of New Jersey, Inc. - 1995 Project)
(the "Refunding Bonds" or the "Bonds") for the purpose of providing funds for
the Borrower to refinance the 1985 Project and redeem the Refunded Bonds (the
"Project"); and
WHEREAS, the Authority has determined that the issuance, sale and delivery of
said Bonds, as hereinafter provided, is needed to finance the cost of the
Project, including necessary expenses incidental thereto and concurrently
herewith, the Authority and the Borrower have entered into a Loan Agreement,
dated as of August 1, 1995, providing for the financing of the Project (the
"Loan Agreement" or "Agreement"); and
WHEREAS, the Borrower has caused to be delivered to the Trustee an Irrevocable
Direct Pay Letter of Credit No. 40017969 (the "Initial Letter of Credit") issued
by First Fidelity Bank, National Association (the "Bank") providing for the
payment of principal and up to 210 days interest on the Bonds calculated at the
rate of six and one hundred twenty-five thousandths percentum (6.125%) per annum
accrued on the Bonds; and
WHEREAS, the Bank will be entitled to reimbursement by the Borrower for all
amounts drawn under the Initial Letter of Credit (as hereinafter defined)
pursuant to the terms of a Letter of Credit Reimbursement Agreement (the
"Reimbursement Agreement"), dated as of the date hereof, between the Borrower
and the Bank, a copy of which has been delivered to the Trustee; and
WHEREAS, the obligation of the Borrower to reimburse the Bank for payments made
under the Initial Letter of Credit and the Reimbursement Agreement shall be
additionally secured by a mortgage from the Borrower to the Bank on the real
property and improvements thereon more specifically described in Exhibit A
thereto (the "Mortgage"), a guaranty of payment by the Corporate Guarantor (as
hereinafter defined), an Assignment of Leases and by filed Financing Statements
creating a security interest in Machinery and Equipment; and
WHEREAS, the execution and delivery of this Indenture have been duly authorized
by the Authority, and all conditions, acts and things necessary and required by
the Constitution or statutes of the State of New Jersey or otherwise, to exist,
to have happened, or to have been performed precedent to and in the execution
and delivery of this Indenture and in the issuance of the Bonds herein
authorized, do exist, have happened and have been performed in regular form,
time and manner; and
WHEREAS, the said Trustee has power to enter into this Indenture and to execute
the trusts hereby created and has accepted the trusts so created and in evidence
thereof has joined in the execution hereof.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That the Authority, in consideration of the premises, of the acceptance by the
Trustee of the trusts hereby created, of the mutual covenants herein contained,
of the purchase and acceptance of the Bonds by the Holders thereof, of the
issuance of the Letter of Credit by the Bank, and of the sum of One Dollar, in
lawful money of the United States of America to it duly paid by the Trustee at
or before the execution and delivery of these presents, and for other good and
valuable consideration the receipt whereof is hereby acknowledged, and in order
to secure (A) the payment of the principal of, redemption premium, if any, and
interest on the Bonds according to their terms, (B) the obligations of the
Borrower under the Loan Agreement, (C) all of the obligations of the Borrower
under the Reimbursement Agreement to reimburse the Letter of Credit Issuer for
all draws under the Letter of Credit, to perform its covenants contained therein
and to repay all amounts owing thereunder, whether for fees, expenses,
reimbursements of drawings under the Letter of Credit or otherwise, and (D) the
performance and observance by the Authority of all the covenants expressed or
implied herein and in the Bonds, does by these presents (i) sell, grant,
bargain, assign, transfer, convey, pledge and set over to the Trustee, and (ii)
grant to the Trustee for the benefit of the owners of the Bonds a security
interest in:
(A) All of the Authority's right, title to and interest in, to and under
the Loan Agreement (but none of its obligations thereunder), including, but not
limited to, all payments due and to become due thereunder (except for payments
to or for the benefit of the Authority under Sections 4.4, 5.22 and 5.23 of the
Loan Agreement, and reserving its right to sue in its own name and for its own
benefit to recover damages for breach by the Borrower of, or to seek specific
performance of the Borrower's obligations as set forth in the Loan Agreement and
including other Reserved Rights), and all moneys, securities, Funds and Accounts
(including investments, if any) held and to be held by the Trustee pursuant to
this Indenture; and
(B) the Revenues; and
(C) all substitutions and replacements for any of the foregoing and all
proceeds of any of the foregoing; the same to be held in trust and applied by
the Trustee as provided herein;
PROVIDED, HOWEVER, that the Authority, in order to accomplish the purposes and
objectives of the New Jersey Economic Development Authority Act (P.L. 1974, c.
80), as amended and supplemented, retains the right, jointly and severally with
the Trustee, upon the happening of an Event of Default, to enforce the
provisions contained in the Loan Agreement, whether or not the Trustee or the
Holders shall have exercised any rights or remedies under this Indenture or the
Loan Agreement, to the extent reasonably necessary to enforce the public
purposes thereof. In addition, the Authority shall have the right and remedy,
without posting bond or other security, to have provisions of the Loan Agreement
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any breach or threatened breach of a provision of
the Loan Agreement will cause irreparable injury to the Authority and that money
damages will not provide an adequate remedy therefor;
PROVIDED THAT THE STATE OF NEW JERSEY IS NOT OBLIGATED TO PAY, AND NEITHER THE
FAITH AND CREDIT NOR TAXING POWER OF THE STATE OF NEW JERSEY IS PLEDGED TO THE
PAYMENT OF THE PRINCIPAL OR REDEMPTION PRICE OF, IF ANY, OR INTEREST ON THE
BONDS. THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY (THE "AUTHORITY"), PAYABLE SOLELY OUT OF THE REVENUES OR
OTHER RECEIPTS, FUNDS OR MONEYS OF THE AUTHORITY PLEDGED UNDER THE INDENTURE AND
FROM ANY AMOUNTS OTHERWISE AVAILABLE UNDER THE INDENTURE FOR THE PAYMENT OF THE
BONDS. THE BONDS DO NOT NOW AND SHALL NEVER CONSTITUTE A CHARGE AGAINST THE
GENERAL CREDIT OF THE AUTHORITY. THE AUTHORITY HAS NO TAXING POWER; AND PROVIDED
FURTHER THAT THE OBLIGATION TO REIMBURSE THE LETTER OF CREDIT ISSUER FOR DRAWS
UNDER THE LETTER OF CREDIT AND THE OTHER OBLIGATIONS UNDER THE REIMBURSEMENT
AGREEMENT (AS HEREIN DEFINED) ARE SOLELY OBLIGATIONS OF THE BORROWER AND ARE NOT
IN ANY MANNER OBLIGATIONS OF THE AUTHORITY, THE STATE OF NEW JERSEY OR ANY
POLITICAL SUBDIVISION THEREOF;
TO HAVE AND TO HOLD the same unto the Trustee and its successors in trust
forever;
IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth, for the equal
and proportionate benefit, security and protection of all Holders of the Bonds
issued under and secured by this Indenture without preference, priority or
distinction as to lien or otherwise of any Bonds over any other Bonds, and for
the security of the Bank, except that moneys available to the Trustee under the
Letter of Credit shall be available solely for the payment of the principal of
and interest on the Bonds.
IT IS HEREBY COVENANTED, declared and agreed by and between the parties hereto
that all Bonds issued and secured hereunder are to be issued, authenticated and
delivered and all said property hereby sold, granted, bargained, assigned,
transferred, conveyed, pledged and set-over is to be dealt with and disposed of
under, upon and subject to the terms, conditions, stipulations, covenants,
agreements, trusts, uses and purposes as hereinafter expressed, and the
Authority does hereby agree and covenant with the Trustee, with the respective
Holders from time to time of the Bonds and with the Bank as follows:
ARTICLE I
DEFINITIONS
Section 101. Definitions. The following words and terms as used herein shall
have the following meanings unless the context or use indicates another or
different meaning or intent. Capitalized terms found herein, but not defined
herein shall have the same meanings as defined in the Loan Agreement.
"Account" shall mean any account created under this Indenture;
"Acquisition Fund" shall mean the fund so designated which is established
pursuant to Section 407 hereof;
"Act" shall mean the New Jersey Economic Development Authority Act, constituting
N.J.S.A. 34:1B-1 et seq., as amended, or any successor legislation, and the
regulations promulgated thereunder;
"Act of Bankruptcy" shall mean the filing of a petition in bankruptcy (or other
commencement of a bankruptcy or similar proceeding) by or against the Borrower,
the Corporate Guarantor or the Authority under any applicable bankruptcy,
insolvency, reorganization or similar law, now or hereafter in effect;
"Act of Bankruptcy of the Bank" shall occur when the Bank, as issuer of the
Letter of Credit, or any Letter of Credit Issuer, becomes insolvent or fails to
pay its debts generally as such debts become due or admits in writing its
inability to pay any of its indebtedness or consents to or petitions for or
applies to any authority for the appointment of a receiver, liquidator, trustee
or similar official for itself or for all or any substantial part of its
properties or assets or any such trustee, receiver, liquidator or similar
official is otherwise appointed or when insolvency, reorganization, arrangement
or liquidation proceedings (or similar proceedings) are instituted by or against
the Bank, or any Letter of Credit Issuer, provided that any such proceedings
brought against the Bank or any Letter of Credit Issuer, will constitute such an
Act of Bankruptcy only if not dismissed within one hundred twenty (120) days;
"Agreement" or "Loan Agreement" shall mean the Loan Agreement dated as of August
1, 1995 by and between the Authority and the Borrower and any amendments thereof
and supplements thereto relating to the Project to be financed from proceeds of
the Bonds;
"Alternate Letter of Credit" shall mean any letter of credit substituted for the
Initial Letter of Credit, including any renewals or extensions of the Initial
Letter of Credit by the Letter of Credit Issuer, pursuant to and meeting the
requirements of Section 404 hereof;
"Alternate Letter of Credit Issuer" shall mean the issuer of an Alternate Letter
of Credit which meets the standards set forth in Section 404(d) hereof;
"Application" shall mean the Borrower's letter to the Authority, dated May 10,
1995, with respect to the Project, and all attachments, exhibits, correspondence
and modifications submitted in writing to the Authority in connection with said
application;
Articles and Sections mentioned by number only are the respective Articles and
Sections of this Indenture so numbered;
"Assignment of Leases and Rents" shall mean the assignment dated as of August 1,
1995, which is made a part of the Record of Proceedings, executed by the
Borrower and assigning to the Bank the benefits of existing and future leases on
the Project Facility, as the same may be amended from time to time;
"Authority" shall mean the New Jersey Economic Development Authority, a public
body corporate and politic constituting an instrumentality of the State of New
Jersey exercising governmental functions and any body, board, authority agency
or political subdivision or other instrumentality of the State which shall
hereafter succeed to the powers, duties and functions thereof;
"Authority's Fee" shall mean the fee in the amount of $25,000, payable to the
Authority for its services in connection with the issuance of the Bonds;
"Authorized Authority Representative" shall mean any individual or individuals
duly authorized by the Authority to act on its behalf pursuant to the
Resolution;
"Authorized Borrower Representative" shall mean any individual or individuals
duly authorized by the Borrower to act on its behalf;
"Authorized Denominations" shall mean minimum denomina tions of $25,000 and
integral multiples of $5,000 thereafter;
"Authorized Trustee Representative" shall mean such person or persons designated
by the Trustee to act on its behalf;
"Available Moneys" shall mean, with respect to the payment of principal of,
redemption premium, if any and interest on the Bonds (i) moneys which are paid
to the Trustee by the Letter of Credit Issuer pursuant to a draw on the Letter
of Credit, (ii) moneys which have been deposited in the Bond Fund, (other than
moneys drawn under the Letter of Credit and deposited in the Letter of Credit
Account within the Bond Fund pursuant to Section 402 hereof), which moneys have
remained on deposit in the Bond Fund for at least 123 days during and prior to
which there has been no Act of Bankruptcy, (iii) moneys which have been
deposited directly by the Borrower with the Trustee in the Bond Fund and which
have remained on deposit therein for at least 123 days during and prior to which
there has been no Act of Bankruptcy, (iv) the proceeds of the sale of refunding
obligations, if, in the opinion, acceptable to Moody's, of nationally recognized
counsel experienced in bankruptcy matters, the application of such moneys will
not constitute a voidable preference in the event of the occurrence of an Act of
Bankruptcy, or (v) the proceeds from investment of moneys qualifying as
Available Moneys under clauses (ii) or (iii) of this definition, if, in the
opinion, acceptable to Moody's, of nationally recognized counsel experienced in
bankruptcy matters, the application of such moneys will not constitute a
voidable preference in the event of an Act of Bankruptcy;
"Bank" shall mean, with respect to the Initial Letter of Credit, First Fidelity
Bank, National Association, issuer of the irrevocable direct pay Initial Letter
of Credit, dated the Issue Date, with its office located at 123 South Broad
Street, Philadelphia, Pennsylvania 19109 and its successors and assigns, and
with respect to an Alternate Letter of Credit, the Alternate Letter of Credit
Issuer;
"Bond" or "Bonds" or "Refunding Bond" or "Refunding Bonds" shall mean the
Authority's not to exceed $10,000,000 aggregate principal amount of Economic
Development Refunding Bonds (Burlington Coat Factory Warehouse of New Jersey,
Inc. - 1995 Project) issued to provide funds to finance the Project,
substantially in the form attached as Exhibit A to the Indenture;
"Bond Counsel" shall mean the law firm of Wilentz, Goldman & Spitzer, P.A., 90
Woodbridge Center Drive, Woodbridge, New Jersey or any other nationally
recognized bond counsel acceptable to the Authority, the Trustee and the Letter
of Credit Issuer;
"Bondholder" or "Holder" or "Owner" shall mean any person who shall be the
registered owner of any Bond or Bonds as shown on the registration books
maintained on behalf of the Authority by the Bond Registrar;
"Bond Fund" shall mean the Fund so designated which is established and created
by Section 402 hereof;
"Bond Proceeds" shall mean the amount, including any accrued interest, paid to
the Authority by the Placement Agent pursuant to the Placement Agreement as the
purchase price of the Bonds, and any interest income earned thereon;
"Bond Year" shall mean the one-year period commencing September 1 and ending on
the following August 31; except that the first Bond Year shall commence on the
Issue Date and end on August 31, 1996;
"Borrower" shall mean Burlington Coat Factory Warehouse of New Jersey, Inc., a
corporation organized and existing under the laws of the State of New Jersey and
its successors and assigns;
"Business Day" shall mean a day of the year, other than a Saturday, Sunday or
other day, on which banks located in the municipality in which the Principal
Offices of the Trustee, the Paying Agent, the Bond Registrar (as defined in
Section 209 hereof) or the Bank are located are authorized or required by law to
close;
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations and rules promulgated thereunder;
"Collateral" shall mean all the real property subject to the lien of the
Mortgage and the Assignment of Leases, the Machinery and Equipment, as well as
all those assets of the Borrower in which the Authority or the Bank are granted
a security interest and all other real and personal property owned by the
Borrower and pledged, conveyed or in which the Authority or the Bank are
otherwise granted a lien and/or security interest in connection with the
Reimbursement Agreement (as hereinafter defined) or any other Loan Document;
"Corporate Guarantor" shall mean Burlington Coat Factory Warehouse Corporation,
a corporation of the State of Delaware, the Borrower's parent corporation;
"Cost" shall mean those items set forth in Section 3(c) of the Act and all
expenses as may be necessary or incident to acquiring, constructing, installing
or restoring the Project;
"Debt Service Payment" shall mean, with respect to any Interest Payment Date,
(i) the interest payable on such Interest Payment Date on all Bonds then
Outstanding, plus (ii) the principal, if any, payable on such Interest Payment
Date on all such Bonds, plus (iii) the redemption premium, if any, payable on
such Interest Payment Date on all such Bonds;
"Determination of Taxability" shall be deemed to have occurred upon the
happening of any of the following:
(i) the issuance of a published or private written ruling of the Internal
Revenue Service in which the Borrower or any "related person" has participated
or with respect to which the Borrower or "related person" has been given written
notice and the opportunity to participate, to the effect that the interest
payable on the Bonds is wholly includable in the gross income for Federal income
tax purposes of one or more Owners thereof; or
(ii) a final, nonappealable determination by a court of competent
jurisdiction in the United States in a proceeding with respect to which the
Borrower or "related person" has been given written notice and the opportunity
to participate and defend, to the effect that the interest payable on the Bonds
is wholly includable in the gross income for Federal income tax purposes of one
or more Owners thereof; or
(iii) the enactment of legislation of the Congress of the United States
with the effect that interest payable on the Bonds is, or would be, in the
opinion of Bond Counsel, includable in the gross income of the Owners (except
Owners who are "substantial users" or "related persons" within the meaning of
Section 147(a) of the Code);
"Escrow Agent" shall mean Shawmut Bank Connecticut, National Association,
Hartford, Connecticut or its successor in interest;
"Escrow Deposit Agreement" shall mean the Escrow Deposit Agreement dated as of
August 1, 1995 pursuant to which proceeds of the Bonds will be deposited with
the Escrow Agent which will be used to redeem the Refunded Bonds;
"Event of Default" shall have the meaning given to such term in Section 901
hereof;
"Excess Investment Earnings" are determinable as of the end of each Bond Year on
the basis of the period from the date of original delivery and payment for the
Bonds through the last day of the most recently completed Bond Year, and are the
excess of:
(a) the aggregate amount earned on investments held under this Indenture
(including unrealized gains and losses upon the retirement of the last Bond, but
excluding (i) investments in evidences of indebtedness described in Section
103(a)(1) of the Code and (ii) investments of amounts held in the Rebate Fund)
over
(b) the amount that would have been earned on such investments if they had
a Yield equal to the Yield of the Bonds (determined on a present value basis
from the date of original delivery and payment for the Bonds, without adjustment
for costs of issuance);
"Fiduciary" shall mean the Trustee or Paying Agent;
"Funds" shall mean the Acquisition Fund and the Bond Fund and shall not include
the Rebate Fund;
"Gross Proceeds" shall have the meaning set forth in Section 1.148-1(b) of the
Treasury Regulations, presently including, without limitation:
(a) Sale proceeds, which are amounts actually or constructively received on
the sale (or other disposition) of the Bonds, excluding amounts included in the
issue price used to pay accrued interest within one (1) year of the date of
issuance;
(b) Investment proceeds, which are amounts actually or constructively
received from the investment of sale proceeds or investment proceeds;
(c) Transferred proceeds, which are proceeds of a refunded issue that are
allocable to a refunding issue at the time the refunded issue is discharged;
(d) Replacement proceeds, which are amounts replaced by proceeds of an
issue, including amounts held in a sinking fund, pledged fund, or reserve or
replacement fund for an issue; and
(e) Amounts not otherwise taken into account which are received as a result
of investing the amounts described above;
"Guaranty" or "Guaranty Agreement" shall mean the guaranty and suretyship
agreement dated as of August 1, 1995, executed and delivered by the Corporate
Guarantor to the Bank;
The terms "herein", "hereunder", "hereby", "hereto", "hereof" and any similar
terms, refer to this Indenture; the term "heretofore" means before the date of
execution of this Indenture; and the term "hereafter" means after the date of
execution of this Indenture;
The term "Holder" shall have the meaning ascribed to "Bondholder" in this
Section;
"Indenture" shall mean this Indenture of Trust, as the same may have been from
time to time amended, modified or supplemented by Supplemental Indentures as
permitted hereby;
"Initial Letter of Credit" shall mean the irrevocable direct pay Letter of
Credit dated the Issue Date, in the form of Annex A attached to the
Reimbursement Agreement (as herein defined), issued by the Bank;
"Interest Payment Date" shall mean March 1, 1996 and each September 1 and March
1 thereafter;
"Issue Date" shall mean August 24, 1995;
"Letter of Credit" shall mean the Initial Letter of Credit or any Alternate
Letter of Credit;
"Letter of Credit Account" shall mean the account so designated which is
established and created as a separate account within the Bond Fund pursuant to
Section 402 hereof;
"Letter of Credit Issuer" shall mean the Bank as issuer of the Initial Letter of
Credit and any issuer of an Alternate Letter of Credit;
"Letter of Credit Maturity Date" shall mean the date of,expiration of the
Initial Letter of Credit which is September 15, 2000, unless extended or
renewed, or if the Initial Letter of Credit has been replaced with an Alternate
Letter of Credit, then the expiration date of the Alternate Letter of Credit;
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing and the filing of
any financing statement under the Uniform Commercial Code (other than any such
financing statement filed for information purposes only) or comparable law of
any jurisdiction to evidence any of the foregoing);
"Loan" shall mean the issuance of an amount not to exceed $10,000,000 by the
Authority for the purposes of redeeming the Refunded Bonds;
"Loan Documents" shall mean any or all of this Indenture, the Loan Agreement,
the Mortgage, the Financing Statements, the Guaranty Agreement, the Placement
Agreement, the Assignment of Leases, the Reimbursement Agreement, the Letter of
Credit, the Escrow Deposit Agreement, any documents securing the Borrower's
obligations under the Loan Agreement, the Indenture and the Reimbursement
Agreement, and all documents and instruments executed in connection therewith
and all amendments and modifications thereto;
"Moody's" shall mean Moody's Investors Service, a corporation organized and
existing under the laws of the State of Delaware, its successors and assigns,
and, if such corporation shall be dissolved or liquidated or shall no longer
perform the functions of a securities rating agency, "Moody's" shall be deemed
to refer to any other nationally recognized securities rating agency designated
by the Authority, with the approval of the Borrower, by notice to the Trustee
and the Borrower;
"Mortgage" shall mean the first mortgage lien on and security interest in the
Premises securing the obligations of the Borrower to the Bank, which Mortgage is
made a part of the Record of Proceedings, executed by the Borrower, as
Mortgagor, and given to the Bank, as Mortgagee;
"Net Proceeds" shall mean the Bond Proceeds less any amounts placed in a
reasonably required reserve or replacement fund within the meaning of Section
150(a)(3) of the Code;
"1985 Project" shall mean the acquisition of 46.779 acres of land in the
Township of Burlington, Burlington County, New Jersey and the construction of an
approximately 500,000 square foot building situate thereon for use as a national
distribution center for the Borrower's products containing about 25,000 square
feet of office space, the equipping of such building with conveyor systems,
rolling racks and automated machinery and the construction of a parking area
adjacent to such building, a portion of such costs being financed with the
proceeds of the Prior Bonds;
"Nonpurpose Investment" shall mean any "investment property" (within the meaning
of Section 148(b)(2) of the Code) which is (i) acquired with the Gross Proceeds
of the Bonds and (ii) not acquired in order to carry out the governmental
purpose of the Bonds;
"Outstanding", when used with reference to Bonds and as of any particular date,
shall describe all Bonds theretofore and thereupon being authenticated and
delivered except (a) any Bond canceled by the Trustee or proven to the
satisfaction of the Trustee to have been canceled by the Authority or by any
other Fiduciary, at or before said date, (b) any Bond for payment or Redemption
of which moneys equal to the principal amount or redemption price thereof, as
the case may be, with interest to the date of maturity or redemption date, shall
have theretofore been deposited with one or more of the Fiduciaries in trust
(whether upon or prior to maturity or the redemption date of such Bond) and,
except in the case of a Bond to be paid at maturity, of which notice of
redemption shall have been given or provided for in accordance with Article III
hereof, (c) any Bond in lieu of or in substitution for which another Bond shall
have been authenticated and delivered pursuant to Article II hereof, and (d) any
Bond held by the Borrower;
"Paragraph" shall mean a specified paragraph of a Section, unless otherwise
indicated;
"Paying Agent" shall mean any paying agent for Bonds appointed by or pursuant to
Section 713 hereof, and its successor or successors and any other corporation or
association which may at any time be substituted pursuant to this Indenture;
"Permitted Encumbrances" shall mean, as of any paricular time: (i) liens for
taxes and assessments not then delinquent or, provided there is no risk of
forfeiture or sale of any of the Collateral, which are being contested in good
faith and for which reserves have been established by the Borrower which are
satisfactory to the Bank, all in accordance with the provisions of Section 5.8
of the Reimbursement Agreement; (ii) liens granted pursuant to the Reimbursement
Agreement, the Indenture, the Loan Agreement, the Mortgage, the Assignment of
Leases, the Financing Statements and the other Loan Documents; (iii) liens
securing claims or demands of mechanics and materialmen or other liens similar
in nature; (iv) utility access and other easements and rights of way,
restrictions and exceptions that the Title Insurance Policy insures will not
interfere with or impair the Premises or the Project Facility and previously
approved by and acceptable to the Bank; (v) purchase money security interests
encumbering (A) property other than the Collateral or (B) property acquired
after the date hereof and otherwise comprising Collateral, provided, however,
that the Bank's lien shall remain in effect with respect to such Collateral
subject only to such purchase money security interest(s); (vi) those exceptions
shown on Schedule B of the Title Insurance Policy acceptable to the Bank and the
Authority; (vii) liens of or resulting from any litigation or legal proceeding
which are being contested in good faith by appropriate actions or proceedings or
any judgment or award, the time for the appeal or petition for rehearing of
which shall not have expired, or in respect of which the Borrower shall at any
time in good faith be prosecuting an appeal or proceeding for a review and in
respect of which a stay of execution pending such appeal or proceeding for
review shall have been secured and for which a supersedeas bond has been timely
posted; (viii) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other similar
purposes, or zoning or other restrictions as to the use of real properties which
are necessary to the conduct of the activities of the Borrower or which
customarily exist on properties of corporations engaged in similar activities
and similarly situated and which do not in the aggregate materially impair the
operation of the business of the Borrower; and (ix) liens in favor of the City
of Burlington in connection with an Urban Development Act Grant (UDAG Grant
Number B-85-AB-34-0262), which liens are subordinate to the lien of and Mortgage
in favor of the Bank;
"Permitted Investments" shall mean those investments described in Article VI
hereof;
"Person" or "Persons" shall mean any individual, corporation, partnership, joint
venture, trust, or unincorporated organization, or a governmental agency or any
political subdivision thereof;
"Placement Agent" shall mean First Fidelity Bank, N.A., n its capacity as agent
in connection with the placement of the Bonds;
"Placement Agreement" shall mean the Placement Agreement dated as of August 1,
1995 by and among the Placement Agent, the Bank, the Authority and the Borrower;
"Premises" shall mean the premises and all improvements thereon located in the
Project Municipality, all as described in Schedule A to the Loan Agreement and
the Mortgage;
"Principal Office" shall mean (i) in the case of the Trustee, the principal
corporate trust office of the Trustee located at Hartford, Connecticut, or which
at any particular time its corporate trust business shall be administered; (ii)
in the case of the Bank, its office at which documents for drawing on the Letter
of Credit are to be presented; (iii) in the case of the Placement Agent, the
office thereof designated in writing to the Trustee, the Bank and the Borrower
and (iv) in the case of any care of their attorney Stacy John Haigney, other
Person, the office thereof designated in writing to the Trustee and the Bank;
"Project" shall mean the refinancing of the 1985 Project and the redemption of
the Refunded Bonds with the proceeds of the Bonds;
"Project Facility" or "Project Facilities" shall mean the land, the improvements
and the building situate thereon located in the Project Municipality acquired
and constructed by the Borrower, including any additions, substitutions or
replacements which have been constructed or acquired thereon with the proceeds
of the Refunded Bonds;
"Project Municipality" shall mean the Township of Burlington, County of
Burlington, State of New Jersey;
"Proper Charge" shall mean (i) issuance costs for the Bonds, including, without
limitation, certain attorneys' fees, printing costs, initial trustee's fees and
similar expenses; or (ii) an expenditure for the Project incurred for the
purposes of redeeming the Refunded Bonds which were issued for the purposes
of.acquiring and constructing the 1985 Project;
"Rebate Fund" shall mean the fund so designated which is.established and created
by Section 413 hereof;
"Record Date" shall mean the fifteenth day of the calendar month immediately
preceding each Interest Payment Date (whether or not a Business Day);
"Record of Proceedings" shall mean the Loan Documents, certificates, affidavits,
opinions and other documentation executed.in connection with the sale of the
Bonds and the making of the.Loan;
"Redemption" shall mean payment of the principal of any Bond prior to its stated
maturity date;
"Redemption Price", when used with respect to a Bond or portion thereof, shall
mean the principal amount of such Bond or Bonds or portion thereof plus the
applicable redemption premium, if.any, payable upon Redemption thereof in the
manner contemplated in.accordance with its terms pursuant to this Indenture;
"Reimbursement Agreement" shall mean the Letter of Credit.Reimbursement
Agreement dated as of August 1, 1995 between the.Borrower and the Bank, as the
same may be amended from time to time.and filed with the Trustee, under which
terms the Bank agrees to.issue the Initial Letter of Credit, and any successor
agreement of.the Borrower with a Letter of Credit Issuer under which terms
the.Borrower and such Letter of Credit Issuer agree o issue a Letter.of Credit;
"Reserved Rights" shall mean those certain rights of the.Authority under the
Loan Agreement to indemnification and to payments of certain Authority fees and
expenses, indemnity ayments, its right to enforce notice and reporting
requirements, restrictions on transfer of ownership, its right to inspect and
audit the books, records and the Project Facilities, of the Borrower, collection
of attorneys' fees, its right to enforce the Borrower's covenant to comply with
applicable Federal tax law, its.rights set forth in the provisions to the
granting clause in the.preamble hereto (to the extent not recited herein) and
its right to.receive certain notices;
"Resolution" shall mean the resolution duly adopted by the Authority on July 11,
1995, accepting the Application, making certain findings and determinations and
authorizing the issuance and sale of the Bonds and determining other matters in
connection with the Project, as the same may be amended or supplemented from
time to time;
"Revenues" shall mean (i) all amounts payable by the Borrower under the Loan
Agreement and assigned to the Trustee hereunder, (ii) any proceeds of Bonds
originally deposited with the Trustee for the payment of interest accrued on the
Bonds or otherwise paid to the Trustee by or on behalf of the Borrower or the
Authority for deposit in the Bond Fund or moneys remaining in the Acquisition
Fund established in connection with the issuance of the Bonds following the
payment of all Costs associated with the Project, (iii) investment income with
respect to any moneys held by the Trustee, except investment income with respect
to moneys held in the Rebate Fund, (iv) proceeds held in the Bond Fund of any
bonds which may be issued by the Authority to provide for the payment of the
Bonds in the manner set forth in Article XI hereof and the proceeds of
investments of such proceeds, (v) any moneys paid to the Trustee under the
Letter of Credit, and (vi) any insurance proceeds, sale proceeds or moneys paid
to the Trustee by the Bank in respect of the Project Facilities, including any
moneys received upon taking possession of or foreclosure on the Project
Facilities;
"Section" shall mean a specified section hereof, unless otherwise indicated;
"Special Record Date" shall mean any date as may be fixed for the payment of
defaulted interest in accordance with Section 204 hereof;
"Standard & Poor's" shall mean Standard & Poor's Corporation, a corporation
organized and existing under the laws of the State of New York, its successors
and assigns, and, if such corporation shall be dissolved or liquidated or shall
no longer perform the functions of a securities rating agency, "Standard &
Poor's" shall be deemed to refer to any other nationally recognized securities
rating agency designated by the Authority, with the approval of the Borrower, by
notice to the Trustee and the Borrower;
"State" shall mean the State of New Jersey;
"Supplemental Indenture" shall mean any indenture, amending, modifying or
supplementing this Indenture made, signed and becoming effective in accordance
with the terms of Article VIII;
"Tax Certificate" shall mean the certificate executed by the Borrower in form
and substance acceptable to the Authority, wherein the Borrower certifies as to
such matters as the Authority shall require;
"Treasury Regulations" shall mean the Income Tax Regulations promulgated by the
Department of Treasury pursuant to Sections 103 and 141-150 of the Code as the
same shall be amended or supplemented from time to time;
"Trust Estate" shall mean all property which may from time to time be subject to
the lien of this Indenture;
"Trustee" shall mean Shawmut Bank Connecticut, National Association, a national
banking association duly organized and validly existing and authorized to accept
and execute the trusts of the character hereinafter set forth under and by
virtue of the laws of the United States of America, with its principal corporate
trust office located in Hartford, Connecticut, or its successor and assigns in
interest of such capacities;
"Yield" shall mean the yield as calculated in the manner set forth in Section
148 of the Code; thus, yield with respect to an investment allocated to the
Bonds is that discount rate which produces the same present value when used in
computing the present value of all receipts received and to be received with
respect to investments and the present value of all the payments with respect to
the investments. The yield on the Bonds is that discount rate which produces the
same present value on the date hereof when used in computing the present value
of all payments of principal, interest and charges for a "qualified guarantee"
to be made with respect to the Bonds and the present value of all of the issue
prices for the Bonds. The issue price for each maturity of the Bonds is the
initial offering price of such Bonds to the public.
Section 102. Rules of Construction. Unless the context or use indicates another
or different meaning or intent, the following rules shall apply to the
construction of the Indenture:
(i) Words importing the singular number shall include the plural number and
vice versa.
(ii) Words importing the Redemption or calling for Redemption of Bonds
shall not be deemed to refer to or connote the payment of Bonds at their stated
maturity or upon the acceleration of the principal thereof by the Trustee
pursuant to Section 902 hereof.
(iii) All references herein to particular articles or sections are
references to articles or sections of this Indenture unless otherwise noted.
(iv) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Indenture nor shall they
affect its meaning, construction or effect.
(v) All references to "hereof" and "hereto" and words of like import shall
refer to this Indenture.
(vi) References to any time of the day in this Indenture shall refer to
Eastern standard time or Eastern daylight saving time, as in effect in the City
of New York, New York on such day.
(vii) Defined terms used in this Indenture which are defined in the Loan
Agreement and not in this Indenture shall have the meaning set forth in the Loan
Agreement.
ARTICLE II
THE BONDS
Section 201. Authorized Amount of Bonds. No Bonds may be issued under the
provisions of this Indenture except in accordance with this Article. There is
hereby created for issuance under this Indenture a series of Bonds designated
the "Economic Development Refunding Bonds, (Burlington Coat Factory Warehouse of
New Jersey, Inc. - 1995 Project)" in the aggregate principal amount not to
exceed $10,000,000. No additional Bonds are authorized pursuant to the terms of
this Indenture.
Section 202. Purposes for Issuance of Bonds. The Authority has authorized Bonds
to be issued for the purpose of financing the Cost of the Project, including
necessary expenses incidental thereto and to the issuance of the Bonds, as
applicable.
Section 203. Manner of Payment of Bonds. Principal or Redemption Price of the
Bonds together with accrued interest, if any, up to and including the redemption
date, maturity date or a date of acceleration of the Bonds, shall be payable
from the sources specified in Section 401 hereof and in the order specified in
Section 402 hereof to the Holders of such Bonds upon presentation and surrender
of such Bonds as they respectively become due at the Principal Office of the
Trustee, as Paying Agent for the Bonds. Interest on the Bonds which will be due
on an Interest Payment Date shall be paid by check or bank draft drawn upon the
Bond Fund by the Trustee and mailed to the Holders of such Bonds as of the close
of business on the Record Date next preceding the Interest Payment Date at the
registered addresses of such Holders as they shall appear as of the close of
business on such Record Date on the registration books maintained pursuant to
Section 209 hereof. Payment as aforesaid shall be made in such coin or currency
of the United States of America as, at the respective times of payment, shall be
legal tender for the payment of public and private debts. Any Holder of at least
one million dollars ($1,000,000) of Bonds may request interest payments by wire
transfer to an account designated by such Holder.
Section 204. Maturities, Interest Rates, and Certain Other Provisions. The Bonds
shall be dated August 1, 1995, shall bear interest from such date, calculated on
a 360 day year basis consisting of twelve (12) thirty (30) day months, at the
rates set forth below payable on the first day of each March and September,
commencing March 1, 1996, until maturity or Redemption, and shall mature on the
dates set forth below:
SERIAL BONDS
Maturity
(September 1)
Amount ($)
Interest
Rate (%)
1996
320,000
3.75
1997
350,000
4.15
1998
385,000
4.45
1999
420,000
4.75
2000
460,000
4.90
2001
505,000
5.05
2002
555,000
5.20
2003
605,000
5.40
TERM BONDS
Maturity
(September 1)
Amount ($)
Interest
Rate (%)
2005
1,400,000
5.600
2010
5,000,000
6.125
The Bonds maturing on September 1, 2005 and September 1, 2010, respectively,
shall be redeemed from sinking fund payments commencing September 1, 2004 and
September 1, 2006, respectively, and each September 1 as follows:
Term Bonds Due September 1, 2005
Year
Sinking Fund Installment ($)
2004
665,000
2005
735,000
Term Bonds Due September 1, 2010
Year
Sinking Fund Installment ($)
2006
810,000
2007
895,000
2008
990,000
2009
1,095,000
2010
1,210,000
Each such payment on the Bonds shall be payable as set forth in this Section 204
with respect to principal or Redemption Price, and interest, in any coin or
currency of the United States of America which, at the respective dates of
payment thereof, is legal tender for the payment of public and private debts.
All Bonds shall be issued in minimum denominations of $25,000 and thereafter in
any integral multiple of $5,000. The Bonds shall be numbered consecutively from
EDRB-1 upward. The Bonds may contain or have words as are (a) not inconsistent
with the provisions of this Indenture or the Resolution, (b) not prejudicial to
the Bondholders, and (c) authorized by a supplemental resolution adopted by the
Authority and a Supplemental Indenture prior to the authentication and delivery
thereof. The Bond text may be amended to reflect the security of the Bonds by
any Alternate Letter of Credit without further action by the Authority upon the
effective date of such Alternate Letter of Credit. Each Bond issued subsequent
to the initial Bonds shall be dated the Issue Date.
The Bonds shall be subject to Redemption to the extent, in the order, at the
times, on the terms, at such Redemption Price and subject to all other terms,
conditions and provisions in conformity with Article III hereof.
Interest on the Bonds shall be payable from the Interest Payment Date next
preceding the date of authentication thereof to which interest has been paid or
duly provided for, unless the date of authentication thereof is an Interest
Payment Date to which interest has been paid or duly provided for, in which case
from the date of authentication thereof, or unless no interest has been paid or
duly provided for on the Bonds, in which case from August 1, 1995, until payment
of the principal thereof has been made or duly provided for. Notwithstanding the
foregoing, if the date of authentication of any Bond is after any date which is
a Record Date next preceding any Interest Payment Date and before such Interest
Payment Date, such Bond shall bear interest from such Interest Payment Date;
provided, however, that if the Authority shall default in the payment of
interest due on such Interest Payment Date, then such Bond shall bear interest
from the next preceding Interest Payment Date to which interest has been paid or
duly provided for, or, if no interest has been paid or duly provided for on the
Bonds, from August 1, 1995. In the event of any such default, such defaulted
interest shall be payable to the Person in whose name such Bond is registered at
the close of business on a record date for the payment of such defaulted
interest (the "Special Record Date") established by notice mailed by or on
behalf of the Authority to the registered Holders of Bonds not less than fifteen
(15) days preceding such Special Record Date. Such notice shall be mailed to the
Person in whose name each Bond is registered at the close of business on the
fifth (5th) day preceding the date of mailing. Payments of interest on the Bonds
shall be payable from the Bond Fund to the Bondholders by check or bank draft
mailed to the respective addresses of the Bondholders as they appear on the
registration books of the Trustee on the Record Date. Any Holder of at least one
million dollars ($1,000,000) of Bonds may request such interest payments by wire
transfer to an account designated by such Holder. All payments of principal of
the Bonds shall be payable at the Principal Office of the Trustee or at such
other place as the Trustee and the Holder of a Bond may agree, upon surrender of
the Bond for cancellation thereof.
Section 205. Execution. The Bonds shall be executed on behalf of the Authority
by manual or facsimile signature of the Chairman, Vice Chairman, Executive
Director or Deputy Director of Investment Banking of the Authority and shall
have impressed thereon the corporate seal of the Authority or shall have
reproduced thereon a facsimile thereof. Such facsimile signatures on the Bonds
shall have the same force and effect as if the Chairman, Vice Chairman,
Executive Director or Deputy Director of Investment Banking of the Authority had
manually signed each Bond. In case any officer of the Authority the facsimile of
whose signature shall appear on the Bonds shall cease to be such officer before
the delivery of such Bonds, such facsimile shall nevertheless be valid and
sufficient for all purposes, the same as if such officer had remained in office
until delivery; and any Bond may be signed on behalf of the Authority, manually
or in facsimile, by the person who, on the date of execution of such Bond, shall
be the proper officer of the Authority, although on the date of execution of
this Indenture such person was not such officer.
Section 206. Authentication. The Trustee is herebyappointed as an authenticating
agent for the Bonds. No Bond shall be valid for any purpose hereunder until it
shall have endorsed thereon a certificate of authentication substantially in the
form attached to the form of Bond, duly executed and dated by the Trustee and
such authentication shall be conclusive evidence that such Bond has been
authenticated and delivered under the Indenture and that the Holder thereof is
entitled to the benefits of the trust hereby created. The certificate of
authentication on any Bond shall be deemed to have been executed by the Trustee
if signed by an authorized signatory of the Trustee, as the case may be, but it
shall not be necessary that the same person sign the certificate of
authentication on all of the Bonds issued hereunder.
Section 207. Limited Obligations. (a) The Bonds, together with interest thereon,
shall be special, limited obligations of the Authority payable solely from the
Revenues and other moneys, securities, funds and accounts (including
investments, if any) held and to be held by the Trustee pursuant to this
Indenture and shall be a valid claim of the respective Holders thereof against
such Revenues and such other moneys, securities, funds and accounts; and there
shall be no other recourse against the Authority or any other property now or
hereafter owned by it.
THE STATE OF NEW JERSEY IS NOT OBLIGATED TO PAY, AND NEITHER THE FAITH AND
CREDIT NOR TAXING POWER OF THE STATE OF NEW JERSEY IS PLEDGED TO THE PAYMENT OF
THE PRINCIPAL OR REDEMPTION PRICE OF, IF ANY, OR INTEREST ON THE BONDS. THE
BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE NEW JERSEY ECONOMIC DEVELOPMENT
AUTHORITY (THE "AUTHORITY"), PAYABLE SOLELY OUT OF THE REVENUES OR OTHER
RECEIPTS, FUNDS OR MONEYS OF THE AUTHORITY PLEDGED UNDER THE INDENTURE AND FROM
ANY AMOUNTS OTHERWISE AVAILABLE UNDER THE INDENTURE FOR THE PAYMENT OF THE
BONDS. THE BONDS DO NOT NOW AND SHALL NEVER CONSTITUTE A CHARGE AGAINST THE
GENERAL CREDIT OF THE AUTHORITY. THE AUTHORITY HAS NO TAXING POWER.
(b) No Holder of any Bond has the right to compel any exercise of taxing
power of the Authority to pay such Bond or the interest or redemption premium,
if any, thereon. No recourse shall be had for the payment of principal of or
interest or redemption premium, if any, on the Bonds or for any claim based
thereon or upon any indenture against any past, present or future official,
officer or employee of the Authority or any successor corporation, as such,
either directly or through the Authority, or any successor corporation under any
rule of law or equity, statute or constitution, or by the enforcement of any
assessment or penalty or otherwise; and all such liability of any such official,
officer or employee, as such, is hereby expressly waived and released as a
condition of and in consideration for the execution of this Indenture and the
issuance of the Bonds.
Section 208. Mutilated, Lost, Stolen or Destroyed Bonds. (a) In the event any
Bond is mutilated, lost, stolen or destroyed, the Authority may execute, upon
request of the registered Owner thereof and, upon its written request, the
Trustee shall authenticate, a duplicate Bond of like series, date, maturity and
denomination as that mutilated, lost, stolen or destroyed Bond; provided that,
in the case of any mutilated Bond, such mutilated Bond shall first be
surrendered to the Authority, which Bond shall be canceled by the Trustee, and
in the case of any lost, stolen or destroyed Bond, there shall be first
furnished to the Authority and the Trustee evidence of such loss, theft or
destruction satisfactory to the Authority and the Trustee together with
indemnity satisfactory to them, and as may be required by applicable law;
provided further that, with respect to any such Bond which shall have matured,
the Trustee may pay the same without surrender thereof if there shall have been
furnished to the Authority, the Trustee and the Borrower indemnity satisfactory
to them and as may be required under applicable law. The Authority and the
Trustee may charge the Holder of such Bond with their reasonable fees and
expenses relating to the replacement of any Bond pursuant to this Section.
(b) Every Bond issued pursuant to the provisions of this Section 208 shall
constitute an additional contractual obligation of the Authority (whether or not
the lost, stolen or destroyed Bond shall be found at any time to be enforceable)
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Bonds duly issued under this Indenture.
(c) All Bonds shall be held and owned upon the express condition that the
provisions of this Section 208 are exclusive, with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Bonds, and shall preclude all
other rights or remedies, notwithstanding any law or statute existing or
hereinafter enacted to the contrary.
Section 209. Bond Register; Registration and Transferability of Bonds. (a) All
Bonds shall be issued in fully registered form. The Bonds shall be registered
upon original issuance and upon subsequent registrations of transfer or exchange
as provided in this Indenture. While any of the Bonds issued hereunder is
Outstanding, there shall be maintained and kept at the Principal Office of the
Trustee books for the registration of the Bonds (herein sometimes referred to as
the "Bond Register"). The Trustee is hereby appointed bond registrar (the "Bond
Registrar") for the Authority for the purpose of registering and making
transfers on such Bond Register. All Bonds shall be registered as to principal
and interest. By executing this Indenture the Trustee accepts the duties and
obligations of Bond Registrar for the Authority.
(b) Bonds shall be transferable only on the Bond Register upon surrender
thereof at the Principal Office of the Trustee by the registered Owner thereof
in person or by his attorney duly authorized in writing, together with a written
instrument of transfer executed by the registered Owner thereof or by his duly
appointed attorney and satisfactory to the Trustee. Upon such surrender, the
Authority shall execute and the Trustee shall authenticate and deliver in the
name of the transferee or transferees, one or more new fully registered Bonds of
the same series in Authorized Denominations in the aggregate principal amount
which the registered Owner is entitled to receive. At the option of the Holder,
Bonds may be exchanged for other Bonds of the same series in any other
Authorized Denomination of a like aggregate principal amount upon surrender of
the Bonds to be exchanged at any such office. All Bonds presented for
registration of transfer or for exchange, Redemption or payment (if so required
by the Authority, the Bond Registrar or the Trustee), shall be accompanied by a
written instrument or instruments of transfer or authorization for exchange, in
form satisfactory to the Bond Registrar. No service charge shall be made for any
exchange or registration of transfer of Bonds, but the Trustee may require
payment of its expenses and a sum sufficient to cover all taxes or other
governmental charges that may be imposed in relation thereto. New Bonds
delivered upon any registration of transfer or exchange shall be valid
obligations of the Authority, evidencing the same debt as the Bonds surrendered,
shall be secured by this Indenture and shall be entitled to all of the security
and benefits hereof to the same extent as the Bonds surrendered.
(c) A Person in whose name a Bond shall be registered shall for all
purposes of this Indenture, be deemed the absolute Owner and, so long as the
same shall be registered, payments of or on account of the principal, redemption
premium, if any, and interest with respect to such Bond shall be made only to
the registered Owner or his legal representative. All such payments so made to
any such registered Owner or upon his order shall be valid and effectual to
satisfy and discharge the liability of the Authority upon such Bond to the
extent of the sum or sums so paid. The Authority and the Trustee shall not be
affected by any notice to the contrary.
(d) The Trustee shall not register, register the transfer of, or exchange
Bonds for the period from the Record Date preceding an Interest Payment Date to
the related Interest Payment Date, nor shall the Trustee register the transfer
of or exchange any Bond during the period fifteen (15) days next preceding the
giving of a notice of redemption.
Section 210. Cancellation and Destruction of Surrendered Bonds. All Bonds which
have been purchased by or on behalf of the Authority and all Bonds surrendered
for payment, Redemption, registration of transfer or exchange and Bonds
surrendered to the Trustee by the Authority or by the Borrower for cancellation
shall be canceled and destroyed by the Trustee. The Trustee shall deliver to the
Authority and to the Borrower certificates of destruction in respect of all
Bonds so destroyed.
Section 211. Form of Bonds. The Bonds issued under this Indenture may have
printed thereon such legend or legends as may be required to comply with any
law, rule or regulation or to conform to general usage or as may, consistent
herewith, be determined to be advisable by the Authority and the Trustee. All
Bonds shall be substantially in the form of Exhibit A attached hereto with such
appropriate variations, omissions and insertions as are permitted or required by
this Indenture.
Section 212. Delivery of Bonds. (a) Upon the execution and delivery of this
Indenture, the Authority shall execute and deliver the Bonds to the Trustee and
the Trustee, upon written order of the Authority, shall authenticate the Bonds
and deliver them to the Placement Agent in accordance with the provisions of
this Section 212.
(b) Prior to or simultaneously with the delivery by the Trustee of any of
the Bonds there shall be filed with the Trustee the following:
(i) Original executed counterparts of the Loan Agreement, this
Indenture, the Escrow Deposit Agreement, the Reimbursement Agreement, the
originally executed Initial Letter of Credit and the other originally executed
Loan Documents.
(ii) A copy, duly certified by the Secretary or Assistant Secretary of
the Borrower, of the resolution or resolutions adopted by the Borrower
authorizing the execution and delivery of the Loan Agreement, the Escrow Deposit
Agreement, the Reimbursement Agreement, and the Loan Documents.
(iii) A copy, duly certified by the Executive Director, Secretary or
Assistant Secretary of the Authority, of the resolution or resolutions adopted
by the Authority authorizing the execution and delivery of the Loan Agreement,
the Escrow Deposit Agreement, the Placement Agreement and this Indenture and the
issuance, execution and delivery of the Bonds.
(iv) An opinion of counsel for the Borrower and Corporate Guarantor
stating in the opinion of such counsel that the Loan Agreement, the
Reimbursement Agreement and the Loan Documents have each been duly authorized by
and lawfully executed and delivered on behalf of the Borrower and Corporate
Guarantor, as applicable, are in full force and effect and are valid, binding
and enforceable against the Borrower and Corporate Guarantor in accordance with
the respective terms thereof, except to the extent certain bankruptcy laws and
equitable principles may affect enforceability.
(v) An opinion of Bond Counsel for the Authority stating in the
opinion of such counsel that the Loan Agreement, the Escrow Deposit Agreement
and this Indenture have each been duly authorized by and lawfully executed and
delivered on behalf of the Authority, are in full force and effect and are
valid, binding and enforceable against the Authority in accordance with the
respective terms thereof, except to the extent certain bankruptcy laws and
equitable principles may affect enforceability.
(vi) An original executed counterpart of a certificate with respect to
the compliance with Federal arbitrage requirements from the Authority given in
part in reliance on a certificate from the Borrower along with an original
executed counterpart of the Borrower's certificate.
(vii) An opinion of Bond Counsel for the Authority stating in the
opinion of such Bond Counsel that: (a) the Authority is duly authorized and
entitled to issue the Bonds and, upon the execution, authentication and delivery
thereof, the Bonds will be duly and validly issued and will constitute valid and
binding special obligations of the Authority; and (b) interest income on the
Bonds is exempt from inclusion as gross income under the Code subject to certain
limitations, more fully set forth therein; and (c) interest income is not
includable as gross income under the New Jersey Gross Income Tax Act (P.L. 1976,
Chapter 47).
(viii) An opinion of counsel for the Bank stating in the opinion of
such counsel addressed to the Authority, the Borrower and the Trustee that: the
Letter of Credit has been duly authorized by and lawfully executed and delivered
on behalf of the Bank, is in full force and effect and is valid and enforceable
against the Bank in accordance with its terms, except (i) as may be limited by
(a) bankruptcy, insolvency, liquidation, reorganization, moratorium or other
similar laws relating to or limiting creditors' rights generally as such laws
would apply in the event of the bankruptcy, insolvency, liquidation,
reorganization, moratorium or other similar occurrence with respect to or
affecting the Bank, (b) the powers of Federal Regulatory bodies to appoint the
Federal Deposit Insurance Corporation as receiver to take possession of the
Bank's assets and to pay creditors of the Bank and (c) general principles of
equity, and (ii) no opinion is expressed as to (a) the ability of a court of
appropriate jurisdiction to enjoin the ability of the Bank to honor a draft or
demand for payment under the Letter of Credit in the event of a presentation of
documents that are forged or fraudulent or there is fraud in the transaction or
(b) the availability of equitable remedies to persons seeking to enforce the
Letter of Credit.
(ix) An opinion of Bond Counsel for the Authority addressed to the
Authority and the Trustee to the effect that payments on the Bonds from
Available Moneys will not constitute preferential payments pursuant to the
provisions of the Federal Bankruptcy Code in a bankruptcy proceeding by or
against the Authority, the Borrower, the Corporate Guarantor or the Bank.
(x) An authorization to the Trustee, signed by an Authorized Authority
Representative, to authenticate and deliver the Bonds to the Placement Agent
therein identified.
and (xi) An executed copy of the Placement Agreement.
Section 213. Temporary Bonds. (a) Pending preparation of definitive Bonds, there
may be executed, and, upon written request of the Authority, the Trustee shall
authenticate and deliver to the Authority, in lieu of definitive Bonds and
subject to the same limitations, conditions and requirements as to date,
temporary printed, engraved, lithographed or typewritten Bonds, in the form of
fully registered Bonds in Authorized Denominations as the Authority by
resolution may provide and with such appropriate omissions, insertions and
variations as may be required.
(b) If temporary Bonds shall be issued, the Authority shall cause
definitive Bonds to be prepared and to be xecuted and delivered to the Trustee,
and the Trustee shall, upon written request of the Authority and upon
presentation to it at its Principal Office of any temporary Bond, cancel the
same and authenticate and deliver in exchange therefor at the Principal Office
of the Trustee, without charge to the Holder thereof, a definitive Bond or Bonds
of an equal aggregate principal amount, of the same maturity and bearing
interest at the same rate as the temporary Bond surrendered. Until so exchanged,
the temporary Bonds shall in all respects be entitled to the same benefit and
security of this Indenture as the definitive Bonds to be issued and
authenticated hereunder.
Section 214. Payments Due on Saturdays, Sundays and Holidays. Except as
otherwise provided in this Indenture, in any case where the date of maturity of
interest or principal of Bonds or the date fixed for Redemption of Bonds shall
not be a Business Day, then payment of interest on or principal or Redemption
Price of such Bonds need not be made on such date but may be made on the next
succeeding Business Day with the same force and effect as if made on the date of
maturity or the date fixed for Redemption, and no interest shall accrue for the
period after such date.
Section 215. Notice of Determination of Taxability. If the Trustee is notified
in writing by the Internal Revenue Service or any Bondholder of the occurrence
of a Determination of Taxability, the Trustee shall give written notice thereof
to the Authority, the Letter of Credit Issuer and the Borrower. The Trustee
shall then give written notice of any Determination of Taxability of which it
receives written notice, to the Holders by registered or certified first class
mail promptly following the receipt of such notice. Such notice shall state that
the Bonds are subject to Redemption pursuant to Section 301(a) hereof and shall
state the matters set forth in Section 303 hereof.
ARTICLE III
REDEMPTION OF BONDS
Section 301. Redemption. The Bonds are subject to Redemption prior to maturity
as provided in the form of the Bonds and as follows, subject to the notice
requirements set forth in Section 303 hereof:
(a) Special Mandatory Redemption. The Bonds are subject to special
mandatory redemption in whole as soon as practicable but not later than the 90th
day following (i) the Trustee's receipt of written notice of the occurrence of a
Determination of Taxability or (ii) the Authority's written notice to the
Trustee, the Letter of Credit Issuer and the Borrower that (A) the Borrower has
ceased to operate the Project Facility or ceased to cause the Project Facility
to be operated as an authorized project under the Act for twelve (12)
consecutive months without first obtaining the prior written consent of the
Authority, or (B) any of the representations and warranties of the Borrower
contained in the Loan Agreement have proven to have been false or misleading in
any material respect when made. In such event, the Bonds shall be redeemed by
the Authority at a Redemption Price equal to 100% of the principal amount
thereof plus accrued interest up to and including the redemption date.
(b) Mandatory Redemption. The Bonds are subject to mandatory redemption, as
a whole or in part, in minimum denominations of $25,000 and in integral
multiples of $5,000 thereafter, on any Interest Payment Date, at a Redemption
Price equal to 100% of the principal amount thereof, together with interest
accrued up to such redemption date in the case of damage, destruction or
condemnation of the Project, in an amount equal to the net proceeds of any
insurance, casualty or condemnation award received by the Bank and at the option
of the Bank pursuant to Section 5.24 of the Loan Agreement and Section 304(d)
hereof.
(c) Extraordinary Mandatory Redemption. The Bonds are subject to
extraordinary mandatory redemption by the Authority, in whole, on the Interest
Payment Date immediately preceding the termination date of the Initial Letter of
Credit on September 15, 2000, (or the Interest Payment Date immediately
preceding the Letter of Credit Maturity Date of a renewal of the Initial Letter
of Credit or an Alternate Letter of Credit), at a Redemption Price equal to 100%
of the principal amount thereof, in the event the Borrower does not provide the
Trustee, at least sixty (60) days prior to the Letter of Credit Maturity Date,
with (i) written notice from the Bank to the Trustee that the Letter of Credit
will be renewed by the Bank upon the termination date thereof, which Letter of
Credit shall have an expiration date of September 15 of any subsequent year, or
written notice from another bank to the Trustee that an Alternate Letter of
Credit will be issued prior to the Letter of Credit Maturity Date, which
Alternate Letter of Credit shall have an expiration date of September 15 of any
subsequent year, and (ii) (A) an Alternate Letter of Credit meeting the
requirements set forth in Section 404(d)(i) hereof and which shall be presented
to the Trustee sixty (60) days prior to the Letter of Credit Maturity Date and
(B) the documents required to be delivered in Section 404(d)(ii) hereof sixty
(60) days prior to the Letter of Credit Maturity Date.
(d) Mandatory Redemption Due to Act of Bankruptcy of Bank. The Bonds are
subject to mandatory redemption, as a whole, at a Redemption Price equal to 100%
of the principal amount of the Outstanding Bonds together with interest accrued
thereon to the redemption date which is at least forty-five (45) days, but not
more than seventy (70) days, after the date on which an Act of Bankruptcy of the
Bank occurs, unless within thirty (30) days after the occurrence of an Act of
Bankruptcy of the Bank, the Borrower has provided the Trustee with (i) an
Alternate Letter of Credit, which Alternate Letter of Credit shall have an
expiration date of September 15, of any subsequent year and (ii) the opinions
and written notice set forth in Section 404 hereof.
(e) Optional Redemption. Subject to the provisions of Section 304(c) hereof
regarding the payment of the redemption premium, if any, by the Borrower, the
Bonds maturing on or after September 1, 2006 are subject to optional redemption
by the Authority, at the direction of the Borrower, in whole at any time, or in
part on any Interest Payment Date, in minimum denominations of $25,000 and in
integral multiples of $5,000 thereafter if in part, on or after September 1,
2005, at the Redemption Prices (expressed as percentages of the principal
amount) for the Redemption Periods set forth below, plus unpaid interest, if
any, accrued up to the redemption date:
Redemption Periods
(Dates Inclusive)
Redemption
Prices (%)
September 1, 2005 to August 31, 2006
102.00
September 1, 2006 to August 31, 2007
101.00
September 1, 2007 and thereafter
100.00
(f) Sinking Fund Redemption. The Bonds maturing September 1, 2005 and September
1, 2010, respectively, shall be subject to Redemption commencing September 1,
2004 and September 1, 2006, respectively, and on each September 1 thereafter, as
applicable, at a Redemption Price equal to 100% of the principal amount thereof
being redeemed plus accrued interest up to the redemption date. The Trustee
shall cause to be redeemed such Bonds in the aggregate principal amounts of the
following Sinking Fund Installments on September 1 of each of the following
years:
Term Bonds Due September 1, 2005
Year
Sinking Fund Installment ($)
2004
665,000
2005
735,000
Term Bonds Due September 1, 2010
Year
Sinking Fund Installment ($)
2006
810,000
2007
895,000
2008
990,000
2009
1,095,000
2010
1,210,000
On or before the thirtieth (30th) day next preceding a Sinking Fund Installment
due date, the Trustee shall select for Redemption on such date the principal
amount of Bonds, in an amount not exceeding that necessary to complete the
retirement of such Sinking Fund Installment, as of such Sinking Fund Installment
due date. Accrued interest on such Bonds so redeemed shall be paid from the Bond
Fund, and all expenses in connection with such Redemption shall be paid by the
Borrower. All Bonds redeemed under the provisions of this Section shall be
redeemed in the manner provided in Section 302 hereof. The principal amount of
Bonds to be redeemed in the years 2004 through 2010 shall be reduced by the
amount of such Bonds that the Trustee has previously redeemed pursuant to
Section 301(b) or (e) hereof.
Section 302. Selection of Bonds to be Redeemed. (a) A Redemption of Bonds shall
be a Redemption of the whole or any part of the Bonds from any funds available
for that purpose in accordance with the provisions of this Indenture. If less
than all the Bonds shall be called for Redemption under any provision of this
Indenture permitting such partial redemption, the particular Bonds (or
Authorized Denominations thereof), to be redeemed shall be selected by the
Trustee by lot, using such method as the Trustee in its sole discretion may deem
proper, in the principal amount designated in writing to the Trustee by the
Borrower or otherwise as required by this Indenture. The Trustee and the Letter
of Credit Issuer, as applicable, shall be notified in writing by the (i)
Authority in the case of a Redemption pursuant to Section 301(a) hereof, (ii) by
the Borrower in the case of a Redemption pursuant to Section 301(e) hereof and
(iii) by the Letter of Credit Issuer in the case of a Redemption pursuant to
Sections 301(b), 301(c) and 301(d) hereof, not less than sixty (60) days prior
to the redemption date of a Redemption pursuant to Section 301(a), (b), (c) and
(e) hereof and in the case of a Redemption pursuant to Section 301(d) hereof,
not more than ten (10) days following an Act of Bankruptcy of the Bank.
(b) Except as otherwise provided herein, any Bonds selected for Redemption
which are deemed to be paid in accordance with the Indenture will bear interest
up to, but not including, the date fixed for Redemption.
Section 303. Notice of Redemption; Rights of Holders. (a) When Bonds are to be
redeemed pursuant to Section 301 hereof, the Trustee shall give notice of such
redemption to the Holders in the name of the Authority, stating: (i) the Bonds
to be redeemed; (ii) the redemption date; (iii) that such Bonds will be redeemed
at the Principal Office of the Trustee; (iv) that on such redemption date there
shall become due and payable upon each Bond to be redeemed the Redemption Price
thereof together with unpaid interest accrued prior to the redemption date; (v)
the CUSIP numbers assigned to the Bonds to be redeemed; (vi) the serial numbers
and maturities of Bonds selected for Redemption, except that where all the Bonds
are to be redeemed, the serial numbers and maturities need not be specified;
(vii) the interest rates and maturity dates of the Bonds to be redeemed; (viii)
the date of mailing notice to Bondholders; and (ix) the record date for the
Redemption (which shall be forty-five (45) days prior to the redemption date).
(b) Such redemption notice shall further state that on such date there
shall become due and payable upon each Bond or portion thereof being redeemed
the Redemption Price thereof, or the Redemption Price of the specified portion
of the principal thereof in the case of a Bond to be redeemed in part only,
together with interest accrued to such date, and that from and after such date,
if the aggregate of the amounts then on deposit in the Bond Fund is sufficient
to pay the Redemption Price together with interest accrued to such date,
interest thereon shall cease to accrue and be payable. In case any Bond is to be
redeemed in part only, the notice of redemption which relates to such Bond shall
state the portion of the principal thereof to be redeemed and that on or after
the redemption date, upon surrender of such Bond, a new Bond or Bonds of the
same maturity and in principal amount equal to the unredeemed portion of such
Bond shall be issued. The notice of redemption shall state that Redemption is
subject to receipt by the Trustee of Available Moneys from the Letter of Credit
or, as applicable and limited by the provisions of this Indenture, other
Available Moneys sufficient to pay the Redemption Price of the Bonds to be
redeemed on or before the redemption date.
(c) The Trustee shall mail the notice required by subsection (a) above,
postage prepaid by first class mail, not less than thirty (30) days, nor more
than sixty 60) days, prior to the applicable date to the Holders of any Bonds to
be redeemed at the addresses thereof appearing on the Bond Register kept for
such purpose. Failure to duly give such notice by mail, or any defect therein,
shall not affect the validity of any proceeding for the Redemption of the Bonds.
Section 304. Payment of Redeemed Bonds. (a) After notice shall have been given
in the manner provided in Section 303 hereof, Bonds or portions thereof called
for Redemption shall become due and payable on the redemption date so
designated. Upon presentation and surrender of such Bonds at the Principal
Office of the Trustee, such Bonds shall be paid at a price equal to the
Redemption Price plus unpaid interest, if any, accrued up to and including the
redemption date. If there shall be called for Redemption less than all of a
fully registered Bond, the Authority shall, upon the surrender of such fully
registered Bond and without charge to the Owner thereof, (i) pay the Redemption
Price of the Authorized Denominations called for Redemption and (ii) execute and
cause the Trustee to authenticate and deliver for the unredeemed balance of the
principal amount of such Bond so surrendered, Bonds of like series, maturity and
interest rate in any Authorized Denominations.
(b) If on any redemption date Available Moneys from the Letter of Credit
or, as applicable and limited by the terms of this Indenture and in the case of
the payment of redemption premium by the Borrower in the event of an optional
redemption pursuant to Section 301(e) hereof, other Available Moneys for the
Redemption of all Bonds or portions thereof to be redeemed, together with
interest thereon to such redemption date, shall be held by the Trustee so as to
be available therefor on such date, the Bonds or portions thereof so called for
Redemption shall cease to bear interest and such Bonds or portions thereof shall
no longer be Outstanding hereunder or be secured by or be entitled to the
benefits of this Indenture. If such Letter of Credit moneys or, as applicable,
other Available Moneys shall not be so available on such date, such Bonds or
portions thereof shall continue to bear interest until paid at the same rate as
they would have borne had they not been called for Redemption and shall continue
to be secured by and be entitled to the benefits of this Indenture.
(c) In the event a redemption premium is due from the Borrower pursuant to
an optional redemption in accordance with Section 301(e) hereof, the following
shall apply: the amount of the redemption premium paid by the Borrower to the
Trustee shall be deposited by the Trustee into the Ineligible Moneys Account in
immediately available funds at least one hundred twenty-three (123) days prior
to the date on which notice of such optional redemption is to be sent by the
Borrower to the Trustee pursuant to Section 302(a) hereof, or the amount of the
redemption premium paid by the Borrower to the Trustee shall be deposited in the
Eligible Moneys Account prior to the date fixed for Redemption, if such moneys
are delivered with an opinion, acceptable to Moody's or the then current rating
agency on the Bonds, of a nationally recognized counsel experienced in
bankruptcy matters, stating that the application of such moneys will not
constitute a voidable preference in the event of the occurrence of an Act of
Bankruptcy. If no Act of Bankruptcy has occurred prior to the date fixed for
Redemption and such moneys become Available Moneys then such Available Moneys
shall be transferred by the Trustee to the Eligible Moneys Account and shall be
utilized to pay the redemption premium on the Bonds to effect an optional
redemption pursuant to Section 301(e) hereof. If an Act of Bankruptcy has
occurred prior to the date fixed for such Redemption, or sufficient Available
Moneys are not held by the Trustee to pay the redemption premium on the Bonds,
the notice of redemption shall be deemed rescinded and the Trustee shall be
directed in writing by the Borrower or the Authority to mail a notice of
rescission to the Holders of the Bonds. If such notice of redemption is
rescinded, the moneys deposited by the Borrower with the Trustee for payment of
the redemption premium which are Available Moneys shall be transferred into the
Eligible Moneys Account and shall be applied by the Trustee in accordance with
the provisions of Section 404(a) hereof to reimburse the Letter of Credit Issuer
for any drawing on the Letter of Credit up to the amount of any such drawing.
From the date of the deposit of the redemption premium by the Borrower with the
Trustee, the Borrower shall have no control whatsoever over such funds and the
Trustee shall invest such funds in Permitted Investments (as defined under
Article VI hereof) to mature prior to the date set for Redemption.
(d) In the event the Letter of Credit Issuer provides the Trustee with
written notice to effect a mandatory redemption of the Bonds pursuant to Section
301(b) hereof, the Trustee shall call for Redemption the amount of Bonds which
(i) does not exceed the amount of net proceeds received by the Bank for any
insurance, casualty or condemnation award and (ii) is in Authorized
Denominations and the Trustee shall present a draft to the Letter of Credit
Issuer for a draw under the Letter of Credit in an amount which does not exceed
the requirements of (i) and (ii) herein.
(e) The Trustee shall promptly notify the Authority in writing of the
Redemption of all Outstanding Bonds, whether at maturity or otherwise.
ARTICLE IV
REVENUES; FUNDS; LETTER OF CREDIT
Section 401. Source of Payment of Bonds. (a) The Bonds issued hereunder and all
payments required by the Authority hereunder are limited obligations payable
solely from the Revenues and moneys, securities, Funds and Accounts (including
investments, if any) held and to be held by the Trustee pursuant to the
Indenture, as authorized by the Act and provided herein.
The foregoing are collectively the "Security" and are hereby pledged to the
Trustee, for the benefit of the Bondholders for the payment of the principal of,
redemption premium, if any, and interest on, the Bonds in accordance with the
terms and provisions of this Indenture, and for the benefit of the Bank for the
payment of all amounts owing to it under the Letter of Credit and the
Reimbursement Agreement. This pledge shall be valid and binding from and after
the date of execution of this Indenture, and the security hereby pledged shall
immediately be subject to the lien of such pledge without any physical delivery
thereof or further act, and the lien of such pledge shall be valid and binding
as against all parties having claims of any kind in tort, contract or otherwise
against the Authority, irrespective of whether such parties have notice thereof.
(b) The payments under the Loan Agreement are to be remitted directly to
the Trustee for the account of the Authority and deposited, as herein provided,
in the Bond Fund. The Loan Agreement provides that the payments to be made shall
be sufficient in amount to ensure the prompt payment of the principal of,
redemption premium, if any, and interest on the Bonds and the entire amount of
said payments are pledged to the payment of the principal of, redemption
premium, if any, and interest on the Bonds. The Loan Agreement further provides
for a credit for such payments to the extent that such payments have been
derived from drawings under the Letter of Credit.
Section 402. Creation of Bond Fund. (a) There is hereby created and established
a trust fund for the benefit of the Holders of the Bonds to be held by the
Trustee and designated the "Bond Fund", which shall be used to pay the principal
of, redemption premium, if any, and interest on the Bonds. There are hereby
established with the Trustee three (3) separate and segregated accounts to be
evidenced by journal entry, to be designated "Eligible Moneys Account",
"Ineligible Moneys Account" and "Letter of Credit Account", which collectively
comprise the Bond Fund.
(b) There shall be deposited into the accounts of the Bond Fund from time
to time the following:
(i) into the Ineligible Moneys Account, (1) all payments of principal,
redemption premium, if any, or interest under the Loan Agreement and (2) all
other moneys received by the Trustee under and pursuant to the provisions of
this Indenture (except moneys described in Section 402(b)(ii) and Section
402(b)(iii) hereof) or of the Loan Agreement; provided that, in each case (but
subject to Section 413 hereof and the last paragraph of Section 402(c)(iii)
hereof), after such moneys shall become Available Moneys, such moneys shall be
transferred first to the Rebate Fund in the amount required by and pursuant to
Section 413 hereof and the remainder to the Eligible Moneys Account; and
provided, further, that any moneys deposited by the Borrower into the Ineligible
Moneys Account to pay a redemption premium on the Bonds pursuant to Section
304(c) hereof which shall thereafter become Available Moneys shall be
transferred by the Trustee directly into the Eligible Moneys Account and shall
be used solely for the purposes of Section 304(c) hereof; and
(ii) into the Letter of Credit Account, all moneys drawn by the
Trustee under the Letter of Credit to pay principal of the Bonds and interest
accrued on the Bonds; and
(iii) into the Eligible Moneys Account, all moneys held in the
Ineligible Moneys Account which shall become Available Moneys and are not
applied as provided in Section 413 hereof and accrued interest on the Bonds from
August 1, 1995 to the Issue Date.
(c) Moneys in the Bond Fund shall be used solely for the payment of the
principal plus any interest accrued on the Bonds, whether on a date of maturity,
Redemption or acceleration or on any Interest Payment Date (excepting moneys
deposited by the Borrower to effectuate an optional redemption pursuant to
Section 304(c) hereof, and except as provided in this Section 402(c) and in
Section 413 hereof with respect to the Rebate Fund) from the following source or
sources but only in the following order of priority:
(i) Available Moneys from the Letter of Credit held in the Letter of
Credit Account; provided that in no event shall moneys held in the Letter of
Credit Account be used to pay any amount that may be due on Bonds held by or for
the account of the Borrower, the redemption premium, if any, or fees or expenses
of the Trustee or the Paying Agent; and
(ii) Available Moneys held in the Eligible Moneys Account; and
(iii) Moneys held in the Ineligible Moneys Account; provided that no
moneys held in the Ineligible Moneys Account shall be used to make any payments
of principal, redemption premium, if any, or interest on the Bonds unless there
are no further draws available to be made on the Letter of Credit.
Moneys deposited into the Ineligible Moneys Account (excepting those
moneys deposited by the Borrower to pay a redemption premium pursuant to Section
304(c) hereof) which shall become Available Moneys shall be transferred to the
Rebate Fund at the times and in the amounts required by Section 413 hereof,
prior to the transfer of such moneys to the Eligible Moneys Account.
(d) Except as set forth in subparagraph (e) herein, to pay principal and/or
interest on the Bonds on the date any such payment becomes due, whether at
maturity or on an Interest Payment Date or as a result of Redemption pursuant to
Sections 301(a), 301(b), 301(c), 301(d), 301(e) and 301(f) hereof or as a result
of acceleration of the Bonds pursuant to Section 902 hereof, the Trustee, to
make timely payment thereof, shall present a draft for a draw upon the Letter of
Credit in an amount equal to the principal of and/or interest on the Bonds which
then shall be due and payable on such date, in accordance with the provisions of
the Letter of Credit and in accordance with Section 404 hereof and such amounts
shall be deposited in the Letter of Credit Account.
(e) Notwithstanding the provisions of subparagraph (d) above, the following
provisions shall govern the payment of principal of and interest on the Bonds to
effect a Redemption pursuant to Section 301(b) hereof:
In the event of damage, destruction or condemnation of part or all of
the Project Facilities, the Borrower shall notify the Trustee and the Bank not
later than five (5) days after the occurrence of such event (the "Initial
Notice") and the following provisions shall apply:
(i) In the event of any partial damage, destruction or condemnation of
the Project Facilities in an amount aggregating less than $5,000,000, the
Borrower shall apply the proceeds of any claim or award related thereto to
reconstruct, repair or restore the Project Facilities to a substantially
equivalent condition or value existing immediately prior to such event or to a
condition of at least an equivalent value, in accordance with the provisions of
Section 407 hereof. In the event the Borrower shall not or shall fail to
commence to repair, reconstruct or restore the Project Facilities within sixty
(60) days after the Initial Notice to the Trustee and the Bank or in the event
such proceeds exceed in the aggregate $5,000,000, the Bank shall notify the
Trustee in writing, within seventy (70) days after the Borrower's Initial Notice
to the Bank and the Trustee, of the Bank's election to (A) apply such funds to
the Cost of repair, reconstruction and restoration of the Project, in which case
such funds shall be deposited with the Trustee in the Acquisition Fund in
accordance with Section 407 hereof and paid in accordance with Section 408(b)
hereof, or (B) redeem Bonds to effect a mandatory redemption pursuant to Section
301(b) hereof, in which case the Trustee shall effect such mandatory redemption
of Bonds by making a draw under the Letter of Credit pursuant to Section 301(b)
hereof, which Redemption shall be in an amount equal to the net proceeds
received by the Bank and in Authorized Denominations pursuant to Section 304(d)
hereof and the Bank shall utilize the net proceeds of any casualty, insurance or
condemnation award to reimburse itself for a draw under the Letter of Credit for
such Redemption, but only to the extent of the amount of net proceeds received
by the Bank for any such casualty, insurance or condemnation award, or (C) such
funds can be used by the Bank to reduce any outstanding balance of unreimbursed
draws under the Letter of Credit and remit the balance to the Borrower, or (D)
the Bank can retain such proceeds (up to the amount of the Borrower's
obligations to the Bank under the Letter of Credit) as cash collateral for the
Borrower's obligations thereunder. Notwithstanding the above, the Trustee shall
continue to present drafts to the Bank for a draw under the Letter of Credit for
the payment of principal and interest on the Bonds when due and payable whether
at maturity or as a result of other redemption or acceleration of the Bonds.
(f) The Authority hereby covenants and agrees that, so long as any of the
Bonds issued hereunder are Outstanding, it will deposit or cause to be deposited
in the Bond Fund all sums received by it derived from the Loan Agreement, but
not including sums received by it in respect of its administrative costs, taxes
and indemnification.
(g) The Trustee shall maintain such other records of accounts based on
written certifications received from the Borrower and the Bank, as applicable,
so that the Trustee may at all times have written records of the source and date
of deposit of the funds in each such account. Funds in a particular subaccount
shall not be in any way commingled with funds in any other trust account
maintained by the Trustee.
Section 403. Use of Moneys in Bond Fund. Except as provided in Sections 413 and
905 hereof, moneys in the Bond Fund shall be used solely for the payment of
principal of, redemption premium, if any, and interest on, the Bonds in the
manner set forth in Section 402 hereof.
Section 404. The Letter of Credit. (a) If, pursuant to Section 402(d), the
Trustee must draw upon the Letter of Credit, the Trustee shall present a draft
for a draw under the Letter of Credit in accordance with the terms thereof no
later than 10:00 a.m., local prevailing time, no later than one (1) Business Day
prior to the day on which the principal of and/or interest on any Outstanding
Bond is due and payable in the amount necessary to make payments of the
principal of, whether at maturity or upon acceleration or Redemption or
otherwise, and/or interest on the Bonds required to be made from the Bond Fund.
The amount of money drawn under the Letter of Credit on each such date shall
equal the amount of the principal and/or interest on all Outstanding Bonds which
is then due and payable. Amounts on deposit in the Eligible Moneys Account
(excepting any amount paid by the Borrower pursuant to Section 304(c) hereof to
effectuate an optional redemption pursuant to Section 301(e) hereof) upon any
such drawing of the Letter of Credit, shall be applied by the Trustee to
reimburse the Letter of Credit Issuer up to the amount of such drawing.
(b) Subject to the provisions set forth in subparagraph (c) below, the
Trustee shall not enter into any amendment or modification of the Letter of
Credit without notice and the written approval or consent of all Bondholders and
Moody's. If at any time the Authority or the Borrower shall request in writing
the consent of the Bondholders to any such proposed amendment or modification,
the Trustee shall cause notice of such proposed amendment, change or
modification to be provided to the Holders in the name of the Authority. Such
notice shall briefly set forth the nature of such proposed amendment, change or
modification and shall state that copies of the instrument embodying the same
are on file at the Principal Office of the Trustee for inspection by all
Bondholders.
(c) Notwithstanding the provisions of subparagraph (b) hereinabove, the
Trustee, within ten (10) Business Days following a payment of principal on the
Bonds, shall execute and deliver to the Bank a certificate, in the form of Annex
C attached to the Letter of Credit, the effect of which shall be to permanently
reduce, as applicable, (i) the Principal Component of the Letter of Credit (as
defined in the Letter of Credit) to reflect the aggregate principal amount of
Bonds Outstanding and (ii) the Interest Component of the Letter of Credit (as
defined in the Letter of Credit) to reflect the amount of interest allocable to
the reduced Principal Component (the "Certificate for the Permanent Reduction of
the Stated Amount"). The execution and delivery of the Certificate for the
Permanent Reduction of the Stated Amount shall not constitute an amendment or
modification of the Letter of Credit requiring the consent of Bondholders.
(d) The Borrower may provide an Alternate Letter of Credit subject to the
conditions set forth below. An Alternate Letter of Credit must be presented to
the Trustee on or before the sixty (60) days immediately preceding the Letter of
Credit Maturity Date.
(i) Any Alternate Letter of Credit must be issued by a banking
institution which, at the time it issues an Alternate Letter of Credit, has a
credit rating established by Moody's or the then current rating agency which is
not less than the credit rating of the Letter of Credit Issuer which is being
replaced by such banking institution in effect at the time of such substitution
from Moody's or the then current rating agency and which credit rating will not
result in a withdrawal or reduction of the rating on the Bonds by Moody's or the
then current rating agency.
(ii) The Trustee shall only accept delivery of an Alternate Letter of
Credit upon prior receipt of (A) an opinion of Bond Counsel stating that the
delivery of such Alternate Letter of Credit to the Trustee is authorized under
the Loan Agreement and complies with the terms of the Loan Agreement and this
Indenture, (B) an opinion of Bond Counsel stating that the delivery of such
Alternate Letter of Credit will not result in a Determination of Taxability, (C)
an opinion of Bond Counsel that such Alternate Letter of Credit shall otherwise
contain the same material terms, including without limitation, the same Letter
of Credit Maturity Date as the Letter of Credit or the Alternate Letter of
Credit being replaced or a later Letter of Credit Maturity Date or the final
maturity date of the Bonds, (D) the legal opinion, dated on the delivery date of
the Alternate Letter of Credit, of counsel to the issuer thereof, addressed to
the Trustee and the Borrower, opining that (i) the issuer has the authority to
issue the Alternate Letter of Credit; (ii) the Alternate Letter of Credit has
been duly authorized, executed and delivered; (iii) payments of the principal
of, redemption premium, if any, and interest on the Bonds will not constitute
voidable preferences under the Federal Bankruptcy Code in the event of an Act of
Bankruptcy of the Borrower or the Authority (except that the opinion referred to
herein may be given by either Bond Counsel or Counsel to the Bank); and (iv) the
Alternate Letter of Credit is a legal, valid and binding obligation of the
issuer, enforceable against the issuer in accordance with its terms, and (E) a
certificate of the issuer thereof dated the date of issuance of the Alternate
Letter of Credit, signed by an authorized officer of the issuer to the effect
that (i) the issuer is duly organized and validly existing, in good standing;
(ii) the Alternate Letter of Credit has been duly authorized, executed and
delivered; and (iii) the performance by the issuer of the Alternate Letter of
Credit is within the corporate power of the issuer, requires no consents,
approvals or filings, other than in the ordinary course of the issuer's business
with any governmental or regulatory agencies and (F) written confirmation of the
credit rating of the Alternate Letter of Credit Issuer established by Moody's or
the then current rating agency and that such rating will not result in a
withdrawal or reduction of the rating of the Bonds. Upon receipt of the
foregoing, the Trustee shall accept such Alternate Letter of Credit and promptly
surrender the previously held Letter of Credit to the issuer thereof, in
accordance with the terms thereof, for cancellation.
Section 405. Satisfaction of Obligations. Any obligations of the Authority under
this Indenture and the Bonds or of the Borrower under the Loan Agreement which
are satisfied by moneys drawn by the Trustee under the Letter of Credit shall be
deemed satisfied for all purposes, except any obligation to reimburse the Bank
for any draws on such Letter of Credit.
Section 406. No Interest of Authority or Borrower. Neither the Authority nor the
Borrower shall have any control over the use of, or any right to withdraw any
moneys from, the Bond Fund. Neither the Authority nor the Borrower shall have
any right, title or interest in the Rebate Fund, except as otherwise provided in
Section 413 hereof.
Section 407. Creation of Acquisition Fund. There is hereby created and
established a trust fund in the name of the Authority but for the account of the
Borrower to be held by the Trustee and designated the "Acquisition Fund" for the
payment of the Costs of the Project. The Acquisition Fund shall consist of any
other amounts the Authority, the Bank, or the Borrower, upon written direction
from the Bank, may deposit or cause to be deposited therein including any moneys
from the damage, destruction or condemnation of the Project as set forth in
Section 5.24 of the Loan Agreement. The amounts in the Acquisition Fund, until
applied as hereinafter provided in Section 408 hereof, shall be held for the
Security of all Bonds Outstanding hereunder. The Trustee shall maintain a record
of the income on investments and interest earned on deposit of amounts held in
the Acquisition Fund and on proceeds of Bonds in respect of accrued or
capitalized interest held by the Trustee as Revenues. Subject to the provisions
of Section 413 hereof, such income or interest may be expended at any time or
from time to time to pay Costs of the Project in the same manner as the moneys
deposited in the Acquisition Fund are expended.
Section 408. Payments from Acquisition Fund. (a) The Trustee is authorized to
pay from the Acquisition Fund in connection with the issuance of the Bonds, in
the amounts set forth in a requisition signed by an Authorized Borrower
Representative, and approved in writing by the Bank, any or all costs of
issuance of the Bonds, including but not limited to the Authority fee, Trustee
fees, Letter of Credit issuance fees, placement fees, legal fees and expenses
and printing costs, upon receipt of a requisition executed by an Authorized
Borrower Representative in accordance with Article III of the Loan Agreement
(and approved in writing by the Bank) within ten (10) days of receipt of same.
(b) In the event the Borrower shall or the Bank elects to repair the
Project Facility pursuant to Section 5.24 of the Loan Agreement and Section 5.21
of the Reimbursement Agreement and net proceeds from any insurance, casualty or
condemnation award are deposited in the Acquisition Fund pursuant to the
provisions of Section 402(e) hereof, the Trustee shall make payments from the
Acquisition Fund upon proper requisition therefor by the Borrower pursuant to
Section 3.3 of the Loan Agreement (and approved inwriting by the Bank) to
restore, renovate or reconstruct the Project Facility.
(c) In the event there are moneys remaining in the Acquisition Fund not
applied to pay the Costs of the Project or retained by the Trustee for Costs of
the Project not yet due or payable or, if due and payable, not yet paid, then
upon the delivery of the certificate of an Authorized Borrower Representative
reflecting such amounts to be retained therein, such moneys shall be transferred
to the Bond Fund and applied pursuant to the terms of Section 402 hereof.
Except during the continuance of an Event of Default hereunder, the Trustee
shall continue to make payments from the Acquisition Fund upon proper
requisition therefor.
Section 409. [Intentionally Omitted]
Section 410. Non-Presentment of Bonds. In the event any Bond shall not be
presented for payment when the principal thereof becomes due, either at maturity
or at the date fixed for Redemption thereof or otherwise, if Available Moneys in
the Bond Fund sufficient to pay the principal of, redemption premium, if any,
and interest on such Bond shall be available to the Trustee for the benefit of
the Holder or Holders thereof, all liability of the Authority to the Holder
thereof for the payment of such Bond, or portion thereof, as the case may be,
shall forthwith cease, determine and be completely discharged, and thereupon it
shall be the duty of the Trustee to hold such fund or funds uninvested and
without liability to the Holder of such Bond for interest thereon, for the
benefit of the Holder of such Bond, who shall thereafter be restricted
exclusively to such fund or funds, for any claim of whatever nature on his part
on, or with respect to, said Bond, or portion thereof. Any such funds held by
the Trustee remaining unclaimed by such Holder or former Holder for two (2)
years after such principal, or premium, if any, has become due and payable and
made available to the Trustee and, upon written instructions of the Borrower,
shall be paid to the Borrower and such Holder or former Holder shall thereafter
be entitled to look only to the Borrower for payment thereof, and the Authority
and the Trustee shall have no further responsibility or liability with respect
to such funds.
Section 411. Moneys To Be Held in Trust. All moneys required to be deposited
with or paid to the Trustee for account of the Bond Fund or the Acquisition Fund
under any provision of this Indenture shall be held by the Trustee in its trust
department in trust for the purposes specified herein; provided, however, that
any moneys which have been deposited with, paid to or received by the Trustee
(i) for the Redemption of a portion of the Bonds, notice of the redemption of
which has been given, or (ii) for the payment of Bonds or interest thereon due
and payable otherwise than upon acceleration by declaration, shall be held in
trust for and subject to a Lien in favor of only the Holders of such Bonds so
called for Redemption or so due and payable.
Section 412. Repayment to the Bank from Bond Fund. Any amounts remaining in the
Bond Fund after payment in full of principal of, redemption premium, if any, and
interest on all the Bonds (or after provision for the payment thereof has been
made in accordance with Article XI hereof), and payment of the fees, charges and
expenses including legal fees of the Trustee and the Paying Agent and all other
amounts required to be paid hereunder, shall be paid to the Bank to the extent
it remains unreimbursed for payments made under the Letter of Credit or any
other amounts due and owing to the Bank under the Reimbursement Agreement and
then to the Borrower pursuant to Section 907(c) hereof.
Section 413. Rebate Fund. There is hereby established with the Trustee a Rebate
Fund which shall be held separate and apart from all other Funds established
under this Indenture. The Borrower shall comply with the provisions of Section
5.29 of the Loan Agreement and instruct the Trustee in writing to transfer from
the Ineligible Moneys Account of the Bond Fund to the Rebate Fund, or shall
otherwise pay to the Trustee for deposit into the Rebate Fund, such amounts as
shall be necessary to cause the aggregate amount transferred to or otherwise
deposited in the Rebate Fund to equal the Excess Investment Earnings as of the
end of such Bond Year; provided that no such transfers or deposits shall be
necessary if the proceeds of the Bonds are fully expended within six (6) months
of the date of issue. Withdrawals from the Rebate Fund may be made on account of
negative arbitrage in other Funds, but not on account of negative arbitrage in
the Rebate Fund. All amounts in the Rebate Fund, including income earned from
investment of the Rebate Fund, shall be held by the Trustee free and clear of
the Lien of this Indenture, and the Trustee shall pay said amounts over to the
United States from time to time as the Trustee shall be instructed in writing by
the Borrower, provided that the Trustee shall so pay over to the United States:
(1) not less frequently than sixty (60) days following each fifth anniversary of
the original issuance of the Bonds, an amount equal to ninety percent (90%) of
the net aggregate amount transferred or deposited to or earned in the Rebate
Fund during such period (and not theretofore paid to the United States or
withdrawn on account of negative arbitrage in other Funds) and (2) not later
than sixty (60) days after the Redemption, payment at maturity or other
retirement of the last Bond, 100% of all moneys remaining in the Rebate Fund.
ARTICLE V
GENERAL REPRESENTATIONS AND COVENANTS
Section 501. Payment of Principal, Premium and Interest. The Authority hereby
covenants that it will promptly pay or cause to be paid the principal of,
redemption premium, if any, and interest on every Bond issued under this
Indenture at the place, on the dates and in the manner provided herein and in
the Bonds appertaining hereto according to the true intent and meaning hereof.
The principal of, redemption premium, if any, and interest on the Bonds are
payable solely from the Revenues and moneys, securities, Funds and Accounts
(including investments, if any) held and to be held by the Trustee pursuant to
this Indenture and moneys available to the Trustee under the Letter of Credit.
Such Revenues and moneys, securities, funds and accounts (other than moneys
available to the Trustee under the Letter of Credit) have been specifically
pledged to the payment of the Bonds in the manner and to the extent herein
specified.
Section 502. Performance of Covenants. (a) The Authority by executing this
Indenture covenants that it will promptly and faithfully observe and perform at
all times any and all covenants, undertakings, stipulations and provisions to be
observed or performed on its part contained (i) in this Indenture, (ii) in any
and every Bond executed, authenticated and delivered hereunder, (iii) in the
Loan Agreement and (iv) in all proceedings of the Authority pertaining thereto.
(b) The Authority agrees that the Trustee in its name or in the name of the
Authority may enforce against the Borrower or any Person any rights of the
Authority under or arising from the Bonds or the Loan Agreement whether or not
the Authority is in default hereunder or under the Loan Agreement, but the
Trustee shall not be deemed to have hereby assumed the obligations of the
Authority under the Loan Agreement, but rather shall have no obligations under
the Loan Agreement except as specifically provided herein. The Authority shall
fully cooperate with the Trustee in the enforcement by the Trustee of any such
rights. At the request of the Authority, the Trustee, upon receiving indemnity
satisfactory to it (including indemnity for its fees, costs and expenses,
including the fees and expenses of its attorneys and paralegals), shall in its
name commence legal action or take such other actions as the Authority shall
reasonably request to enforce the rights of the Authority or the Trustee under
or arising from the Bonds or the Loan Agreement.
Section 503. Authorization. The Authority hereby represents, warrants and
covenants that it is duly authorized under the Constitution and laws of the
State, including particularly and without limitation the Act, to issue the Bonds
authorized hereby and to assign and pledge the Revenues and the moneys,
securities, funds and accounts (including investments, if any) held and to be
held by the Trustee pursuant to this Indenture, and to assign its rights and
interests with respect to the Loan Agreement in the manner and to the extent
herein specified; that all actions on its part relating to the issuance of the
Bonds have been duly taken, as provided herein, and that the Bonds in the hands
of the Holders thereof are and will be valid and enforceable obligations of the
Authority, subject to the limitations set forth herein.
Section 504. Creation of Liens; Indebtedness. The Authority hereby covenants
that it shall not create or suffer to be created or to exist any Lien or charge
upon the Revenues or upon the moneys, securities, funds or Accounts (including
investments, if any) held and to be held by the Trustee pursuant to this
Indenture, except as provided in this Indenture. The Authority shall not incur
any indebtedness, or issue any evidences of indebtedness, secured by a pledge of
the Revenues or the moneys, securities, funds and Accounts (including
investments, if any) held and to be held by the Trustee pursuant to this
Indenture, other than the Bonds.
Section 505. Inspection of Project Books. The Authority hereby covenants and
agrees that all books and documents in its possession relating to the Project or
the Project Facilities and the Revenues shall at all times be open to inspection
by such accountants or other agencies as the Trustee may from time to time
designate.
Section 506. Rights under Loan Agreement. The Loan Agreement sets forth the
covenants and obligations of the Authority and the Borrower, including
provisions that subsequent to the issuance of the Bonds and prior to their
payment in full, or provision for payment thereof in accordance with the
provisions hereof, the Loan Agreement may not be amended or terminated (other
than as provided herein or therein) without the prior written consent of the
Trustee and the Bank, and reference is hereby made to the same for a detailed
statement of said covenants and obligations of the Borrower thereunder.
Section 507. Enforcement of Duties and Obligations of the Borrower. The
Authority hereby covenants that it shall require the Borrower fully to perform
all duties and acts and fully to comply with the covenants of the Borrower
required by the Loan Agreement in the manner and at the times provided in the
Loan Agreement. The Authority agrees that the Trustee in its own name may
enforce all rights of the Authority and all obligations of the Borrower under
and pursuant to the Loan Agreement for and on behalf of the Bondholders and the
Bank, whether or not an Event of Default exists hereunder; provided that the
Trustee shall not be deemed to assume the Authority's obligations under the Loan
Agreement and shall have no obligations under the Loan Agreement except as
expressly provided herein. Subject to the limitation of liability herein set
forth, the Authority hereby agrees to cooperate fully with the Trustee in any
proceedings, or to join in any proceedings, necessary to enforce the rights of
the Authority and all obligations of the Borrower under and pursuant to the Loan
Agreement if the Trustee shall so request.
Section 508. Recordation and Filing of Documents. The Authority hereby covenants
that it will cause this Indenture, the Loan Agreement (or a memorandum thereof)
and all supplements hereto and thereto, together with all other security
instruments and financing statements, to be recorded and filed, as the case may
be, in such manner and in such places as may be required by law in order to
perfect the Lien of, and the security interests created by, this Indenture.
Section 509. Instruments of Further Assurance. The Authority covenants that it
will do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged and delivered, such further acts, instruments and transfers as the
Trustee may reasonably require for the better assuring, pledging, assigning and
confirming unto the Trustee of all the Revenues and moneys, securities, funds
and accounts (including investments, if any) held and to be held by the Trustee
pursuant to the Indenture, pledged as contemplated herein to the payment of the
principal of, redemption premium, if any, and interest on the Bonds and to the
reimbursement of the Bank for draws on the Letter of Credit.
Section 510. Transfer of Letter of Credit. The Trustee shall not sell, assign or
transfer the Letter of Credit, except to a successor trustee under this
Indenture, in accordance with the provisions of the Letter of Credit.
Section 511. Furnishing Documents to the Authority. The Trustee agrees that it
shall hold all documents, affidavits, certificates and opinions delivered to the
Trustee pursuant to Section 3.3 of the Loan Agreement for a period of at least
two (2) years after the defeasance of the Bonds and the release of all liens
created under this Indenture. The Authority shall have the right to inspect such
documents, affidavits, certificates and opinions at the principal corporate
trust office of the Trustee at reasonable times and upon reasonable notice. The
Trustee shall provide copies of such documents, affidavits, certificates and
opinions to the Authority at its request.
Section 512. No Litigation. The Authority represents and warrants that (a) no
litigation or administrative action of any nature has been served upon it and is
now pending restraining or enjoining the issuance or delivery of the Bonds or
the execution and delivery of this Indenture or the Agreement or in any manner
questioning the proceedings or authority under which the same have been had, or
affecting the validity of the same; (b) no contest is pending as to its
existence or authority or that of its present member or officers; (c) no
authority or proceeding for the issuance of the Bonds or for the payment or
Security thereof has been repealed, revoked or rescinded; (d) no petition
seeking to initiate any resolution or other measure affecting the same or the
proceedings therefor has been filed; and (e) to the best of the knowledge of the
officers of the Authority, none of the foregoing actions are threatened.
Section 513. No Other Encumbrances. The Authority covenants that except as
otherwise provided herein and in the Agreement, it will not sell, convey,
mortgage, encumber or otherwise dispose of any portion of the Security.
Section 514. No Personal Liability. No member, officer, director, agent,
employee or attorney of the Authority, or any other future, past or present
members, officers, directors, agents or attorneys of the Authority, including
any Person executing this Indenture or the Bonds, shall be liable personally on
the Bonds or for any reason relating to the issuance of the Bonds.
Section 515. Compliance with Rule 15c2-12. 1. The Authority shall cause the
Borrower (the Borrower, the Corporate Guarantor and any entity that may become
obligated directly or indirectly to pay the principal of and interest on the
Bonds in the future, shall be the "Obligated Person" herein) to provide, and the
Borrower shall, in accordance with the provisions of Rule 15c2-12 (the "Rule"),
promulgated by the Securities and Exchange Commission (the "Commission")
pursuant to the Securities Exchange Act of 1934, provide, and cause the
Corporate Guarantor to provide to each nationally recognized municipal
securities information repository ("NRMSIR"), in each case as designated by the
Commission in accordance with the Rule, the following annual financial
information and operating data commencing with the fiscal year ended December
31, 1996:
(a) annual financial statements and annual reports, prepared in
accordance with generally accepted accounting principles and certified by
independent public accountants, and
(b) material financial information and operational data.
The Obligated Person reserves the right to modify from time to time
the specific types of information provided or the format of the presentation of
such information, to the extent necessary or appropriate in the judgment of the
Obligated Person; provided that, the Obligated Personagrees that any such
modification will be done in a manner consistent with the Rule.
(c) Such annual information and operating datadescribed above is to be
provided on or before one hundred and twenty (120) days after the end of each
fiscal year ending on the preceding July 1 and will be made available, in
addition to the NRMSIR's, to the Trustee and to each holder of the Bonds who
makes a request for such information.
2. The Obligated Person agrees to provide or cause to be provided, in a
timely manner, to (i) each NRMSIR or to the Municipal Securities Rulemaking
Board ("MSRB"), notice of the occurrence of any of the following events with
respect to the Bonds, if such event is material:
(a) principal and interest payment delinquencies;
(b) non-payment related defaults;
(c) unscheduled draws on the Bond Fund reflecting financial
difficulties;
(d) unscheduled draws on the Letter of Credit reflecting financial
difficulties;
(e) substitution of the Letter of Credit Issuer or its failure to
perform;
(f) adverse tax opinions or events affecting the tax- exempt status of
the Bonds;
(g) modifications to rights of the Holders of the Bonds;
(h) notices of optional or mandatory redemptions of the Bonds given
pursuant to the provisions of Article III hereof;
(i) defeasances;
(j) release, substitution, or sale of property securing repayment of
the Bonds; and
(k) rating changes.
The Obligated Person may from time to time choose to provide notice of
the occurrence of certain other events, in addition to those listed above, if
such other event is material with respect to the Bonds, but the Obligated Person
does not undertake to commit to provide any such notice of the occurrence of any
material event except those events listed above.
3. The Obligated Person agrees to provide or cause to be provided, in a
timely manner, to each NRMSIR, notice of a failure by the Obligated Person to
provide the annual financial information with respect to the Obligated Person
described above on or prior to the date set forth above; to the extent that the
Obligated Person is aware of a failure by any other 'obligated person' with
respect to the Bonds to provide annual financial information with respect to
that 'obligated person' pursuant to a separate undertaking by that 'obligated
person', the Obligated Person also will provide notice of such failure by such
'obligated person'.
4. The Obligated Person reserves the right to terminate its obligation to
provide annual financial information and notices of material events, as set
forth above, if and when the Obligated Person no longer remains an 'obligated
person' with respect to the Bonds within the meaning of the Rule; the Obligated
Person will provide notice of such termination to the NRMSIR's, the MSRB and the
Trustee.
5. The Obligated Person agrees that its undertaking pursuant to the Rule
set forth in this section is intended to be for the benefit of the Holders of
the Bonds and shall be enforceable by the Trustee on behalf of such holders or
by any Holder; (or by any beneficial holder in the event the Bonds are
registered in the name of Cede & Co. on behalf of The Depository Trust Company);
provided that, such right to enforce the provisions of this undertaking shall be
limited to a right to obtain specific enforcement of the Obligated Person's
obligations hereunder and any failure by the Obligated Person to comply with the
provisions of this undertaking shall not be an event of default with respect to
the Bonds under the Indenture.
6. Notwithstanding the provisions of Article IX hereof, the provisions in
the previous paragraphs shall not be amended, except under the following
conditions:
(a) The amendment may only be made in connection with a change in
circumstances that arises from a change in legal requirements, change in law, or
change in the identity, nature, or status of the Obligated Person, or type of
business conducted;
(b) This section of the Indenture, as amended, would have complied
with the requirements at the time of the primary offering, after taking into
account any amendments or interpretations of the rule, as well as any change in
circumstances; and
(c) The amendment does not materially impair them interests of
holders, as determined either by parties unaffiliated with the Authority or
Obligated Person (such as the Trustee or Bond Counsel), or by approving vote of
Holders pursuant to the terms of the Indenture at the time of the amendment.
ARTICLE VI
INVESTMENTS
Section 601. Investment of Bond Fund and Acquisition Fund. (a) So long as no
Event of Default has occurred and is continuing, moneys held as part of the
Acquisition Fund and of the Bond Fund (other than moneys held in the Letter of
Credit Account) shall be invested or reinvested by the Trustee, in accordance
with written directions, or oral directions confirmed in writing, of the
Authorized Borrower Representative in any of the following obligations or
securities (collectively "Permitted Investments"):
(i) direct obligations of the United States of America for which its
full faith and credit ispledged;
(ii) obligations issued by any instrumentality or agency of the United
States of America, whether now existing or hereafter organized, and the payment
of the principal, premium, if any, and interest on which is fully and
unconditionally guaranteed as a full faith and credit obligation by the United
States of America;
(iii) obligations issued or guaranteed by any State of the United
States or the District of Columbia which are rated at least "Aa" by Moody's or
an equivalent rating of the then current rating agency of the Bonds;
(iv) interest-bearing deposits in any bank or trust company (which may
include the Trustee) or any other bank or trust company which has a combined
capital surplus and undivided profits of at least $50,000,000, which bank or
trust company having an investment grade rating by Moody's or an equivalent
rating of the then current rating agency of the Bonds;
(v) prime commercial paper with one of the two (2) highest ratings by
Moody's or an equivalent rating of the then current rating agency of the Bonds;
and
(vi) deposits in a common trust fund holding short-term government
obligations established pursuant to law as a legal depository of public moneys,
any such common trust fund having a "Aaa" rating by Moody's or the highest long
term rating of the then current rating agency of the Bonds.
(b) The Trustee, in purchasing securities of the type described in clauses
(i) and (ii) of subsection (a) above: (i) may make any such purchase subject to
agreement with the seller for repurchase by the seller at a later date, and in
such connection may accept the seller's agreement for the payment of interest in
lieu of the right to receive the interest payable by the issuer of the security
purchased, provided that title to the security so purchased by the Trustee shall
vest in the Trustee, that the Trustee shall have a perfected security interest
in such security, and that the current market value of such security (or of cash
or additional securities of the type described in said clauses pledged with the
Trustee as collateral for the purpose) is at all times at least equal to the
total amount thereafter to become payable by the seller under said agreement, or
(ii) may purchase shares of a fund whose sole assets are of a type described in
clauses (i), (ii) and (iii) of subsection (a) above and such repurchase
agreements thereof.
(c) If any Event of Default has occurred and is continuing hereunder, the
Trustee may make such investments in Permitted Investments (as described in
Section 601(a)(i) hereof) as permitted under applicable laws as it deems
advisable; provided that in no event shall it invest in securities issued by or
obligations of, or guaranteed by, the Authority, the Borrower or any affiliate
or agent of either of the foregoing.
Section 602. Investment of Letter of Credit Account. Moneys held in the Letter
of Credit Account shall remain uninvested.
Section 603. General Provisions of Investments. (a) Any permissible investments
of money in the Bond Fund or Acquisition Fund shall be held by or under the
control of the Trustee and shall be deemed at all times as part of the fund or
account from which the investment was made and the interest accruing on any such
investment and any profit realized from such investment shall be credited to
such fund or account and any loss resulting from such investment shall be
charged to such fund or account.
(b) The Trustee shall sell and reduce to cash a sufficient portion of
investments held for the account of the Eligible Moneys Account in the Bond Fund
whenever the cash balance of Available Moneys in the Eligible Moneys Account is
insufficient to make a payment required to be made therefrom or when such cash
balance therein is insufficient to meet any Redemption of said Bonds that may be
required under the provisions hereof or of the Loan Agreement. The Trustee shall
sell and reduce to cash a sufficient portion of investments held for the account
of the Acquisition Fund whenever the cash balance in the Acquisition Fund is
insufficient to make a payment in respect of a certificate of requisition when
presented.
(c) Notwithstanding the foregoing, the Borrower shall not direct the
Trustee to invest the proceeds of the Bonds or payments due under the Loan
Agreement, or any other funds which may be deemed to be proceeds of the Bonds
pursuant to Section 103 or 148 of the Code and the applicable Regulations
thereunder, in such a way as to cause the Bonds to be treated as "arbitrage
bonds" within the meaning of Section 103 or 148 of the Code and such Treasury
Regulations issued thereunder, as applicable to the Bonds. In accordance with
the foregoing, unless the Trustee shall have been furnished with an approving
opinion of Bond Counsel, the Borrower shall not direct the Trustee to invest
moneys in the Acquisition Fund or the Bond Fund except as provided in the
Authority's Tax Certificate dated the Issue Date.
(d) The Trustee, except for its willful misconduct or gross negligence,
shall have no liability to any Person for any breach by the Borrower of
provisions of the foregoing paragraph as long as the Trustee invests or
reinvests, pursuant to directions of the Authorized Borrower Representative
properly given in accordance with Section 601, the Bond Fund and Acquisition
Fund moneys in Permitted Investments pursuant to Section 601 hereof. The Trustee
may refuse to invest in obligations directed by the Authorized Borrower
Representative which violate the provisions of Sections 601(a) and 603(c)
hereof, but the Trustee shall be under no obligation to verify any such
direction received by it in accordance with the terms of this Indenture.
ARTICLE VII
THE TRUSTEE, PAYING AGENTS
Section 701. Appointment of Trustee; Acceptance of the rusts. (a) Shawmut Bank
Connecticut, National Association, artford, Connecticut, is hereby appointed as
Trustee. The Trustee hereby accepts the trusts imposed upon it by this
Indenture, and agrees to perform said trusts, but only upon and subject to the
following express terms and conditions:
(i) The Trustee may execute any of the trusts or powers hereof and
perform any of its duties by or through attorneys or agents (provided that
neither the Authority, the Borrower or any affiliate or agent of any of the
foregoing shall act as an agent of the Trustee) and shall not be answerable for
any misconduct or negligence on the part of any attorney or agent appointed
hereunder and shall be entitled to advice of counsel concerning all matters of
the trusts hereof and the duties hereunder and may in all cases pay such
reasonable compensation to all such attorneys and agents as may reasonably be
employed in connection with the trusts hereof. The Trustee may act upon the
opinion or advice of any attorney (who may be the attorney or attorneys for the
Authority or the Borrower) approved by the Trustee in the exercise of its
reasonable judgment. The Trustee shall not be responsible for any loss or damage
resulting from any action or nonaction in good faith in reliance upon such
opinion or advice.
(ii) The Trustee shall not be responsible for any recital herein or in
the Bonds (except in respect of the Certificate of Authentication of the Trustee
endorsed on the Bonds) or for insuring the Project Facilities, or collecting any
insurance moneys, or for the validity of execution by the Authority of this
Indenture or of any supplements hereto or any instruments of further assurance,
or for the sufficiency of the security for the Bonds issued hereunder or
intended to be secured hereby, or for the value or title of the Project
Facilities or otherwise as to the maintenance of the security hereof, or, except
as provided in Article VI hereof, for the eligibility of any security as an
investment of trust funds held by it.
(iii) The Trustee shall not be accountable for the use of any Bonds
authenticated or delivered hereunder after such Bonds shall have been delivered
in accordance with the instructions of the Authority or the Borrower, as the
case may be. The Trustee may become the Owner of Bonds secured hereby with the
same rights which it would have if not Trustee.
(iv) The Trustee shall be protected in acting in good faith upon any
notice, request, investment instruction, consent, certificate, order, affidavit,
letter, telegram or other paper or document believed to be genuine and correct
and to have been signed or sent by the proper Person or Persons. Any action
taken by the Trustee pursuant to this Indenture upon the request or authority or
consent of any Person who at the time of making such request or giving such
authority or consent is the Owner of any Bond, shall be conclusive and binding
upon all future Owners of the same Bond and upon Bonds issued in exchange
therefor or in place thereof.
(v) As to the existence or nonexistence of any fact or as to the
sufficiency or validity of any instrument, paper or proceeding, the Trustee
shall be entitled, in the absence of bad faith on its part, to rely upon a
certificate of the Authority signed by
(a) the Executive Director or Deputy Director of the Authority or
an Authorized Authority Representative, or
(b) any other duly authorized Person (such authority to be
conclusively evidenced by an appropriate resolution of the Authority), or any
certificate signed by an Authorized Borrower Representative, as sufficient
evidence of the facts therein contained, and prior to the occurrence of an Event
of Default of which the Trustee has been notified in writing or deemed notified
asprovided in Section 901 hereof, shall also be at liberty to accept a similar
certificate to the effect that any particular dealing, transaction or action is
necessary or expedient, but may at its discretion secure such further evidence
deemed necessary or advisable, but shall in no case be bound to secure the same.
The Trustee may accept a certificate of the Secretary of the Authority under its
seal to the effect that a resolution in the form therein set forth has been
adopted by the Authority as conclusive evidence that such resolution has been
duly adopted, and is in full force and effect.
(vi) The permissive right of the Trustee take any actions or to
refrain from taking any actions enumerated in this Indenture shall not be
construed as a duty. The Trustee shall not be answerable for other than its
gross negligence, willful misconduct, or willful default in connection with the
acceptance or administration of the trusts hereunder. The Trustee shall act on
behalf of the Authority hereunder only insofar as its duties are expressly set
forth and shall not have implied duties. The Trustee shall not be under a duty
to inquire into or pass upon the validity, effectiveness, genuineness or value
of the Mortgage, the Loan Agreement or the other Loan Documents and shall assume
that the same are valid, effective and genuine and what they purport to be. The
Trustee may consult with legal counsel selected by it and shall be entitled to
rely upon the opinion of such counsel in taking or omitting to take any action.
The Trustee shall have the same rights and powers as any other bank or lender
and may exercise the same as though it were not the Trustee, and it may accept
deposits from, lend money to and generally engage in any kind of business with
the Borrower as though it were not the Trustee.
(vii) The Trustee shall not be personally liable for any debts
contracted or for damages to Persons or to personal property injured or damaged,
or for salaries or non-fulfillment of contracts during any period.
(viii) Subject to the provisions of the Loan Agreement, the Trustee
and its duly authorized agents, attorneys, experts, engineers, accountants and
representatives shall have the right at any and all reasonable times, fully to
inspect the Project Facilities, including all books, papers and records of the
Authority pertaining to the Project Facilities and the Bonds, and to take such
memoranda from and in regard thereto as may be desired.
(ix) The Trustee shall not be required to give any bond or surety in
respect of the execution of the said trusts and powers or otherwise in respect
to the premises.
(x) Notwithstanding anything contained elsewhere in this Indenture,
the Trustee shall have the right, but shall not be required, to demand, in
respect of the authentication of any Bonds, the withdrawal of any cash, the
release of any property, or any action whatsoever within the purview of this
Indenture, any showings, certificates, opinions, appraisals or other
information, or corporate actions or evidence thereof, in addition to that by
the terms hereof required as a condition of such action by the Trustee, deemed
desirable for the purpose of establishing the right of the Authority to the
authentication of any Bonds, the withdrawal of any cash, or the taking of any
other action by the Trustee.
(xi) Before taking any action under the Indenture the Trustee may
require that a satisfactory indemnity bond be furnished for the reimbursement of
all expenses to which it may be put and to protect it against all liability,
except liability which is adjudicated to have resulted from gross negligence,
willful misconduct or willful default by reason of any action so taken; provided
that the Trustee may not require such an indemnity bond to be furnished when the
Trustee is presenting a draft for a draw or drawing upon the Letter of Credit,
paying the principal and accrued interest due on the Bonds when due at maturity
or upon Redemption or acceleration of the Bonds in accordance with this
Indenture; provided, further, however, that while the Trustee may not require
indemnification prior to the specific acts of presenting a draft under the
Letter of Credit or paying the principal of and interest accrued on the Bonds
when due whether at maturity, Redemption, acceleration or otherwise as set forth
herein, the Trustee shall continue to be entitled to such indemnification as
otherwise provided herein.
(xii) All moneys received by the Trustee or any Paying Agent shall,
until used or applied or invested as herein provided, be held in trust in the
manner and for the purposes for which they were received.
(xiii) The Trustee shall have no obligation with respect to any
Financial Statements forwarded to the Trustee by the Borrower pursuant to
Article V of the Loan Agreement other than the obligation to make such Financial
Statements available for review by any Holder of any Bond upon receipt of a
written request to do so from any such Holder.
(b) In the case of and during the continuance of an Event of Default or
upon the occurrence of an Event of Default as to which the Trustee has received
a notice as provided herein, the Trustee shall exercise the rights and powers
vested in it by this Indenture, and use the same degree of care and skill in
their exercise, as a prudent Person would exercise or use under the
circumstances in the conduct of his own affairs.
Section 702. Fees, Charges and Expenses of Trustees and Paying Agents. The
Trustee and Paying Agent shall be entitled to payment or reimbursement for
reasonable fees for services rendered hereunder and all reasonable expenses
(including advances, counsel fees and other expenses reasonably and necessarily
made or incurred by the Trustee and Paying Agent in connection with such
services). The Trustee and Paying Agent shall be entitled to be indemnified for,
and be held harmless against, any loss, liability or expense, incurred without
gross negligence, willful misconduct or bad faith on the part of the Trustee and
Paying Agent, arising out of or in connection with the acceptance or
administration of the trusts hereunder, including the costs and expenses of
defending itself against any claim or liability in the premises. The indemnity
set forth in the Loan Agreement at Section 5.23 is hereby incorporated by
reference as if set forth herein in its entirety. All fees, charges and other
compensation to which the Trustee and Paying Agent may be entitled under the
provisions of this Indenture are required to be paid by the Borrower under the
terms of the Loan Agreement and, accordingly, except for moneys that the
Authority may derive from the foregoing, neither the Authority nor the Bank
shall be liable to indemnify the Trustee and Paying Agent for fees, charges and
other compensation to which the Trustee and Paying Agent may be entitled, and by
acceptance of the trusts hereunder the Trustee and Paying Agent shall be deemed
to have agreed to the foregoing. The Trustee is hereby granted a lien to be
perfected by possession on all moneys held by it hereunder (other than moneys
held by it in the Letter of Credit Account and Rebate Fund) for the payment of
the foregoing; provided, however, that while the Trustee may not require
indemnification prior to the specific acts of presenting a draft under the
Letter of Credit or paying the principal of and interest accrued on the Bonds
when due whether at maturity, Redemption, acceleration or otherwise as set forth
herein, the Trustee shall continue to be entitled to such indemnification as
otherwise provided herein.
Section 703. [Intentionally Omitted]
Section 704. Intervention by Trustee. In any judicial proceeding to which the
Authority is a party and which in the opinion of the Trustee and its counsel has
a substantial bearing on the interests of Holders of the Bonds, the Trustee may,
and if requested in writing by the Holders of at least twenty-five percent (25%)
of the aggregate principal amount of Bonds then Outstanding shall, intervene on
behalf of Bondholders.
Section 705. Successor Trustee. Any corporation or association into which the
Trustee may be converted or merged, or with which it may be consolidated, or to
which it may sell or transfer its trust business and assets as a whole or
substantially as a whole, or any corporation or association resulting from any
such conversion, sale, merger, consolidation or transfer to which it is a party,
provided such corporation or association is a trust company or national or state
bank within or outside the State having trust powers, in good standing, having
reported capital surplus and undivided profits of not less than $50 million ipso
facto and having a Moody's rating of at least Baa3 or P3 or be therwise
acceptable to Moody's or the then current rating agency of the Bonds, shall be
and become successor Trustee hereunder and vested with all the trusts, powers,
discretions, immunities, privileges and all other matters as was its
predecessor, without the execution or filing of any instrument or any further
act, deed or conveyance on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
Section 706. Resignation by the Trustee. The Trustee and any successor Trustee
may at any time resign by giving not less than thirty (30) days' written notice
to the Authority, the Letter of Credit Issuer and the Borrower and by first
class mail to each registered Owner of Bonds then Outstanding as shown on the
records of the Trustee. Such resignation shall take effect only upon the
appointment of a successor Trustee by the Bondholders or the Borrower. Such
notice to the Authority, the Letter of Credit Issuer and the Borrower may be
served personally or sent by registered mail or telegram. In case at any time
the Trustee shall resign and no appointment of a successor Trustee shall be made
prior to the date specified in the notice of resignation as the date when such
resignation shall take effect, the resigning Trustee may forthwith apply to a
court of competent jurisdiction for the appointment of a successor Trustee. The
Trustee shall be compensated for all costs of seeking and appointing a successor
should the Bondholders and Authority fail to so appoint a successor Trustee
within the thirty (30) day time period to do so.
Section 707. Removal of the Trustee. (a) The Trustee may be removed at any time,
by an instrument or concurrent instruments in writing delivered to the Trustee,
the Authority and the Borrower by the Letter of Credit Issuer, which after the
occurrence of an Event of Default or an Event of Default by the Letter of Credit
Issuer of its obligations under the Letter of Credit must be signed by the
Owners of fifty-one percent (51%) inaggregate principal amount of Bonds then
Outstanding.
(b) The Trustee may also be removed at any time for any breach of trust or
for acting or proceeding in violation of, or for failing to act or proceed in
accordance with, any provisions of this Indenture, by any court of competent
jurisdiction upon the application by the Authority, the Letter of Credit Issuer,
the Borrower or the Owners of fifty-one percent (51%) in aggregate principal
amount of the Bonds then Outstanding.
Section 708. Appointment of Successor Trustee by the Borrower or Bondholders.
(a) In case the Trustee hereunder shall resign, or be removed, or be dissolved,
or shall be in the course of dissolution or liquidation, or otherwise become
incapable of acting hereunder as fiduciary for Holders of the Bonds, or in case
it shall be taken under the control of any public officer or officers, or of a
receiver appointed by a court, upon the request of the Borrower or the Owners of
fifty-one percent (51%) in aggregate principal amount of Bonds Outstanding, the
Authority by an instrument executed and signed by the Executive Director, Deputy
Director or any other Authorized Authority Representative of the Authority and
attested by the Secretary or Assistant Secretary of the Authority under its seal
shall forthwith appoint a Trustee to fill such vacancy. Such appointment shall
become final upon the written acceptance of such trusts by the successor Trustee
so appointed as provided in Section 709 hereof.
(b) Every such Trustee appointed pursuant to the provisions of this Section
shall be a national banking association or a domestic bank or trust company
within or outside the State having trust powers, in good standing and having a
reported capital surplus and undivided profits of not less than $50 million ipso
facto and having a Moody's rating of at least Baa3 or P3 or be a banking
institution otherwise acceptable to Moody's or the then current rating agency of
the Bonds.
Section 709. Concerning any Successor Trustee. (a) Every successor Trustee
appointed hereunder shall execute, acknowledge and deliver to its predecessor
Trustee and to the Authority and the Borrower an instrument in writing accepting
such appointment hereunder as fiduciary for Holders of the Bonds. Thereupon such
successor, without any further act, deed or conveyance, shall become fully
vested with all the estates, properties, rights, powers, trusts, duties and
obligations of its predecessors.
(b) Every predecessor Trustee shall, on the written request of the
Authority, or of the successor Trustee, execute and deliver an instrument
transferring to such successor Trustee all the estates, properties, rights,
powers and trusts, duties and obligations of such predecessor hereunder. Every
predecessor Trustee shall deliver all securities and moneys held by it as
Trustee hereunder to its successor for direct deposit in the appropriate
successor trust accounts. Should any instrument in writing from the Authority be
required by a successor Trustee for more fully and certainly vesting in such
successor the estates, properties, rights, powers, trusts, duties and
obligations hereby vested or intended to be vested in the predecessor Trustee,
any and all such instruments in writing shall, on request, be executed,
acknowledged and delivered by the Authority. Every predecessor Trustee shall
transfer the Letter of Credit and all required documents to effectively transfer
such Letter of Credit to its successor Trustee in accordance with the provisions
of the Letter of Credit.
(c) The resignation of any Trustee and the instrument or instruments
removing any Trustee and appointing a successor hereunder, or the instrument
evidencing the transfer of the Trust Estate shall be filed and/or recorded by
the successor Trustee in each filing or recording office where this Indenture
(or a memorandum thereof) shall have been filed and/or recorded.
(d) The Borrower shall give prompt written notice to the Letter of Credit
Issuer as to the appointment of any successor Trustee hereunder.
Section 710. Trustee Protected in Relying upon Resolutions, etc. The
resolutions, opinions, certificates and other instruments provided for in this
Indenture may be accepted by the Trustee as conclusive evidence of the facts and
conclusions stated therein and shall be full warrant, protection and authority
to the Trustee for the withdrawal of cash hereunder and the taking of or
omitting to take any other action under this Indenture.
Section 711. Successor Trustee as Trustee of the Funds, Bond Registrar and
Paying Agent. Any Trustee which has resigned or been removed shall cease to be
Trustee of the Funds, Bond Registrar and Paying Agent for principal and interest
of the Bonds, and the successor Trustee shall become such Trustee, Bond
Registrar and Paying Agent. Every predecessor Trustee shall deliver to its
successor Trustee all books of account, the registration books, the list of
Bondholders and all other records, documents and instruments relating to its
duties as such custodian and Bond Registrar.
Section 712. Trustee and Authority Required to Accept Directions and Actions of
Borrower. (a) Whenever, after a reasonable request by the Borrower, the
Authority shall fail, refuse or neglect to give any direction to the Trustee or
to require the Trustee to take any other action which the Authority is required
to have the Trustee take pursuant to the provisions of the Loan Agreement or
this Indenture, the Borrower instead of the Authority may give any such
direction to the Trustee or require the Trustee to take any such action. Upon
receipt by the Trustee of a written notice from the Borrower stating that the
Borrower has made reasonable request of the Authority, and that the Authority
has failed, refused or neglected to give any direction to the Trustee or to
require the Trustee to take any such action, the Trustee is hereby irrevocably
empowered and directed, subject to other provisions of this Indenture, to accept
such direction from the Borrower as sufficient for all purposes of this
Indenture. The Borrower shall have the direct right to cause the Trustee to
comply with any of the Trustee's obligations under this Indenture to the same
extent that the Authority is empowered so to do.
(b) Certain actions or failures to act by the Authority under this
Indenture may create or result in an Event of Default under this Indenture and
the Authority hereby agrees that the Borrower may, to the extent permitted by
law, perform any and all acts or take such action as may be necessary for and on
behalf of the Authority to prevent or correct said Event of Default and the
Trustee shall take or accept such performance by the Borrower as performance by
the Authority in such event.
Section 713. Paying Agent or Agents. (a) The Trustee is hereby designated, and
by executing this Indenture agrees to act, as Paying Agent for and with respect
to the Bonds.
(b) The Authority from time to time may appoint one or more additional
Paying Agents and, in the event of the resignation or removal of any Paying
Agent, a successor Paying Agent, pursuant to the provisions hereof. Each Paying
Agent appointed shall be a national banking association or a domestic bank or
trust company within or outside the State, having trust powers, in good
standing, having a reported capital surplus and undivided profits aggregating at
least $50 million ipso facto and having a Moody's rating of Baa3 or P3 or be a
banking institution otherwise acceptable to Moody's or the then current rating
agency of the Bonds and willing and able to accept the office on reasonable and
customary terms and authorized by law to perform all the duties imposed on it by
this Indenture. Each Paying Agent shall accept in writing its appointment as a
fiduciary for Holders of the Bonds and shall hold in one or more separate trust
accounts, maintained by it in its own name, all moneys transferred to it for the
payment of principal, redemption premium, if any, and interest on the Bonds.
(c) Any Paying Agent may at any time resign and be discharged of the duties
and obligations created by the Indenture by giving at least thirty (30) days'
written notice to the Authority and the Trustee. Any Paying Agent may be removed
at any time by an instrument filed with such Paying Agent and the Trustee and
signed by the Authority. In the event of the resignation or removal of any
Paying Agent, such Paying Agent shall pay over, assign and deliver any moneys
held by it as Paying Agent to its successor, or if there be no successor, to the
Trustee.
(d) Any Paying Agent shall be entitled to payment of reimbursement for fee
charges and expenses as provided in Section 702 hereof.
Section 714. Maintenance of Records. The Trustee hereby agrees to hold all
documents, affidavits, certificates and opinions delivered to it pursuant to
Section 3.3 of the Loan Agreement for a period of at least two (2) years after
the defeasance of the Bonds and the release of all liens created under the
Indenture associated therewith. The Authority shall have the right to inspect
such documents, affidavits, certificates and opinions at the principal corporate
trust office of the Trustee at reasonable times and upon reasonable notice. The
Trustee shall be obligated to provide copies of such documents, affidavits,
certificates and opinions to the Authority at its request.
Section 715. Consent of Borrower and Letter of Credit Issuer. Whenever in this
Article VII an appointment of a successor fiduciary is to be made, such
appointment (other than an appointment by a court of competent jurisdiction
pursuant to Section 706 hereof) shall be made only with the prior written
consent of the Borrower and Letter of Credit Issuer, provided that if either
party is in default of its obligations under the Loan Agreement, the
Reimbursement Agreement or the Letter of Credit, such defaulting party's consent
shall not be required to effectuate such appointment.
ARTICLE VIII
SUPPLEMENTAL INDENTURES
Section 801. Supplemental Indentures Not Requiring Consent of Bondholders. (a)
The Authority and the Trustee may without the consent of, or notice to, any of
the Bondholders, enterinto an indenture or indentures supplemental hereto as
shall not be inconsistent with the terms and provisions hereof for any one or
more of the following purposes:
(i) To cure any ambiguity or formal defect or omission in the
Indenture;
(ii) To grant to or confer upon the Trustee, with its consent, for the
benefit of the Bondholders any additional rights, remedies, powers or authority
that may lawfully be granted to or conferred upon the Bondholders or the
Trustee;
(iii) To grant or pledge to the Trustee for the benefit of Bondholders
any additional security;
(iv) To modify, amend or supplement the Indenture or any indenture
supplemental thereto in such manner as to permit the qualification thereof under
the Trust Indenture Act of 1939 or any similar Federal statute then in effect or
to permit the qualification of the Bonds for sale under the securities laws of
any of the States of the United States, and, if they so determine, to add to the
Indenture or any indenture supplemental thereto such other terms, conditions and
provisions as may be permitted by the Trust Indenture Act of 1939 or similar
Federal statute;
(v) To add to the covenants and agreements of the Authority in this
Indenture, other covenants and agreements to be observed by the Authority;
(vi) To obtain a rating on the Bonds from Moody's or Standard &
Poor's, or any similar credit agency;
(vii) To provide for book-entry only bonds;
(viii) To make any other change which, in the judgment of the Trustee
acting in reliance upon an opinion of independent counsel, is not to the
prejudice of the Trustee or the Holders of the Bonds.
(b) The Trustee may rely upon an opinion of independent counsel as
conclusive evidence that any such Supplemental Indenture complies with the
foregoing conditions and provisions.
Section 802. Supplemental Indentures Requiring Consent of Bondholders. (a)
Exclusive of Supplemental Indentures covered by Section 801 hereof and subject
to the terms and provisions contained in this Section 802, the Holders of not
less than 66 2/3% aggregate principal amount of the Bonds then Outstanding shall
have the right, from time to time, to consent to and approve the execution by
the Authority and the Trustee of such other indenture or indentures supplemental
hereto as shall be deemed necessary and desirable by the Authority for the
purpose of modifying, altering, amending, adding to or rescinding, in any
particular, any of the terms or provisions contained herein or in any
supplemental indenture; provided that nothing contained in this Section shall
permit, or be construed as permitting without the consent of all the Holders of
Bonds Outstanding:
(i) an extension of the maturity of the principal of or the interest
on any Bond issued hereunder; or
(ii) a reduction in the principal amount of any Bond or the rate of
interest thereon or a change in the method of calculation of the rate of
interest thereon; or
(iii) a privilege, preference or priority of any Bond or Bonds over
any other Bond or Bonds (except with respect to the Letter of Credit or similar
credit instrument issued with respect to the Bonds); or
(iv) a reduction in the aggregate principal amount of the Bonds
required for consent to such supplemental indenture; or
(v) the creation of a lien upon the Trust Estate ranking prior to or
on a parity with the lien created by this Indenture.
(b) If at any time the Authority shall request the Trustee to enter into a
Supplemental Indenture for any of the purposes of this Section 802, the Trustee
shall, upon being satisfactorily indemnified with respect to expenses and unless
such notice is waived by 100% of the Bondholders, cause notice of the proposed
execution of such Supplemental Indenture to be mailed, by first class mail, to
all registered Owners of Bonds then Outstanding at their addresses as they
appear on the registration books kept by the Trustee. Such notice shall briefly
set forth the nature of the proposed Supplemental Indenture and shall state that
copies thereof are on file at the Principal Office of the Trustee for inspection
by all Bondholders.
(c) If, within such period after the mailing of thenotice required by
Section 802(b) as the Authority shall prescribe with the approval of the
Trustee, the Authority shall deliver to the Trustee an instrument or instruments
executed by the Holders of not less than 66 2/3% in aggregate principal amount
of the Bonds hen Outstanding, referring to the proposed Supplemental Indenture
as described in such notice and consenting to and approving the execution
thereof, the Trustee shall execute such Supplemental Indenture.
(d) If, within sixty (60) days or such longer period as shall be prescribed
by the Authority following the mailing of such notice, the Holders of not less
than 66 2/3% in aggregate principal amount of the Bonds Outstanding at the time
of the adoption of any such Supplemental Indenture shall have consented to and
approved the adoption thereof as herein provided, no Holder of any Bond shall
have any right to object to any of the terms and provisions contained therein,
or the operation thereof, or in any manner to question the propriety of the
adoption thereof, or to enjoin or restrain the Trustee or the Authority from
taking any action pursuant to the provisions thereof. Upon the adoption of any
such Supplemental Indenture as in this Section 802 permitted and provided, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith.
(e) The Trustee may rely upon an opinion of independent counsel as
conclusive evidence that (i) any Supplemental Indenture entered into by the
Authority and the Trustee and (ii) the evidence of requisite Bondholder consent
thereto comply with the provisions of this Section 802.
Section 803. Consent of Borrower and Bank. (a) Anything herein to the contrary
notwithstanding, no Supplemental Indenture under this Article VIII shall become
effective unless and until the Borrower shall have consented to the adoption of
such Supplemental Indenture. The Borrower shall be deemed to have consented to
the adoption of any such Supplemental Indenture if the Authority does not
receive a letter of protest or objection thereto signed by or on behalf of the
Borrower on or before 3:30 p.m., on the 30th day after the mailing of a notice
and a copy of the proposed Supplemental Indenture to the Borrower.
(b) Anything herein to the contrary notwithstand- ing, no Supplemental
Indenture as described in Sections 801 and 802 hereof shall be entered into
without the prior written consent of the Letter of Credit Issuer so long as any
Bonds are Outstanding. Section 804. Bond Counsel Opinion. As a precondition to
the execution and delivery of any Supplemental Indenture hereunder there shall
be delivered to the Authority, the Trustee, the Borrower and the Letter of
Credit Issuer an opinion of Bond Counsel stating that such Supplemental
Indenture is authorized or permitted by this Indenture and the Act, complies
with their respective terms, will be valid and binding upon the Authority in
accordance with its terms and will not adversely affect exclusion from gross
income of interest on the Bonds for Federal income tax purposes.
ARTICLE IX
DEFAULT PROVISIONS AND REMEDIES OF
TRUSTEE AND BONDHOLDERS
Section 901. Events of Default. Each of the following events is hereby defined
as and shall constitute an "Event of Default" under this Indenture:
(a) if payment of any installment of interest on any Bond is not made when
it becomes due and payable;
(b) if payment of any portion of the principal or Redemption Price on any
Bond is not made when it becomes due and payable whether at stated Redemption,
by call for Redemption other than an optional redemption pursuant to Sections
301(e), 304(b) and 304(c) hereof, acceleration or otherwise;
(c) receipt by the Trustee from the Letter of Credit Issuer of (i) a
written declaration from the Letter of Credit Issuer of the occurrence of an
"Event of Default" under the Reimbursement Agreement or (ii) notice that the
Letter of Credit Issuer has elected not to reinstate an "A Drawing" under the
Letter of Credit in accordance with the terms of the Letter of Credit, together
with a written direction from the Letter of Credit Issuer to declare an Event of
Default hereunder and under the Loan Agreement and to accelerate the Bonds;
(d) if the Letter of Credit Issuer shall wrongfully refuse to honor the
Letter of Credit; and
(e) receipt by the Trustee of written notice from the Authority of the
occurrence of an Event of Default under the Loan Agreement (but only with the
consent of the Letter of Credit Issuer as long as the Letter of Credit is in
full force and effect and the Letter of Credit Issuer is not in default in its
obliga- tions under the Letter of Credit), other than an Event of Default under
Subsection 901(a) or (b) above.
Section 902. Acceleration. (a) (i) Upon any Event of Default under Section 901
hereof (except an Event of Default under Section 901(c) which shall be treated
as set forth in 902(a)(ii) below), while the Letter of Credit is not in effect
or while the Letter of Credit Issuer is then in default of its obligations
thereunder, upon the written request of the Holders of not less than fifty-one
percent (51%) in aggregate principal amount of Bonds then Outstanding or (ii)
upon the occurrence of any Event of Default under Section 901(c), the Trustee
shall, by notice in writing delivered to the Authority, the Borrower and the
Letter of Credit Issuer, declare the principal of all Bonds then Outstanding and
the interest accrued on such Bonds to the date of the declaration of
acceleration to be due and payable, whereupon such principal and interest shall
become and be immediately due and payable and declare that interest shall cease
to accrue on the date of the declaration of acceleration.
(b) Upon the occurrence and during the continuance of any Event of Default
under Section 901 hereof, while the Letter of Credit is in effect and the Letter
of Credit Issuer is not in default of its obligations thereunder, the Trustee
shall, but only if so directed by the Letter of Credit Issuer, without any
notice to the Authority and the Borrower, declare the principal of all Bonds
then Outstanding and the interest accrued on the Bonds to the date of the
declaration of acceleration immediately due and payable, and such principal and
interest shall thereupon become and be immediately due and payable and declare
that interest shall cease to accrue on the date of the declaration of
acceleration.
(c) If all of the Bonds Outstanding shall become so immediately due and
payable pursuant to Sections 902(a) or 902(b)hereof, the Trustee shall, as soon
as practicable, declare by written notice to the Borrower all unpaid
installments payable by the Borrower under Section 4.2 of the Loan Agreement to
be immediately due and payable. Upon any acceleration of the Bonds, the Trustee
shall immediately draw under the Letter of Credit in accordance with Section 404
hereof and make payment to the Bondholders of principal of all Bonds then
Outstanding and interest accrued on such Bonds to the date of declaration of
acceleration.
(d) Upon receipt by the Trustee of payment of the full amount drawn on the
Letter of Credit and provided sufficient moneys are available in the Bond Fund
to pay sums due on the Bonds, the Letter of Credit Issuer shall be subrogated to
the right, title and interest of the Trustee and Bondholders in and to the Trust
Estate and any other security held by the Trustee for payment of the Bonds and
the Trustee shall be required to execute such documents as the Bank may
reasonably request to evidence such subrogation.
(e) If, after the principal of the Bonds has been so declared to be due and
payable (other than by reason of or in connection with an Event of Default under
Section 901(c) unless and until the Letter of Credit Issuer shall have withdrawn
in writing its notice specified in such Section and has given written notice of
reinstatement of the Letter of Credit in full):
(i) the Authority pays or causes to be paid all arrears of interest
and interest on overdue installments of interest (if lawful) at the rate or
rates per annum borne by the Bonds and the principal and premium, if any, on all
the Bonds then Outstanding which shall have become due and payable otherwise
than by acceleration;
(ii) the Authority pays or causes to be paid all other sums payable
under this Indenture, except the principal of and interest on the Bonds which by
such declaration shall have become due and payable, upon the Bonds;
(iii) the Authority also performs all other things in respect to which
it may have been in default hereunder and pays the reasonable charges of the
Trustee, the Bondholders and any trustee appointed under law, including the
Trustee's reasonable attorneys' fees; and
(iv) no Event of Default under this Indenture or the Agreement is then
continuing;
then, in every such case, the Trustee shall annul such declaration and its
consequences (but if the Letter of Credit has been drawn on in connection with
such acceleration, only if the Trustee has received written notice from the
Letter of Credit Issuer that the Letter of Credit has been fully reinstated),
and such annulment shall be binding upon all Holders of Bonds issued hereunder.
No such annulment shall extend to or affect any subsequent Event of Default or
impair any right or remedy consequent thereon. The Trustee shall forward a copy
of any such annulment notice pursuant to this paragraph to the Authority, the
Borrower, the Paying Agent and the Letter of Credit Issuer.
Section 903. Preservation of Security. Subject to the provisions of Sections
905, 912 and 914 hereof, upon the occurrence and during the continuance of any
Event of Default, the Trustee may, and upon the written request of the Holders
of not less than fifty-one percent (51%) in aggregate principal amount of the
Bonds then Outstanding, and provided the Trustee is furnished with security and
indemnity satisfactory to it, shall institute and maintain such suits and
proceedings as it may be advised by counsel shall be necessary or expedient to
prevent any impairment of the Security under this Indenture by any acts which
may be unlawful or in violation of this Indenture and such suits and proceedings
as the Trustee may be advised shall be necessary or expedient to preserve or
protect its interests and the interests of the Bondholders and the Letter of
Credit Issuer.
Section 904. Other Remedies. (a) Subject to Sections 905 and 914 hereof, upon
the occurrence and during the continuance of any Event of Default the Trustee
may, as an alternative, proceed to pursue any available remedy to enforce the
payment of the principal of, redemption premium, if any, and interest on the
Bonds then Outstanding, including, without limitation, an action or writ of
mandamus.
(b) Subject to Sections 905 and 914 hereof, upon the occurrence and during
the continuance of any Event of Default, then and in every case the Trustee may
proceed, and upon the written request of the Holders of not less than fifty-one
percent (51%) in aggregate principal amount of the Bonds then Outstanding shall
proceed, to protect and enforce its rights, the rights of the Bondholders under
the Act and under the Indenture and the rights of the Letter of Credit Issuer
forthwith by such suits, actions or special proceedings in equity or at law, or
by proceedings in the office of any board or officer having jurisdiction
(provided the Trustee is furnished with security and indemnity satisfactory to
it), whether for the specific performance of any covenant or agreement contained
in this Indenture or the Agreement or in aid of the execution of any power
granted herein or in the Agreement, or in the Act or for the enforcement of any
legal or equitable right or remedy, as the Trustee, being advised by counsel,
shall deem most effectual to protect and enforce such rights or to perform any
of its duties under this Indenture.
(c) If an Event of Default shall have occurred and be continuing, and if
requested to do so by the Holders of not less than fifty-one percent (51%) in
aggregate principal amount of the Bonds then Outstanding or the Letter of Credit
Issuer, as applicable, pursuant to Section 905 and indemnified as provided in
Section 903 hereof, the Trustee shall be obligated to exercise such one or more
of the rights and powers conferred by this Section and by Sections 903 and 906
hereof as the Trustee, being advised by counsel, shall deem most expedient and
in the interest of the Bondholders.
(d) No remedy by the terms of this Indenture conferred upon or reserved to
the Trustee (or to the Bondholders) is intended to be exclusive of any other
remedy, but each and every such remedy shall be cumulative and shall be in
addition to any other remedy given to the Trustee, the Letter of Credit Issuer
or to the Bondholders hereunder or now or hereafter existing by law.
(e) No waiver of any Event of Default hereunder, whether by the Trustee,
the Letter of Credit Issuer or by the Bondholders, shall extend to or shall
affect any subsequent Event of Default or shall impair any rights or remedies
consequent thereon.
Under no circumstances shall the Trustee be required to resort to any other
remedy prior to drawing under the Letter of Credit.
Section 905. Right of Letter of Credit Issuer or Bondholders to Direct
Proceedings. Anything in this Indenture to the contrary notwithstanding,
following an acceleration of the payment of the Bonds as provided in Section 902
hereof, the Letter of Credit Issuer (so long as the Letter of Credit is in
effect and not wrongfully dishonored) or, upon the termination of the Letter of
Credit or a default by the Letter of Credit Issuer thereunder, the Holders of at
least fifty-one percent (51%) in aggregate principal amount of Bonds then
Outstanding shall have the right, at any time, by an instrument or instruments
in writing executed and delivered to the Trustee, to direct the method and place
of conducting all proceedings to be taken in connection with the enforcement of
the terms and conditions of this Indenture or for the appointment of a receiver
or any other proceedings hereunder provided that such direction shall not be
otherwise than in accordance with the provisions of law or of this Indenture;
and further provided that the Trustee shall be indemnified to its satisfaction
pursuant to Section 903 hereof; provided, further, however, that while the
Trustee may not require indemnification prior to the specific acts of presenting
a draft under the Letter of Credit or paying the principal of and interest
accrued on the Bonds when due whether at maturity, Redemption, acceleration or
otherwise as set forth herein, the Trustee shall continue to be entitled to such
indemnification as otherwise provided herein.
Section 906. Appointment of Receiver. Upon the occurrence and during the
continuance of an Event of Default, and upon the filing of a suit or other
commencement of judicial proceedings to enforce the rights of the Trustee, the
Letter of Credit Issuer and/or of the Bondholders, the Trustee shall be
entitled, as a matter of right, to the appointment of a receiver or receivers of
the Trust Estate and the payments derived from the Agreement, together with such
other powers as the court making such appointments shall confer.
Section 907. Application of Moneys. (a) All moneys received by the Trustee
pursuant to any right given or action taken under the provisions of this Article
IX (except moneys derived from a draw under the Letter of Credit) shall be
applied first to the payment of the reasonable costs and expenses of the
proceedings, including reasonable attorneys' fees, resulting in the collection
of such moneys and of the expenses, liabilities and advances incurred or made by
the Trustee hereunder, including reasonable attorneys' fees, except as a result
of its gross negligence, willful misconduct or bad faith. The balance of such
moneys, after providing for the foregoing, shall be deposited by the Trustee in
the Eligible Moneys Account in the Bond Fund and all moneys in the Bond Fund
shall be applied as follows:
(i) Unless the principal of all the Bonds shall have become or shall
have been declared due and payable, all such moneys shall be applied:
First - To the payment to the Holders of the Bonds entitled
thereto of all installments of interest then due on the Bonds, in order of
maturity of the installments of such interest and, if the amount available shall
not be sufficient to pay in full any particular installment, then to the amounts
due on such installment, to the Holders entitled thereto, ratably, without any
discrimination or preference;
Second - To the payment to the Holders of the Bonds entitled
thereto of the unpaid principal or Redemption Price of any of the Bonds which
shall have become due (other than Bonds called for Redemption for the payment of
which moneys are held pursuant to the provisions of this Indenture), in order of
their due dates, and to the payment of interest on such Bonds from the
respective dates upon which they became due. If the amount available shall not
be sufficient to pay in full Bonds due on any particular date, together with
such interest, then to the payment ratably, according to the amount of principal
and redemption premium, if any, due on such date, to the Persons entitled
thereto without any discrimination or preference; and
Third - To the payment of the principal or Redemption Price of
and interest on the Bonds as the same become due and payable.
(ii) If the principal of all Bonds shall have become due or shall have
been declared due and payable, all such moneys applied to the payment of the
principal of, redemption premium, if any, and interest then due and unpaid on
the Bonds, without preference or priority of principal over interest or of
interest over principal, or of any installment of interest over any other
installment of interest, or of any Bond over any other Bond, ratably, according
to the amounts due respectively for principal, redemption premium, if any, and
interest, to the Holders of Bonds entitled thereto without any discrimination or
preference.
(iii) If the principal of all the Bonds shall have been declared due
and payable, and if such declaration shall thereafter have been rescinded and
annulled under the provisions of this Article IX then, subject to the provisions
of paragraph (ii) of this Section 907(a) in the event that the principal of all
the Bonds shall later become due or be declared due and payable, the moneys
shall be applied in accordance with the provisions of paragraph (i) of this
Section 907(a).
(b) Whenever moneys are to be applied pursuant to the provisions of this
Section 907, such moneys shall be applied at such times, and from time to time,
as the Trustee shall determine, having due regard for the amount of such moneys
available for application and the likelihood of additional moneys becoming
available for such application in the future. Whenever the Trustee shall apply
such funds, it shall fix the date (which shall be an Interest Payment Date
unless another date shall be deemed more suitable) upon which such application
is to be made and upon such date interest on the amounts of principal to be paid
on such dates shall cease to accrue, except if the Bonds were immediately due
and payable by acceleration then the interest on such principal amounts to be
paid shall have ceased to accrue on the date of the declaration of acceleration
and the date fixed for payment shall be as near as possible to the date of the
declaration of acceleration. The Trustee shall give such notice as it may deem
appropriate of the deposit with it of any such moneys and of the fixing of any
such date, and shall not be required to make payment to the Holder of any Bond
until such Bond shall be presented to the Trustee for appropriate endorsement or
for cancellation if fully paid.
(c) Whenever all Bonds and interest thereon have been paid under the
provisions of this Section 907 and all expenses and charges of the Trustee have
been paid, any balance remaining in the Bond Fund and Letter of Credit Account
shall be paid, first to the Letter of Credit Issuer as provided in Section 412
hereof and then to the Borrower.
Section 908. Remedies Vested in Trustee. All rights of action (including the
right to file proof of claims) under the Indenture or under any of the Bonds may
be enforced by the Trustee without the possession of any of the Bonds or the
production thereof in any trial or other proceedings relating thereto and any
such suit or proceedings instituted by the Trustee shall be brought in its name
as Trustee without the necessity of joining as plaintiffs or defendants any
Holders of the Bonds. Subject to the provisions of Section 907 hereof, any
recovery of judgment shall be for the equal and ratable benefit of the Holders
of the Outstanding Bonds in respect of which such proceedings shall be brought.
Section 909. Rights and Remedies of Bondholders. (a) No Holder of any Bond shall
have any right to institute any suit, action or proceeding for the enforcement
of any covenant or provision of the Indenture or for the appointment of a
receiver or any other remedy hereunder, unless:
(i) an event of default has occurred of which the Trustee has been
notified or is deemed to have notice as provided in this Article IX;
(ii) such event of default shall have become an Event of Default;
(iii) the Holders of at least fifty-one percent (51%) in aggregate
principal amount of Bonds then Outstanding shall have made written request to
the Trustee, shall have offered reasonable opportunity either to proceed to
exercise the powers hereinbefore granted or to institute such action, suit or
proceeding in the Trustee's name and shall have offered to the Trustee indemnity
satisfactory to the Trustee, as provided in Section 903 hereof; and
(iv) the Trustee shall thereafter have failed or refused to exercise
the powers hereinbefore granted, or to institute such action, suit or proceeding
in its own name.
Such notification, request and offer of indemnity are hereby declared in every
case at the option of the Trustee to be conditions precedent to the execution of
the powers and trusts of this Indenture, and to any action or cause of action
for the enforcement of this Indenture, or for the appointment of a receiver or
for any other remedy hereunder, it being understood and intended that no one or
more Holders of the Bonds shall have any right in any manner whatsoever to
enforce any right hereunder except in the manner herein provided, and that all
proceedings shall be instituted, had and maintained in the manner herein
provided and for the equal and ratable benefit of the Holders of all Bonds then
Outstanding. The provisions of this Section 909 shall no longer be of any effect
after all of the right, title and interest of the Bondholders under this
Indenture shall have been subrogated to the Letter of Credit Issuer, pursuant to
Section 902(d) hereof.
(b) Nothing contained in the Indenture shall affect or impair any right of
enforcement conferred on any Bondholder by law, including the Act, or the right
of any Bondholder to enforce the payment of the principal of, redemption
premium, if any, and interest on any Bond at and after the maturity thereof, or
the obligation of the Authority to pay the principal of, redemption premium, if
any, and interest on each of the Bonds issued hereunder to the respective
Holders thereof at the time, place, from the source and in the manner as
provided herein and in the Bonds.
Section 910. Termination of Proceedings. In case the Trustee shall have
proceeded to enforce any right hereunder by the appointment of a receiver or
otherwise, and such proceedings shall have been discontinued or abandoned for
any reason, or shall have been determined adversely, then and in every such case
the Authority, the Letter of Credit Issuer and the Trustee shall be restored to
their former positions and rights hereunder and all rights, remedies and powers
of the Trustee shall continue as if no such proceedings had been taken.
Section 911. Waivers and Non-Waiver of Events of Default. Subject to the
provisions of Section 914 hereof, (a) to the extent not precluded by the Act,
the Trustee may in its discretion waive any Event of Default hereunder (other
than an Event of Default under Section 901(c)) and its consequences and rescind
any declaration of acceleration of maturity of principal, and shall waive any
Event of Default hereunder and its consequences upon the written request of the
Holders of not less than fifty-one percent (51%) in aggregate principal amount
of all the Bonds then Outstanding; provided that an Event of Default under
Section 901(c) hereof may only be waived if the Letter of Credit Issuer
withdraws in writing its notice specified in Section 901(c); provided, further
that an Event of Default under Section 901(c) hereof may only be waived if the
Trustee has received written notice from the Letter of Credit Issuer that the
Letter of Credit has been fully reinstated; provided, further that there shall
not be waived any Event of Default unless prior to such waiver or rescission,
all arrears of interest and payment of principal when due, as the case may be,
together with interest (to the extent permitted by law) on overdue principal and
interest, at the applicable rate of interest borne by the Bonds, and all
expenses of the Trustee in connection with such Event of Default shall have been
paid or provided for. In case of any such waiver or rescission, or in case any
proceeding taken by the Trustee on account of any such Event of Default shall
have been discontinued or abandoned or determined adversely, then and in every
such case the Authority, the Trustee, the Bondholders and the Letter of Credit
Issuer shall be restored to their former positions and rights hereunder
respectively. No such waiver or rescission shall extend to any subsequent or
other Event of Default, or impair any right consequent thereon.
(b) No delay or omission of the Trustee or of any Holder of the Bonds to
exercise any right or power accruing upon any Event of Default shall impair any
such right or power or shall be construed to be a waiver of any such Event of
Default or an acquiescence therein. Every power and remedy given by this Article
IX to the Trustee, the Letter of Credit Issuer and the Holders of the Bonds,
respectively, may be exercised from time to time and as often as may be deemed
expedient.
(c) The Trustee may waive any Event of Default, other than an Event of
Default under Section 901(c) hereof, which in its opinion shall have been
remedied before the entry of final judgment or decree in any suit, action or
proceeding instituted by it under the provisions of this Indenture or the
Agreement, or before the completion of the enforcement of any other remedy under
this Indenture or the Agreement.
Section 912. Notice of Defaults. (a) Within ninety (90) days after (i) the
receipt of notice of an Event of Default as provided in Section 901 hereof or
(ii) the occurrence of an Event of Default under 901(a) or (b), the Trustee
shall, unless such Event of Default shall have theretofore been cured, give
written notice thereof by certified or registered first class mail to each Owner
of Bonds then Outstanding, provided that, except in the case of a default in the
payment of the principal or Redemption Price of or interest on any of the Bonds,
the Trustee may withhold such notice if, in its sole judgment, it determines
that the withholding of such notice is in the best interests of the Bondholders.
(b) The Trustee shall, as soon as practicable, notify the Authority, the
Letter of Credit Issuer and the Borrower of any Event of Default known to the
Trustee.
Section 913. Waiver of Redemption Rights. Upon the occurrence and continuance of
an Event of Default, to the extent that such rights may then lawfully be waived,
neither the Authority, nor anyone claiming through or under it, shall set up,
claim, or seek to take advantage of any appraisement, valuation, stay, extension
or Redemption laws now or hereafter in force, in order to prevent or hinder the
enforcement of this Indenture or a foreclosure under this Indenture. The
Authority, for itself and all who may claim through or under it, hereby waives,
on or after the date of foreclosure, to the extent that it lawfully may do so,
the benefit of all such laws and all rights of appraisement and Redemption to
which it may be entitled under the laws of the State of New Jersey.
Section 914. Rights of Bank Regarding Collateral. So long as the Letter of
Credit is in effect and the Letter of Credit Issuer is making all required
payments with respect to the Bonds in accordance with the terms of the Letter of
Credit, the right of the Trustee hereunder to grant consents, grant waivers,
direct proceedings, pursue remedies and otherwise exercise any rights under this
Indenture with respect to the Collateral shall be exercised by the Letter of
Credit Issuer acting alone and the Trustee will execute any documents and take
or refrain from taking all actions which the Trustee is required or entitled to
execute or take or refrain from taking hereunder in accordance with the written
request and instructions of the Letter of Credit Issuer provided that the Letter
of Credit Issuer shall pay or agree to pay (subject to the Letter of Credit
Issuer's right to reimbursement under the Reimbursement Agreement) any and all
costs and expenses incurred or to be incurred in connection therewith.
ARTICLE X
AMENDMENT OF LOAN AGREEMENT
Section 1001. Amendments to Loan Agreement Not Requiring Consent of Bondholders.
Except for the amendments as provided in Section 1002 hereof, the Authority and
the Trustee may, with the consent of the Letter of Credit Issuer but without the
consent of or notice to the Bondholders, consent to any amendment of the Loan
Agreement including those which may be required (i) by the provisions of the
Loan Agreement or the Indenture, (ii) for the purpose of curing any ambiguity or
formal defect or omission, (iii) to grant or pledge to the Trustee for the
benefit of the Bondholders any additional security, or (iv) in connection with
any other change therein which, in the judgment of the Trustee acting in
reliance upon an opinion of independent counsel, does not materially and
adversely affect the rights of the Holders of the Bonds. Nothing in this Section
contained shall permit, or be construed as permitting, any reduction in the
payments required to be paid under the Loan Agreement without the consent of all
Holders of the Outstanding Bonds and the Letter of Credit Issuer.
Section 1002. Amendments to Loan Agreement Requiring Consent of Bondholders. Any
reduction in the payments required to be paid under the Loan Agreement shall not
be permitted without the publication of notice and the consent of all Holders of
the Outstanding Bonds and the Letter of Credit Issuer. Such consent shall be
given and procured as provided in Section 802 hereof.
ARTICLE XI
DISCHARGE OF LIEN
Section 1101. Defeasance of Bonds. (a) If the Authority shall pay or cause to be
paid to all the Holders of any Outstanding Bonds the principal of, redemption
premium, if any, and interest to become due thereon at the times and in the
manner stipulated therein and herein with Available Moneys, and if the Authority
shall keep, perform and observe all and singular the covenants and promises in
the Bonds so paid and in this Indenture expressed as to be kept, performed and
observed by it or on its part, then such Bonds shall cease to be subject to the
Lien of this Indenture and the rights hereby granted shall cease, determine and
be void, whereupon the Trustee shall cancel and discharge this Indenture;
provided that the Trustee's obligation to pay to the Holders of the Outstanding
Bonds the principal of, redemption premium, if any, and interest to become due
thereon shall survive the cancellation and discharge of this Indenture; and
provided further that in the event there has been a drawing under the Letter of
Credit for which the Letter of Credit Issuer has not been fully reimbursed
pursuant to the Reimbursement Agreement or any other obligations are then due
and owing to the Letter of Credit Issuer under the Reimbursement Agreement, and
upon written instructions from the Letter of Credit Issuer, the Trustee shall
assign and turn over to the Letter of Credit Issuer, as subrogee or otherwise,
all of the Trustee's right, title and interest under this Indenture, all
balances held hereunder not required for the payment of the Bonds and such other
sums and the Trustee's right, title and interest in, to and under the Loan
Agreement. In such event the Trustee shall execute and deliver to the Authority
such instruments in writing as shall be requisite to cancel the Lien hereof and
shall assign and deliver to the Authority any property at the time subject to
the Indenture which may then be in its possession, except amounts required to be
paid to the Borrower under Section 413 hereof, which shall be assigned and
delivered to the Borrower, and except cash or securities held by the Trustee for
the payment of the principal of, redemption premium, if any, and interest on the
Bonds. The Authority and the Borrower shall have no right to draw under the
Letter of Credit for the payment of Bonds pursuant to this Section 1101.
(b) Any Bond shall be deemed to be paid within the meaning of this Article
and for all purposes of this Indenture when (i) payment of the principal of and
redemption premium, if any, on such Bond, plus interest thereon to the due date
thereof (whether such due date is by reason of maturity or upon redemption as
provided herein) shall have been made or caused to be made in accordance with
the terms thereof with Available Moneys, or shall have been made or caused to be
made by irrevocably depositing in the Eligible Moneys Account of the Bond Fund
other moneys of the Borrower, in the form of cash and/or obligations described
in Section 601(a)(i) hereof of the United States of America, maturing as to
principal and interest in such amounts and at such times as will ensure the
availability of sufficient moneys to make such payment, and (ii) all necessary
and proper fees, compensation and expenses, including legal fees of the Trustee,
the Registrar, and the Paying Agent pertaining to the Bonds with respect to
which such deposit is made shall have been paid or the payment thereof provided
for to the satisfaction of the Trustee. At such times as a Bond shall be deemed
to be paid hereunder, as aforesaid, such Bond shall no longer be secured by or
subject to the lien of this Indenture, except for the purposes of any such
payment from cash or such moneys or obligations described in Section 601(a)(i)
hereof of the United States of America and shall be canceled pursuant to Section
210 hereof.
(c) Notwithstanding the foregoing subparagraph (b) hereinabove, no deposit
thereunder shall be deemed a payment of the Bonds unless and until (i) proper
notice of Redemption shall have been given in accordance with Article III of
this Indenture or, in the event that the Bonds are not by their terms subject to
Redemption within the next succeeding sixty (60) days, until the Borrower shall
have given the Trustee, on behalf of the Authority, irrevocable instructions to
notify the Owners of the Bonds, in accordance with Article III of this
Indenture, that the deposit required by Section 1101(b) hereof has been made and
that said Bonds are deemed to have been paid in accordance with the provisions
hereof and stating the maturity or redemption date upon which the moneys are to
be available for the payment of the principal of and the applicable redemption
premium, if any, on said Bonds plus interest thereon to the due date thereof or
the maturity date of such Bonds; (ii) a certificate from a nationally recognized
accounting firm, acceptable to Moody's, verifying that the Available Moneys (but
not including investment earnings thereon) deposited with the Trustee shall have
been sufficient to pay when due the principal of, redemption premium, if any and
interest (iii) legal opinion of Bond Counsel to the effect that the Bonds have
been paid in accordance with the terms of this Indenture (such opinion being
given in reliance on the verification report identified in (ii) above); and (iv)
an opinion, acceptable to Moody's, of nationally recognized counsel experienced
in bankruptcy matters stating the application of such Available Moneys or other
moneys of the Borrower will not constitute a voidable preference in the event of
an occurrence of an Act of Bankruptcy.
(d) The payment of principal of, redemption premium, if any, and interest
due thereon shall be made at the Principal Office of the Trustee upon surrender
of the Bonds for cancellation.
(e) The Trustee shall provide written notice to the Authority upon the
maturity or defeasance of all of the Bonds Outstanding.
ARTICLE XII
MISCELLANEOUS
Section 1201. Consent of Bondholders. (a) Any consent, request, direction,
approval, objection or other instrument required by this Indenture to be signed
and executed by the Bondholders may be in any number of writings of similar
tenor and may be signed or executed by such Bondholders in person or by agents
appointed in writing and may, but shall not be required to, be obtained at a
meeting of Bondholders called in such manner as the Trustee shall specify. Proof
of the execution of any such consent, request, direction, approval, objection or
other instrument or of the writing appointing any such agent and of the
ownership of Bonds, if made in the following manner, shall be sufficient for any
of the purposes of this Indenture, and may be conclusively relied on by the
Trustee with regard to any action taken thereunder:
(i) The fact and date of the execution by any Person of any such
writing may be proved by the certificate of any officer in any jurisdiction who
by law has power to take acknowledgments within such jurisdiction that the
Person signing such writing acknowledged before him the execution thereof, or by
an affidavit of any witness to such execution. The authority of the Person or
Persons executing any such instrument on behalf of a corporate Bondholder may be
established without further proof if such instrument is signed by a Person
purporting to be the president or a vice-president of such corporation with a
corporate seal affixed and attested by a Person purporting to be its secretary
or an assistant secretary.
(ii) The ownership of Bonds and the amount, number and other
identification, and the date of holding shall be determined by reference to the
books of registration maintained by the Trustee as Bond Registrar.
(b) For all purposes of the Indenture and of the proceedings for the
enforcement hereof, such Person shall be deemed to continue to be the Holder of
such Bond.
(c) Any request, consent or vote of the Owner of any Bond shall bind all
future Owners of such Bond with respect to anything done or suffered to be done
or omitted to be done by the Authority or the Trustee in accordance therewith,
unless and until such request, consent or vote is revoked by the filing with the
Trustee of a writing, signed and executed by the Owner of the Bond, covenants,
conditions and provisions herein contained. The Indenture and all of the
covenants, conditions and provisions thereof are intended to be and are for the
sole and exclusive benefit of such Persons.
Section 1203. Limitation on Liability of Members of Authority. No covenant,
condition or agreement contained herein shall be deemed to be a covenant,
agreement or obligation of a present or future member of the Authority or any
officer, employee or agent of the Authority in his or her individual capacity,
and neither the Authority nor any officer thereof executing the Bonds shall be
liable personally on the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof. No member, officer, employee
or agent of the Authority shall incur any personal liability with respect to any
other action taken by him or her pursuant to this Indenture or the Act, provided
such member, officer, employee or agent acts in good faith.
Section 1204. Severability. (a) If any of the provisions of this Indenture shall
be held or deemed to be or shall, in fact, be inoperative or unenforceable as
applied in any particular case in any jurisdiction or jurisdictions or in all
jurisdictions, or in all cases, because it conflicts with any other provision or
provisions hereof or any constitution or statute or rule of public policy, or
for any other reason, such circumstances shall not have the effect of rendering
the provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions therein
contained invalid, inoperative or unenforceable to any extent whatever.
(b) The invalidity of any one or more phrases, sentences, clauses or
Sections in this Indenture shall not affect the remaining portions hereof.
Section 1205. Notices. All notices, certificates, requests, complaints, demands
or other communications hereunder shall be in writing unless otherwise specified
herein and shall be deemed sufficiently given when sent by telegram, telex or
registered mail, postage prepaid, return receipt requested, or first class mail
unless registered or certified mail is specified herein addressed as follows:
(a)
(b)
(c)
(d)
If to the Authority
New Jersey Economic Development Authority
200 South Warren Street
Capital Place One
Trenton, New Jersey 08625
Attention: Executive Director
with a copy to
Wilentz, Goldman & Spitzer, P.A.
90 Woodbridge Center Drive
Woodbridge, New Jersey 07095
Attention: Anthony J. Pannella, Jr., Esq./Cheryl J.
Oberdorf, Esq.
If to the Trustee
Shawmut Bank Connecticut, National Association
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
If to the Borrower:
Burlington Coat Factory Warehouse of New Jersey, Inc.
1830 Route 130
Burlington, New Jersey 08016
Attention: Chief Accounting Officer
with a copy of such notice to
Paul C. Tang, Esq., General Counsel,
at the above address
If to the Letter of Credit Issuer
First Fidelity Bank, N.A.
123 South Broad Street
Philadelphia, Pennsylvania 19109
Attention: Stephen H. Clark, Vice President
with a copy to:
Pepper, Hamilton & Scheetz
3000 Two Logan Square
18th and Arch Streets
Philadelphia, Pennsylvania 19103
The Authority and the Trustee may by notice given hereunder to the other, the
Borrower and the Letter of Credit Issuer designate any further or different
addresses to which subsequent notices, certificates, requests, complaints,
demands or other communications hereunder shall be sent. All notices required to
be sent by the Trustee, the Authority, the Borrower, the Bondholders or the
Placement Agent shall also be sent to the Letter of Credit Issuer, provided
failure to so notify the Letter of Credit Issuer shall not negate the effect of
such notice.
Section 1206. Notice to Moody's. As long as the Bonds are rated by Moody's, the
Trustee shall provide prior written notice in the manner provided in Section
1205 hereof to Moody's upon the occurrence of (i) the execution of any
amendment, modification or supplement to the Loan Agreement pursuant to Article
X hereof; (ii) the execution of a Supplemental Indenture pursuant to Article
VIII of the Indenture; (iii) any expiration, termination, revocation or
extension of the Letter of Credit; (iv) any change in a Trustee or Paying Agent;
(v) any material amendments, supplements or modification of the provisions of
the Letter of Credit; and (vi) when all Bonds have been paid or deemed to have
been paid pursuant to the terms of this Indenture.
Section 1207. Counterparts. This Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
Section 1208. Table of Contents and Section Headings Not Controlling. The table
of contents and the headings of the several sections of this Indenture have been
prepared for convenience of reference only and shall not control, affect the
meaning of, or be taken as an interpretation of any provision of this Indenture.
Section 1209. Governing Law. This Indenture and each Bond shall be deemed to be
a contract made under the laws of the State of New Jersey and for all purposes
shall be construed in accordance with the laws of said State of New Jersey.
Section 1210. Third Party Beneficiary. So long as the Initial Letter of Credit
Issuer honors its obligations under the Letter of Credit, the parties hereto
acknowledge that the Initial Letter of Credit Issuer is a third party
beneficiary hereunder.
IN WITNESS WHEREOF, the NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY has caused
this Indenture to be executed by one of its officers thereunto duly authorized,
its corporate seal to be hereunto affixed, and the same to be attested by one of
its officers duly authorized, and Shawmut Bank Connecticut, National Association
has caused this Indenture to be executed by one of its officers thereunto duly
authorized, and its corporate seal to be hereunto affixed, all as of the day and
year first above written.
[SEAL]
ATTEST:
FRANK T. MANCINI, JR.,
Assistant Secretary
ATTEST:
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
By:
CAREN S. FRANZINI
Executive Director
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
as Trustee
By:
SUSAN C. MERKER
Assistant Vice President
NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY
ECONOMIC DEVELOPMENT REFUNDING BONDS
(BURLINGTON COAT FACTORY WAREHOUSE
OF NEW JERSEY, INC. - 1995 Project)
No. EDRB-_
MATURITY DATE:
DATED DATE: August 1, 1995
AUTHENTICATION DATE:
CUSIP:
INTEREST RATE:
REGISTERED OWNER:
PRINCIPAL SUM: ___________________ Dollars ($ )
THE NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY (the "Authority"), a body politic
and corporate and a public instrumentality of the State of New Jersey (the
"State") and duly existing under the Constitution and laws of the State,
including the New Jersey Economic Development Authority Act (the "Act"), for
value received hereby promises to pay, (but solely from the sources described in
this Bond), to the REGISTERED OWNER identified above, or registered assigns, the
PRINCIPAL SUM, on the MATURITY DATE or on the date fixed for Redemption, as the
case may be, together with INTEREST on the PRINCIPAL SUM from the DATED DATE,
until the Authority's obligations with respect to the payments of such PRINCIPAL
SUM shall be discharged, at the INTEREST RATE per annum stated above
semiannually on the first days of March and September, commencing March 1, 1996.
This Bond (as hereinafter defined) shall be payable as to principal or
Redemption Price when due, upon presentation and surrender thereof, at the
principal corporate trust office of Shawmut Bank Connecticut, National
Association, Hartford, Connecticut, as Trustee, Bond Registrar and Paying Agent
(the "Trustee"), or at the duly designated office of any duly appointed
alternate or successor thereto. The interest on this Bond will be payable by
check or bank draft and will be mailed to the Person in whose name each Bond is
registered which appears on the registration books of the Authority held by the
Trustee as determined as of the close of business on the fifteenth day (whether
or not a Business Day) of February and August (the "Record Date"). Upon request,
any Holder of at least one million dollars ($1,000,000) of Bonds shall be
entitled to receive interest payments from the Trustee by wire transfer. Payment
of the principal or Redemption Price of and interest on this Bond shall be made
in any coin or currency of the United States of America which at the time of
payment is legal tender for the payment of public and private debts.
THE STATE OF NEW JERSEY IS NOT OBLIGATED TO PAY, AND NEITHER THE FAITH AND
CREDIT NOR TAXING POWER OF THE STATE OF NEW JERSEY IS PLEDGED TO THE PAYMENT OF
THE PRINCIPAL OR REDEMPTION PRICE OF, IF ANY, OR INTEREST ON THE BONDS. THE
BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE NEW JERSEY ECONOMIC DEVELOPMENT
AUTHORITY (THE "AUTHORITY"), PAYABLE SOLELY OUT OF THE REVENUES OR OTHER
RECEIPTS, FUNDS OR MONEYS OF THE AUTHORITY PLEDGED UNDER THE INDENTURE (AS
HEREAFTER DEFINED) AND FROM ANY AMOUNTS OTHERWISE AVAILABLE UNDER THE INDENTURE
FOR THE PAYMENT OF THE BONDS. THE BONDS DO NOT NOW AND SHALL NEVER CONSTITUTE A
CHARGE AGAINST THE GENERAL CREDIT OF THE AUTHORITY. THE AUTHORITY HAS NO TAXING
POWER.
No recourse shall be had for the payment of the principal or Redemption Price of
or interest on this Bond or for any claim based hereon or on the Indenture,
against any member, officer or employee, past, present or future of the
Authority or of any successor body, as such, either directly or through the
Authority or any successor body, under any constitutional provision, statute,
rule of law, or by the enforcement of any assessment thereof by any legal or
equitable proceedings or otherwise.
Reference is made to the further provisions of this Bond set forth on the
reverse side of this Bond; such provisions shall for all purposes have the same
effect as if set forth at this place.
It is hereby certified and recited that all acts, things and conditions required
by the Constitution or statutes of the State or the Indenture to exist, to have
happened or to have been performed precedent to or in the issuance of this Bond
exist, have happened and have been performed in due time, form and manner as
required by law and that said issue of Bonds, together with all other
indebtedness of the Authority, is within every debt and other limit prescribed
by said Constitution or statutes.
This Bond shall not be entitled to any right or benefit under the Indenture, or
be valid or become obligatory for any purpose, until this Bond shall have been
authenticated by the execution by the Trustee, or its successor as Trustee, or
an authenticating agent thereof, of the certificate of authentication inscribed
hereon.
IN WITNESS WHEREOF, THE NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY has caused
this Bond to be executed in its name by the manual or printed facsimile
signature of its Executive Director and attested by the printed facsimile
signature of its Assistant Secretary, and the facsimile of its corporate seal to
be impressed or imprinted hereon.
CERTIFICATE OF AUTHENTICATION
This Bond is one of the issue of Economic Development Refunding Bonds described
and delivered pursuant to the within mentioned Indenture.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
As Trustee
By:
Authorized Signatory
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
By:
CAREN S. FRANZINI
Executive Director
Attest
By:
Name: Frank T. Mancini, Jr.
Title: Assistant Secretary
[SEAL]
[REVERSE OF BOND]
1. Indenture; Loan Agreement. This Bond is one of an authorized issue of bonds
(the "Bonds"), limited in aggregate principal amount to $10,000,000. The Bonds
are issued under and governed by the Indenture of Trust dated as of August 1,
1995 (the "Indenture") between the Authority and Shawmut Bank Connecticut,
National Association, Hartford, Connecticut, as Trustee and pursuant to a
resolution of the Authority duly adopted July 11, 1995. THE TERMS AND PROVISIONS
OF THE BONDS INCLUDE THOSE IN THE INDENTURE. BONDHOLDERS ARE REFERRED TO THE
INDENTURE FOR A STATEMENT OF THOSE TERMS AND PROVISIONS. ANY CAPITALIZED TERMS
USED HEREIN AND NOT OTHERWISE DEFINED SHALL HAVE THE SAME MEANINGS ASCRIBED TO
SUCH TERMS IN THE INDENTURE.
The Bonds are issued pursuant to and in full compliance with the Act which
authorizes the execution and delivery of the Loan Agreement (as hereinafter
defined) and the Indenture.
The Bonds are being issued for the purpose of providing funds to refund, on a
current basis, $10,000,000 aggregate principal amount Economic Development Bonds
(Burlington Coat Factory Warehouse of New Jersey, Inc. - 1985 Project) of the
New Jersey Economic Development Authority dated as of September 1, 1985 (the
"Prior Bonds"), maturing on or after September 1, 1996 (the "Refunded Bonds") on
September 1, 1995 (the "Project"), the proceeds of which Prior Bonds were used
to finance a portion of a project which consisted of the acquisition of land and
the construction of a building thereon to house the national distribution center
of the Borrower, including the equipping of such building with rolling racks,
conveyor systems and automated machinery, all located in the Township of
Burlington, Burlington County, New Jersey (the "1985 Project"), and further
providing, among other things, for the execution and delivery of the Indenture
and the payment of necessary costs incidental thereto. To provide for the
payment of the Bonds, the Authority and the Borrower have entered into a Loan
Agreement dated as of the date of the Indenture (the "Loan Agreement"), under
which the Borrower is obligated to pay, among other payments, all amounts coming
due on the Bonds. The Authority has assigned all its rights except for certain
Reserved Rights to such payments under the Loan Agreement to the Trustee as
security for the Bonds.
Executed counterparts of the Indenture, the Loan Agreement, the Reimbursement
Agreement (as hereinafter defined), the Letter of Credit (as hereinafter
defined) and all documents and instruments executed in connection therewith, are
on file at the principal corporate trust office of the Trustee.
2. Source of Payments. The Bonds are special limited obligations of the
Authority and, as provided in the Indenture, the Authority shall be obligated to
pay the principal of, redemption premium, if any, and interest on the Bonds
solely from payments to be made by the Borrower under the Loan Agreement and
from the Letter of Credit as described below (but only so long as the Letter of
Credit is in effect) and from any other Revenues and moneys, securities, Funds
and Accounts (including investments, if any) pledged to or held by the Trustee
under the Indenture for such purpose, and there shall be no other recourse
against the Authority or any other property now or hereafter owned by it. Except
as otherwise provided in the Indenture, this Bond is entitled to the benefits of
the Indenture equally and ratably both as to principal or Redemption Price of
and interest under the Indenture to which reference is made for a description of
the rights of the Holders of the Bonds, the rights and obligations of the
Authority, and the rights, duties and obligations of the Trustee. No additional
bonds may be issued under the Indenture. The Holder of this Bond shall have no
right to enforce the provisions of the Indenture, the Loan Agreement or the
Letter of Credit or the rights and remedies thereunder, except as provided in
the Indenture.
3. Security. The Borrower has caused an Irrevocable, Direct-Pay Letter of Credit
(the "Initial Letter of Credit") to be issued by First Fidelity Bank, National
Association (as issuer of the Initial Letter of Credit the "Letter of Credit
Issuer") to be delivered to the Trustee (the Initial Letter of Credit or any
replacement or alternate Letter of Credit, the "Alternate Letter of Credit",
collectively the "Letter of Credit"). The Initial Letter of Credit entitles the
Trustee to draw an amount equal to the principal amount of the Outstanding Bonds
to pay the principal of the Bonds when due at maturity or upon redemption or
acceleration as described herein and in the Indenture, plus an amount equal to
210 days' interest accrued on the Outstanding Bonds (computed at a maximum rate
of 6.125%). Unless extended, the Initial Letter of Credit expires September 15,
2000 or on the earlier occurrence of events specified therein. Subject to the
provisions of the Indenture, the Borrower may cause an Alternate Letter of
Credit to be substituted for the Letter of Credit then in effect, having terms
substantially similar to the Initial Letter of Credit with the exception of the
expiration date thereof. Unless the Initial Letter of Credit or an Alternate
Letter of Credit substituted therefor is extended or replaced in accordance with
the terms of the Indenture, this Bond will become subject to mandatory
redemption as described below. The Initial Letter of Credit is being issued
pursuant to a Letter of Credit Reimbursement Agreement dated August 1, 1995 (the
"Reimbursement Agreement") between the Borrower and the Letter of Credit Issuer,
under which the Borrower is obligated, among other things, to reimburse the
Letter of Credit Issuer for any draws under the Initial Letter of Credit.
4. Redemption. The Bonds are subject to Redemption prior to maturity as provided
herein and in the Indenture.
(a) Special Mandatory Redemption. The Bonds are subject to special
mandatory redemption in whole as soon as practicable but not later than the 90th
day following (i) the Trustee's receipt of written notice of the occurrence of a
Determination of Taxability or (ii) written notification by the Authority to the
Trustee, the Letter of Credit Issuer and the Borrower that (a) the Borrower has
ceased to operate the Project Facility or ceased to cause the Project Facility
to be operated as an authorized project under the Act for twelve (12)
consecutive months without first obtaining the prior written consent of the
Authority, or (b) any of the representations and warranties of the Borrower
contained in the Loan Agreement have proven to have been false or misleading in
any material respect when made. In such event, the Bonds shall be redeemed by
the Authority at a Redemption Price equal to 100% of the principal amount
thereof plus accrued interest up to and including the redemption date.
(b) Mandatory Redemption. The Bonds are subject to mandatory redemption, as
a whole or in part, in minimum denominations of $25,000 and in integral
multiples of $5,000 thereafter, on any Interest Payment Date, at a Redemption
Price equal to 100% of the principal amount thereof, together with interest
accrued up to such redemption date in the case of damage, destruction or
condemnation of the Project in an amount equal to the net proceeds of any
insurance, casualty or condemnation award received by the Bank and at the option
of the Bank pursuant to Section 5.24 of the Loan Agreement.
(c) Extraordinary Mandatory Redemption. The Bonds are subject to
extraordinary mandatory redemption by the Authority, in whole, on the Interest
Payment Date immediately preceding the termination of the Initial Letter of
Credit on September 15, 2000 (the "Letter of Credit Maturity Date") or the
Interest Payment Date immediately preceding the Letter of Credit Maturity Date
of an Alternate Letter of Credit, at a Redemption Price equal to 100% of the
principal amount thereof, in the event the Borrower does not provide the
Trustee, at least sixty (60) days prior to the Letter of Credit Maturity Date,
with (i) written notice from the Letter of Credit Issuer to the Trustee that the
Letter of Credit will be renewed by the Letter of Credit Issuer upon the Letter
of Credit Maturity Date, which Letter of Credit shall have an expiration date of
September 15 of any subsequent year or written notice from another bank to the
Trustee that an Alternate Letter of Credit will be issued on or prior to the
Letter of Credit Maturity Date, which Alternate Letter of Credit shall have an
expiration date of September 15 of any subsequent year, and (ii) (A) an
Alternate Letter of Credit meeting the requirements of Section 404(d)(i) of the
Indenture which shall be presented to the Trustee at least sixty (60) days prior
to the Letter of Credit Maturity Date and (B) the documents required to be
delivered in Section 404(d)(ii) of the Indenture sixty (60) days prior to the
Letter of Credit Maturity Date.
(d) Mandatory Redemption Due to Act of Bankruptcy of Bank. The Bonds are
subject to mandatory redemption, as a whole, at a Redemption Price equal to 100%
of the principal amount of the Outstanding Bonds together with interest accrued
thereon to the redemption date which is at least forty-five (45) days, but not
more than seventy (70) days, after the date on which an Act of Bankruptcy of the
Bank occurs, unless within thirty (30) days after the occurrence of an Act of
Bankruptcy of the Bank, the Borrower has provided the Trustee with (i) an
Alternate Letter of Credit, which Alternate Letter of Credit shall have an
expiration date of September 15, of any subsequent year and (ii) the opinions
and written notice set forth in Section 404 of the Indenture.
(e) Optional Redemption. Subject to the payment of the redemption premium
by the Borrower pursuant to Section 304 of the Indenture, the Bonds maturing on
or after September 1, 2006 are subject to optional redemption by the Authority,
at the direction of the Borrower, in whole at any time or in part on any
Interest Payment Date, in minimum amounts of $25,000 and in integral multiples
of $5,000 thereafter, on or after September 1, 2005, at the Redemption Prices
(expressed as percentages of the principal amount) for the Redemption Periods
set forth below, plus unpaid interest, if any, accrued up to the redemption
date:
Redemption Periods
(Dates Inclusive)
Redemption
Prices (%)
September 1, 2005 to August 31, 2006
102.00
September 1, 2006 to August 31, 2007
101.00
September 1, 2007 and thereafter
100.00
(f) Sinking Fund Redemption. The Bonds maturing on September 1, 2005 and
September 1, 2010, respectively, shall be subject to redemption commencing
September 1, 2004 and September 1, 2006, respectively, and on each September 1
thereafter, at a Redemption Price equal to 100% of the principal amount thereof
being redeemed plus accrued interest up to the redemption date.
The Trustee shall cause to be redeemed such Bonds in the aggregate principal
amounts of the following Sinking Fund Installments on September 1 of each of the
following years:
TERM BONDS DUE SEPTEMBER 1, 2005
Year
Sinking Fund Installment ($)
2004
665,000
2005
735,000
TERM BONDS DUE SEPTEMBER 1, 2010
Year
Sinking Fund Installment ($)
2006
810,000
2007
895,000
2008
990,000
2009
1,095,000
2010
1,210,000
Accrued interest on such Bonds so redeemed shall be paid from the Bond Fund, and
all expenses in connection with such Redemption shall be paid by the Borrower.
All Bonds redeemed under the Indenture shall be redeemed in the manner provided
in the Indenture. The principal amount of Bonds to be redeemed in the years 2004
through 2010 shall be reduced by the amount of such Bonds that the Trustee has
previously redeemed pursuant to Section 301(b) (special mandatory redemption) or
301(e) (optional redemption) of the Indenture.
5. Selection of Bonds to be Redeemed. (a) A Redemption of Bonds shall be a
Redemption of the whole or any part of the Bonds from any funds available for
that purpose in accordance with the provisions of the Indenture. If less than
all of the Bonds shall be called for Redemption under any provision of the
Indenture permitting such partial redemption, the particular Bonds (or
Authorized Denominations thereof), to be redeemed shall be selected by the
Trustee by lot, using such method as the Trustee in its sole discretion may deem
proper, in the principal amount designated in writing to the Trustee by the
Borrower or otherwise as required by the Indenture. The Trustee shall be
notified in writing pursuant to the Indenture not less than sixty (60) days
prior to the date fixed for Redemption, but in the case of a Mandatory
Redemption due to an Act of Bankruptcy of the Bank, not more than ten (10) days
following the occurrence thereof.
(b) Except as otherwise provided in the Indenture, any Bonds selected for
Redemption which are deemed to be paid in accordance with the Indenture will
bear interest up to, but not including, the date fixed for redemption.
6. Notice of Redemption; Rights of Holders.
When Bonds are to be redeemed, the Trustee shall give notice of such Redemption
to the Holders in the name of the Authority, stating, among other things: (i)
the Bonds to be redeemed; (ii) the redemption date; (iii) that such Bonds will
be redeemed at the Principal Office of the Trustee; (iv) that on such redemption
date there shall become due and payable upon each Bond to be redeemed the
Redemption Price thereof together with unpaid interest accrued prior to the
redemption date; (v) the CUSIP numbers assigned to the Bonds to be redeemed;
(vi) the serial numbers and maturities of Bonds selected for Redemption, (except
that where all of the Bonds are to be redeemed the serial numbers and maturities
need not be specified); (vii) the interest rates and maturity dates of the Bonds
to be redeemed; (viii) the date of mailing the notice of redemption; (ix) the
record date for the Redemption (which shall be forty-five (45) days prior to the
redemption date); and (x) that on the redemption date interest thereon shall
cease to accrue. The notice of redemption shall state that Redemption is subject
to receipt by the Trustee of Available Moneys sufficient to pay the Redemption
Price of the Bonds to be redeemed on or before the redemption date.
The Trustee shall mail the required notice, postage prepaid by first class mail,
not less than thirty (30) days, nor more than sixty (60) days, prior to the
applicable date to the Holders of any Bonds to be redeemed at the addresses
thereof appearing on the Bond Register kept for such purpose. Failure to duly
give such notice by mail, or any defect therein, shall not affect the validity
of any proceeding for the Redemption of the Bonds.
Pursuant to Section 304(b) of the Indenture, if on any redemption date Available
Moneys for the Redemption of all Bonds or portions thereof to be redeemed,
together with interest thereon to such redemption date, shall be held by the
Trustee so as to be available therefor on such date, the Bonds or portions
thereof so called for Redemption shall cease to bear interest and such Bonds or
portions thereof shall no longer be Outstanding under the Indenture or be
secured by or be entitled to the benefits of the Indenture. If such Available
Moneys shall not be so available on such date, such Bonds or portions thereof
shall continue to bear interest until paid at the same rate as they would have
borne had they not been called for Redemption and shall continue to be secured
by and be entitled to the benefits of the Indenture.
7. Denominations; Transfer; Exchange. The Bonds are in registered form without
coupons in minimum principal denominations of $25,000 and in integral multiples
of $5,000 thereafter.
8. Transferability of Bonds. This Bond is transferable only on the Bond Register
upon surrender thereof at the Principal Office of the Trustee by the registered
Owner thereof or by his attorney duly authorized in writing together with a
written instrument of transfer satisfactory to the Trustee. Upon such surrender,
the Authority shall execute and the Trustee shall authenticate and deliver in
the name of the transferee or transferees, one or more new fully registered
Bonds of the same series in Authorized Denominations in the aggregate principal
amount which the registered Owner is entitled to receive. At the option of the
Holder, Bonds may be exchanged for other Bonds of the like aggregate principal
amount upon surrender of the Bonds to be exchanged at any such office. All Bonds
presented for registration of transfer or for exchange, Redemption or payment
(if so required by the Authority, the Bond Registrar or the Trustee), shall be
accompanied by a written instrument or instruments of transfer or authorization
for exchange, in form satisfactory to the Bond Registrar. No service charge
shall be made for any exchange or registration of transfer of Bonds, but the
Trustee may require payment of its expenses and a sum sufficient to cover all
taxes or other governmental charges that may be imposed in relation thereto. New
Bonds delivered upon any registration of transfer or exchange shall be valid
obligations of the Authority, evidencing the same debt as the Bonds surrendered,
shall be secured by the Indenture and shall be entitled to all of the security
and benefits thereof to the same extent as the Bonds surrendered.
A Person in whose name a Bond shall be registered shall for all purposes of the
Indenture, be deemed the absolute Owner thereof and, so long as the same shall
be registered, payments of or on account of the principal, redemption premium,
if any, and interest with respect to such Bond shall be made only to the
registered Owner or his legal representative. All such payments so made to any
such registered Owner or upon his order shall be valid and effectual to satisfy
and discharge the liability of the Authority upon such Bond to the extent of the
sum or sums so paid. The Authority and the Trustee shall not be affected by any
notice to the contrary.
The Authority and the Trustee shall not register, register the transfer of, or
exchange Bonds for the period from the Record Date preceding an Interest Payment
Date to the related Interest Payment Date, nor shall the Trustee register the
transfer of or exchange any Bond during the period fifteen (15) days before the
giving of a notice of redemption.
9. Defaults and Remedies. The Indenture provides that the occurrence of certain
events constitute Events of Default. If an Event of Default occurs and is
continuing, the Trustee may, and shall, upon the written direction of the Letter
of Credit Issuer, declare the principal of all the Bonds Outstanding and the
interest accrued on such Bonds then to be due and payable immediately in the
manner and with the effects and subject to the conditions set forth in the
Indenture. An Event of Default and its consequences may be waived as provided in
the Indenture. Bondholders may not enforce the Indenture or the Bonds except as
provided in the Indenture. Under certain circumstances, the Trustee may refuse
to enforce the Indenture or the Bonds unless it receives indemnity from the
Holders satisfactory to it. Subject to certain limitations, Holders of fifty-one
percent (51%) in aggregate principal amount of the Bonds then Outstanding may
direct the Trustee in its exercise of any trust or power.
|
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
MANAGEMENT INCENTIVE PLAN
Effective as of January 1, 2001
TABLE OF CONTENTS
ARTICLE I
INTRODUCTION AND PURPOSE
Page
1.1
Purpose of the Plan
1
ARTICLE II
DEFINITIONS
2.1
2.2
2.3
2.4
2.5
"Annual Incentive Award"
"Award Payment Date"
"Board" or "Board of Directors"
"Change in Control"
"Code"
2
2
2
2
2
2.6
2.7
2.8
2.9
2.10
"Committee"
"Company"
"Compensation"
"Effective Date"
"Eligible Employee"
2
2
2
2
3
2.11
2.12
2.13
2.14
2.15
"For Cause"
"Group 1 Eligible Employee"
"Group 2 Eligible Employee"
"Participant"
"Performance Goals"
3
3
3
3
3
2.16
2.17
2.18
"Performance Period"
"Permanent and Total Disability"
"Plan"
3
3
3
ARTICLE III
PARTICIPATION
3.1
Participation
4
ARTICLE IV
PERFORMANCE GOALS AND AWARD OPPORTUNITIES
4.1
4.2
4.3
4.4
Performance Goals
Performance Levels
Participation Goals
Amount of Award
5
5
6
6
ARTICLE V
DETERMINATION AND PAYMENT OF ANNUAL INCENTIVE AWARDS
5.1
5.2
5.3
5.4
5.5
Timing and Determination of Annual Incentive Awards
Short Performance Year
Termination, Death, Retirement or Permanent and Total Disability
Change in Control
Limitation on Right to Payment of Award
8
8
9
9
9
ARTICLE VI
ADMINISTRATION
6.1
6.2
6.3
Committee
Authority of the Committee
Costs
10
10
10
ARTICLE VII
MISCELLANEOUS
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
7.9
7.10
7.11
7.12
7.13
7.14
Amendment
Termination
Employment Rights
Nonalienation of Benefits
No Funding
Tax Withholding
Controlling Laws
Gender and Number
Action by the Company
Mistake of Fact
Severability
Effect of Headings
No Liability
Successors
11
11
11
12
12
12
12
12
12
12
12
13
13
13
ARTICLE I
INTRODUCTION AND PURPOSE
1.1
Purpose of the Plan
. The Central Vermont Public Service Corporation Management Incentive Plan (the
"Plan") is an incentive compensation program for eligible officers of Central
Vermont Public Service Corporation (the "Company"). The purpose of the Plan is
to focus the efforts of the Executive Team in achievement of challenging and
demanding objectives. The Plan is designed and intended to further the
attainment of the customer service, financial, process improvement and employee
related objectives of the Company, to assist the Company in attracting and
retaining highly qualified executives, and to enhance the mutual interest of
customers, shareholders and eligible officers of the Company. In addition, this
Plan supports the Company's performance oriented culture.
ARTICLE II
DEFINITIONS
2.1
"Annual Incentive Award" shall mean a cash incentive payable to a Participant
under the terms of this Plan.
2.2
"Award Payment Date" shall mean, for each Performance Period, the date that the
amount of the Annual Incentive Award for that Performance Period shall be paid
to the Participant under Article 5 of the Plan.
2.3
"Board" or "Board of Directors" shall mean the Board of Directors of the
Company.
2.4
"Change in Control" is fully defined in the Change of Control Agreement, page 2,
Section 3 Change of Control.
2.5
"Code" shall mean the Internal Revenue Code of 1986, as amended, and references
to particular provisions of the Code shall include any amendments thereto or
successor provisions and any rules and regulations promulgated thereunder.
2.6
"Committee" shall mean the Compensation Committee of the Board of Directors of
the Company or any other duly established committee or subcommittee appointed by
the Board for purposes of this Plan.
2.7
"Company" shall mean Central Vermont Public Service Corporation, a Vermont
corporation.
2.8
"Compensation" shall mean a Participant's base pay for the Performance Period
for which the amount of an Annual Incentive Award is being determined.
2.9
"Effective Date" shall mean January 1, 2001. The Plan shall be effective for the
Performance Period beginning on January 1, 2001.
2.10
"Eligible Employee" shall mean an Employee who is a Group 1 Eligible Employee or
a Group 2 Eligible Employee. An Eligible Employee may not be both a Group 1
Eligible Employee and a Group 2 Eligible Employee.
2.11
"For Cause" shall mean, but is not limited to, fraud, dishonesty, theft of
corporate assets, gross misconduct, failure to substantially perform assigned
duties, material breach of any agreement with the Company, the commission of a
crime or act which involves dishonesty or moral turpitude, or willful misconduct
which subjects the Company to potential liability.
2.12
"Group 1 Eligible Employee" shall mean the Chief Executive Officer (CEO) of
Central Vermont Public Service Corporation and other executive officers of the
regulated part of the Company.
2.13
"Group 2 Eligible Employee
" shall mean (1) the President and Chief Operating Officer (COO) and other
executive officers of Catamount Energy Corporation (Catamount); and (2) the Vice
President of Business Development and other executive officers of Smart Energy
Services (SES).
2.14
"Participant" for a Performance Period shall mean each Eligible Employee who is
an Eligible Employee for that Performance Period.
2.15
"Performance Goals" shall mean the measures of the Company's performance as
defined in Section 4.1 of this Plan that must be met for any Participant to
receive any Annual Incentive Award under this Plan, as provided in Section 4.1.
2.16
"Performance Period" shall mean the taxable year of the Company or any other
period designated by the Committee with respect to which an Annual Incentive
Award may be granted.
2.17
"Permanent and Total Disability" shall mean any disability that would qualify as
permanent and total disability under any long term disability policy sponsored
by the Company.
2.18
"Plan" shall mean this Central Vermont Public Service Corporation Management
Incentive Plan, as it may be amended from time to time.
ARTICLE III
PARTICIPATION
3.1
Participation
. An Eligible Employee will become a Participant in this Plan as of the later of
the Effective Date, the Eligible Employee's date of hire or the date the
individual becomes an Eligible Employee.
An Eligible Employee who is a Participant for the entire length of a Performance
Period shall be eligible for consideration for an Annual Incentive Award with
respect to that Performance Period.
The Committee may provide a prorated Annual Incentive Award for an Eligible
Employee who becomes a Participant during the Performance Period.
ARTICLE IV
PERFORMANCE GOALS AND AWARD OPPORTUNITIES
4.1
Performance Goals
. The measures of Performance Goals are established as follows:
a. Corporate Performance. A measure of overall corporate financial performance
based upon cash flow from operating activities.
b. Strategic Business Unit Performance. Measures the performance of each
Strategic Business Unit (SBU) or of overall corporate performance, depending
on the officer's responsibilities. These performance measures which are
established annually are a balanced set of measures including customer
satisfaction, financial performance, process improvement and employee
measures.
c. Individual Performance. Based on advice and recommendation from the Chief
Executive Officer for those reporting to him. The Chairman and Committee
evaluate the Chief Executive Officer's performance.
SBU and Individual Performance Goals will be established in writing for each
Performance Period by no later than the first quarter of the Performance Period.
For all of Central Vermont Public Service Corporation's Executive Officers (e.g.
Group 1 Eligible Employees), SBU performance is given a 50% weight with the
other two measures equally weighted at 25%. For the executives in the
unregulated businesses of Catamount and SES (e.g. Group 2 Eligible Employees),
the SBU Performance is given an 80% weight with the other two measures equally
weighted at 10%.
4.2
Performance Levels
. Corporate and SBU measures described in Section 4.1 will be established for
three performance levels: threshold, target and maximum. These levels are set
based on the following probabilities: 90% probability of achieving the threshold
level; 50% probability of achieving target level; and 10% probability of
achieving the maximum level.
4.3
Participant Goals
. Participants will have a combination of Corporate Performance, SBU Performance
and Individual Performance measured goals used in determining any Annual
Incentive Award as described in 4.1 above.
4.4
Amount of Award
. Following the completion of the Performance Period, the Committee shall
undertake or direct a calculation of actual performance for each of the
Corporate and SBU measures for such performance year, based on criteria used in
the measures. The actual award opportunity for each Participant will be
determined as follows;
a. Linear interpolation between three points where achieving the threshold
level of performance results in no payout; the target level of performance
results in 100% of the target payout and achieving the maximum level of
performance results in a 200% of the target payout.
b. A weighted average of the target incentive multiplier for each component of
the Corporate measure will be determined. (For the year 2000 there is only
one Corporate measure). A weighted average of the target incentive
multiplier for each component of the applicable SBU measure will be
determined. A weighted average of the target incentive multiplier for each
component of the Individual Performance measure will be determined.
c. A weighted average of the target incentive multiplier for the Corporate, SBU
and Individual Performance measures will be determined, based on the
weightings described in Section 4.1 for Group 1 Eligible Employees and Group
2 Eligible Employees.
d. The final target incentive multiplier will be multiplied by the
Participant's target incentive percentage to determine the Annual Incentive
Award percentage.
e. The Annual Incentive Award percentage will then be multiplied by the
Participant's Compensation to determine the Participant's Annual Incentive
Award, prior to any further reductions as described in this Plan, including
Sections 5.2, 5.3, 5.4, 5.5 and 6.2.
ARTICLE V
DETERMINATION AND PAYMENT OF ANNUAL INCENTIVE AWARDS
5.1
Timing and Determination of Annual Incentive Awards
. Following the completion of a Performance Period, the Committee shall
undertake or direct an evaluation of performance results as compared to the
appropriate performance criteria established for the Performance Period as
determined in Article IV. The Committee will report to the Board with respect to
achievement of previously approved Corporate, SBU and Individual Performance
targets for that Performance Period, and will submit to the Board its
recommendations as to the appropriate award payment levels for each eligible
participant.
Recommendations of the Committee, with such modifications as may be made by the
Board, will be biding on all Participants.
No Annual Incentive Award may be paid without the prior approval of the
Committee.
Any Annual Incentive Awards will be paid on the Award Payment Date, which shall
be as soon as practicable following the end of the Performance Period to which
they relate.
5.2
Short Performance Year
. In the event that a determination of an Annual Incentive Award must be made
for a Performance Period of less than 12 months, and the year of termination of
employment, the determination shall be made in accordance with the provisions of
this Plan, except that:
a. In the year of hire, if hired after the first date a Performance Period
begins, or year of termination, retirement, death, or Permanent and Total
Disability, the amount otherwise determined under the Plan shall be prorated
to reflect the period of time during which the Participant was a Participant
in the Plan compared to the total period of time of the Performance Period.
b. In the year of a Change in Control, the Company will be assumed to have
achieved a target performance level prorated by time.
5.3
Termination, Death, Retirement or Permanent and Total Disability
. In the event of the termination, death, retirement, or Permanent and Total
Disability of a Participant during a Performance Period, such Participant may,
only in the discretion of the Committee, be eligible for a prorated Annual
Incentive Award with respect to that Performance Period to the extent the
Committee deems appropriate.
5.4
Change in Control
. Notwithstanding any of the Plan provisions to the contrary, if a Change in
Control occurs during a Performance Period, each Participant will, effective as
of the date of the Change in Control, become fully vested in his right to
receive an Annual Incentive Award based on the Plan's provisions for such
Performance Period in which the Change in Control occurs.
5.5
Limitation on Right to Payment of Award
. Notwithstanding any other Plan provision to the contrary, no Participant shall
have a right to receive payment of an Annual Incentive Award under the Plan if,
subsequent to the commencement of the Performance Period and prior to the date
any award would otherwise be payable, is terminated For Cause.
ARTICLE VI
ADMINISTRATION
6.1
Committee
. The Plan shall be operated and administered by the Committee.
6.2
Authority of the Committee
. The Committee shall have full power except as limited by law, the bylaws of
the Company or any restrictions or directions imposed by the Board and subject
to the provisions herein, to determine the Performance Goals during each
Performance Period, to determine the terms, conditions and amounts of Annual
Incentive Awards in a manner consistent with the Plan, and to establish, amend
or waive rules and regulations as it deems appropriate for the Plan's
administration in a manner consistent with the terms of this Plan. Further, the
Committee shall make all other determinations that may be necessary or advisable
for the administration of the Plan. The Committee's determinations and
interpretations with respect to this Plan shall be binding on all parties. While
the Committee may appoint individuals to act on its behalf in the administration
of this Plan, the Committee will have the sole, final and conclusive authority
to administer, construe and interpret this Plan.
The Committee may, for reasons it deems appropriate, in its discretion,
determine to delay, disapprove, reduce or eliminate any Participant's Annual
Incentive Award as it deems warranted by extraordinary circumstances.
6.3
Costs
. The Company shall pay all costs of administration of the Plan.
ARTICLE VII
MISCELLANEOUS
7.1
Amendment
. The Committee or the Board may at any time alter or amend any provision of the
Plan, provided that no such amendment that would require the consent of the
stockholders of the Company pursuant to the Code, or any other applicable law,
rule or regulation, shall be effective without such consent. No such amendment
which adversely affects in any material way a Participant's rights to, or
interest in, an Annual Incentive Award earned through the end of the Performance
Period in which such amendment is adopted or becomes effective unless the
Participant shall have agreed thereto in writing, unless such amendment is
required by applicable law.
7.2
Termination
. The Committee or Board may suspend or terminate this Plan at any time, and in
the case of such termination, the following provisions of this Section shall
apply notwithstanding any other provisions of the Plan to the contrary. In no
event shall the suspension or termination of the Plan adversely affect the
rights of any Participant to an Annual Incentive Award earned through the end of
the Performance Period in which such suspension or termination is adopted or
becomes effective, unless the Participant shall have agreed thereto in writing.
7.3
Employment Rights
. The Plan does not constitute a contract of employment and participation in
this Plan will not give an Eligible Employee the right to be rehired or retained
in the employ of the Company, nor will participation in this Plan give any
Eligible Employee any right or claim to any benefit under this Plan, unless such
right or claim has specifically accrued under the terms of this Plan. This Plan
is not a contract between the Company and its Eligible Employees or
Participants. No Participant or other person shall have any claim or right to be
granted an Annual Incentive Award under this Plan until such Annual Incentive
Award is actually granted. Neither the establishment of this Plan, nor any
action taken hereunder, shall be construed as giving any Participant any right
to be retained in the employ of the Company. Nothing contained in this Plan
shall limit the ability of the Company to make payments or awards to
Participants under any other plan, agreement or arrangement. To the extent any
provision of this Plan conflicts with any provision of a written agreement
between an Employee and the Company, the provisions of the employment agreement
shall control.
7.4
Nonalienation of Benefits
. A Participant's right and interest under the Plan may not be assigned or
transferred and any attempted assignment or transfer shall be null and void and
shall extinguish, in the Company's sole discretion, the Company's obligation
under the plan to pay Annual Incentive Awards with respect to the Participant.
7.5
No Funding
. The Plan shall be unfunded. The Company shall not be required to establish any
special segregation of assets to assure payment of Annual Incentive Awards.
7.6
Tax Withholding
. The Company shall have the right to deduct from Annual Incentive Awards paid
any taxes or other amounts required by law to be withheld.
7.7
Controlling Laws
. All questions pertaining to the construction, regulation, validity and effect
of the provisions of the plan shall be determined in accordance with the laws of
the State of Vermont, except to the extent superseded by laws of the United
States.
7.8
Gender and Number
. Where the context admits, words in the masculine gender shall include the
feminine gender, the plural shall include the singular and the singular shall
include the plural.
7.9
Action by the Company
. Any action required of or permitted by the Company under this Plan shall be by
written resolution of the Board or by a person or persons authorized by written
resolution of the Board.
7.10
Mistake of Fact
. Any mistake of fact or misstatement of fact shall be corrected when it becomes
known and proper adjustment made by reason thereof.
7.11
Severability
. In the event any provision of this Plan shall be held to be illegal or invalid
for any reason, such illegality or invalidity shall not affect the remaining
parts of this Plan, and this Plan shall be construed and endorsed as if such
illegal or invalid provision had never been contained in this Plan.
7.12
Effect of Headings
. The descriptive headings of the Articles and Sections of this Plan are
inserted for convenience of reference and identification only and do not
constitute a part of this Plan for purposes of interpretation.
7.13
No Liability
. No member of the Board or the Committee or any officer or employee of the
Company or an affiliate shall be personally liable for any action, omission or
determination made in good faith in connection with this Plan. The Company shall
indemnify and hold harmless the members of the Committee, the Board and the
officers and employees of the Company and any affiliates, and each of them, from
and against any and all loss which results from liability to which any of them
may be subjected by reason of any act or conduct (except willful misconduct or
gross negligence) in their official capacities in connection with the
administration of this Plan, including all expenses reasonably incurred in their
defense, in case the Company fails to provide such defense. By participating in
this Plan, each Eligible Employee agrees to release and hold harmless each of
the Company and any affiliates (and their respective directors, officers and
employee), the Board and the Committee, from and against any tax or other
liability, including without limitation, interest and penalties, incurred by the
Eligible Employee in connection with his participation in the plan.
7.14
Successors
. All obligations of the Company under the plan with respect to Annual Incentive
Awards granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is a result of a direct or indirect
purchase, merger, consolidation or otherwise, of all or substantially all of the
business and/or assets of the Company. |
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CHASSIS HOLDINGS I LLC
LIMITED LIABILITY COMPANY AGREEMENT
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TABLE OF CONTENTS
Page
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ARTICLE I FORMATION OF COMPANY 1 1.1. Formation of the Company 1
1.2. Name 1 1.3. Principal Office of Company 1 1.4. Purposes 1
1.5. Term 1 1.6. Definitions 1 1.7. Status of Members 6
1.8. Meetings of Members 7 1.9. Title and Ownership of Property 7
ARTICLE II CAPITAL 7 2.1. Units 7 2.2. Contributions 8 2.3. No
Liabilities 8 2.4. Capital Accounts 8 2.5. Withdrawal of Capital 8
ARTICLE III ALLOCATIONS OF NET INCOME AND NET LOSS 8 3.1. Allocations of
Net Income and Net Loss 8 3.2. Special Allocations 9 3.3. Other
Allocation Rules 11 3.4. Tax Allocations: Code Section 704(c) 11
3.5. Change in Allocations 12 ARTICLE IV DISTRIBUTIONS 12 4.1.
Payment of Expenses 12 4.2. Cash Distributions 12 4.3. Distributions
In-Kind 13 4.4. Restriction on Distributions 13 ARTICLE V MANAGEMENT OF
THE COMPANY 13 5.1. Managing Member 13 5.2. Powers, Rights and
Duties of the Managing Member 13 5.3. Compensation and Expense
Reimbursement of the Managing Member 13 5.4. Officers and Employees 13
ARTICLE VI OPERATION OF THE COMPANY 14 6.1. Books of Account 14 6.2.
Reports 14 6.3. Bank Accounts 14 6.4. Tax Matters 14 ARTICLE VII
TRANSFER; ADDITIONAL MEMBERS 14 7.1. Transfer of Shares 14 7.2.
Certificate Legend 15 7.3. Admission of Additional Members 15 ARTICLE
VIII DISSOLUTION 15 8.1. Events Causing Dissolution 15 8.2. Winding
Up of Company Affairs 15 8.3. Distribution on Liquidation 16 ARTICLE IX
INDEMNIFICATION 16 9.1. Indemnification 16 ARTICLE X CONFIDENTIALITY
AND PROPRIETARY INFORMATION 18 10.1. Confidentiality 18 ARTICLE XI
GENERAL 18 11.1. Delaware Law 18 11.2. Integration; Amendments 18
11.3. Notices 18 11.4. Severability 18 11.5. Power of Attorney
18 11.6. Miscellaneous 19
(i)
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CHASSIS HOLDINGS I LLC
(a Delaware Limited Liability Company)
LIMITED LIABILITY COMPANY AGREEMENT of Chassis Holdings I LLC (the
“Company”), dated as of July 1, 2001, by and among each of the persons listed on
Schedule 1 attached hereto, as members. The parties to this agreement are
sometimes hereinafter referred to individually as a “Member” and collectively as
the “Members.”
WHEREAS, this Agreement is being entered into by the Members to set forth
in their entirety the terms and conditions of the agreement of the Members with
respect to the operation of the Company; and
WHEREAS, the Company is being formed to acquire certain assets and subject
to the assumption of certain related liabilities of certain of the Members;
NOW, THEREFORE, in consideration of the covenants and agreements made
herein, the Members, intending to be legally bound, hereby agree as follows:
ARTICLE I
FORMATION OF COMPANY
1.1. Formation of the Company. Pursuant to the provisions of the Delaware
Act, the Members hereby agree to form the Company as a Delaware limited
liability company. The Members agree that each of them shall execute and file
all certificates and documents necessary or appropriate for the formation and
continuance of the Company or for the qualification of the Company to do
business.
1.2. Name. The name of the Company is “Chassis Holdings I LLC.”
1.3. Principal Office of Company. The principal office of the Company is located
at 211 College Road East, Princeton, New Jersey 08450. The address of the
registered office and the name of the registered agent for service of process
required to be maintained by Section 18-104 of the Delaware Act are: The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801.
1.4. Purposes. The purposes of the Company are (a) to own and lease
intermodal chassis, and (b) to take all actions necessary, appropriate,
advisable, incidental or convenient to carry out the foregoing.
1.5. Term. The term of the Company shall continue until December 31, 2050
unless the Company is sooner dissolved pursuant to the provisions hereof.
1.6. Definitions. As used in this Agreement, the following terms shall have
the meanings set forth below:
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“Adjusted Capital Account Deficit” shall mean the deficit balance, if any,
in such Member’s Capital Account as of the end of the relevant fiscal year,
after giving effect to the following adjustments: (i) crediting to such Capital
Account any amounts that such Member is obligated to restore or is deemed to be
obligated to restore pursuant to Sections 1.704-1 (b)(2)(ii)(b)(3),
1.704-1(b)(2)(ii)(c), 1.704-2(g), and 1.704-2(i)(5) of the IRS Regulations, and
(ii) debiting to such Capital Account the items described in Section
1.704(b)(2)(ii)(d)(4), (5), and (6) of the IRS Regulations.
“Agreement” shall mean this Limited Liability Company Agreement, as the
same may be amended from time to time.
“Capital Account” shall mean the capital account established and maintained
for each Member pursuant to Section 2.4 hereof.
“Capital Contributions” shall mean the sum of Initial Capital
Contributions. The Initial Capital Contributions as of the date hereof are set
forth opposite each Member’s name on Schedule 1 attached hereto.
“Code” shall mean the Internal Revenue Code of 1986, as amended from time
to time, or any successor federal tax law.
“Common Unit” shall have the meaning set forth in Section 2.1.
“Company Minimum Gain” shall mean “partnership minimum gain” as set forth
in Section 1.704-2(d) of the IRS Regulations.
“Delaware Act” shall mean the Delaware Limited Liability Company Act, as
amended from time to time.
“Depreciation” shall mean, for each Fiscal Year or other period, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such Fiscal Year or other period, except
that if the Gross Asset Value of an asset differs from its adjusted basis for
federal income tax purposes at the beginning of such Fiscal Year or other
period, Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such Fiscal Year or other
period bears to such beginning adjusted tax basis. If any asset shall have a
zero adjusted basis for federal income tax purposes, Depreciation shall be
determined utilizing any reasonable method selected by the Members.
“Distributable Cash” shall mean the cash (excluding cash from Net Proceeds)
of the Company at the time of determination in excess of (a) amounts held in the
sole and absolute discretion of the Managing Member for investment or
reinvestment in respect of the Company in accordance with this Agreement and (b)
any reserves determined in the sole and absolute discretion of the Managing
Member to be necessary or appropriate in respect of known or unknown Company
obligations or contingencies.
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“Fair Market Value” shall mean the value of the particular asset or
interest in question determined on the basis of an arm’s length transaction for
cash between an informed and willing seller (under no compulsion to sell) and an
informed and willing purchaser (under no compulsion to purchase), taking into
account, among other things, the anticipated cash flow, taxable income and
taxable loss attributable to the asset or interest in question. Except as
otherwise expressly set forth herein, in the case of any asset other than a
marketable security, the Fair Market Value shall be determined by the Managing
Member; in determining the value of any asset other than a marketable security,
the Managing Member may, but shall not be under any obligation to, engage an
independent appraiser having recognized qualifications necessary in order to
make such determination and the fees and expenses of such appraiser shall be
borne by the Company. Except as otherwise expressly set forth herein, in the
case of any marketable security at any date, the Fair Market Value of such
security shall equal the closing sale price of such security on the business day
(on which any national securities exchange is open for the normal transaction of
business) next preceding such date, as appearing in any published list of any
national securities exchange or in the National Market List of the National
Association of Securities Dealers, Inc., or, if there is no such closing sale
price of such security, the final price of such security at face value quoted on
such business day by a financial institution of recognized standing which
regularly deals in securities of such type.
“Fiscal Year” shall mean the fiscal year of the Company, which shall be the
twelve (12) month period ending on December 31st of each year; provided,
however, that the initial Fiscal Year shall begin on the date hereof and end on
December 31, 2001, and that upon Termination, Fiscal Year means the period from
the day after the end of the last preceding Fiscal Year to the date of
Termination.
“Gross Asset Value” shall mean, with respect to any asset, the asset’s
adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Member to
the Company shall be the gross Fair Market Value of such asset, as determined by
the Managing Member (as evidenced by this Agreement or an amendment hereto);
(b) The Gross Asset Values of all assets shall be adjusted to equal their
respective gross fair market values, as determined by the Managing Member, as of
the following times: (i) the acquisition of an interest or an additional
interest in the Company by any new or existing Member in exchange for more than
a de minimis Capital Contribution or other consideration; (ii) the distribution
by the Company to a Member of more than a de minimis amount of property or money
as consideration for an interest in the Company; and (iii) the liquidation of
the Company within the meaning of Section 1.704-1(b)(2)(ii)(g) of the IRS
Regulations; provided, however, that adjustments pursuant to clauses (i) and
(ii) above shall be made only if the Members determine that such adjustments are
necessary or appropriate to reflect the relative economic interests of the
Members;
(c) The Gross Asset Value of any asset distributed to a Member shall be the
gross Fair Market Value of such asset on the date of distribution;
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(d) The Gross Asset Values of assets shall be increased (or decreased) to
reflect any adjustments to the adjusted basis of such assets pursuant to Code
Section 734(b) or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Section 1.704-1(b)(2)(iv)(m) of the IRS Regulations, clause (f) of the
definition of Net Income and Net Loss and Section 3.2(g); provided, however,
that Gross Asset Values shall not be adjusted pursuant to this paragraph (d) to
the extent the Managing Member determines that an adjustment pursuant to
paragraph (b) hereof is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
paragraph (d); and
(e) If the Gross Asset Value of an asset has been determined or adjusted
pursuant to paragraphs (a), (b), or (d), such Gross Asset Value shall thereafter
be adjusted by the Depreciation taken into account with respect to such asset
for purposes of computing Net Income and Net Loss.
“Initial Capital Contribution” shall have the meaning set forth in Section
2.1.
“IRS Regulations” shall mean the rules, regulations, orders and
interpretations of rules, regulations and orders adopted under the Code, as in
effect from time to time.
“Managing Member” shall mean Trac Lease, Inc.
“Member” shall mean any of the persons listed on Schedule 1 attached hereto
or any person who becomes a member pursuant to Section 7.3.
“Member Nonrecourse Debt” shall mean “partner non-recourse debt” as set
forth in Section 1.704-2(b)(4) of the IRS Regulations.
“Member Nonrecourse Debt Minimum Gain” shall mean an amount, with respect
to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i)(2) and (3) of the IRS
Regulations.
“Member Nonrecourse Deductions” shall mean “partnership nonrecourse
deductions” as set forth in Section 1.704-2(i)(2) of the IRS Regulations. For
any Fiscal Year, the amount of Member Nonrecourse Deductions with respect to a
Member Nonrecourse Debt equals the excess, if any, of the net increase, if any,
in the amount of the Member Nonrecourse Debt Minimum Gain attributable to such
Member Nonrecourse Debt over the aggregate amount of any distributions during
such Year to the Member that bears the economic risk of loss for such Member
Nonrecourse Debt to the extent such distributions are from proceeds of such
Member Nonrecourse Debt and are allocable to an increase in Member Nonrecourse
Debt Minimum Gain, determined according to the provisions of Section
1.704-2(i)(2) of the IRS Regulations.
“Membership Interest” shall mean, with respect to any person, all of the
interests of that person in the Company, including, without limitation, such
person’s (i) right to a distributive share of profits and losses of the Company,
(ii) right to a distributive share of Company assets, and (iii) right, if any,
to participate in the management and control of the business and affairs of the
Company.
“Net Income” and “Net Loss” means, with respect to any Fiscal Year, an
amount equal to the Company’s taxable income or loss for such Fiscal Year or
period, determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss, or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments:
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(a) Any income of the Company that is exempt from federal income tax and
not otherwise taken into account in computing Net Income or Net Loss pursuant to
this definitional Section shall be added to such taxable income or loss;
(b) Any expenditures of the Company described in Code Section 705(a)(2)(B)
or treated as Code Section 705(a)(2)(B) expenditures pursuant to Section
1.704-1(b)(2)(iv)(i) of the IRS Regulations, and not otherwise taken into
account in computing Net Income or Net Loss pursuant to this definitional
Section, shall be subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any asset is adjusted pursuant to
paragraph (b) or (c) under the definition of “Gross Asset Value,” the amount of
such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Net Income or Net Loss;
(d) Gain or loss resulting from any disposition of Company property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(e) In lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year or other period,
computed in accordance with the definition thereof;
(f) To the extent an adjustment to the adjusted tax basis of any asset
pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in
determining Capital Accounts as a result of a distribution other than in
complete liquidation of a Member’s Units, the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases the basis of the asset) from the
disposition of the asset and shall be taken into account for purposes of
computing Net Income or Net Loss; and
(g) Notwithstanding any other provision of this definitional Section, any
items which are specially allocated under this Agreement shall not be taken into
account in computing Net Income or Net Loss.
“Net Proceeds” shall mean, with respect to any transaction or event, the
cash realized by the Company from such transaction or event after deduction of
(a) the amount paid in respect of any secured loan or other indebtedness or
encumbrance at the closing of such transaction or event, (b) the costs and
expenses incurred by the Company relating to such transaction or event and (c)
such reserves as are deemed necessary by the Managing Member for contingent or
unforeseen liabilities or obligations of the Company arising out of or in
connection with such transaction or event, which reserves may be held in escrow
for a period of time deemed appropriate by the Managing Member and then
distributed to the Members in accordance with the provisions of this Agreement
as if such reserves had been distributed at the time of distribution of the Net
Proceeds.
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“Nonrecourse Deductions” shall have the meaning set forth in Section
1.704-2(b)(1) of the IRS Regulations. The amount of Nonrecourse Deductions for a
Fiscal Year equals the excess, if any, of the net increase, if any, in the
amount of Company Minimum Gain during that Fiscal Year, over the aggregate
amount of any distributions during that Fiscal Year of proceeds of a Nonrecourse
Liability that are allocable to an increase in Company Minimum Gain, determined
according to the provisions of Section 1.704-2(c) of the IRS Regulations.
“Preferred Unit” shall have the meaning set forth in Section 2.1.
“Preferred Unit Net Investment” shall mean, with respect to a Preferred
Unit holder as of any date (including any transferee of a Preferred Unit
permitted by this Agreement), the net amount of all capital contributions made
by such Unit holder (or its predecessor holder) in cash or property in respect
of Preferred Units, reduced, by all previous distributions in cash or property
made to such Preferred Unit holder (or its predecessor holder) pursuant to
Section 4.2(b)(iii), and further, reduced by distributions in cash or property
in redemption of Units pursuant to Section 8.2(b). Property, for purposes of
this Section, shall be valued at its fair market value on the date of
contribution or distribution, as the case may be. If the valuation of any
property comprising a Member’s Net Investment shall subsequently be found to be
incorrect, the amount of such Net Investment, the value per Unit assigned in
Section 2.1, and the Priority Amount paid or payable thereon, shall be adjusted
accordingly to reflect such subsequent adjustment in value.
“Priority Amount” shall mean, with respect to a holder of a Preferred Unit
as of any date, an amount, payable monthly, determined by applying to such
holder’s Preferred Unit Net Investment outstanding from time to time an annual
rate of (i) five and three-quarter percent (5.75%) from the date hereof through
August 31, 2003, and (ii) twelve percent (12%) thereafter, to be calculated on a
cumulative (to the extent not distributed annually) and non-compounded basis,
reduced by the amount of all Priority Amounts previously paid. The Priority
Amount shall be due within five (5) days following the end of each calendar
month. The Priority Amount shall not constitute a guaranteed payment for
purposes of Section 707(c) of the Code.
“Pro Rata” shall mean to each Member in proportion to its Units, as
applicable.
“Regulatory Allocation” shall have the meaning set forth in Section 3.2.
“Termination” shall mean the complete distribution of the assets of the
Company to the Members following dissolution and winding up of the Company.
“Unit” shall mean a Preferred Unit or a Common Unit.
1.7. Status of Members.
(a) No Personal Liability. The Members shall not have any personal liability
whatsoever, whether to the Company, to any Member or to the creditors of the
Company, for the debts of the Company or for any of its losses except to the
extent required by the Delaware Act or this Agreement.
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(b) No Management Rights. Except to the extent set forth in this Agreement,
the Members shall not participate in the management or control of the Company’s
business. The Members shall not transact any business for the Company, nor shall
they have the power or authority to act for or bind the Company, in their
capacity as members, all such powers being vested solely and exclusively in the
Managing Member.
(c) Return of Capital. The Members shall not be entitled to the withdrawal
or return of their capital contributions, except to the extent, if any, that
distributions made pursuant to this Agreement or upon Termination of the Company
may be considered as such by law and then only to the extent provided for
herein.
1.8. Meetings of Members.
(a) The Members shall have an annual meeting in each year, on a date
established by the Managing Member. Special meetings of the Members may be
called by the Managing Member.
(b) Any vote, consent or approval of the Members may be accomplished by
written consent in lieu of a meeting signed by Members constituting the required
vote for the action so taken.
(c) Members may participate in a regular or special meeting by, or conduct
the meeting through, the use of any means of communication by which all Members
participating may simultaneously hear each other during the meeting. Any Member
who participates in a meeting in this manner is deemed to be present in person
at the meeting, except where a Member participates in the meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
(d) Unless otherwise specified herein or required by law, (i) the Members
may act by the affirmative approval of a majority of the Members by Common
Units, and (ii) the Preferred Units shall be non-voting.
1.9. Title and Ownership of Property. Title to and ownership of all
property, both real and personal, shall be vested in the Company, and not the
Members individually.
ARTICLE II
CAPITAL
2.1. Units. The interests of the Members in the Company shall be
represented by Units. Units shall be comprised of two series, Series A Preferred
Units (the “Preferred Units”) and Series B Common Units (the “Common Units”),
having respectively the attributes described in this Article and elsewhere in
this Agreement. Schedule 1 sets forth, with respect to each Member, the number
of Preferred Units and Common Units issued to such Member and such Member’s
initial capital contribution (which may be in the form or cash or property (net
of associated liabilities)) (“Initial Capital Contribution”) with respect to
such Units. Each Unit shall be assigned an initial value of One Dollar ($1.00).
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2.2. Contributions. Each Member has made an initial capital contribution to
the Company, in accordance with Section 2.1, in exchange for its Units.
2.3. No Liabilities. Except as otherwise specifically provided in this
Agreement, no Member shall be required to make any further contribution to the
capital of the Company to restore a loss, to discharge any liability of the
Company or for any other purpose, nor shall the Members personally be liable for
any liabilities of the Company except as provided by law or this Agreement.
2.4. Capital Accounts. A Capital Account shall be established for each
Member on the books of the Company. The Capital Account of any Member shall
include the fair market value of the Initial Capital Contribution made by such
Member as set forth in Section 2.1, (a) increased by the amount of all Net
Income allocated to such Member pursuant to Article III; and (b) decreased by
(i) the amount of all money distributed to such Member pursuant to Article IV,
(ii) the amount of all Net Loss allocated to such Member pursuant to Article
III, and (iii) the fair market value of property distributed to such Member by
the Company pursuant to Section 8.2(b) or otherwise. The Capital Accounts of the
Members shall be further adjusted in accordance with the additional rules set
forth in Section l.704-l(b)(2)(iv) of the IRS Regulations, to the extent that
such adjustments are not otherwise affected by the foregoing provisions of this
Section 2.4.
2.5. Withdrawal of Capital. A Member may not withdraw its capital, in whole
or in part, from the Company without the consent of the Managing Member, which
consent may be withheld in the sole discretion of the Managing Member.
ARTICLE III
ALLOCATIONS OF NET INCOME
AND NET LOSS
3.1. Allocations of Net Income and Net Loss. Subject to the provisions of
Section 3.2,
(a) Net Income for any Allocation Period during any Fiscal Year shall be
allocated among the Members:
(i) First, Pro Rata to the Common Unit holders until they have been
allocated an amount of Net Income equal to the amount of Net Loss allocated
under Section 3.1(b)(v);
(ii) Second, Pro Rata to the Preferred Unit holders until they have
received an amount of Net Income equal to the amount of Net Loss allocated under
Section 3.1(b)(iv);
(iii) Third, Pro Rata to the Common Unit holders until they have received
an amount of Net Income equal to the amount of Net Loss allocated under Section
3.1(b)(iii);
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(iv) Fourth, Pro Rata to the Preferred Unit holders until they have
received an amount of Net Income equal to their Priority Amount; and
(v) Fifth, Pro Rata to the Common Unit holders.
(b) Net Loss for any Allocation Period during any Fiscal Year shall be
allocated among the Members:
(i) First, Pro Rata to the Common Unit holders until they have been
allocated an amount of Net Loss equal to the amount of Net Income allocated
under Section 3.1(a)(v);
(ii) Second, Pro Rata to the Preferred Unit holders until they have been
allocated an amount of Net Loss equal to the amount of Net Income allocated
under Section 3.1(a)(iv);
(iii) Third, Pro Rata to the Common Unit holders until they have been
allocated an amount of Net Loss equal to the amount of their positive Capital
Account balances;
(iv) Fourth, Pro Rata to the Preferred Unit holders until they have been
allocated an amount of Net Loss equal to the amount of their positive Capital
Account balances; and
(v) Fifth, Pro Rata to the Common Unit holders.
3.2. Special Allocations.
(a) Minimum Gain Chargeback. Notwithstanding any other provision of this
Article 3, if there is a net decrease in Company Minimum Gain during any Fiscal
Year, the Members shall be specially allocated items of Company income and gain
for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount
equal to such Member’s share of the net decrease in Company Minimum Gain,
determined in accordance with Section 1.704-2(g)(2) of the IRS Regulations.
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant thereto. The
items so allocated shall be determined in accordance with Section 1.704-2(f) of
the IRS Regulations. This Section 3.2(a) is intended to comply with the minimum
gain chargeback requirement in Section 1.704-2(f) of the IRS Regulations and
shall be interpreted consistently therewith.
(b) Member Nonrecourse Debt Minimum Gain Chargeback. Notwithstanding any
other provision of this Article 3, except Section 3.2(a), if there is a net
decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member
Nonrecourse Debt during any Fiscal Year, each Member who has a share of the
Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
Debt, determined in accordance with Section 1.704-2(i)(5) of the IRS
Regulations, shall be specially allocated items of Company income and gain for
such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal
to such Member’s share of the net decrease in Member Nonrecourse Debt Minimum
Gain attributable to such Member Nonrecourse Debt, determined in accordance with
Section 1.704-2(i)(4) of the IRS Regulations. Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Member pursuant thereto. The items so allocated shall be
determined in accordance with Section 1.704-2(i)(4) of the IRS Regulations. This
Section 3.2(b) is intended to comply with the minimum gain chargeback
requirement in such Section of the IRS Regulations and shall be interpreted
consistently therewith.
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(c) Qualified Income Offset. In the event any Member unexpectedly receives
any adjustments, allocations, or distributions described in paragraphs (4), (5)
and (6) of Section 1.704-1(b)(2)(ii)(d) of the IRS Regulations, items of Company
income and gain shall be specially allocated to such Members in an amount and
manner sufficient to eliminate, to the extent required by such Regulations, the
Adjusted Capital Account Deficit of such Members as quickly as possible,
provided that an allocation pursuant to this Section 3.2(c) shall be made only
if and to the extent that such Member would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article 3 have been
tentatively made as if this Section 3.2(c) were not in the Agreement.
(d) Nonrecourse Deductions. Nonrecourse Deductions shall be allocated to
the Members in accordance with their respective Units.
(e) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for
any Fiscal Year or other period shall be specially allocated to the Member who
bears the economic risk of loss with respect to the Member Nonrecourse Debt to
which such Member Nonrecourse Deductions are attributable in accordance with
Section 1.704-2(i)(1) of the IRS Regulations.
(f) Limitation on Allocation of Net Loss. In no event shall Net Loss be
allocated to a Member to the extent such allocation would result in such Member
having an Adjusted Capital Account Deficit at the end of any Fiscal Year. Such
Net Loss shall be allocated to the other Member, provided, however, that
appropriate adjustments shall be made to the allocation of future Net Income in
order to offset such specially allocated Net Loss hereunder.
(g) Section 754 Adjustments. To the extent an adjustment to the adjusted
tax basis of any Company asset pursuant to Code Section 734(b) or Code Section
743(b) is required, pursuant to Section 1.704-1(b)(2)(iv)(m) of the IRS
Regulations, to be taken into account in determining Capital Accounts, the
amount of such adjustment to the Capital Accounts shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be allocated to the
Members in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such Section of the IRS Regulations.
(h) Curative Allocations. The allocations contained in Sections 3.2(a)
through 3.2(g) (the “Regulatory Allocations”) are intended to comply with
certain requirements of the Code and the IRS Regulations. The Members intend
that, to the extent possible, all Regulatory Allocations shall be offset either
by other Regulatory Allocations or with special allocations of other items of
Company income, gain, loss or deduction pursuant to this Section 3.2(h).
Therefore, notwithstanding any other provisions of this Article 3 (other than
the Regulatory Allocations), the Members shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner they
reasonably determine to be appropriate so that, after such offsetting
allocations are made, each Member’s Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Member would have had if the
Regulatory Allocations were not part of this Agreement.
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3.3. Other Allocation Rules.
(a) For purposes of determining the Net Income, Net Loss, or any other
items allocable to any period, Net Income, Net Loss, and any such other items
shall be determined on a daily, monthly, or other basis, as reasonably
determined by the Members using any permissible method under Code Section 706
and the IRS Regulations thereunder.
(b) Except as otherwise provided in this Agreement, all items of Company
income, gain, loss, deduction, and any other allocations not otherwise provided
for shall be divided among the Members for tax purposes in the same proportions
as they share Net Income or Net Loss, as the case may be, for the Fiscal Year.
(c) The Members are aware of the income tax consequences of the allocations
made by this Article 3 and hereby agree to be bound by the provisions of this
Article 3 in reporting their shares of Company income and loss for income tax
purposes.
(d) Solely for purposes of determining a Member’s proportionate share of
the “excess nonrecourse liabilities” of the Company within the meaning of
Section 1.752-3(a)(3) of the IRS Regulations, the interest of the Members in
Company Net Income equals one hundred percent (100%), in proportion to their
Units.
(e) To the extent permitted by Section 1.704-2(h)(3) of the IRS
Regulations, the Members shall treat distributions of Net Proceeds as not
allocable to an increase in Company Minimum Gain to the extent the distribution
does not cause or increase a deficit balance in the Capital Account of any
Member.
3.4. Tax Allocations: Code Section 704(c).
(a) In accordance with Code Section 704(c) and the IRS Regulations
thereunder, income, gain, loss, and deduction with respect to any property
contributed to the capital of the Company shall, solely for tax purposes, be
allocated among the Members so as to take account of any variation between the
adjusted basis of such property to the Company for federal income tax purposes
and its initial Gross Asset Value.
(b) In the event the Gross Asset Value of any Company property is adjusted
pursuant to paragraph (b) of the definition of Gross Asset Value, subsequent
allocations of income, gain, loss, and deduction with respect to such asset
shall take account of any variation between the adjusted basis of such asset for
federal income tax purposes and its Gross Asset Value in the same manner as
under Code Section 704(c) and the IRS Regulations thereunder. The Members hereby
agree that the Company shall elect to use the “traditional method”as described
in Section 1.704-3(b) of the IRS Regulations.
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(c) Any elections or other decisions relating to such allocations shall be
made by the Members, in any manner that reasonably reflects the purpose and
intention of this Agreement. Allocations pursuant to this Section 3.4 are solely
for purposes of federal, state, and local taxes and shall not affect, or in any
way be taken into account in computing, any Member’s Capital Account or share of
Net Income, Net Loss, other items, or distributions pursuant to any provision of
this Agreement.
3.5. Change in Allocations. In the event the tax matters member shall
determine that it is prudent to modify the allocations set forth herein to
comply with the IRS Regulations and/or the Code, the Managing Member shall be
directed to make such modifications, provided that such modifications will not
have a reasonable likelihood of causing a material adverse effect upon any
Member.
ARTICLE IV
DISTRIBUTIONS
4.1. Payment of Expenses. The Company shall pay such expenses as it shall
incur over the course of each Fiscal Year.
4.2. Cash Distributions.
(a) Distributable Cash, if any, for each Fiscal Year shall be distributed
to the Members in the discretion of the Managing Member, subject to the express
provisions of this Agreement, in the following order, to the extent of
Distributable Cash:
(i) First, the holders of Preferred Units shall receive the Priority Amount, Pro
Rata in accordance with Preferred Units held;
(ii) Second, the excess, if any, shall be paid to the holders of Common Units,
Pro Rata in accordance with Common Units held, but only to the extent such
distribution does not cause the fair market value of the Company’s net assets to
be less than 100% of the Preferred Unit Net Investment.
(b) The Net Proceeds of a capital event or a distribution of Company assets
in partial liquidation shall be distributed to the Members, subject to the
express provisions of this Agreement, in the order and to the extent provided
below:
(i) First, the holders of Preferred Units shall receive the Priority Amount, Pro
Rata in accordance with Preferred Units held;
(ii) Second, the balance, if any, shall be paid to the holders of Common Units,
Pro Rata in accordance with Common Units held, but only to the extent such
distribution does not cause the fair market value of the Company’s net assets to
be less than 100% of the Preferred Unit Net Investment;
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(iii) Third, the balance, if any, shall be paid to the holders of Preferred
Units and Common Units in the order specified in Section 8.2(b)(ii) and (iii),
below.
Notwithstanding the foregoing, the Managing Member shall be entitled to retain
for the Company any and all Distributable Cash received during any Fiscal Year
and, if the Managing Member shall deem it to be advisable, to use such funds in
the interim for purposes deemed appropriate and in the best interests of the
Company, including, without limitation, payment of expenses and taxes.
Distributions with respect to a Fiscal Year shall at least equal the income
tax payment requirements of the Members with respect to Net Income allocated to
such Members during such Fiscal Year.
4.3. Distributions In-Kind. If the Company receives an in-kind distribution
or if the Managing Member determines it to be in the best interest of the
Members that assets be distributed in-kind to the Members, the Managing Member
may, in its discretion, make an in-kind distribution to the Members. The
Managing Member shall determine the fair market value of any assets distributed
in-kind. In-kind distributions need not be Pro Rata, provided, that the fair
market value of the combined cash distributions and in-kind distributions made
to a Member is in the proportion that would have been distributed to such Member
had the in-kind distribution been sold and the Net Proceeds thereof been
distributed.
4.4. Restriction on Distributions. Notwithstanding any other provision of
this Agreement, payment of distributions under this Agreement may be made only
to the extent permitted by the Delaware Act. No return of Capital Contributions
shall be made other than in accordance with the express provisions of this
Agreement.
ARTICLE V
MANAGEMENT OF THE COMPANY
5.1. Managing Member. Except as otherwise limited by this Agreement or
applicable law, all powers of the Company shall be exercised by or under the
authority of, and the business and affairs of the Company shall be managed under
the direction of, the Managing Member.
5.2. Powers, Rights and Duties of the Managing Member. The Managing Member
shall have the full, exclusive and complete authority and discretion in the
management and control of the business of the Company and shall make all
decisions affecting the business of the Company. The Managing Member shall have
all of the rights and powers of a manager as provided in the Delaware Act and as
otherwise provided by law.
5.3. Compensation and Expense Reimbursement of the Managing Member. The
Managing Member shall be reimbursed for any expenses incurred by the Managing
Member on behalf of the Company.
5.4. Officers and Employees. The Managing Member may appoint such officers
who shall have such power and authority as may be specified by the Managing
Member. Officers shall serve at the pleasure of the Managing Member. The initial
officers of the Company shall be as set forth on Schedule 2 attached hereto. The
Managing Member (or officers designated by the Managing Member) may hire, fire
and compensate employees of the Company.
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ARTICLE VI
OPERATION OF THE COMPANY
6.1. Books of Account. The Company shall maintain its books and records and
shall determine all items of Net Income and Net Loss and distributions using the
accrual method of accounting in accordance with principles applicable in
determining taxable income or loss for Federal income tax purposes for
partnerships and consistent with accounting methods used by the Company in
determining taxable income or loss for Federal income tax purposes. The Managing
Member may change the Company’s method of accounting. The Company shall also
keep all other records necessary or convenient to record the Company’s business
and affairs.
6.2. Reports. As soon as practicable after the end of each Fiscal Year,
there shall be prepared and delivered to each Member a financial statement for
the Company consisting of the following: (i) income statements and balance
sheets for such Fiscal Year showing separately the computation of Net Income or
Net Loss and (ii) the amount of the distributions to the Members and the effect
of such distributions on the balance sheet of the Company and the Capital
Accounts of each Member. Annually, the Company shall provide a K-1 or equivalent
to each Member.
6.3. Bank Accounts. The bank accounts of the Company shall be maintained in
such bank or banks as may be designated by the Managing Member and withdrawals
from said accounts shall be made as the Managing Member shall determine. There
shall be no commingling of the moneys or funds of the Company with moneys or
funds of any Member or any other entity.
6.4. Tax Matters. The Managing Member shall be the initial “tax matters
member”.
ARTICLE VII
TRANSFER; ADDITIONAL MEMBERS
7.1. Transfer of Shares. No Units shall be transferred, assigned, pledged,
mortgaged or otherwise disposed of, in whole or in part, except in compliance
with applicable securities laws and upon written notice to the Company. The
Company may require from the transferor/transferee such documentation as the
Company deems reasonably necessary, prior to registering such transfer on the
books of the Company. Transferred Units shall continue to be covered by this
Agreement and the Put/Call Agreement dated as of the date hereof. The Common
Units and the Preferred Units have not been registered under the Securities Act
of 1933 or under the securities laws of any state. They may only be acquired for
investment and not with the view to the distribution thereof within the meaning
of the Securities Act of 1933. They may not be transferred in the absence of an
effective registration statement applicable to said Units except with an opinion
of counsel of the holder reasonably satisfactory to the Company to the effect
that registration is not required.
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7.2. Certificate Legend. If approved by the Managing Member, Units may be
evidenced by certificates. All certificates issued by the Company shall bear the
following legend:
THE UNITS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF THE
COMPANY’S LIMITED LIABILITY COMPANY AGREEMENT DATED AS OF JULY 1, 2001 AND THE
PUT/CALL AGREEMENT DATED AS OF JULY 1, 2001. A DUPLICATE COPY OF EACH OF THE
LIMITED LIABILITY COMPANY AGREEMENT AND THE PUT/CALL AGREEMENT IS ON FILE AT THE
OFFICE OF THE COMPANY.
7.3. Admission of Additional Members. Additional Members may only be
admitted to the Company upon the affirmative vote of the Managing Member. Such
admission will be on such terms and conditions as may be agreed to by the
Managing Member. No person shall be admitted as an additional Member unless such
person agrees to be bound by the terms of this Agreement. Upon the admission (or
withdrawal) of a Member, the Capital Account of each Member shall be adjusted in
accordance with Section 1.704-1(b)(2)(iv)(f) of the IRS Regulations.
ARTICLE VIII
DISSOLUTION
8.1. Events Causing Dissolution.
(a) The happening of any one of the following events shall cause the
dissolution of the Company:
(i) the determination by Members holding a majority of the Common Units and a
majority of the Preferred Units, each voting as a separate class, to dissolve
the Company, or
(ii) the expiration of the term of the Company described in Section 1.5 hereof.
(b) The death, insanity, bankruptcy, receivership, liquidation or
dissolution of a Member shall not cause a dissolution of the Company. The rights
of such Member to share in the profits and losses of the Company, to receive
distributions of Company funds and to assign a Unit shall, on the happening of
such an event, devolve upon such Member’s successors and assigns, subject to the
terms and conditions of this Agreement; provided, however, that in no event will
any such successor or assign become a substituted Member, except as provided in
Section 7 hereof.
8.2. Winding Up of Company Affairs.
(a) In the event of the dissolution of the Company for any reason, the
Managing Member shall proceed promptly to wind up the affairs of the Company.
The Managing Member shall have full right and unlimited discretion to determine
the time, manner, and terms of any sale or sales of Company property pursuant to
such winding up having due regard to the activity and condition of the relevant
market and general financial and economic conditions, and having due regard for
such Managing Member’s fiduciary obligations to the Company and the Members.
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(b) Upon the termination, winding-up or liquidation of the Company, all the
debts and liabilities of the Company shall be paid or provided for, and the
Company’s net assets shall be distributed to the Members in liquidation of their
interests in the Company, in the following order:
(i) First, the holders of Preferred Units, in payment of the Priority Amount,
shall receive an amount equal to the Priority Amount, Pro Rata in accordance
with Preferred Units held;
(ii) Second, the holders of Preferred Units shall receive an amount equal to,
and Pro Rata in accordance with, their Net Investment;
(iii) Finally the balance, if any, shall be paid to the holders of Common Units,
Pro Rata in accordance with Common Units held.
Distributions pursuant to this Section 8.2(b) may be made in cash or property or
both, in the discretion of the Managing Member; provided, however, that any
distributions of property made pursuant hereto shall be made Pro Rata (based on
the fair market value of such property) among the Members in proportion to the
respective total distributions being received.
The Managing Member shall have the right, in its discretion, to place
assets of the Company into a liquidating trust or other similar entity.
(c) The Managing Member shall have the authority to execute and record any
and all documents required in connection with the dissolution, winding up and
Termination of the Company. Upon completion of the distribution of Company
property as provided in Section 8.2(b) hereof, the Company shall be terminated,
and the Managing Member shall cause the Certificate of Formation and all
qualifications of the Company in jurisdictions to be canceled and shall take
such other action as may be necessary to terminate the Company.
8.3. Distribution on Liquidation. Notwithstanding any other provision of
this Agreement, in the event of a liquidation, the Managing Member shall make
liquidating distributions within the period prescribed in the IRS Regulations
under Section 704(b) of the Code.
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ARTICLE IX
INDEMNIFICATION
9.1. Indemnification. (a) Any person who was or is a party or threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Company) by reason of the fact that he/she
or it is or was the Managing Member, an officer, employee or agent of the
Company or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise (including employee benefit plans) (hereinafter an
“indemnitee”), shall be indemnified and held harmless by the Company to the
fullest extent authorized by the Delaware Act, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Company to provide broader indemnification than
permitted prior thereto), against expenses (including attorneys’fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such indemnitee in connection with such action, suit or proceeding, if the
indemnitee acted in good faith and in a manner he/she or it reasonably believed
to be in or not opposed to the best interests of the Company, and with respect
to any criminal action or proceeding, had no reasonable cause to believe such
conduct was unlawful. The termination of the proceeding, whether by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he or she reasonably believed to be in
or not opposed to the best interests of the Company and, with respect to any
criminal action or proceeding, had reasonable cause to believe such conduct was
unlawful.
(b) Any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor by reason of the fact that he/she or
it is or was the Managing Member, an officer, employee or agent of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise (including employee benefit plans) shall be indemnified and
held harmless by the Company to the fullest extent authorized by the Delaware
Act, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Company to
provide broader indemnification than permitted prior thereto), against expenses
(including attorneys’fees) actually and reasonably incurred by him or her in
connection with the defense or settlement of such action or suit if he or she
acted in good faith and in a manner he/she or it reasonably believed to be in or
not opposed to the best interests of the Company and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Company unless
and only to the extent that the court in which such suit or action was brought,
shall determine, upon application, that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
(c) All reasonable expenses incurred by or on behalf of the indemnitee in
connection with any suit, action or proceeding, may be advanced to the
indemnitee by the Company.
(d) The rights to indemnification and to advancement of expenses conferred
in this article shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, this Agreement, agreement, vote of
Members or otherwise.
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(e) The indemnification and advancement of expenses provided by this
article shall continue as to a person who has ceased to be the Managing Member,
an officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
ARTICLE X
CONFIDENTIALITY
10.1. Confidentiality. In the course of a Member’s membership in the
Company, such Member may have access to trade secrets and confidential
information which is not available to the general public. Such information shall
be regarded as confidential and shall not be disclosed to any person, firm or
corporation unless so authorized in writing by the Managing Member.
ARTICLE XI
GENERAL
11.1. Delaware Law. This Agreement shall be construed and interpreted in
accordance with the laws of Delaware, without regard to principles of conflict
of laws.
11.2. Integration; Amendments. This Agreement is the entire agreement among
the parties with respect to the subject matter herein. This Agreement may only
be amended in writing by a majority of the Common Units and a majority of the
Preferred Units, each voting as a separate class.
11.3. Notices. All notices required or permitted by this Agreement shall be
in writing and shall be sent by personal delivery, including recognized
overnight courier service, or certified first class mail, postage prepaid, or
facsimile addressed to the address of such Member set forth on Schedule 1
attached hereto (or to such other address as shall from time to time be supplied
in writing by notice to the Members in accordance with this Section 11.3).
Notices given pursuant to this Section shall be deemed given when received by
personal delivery or facsimile or 5 days after the date when mailed at a United
States Post Office box or branch office.
11.4. Severability. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby, and each provision
hereof shall be validated and shall be enforced to the fullest extent permitted
by law.
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11.5. Power of Attorney. Provided that the action to be taken is in
accordance with the terms of this Agreement, each Member, by executing this
Agreement, hereby makes, constitutes and appoints the Managing Member with full
power of substitution, the Member’s true and lawful attorney, for the Member and
in the Member’s name, place and stead for the Member’s use and benefit to
execute, acknowledge, swear to, file and record on the books and records of the
Company all certificates, instruments, documents and agreements which the
Managing Member determines in its sole and absolute discretion are necessary or
desirable to effectuate the provisions of this Agreement. The foregoing power of
attorney is deemed to be coupled with an interest and is irrevocable. Such power
of attorney may be exercised by the Managing Member either by signing separately
as attorney-in-fact, or by listing all of the Members executing any instrument
with the signature of the Managing Member as attorney-in-fact for all of them.
Such power of attorney will survive the death, incapacity or dissolution of the
Member or the assignment of the Member’s interest in the Company. Any person
dealing with the Managing Member may conclusively presume and rely upon the fact
that any such instrument executed by such agent and attorney-in-fact is
authorized, regular and binding without further inquiry. The Member hereby
waives any and all defenses which may be available to contest, negate or
disaffirm the action of the Managing Member taken in good faith under such power
of attorney.
11.6. Miscellaneous.
(a) Titles and Captions. All article or section titles or captions in this
Agreement shall be for convenience only, shall not be deemed part of this
Agreement and shall in no way define, limit, extend or describe the scope or
intent of any provisions hereof. Except as specifically provided otherwise,
references to “Articles” and “Sections” are to articles and sections of this
Agreement.
(b) Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
(c) Further Action. The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.
(d) Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
(e) Creditors. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Company.
(f) Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute a waiver
of any such breach or any other covenant, duty, agreement or condition.
(g) Counterparts. This Agreement may be executed in counterparts, all of
which together shall constitute one and the same agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
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Martin Tuchman
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Raoul Witteveen
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Thomas Birnie
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Graham Owen
PRINCETON INTERNATIONAL
PROPERTIES
By:
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Name:
Title:
RADCLIFF GROUP, INC.
By:
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Name:
Title:
TRAC LEASE INC.
By:
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Name:
Title:
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Exhibit F
FORM OF PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made as of the day of September, 2000, by and
between STAAR Surgical Company (the "Company"), a corporation organized under
the laws of the State of Delaware, with its principal offices at 1911 Walker
Avenue, Monrovia, California 91016, and the purchaser whose name and address is
set forth on the signature page hereof (the "Purchaser").
IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Purchaser agree as follows:
1. Sale and Purchase of the Shares. The Company has authorized the sale of
up to 1,500,000 shares (the "Shares") of common stock, par value $.01 per share
(the "Common Stock"), of the Company on the terms and subject to the conditions
set forth in this Agreement. At the Closing (as defined in Section 3), the
Company will sell to the Purchaser, and the Purchaser will buy from the Company,
upon the terms and conditions contained in this Agreement, the number of Shares
specified below such Purchaser's name on the signature page attached hereto at
the price set forth thereto.
2. Other Purchasers. The Company intends to enter into this same form of
purchase agreement with certain other investors (the "Other Purchasers") and
expects to complete sales of the Shares to them. The Purchaser's obligations
hereunder are expressly not subject to or conditioned on the purchase of the
Shares by any or all of the Other Purchasers.
3. Closing; Delivery; Conditions.
3.1 Closing. The purchase and sale of the Shares (the "Closing") shall
occur as soon as practicable after the execution of this Agreement by the
Company and the Purchasers at the time and location (the "Closing Date") agreed
upon by the Company and the Placement Agent (as defined herein). The Placement
Agent will promptly notify the Purchasers of the Closing Date by facsimile
transmission or otherwise.
3.2 Delivery of the Shares. Subject to the satisfaction of the conditions
set forth below, at the Closing, the Company will deliver to each Purchaser one
or more stock certificates, registered in the name of such Purchaser,
representing the number of Shares to be purchased by such Purchaser as set forth
opposite such Purchaser's name on the signature page hereto and bearing an
appropriate legend stating that the Shares have not been registered under the
Securities Act (as defined herein) and cannot be sold unless registered under
the Securities Act, or an exemption from registration is available. Such
deliveries shall be made against payment of the purchase price therefore (the
"Purchase Price") by wire transfers to the respective accounts as designated in
writing by the Company, of immediately available funds in the respective amounts
set forth on the signature page hereto, as the case may be, at least two
business days prior to the Closing. The name(s) in which the stock certificate
are to be registered are set forth in the Stock Certificates Questionnaire
attached hereto as part of Appendix I.
3.3 Closing Conditions.
(a) The Company's respective obligations to complete the purchase and sale
of the Shares and deliver the stock certificates representing the Shares to the
Purchasers at the Closing shall be subject to the following conditions, any one
or more of which may be waived by the Company:
(1) receipt by the Company of same-day funds in the full amount of the
Purchase Price for the Shares being purchased hereunder; and
(2) the accuracy of the representations and warranties made by the
Purchasers and the fulfillment of those obligations of the Purchasers to be
fulfilled prior to the Closing.
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(b) The Purchaser's obligation to accept delivery of such stock
certificate(s) and to pay for the Shares evidenced thereby shall be subject to
the accuracy in all material respects of the representations and warranties made
by the Company herein and the fulfillment in all material respects of those
obligations of the Company to be fulfilled prior to the Closing.
4. Certain Definitions. Unless the context otherwise requires, the terms
defined in this Section 4 shall have the meaning herein specified for purposes
of this Agreement.
"Agreement" means this agreement, including the exhibits and appendices
thereto.
"Agreements" means this Agreement and the agreements executed by the Other
Purchasers, collectively.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended
from time to time.
"Material Adverse Change" means a material adverse change in the condition
(financial or otherwise), properties, business, or results of operations of the
Company and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on the condition
(financial or otherwise), properties, business, or results of operations of the
Company and its Subsidiaries taken as a whole.
"Placement Agent" means CIBC World Markets Corp., and Adams, Harkness &
Hill, Inc.
"Purchasers" means the Purchaser and the Other Purchasers.
"Private Placement Memorandum" means the Confidential Private Placement
Memorandum dated [September XX, 2000], including all exhibits thereto.
"Registration Statement" means the registration statement on Form S-3, as
may be amended, that will be filed pursuant to the Private Placement Memorandum
with the Commission covering the re-sale of the Shares.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
5. Representations, Warranties and Covenants of the Company. The Company
hereby represents and warrants to, and covenants with, the Purchaser as follows:
5.1 Organization and Qualification. The Company (and each such subsidiary
or other entity controlled directly or indirectly by the Company (the
"Subsidiaries") is a corporation or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization. The Company and each of its subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation (or
other entity) in each jurisdiction in which the nature of the business conducted
by it or location of the assets or properties, owned, leased or licensed by it
requires such qualification, except where failure to so qualify or to be in good
standing would not have a Material Adverse Effect.
5.2 Authorized Capital Stock. The Company had the authorized and
outstanding capital stock set forth under the heading "Capitalization" in the
Private Placement Memorandum, as of the date set forth therein. All of the
issued and outstanding shares of the Company's Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable, have been
issued in compliance in all material respects with all federal and state
securities laws, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities, and conform in
all material respects to the description thereof contained in the Private
Placement Memorandum. Except as disclosed in or contemplated by the Private
Placement Memorandum, the Company does not have outstanding any options to
purchase, or any preemptive rights or other rights to subscribe for or to
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purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock.
5.3 Shares. The Shares have been duly authorized and, when issued,
delivered and paid for in the manner set forth in the Agreements, will be duly
authorized, validly issued, fully paid and nonassessable, and will conform in
all material respects to the description thereof set forth in the Private
Placement Memorandum. No preemptive rights or other rights to subscribe for or
purchase exist with respect to the issuance and sale of the Shares by the
Company pursuant to this Agreement. No stockholder of the Company has any right
(which has not been waived or has not expired by reason of lapse of time
following notification of the Company's intent to file the Registration
Statement) to require the Company to register the sale of any shares owned by
such stockholder under the Securities Act in the Registration Statement. No
further approval or authority of the stockholders or the Board of Directors of
the Company will be required for the issuance and sale of the Shares to be sold
by the Company as contemplated herein.
5.4 Corporate Acts and Proceedings. The Company has full legal right,
corporate power and authority to enter into the Agreements and perform the
transactions contemplated hereby and thereby. The Agreements have been duly and
validly authorized, executed and delivered by the Company. The execution,
delivery and performance of the Agreements by the Company or its Subsidiaries
and the consummation of the transactions herein contemplated will not violate
any provision of the organizational documents of the Company and will not result
in the creation of any lien, charge, security interest or encumbrance upon any
assets of the Company pursuant to the terms or provisions of, or will not
conflict with, result in the breach or violation of, or constitute, either by
itself or upon notice or the passage of time or both, a default under any
agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit
or other instrument to which the Company or the Subsidiaries are a party or by
which the Company or the Subsidiaries or their respective properties may be
bound or affected and in each case which would have a Material Adverse Effect
or, to the Company's knowledge, under any statute or any authorization,
judgment, decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to the Company or
its Subsidiaries or their respective properties. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required for the execution and delivery of
this Agreement or the consummation of the transactions contemplated by this
Agreement, except for compliance with the Blue Sky laws and federal securities
laws applicable to the offering of the Shares. Upon their execution and
delivery, and assuming the valid execution thereof by the respective Purchasers
and payment of their respective Purchase Price, the Agreements will constitute
valid and binding obligations of the Company, enforceable in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' and contracting parties' rights generally and except
as enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except as the indemnification agreements of the Company in Section 9 hereof
may be legally unenforceable.
5.5 Contracts. The contracts described in the Private Placement Memorandum
as being in effect on the date hereof that are material to the Company, are in
full force and effect on the date hereof; and neither the Company nor its
Subsidiaries, nor, to the Company's knowledge, is any other party in breach of
or default under any of such contracts which would have a Material Adverse
Effect.
5.6 No Actions. Other than as described in the Private Placement
Memorandum, there are no legal or governmental actions, suits or proceedings
pending or, to the Company's knowledge, overtly threatened to which the Company
or its Subsidiaries are or may be a party or of which property owned or leased
by the Company or its Subsidiaries are or may be the subject, or related to
environmental or discrimination matters, which actions, suits or proceedings,
individually or in the aggregate, might prevent or might reasonably be expected
to materially and adversely affect the transactions
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contemplated by this Agreement or result in a Material Adverse Change; and no
labor disturbance by the employees of the Company exists, to the Company's
knowledge, or is imminent which might reasonably be expected to have a Material
Adverse Effect. Neither the Company nor its Subsidiaries is a party to or
subject to the provisions of any material injunction, judgment, decree or order
of any court, regulatory body administrative agency or other governmental body.
5.7 Properties. The Company and each of its Subsidiaries has good and
marketable title in fee simple to all real property and good and marketable
title to all personal property reflected as owned by them in the consolidated
financial statements included in the Private Placement Memorandum. Such property
is not subject to any lien, mortgage, pledge, charge or encumbrance of any kind
except (i) those, if any, reflected in such consolidated financial statements
(including the notes thereto), or (ii) those which are not material in amount
and do not adversely affect the use of such property by the Company or its
Subsidiaries. Any property or building held under lease by the Company or its
Subsidiaries is held under valid, existing and enforceable leases, free and
clear of all liens, encumbrances, claims, and defects except such as would not
have a Material Adverse Effect. Except as disclosed in the Private Placement
Memorandum and except for the property referred to in Section 5.8, each of the
Company and its Subsidiaries owns or leases all such properties as are necessary
to its operations as now conducted.
5.8 Proprietary Rights. Except as disclosed in the Private Placement
Memorandum, (i) to the Company's knowledge, the Company has filed for or holds
rights, licenses or options for the inventions, patent applications, patents,
trademarks (both registered and unregistered), trade names, copyrights and trade
secrets necessary for the conduct of the Company's business as currently
conducted (collectively, the "Intellectual Property"); and (ii) to the Company's
knowledge (for each of the following subsections (a) through (e)): (a) there are
no third parties who have any ownership rights to any Intellectual Property that
is owned by, or has been licensed to the Company for the products described in
the Private Placement Memorandum in the case of any business the Company has or
intends to conduct during the year ending December 31, 2000 that would preclude
the Company from conducting its business as currently conducted and as the
Private Placement Memorandum indicates the Company contemplates conducting;
(b) there are currently no sales of any products that would constitute an
infringement by a third party of any Intellectual Property owned, licensed or
optioned by the Company; (c) there is no pending or threatened action, suit,
proceeding or claim by others challenging the rights of the Company in or to any
Intellectual Property owned, licensed or optioned by the Company, other than
claims which would not be reasonably expected to have a Material Adverse Effect;
(d) there is no pending or threatened action, suit, proceeding or claim by
others challenging the validity or scope of any Intellectual Property owned,
licensed or optioned by the Company, other than claims which would not be
reasonably expected to have a Material Adverse Effect; and (e) there is no
pending or threatened action, suit, proceeding or claim by others that the
Company infringes or otherwise violates any patent, trademark, copyright, trade
secret or other proprietary right of others, other than claims which would not
be reasonably expected to have a Material Adverse Effect.
5.9 No Material Adverse Change. Since June 30, 2000, and except as
disclosed in the Private Placement Memorandum, (i) neither the Company nor its
Subsidiaries have incurred any material liabilities or obligations, indirect, or
contingent, or entered into any material verbal or written agreement or other
transaction which is not in the ordinary course of business or which could
reasonably be expected to result in a material reduction in the future earnings
of the Company; (ii) neither the Company nor its Subsidiaries have sustained any
material loss or interference with its businesses or properties from fire,
flood, windstorm, accident or other calamity not covered by insurance;
(iii) neither the Company nor its Subsidiaries have paid or declared any
dividends or other distributions with respect to its capital stock and the
Company and its Subsidiaries are not in default in the payment of principal or
interest on any outstanding debt obligations; (iv) there has not been any change
in the capital stock of the Company or its Subsidiaries other than the sale of
the Shares
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hereunder and shares or options issued pursuant to employee equity incentive
plans or purchase plans approved by the Company's or the Subsidiaries' Board of
Directors, as the case may be, or indebtedness material to the Company or its
Subsidiaries (other than in the ordinary course of business); and (v) there has
not been a Material Adverse Change.
5.10 Financial Statement. BDO Seidman, LLP (a) have expressed their
opinion with respect to the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999, (b) have not given the Company any indication that they will not include
such opinion in the Registration Statement and the Prospectus, and (c) have
confirmed to the Company that they are independent accountants as required by
the Securities Act and the rules and regulations promulgated thereunder.
5.11 No Defaults. Except as to defaults, violations and breaches which
individually or in the aggregate would not be material to the Company and its
Subsidiaries, taken as a whole, neither the Company nor its Subsidiaries are in
violation or default of any provision of their certificate of incorporation or
bylaws, or other organizational documents, or in breach of, or default with
respect to, any provision of any material agreement filed as an exhibit to the
Company's filings with the Commission, any judgment, decree, order, mortgage,
deed of trust, lease, franchise, license, indenture, or permit to which it is a
party or by which it or any of its properties are bound; and there does not
exist any state of fact which, with notice or lapse of time or both, would
constitute an event of breach or default on the part of the Company or the
Subsidiaries as defined in such documents, except such breaches or defaults
which individually or in the aggregate would not be material to the Company and
its Subsidiaries, taken as a whole.
5.12 Compliance. Neither the Company nor its Subsidiaries have been
advised, and neither has any reason to believe, that it is not conducting its
business in compliance with all applicable laws, rules and regulations of the
jurisdictions in which it is conducting business, including, without limitation,
all applicable local, state and federal environmental laws and regulations;
except where failure to be so in compliance therewith would not have a Material
Adverse Effect.
5.13 Taxes. Each of the Company and its Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns which are
required to be filed, or has received extensions thereof, and has paid or
accrued all taxes shown as due thereon, and neither the Company nor its
Subsidiaries has knowledge of a tax deficiency which has been or might be
asserted or threatened against it which could have a Material Adverse Effect. On
the Closing Date, all stock transfer or other taxes (other than income taxes)
which are required to be paid in connection with the sale and transfer of the
Shares to be sold to the Purchaser hereunder will be, or will have been, fully
paid or provided for by the Company and all laws imposing such taxes will be or
will have been fully complied with.
5.14 Books, Records and Accounts. The books, records and accounts of the
Company and its Subsidiaries accurately and fairly reflect, in reasonable
detail, the transactions in, and dispositions of, the assets of, and the results
of operations of, the Company and its Subsidiaries. The Company and each of its
Subsidiaries maintains a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
5.15 Offering Materials. The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection with
the offering and sale of the Shares other than the Private Placement Memorandum
or any amendment or supplement thereto. The Company has not in the past nor will
it hereafter take any action independent of the Placement Agent to sell, offer
for
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sale or solicit offers to buy any securities of the Company which would bring
the offer, issuance or sale of the Shares, as contemplated by this Agreement,
within the provisions of Section 5 of the Securities Act, unless such offer,
issuance or sale was or shall be within the exemptions of Section 4 of the
Securities Act.
5.16 Insurance. The Company maintains insurance of the type and in the
amount that the Company reasonably believes is adequate for its business,
including, but not limited to, insurance covering all real and personal property
owned or leased by the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against by similarly situated
companies, all of which insurance is in full force and effect.
5.17 Investment Company. The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company Act of 1940, as
amended.
5.18 Contributions. At no time since its incorporation has the Company,
directly or indirectly, (i) used any corporate or other funds for gifts,
entertainment or other unlawful contributions to any candidate for public
office, or failed to disclose fully any contribution in violation of law, or
(ii) made any payment to any federal or state governmental officer or official,
or other person charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof.
5.19 Additional Information. The Company represents and warrants that the
information contained in the following documents, which the Placement Agent has
furnished to the Purchaser, or will furnish prior to the Closing, is and will be
true and correct in all material respects as of the respective dates that they
were filed with the Commission, or their final dates, if not filed with the
Commission and does not and will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading:
(1) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999;
(2) the Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2000;
(3) the Company's Proxy Statement for the 2000 Annual Meeting of
Stockholders;
(4) the Company's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2000;
(5) the Registration Statement;
(6) the Private Placement Memorandum, including all addenda and exhibits
thereto (other than the Appendices); and
(7) all other documents, if any, filed by the Company with the Commission
since June 30, 2000 pursuant to the reporting requirements of the Exchange Act.
5.20 Legal Opinions. Prior to the Closing, Pollet & Richardson, counsel to
the Company, will deliver its legal opinion to the Placement Agent (stating that
each of the Purchasers may rely thereon as if directly addressed to each of
them), substantially in such form as such counsel rendering the opinion and the
Placement Agent may agree upon (the "Opinion Letter").
6. Representations, Warranties and Covenants of the Purchaser.
6.1 Investment Intent and Expense. The Purchaser represents and warrants
to, and covenants with, the Company that: (i) the Purchaser is knowledgeable,
sophisticated and experienced in making,
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and is qualified to make, decisions with respect to investments in shares
representing an investment decision like that involved in the purchase of the
Shares, including investments in securities issued by the Company, and has
requested, received, reviewed and considered all information it deems relevant
in making an informed decision to purchase the Shares; (ii) the Purchaser is
acquiring the number of Shares set forth on the signature page hereto in the
ordinary course of its business and for its own account for investment (as
defined for purposes of the Hart-Scott-Rodino Antitrust Improvement Act of 1976
and the regulations thereunder) only and with no present intention of
distributing any of such Shares or any arrangement or understanding with any
other persons regarding the distribution of such Shares within the meaning of
Section 2(11) of the Securities Act; (iii) the Purchaser will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Shares except in compliance with the Act and the Rules and Regulations; (iv) the
Purchaser has completed or caused to be completed the Registration Statement
Questionnaire and the Stock Certificate Questionnaire, both attached hereto as
Appendix I, for use in preparation of the Registration Statement, and the
answers thereto are true, correct and complete as of the date hereof and will be
true. correct and complete as of the effective date of the Registration
Statement; (v) the Purchaser has, in connection with its decision to purchase
the number of Shares set forth on the signature page hereto, relied solely upon
the Private Placement Memorandum and the documents included therein and the
representations and warranties of the Company contained herein; and (vi) the
Purchaser is a "qualified institutional buyer" within the meaning of Rule 144A
promulgated under the Securities Act.
6.2 Restrictions on Transfer. The Purchaser hereby covenants with the
Company not to make any sale of the Shares without satisfying the prospectus
delivery requirement under the Securities Act, and the Purchaser acknowledges
and agrees that such Shares are not transferable on the books of the Company
unless the certificate submitted to the transfer agent evidencing the Shares is
accompanied by a separate officer's certificate: (i) in the form of Appendix II
hereto, (ii) executed by an officer of, or other authorized person designated
by, the Purchaser, and (iii) to the effect that (A) the Shares have been sold in
accordance with the Registration Statement, all federal laws and requirements,
including without limitation the Securities Act and the rules and regulations
promulgated thereunder and any applicable state securities or blue sky laws and
(B) the requirement of delivering a current prospectus has been satisfied. The
Purchaser acknowledges that there may occasionally be times when the Company
determines the use of the prospectus forming a part of the Registration
Statement should be suspended until such time as an amendment or supplement to
the Registration Statement or the Prospectus has been filed by the Company and
any such amendment to the Registration Statement is declared effective by the
Commission, or until such time as the Company has filed an appropriate report
with the Commission pursuant to the Exchange Act. The Purchaser hereby covenants
that it will not sell any Shares pursuant to said prospectus during the period
commencing at the time at which the Company gives the Purchaser written notice
of the suspension of the use of said prospectus and ending at the time the
Company gives the Purchaser written notice that the Purchaser may thereafter
effect sales pursuant to said prospectus and the Purchaser hereby covenants that
it will thereafter solely utilize said amended or supplemented prospectus for
the sale of Shares. The Purchaser further covenants to notify the Company
promptly of the sale of any or all of its Shares.
6.3 Authorization. The Purchaser further represents and warrants to, and
covenants with, the Company that (i) the Purchaser has full right, power,
authority and capacity to enter into this Agreement and to consummate the
transactions contemplated hereby and has taken all necessary action to authorize
the execution, delivery and performance of this Agreement, and (ii) upon the
execution and delivery of this Agreement, this Agreement shall constitute a
valid and binding obligation of the Purchaser enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and
7
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except as the indemnification agreements of the Purchaser in Section 9 hereof
may be legally unenforceable.
6.4 Restriction on Sales, Short Sales and Hedging Transactions. Purchaser
represents and agrees that during the period of five business days immediately
prior to the execution of this Agreement by Purchaser, Purchaser did not, and
from such date through the effectiveness of the Registration Statement (as
defined below), Purchaser will not, directly or indirectly, execute or effect or
cause to be executed or effected any short sale, option or equity swap
transactions in or with respect to the Common Stock or any other derivative
security transaction the purpose or effect of which is to hedge or transfer to a
third party all or any part of the risk of loss associated with the ownership of
the Shares by the Purchaser; provided however, that the Purchaser shall be
allowed to effectuate such above described transactions, but only up to the
aggregate number of Shares purchased by such Purchaser hereunder, and then only
in compliance with all applicable state and federal securities laws and the
rules and regulations thereunder.
6.5 No Legal, Tax or Investment Advice. Purchaser understands that nothing
in the Private Placement Memorandum, the Agreement, the Opinion Letter or any
other materials presented to Purchaser in connection with the purchase and sale
of the Shares constitutes legal, tax or investment advice. Purchaser has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of the
Shares.
6.6 Further Agreements of Purchaser.
(a) The Purchaser understands that the Shares are being offered and sold to
it in reliance upon specific exemptions from the registration requirements of
the Securities Act, the rules and regulations promulgated thereunder, and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Purchaser's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth herein
in order to determine the availability of such exemptions and the eligibility of
the Purchaser to acquire the Shares.
(b) The Purchaser understands that its investment in the Shares involves a
significant degree of risk and that the market price of the Common Stock has
been volatile and that no representation is being made as to the future value of
the Common Stock. The Purchaser has the knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of an
investment in the Shares and has the ability to bear the economic risks of an
investment in the Shares.
(c) The Purchaser understands that no United States federal or state agency
or any other government or governmental agency has passed upon or made any
recommendation or endorsement of the Shares.
(d) The Purchaser understands that, until such time as the Registration
Statement has been declared effective or the Shares may be sold pursuant to
Rule 144 under the Securities Act without any restriction as to the number of
securities as of a particular date that can then be immediately sold, the Shares
will bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for the
Shares):
"The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended. The securities may not be sold,
transferred or assigned in the absence of an effective registration statement
for the securities under said Act, or an opinion of counsel, in form, substance
and scope reasonably acceptable to the Company, that registration is not
required under said Act or unless sold pursuant to Rule 144 under said Act."
(e) The Purchaser's principal executive offices are in the jurisdiction set
forth immediately below the Purchaser's name on the signature pages hereto.
8
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(f) The Purchaser hereby covenants with the Company not to make any sale of
the Shares under the Registration Statement without effectively causing the
prospectus delivery requirement under the Securities Act to be satisfied, and
the Purchaser acknowledges and agrees that such Shares are not transferable on
the books of the Company unless the certificate submitted to the transfer agent
evidencing the Shares is accompanied by a separate Purchaser's Certificate:
(i) in the form of Appendix II hereto, (ii) executed by an officer of, or other
authorized person designated by, the Purchaser, and (iii) to the effect that
(A) the Shares have been sold in accordance with the Registration Statement, the
Securities Act and any applicable state securities or blue sky laws and (B) the
requirement of delivering a current prospectus has been satisfied. The Purchaser
acknowledges that there may occasionally be times when the Company must suspend
the use of the prospectus forming a part of the Registration Statement until
such time as an amendment to the Registration Statement has been filed by the
Company and declared effective by the Commission, or until such time as the
Company has filed an appropriate report with the Commission pursuant to the
Exchange Act. The Purchaser hereby covenants that it will not sell any Shares
pursuant to said prospectus during the period commencing at the time at which
the Company gives the Purchaser written notice of the suspension of the use of
said prospectus and ending at the time the Company gives the Purchaser written
notice that the Purchaser may thereafter effect sales pursuant to said
prospectus. The Purchaser further covenants to notify the Company promptly of
the sale of any or all of its Shares and the Purchaser hereby covenants that it
will thereafter solely utilize said amended or supplemented prospectus for the
sale of Shares.
(g) Notwithstanding anything to the contrary contained herein, at any time
after the effectiveness of the Registration Statement, the Company may refuse to
permit the Purchaser to resell any Shares pursuant to the Registration Statement
for a period not to exceed ninety (90) days (the "Blackout Period"); provided
however, that to exercise this right, the Company must deliver a certificate in
writing to the Purchaser to the effect that a delay in such sale is necessary
because a sale pursuant to such Registration Statement in its then-current form
would not be in the best interests of the Company and its stockholders due to
disclosure obligations of the Company. Notwithstanding the foregoing, the
Company shall not be entitled to exercise its right to block such sales more
than three (3) times during the effectiveness of the Registration Statement or
more than one (1) time in any four-month period. Each Purchaser hereby covenants
and agrees that it will not sell any Shares pursuant to the Registration
Statement during such Blackout Periods.
7. Survival of Representations, Warranties and Agreements. Notwithstanding
any investigation made by any party to this Agreement or by the Placement Agent,
all covenants, agreements, representations and warranties made by the Company
and the Purchaser herein and in the certificates for the Shares delivered
pursuant hereto shall survive the execution of this Agreement, the delivery to
the Purchaser of the Shares being purchased and the payment therefor.
8. Covenants.
8.1 Registration Procedures and Expenses.
(a) The Company shall:
(1) as soon as practicable after the Closing, but in no event later than two
(2) weeks following the Closing, prepare and file with the Commission the
Registration Statement relating to the sale of the Shares by the Purchaser from
time to time through the automated quotation system of the Nasdaq National
Market or the facilities of any national securities exchange on which the
Company's Common Stock is then traded or in privately-negotiated transactions;
(2) use its reasonable efforts subject to receipt of necessary information
from the Purchasers, to cause the Commission to notify the Company of the
Commission's willingness to declare the
9
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Registration Statement effective within 60 days after the Registration Statement
is filed by the Company;
(3) prepare and file with the Commission such amendments and supplements to
the Registration Statement and the prospectus used in connection therewith as
may be necessary to keep the Registration Statement effective until the earlier
of (i) twenty-four (24) months after the effective date of the Registration
Statement or (ii) the date on which the Shares may be resold by the Purchasers
without registration by reason of Rule 144(k) under the Securities Act or any
other rule of similar effect;
(4) furnish to the Purchaser with respect to the Shares registered under the
Registration Statement (and to each underwriter, if any, of such Shares) such
reasonable number of copies of prospectuses in order to facilitate the public
sale or other disposition of all or any of the Shares by the Purchaser;
provided, however, that the obligation of the Company to deliver copies of
prospectuses to the Purchaser shall be subject to the receipt by the Company of
reasonable assurances from the Purchaser that the Purchaser will comply with the
applicable provisions of the Securities Act and of such other securities or blue
sky laws as may be applicable in connection with any use of such prospectuses;
(5) file documents required of the Company for normal blue sky clearance in
states specified in writing by the Purchaser; provided, however, that the
Company shall not be required to qualify to do business or consent to service of
process in any jurisdiction in which it is not now so qualified or has not so
consented; and
(6) bear all expenses in connection with the procedures in paragraphs
(1) through (5) of this Section 8.1 and the registration of the Shares pursuant
to the Registration Statement, other than fees and expenses, if any, of counsel
or other advisers to the Purchaser or the Other Purchasers or underwriting
discounts, brokerage fees and commissions incurred by the Purchaser or the Other
Purchasers, if any.
(b) The Company covenants that it will file the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any Purchaser, make
publicly available other information), and it will take such further action as
any Purchaser may reasonably request, all to the extent required from time to
time to enable such Purchaser to sell the Shares without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the Securities Act, as such rule may be amended from time to time, or
(ii) any similar rule or regulation hereafter adopted by the Commission. Upon
the request of any Purchaser, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
8.2 Transfer of Shares After Registration. The Purchaser agrees that it
will not effect any disposition of the Shares or its right to purchase the
Shares that would constitute a sale within the meaning of the Securities Act,
except as contemplated in the Registration Statement referred to in Section 8.1,
and that it will promptly notify the Company of any changes in the information
set forth in the Registration Statement regarding the Purchaser or its Plan of
Distribution.
8.3 Termination of Conditions and Obligations. The restrictions imposed by
Section 6 or this Section 8 upon the transferability of the Shares shall cease
and terminate as to any particular number of the Shares upon the passage of
twenty-four months from the effective date of the Registration Statement
covering such Shares or at such time as an opinion of counsel satisfactory in
form and substance to the Company shall have been rendered to the effect that
such conditions are not necessary in order to comply with the Securities Act.
10
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8.4 Information Available. So long as the Registration Statement is
effective covering the resale of Shares owned by the Purchaser, the Company will
furnish to the Purchaser:
(1) upon request, as soon as practicable after available (but in the case of
the Company's Annual Report to Stockholders, within 120 days after the end of
each fiscal year of the Company), one copy of (i) its Annual Report to
Stockholders (which Annual Report shall contain financial statements audited in
accordance with generally accepted accounting principles by a national firm of
certified public accountants), (ii) if not included in substance in the Annual
Report to Stockholders, its Annual Report on Form 10-K, (iii) if not included in
substance in its Quarterly Reports to Shareholders, its quarterly reports on
Form 10-Q, and (iv) a full copy of the particular Registration Statement
covering the Shares (the foregoing, in each case, excluding exhibits);
(2) upon the reasonable request of the Purchaser, a reasonable number of
copies of the prospectuses to supply to any other party requiring such
prospectuses;
and the Company, upon the reasonable request of the Purchaser, will meet with
the Purchaser or a representative thereof at the Company's headquarters to
discuss information relevant for disclosure in the Registration Statement
covering the Shares subject to appropriate confidentiality limitations.
9. Indemnification. For the purpose of this Section 9 only:
(1) the term "Purchaser" shall include the Purchaser and any affiliate of
such Purchaser; and the term "Registration Statement" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 8.1.
(2) The Company agrees to indemnify and hold harmless each of the Purchasers
and each person, if any, who controls any Purchaser within the meaning of the
Securities Act, against any and all losses, claims, damages, liabilities or
expenses, joint or several, to which such Purchasers or such controlling person
may become subject, under the Securities Act, the Exchange Act, or any other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Company), insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, including the
prospectus, financial statements and schedules, and all other documents filed as
a part thereof, as amended at the time of effectiveness of the Registration
Statement (the "Prospectus"), or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state in any of
them a material fact required to be stated therein or necessary to make the
statements in any of them, in light of the circumstances under which they were
made, not misleading, or arise out of or are based in whole or in part on any
inaccuracy in the representations and warranties of the Company contained in
this Agreement, or any failure of the Company to perform in all material
respects its obligations hereunder or under law, and will reimburse each
Purchaser and each such controlling person for any legal and other expenses as
such expenses are reasonably incurred by such Purchaser or such controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage, liability or expense arises out of or is based
upon (i) an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Purchaser expressly for use
therein, or (ii) the failure of such Purchaser to comply with the covenants and
agreements contained in Sections 6.2 or 8.2 hereof respecting sale of the
Shares, or (iii) the inaccuracy of any representations made by such Purchaser
herein or (iv) any statement or
11
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omission in any Prospectus that is corrected in any subsequent Prospectus that
was delivered to the Purchaser prior to the pertinent sale or sales by the
Purchaser.
(3) Each Purchaser will severally indemnify and hold harmless the Company,
each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Securities Act, against any losses, claims, damages, liabilities or
expenses to which the Company, each of its directors, each of its officers who
signed the Registration Statement or controlling person may become subject,
under the Securities Act, the Exchange Act, or any other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Purchaser) insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof as contemplated below) arise out of
or are based upon (i) any failure to comply with the covenants and agreements
contained in Sections 6.2 or 8.2 hereof respecting the sale of the Shares or
(ii) the inaccuracy of any representation made by such Purchaser herein or
(iii) any untrue or alleged untrue statement of any material fact contained in
the Registration Statement, the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, the Prospectus, or
any amendment or supplement thereto, in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any Purchaser
expressly for use therein, and will reimburse the Company, each of its
directors, each of its officers who signed the Registration Statement or
controlling person for any legal and other expense reasonably incurred by the
Company, each of its directors, each of its officers who signed the Registration
Statement or controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action.
(4) Promptly after receipt by an indemnified party under this Section 9 of
notice of the threat or commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against an indemnifying party under
this Section 9 promptly notify the indemnifying party in writing thereof; but
the omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section 9 or to
the extent it is not materially prejudiced as a result of such failure. In case
any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with all other indemnifying parties similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party, based upon the
advice of such indemnified party's counsel, the indemnified party shall have
reasonably concluded that there may be a conflict of interest between the
positions of the indemnifying party and the indemnified party in conducting the
defense of any such action or that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 9 for any legal
or other expenses subsequently reasonably incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified party shall have
employed such counsel in connection with the assumption of legal defenses in
accordance
12
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with the proviso to the preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by such indemnifying party in the case of
paragraph (2), representing all of the indemnified parties who are parties to
such action) or (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of action, in each
of which cases the reasonable fees and expenses of counsel shall be at the
expense of the indemnifying party.
(5) If the indemnification provided for in this Section 9 is required by its
terms but is for any reason held to be unavailable to or otherwise insufficient
to hold harmless an indemnified party under paragraphs (2), (3) or (4) of this
Section 9 in respect to any losses, claims, damages, liabilities or expenses
referred to herein, then each applicable indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of any losses,
claims, damages, liabilities or expenses referred to herein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Purchaser from the placement of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but the relative fault of the Company and the
Purchaser in connection with the statements or omissions or inaccuracies in the
representations and warranties in this Agreement which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company on the one hand and each Purchaser on the other shall be deemed to be in
the same proportion as the amount paid by such Purchaser to the Company pursuant
to this Agreement for the Shares purchased by such Purchaser that were sold
pursuant to the Registration Statement bears to the difference (the
"Difference") between the amount such Purchaser paid for the Shares that were
sold pursuant to the Registration Statement and the amount received by such
Purchaser from such sale. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in paragraph (3) of this
Section 9, any legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any action or claim. The
provisions set forth in paragraph (3) of this Section 9 with respect to the
notice of the threat or commencement of any threat or action shall apply if a
claim for contribution is to be made under this paragraph (5); provided,
however, that no additional notice shall be required with respect to any threat
or action for which notice has been given under paragraph (4) for purposes of
indemnification. The Company and each Purchaser agree that it would not be just
and equitable if contribution pursuant to this Section 9 were determined solely
by pro rata allocation (even if the Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in this paragraph. Notwithstanding
the provisions of this Section 9, no Purchaser shall be required to contribute
any amount in excess of the amount by which the Difference exceeds the amount of
any damages that such Purchaser has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The Purchasers'
obligations to contribute pursuant to this Section 9 are several and not joint.
10. Broker's Fee. The Purchaser acknowledges that the Company intends to
pay to the Placement Agent a fee in respect of the sale of the Shares to the
Purchaser. Each of the parties hereto hereby represents that, on the basis of
any actions and agreements by it, there are no other brokers or finders entitled
to compensation in connection with the sale of the Shares to the Purchaser.
13
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11. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed by first-class registered or
certified airmail, confirmed facsimile or nationally recognized overnight
express courier postage prepaid, and shall be deemed given when so mailed and
shall be delivered as addressed as follows:
(1) if to the Company, to:
Andrew F. Pollet
Chairman
STAAR Surgical Company
1911 Walker Avenue
Monrovia, California 91016
with a copy to:
Pollet & Richardson
10900 Wilshire Boulevard
Suite 500
Los Angeles, California 90024
Attention: Andrew F. Pollet, Esq.
or to such other person at such other place as the Company shall designate to
the Purchaser in writing; and
(2) if to the Purchaser, at its address as set forth at the end of this
Agreement, or at such other address or addresses as may have been furnished to
the Company in writing.
12. Changes. This Agreement may not be modified or amended except pursuant
to an instrument in writing signed by an authorized representative of the
Company and the Purchaser.
13. Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
14. Severability. In case any provision contained in this Agreement should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to the conflict
of laws and the federal law of the United States of America.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
[Signature Page Follows]
14
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
STAAR SURGICAL COMPANY
/s/ ANDREW F. POLLET
--------------------------------------------------------------------------------
By: Andrew F. Pollet
Its: Chairman
Baystar Capital, L.P.
--------------------------------------------------------------------------------
Name of Purchaser (Individual or
Institution) Steven Lamar
--------------------------------------------------------------------------------
Name of Individual representing
Purchaser (if an Institution)
V.P. of Baystar Management LLC
--------------------------------------------------------------------------------
Title of Individual representing
Purchaser (if an Institution)
/s/ STEVEN LAMAR
--------------------------------------------------------------------------------
Signature of Individual Purchaser or
Individual representing Purchaser
Address: 1500 W. Market St., Ste 200
Mequon, WI 53092
--------------------------------------------------------------------------------
Telephone: (415) 834-4600
--------------------------------------------------------------------------------
Telecopier: (415) 834-4601
--------------------------------------------------------------------------------
Number to Be
Purchased
--------------------------------------------------------------------------------
Price Per
Share In
Dollars
--------------------------------------------------------------------------------
Aggregate
Price
--------------------------------------------------------------------------------
195,000 $14.00 $2,730,000
15
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QuickLinks
Exhibit F FORM OF PURCHASE AGREEMENT
|
AMENDMENT NO.2
(MAY 14, 2001)
TO
FAHNESTOCK VINER HOLDINGS INC.
1996 EQUITY INCENTIVE PLAN
AMENDED AND RESTATED
AS AT MAY 17, 1999
Effective May 14, 2001, the Fahnestock Viner Holdings Inc. 1996 Equity Incentive
Plan (Amended and Restated as at May 17, 1999) be further amended by increasing
the number of Class A Shares which may be issued pursuant to Awards granted
under the Plan and awards or options granted under other Plans of the Company
from 3,230,000 Class A Shares to 3,405,000 Class A Shares.
__________________________
The foregoing amendment was approved by the Board of Directors of the
Corporation on February 28, 2001 and confirmed by holders of Class B voting
shares of the Corporation at the Annual and Special Meeting of Shareholders of
the Corporation held on May 14, 2001.
> > > > > [signed: A.W. Oughtred]
> > > > > A. Winn Oughtred, Secretary
> > > > > Fahnestock Viner Holdings Inc. |
Use these links to rapidly review the document
TABLE OF CONTENTS FOR EXHIBIT 10–b
ADC TELECOMMUNICATIONS, INC.
CHANGE IN CONTROL
SEVERANCE PAY PLAN
Effective July 1, 2001
--------------------------------------------------------------------------------
ADC TELECOMMUNICATIONS, INC.
CHANGE IN CONTROL
SEVERANCE PAY PLAN
TABLE OF CONTENTS
EXHIBIT 10-b SECTION 1. INTRODUCTION 1.1. Establishment 1.2. Definitions
1.2.1. Base Pay 1.2.2. Change in Control 1.2.3. Cause 1.2.4.
Code 1.2.5. Continuing Director 1.2.6. Disability 1.2.7.
Effective Date 1.2.8. Eligible Employee 1.2.9. Employer
1.2.10. ERISA 1.2.11. Exchange Act 1.2.12. Good Reason 1.2.13.
Incentive Bonus Plan 1.2.14. Participant 1.2.15. Plan 1.2.16.
Plan Statement 1.2.17. Plan Year 1.2.18. Principal Sponsor
1.2.19. Termination of Employment
SECTION 2. PARTICIPATION 2.1. Eligibility to Participate 2.2. Termination of
Participation
SECTION 3. SEVERANCE PAYMENT 3.1. Eligibility for Payment 3.2. Amount of
Benefits 3.3. Benefit Offset 3.4. Time and Form of Payment 3.5.
Withholding Tax
--------------------------------------------------------------------------------
SECTION 4. BONUS PAYMENT 4.1. General 4.2. Bonus Payments 4.3. Adjusted
Bonus Payments
SECTION 5. 280G LIMITATION
SECTION 6. FUNDING
SECTION 7. AMENDMENT AND TERMINATION
SECTION 8. CLAIMS PROCEDURE
SECTION 9. MISCELLANEOUS 9.1. Type of Plan 9.2. No Assignment 9.3. Named
Fiduciaries 9.4. Administrator 9.5. Service of Legal Process 9.6. Validity
9.7. Governing Law 9.8. No Employment Rights 9.9. No Guarantee 9.10. No
Co-Fiduciary Responsibility
--------------------------------------------------------------------------------
SECTION 1
INTRODUCTION
1.1. Establishment. ADC Telecommunications, Inc., a Minnesota corporation,
has previously established and maintained a welfare benefit plan to provide
severance benefits to certain Eligible Employees following a Change in Control.
In its most recent form this severance plan is embodied in a document which was
first adopted effective September 26, 1989 and amended effective September 23,
1997 and entitled "ADC Telecommunications, Inc. Change in Control Severance Pay
Plan." Effective July 1, 2001, ADC Telecommunications, Inc. has amended and
restated its existing plan in this document. This restatement completely
replaces all previous plan documents.
1.2. Definitions. When the following terms are used in this document with
initial capital letters, they shall have the following meanings.
1.2.1. Base Pay—the regular basic cash remuneration before deductions for
taxes and other items withheld, payable to a Participant for services rendered
to the Employer, but not including items such as Incentive Bonus payments,
perquisites, allowances, per diem payments, bonuses, incentive compensation,
stock options, equity compensation, fringe benefits, special pay, awards or
commissions. Base pay shall include regular basic cash remuneration that is
contributed by an employee to a qualified retirement plan, nonqualified deferred
compensation plan or similar plan sponsored by the Employer but it shall not
include earnings on those amounts.
1.2.2. Change in Control—the occurrence of any of the following events:
(a)a change in control of the Principal Sponsor of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Exchange Act, whether or not the Principal Sponsor is
then subject to such reporting requirement;
(b)the public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to Section 13(d) of the
Exchange Act) by the Principal Sponsor or any "person" (as such term is used in
Section 13(d) of the Exchange Act) that such person has become the "beneficial
owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), of
securities of the Principal Sponsor representing 20% or more of the combined
voting power of the Principal Sponsor's then outstanding securities, determined
in accordance with Rule 13d-3;
(c)the Continuing Directors cease to constitute a majority of the Principal
Sponsor's Board of Directors;
(d)consummation of a reorganization, merger or consolidation of, or a sale or
other disposition of all or substantially all of the assets of, the Principal
Sponsor (a "Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the persons who were the
beneficial owners of the Principal Sponsor's outstanding voting securities
immediately prior to such Business Combination beneficially own voting
securities of the corporation resulting from such Business Combination having
more than 50% of the combined voting power of the outstanding voting securities
of such resulting Corporation and (B) at least a majority of the members of the
Board of Directors of the corporation resulting from such Business Combination
were Continuing Directors at the time of the action of the Board of Directors of
the Principal Sponsor approving such Business Combination;
(e)approval by the shareholders of the Principal Sponsor of a complete
liquidation or dissolution of the Principal Sponsor; or
1
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(f)the majority of the Continuing Directors determine in their sole and absolute
discretion that there has been a change in control of the Principal Sponsor.
1.2.3. Cause—the willful and continued failure by a Participant to perform
his or her duties or gross and willful misconduct including, but not limited to,
wrongful appropriation of funds.
1.2.4. Code—the U.S. Internal Revenue Code of 1986, as amended.
1.2.5. Continuing Director—any person who is a member of the Board of
Directors of the Principal Sponsor, while such person is a member of the Board
of Directors, who is not an Acquiring Person (as defined below) or an Affiliate
or Associate (as defined below) of an Acquiring Person, or a representative of
an Acquiring Person or of any such Affiliate or Associate, and who (i) was a
member of the Board of Directors on the Effective Date of the Plan as first
written above, or (ii) subsequently becomes a member of the Board of Directors,
if such person's initial nomination for election or initial election to the
Board of Directors is recommended or approved by a majority of the Continuing
Directors. For purposes of definition, "Acquiring Person" shall mean any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
who or which, together with all Affiliates and Associates of such person, is the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Principal Sponsor
representing 20% or more of the combined voting power of the Principal Sponsor's
then outstanding securities, but shall not include the Principal Sponsor, any
subsidiary of the Principal Sponsor or any employee benefit plan of the
Principal Sponsor or of any subsidiary of the Principal Sponsor or any entity
holding shares of common stock of the Principal Sponsor organized, appointed or
established for, or pursuant to the terms of, any such plan; and "Affiliate" and
"Associate" shall have the respective meanings ascribed to such terms in Rule
12b-2 promulgated under the Exchange Act.
1.2.6. Disability—the Participant's inability, due to an impairment, to
perform the essential functions of the Participant's position, with or without
reasonable accommodation, provided the Participant has exhausted the
Participant's entitlement to any applicable disability-related leave of absence,
if the Participant desires to take and satisfies all eligibility requirements
for such leave.
1.2.7. Effective Date—July 1, 2001.
1.2.8. Eligible Employee—an individual who, immediately prior to a Change
in Control, is classified by the Employer as a regular employee in an ADC global
job grade 15 through 21.
Eligible Employee does not include an employee who is employed outside the
United States (other than a U.S. regular employee whose assignment outside the
United States has been classified by the Employer as temporary, provided that
any assignment outside the United States that is expected to exceed 60 months
will not be considered temporary) or who is a non-immigrant worker residing in
the United States covered by any non-immigrant visa status other than an H-1B
visa status.
The Employer's classification of a person as a regular employee shall be
conclusive. No reclassification of a person's status with the Employer, for any
reason, without regard to whether it is initiated by a court, governmental
agency or otherwise and without regard to whether or not the Employer agrees to
such reclassification, shall result in the person being an Eligible Employee,
either retroactively or prospectively. Notwithstanding anything to the contrary
in this provision, however, the Employer may declare that a reclassified person
will be classified as an Eligible Employee, either retroactively or
prospectively.
1.2.9. Employer—ADC Telecommunications, Inc., a Minnesota corporation, its
wholly owned subsidiaries with employees who meet the definition of Eligible
Employee, and any successor of
2
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the Principal Sponsor. Employer shall also refer to any affiliates designated by
ADC Telecommunications, Inc.
1.2.10. ERISA—the United States Employee Retirement Income Security Act of
1974, as amended.
1.2.11. Exchange Act—the United States Securities Exchange Act of 1934, as
amended.
1.2.12. Good Reason—the occurrence of any of the following events: (i) a
reduction in the Participant's Base Pay as in effect immediately prior to a
Change in Control; (ii) a material modification of the Employer's incentive
compensation program (that is adverse to the Participant) as in effect
immediately prior to a Change in Control; (iii) a requirement by the Employer
that the Participant be based anywhere other than within fifty miles of the
Participant's work location immediately prior to a Change in Control (with
exceptions for temporary business travel); or (iv) except as otherwise required
by applicable law, the failure by the Employer to provide employee benefit
programs and plans (including any stock ownership and stock purchase plans) that
provide substantially similar benefits, in terms of aggregate monetary value, at
substantially similar costs to the Participant as the benefits provided in
effect immediately prior to a Change in Control. Termination or reassignment of
the Participant's employment for Cause, or by reason of Disability or death, are
excluded from this definition.
1.2.13. Incentive Bonus Plan—Employer's Management Incentive Plan ("MIP")
or Sales Management Incentive Plan ("SMIP") or any other equivalent incentive
bonus plan that the Compensation Committee of the Board has determined to be an
Incentive Bonus Plan for purposes of this Plan.
1.2.14. Participant—an Eligible Employee of the Employer who becomes a
Participant under the terms of Section 2 of the Plan.
1.2.15. Plan—the severance pay plan of the Employer established for the
benefit of certain Eligible Employees in the event of a Change in Control and
described in this Plan Statement. (As used herein, "Plan" refers to the program
established by the Employer and not the document pursuant to which the Plan is
maintained. That document is referred to herein as the "Plan Statement.")
1.2.16. Plan Statement—effective July 1, 2001, this written document
entitled "ADC Telecommunications, Inc. Change in Control Severance Pay Plan," as
the same may be amended from time to time thereafter.
1.2.17. Plan Year—the twelve consecutive month period ending on any
December 31.
1.2.18. Principal Sponsor—ADC Telecommunications, Inc.
1.2.19. Termination of Employment—actual cessation of active employment by
a Participant as a result of: (a) an involuntary termination by the Employer,
with or without reasonable notice, and for any reason other than Cause; or (b) a
voluntary termination by the Participant for Good Reason. Termination of
Employment shall not include termination by reason of the Participant's death or
Disability.
3
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SECTION 2
PARTICIPATION
2.1. Eligibility to Participate. An individual shall become a Participant
on the day such individual becomes an Eligible Employee. Notwithstanding
anything to the contrary in the Plan, an individual who is an employee of a
successor to the Principal Sponsor immediately prior to a Change in Control
shall not be eligible for benefits under the Plan.
2.2. Termination of Participation. An individual ceases to be a
Participant on the earliest of:
(a)the date the Participant ceases to be an Eligible Employee or otherwise
ceases to satisfy the Plan's eligibility requirements, except where such
cessation results in eligibility for a severance payment as provided in Section
3;
(b)the date the Participant ceases to be an employee due to termination of the
Participant's employment (with or without reasonable notice and whether
voluntary or involuntary and including retirement) with the Employer, except
where such termination results in eligibility for a severance payment as
provided in Section 3;
(c)the date the Participant ceases to be an employee due to Participant's death
or Disability;
(d)the date following a Change in Control that the Participant receives all of
the severance and bonus payments due, if any, under the Plan;
(e)the date the Plan is amended pursuant to the rules of Section 7 to exclude
the Participant from participation; or
(f)the date the Plan is terminated pursuant to the rules of Section 7.
4
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SECTION 3
SEVERANCE PAYMENT
3.1. Eligibility for Payment. To qualify for a severance payment under
this Plan, a Change in Control must occur and a Participant must: (a) be a
Participant immediately prior to the time of such Change in Control and
immediately prior to the Participant's Termination of Employment; and (b) have a
Termination of Employment that occurs within 12 months following a Change in
Control.
3.2. Amount of Benefits. The severance payment to a Participant under the
Plan shall be based on the Participant's global job grade in effect immediately
prior to a Change in Control. The formula for determining the Participant's
severance payment shall be calculated by first adding together: (a) the
Participant's annual Base Pay in effect immediately prior to the Change in
Control or, if greater, the Termination of Employment; and (b) the Participant's
annual target bonus under the Participant's Incentive Bonus Plans in effect
immediately prior to the Change in Control or, if greater, the Termination of
Employment. The sum of subparagraphs (a) and (b) shall then be divided by 52 to
calculate a "weekly severance payment." The total severance benefit for a
Participant shall be a single lump sum payment equal to the Participant's
"weekly severance payment" multiplied by the number of weeks designated in the
following table:
Grade
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Number of Weeks of Severance Payments
--------------------------------------------------------------------------------
20-21 78 weeks 18-19 52 weeks 15-17 3 weeks for each "year of service"
completed by the Participant, except in no case will the severance amount be
less than 17 weeks or more than 52 weeks.
For the purpose of this Section 3.2, a Participant's "years of service" shall
equal the number of twelve month periods the Participant has worked for the
Employer. The measurement period for such determination shall commence on the
Participant's date of hire and end on the Participant's Termination of
Employment. A year in which the Participant did not work the entire twelve month
period shall be counted as a fractional year consistent with the number of full
calendar months of employment during that period.
3.3. Benefit Offset. The amount of any severance payment that a
Participant is entitled to under Section 3.2 shall be reduced by any cash
compensation paid or payable by the Employer to the Participant associated with
the Participant's termination of employment (including any pay in lieu of notice
and severance pay).
3.4. Time and Form of Payment. Payments will be made to eligible
Participants in a single lump sum cash payment as soon as administratively
feasible following the Participant's Termination of Employment. If the
Participant should die before actually receiving the severance payment, such
payment will be made to the personal representative of the Participant's estate.
3.5. Withholding Tax. The Employer shall deduct from the amount of any
severance payment under the Plan any amount required to be withheld by reason of
any law or regulation for the payment of federal, state or local taxes.
5
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SECTION 4
BONUS PAYMENT
4.1. General. A Participant is eligible to receive a bonus payment
provided for in this Section 4 only if the Participant is eligible to receive a
severance payment as provided in Section 3. This Section 4 is intended to
provide for a final payment under any applicable Incentive Bonus Plans for the
bonus period in which Participant's Termination of Employment occurs. Any
amounts determined pursuant to this Section 4 shall be offset by amounts
otherwise paid or payable to the Participant under the relevant Incentive Bonus
Plans for the bonus period in which the Participant's Termination of Employment
occurs.
4.2. Bonus Payments. Bonus payment(s), if any, shall be equal to the
target bonus amount in effect for the bonus period in which the Termination of
Employment occurs multiplied by a fraction, the numerator of which is the number
of days worked by the Participant in the bonus period prior to the Termination
of Employment, and the denominator of which is the number of days in the bonus
period. The bonus payment will be made to the Participant in a single lump sum
cash payment as soon as administratively feasible following the Participant's
Termination of Employment. If the Participant should die before actually
receiving the payment, such payment will be made to the personal representative
of the Participant's estate.
4.3. Adjusted Bonus Payments. At the end of the bonus period, the Employer
shall calculate the amount that a Participant would receive for a bonus period
in which a Termination of Employment occurs based on actual performance over the
entire bonus period multiplied by a fraction, the numerator of which is the
number of days worked by the Participant in the bonus period prior to the
Termination of Employment and the denominator of which is the number of days in
the bonus period (the "Actual Bonus Amount"). If the Actual Bonus Amount is
greater than the amount calculated under Section 4.2 above, the Employer shall
pay the difference to the Participant in a single lump sum cash payment as soon
as administratively feasible following the end of the bonus period. If the
Participant should die before actually receiving the payment, such payment will
be made to the personal representative of the Participant's estate.
6
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SECTION 5
280G LIMITATION
The amount of any cash payment to be received by Participant pursuant to
Section 3 or 4 of this Plan shall be reduced (but not below zero) to the extent
required so that no portion of any payment or benefit in the nature of
compensation received or to be received by Participant (whether payable pursuant
to the terms of this Plan or pursuant to any other plan, contract, agreement or
arrangement with the Employer or any other person) (such payments or benefits
are referred to collectively as the "Total Payments") shall be treated as an
"excess parachute payment" within the meaning of section 280G(b)(1) of the Code
but only if and to the extent that such reduction will result in a greater
after-tax benefit to Participant than the after-tax benefit to Participant of
the Total Payments computed without regard to any such reduction. For purposes
of determining Participant's after-tax benefit, all state and federal taxes
applicable to the Total Payments, including income tax, Participant's share of
F.I.C.A. and Medicare taxes and any excise taxes payable under Section 4999 of
the Code, shall be taken into account. Only amounts payable under this Plan, and
no other payments or benefits included in the Total Payments, shall be reduced
pursuant to this Section 5.
The determination of whether any reduction in payments is required pursuant
to Section 5 of this Plan shall be made in writing by the Principal Sponsor's
independent public accountants, or such other independent accounting firm or tax
advisors selected by the Principal Sponsor in its sole discretion (the
"Accountants"), whose determination shall be conclusive and binding upon
Participant and the Employer for all purposes, including for purposes of Section
8 of this Plan. For purposes of making the calculations required by this Section
5, the Accountants may make reasonable assumptions and approximations regarding
applicable taxes and applicable tax rates and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code, applicable regulations and other authority. The Principal Sponsor and the
Participant shall furnish to the Accountants such information and documents as
the Accountants may reasonably request in order to make a determination under
this Section. The Accountants shall provide detailed supporting calculations, in
writing, to both the Principal Sponsor and the Participant of determinations
made pursuant to this Section 5. The Employer shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section.
In the event of any uncertainty as to whether a reduction in payments to a
Participant is required pursuant to Section 5 of this Plan, the Employer shall
initially make the payment to Participant and Participant shall be required to
refund to the Employer any amounts ultimately determined not to have been
payable under the terms of this Plan.
The Employer and the Participant shall promptly deliver to each other copies
of any written communications, and summaries of any verbal communications, with
any taxing authority regarding the applicability of Section 280G or 4999 of the
Code to any portion of the Total Payments. In the event of any controversy with
the Internal Revenue Service or other taxing authority with regard to Section
280G or 4999 of the Code to any portion of the Total Payments, the Employer
shall have the right, exercisable in its sole discretion, to control the
resolution of such controversy at its own expense. Participant and the Employer
shall in good faith cooperate in the resolution of such controversy.
7
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SECTION 6
FUNDING
The Employer may establish a trust to fund the Plan but the Employer is not
under any obligation to establish a trust. A Participant will be entitled to
claim benefits from the trust to the extent the Plan is funded under a trust and
a Participant shall have only such rights as set forth in the trust. To the
extent benefits are not funded under a trust, payments made pursuant to the Plan
will be paid out of the general funds of the Employer. To the extent benefits
are not funded under a trust, a Participant will not have any secured or
preferred interest by way of trust, escrow, lien or otherwise in any specific
assets and the Participant's rights shall be solely those of an unsecured
general creditor of the Employer.
8
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SECTION 7
AMENDMENT AND TERMINATION
The right has been reserved to the Board of Directors of the Principal
Sponsor to amend the provisions of the Plan Statement and to amend or terminate
the Plan at any time prior to a Change in Control. If any of these actions are
taken, affected Participants will be notified. During one year following the
date of a Change in Control, the provisions of the Plan Statement may not be
amended if any amendment would adversely affect the rights, expectancies or
benefits provided by the Plan (as in effect immediately prior to the Change in
Control) of any Participant or other person entitled to payment under the Plan.
The Plan may not be terminated during the same one-year period. Except to the
extent benefits have become payable but have not actually been paid, the Plan
terminates automatically on the first anniversary of the date of a Change in
Control, except to pay any remaining severance benefits to any Participant who
has a Termination of Employment on or before the Plan's termination date and
except to resolve claims for benefits under the Plan arising on or before the
Plan's termination date.
9
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SECTION 8
CLAIMS PROCEDURE
The claims procedure set forth in this section shall be the exclusive
procedure for the disposition of claims for benefits arising under this Plan.
(a)Original Claim. Any Participant, former Participant, or beneficiary of such
Participant or former Participant, if he or she so desires, may file with the
Principal Sponsor a written claim for benefits under this Plan. Within ninety
(90) days after the filing of such a claim, the Principal Sponsor shall notify
the claimant in writing whether the claim is upheld or denied in whole or in
part or shall furnish the claimant a written notice describing specific special
circumstances requiring a specified amount of additional time (but not more than
one hundred eighty (180) days from the date the claim was filed) to reach a
decision on the claim. If the claim is denied in whole or in part, the Principal
Sponsor shall state in writing:
(i)the specific reasons for the denial;
(ii)the specific references to the pertinent provisions of the Plan on which the
denial is based;
(iii)a description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is necessary; and
(iv)an explanation of the claims review procedure set forth in this section.
(b)Review of Denied Claim. Within sixty (60) days after receipt of notice that
the claim has been denied in whole or in part, the claimant may file with the
Principal Sponsor a written request for a review and may, in conjunction
therewith, submit written issues and comments. Within sixty (60) days after the
filing of such a request for review, the Principal Sponsor shall notify the
claimant in writing whether, upon review, the claim was upheld or denied in
whole or in part or shall furnish the claimant a written notice describing
specific special circumstances requiring a specified amount of additional time
(but not more than one hundred twenty (120) days from the date the request for
review was filed) to reach a decision on the request for review.
(c)General Rules.
(i)No inquiry or question shall be deemed to be a claim or a request for a
review of a denied claim unless made in accordance with the claims procedure.
The Principal Sponsor may require that any claim for benefits and any request
for a review of a denied claim be filed on forms to be furnished by the claimant
upon request.
(ii)All decisions on claims and on requests for a review of denied claims shall
be made by the Principal Sponsor or its delegatee.
(iii)The Principal Sponsor may, in its discretion, hold one or more hearings on
a claim or a request for a review of a denied claim.
(iv)A claimant may be represented by a lawyer or other representative (at the
claimant's own expense), but the Principal Sponsor reserves the right to require
the claimant to furnish written authorization. A claimant's representative shall
be entitled, upon request, to copies of all notices given to the claimant.
(v)The decision of the Principal Sponsor on a claim and on a request for a
review of a denied claim shall be served on the claimant in writing. If a
decision or notice is not
10
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received by a claimant within the time specified, the claim or request for a
review of a denied claim shall be deemed to have been denied.
(vi)Prior to filing a claim or a request for a review of a denied claim, the
claimant or his or her representative shall have a reasonable opportunity to
review a copy of the Plan and all other pertinent documents in the possession of
the Principal Sponsor.
(vii)The Principal Sponsor may permanently or temporarily delegate its
responsibilities under this claims procedure to an individual or a committee of
individuals.
11
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SECTION 9
MISCELLANEOUS
9.1. Type of Plan. Section 3 of the Plan is a severance pay welfare
benefit plan and not a pension benefit plan. Section 4 of the Plan is a payroll
practice. Any severance payment under Section 3 of the Plan will not be
contingent directly or indirectly upon an employee retiring and shall not be
made beyond 24 months after the employee's Termination of Employment. Section 4
is neither a severance pay welfare benefit plan nor a pension benefit plan.
9.2. No Assignment. No Participant shall have any transmissible interest
in any benefit under the Plan nor shall any Participant have any power to
anticipate, alienate, dispose of, pledge or encumber the same, nor shall the
Employer recognize any assignment thereof, either in whole or in part, nor shall
any benefit be subject to attachment, garnishment, execution following judgment
or other legal process.
9.3. Named Fiduciaries. The Principal Sponsor and any committee appointed
hereunder to decide claims shall be named fiduciaries for the purpose of section
402(a) of ERISA.
9.4. Administrator. The Principal Sponsor shall be the administrator for
purposes of section 3(16)(A) of ERISA.
9.5. Service of Legal Process. The corporate secretary of ADC
Telecommunications, Inc. is designated as agent for service of legal process
against the Plan. Also, service of legal process may be made upon ADC
Telecommunications, Inc. as Plan Administrator.
9.6. Validity. The invalidity or unenforceability of any provision of the
Plan shall not affect the validity or enforceability of any other provision of
the Plan which shall remain in full force and effect.
9.7. Governing Law. This Plan Statement has been executed and delivered in
the State of Minnesota and has been drawn in conformity to the laws of that
State and shall, except to the extent that U.S. federal law is controlling, be
construed and enforced in accordance with the domestic laws of the State of
Minnesota without giving effect to any choice or conflict of law provision or
rule (whether of the State of Minnesota or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Minnesota.
9.8. No Employment Rights. Neither the terms of this Plan Statement nor
the benefits hereunder nor the continuance thereof shall be a term of the
employment of any employee, and the Employer shall not be obliged to continue
the Plan. The terms of this Plan Statement shall not give any employee the right
to be retained in the employment of the Employer. The Employer assumes no
obligation to the participants under this Plan Statement with respect to any
doctrine or principle of acquired rights or similar concept.
9.9. No Guarantee. Neither the members of any committee appointed by the
Principal Sponsor nor any of the Employer's officers in any way secure or
guarantee the payment of any benefit or amount which may become due and payable
hereunder to any Participant. Neither the members of any committee nor any of
the Employer's officers shall be under any liability or responsibility (except
to the extent that liability is imposed under ERISA) for failure to effect any
of the objectives or purposes of the Plan by reason of the insolvency of the
Employer.
9.10. No Co-Fiduciary Responsibility. Except as is otherwise provided in
ERISA, no fiduciary shall be liable for an act or omission of another person
with regard to a fiduciary responsibility that has been allocated to or
delegated in this Plan Statement or pursuant to procedures set forth in this
Plan Statement.
12
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|
AXA FINANCIAL, INC.
1290 Avenue of Americas
New York, New York 10104
June 20, 2000
Sanford C. Bernstein
767 Fifth Avenue
NewYork, NY 10153
Re: Agreement to elect Lew Sanders and
Roger Hertog to ACMC’s Board of Directors
AXA Financial Inc. (“AXA Financial”) hereby agrees that:
1. upon the closing (the “Closing”) of the transactions contemplated by
the Acquisition Agreement, dated as of June 20, 2000 (the “Acquisition
Agreement”), between Alliance Capital Management L.P., a Delaware limited
partnership (“Alliance Capital”), Sanford C. Bernstein Inc., a Delaware
corporation (“Sanford Bernstein”), Alliance Capital Management Holding L.P., a
Delaware limited partnership and Bernstein Technologies Inc., a California
corporation, AXA Financial shall cause Lew Sanders and Roger Hertog to be
elected to the Board of Directors of Alliance Capital Management Corporation, a
Delaware corporation (“ACMC”) for a term or for successive terms ending no
earlier than the third anniversary of the Closing; provided, however, that Mr.
Sanders and/or Mr. Hertog may each be removed from the Board of Directors of
ACMC, prior to the third anniversary of the Closing, in accordance with Alliance
Capital’s certificate of incorporation and by-laws but, in either case, only in
the event his employment by Alliance Capital terminates in accordance with the
terms of their respective employment agreements; and
2. in the event that prior to the third anniversary of the Closing, either
of Messrs. Sanders or Hertog ceases to serve as a member of the Board of
Directors of ACMC for any reason, then AXA Financial will cause a replacement to
be elected, who shall serve for a term or for successive terms ending no earlier
than the third anniversary of the Closing Date; provided, however, that any such
replacement may be removed from the Board of Directors of ACMC and replaced in
accordance with this paragraph 2, prior to the third anniversary of the Closing,
for the reasons set forth in the proviso to paragraph 1 above; and provided
further, that any such replacement shall be selected by AXA Financial from the
list of names attached hereto as Annex A, as such list may be amended from time
to time with the prior written consent of AXA Financial and the Sanford
Bernstein Committee (as such term is defined in the Acquisition Agreement).
AXA Financial’s obligations hereunder shall terminate and be of no
further effect upon the termination of the Acquisition Agreement prior to the
Closing.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to AXA Financial a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between AXA Financial and Sanford Bernstein in accordance with its
terms.
Very truly yours, AXA FINANCIAL, INC.
By: /s/ Stanley B. Tulin
--------------------------------------------------------------------------------
Name:Stanley B. Tulin Title: Vice Chairman and Chief Financial
Officer
Confirmed and accepted as of the date first above written:
SANFORD C. BERNSTEIN INC.
By: /s/ Lewis A. Sanders
--------------------------------------------------------------------------------
Name:Lewis A. Sanders Title: Chairman and Chief Executive Officer
ANNEX A
Andrew S. Adelson
Kevin R. Brine
Charles C. Cahn, Jr.
Marilyn G. Fedat
Michael L. Goldstein
|
EXHIBIT 10(b)
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of
April 27, 2001, is made and entered into by and between HYPERFEED TECHNOLOGIES
CORPORATION, a Delaware corporation, or its nominee ("Purchaser"), and LASDORF
CORPORATE SERVICES, INC, a California corporation, ("Seller") and Andrew
Yasinsky (the “Principal”).
WITNESSETH:
WHEREAS, concurrently with the execution of this Agreement,
Purchaser, Marketscreen.com, Inc. (an affiliate of Seller) and certain
stockholders of Marketscreen.com, Inc. have entered into that certain Asset
Purchase Agreement and Plan of Reorganization (the “Marketscreen APA”) pursuant
to which Purchaser is acquiring all of the assets, business and operations of
Marketscreen.com, Inc.
WHEREAS, the parties hereto acknowledge that the purpose of this
Agreement is to allow Purchaser to acquire ownership of the assets necessary for
Purchaser to own and operate the Marketscreen.com web site offerings.
WHEREAS, Seller desires to sell all of Seller's assets, whether
tangible or intangible, licenses and other property rights of any kind or nature
necessary to own, develop, market support, enhance or otherwise commercially
develop the offerings of the markestreen.com web site as currently offered on
such site. See Exhibit A for a representative description of offerings of the
marketscreen.com web site (the "Business Segment"), and Purchaser desires to
purchase such assets and assume certain of Seller's liabilities;
WHEREAS, Seller is not selling and Purchaser is not purchasing any
of Seller’s assets not specified herein;
WHEREAS, the Principal is Seller's sole stockholder.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants herein contained, and on the terms and subject to the
conditions herein set forth, the parties hereto, intending to be legally bound,
hereby covenant and agree as follows:
ARTICLE I
Purchase and Sale
Section 1.1 Sale and Purchase of Assets. Subject to and upon
the terms and conditions contained herein, at the Closing (as hereinafter
defined) Seller shall sell, transfer, assign, convey and deliver to Purchaser,
and Purchaser shall purchase, accept and acquire from Seller the assets of
Seller relating to the Business Segment as specified in Section 1.1 hereto which
assets shall be free and clear of all liens, liabilities, security interests,
claims, and encumbrances, except as otherwise expressly provided herein. All
such assets to be acquired as provided herein are sometimes collectively
referred to as the "Purchased Assets". All assets of Seller of whatever nature
other than the Purchased Assets are expressly excluded from this sale. The
Purchased Assets shall include the following specified assets:
(a) Inventory. None;
(b) Equipment. None;
(c) Intangibles and Intellectual Property. All of the
right, title and interest Seller may possess in and to the items set forth on
Schedule 3.12 whether owned or licensed by Seller (collectively, the “Intangible
Assets”);
(d) Records. Copies of all books, documents and records of,
or relating to any material necessary to the operation of the Business Segment
(including all financial and business records, customer lists and files,
supplier records, insurance polices and any claims or credits thereunder
relating to the Business Segment);
(e) Employee Records. Copies of all personnel records and
payroll records for the current and last two calendar years for all employees of
Seller relating to the Business Segment, if any;
(f) Contract Rights. All rights, privileges and interest
of Seller arising from any contract, agreement, purchase orders, deposits and
other contractual rights to the extent set forth on Schedule 1.1(f) (the
“Assigned Contracts”);
(g) Computer Software. All computer applications and
operating programs which are used in the operation of the Business Segment
(including third party packaged software products and custom programs developed
and written in house or by third party consultants);
(h) Licenses and Permits. All right, title and interest in
any assignable licenses and permits relating to the Business Segment, if any;
(i) Supplies. None;
(j) Prepaid Expenses. None;
(k) Securities. None; and
(l) Accounts Receivable. None.
Section 1.2 Closing. The closing of the transactions
contemplated hereby (the "Closing") shall occur on the date hereof (the "Closing
Date") concurrently with the execution of this Agreement in the offices of
Wildman, Harrold, Allen & Dixon, 225 West Wacker Drive, Chicago, Illinois 60606.
Section 1.3 Purchase Price. The aggregate consideration (the
"Purchase Price"), to be paid to Seller for the Purchased Assets and the
non-compete agreements described in Section 1.7 hereof shall payable as follows:
(a) $300,000 will be payable at the Closing by Purchaser’s
company check or, at Purchaser’s option, by wire transfer to a U.S. bank
designated by Seller to Purchaser in writing at least two (2) business days
prior to the Closing.; and
(b) the Assumed Liabilities will be assumed and paid by
Purchaser as provided in Section 1.4 hereof.
Section 1.4 Assumed Liabilities.
(a) Commencing from and after the Closing Date, Purchaser
shall assume and agree to pay, perform and discharge, promptly when due all
duties, liabilities and obligations under the Assigned Contracts arising after
the Closing (the "Assumed Liabilities").
(b) Purchaser does not assume or agree to pay, perform or
discharge any liability or obligation of Seller, whether known or unknown,
arising out of, incurred in connection with, or related to: (i) liabilities or
obligations of Seller arising prior the Closing Date which are not specifically
included within the definition of "Assumed Liabilities" hereunder;
(ii) liabilities or obligations of Seller incurred on or after the Closing Date;
(iii) any product liability claims arising from defects in products manufactured
or sold by Seller; (iv) any pension or other benefit liability relating to
Seller's employees; or (v) any warranty claims relating to products sold by
Seller prior to Closing.
Section 1.5 Allocation of Purchase Price. Intentionally
Deleted..
Section 1.6 Intentionally Deleted.
Section 1.7 Employee Relation Issues. At the Closing, Seller
and the Principal will each execute a Non-Compete Agreement in the form attached
hereto as Exhibit B (the "Non-Compete Agreements").
Section 1.8 Closing Deliveries. In order to consummate the
transactions contemplated hereby, the following documents shall be executed
and/or delivered at the Closing, as appropriate:
(a) Seller shall deliver to Purchaser each of the following
items executed by Seller and/or the Principal as appropriate:
(i) a Bill of Sale and Assignment in form and substance
acceptable to Purchaser;
(ii) the Non-Compete Agreements;
(iii) all documentation reasonably required by Purchaser to
effect the transfer of any trademarks, service marks, domain names or other
intellectual property included in the Purchased Assets;
(iv) a Certificate of Good Standing for Seller from the
California Secretary of State dated within twenty (20) days of the Closing;
(v) a copy of Seller’s charter documents certified by the
California Secretary of State dated within twenty (20) days of the Closing;
(vi) and a duly executed Secretary’s Certificate as to
Seller’s Bylaws, incumbent officers and directors and resolutions adopted by
Seller’s board of directors and shareholders authorizing the execution of this
Agreement, confirmation of the sale provided for herein and performance by
Seller of all its obligations hereunder;
(vii) an opinion of legal counsel for Seller in form an
substance acceptable to Purchaser;
(viii) search results of the public records of the California
Secretary of State and the Recorder's Office of San Mateo County, California
confirming the absence of security interests, judgments, tax liens and
bankruptcy proceedings which affect or could affect the Purchased Assets;
(ix) an officer’s certificate dated as of the Closing
confirming that the representations and warranties of Seller are true and
correct as of the Closing;
(x) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of the
transactions hereunder, if any;
(xi) copies of the fully-executed assignments form each of
Andew Yasinsky, Neil Waldo and James Wilson in the form attached hereto as
Exhibit C; and
From time-to-time after the Closing, at Purchaser’s request and without further
consideration from Buyer, Seller shall execute and deliver such other
instruments of conveyance and transfer and take such other action as Buyer
reasonably may require to convey, transfer to and vest in Buyer and to put Buyer
in possession of Purchased Assets with customary warranties of title.
At the Closing, and at all times thereafter as may be necessary, Seller shall
execute and deliver to Purchaser such other instruments as shall be reasonably
necessary or appropriate (i) to vest in Purchaser good and indefeasible title to
the Purchased Assets and (ii) to vest in Purchaser all rights of Seller under
the Assigned Contracts and to comply with the purposes and intent of this
Agreement.
(b) Purchaser shall deliver to Seller each of the following
items executed by Purchaser as appropriate:
(i) an Assumption of Liabilities and Assumed Contracts
Agreement in a form acceptable to Seller and Purchaser;
(ii) the Non-Compete Agreements; and
(iii) a copy of the resolutions of Purchaser’s Board of
Directors approving the Agreement and its related exhibits.
At the Closing, and at all times thereafter as may be necessary, Purchaser shall
execute and deliver to Seller such other instruments as shall be reasonably
necessary or appropriate to evidence the assumption by Purchaser of the Assumed
Liabilities, including without limitation those arising under the Assigned
Contracts, and to comply with the purposes and intent of this Agreement.
ARTICLE II
Purchaser's Representations and Warranties
Purchaser represents and warrants that the following are true and
correct as of this date and will be true and correct through the Closing Date as
if made on that date:
Section 2.1 Organization and Good Standing. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and validly qualified to transact business in the State
of Illinois, with all requisite power and authority to carry on the business and
in good standing in which it is engaged, to own the properties it owns and to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
Section 2.2 Authorization and Validity. The execution,
delivery and performance of this Agreement and the other agreements contemplated
hereby by Purchaser, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by Purchaser. This Agreement and
each other agreement contemplated hereby have been or will be prior to Closing
duly executed and delivered by Purchaser and constitute or will constitute as of
the Closing, legal, valid and binding obligations of Purchaser, enforceable
against Purchaser in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
Section 2.3 Violation. Neither the execution and performance
of this Agreement or the other agreements contemplated hereby, nor the
consummation of the transactions contemplated hereby or thereby, will (a)
conflict with, or result in a breach of the terms, conditions and provisions of,
or constitute a default under, the Articles of Incorporation or Bylaws of
Purchaser or of any agreement, indenture or other instrument under which
Purchaser is bound, or (b) violate or conflict with any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over Purchaser or the properties
or assets of Purchaser.
Section 2.4 Finder's Fee. Purchaser has not incurred any
obligation for any finder's, broker's or agent's fee in connection with the
transactions contemplated hereby for which Seller or any Principal may be
liable.
ARTICLE III
Representations and Warranties of Seller
Except as set forth on the Disclosure Schedules attached to this
Agreement, Seller and the Principal, and each of them, hereby jointly and
severally represent and warrant that the following are true and correct as of
this date and will be true and correct through the Closing Date as if made on
that date. Whenever any representation or warranty is qualified “to Seller’s
knowledge,” that phrase shall mean to the actual knowledge of the Principal.
Section 3.1 Organization and Good Standing. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of California, with all requisite power and authority to carry on the business
in which it is engaged and to own the properties it owns. Seller is duly
qualified to do business in California and every other jurisdiction where Seller
is required by law to be qualified to transact business. Except as set forth in
Schedule 3.1 hereto, Seller does not have any assets, employees or offices in
any state other than in San Mateo County, California. Seller does not own,
directly or indirectly, any of the capital stock of any other corporation or any
equity, profit sharing, participation, or other interest in any corporation,
partnership, limited partnership, limited liability partnership, limited
liability company, joint venture or other entity.
Section 3.2 Capitalization. The authorized, issued and
outstanding capital stock of Seller, and the record and beneficial shareholders
of all issued and outstanding capital stock of Seller, is set forth in Schedule
3.2 hereto. The Principal owns all such capital stock of Seller, free and clear
of all liens, liabilities, claims, encumbrances, equities, voting agreements,
voting trust agreements, and proxies. Each outstanding share of capital stock
of Seller has been legally and validly issued and is fully paid and
nonassessable. There exist no options, warrants, subscriptions or other rights
to purchase, or securities convertible into or exchangeable for, any of the
authorized or outstanding securities of Seller. No shares of capital stock of
Seller are owned by Seller in treasury or otherwise or have been issued or
disposed of in violation of the preemptive rights of any of Seller's
shareholders.
Section 3.3 Corporate Records. Copies of Seller's Articles
of Incorporation and all amendments thereto, and its Bylaws of Seller and all
amendments thereto have been delivered to Purchaser and are full and complete
copies thereof.
Section 3.4 Authorization and Validity. The execution,
delivery and performance of this Agreement and the other agreements contemplated
hereby by Seller and the Principal, and the consummation of the transactions
contemplated hereby and thereby, have been unanimously approved and duly
authorized by the Board of Directors of Seller and shareholders of Seller. This
Agreement and each other agreement contemplated hereby have been or will be duly
executed and delivered by Seller and the Principal, as the case may be, and
constitute, or will constitute as of the Closing, legal, valid and binding
obligations of Seller and the Principal, enforceable against each of them in
accordance with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
Section 3.5 Financial Statements. Intentionally Deleted.
Section 3.6 Liabilities and Obligations. To Seller’s
knowledge, Schedule 3.6 provides a listing of all liabilities and obligations of
Seller, accrued, contingent or otherwise (known or unknown and asserted or
unasserted), arising out of transactions effected or events occurring on or
prior to the date hereof and prior to the Closing and related to the Purchased
Assets or the Business Segment. Except as set forth on Schedule 3.6, Seller is
not liable, upon or with respect to, or obligated in any other way to provide
funds in respect of or to guarantee or assume in any manner, any debt,
obligation or dividend of any person, corporation, association, partnership,
joint venture, trust or other entity that in any way affects the Purchased
Assets or the Business Segment. Seller knows of no basis for the assertion of
any other claims or liabilities of any nature or in any amount that in any way
affects the Purchased Assets or the Business Segment.
Section 3.7 Employee Benefits. Seller does not sponsor,
maintain, or otherwise is a party to, or is in default under, or has any accrued
obligations under any pension, deferred compensation, bonus or other incentive
plan, severance plan, health, group insurance or other welfare plan, employee
benefit plan or other similar plan, agreement, policy or understanding.
Section 3.8 Absence of Certain Changes. Except as disclosed
on Schedule 3.6, in relation only to the Purchased Assets or the Business
Segment Seller has not (a) suffered any material adverse change in its financial
condition, assets, liabilities or business; (b) contracted for or paid any
capital expenditure in excess of $10,000 or contracted for or paid more than
$50,000 for all capital expenditures to any person, entity, and/or any
affiliates of any such person or entity, (c) incurred any indebtedness for
borrowed money, issued or sold any debt securities or, other than in the
ordinary course of business consistent with prior practices, discharged any
liabilities or obligations, or agreed to do any of the foregoing; (d) mortgaged,
pledged or subjected to any lien, lease, security interest or other charge or
encumbrance any of Seller's properties or assets or agreed to do any of the
foregoing; (e) paid any amount on any indebtedness for borrowed money prior to
the due date, forgiven or canceled any material debts or claims or released or
waived any material rights or claims or agreed to do any of the foregoing; (f)
suffered any damage or destruction to or loss of any assets (whether or not
covered by insurance) that could or does materially and adversely affect its
business; (g) acquired or disposed of any assets or incurred any liabilities or
obligations or agreed to do any of the foregoing, except in the ordinary course
of business consistent with prior practice; (h) written up or written down the
carrying value of any of its assets; (i) changed the costing system or
depreciation methods of accounting for its assets or otherwise changed any
method of accounting or adopted any new method of accounting or agreed to do any
of the foregoing; (j) accelerated any item of income or gain into the period
prior to the Closing, or deferred any item of expense or loss into the period
after Closing, and such acceleration or deferral is not made in the ordinary
course of Seller's business consistent with Seller's treatment of such items in
prior periods; (k) lost or terminated employees, consultants, agents,
representatives, customers or suppliers that could or does materially and
adversely affect its business or assets; (l) increased or agreed to increase the
compensation of any consultant, agent, representative or employee, except in the
ordinary course of business consistent with prior practices; (m) formed or
acquired or disposed of any interest in any corporation, partnership, joint
venture or other entity; (n) redeemed, purchased or otherwise acquired, or sold,
granted or otherwise disposed of, directly or indirectly, any of its capital
stock or securities or any rights to acquire such capital stock or securities,
or agreed to change terms and conditions of any such rights; or (o) entered into
any employment, compensation, consulting or collective bargaining agreement with
any person or group, or modified or amended the terms of any such existing
agreement or agreed to do any of the foregoing.
Section 3.9 Title; Leased Assets.
(a) Seller owns the Purchased Assets free and clear of all
liens, liabilities, claims, and encumbrances. The Purchased Assets are the only
ones necessary for the conduct of the Business Segment other than those assets
to be acquired by Purchaser from Marketscreen.com, Inc. concurrently with the
Closing pursuant to a separate agreement. Schedule 3.9 also contains a listing
of which Purchased Assets are leased. Upon consummation of the transactions
contemplated hereby, Purchaser shall receive good, valid, and marketable title
to the Purchased Assets, and will be entitled to, subject to the receipt of all
appropriate consents, use as lessee all leased assets which are material to the
operation of the Business Segment.
(b) Except as set forth on Schedule 3.9, all tangible
properties and assets material to the Business Segment, other than those assets
to be acquired by Purchaser from Marketscreen.com, Inc. concurrently with the
Closing pursuant to a separate agreement, are included in the Purchased Assets.
Seller owns or leases or otherwise possesses a transferable right to use all
Purchased Assets which are material to the operation of the Business Segment as
conducted immediately before the date of this Agreement.
Section 3.10 Material Agreements. Except as set forth in
Schedule 3.10 hereto, Seller has not entered into, nor are the Purchased Assets
or the Business Segment bound by, whether or not in writing, any (i) partnership
or joint venture agreement; (ii) deed of trust or other security agreement;
(iii) guaranty or suretyship, indemnification or contribution agreement or
performance bond; (iv) employment, consulting or compensation agreement or
arrangement, including the election or retention in office of any director or
officer; (v) labor or collective bargaining agreement; (vi) debt instrument,
loan agreement or other obligation relating to indebtedness for borrowed money
or money lent to another; (vii) deed or other document evidencing an interest in
or contract to purchase or sell real property; (viii) agreement with dealers or
sales or commission agents, public relations or advertising agencies,
accountants or attorneys; (ix) lease of real or personal property, whether as
lessor, lessee, sublessor or sublessee; (x) powers of attorney; (xi) agreement
for the acquisition of services, supplies, equipment or other personal property
entered into other than in the ordinary course of business consistent with prior
practices and involving more than $10,000; (xii) contract containing
noncompetition covenants; (xiii) agreement relating to any matter or transaction
in which an interest is held by a person or entity which is an "affiliate" of
Seller or any Principal (as the term "affiliate" is defined in Rule 144(a)(i) of
the Securities and Exchange Commission promulgated under the Securities Act of
1933), or any "associate" of any such affiliate (as the term "associate" is
defined in Regulation 14A of the general rules and regulations under the
Securities Exchange Act of 1934); or (xiv) other agreement or commitment not
made in the ordinary course of business consistent with prior practices, that is
material to the Business Segment or financial condition of Seller (all of the
foregoing are hereinafter collectively referred to as the "Material
Agreements"). True, correct and complete copies of the written Material
Agreements, and true, correct and complete written descriptions of the oral
Material Agreements, have heretofore been delivered to Purchaser. There are no
existing defaults, events of default or events, occurrences or acts that, with
the giving of notice or lapse of time or both, would constitute defaults, and no
penalties have been incurred nor are amendments pending, with respect to the
Material Agreements, except as set forth in Schedule 3.10. The Material
Agreements are in full force and effect and are valid and enforceable
obligations of the parties thereto in accordance with their terms, and no
defenses, off-sets or counterclaims have been asserted or may be made by any
party thereto, nor has Seller waived any rights thereunder, except as set forth
in Schedule 3.10. Seller is not a party to, and none of the Purchased Assets
are subject to or otherwise affected by, any agreement or instrument, or any
charter or other restriction, or any judgment, order, writ, injunction, decree,
rule or regulation, that could or does materially and adversely affect the
Purchased Assets or Business Segment.
Section 3.11 Insurance. Intentionally Deleted.
Section 3.12 Patents, Trademarks and Copyrights.
(a) Other than the intellectual property rights to be
acquired by Purchaser from Marketscreen.com, Inc. concurrently with the Closing
pursuant to a separate agreement, Seller owns all patents, trademarks,
copyrights, and other intellectual property rights if any, necessary to conduct
the Business Segment, or possesses adequate licenses or other rights, if any,
therefor, without conflict with the rights of others. Set forth in Schedule
3.12 hereto is a true and correct description of the following ("Proprietary
Rights"):
(i) All trademarks, trade names, service marks, domain
names, product labels, trade dress, and other trade designations, including
common-law rights, registrations and applications therefor, and all patents,
copyrights and applications currently owned, in whole or in part, by Seller, and
all licenses, royalties, assignments and other similar agreements relating to
the foregoing to which Seller is a party (including expiration dates if
applicable) related to the Business Segment; and
(ii) All agreements relating to technology, know-how,
processes or web site development and hosting (including but not limited to all
agreements covering application software and/or operating system software)
related to the Business Segment that Seller is licensed or authorized to use by
others, or which it licenses or authorizes others to use.
(b) Except as set forth in Schedule 3.12, Seller has the
sole and exclusive right to use the Proprietary Rights identified in Schedule
3.12 without infringing or violating the rights of any third parties. Except as
set forth in Schedule 3.12, no consent of third parties will be required for the
use thereof by Purchaser upon consummation of the transactions contemplated by
this Agreement. No claim has been asserted by any person to the ownership of or
right to use any Proprietary Right or challenging or questioning the validity or
effectiveness of any such license or agreement, and neither Seller nor any
Principal knows of any valid basis for any such claim. Each of the Proprietary
Rights is valid and subsisting, has not been canceled, abandoned or otherwise
terminated and, if applicable, has been duly issued or filed.
(c) To the best of Seller's knowledge, no product, activity
or operation of Seller infringes upon or involves, or has resulted in the
infringement of, any Proprietary Right of any other person, corporation or other
entity. No proceedings have been instituted, are pending or, to the best
knowledge of Seller and the Principal, are threatened which challenge the rights
of Seller with respect thereto. Seller has not given and is not bound by any
agreement of indemnification for or regarding any Proprietary Right.
Section 3.13 No Violation. Neither the execution and
performance of this Agreement or the agreements contemplated hereby nor the
consummation of the transactions contemplated hereby or thereby will (a) result
in a violation or breach of the Articles of Incorporation or Bylaws of Seller or
any agreement or other instrument under which Seller is bound or to which any of
the Purchased Assets are subject, or result in the creation or imposition of any
lien, charge or encumbrance upon any of the Purchased Assets except as described
in Schedule 3.13 or (b) violate any applicable law or regulation or any judgment
or order of any court or governmental agency.
Section 3.14 Taxes. Seller has filed or will file prior to
applicable deadlines all income, excise, corporate, franchise, property, sales,
payroll, withholding and other tax returns and reports required to be filed by
it as of the date hereof by the United States of America or any state or any
political subdivision thereof and has paid or established adequate reserves for
all taxes (including penalties and interest) which have or may become due
pursuant to such returns and any assessments which have been received by it or
otherwise. All such tax returns or reports fairly and accurately reflect the
taxes of Seller for the periods covered thereby. Seller is not delinquent in
the payment of any tax, assessment or governmental charge, there is no tax
deficiency or delinquency asserted against Seller and there is no unpaid
assessment, proposal for additional taxes, deficiency or delinquency in the
payment of any of the taxes of Seller that could be asserted by any taxing
authority, nor of any violation of any federal, state, local or foreign tax
law. No Internal Revenue Service or other tax audit of Seller is pending or, to
Seller's actual knowledge, threatened. No Internal Revenue Service or other tax
audit of Seller has occurred during the last five (5) years. Seller has not
granted any extension to any taxing authority of the limitation period during
which any tax liability may be asserted. Seller has not committed a violation of
any federal, state, local or foreign tax laws. All monies required to be
withheld by Seller from employees or other payees, including amounts
attributable to tips or gratuities received by employees, or collected from
customers or other payees for income taxes, social security and unemployment
insurance taxes and sales, excise and use taxes, including but not limited to
penalties and interest thereon, have been collected or withheld and either paid
to the respective governmental agencies or set aside in accounts for such
purpose. Seller has furnished to Purchaser true and accurate copies the tax
returns for the years 1998 through 2000.
Section 3.15 Consents. Except as set forth in Schedule 3.15
hereto, no authorization, consent, approval, permit or license of, or filing
with, any governmental or public body or authority, any lender or lessor or any
other person or entity is required (i) to authorize, or is required in
connection with, the execution, delivery and performance of this Agreement or
the agreements contemplated hereby on the part of Seller or the Principal or
(ii) in connection with the transfer of any Purchased Assets from Seller to
Purchaser, including but not limited to the assignment of the Assigned
Contracts. Schedule l.1(f) contains a complete and accurate list and
description of the Assigned Contracts.
Section 3.16 Compliance with Laws and Agreements.
(a) Seller is not in violation of any term or provision of
any charter, bylaw, mortgage, indenture, contract, agreement, instrument,
judgment, decree, order, or to Seller’s knowledge, any law, statute, rule,
regulation or judicial or administrative decision applicable to, or which could
materially affect, Seller, the Purchased Assets or the Business Segment.
(b) Neither Seller nor the Principal has (i) made any
payment to any person (an "Official") employed by or affiliated with any
customer, supplier, or governmental entity or agency charged with reviewing,
monitoring, or regulating any activities of Seller or the Principal, (ii) given
any personal property or real property to any Official, (iii) sold any personal
property or real property to any Official at less than fair market value, (iv)
made a political contribution to any governmental official in violation of
applicable law, or (v) otherwise taken any action in violation of any statute,
rule, or regulation prohibiting bribes, kickbacks, or other activities that seek
to wrongfully influence any Official.
(c) Except as set forth in Schedule 3.16(c) hereto, to
Seller’s knowledge, neither Seller nor the Principal has (i) committed any act,
(ii) violated any law, or (iii) been charged with violating any law that has
restricted or impaired, or could restrict or impair, the ability of Seller or
the Principal (or following the Closing, Purchaser) to conduct business.
Section 3.17 Finder's Fee. Seller and the Principal have not
incurred any obligation for any finder's, broker's or agent's fee in connection
with the transactions contemplated hereby for which Purchaser may be liable or
for which a claim could be asserted against the Purchased Assets.
Section 3.18 Claims and Proceeding. Schedule 3.18 is a
complete and accurate list and description of all claims, actions, suits,
proceedings and investigations currently pending or, to the best knowledge of
Seller, threatened against or affecting Seller, the Principal or the Business
Segment or any of the properties, Purchased Assets, at law or in equity, or
before or by any court, municipal or other governmental department, commission,
board, agency or instrumentality. Except as set forth in Schedule 3.18, none of
such claims, actions, suits, proceedings or investigations will result in any
liability or loss to Seller, the Purchased Assets or the Business Segment which
(individually or in the aggregate) is material to Seller, the Purchased Assets,
or the Business Segment and Seller has not been, and is not now, subject to any
order, judgment, decree, stipulation or consent of any court, governmental body
or agency. No inquiry, action or proceeding has been asserted, instituted or,
to the best knowledge of Seller, threatened to restrain or prohibit the carrying
out of the transactions contemplated by this Agreement or to challenge the
validity of such transactions or any part thereof or seeking damages on account
thereof. To the best knowledge of Seller, there is no basis for any claim or
action which would, or could reasonably be expected to (individually or in the
aggregate), have a material adverse effect on the Business Segment or financial
condition of Seller. Except as set forth in Schedule 3.18, no claim, complaint,
suit, action, proceeding or investigation is pending or, to Seller's actual
knowledge, threatened against the Principal or to any other person or entity
having an ownership interest in, or who was an officer, director, or agent of
Seller, which may result in any restraint, prohibition or the obtaining of
damages or any other relief.
Section 3.19 Employees and Consultants. Set forth in Schedule
3.19 hereto is a complete and accurate list of all employees and consultants of
Seller related to the Business Segment. Seller has not granted or become
obligated to grant any increases in the wages or salary of, or paid or become
obligated to pay any bonus or made or become obligated to make any similar
payment to or grant any benefit to or on behalf of any of such individuals.
Seller has no direct or indirect, express or implied, obligation to pay
severance or termination pay to any such individuals or to pay any amounts to
any consultant in relation to the Business Segment other than the individuals
set forth on Schedule 3.19. Seller and the Principal have no actual knowledge
of any facts which would indicate that any employee or consultant of Seller
listed on Schedule 3.19 will not accept employment or a consulting relationship
with Purchaser on a basis no less favorable than such employee or consultant’s
current relationship with Seller.
Section 3.20 Other Employee Matters. To Seller's actual
knowledge, Seller is in compliance with all federal and state laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours and is not engaged in, nor has it committed, any unfair labor
practice as defined in the National Labor Relations Act of 1947, as amended.
There is no unfair labor practice claim against Seller before the National Labor
Relations Board.
Section 3.21 Overtime. Back Wages. Vacation and Minimum Wages.
No present or former employee of Seller has, or will as of the Closing Date
have, any claim against Seller (whether under federal, state or local law, any
employment agreement, or otherwise) on account of or for (a) overtime pay, other
than overtime pay for the then current payroll period, (b) wages or salary for
any period other than the current payroll period, (c) vacation, time off or pay
in lieu of vacation or time off, other than that earned in respect of the
current fiscal year or accrued on Seller's books and records, or (d) any
violation of any statute, ordinance or regulation relating to minimum wages or
maximum hours of work. All amounts required to be withheld by Seller from its
employees have been properly withheld and will be timely deposited and all
contributions required to be paid by Seller in respect of its employees have
been paid in accordance with the applicable provisions of federal, state and
local laws regarding income tax withholding and social security, workers
compensation, unemployment compensation or similar taxes or contributions.
Section 3.22 Discrimination and Occupational Safety and
Health. No person or party (including, but not limited to, governmental
agencies of any kind) has any claim, or basis for any action or proceeding,
against Seller arising out of any statute, ordinance or regulation relating to
discrimination in employment or employment practices or occupational safety and
health standards. Seller has not received any notice from any federal, state or
local entity alleging a violation of occupational safety or health standards.
Section 3.23 ADA. Seller has not received notice from any
individual, entity or federal, state, local governmental agency or official
notifying it that Seller or any property or asset of Seller is in violation of,
or in noncompliance with, the Americans with Disabilities Act (the "ADA").
Seller has not received any notice of a claim or potential claim under the Civil
Rights Act of 1991 for any violation of the ADA.
Section 3.24 Condition of Fixed Assets. Intentionally Deleted.
Section 3.25 Books of Account and Records. The books of
account of Seller have been kept accurately in the ordinary course of its
business, the transactions entered therein represent bona fide transactions and
the revenues, expenses, assets and liabilities of Seller have been properly
recorded in such books. The Records are in good order, are complete, and have
been maintained in accordance with sound business practices.
Section 3.26 Corporate Name. Intentionally Deleted.
Section 3.27 Investments in Competitors. Except for the
ownership of non-controlling interests in securities of corporations the shares
of which are listed on generally recognized stock exchanges, the Principal does
not own directly or indirectly any interest or has any investment in any
corporation, business or other person which is a competitor of the Business
Segment, or which otherwise directly does business with Seller in relation to
the Business Segment.
Section 3.28 Contracts and Transactions with Affiliates and
Others. Except as set forth on Schedule 3.28, no Principal, director or officer
of Seller, nor any person who is a spouse or descendant of such Principal,
director or officer, has any direct or indirect relationship with any customer
or supplier of, or other contracting party with, Seller. Except as set forth on
Schedule 3.28 and except for salaries and benefits paid in the ordinary course
of Seller’s business, Seller has not paid any sum, assumed any debt or
distributed any assets to the Principal or any director or officer of Seller,
or any person who is a spouse or descendant of the Principal, director or
officer
Section 3.29 Real Property. Schedule 3.29 describes all real
estate owned or leased by Seller or otherwise occupied by Seller in the Business
Segment (the "Real Property"). Except as set forth on Schedule 3.29, Seller's
use and operation of the Real Property and Purchaser's use of such premises in
the same manner as used by Seller are, and at the Closing Date will be, valid
and permitted uses of such premises which in no way violate any Laws (as
hereinafter defined) or any agreement, document or instrument respecting such
premises and do not constitute non-conforming use. All uses of the Real
Property and all uses made thereby by Seller have been, and as of the Closing
Date will be, in compliance with all federal, state, county and local laws,
rules, orders, regulations and ordinances, including without limitation, all
applicable planning and zoning laws, rules, regulations and ordinances
(collectively, "Laws"), except for minor violations which do not and will not
have a material adverse effect on the operation of the Business Segment.
Neither Seller, the Principal, nor anyone on its or their behalf, has received
any notices of any violations of any Laws regarding the Real Property.
Section 3.30 Business Relations with Suppliers. Except as set
forth in Schedule 3.30 hereto, neither Seller nor any Principal has received
actual notice, that any supplier of Seller will, cease or refuse to do business
with Purchaser after the consummation of the transactions contemplated hereby.
Except as set forth in Schedule 3.30, neither Seller nor any Principal has
received any actual notice of any disruption (including delayed deliveries or
allocations by suppliers or service providers) in the availability of the
materials, products, supplies or services used by Seller, nor is Seller aware of
any facts which could lead Seller to believe that the Business Segment (whether
before or after the Closing) will be subject to any such material disruption.
Seller is not aware of any condition (financial or otherwise) affecting any of
Seller's major suppliers that is likely to reduce each such supplier's ability
to do business with Purchaser in a similar manner that each such supplier has
done business with Seller during the period preceding this Agreement.
Section 3.31 Agents. Seller has not designated or appointed
any person or other entity to act for it or on its behalf pursuant to any power
of attorney or any agency which is presently in effect.
Section 3.32 Permits. Set forth in Schedule 3.32 hereto is a
list of all permits, licenses and approvals from federal, state, county, local
and foreign governmental and regulatory bodies (collectively, "Permits") held,
utilized or applied for by Seller, including, without limitation, all state
licenses required to be issued in those states in which Seller does business,
and the Permits are valid and in full force and effect. Except as set forth in
Schedule 3.32, no other or additional licenses, permits or approvals are
required of or from any governmental authority or agency in connection with the
conduct of the Business Segment which, if not obtained, could materially and
adversely affect the Business Segment or the Purchased Assets. Seller and the
Business Segment have complied and are in compliance, in all material respects,
with the terms and conditions of the Permits and no violation of any of the
Permits or the laws or rules governing the issuance or continued validity
thereof has occurred. Seller has not received any claim or notice, have no
knowledge indicating, that Seller or the Business Segment is not in compliance
with the terms of any such Permits or with any of the requirements, standards
and procedures of the federal, state, county, local and foreign governmental
regulatory bodies which issued them. To Seller’s knowledge, Seller is in
material compliance with all federal, state, county and local laws, ordinances,
codes, regulations, orders, requirements, standards and procedures which are
applicable to Seller, the Business Segment or the Purchased Assets.
Section 3.33 Proprietary Information. Neither Seller, nor any
Principal (nor to the best knowledge of Seller, any employee of Seller) has
disclosed any confidential information purported to be transferred hereunder
(including, but not limited to, current or prospective customer lists, financial
statements, trade secrets, methods by which the business of Seller is or has
been conducted, and methods by which the customers or business of Seller are or
have been obtained) which does not exist in the public domain to any third party
except (i) in the ordinary course of business and then under appropriate
confidentiality covenants or agreements sufficient to protect and maintain the
confidentiality and proprietary nature of such information, (ii) to prospective
buyers of the Business Segment under appropriate confidentiality covenants or
agreements sufficient to protect and maintain the confidentiality and
proprietary nature of such information, and (iii) to Purchaser or its agents or
representatives.
Section 3.34 Necessary Property. The Purchased Assets
(including the Assigned Contracts) constitute all of the property, rights and
agreements now used, necessary or advisable for the conduct and operation of the
Business Segment in the manner and to the extent presently conducted or
currently proposed to be conducted by Seller. Each Assigned Contract is valid,
binding, and in full force and effect and has not been amended, rescinded, or
modified, will not be breached or violated as a result of its assignment to
Purchaser (except for the obtaining of the appropriate consents for the Assigned
Contracts which are listed on Schedule 3.15 as requiring consents) and will be
fully enforceable by Purchaser in accordance with its terms. To the best of
Seller's and Principal's knowledge, no party to any of the Assigned Contracts is
in default or alleged to be in default thereunder and there exists no condition
or event which, after notice or lapse of time or both, would constitute a
default by any party and Seller is not aware of any cancellation, or threat to
cancel or not to renew or extend any of the Assigned Contracts by any party
thereto. A list of all the Assigned Contracts is attached as Schedule l.l(f)
and Seller has furnished Purchaser complete and accurate copies of the Assigned
Contracts. Except for the Assigned Contracts, Seller has no oral or written
agreement, contract or understanding with any person or entity
Section 3.35 Environmental Matters.
(a) The following terms shall have the following meanings:
(i) "Applicable Environmental Laws" means all federal,
state and local or municipal, statutory, regulatory and common law requirements
relating to the protection of human health and safety or the environment,
including, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act (42 U.S.C. § 9601 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Clean Water Act,
(33 U.S.C. § 1251 et seq.), the Clean Air Act, (42 U.S.C. § 7401 et seq.), the
Toxic Substance Control Act (15 U.S.C. § 2601 et seq.), Federal Insecticide
Fungicide Rodenticide Act (7 U.S.C. § 136 et seq.), Occupational Safety and
Health Act (29 U.S.C. § 651 et seq.), and all applicable judicial,
administrative, and regulatory decrees, judgments, and orders.
(ii) "Hazardous Materials" means any chemical substances,
pollutants, contaminants, materials, industrial solid wastes or other wastes, or
combinations thereof, whether solid, liquid or gaseous in nature which poses or
may pose a hazard to the health or safety of persons or the environment or the
presence of which may require investigation or remediation under any Applicable
Environmental Laws, including, without limitation, material which is or becomes
defined as a "hazardous waste" or "hazardous substance" under the Comprehensive
Environmental Response Compensation and Liability Act (42 U.S.C. § 9601 et seq.)
and/or the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.) or
which contains gasoline, diesel fuel or other petroleum hydrocarbons,
polychlorinated biphenyls (PCBs), asbestos, urea formaldehyde foam insulation,
or radon gas.
(b) To the best of Seller's and Principal's knowledge,
Seller is and has been in compliance with all Applicable Environmental Laws.
(c) To the best of Seller's and Principal's knowledge,
there has been no past or present spill, discharge, disposal or release of
Hazardous Materials onto or from the Real Property or other property occupied by
Seller, nor are any Hazardous Materials presently deposited, stored, or
otherwise located on, under, in or about the Real Property or such other
property (except in strict compliance with applicable laws), nor have any
Hazardous Materials migrated from the Real Property or such other property upon
or beneath other properties.
(d) Schedule 3.35(d) contains a list of all applicable
permits, licenses, approvals and/or registrations required to be issued to it
under Applicable Environmental Laws on account of any or all of its activities
and is in full compliance with the terms and conditions of each permit, license,
approval and registration. No material change in the facts or circumstances
reported or assumed in the application for or granting of such permit, license,
approval or registration exists. Each such permit, license, approval, or
registration is in full force and effect, and following consummation of the
transactions contemplated herein, will continue to be in full force and effect
without any consent or approval, or may be modified, transferred or replaced by
Purchaser in the ordinary course of business without any interruption of the
conduct of its business, assuming timely application therefor and reasonable
diligence in pursuit thereof by Purchaser.
(e) Seller has not received any notice or other
communication concerning any alleged violation of any Applicable Environmental
Law, whether or not corrected to the satisfaction of the appropriate authority,
or notice or other communication concerning alleged liability for any response
costs or remedial action in connection with: (i) the Real Property or any other
property occupied by Seller, or (ii) any activities of Seller, or for which
Seller is alleged to be liable under any Applicable Environmental Law. There
exists no writ, injunction, decree, order, judgment, or lien outstanding, nor
any lawsuit, claim, proceeding, citation, directive, summons or investigation,
pending or, to the Seller's actual knowledge, threatened, relating to: (i) the
occupancy, use, maintenance or operation of the Real Property or other property
occupied by Seller, or (ii) conduct of the Business Segment or other operations
by Seller, or (iii) any alleged violation of Applicable Environmental Law by
Seller or (iv) the suspected presence of Hazardous Materials on the Real
Property or other property occupied by Seller (other than those stored or
utilized by Seller in the conduct of the Business Segment which storage and
usage has been and is in conformity with applicable laws including but not
limited to Applicable Environmental Laws).
(f) No claim has been asserted, and Seller has no actual
knowledge of any unasserted claims arising out of violations of any Applicable
Environmental Laws or the handling, treatment, storage, transportation, disposal
(or the arranging therefor) or the discharge into the environment of any
Hazardous Materials, including, without limitation, claims for penalties,
natural resource damage, personal injury, property damage or response or
remedial costs.
(g) No underground storage tanks for petroleum or any other
substance, or underground piping or conduits associated with such tanks, are or
have previously been located on the Real Property or any other property occupied
by Seller.
(h) No Hazardous Materials, including without limitation,
asbestos-containing materials or PCB-containing materials, are installed,
contained in building material, contained in transformers or other electrical
equipment, or are otherwise present on the Real Property nor any other property
occupied by Seller (other than those stored or utilized on the Real Property by
Seller in the conduct of the Business Segment which storage and usage has been
and is in conformity with Applicable Environmental Laws).
(i) Seller has not been refused insurance coverage, nor
has insurance coverage ever been canceled, as a result of the presence of
Hazardous Materials on the Real Property or other property occupied by Seller,
or violations of Applicable Environmental Laws, or due to other concerns
relating to matters affecting human health or the environment.
(j) There are no activities on the Real Property or any
other property occupied by Seller, or any type of material, including but not
limited to Hazardous Materials, on the Real Property or other property occupied
by Seller that would currently require deed recordation of such activities by
Seller.
(k) There are no active or inactive solid waste management
units or hazardous waste management units on the Real Property or any other
property occupied by Seller.
(l) There are no plans or documents, whether or not
government approved, including, but not limited to, contingency plans, closure
and post-closure plans or consent decrees or settlement agreements which impose
environmental obligations on Seller or against the Real Property. There are no
requirements, whether by regulation, agreement or otherwise, imposing financial
obligations on Seller or on the Real Property with respect to environmental
conditions or activities which exist, have existed, are occurring or have
occurred on the Real Property or in connection with or resulting from the
conduct of the Business Segment by Seller or other activities of Seller.
(m) Seller has provided Purchaser with all environmental
studies and reports in its possession or control by whomsoever conducted, all
environmental records of Seller, and all documents of Seller concerning
environmental conditions of the Real Property or other property occupied by
Seller, or which identify underground tanks, or otherwise relate to actual or
potential contamination of the soil or groundwater.
(n) No Hazardous Materials have been disposed of by Seller
on the Real Property or other property occupied by it or have been transported
to any off-site disposal area other than those identified in Schedule 3.35(n)
and, to the actual knowledge of Seller, none of those sites have been designated
or are being considered for designation as a site requiring clean-up pursuant to
any Environmental Law.
Section 3.36 Investment Representations. Intentionally
Deleted.
Section 3.37 Accuracy of Information Furnished. To Seller's
best knowledge, all information furnished to Purchaser by Seller, as an Exhibit
or Schedule hereto, is true, correct and complete in all material respects.
Such information states all material facts required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements are made, true, correct and complete in all material
respects. Seller has made due inquiry and investigation concerning the matters
to which representations and warranties of Seller under this Agreement pertain
and Seller is not unaware of any facts, events or circumstances which have not
been disclosed to Purchaser which are material to the Purchased Assets, the
Business Segment or Seller.
ARTICLE IV
Cross Default
Section 4.1 Any breach or default under any covenant or any
inaccuracy in any representation made by Seller’s Affiliate, Lasdorf Corporate
Services, Inc., in that certain Asset Purchase Agreement of even date herewith
among Purchaser, Lasdorf Corporate Services, Inc. and Andrew Yasinsky, the sole
shareholder of Lasdorf Corporate Services, Inc., including any exhibits and
schedules thereto or in any certificate, document or other instrument delivered
in connection with the transfer or other transactions contemplated by this such
agreement shall be deemed a breach and default under this Agreement by Seller
and the Principal. In that event, Purchaser shall have the right to any and all
legal remedies available to it for a breach/violation of both Asset Purchase
Agreements
ARTICLE V
Indemnification
Section 5.1 Seller's Indemnity. Subject to the terms and
conditions of this Article V, Seller and the Principal, and each of them hereby
jointly and severally agree to indemnify, defend and hold Purchaser and its
shareholders, officers, directors, agents, attorneys and affiliates (defined as
Purchaser and any person or entity controlling, controlled by, or under common
control with, Purchaser) harmless from and against all losses, claims,
obligations, demands, assessments, penalties, liabilities, costs, damages,
reasonable attorneys' fees and expenses (collectively, "Damages"), incurred by
any or all of them or assessed against the Purchased Assets by reason of or
resulting from or based upon:
(a) The inaccuracy of any representation or breach or
default of or under any warranty, covenant or agreement made by Seller and/or
the Principal in this Agreement, including, the Exhibits and Schedules or in any
certificate, document or other instrument delivered in connection with the
transfer or other transactions contemplated by this Agreement including the
Non-Compete Agreements;
(b) Any product liability claims relating to products sold
and/or leased by Seller;
(c) Any general liability claims arising out of or relating
to occurrences of any nature relating to the Business Segment or the conduct
thereof, prior to the Closing, whether any such claims are asserted prior to or
after the Closing;
(d) Any obligation or liability under or related to any Plan
or the termination thereof;
(e) Any failure to comply with all applicable bulk transfer
laws;
(f) Any sales, use, or similar taxes in connection with the
purchase and sale transaction contemplated by this Agreement; or
(g) Any general liability claims arising out of or relating
to occurrences of any nature relating to Seller's conduct from and after the
Closing.
Section 5.2 Purchaser's Indemnity. Subject to the terms and
conditions of this Article V, Purchaser hereby agrees to indemnify, defend and
hold Seller and its shareholders, officers, directors, agents, attorneys and
affiliates (defined as Seller and any person or entity controlling, controlled
by, or under common control with, Seller), and Principal harmless from and
against all Damages asserted against or incurred by any or all of them by reason
of or resulting from or based on:
(a) The inaccuracy of any representation or breach or
default of or under any warranty, covenant or agreement made by Purchaser in
this Agreement, including Exhibits and Schedules, or in any certificate,
document, or other instrument delivered in connection herewith or with the
transfer or other transactions contemplated by this Agreement;
(b) The failure of Purchaser to pay, perform and discharge
when due any Assumed Liabilities;
(c) Any product liability claims relating to products sold
by Purchaser; or
(d) Any general liability claims arising out of or relating
to occurrences of any nature relating to the conduct of the Business Segment
after the Closing.
Section 5.3 Conditions of Indemnification. The respective
obligations and liabilities of Seller and Purchaser (the "indemnifying party")
to the other (the "party to be indemnified") under Sections 5.1 and 5.2 hereof
with respect to claims resulting from the assertion of liability by third
parties shall be subject to the following terms and conditions:
(a) Within 20 days (or such earlier time as might be
required to avoid prejudicing the indemnifying party's position) after receipt
of notice of commencement of any legal action evidenced by service of process or
other legal pleading, or with reasonable promptness after the assertion in
writing of any claim by a third party, the party to be indemnified shall give
the indemnifying party written notice thereof together with a copy of such
claim, process or other legal pleading, and the indemnifying party shall have
the right to undertake the defense thereof by representatives of its own
choosing (but subject to the approval of the indemnified party which approval
will not be unreasonably withheld or delayed) and at its own expense; provided,
however, that the party to be indemnified may participate in the defense with
counsel of its own choice and at its own expense and, provided further, that the
failure of the party to be indemnified to give timely notice shall not affect
the right to indemnification hereunder except to the extent (and then only to
the extent) the indemnifying party proves actual damages caused by such failure.
(b) In the event that the indemnifying party, by the 30th
day after receipt of notice of any such claim (or, if earlier, by the 10th day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim),
does not elect to defend against such claim, the party to be indemnified will
(upon further notice to the indemnifying party) have the right to undertake the
defense, compromise or settlement of such claim on behalf of and for the account
and risk of the indemnifying party and at the indemnifying party's expense,
subject to the right of the indemnifying party to assume the defense of such
claims in accordance with this Section 5.3(b) at any time prior to settlement,
compromise or final determination thereof.
(c) Anything in this Section 5.3 to the contrary
notwithstanding, the indemnifying party shall not settle any claim without the
consent of the party to be indemnified unless such settlement involves only the
payment of money and the claimant provides to the party to be indemnified a
release from all liability in respect of such claim. If the settlement of the
claim involves more than the payment of money, the indemnifying party shall not
settle the claim without the prior consent of the party to be indemnified, which
consent shall not be unreasonably withheld.
(d) The party to be indemnified and the indemnifying party
will each cooperate with all reasonable requests of the other.
Section 5.4 Remedies Not Exclusive. The remedies provided in
this Article V shall not be exclusive of any other rights or remedies available
by one party against the other, either at law or in equity.
Section 5.5 Actions to Minimize Losses. Notwithstanding any
provision of this Article V to the contrary, any party to this Agreement shall
be entitled, without first complying with the provisions of Sections 5.1, 5.2 or
5.3 hereof, to (c) pay to and/or compromise or settle with the claimant any
claim for which such party is entitled to indemnification under Section 5.1 or
5.2 hereof, if delay in the resolution of such claim could reasonably be
expected to have an immediate and material adverse effect on such party or on
the conduct of the Business Segment and (d) compromise and settle any lawsuit,
enforcement action or administrative proceeding for which indemnification is
provided to such party, or with respect to which such party has the right to
control the defense and investigation under Section 5.3 hereof, if the pendency
of such lawsuit, enforcement action or administrative proceeding or delay in the
resolution of the claim to which it relates could reasonably be expected to have
an immediate and material adverse effect on the conduct of the Business Segment;
provided, however, such party shall, prior to exercising its rights pursuant to
this Section 5.6, give at least ten (10) days prior written notice to the other
party(ies) of the intent to exercise the rights granted hereunder, the
occurrence causing such intended exercise, the action requested of the other
party(ies) and the time within which such action by the other party(ies) must be
taken to avoid the exercise of rights pursuant to this Section 5.5.
Section 5.6 Restrictions on Indemnification. Neither party
shall have liability under this Article V arising from any breach of warranty,
misrepresentation or omission unless the aggregate amount of all Damages finally
determined to arise from such breaches, misrepresentations or omissions exceeds
Fifty Thousand Dollars ($50,000), and, in such event the indemnifying party
shall be required to pay the full amount of such Damages including the first
Fifty Thousand Dollars ($50,000) of such Damages.
ARTICLE VI
Miscellaneous
Section 6.1 Amendment and Waiver. No provision of this
Agreement may be amended, modified, supplemented or waived except by an
instrument in writing executed by all of the parties hereto or, in the case of
an asserted waiver, executed by the party against which enforcement of the
waiver is sought.
Section 6.2 Assignment. Neither this Agreement nor any right
created hereby shall be assignable by any party hereto, except by Purchaser to
an affiliate.
Section 6.3 Notice. Any notice or communication must be in
writing and given by depositing the same in the United States mail, addressed to
the party to be notified, postage prepaid and registered or certified with
return receipt requested, or by delivering the same in person or by fax. Such
notice shall be deemed received on the date on which it is hand-delivered or
faxed (with confirmation received) or on the third business day following the
date on which it is so mailed. For purposes of notice, the addresses of the
parties shall be:
If to Purchaser: HyperFeed Technologies, Inc.
300 South Wacker Drive
Suite 300
Chicago, IL 60606
Attn: John Juska
Fax: 312-913-2900 with a copy to: Craig M. White, Esq.
Wildman, Harrold, Allen & Dixon
225 West Wacker Drive, Suite 3000
Chicago, IL 60606
Fax: 312-201-2555 If to Seller: Lasdorf Corporate Services, Inc.
c/o Andrew Yasinsky
512 Davey Glen Rd.
Belmont, CA 94002
Fax: (650)654-3354 with a copy to: David C. Longinotti
Hanson, Bridgett, Marcus, Vlahos & Rudy, LLP.
333 Market Street, Suite 2300
San Francisco, CA 94105
FAX: (415)541-9366
Any party may change its address for notice by written notice given to the other
parties in accordance with this Section 6.3.
Section 6.4 Confidentiality. Until the Closing, the parties
shall keep this Agreement and its terms confidential, but after the Closing (i)
any party may make such disclosures after the Closing as it reasonably considers
are required by law, but each party will notify the other parties in advance of
any such disclosure and (ii) the parties may disclose this Agreement, but not
its terms, in such manner as such party deems in the exercise of good faith
necessary or appropriate. In the event that the transactions contemplated by
this Agreement are not consummated for any reason whatsoever, the parties hereto
agree not to disclose or use any confidential information they may have
concerning the affairs of the other parties, except for information which is
required by law to be disclosed. Confidential information includes, but is not
limited to: customer lists and files, prices and costs, business and financial
records, valuations, surveys, reports, plans, proposals, financial information,
information relating to personnel contracts, stock ownership, liabilities and
litigation. Should the transactions contemplated hereby not be consummated,
nothing contained in this section shall be construed to prohibit a party hereto
from operating a business in competition with the other party.
Section 6.5 Entire Agreement. This Agreement and the
exhibits hereto supersede all prior agreements and understandings relating to
the subject matter hereof, except that the obligations of any party under any
agreement executed pursuant to this Agreement shall not be affected by this
Section.
Section 6.6 Transactional Expenses.
(a) Except as otherwise provided in this Agreement,
Purchaser and Seller shall each bear their respective costs and expenses of the
transactions contemplated hereby, including without limitation, the fees and
expenses of their attorneys, accountants and other advisors. The prevailing
party in any arbitration or other legal proceeding hereunder or under any
agreement executed pursuant hereto will, however, be entitled to recover its
reasonable attorneys' fees and expenses.
(b) Seller shall pay out of the proceeds of the purchase and
sale transaction contemplated by this Agreement all sales, use, and similar
taxes, if any, in connection with such purchase and sale of the Purchased
Assets.
Section 6.7 Severability. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, such provision shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
Section 6.8 Specific Performance. Each party to this
Agreement acknowledges that a refusal by the other party to consummate the
transactions contemplated hereby will cause irrevocable harm to the non-refusing
party, for which there may be no adequate remedy at law and for which the
ascertainment of damages would be difficult. Therefore, the non-refusing party
shall be entitled, in addition to, and without having to prove the inadequacy
of, other remedies at law, to specific performance of this Agreement, as well as
injunctive relief.
Section 6.9 Survival of Representations. Warranties and
Covenants. Except as otherwise set forth in this Section 6.9, all
representations and warranties of the parties hereunder shall survive for three
(3) years after the Closing Date; provided that there shall be no termination of
any such representation or warranty as to which a claim has been asserted prior
to the termination of such survival period. All representations and warranties
of Seller set forth in Sections 3.4, 3.9 and 3.35 shall survive indefinitely.
All representations and warranties of Seller set forth in Section 3.14 shall
survive the Closing and remain effective until one year after the expiration of
the applicable statute of limitations for claims that might be asserted for
matters related thereto.
Section 6.10 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the substantive laws of the State of
Illinois without reference or regard to the conflicts of law rules of said
state. In the event a dispute arises under this Agreement, the parties agree
that the exclusive jurisdiction and venue for the resolution of any dispute
shall be state and Federal courts located in Cook County, Illinois. Each party
irrevocably submits to the jurisdiction of the State of Illinois and waives any
objection, which it may have based upon improper venue or forum non conveniens
to the conduct of any proceeding in any such court. Both parties waive personal
service of any process upon it and consents to service of process by mail.
Section 6.11 Captions. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof.
Section 6.12 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
Section 6.13 Number and Gender. Whenever the context requires,
references in this Agreement to the singular number shall include the plural,
the plural number shall include the singular and words denoting gender shall
include the masculine, feminine and neuter.
[SIGNATURE PAGES TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have executed this Agreement as of the date first above written.
PURCHASER:
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HyperFeed Technologies Corporation,
a Delaware corporation By:
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Name:
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Its:
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SELLER:
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Lasdorf Corporate Services, Inc.,
a California corporation By:
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Name:
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Its:
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PRINCIPAL:
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Name: Andrew Yasinsky
SUPPORT SERVICES
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EXHIBIT 10.10
GUARANTY AND SURETYSHIP AGREEMENT
This GUARANTY AND SURETYSHIP AGREEMENT is made as of the 1st day of August,
1995, by BURLINGTON COAT FACTORY WAREHOUSE CORPORATION, a Delaware corporation
(the "Guarantor") in favor of FIRST FIDELITY BANK, NATIONAL ASSOCIATION, a
national banking association (the "Bank").
WHEREAS, the New Jersey Economic Development Authority Act, constituting Chapter
80 of the Pamphlet Laws of 1974 of the State of New Jersey, approved on
August 7, 1974, as amended and supplemented (the "Act"), declares it to be in
the public interest and to be the policy of the State of New Jersey (the
"State") to foster and promote the economy of the State, increase opportunities
for gainful employment and improve living conditions, assist in the economic
development or redevelopment of political subdivisions within the State, and
otherwise contribute to the prosperity, health and general welfare of the State
and its inhabitants by inducing manufacturing, industrial, commercial,
recreational, retail, service and other employment promoting enterprises to
locate, remain or expand within the State by making available financial
assistance; and
WHEREAS, the New Jersey Economic Development Authority (the "Authority"), a
public body corporate and politic constituting an instrumentality of the State
of New Jersey was created to aid in remedying the aforesaid conditions and to
implement the purposes of the Act, and the Legislature has determined that the
authority and powers conferred upon the Authority under the Act and the
expenditure of moneys pursuant thereto constitute a serving of a valid public
purpose and that the enactment of the provisions set forth in the Act is in the
public interest and for the public benefit and good and has been so declared to
be as a matter of express legislative determination; and
WHEREAS, the Authority, to accomplish the purposes of the Act, is empowered to
extend credit to such employment promoting enterprises in the name of the
Authority on such terms and conditions and in such manner as it may deem proper
for such consideration and upon such terms and conditions as the Authority may
determine to be reasonable; and
WHEREAS, Burlington Coat Factory Warehouse of New Jersey, Inc. (the "Company"),
a wholly owned subsidiary of the Guarantor, submitted an application (the
"Original Application") to the Authority for financial assistance in the
principal amount of $10,000,000 for financing a portion of the costs of a
project (the "1985 Project") consisting of the acquisition of 46.779 acres of
land in the Township of Burlington, Burlington County, New Jersey, the
construction of an approximately 500,000 square foot building situate thereon
for use as a national distribution center for the Company's products (which
building currently contains 75,000 square feet of office space), the equipping
of such building with conveyor systems, rolling racks and automated machinery
and the construction of a parking lot adjacent to such building, and the
Authority, by resolution duly adopted July 3, 1985 in accordance with the Act,
accepted the application of the Company for assistance in financing the 1985
Project; and
WHEREAS, the Authority, by resolution duly adopted September 4, 1985 in
accordance with the Act, authorized the issuance of not to exceed $10,000,000
aggregate principal amount of its Economic Development Bonds (Burlington Coat
Factory Warehouse of New Jersey, Inc. - 1985 Project) for the purpose of making
a loan to the Company to finance the 1985 Project (the "Original Loan"); and
WHEREAS, on September 20, 1985 the Authority issued $10,000,000 of its Economic
Development Bonds dated September 1, 1985 to finance the 1985 Project (the
"Prior Bonds"); and
WHEREAS, those Prior Bonds maturing on or after September 1, 1996 are subject to
redemption prior to maturity, at the option of the Company, on any interest
payment date on or after September 1, 1995; and
WHEREAS, the Company desires to redeem $10,000,000 aggregate principal amount of
the Prior Bonds maturing on or after September 1, 1996 (the "Refunded Bonds") on
September 1, 1995; and
WHEREAS, the Company, by letter dated May 10, 1995, notified the Authority of
its intent to redeem the Refunded Bonds on September 1, 1995 and has requested
the Authority's assistance in the issuance of not to exceed $10,000,000
aggregate principal amount of bonds to refinance the 1985 Project and to redeem
the Refunded Bonds; and
WHEREAS, on July 11, 1995, the Authority, by resolution duly adopted (the
"Resolution"), authorized the issuance of its Economic Development Refunding
Bonds (Burlington Coat Factory Warehouse of New Jersey, Inc. - 1995 Project)
(the "Refunding Bonds" or the "Bonds") for the purpose of providing funds for
the Company to refinance the 1985 Project and to redeem the Refunded Bonds (the
"Project"); and
WHEREAS, the Authority has determined to issue the Bonds concurrently herewith
pursuant to the Act, the Resolution and the Indenture (as hereinafter defined);
and
WHEREAS, the Authority, contemporaneously with the execution and delivery of
this Agreement, has entered into a Loan Agreement with the Company, and an
Indenture of Trust dated as of August 1, 1995 (the "Indenture") wherein the
Authority has assigned certain of its rights under the Loan Agreement to the
Trustee for the benefit of the Holders from time to time of the Bonds; and
WHEREAS, to facilitate the issuance and sale of the Bonds and to enhance the
marketability of the Bonds, the Company has requested the Bank to issue an
irrevocable direct pay letter of credit substantially in the form of Annex A
attached hereto, in an amount up to an aggregate amount of $10,357,293.00 (as
reduced and reinstated from time to time in accordance with the provisions
hereof and of the Letter of Credit), of which (a) the sum of $10,000,000 shall
be available to pay the principal amount of the Bonds either at maturity
(whether at the stated maturity date or by acceleration) or upon redemption
thereof, and (b) the remainder shall be available to pay up to 210 days'
interest on the outstanding Bonds computed at the rate of six and one hundred
twenty-five thousandths percent (6.125%) per annum accrued on the outstanding
Bonds, as such interest becomes due; and
WHEREAS, as a condition, among others, to its issuance of the Letter of Credit,
the Bank has required that (a) the Company and the Bank enter into a certain
Letter of Credit Reimbursement Agreement dated of even date herewith (as amended
from time to time, the "Reimbursement Agreement") and (b) the Guarantor execute
and deliver to the Bank this Guaranty;
NOW, THEREFORE, for and in consideration of the premises and of the mutual
representations, covenants and agreements herein set forth (each of which is
incorporated herein by reference), intending to be legally bound hereby, and in
order to induce the Bank to issue the Letter of Credit, and to secure the
observance, payment and performance of the Liabilities (as defined below), and
with full knowledge that Bank would not make the said loans, extensions of
credit or financial accommodations without this Guaranty and Suretyship
Agreement (together with any amendments or modifications hereto in effect from
time to time, the "Guaranty"), which shall be construed as an agreement of
suretyship, the Guarantor hereby unconditionally agrees as follows:
Section 1. LIABILITIES GUARANTEED.
Guarantor hereby guarantees and becomes surety to Bank for the full, prompt and
unconditional payment of the Liabilities (as defined below), when and as the
same shall become due, whether at the stated maturity date, by acceleration or
otherwise, and the full, prompt and unconditional performance of each and every
term and condition of every transaction to be kept and performed by the Company
under the Reimbursement Agreement and the other Loan Documents (as defined
below). This Guaranty is a primary obligation of Guarantor and shall be a
continuing Guaranty. Bank may require Guarantor to pay and perform its
liabilities and obligations under this Guaranty and may proceed immediately
against Guarantor without being required to bring any proceeding or take any
action against the Company, any collateral, security for the Company's
obligations under the Reimbursement Agreement and the other Loan Documents, any
other guarantor or any other person, entity or property prior thereto, the
liability of Guarantor hereunder being joint and several, and independent of and
separate from the liability of the Company, and any other guarantor or person
and the availability of such collateral.
Section 2. DEFINITIONS.
2.1. "Affiliate" means First Fidelity Bancorporation and any of its direct and
indirect affiliates and subsidiaries.
2.2. "Liabilities" means, collectively: (i) the repayment of all sums due under
the Reimbursement Agreement (as the same may be amended from time to time) and
the other Loan Documents; (ii) the performance of all terms, conditions and
covenants set forth in the Reimbursement Agreement and the other Loan Documents;
and (iii) all obligations and indebtedness of every kind and description of the
Company to Bank or to any Affiliate, whether primary or secondary, absolute or
contingent, direct or indirect, sole, joint or several, secured or unsecured,
due or to become due, contractual or tortious, arising by operation of law or
otherwise, or now or hereafter existing, and whether incurred by the Company as
principal, surety, endorser, guarantor, accommodation party or otherwise,
including without limitation, principal, interest, fees, late charges and
expenses, including attorneys' fees and/or allocated fees of Bank's in-house
legal counsel.
2.3. "Loan Documents" means, collectively, the Reimbursement Agreement, that
certain Mortgage and Security Agreement of even date herewith from the Company
to Bank (the "Mortgage"), that certain Assignment of Leases and Rents of even
date herewith from the Company to Bank (the "Assignment of Leases"), UCC-1
financing statements, this Guaranty and any other guaranty, document,
certificate or instrument executed by the Company, Guarantor or any other
obligated party in connection with the Letter of Credit and the Bonds, together
with all amendments, modifications, renewals or extensions thereof. The Loan
Documents are hereby made a part of this Guaranty to the same extent and with
the same effect as if fully set forth herein.
2.4. Capitalized terms not otherwise defined herein shall have the same meanings
as are given to such terms in the Reimbursement Agreement and the other Loan
Documents.
Section 3. REPRESENTATIONS AND WARRANTIES.
Guarantor represents and warrants as of the date hereof and, unless otherwise
indicated, at all times hereafter until the Liabilities are fully paid and
performed, as follows:
3.1. Organization, Powers. Guarantor: (i) is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and is authorized to do business in each other jurisdiction wherein its
ownership of property or conduct of business legally requires such authorization
and in which such qualification is material to the conduct of its business; (ii)
has the power and authority to own its properties and assets and to carry on its
business as now being conducted and as now contemplated; and (iii) has the power
and authority to execute, deliver and perform all of its obligations under this
Guaranty and any other Loan Document to which it is a party.
3.2. Execution of Guaranty. This Guaranty and all other Loan Documents to which
Guarantor is a party have been duly executed and delivered by Guarantor.
Execution, delivery and performance of this Guaranty and each other Loan
Document to which Guarantor is a party will not: (i) violate any of its
organizational documents, provision of law, order of any court, agency or other
instrumentality of government, or any provision of any indenture, agreement or
other instrument to which it is a party (including without limitation the Loan
Documents) or by which it or any of its properties is bound; (ii) result in the
creation or imposition of any lien, charge or encumbrance of any nature, other
than the liens created by the Loan Documents; and (iii) require any
authorization, consent, approval, license, exemption of, or filing or
registration with, any court or governmental authority.
3.3. Obligations of Guarantor. This Guaranty and each other Loan Document to
which Guarantor is a party are the legal, valid and binding obligations of
Guarantor, enforceable against it in accordance with their terms, except as the
same may be limited by bankruptcy, insolvency, reorganization or other laws or
equitable principles relating to or affecting the enforcement of creditors'
rights generally. The loans or credit accommodations made by Bank to the Company
and the assumption by Guarantor of its obligations hereunder and under any other
Loan Document to which Guarantor is a party will result in material benefits to
Guarantor. This Guaranty was entered into by Guarantor for commercial purposes.
3.4. Litigation; Compliance with Laws. Except as set forth on Schedule A
attached hereto, there is no action, suit or proceeding at law or in equity or
by or before any governmental authority, agency or other instrumentality now
pending or, to the knowledge of Guarantor, threatened against or affecting
Guarantor or any of its properties or rights which, if adversely determined,
would materially impair or affect: (i) the value of any collateral securing the
Liabilities; (ii) Guarantor's right to carry on its business substantially as
now conducted (and as now contemplated); (iii) its financial condition; or (iv)
its capacity to consummate and perform its obligations under this Guaranty or
any other Loan Document to which Guarantor is a party. Guarantor is in
compliance in all material respects with all laws, ordinances, rules,
regulations and requirements which affect Guarantor, its assets or the operation
of its business, and is not in violation of or in default with respect to any
order, writ, injunction, decree or demand of any court or governmental
authority.
3.5. Payment of Taxes. Guarantor has filed or caused to be filed all federal,
state and local tax returns which are required to be filed, and has paid or
caused to be paid all taxes as shown on said returns or on any assessment
received by it, to the extent that such taxes or assessments have become due,
except such that are contested in good faith by Guarantor by appropriate
proceedings and for which adequate reserves have been established. Guarantor is
not aware of any material unasserted claims for prior taxes against it for which
adequate reserves have not been established.
3.6. No Defaults. Guarantor is not (a) in default in the performance, observance
or fulfillment of any of the obligations, covenants or conditions contained
herein or (b) in default in any material respect in the performance, observance
or fulfillment of any of the obligations, covenants or conditions contained in
any material agreement or instrument to which it is a party or by which it or
any of its properties is bound.
3.7. Financial Statements. All financial statements delivered by Guarantor to
Bank are true, correct and complete in all material respects, fairly represent
Guarantor's financial condition as of the date hereof and thereof, and no
information has been omitted which would make the information previously
furnished misleading or incorrect in any material respect.
3.8. No Material Adverse Change. As of the date hereof, there has been no
material adverse change in the financial condition, operations, affairs,
prospects or business of Guarantor from the date of the most recent financial
statements provided by Guarantor to Bank.
3.9. No Untrue Statements. No Loan Document or other document, certificate or
statement furnished to Bank by or on behalf of Guarantor contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein not misleading. It is
specifically understood by Guarantor that all such statements, representations
and warranties shall be deemed to have been relied upon by Bank as an inducement
to make the Loan to the Company.
3.10. Title to Property. Guarantor has good and marketable title to all of its
properties and assets listed in the most recent financial statements delivered
to Bank on or prior to the date hereof, except as otherwise expressly described
in said financial statements, and except those properties and assets disposed of
since the date of said financial statements.
Section 4. NO LIMITATION OF LIABILITY.
4.1. Without incurring responsibility to Guarantor, without impairing or
releasing the obligations of Guarantor to Bank, and without reducing the amount
due under the terms of this Guaranty (except to the extent of amounts actually
paid to and legally retained by Bank), Bank may at any time and from time to
time, without the consent of or notice to Guarantor, upon any terms or
conditions, and in whole or in part:
4.1.1. Change the manner, place or terms of payment of (including, without
limitation, the interest rate and monthly payment amount), and/or change or
extend the time for payment of, or renew or modify, any of the Liabilities, any
security therefor, or any of the Loan Documents evidencing same, and the
Guaranty herein made shall apply to the Liabilities and the Loan Documents as so
changed, extended, renewed or modified;
4.1.2. Sell, exchange, release, surrender, realize upon or otherwise deal with
in any manner and in any order, any property at any time pledged, mortgaged or
in which a security interest is given to secure, or however securing, the
Liabilities;
4.1.3. Exercise or refrain from exercising any rights against the Company or
others (including Guarantor) or against any security for the Liabilities or
otherwise act or refrain from acting;
4.1.4. Settle or compromise any Liabilities, whether in a proceeding or not, and
whether voluntarily or involuntarily, dispose of any security therefor (with or
without consideration) or settle or compromise any liability incurred directly
or indirectly in respect thereof or hereof, and subordinate the payment of all
or any part thereof to the payment of any Liabilities, whether or not due, to
creditors of the Company other than Bank and Guarantor;
4.1.5. Apply any sums it receives, by whomever paid or however realized, to any
of the Liabilities;
4.1.6. Add, release, settle, modify or discharge the obligation of any maker,
endorser, guarantor, surety, obligor or any other party who is in any way
obligated for any of the Liabilities;
4.1.7. Accept any additional security for the Liabilities; and/or
4.1.8. Take any other action which might constitute a defense available to, or a
discharge of, the Company or any other obligated party (including Guarantor) in
respect of the Liabilities.
4.2. The invalidity, irregularity or unenforceability of all or any part of the
Liabilities or any Loan Document, or the impairment or loss of any security
therefor, whether caused by any action or inaction of Bank or any Affiliate, or
otherwise, shall not affect, impair or be a defense to Guarantor's obligations
under this Guaranty.
Section 5. WAIVERS AND SUBORDINATION.
5.1. Subordination of Subrogation. Guarantor irrevocably subordinates to the
full and indefeasible payment of all of the Liabilities, any present or future
claim, right or remedy to which Guarantor is now or may hereafter become
entitled which arises on account of this Guaranty and/or from the performance by
Guarantor of its obligations hereunder to be subrogated to Bank's rights against
the Company or any other obligated party and/or any present or future claim,
remedy or right to seek contribution, reimbursement, indemnification,
exoneration, payment or the like, or participation in any claim, right or remedy
of Bank against the Company or any security which Bank now has or hereafter
acquires, whether or not such claim, right or remedy arises under contract, in
equity, by statute, under common law or otherwise. If, notwithstanding such
subordination, any funds or property shall be paid or transferred to Guarantor
on account of such subrogation, contribution, reimbursement, exoneration or
indemnification at any time when all of the Liabilities have not been paid in
full, Guarantor shall hold such funds or property in trust for Bank and shall
segregate such funds from other funds of Guarantor and shall forthwith pay over
to Bank such funds and/or property to be applied by Bank to the Liabilities,
whether matured or unmatured, in accordance with the terms of the Reimbursement
Agreement and the Loan Documents.
5.2. Waiver of Remedies. To the extent permitted by law, Guarantor waives the
right of inquisition on any real estate levied on, voluntarily condemns the
same, authorizes the prothonotary or clerk to enter upon the writ of execution
this voluntary condemnation and agrees that such real estate may be sold on a
writ of execution; and also waives any relief from any appraisement, stay or
exemption law of any state now in force or hereafter enacted. In addition,
Guarantor waives the right to marshalling of the Company's assets and any other
protection granted by law to guarantors, now or hereafter in effect with respect
to any action or proceeding brought by Bank against it. The parties hereto
acknowledge and agree, however, that notwithstanding the waivers set forth in
this Section 5.2, in the event the Guarantor provides to the Bank cash
collateral in the amounts and otherwise as required pursuant to Section 7.2(c)
of the Reimbursement Agreement, the Bank agrees to refrain from exercising any
such rights against the Guarantor's non-cash collateral.
5.3. Waiver of Defenses. Guarantor irrevocably waives all claims of waiver,
release, surrender, alteration or compromise and all defenses, set-offs,
counterclaims, recoupments, reductions, limitations or impairments other than
(a) payment in full of the Liabilities, and (b) such defenses as are assertable
by the Company and not otherwise specifically waived pursuant to any other
provision of this Guaranty.
5.4. Waiver of Notice. Guarantor waives notice of acceptance of this Guaranty
and notice of the Liabilities and waives notice of default, non-payment, partial
payment, presentment, demand, protest, notice of protest or dishonor, and all
other notices to which Guarantor might otherwise be entitled or which might be
required by law to be given by Bank.
Section 6. COVENANTS.
6.1. Merger, Restructure. Guarantor shall not merge into, consolidate with or
into, or sell, assign, lease or otherwise dispose of (whether in one transaction
or a series of transactions) all or substantially all of its assets (now owned
or hereafter acquired) to any person or entity, without the prior written
consent of Bank.
6.2. Maintenance of Business. Guarantor shall: (i) continue to remain in and
operate substantially the same type of business presently engaged in by it; (ii)
not suspend transaction of its usual business; (iii) conduct its business in an
orderly, efficient and customary manner; (iv) comply with all laws, ordinances,
rules, regulations and requirements and shall maintain its business, properties
and assets necessary to conduct its business in compliance with all applicable
governmental laws, ordinances, approvals, rules, regulations and requirements,
including without limitation, zoning, sanitary, pollution, building,
environmental and safety laws and ordinances, and the rules and regulations
promulgated thereunder; and (v) not remove, demolish, materially alter,
discontinue the use of, sell, transfer, assign, hypothecate, pledge or otherwise
dispose of any part of its properties or assets necessary for the continuance of
its business, as presently conducted and as presently contemplated, other than
(1) in the normal course of its business and (2) in connection with additional
financing in relation to real property (other than the Mortgaged Premises, as
defined in the Mortgage) from time to time owned by the Guarantors; provided,
however, that the foregoing limitations shall not prohibit the Guarantor from
engaging in additional activities related to its present corporate activities.
To the extent that Guarantor controls the Company, Guarantor will not take or
cause to be taken any action or permit any inaction which will violate or cause
a default or Event of Default under any of the Loan Documents.
6.3. Books and Records. Guarantor shall keep and maintain complete and accurate
books and records in accordance with generally accepted accounting principles
consistently applied, reflecting all of the financial affairs of Guarantor.
Guarantor shall permit representatives of Bank to examine and audit Guarantor's
(and its parent's and its subsidiaries') books and records, to inspect
Guarantor's facilities and properties, and to discuss Guarantor's financial
condition and the contents of Guarantor's financial statements with Guarantor's
accountants.
6.4. Financial Statements; Compliance Certificate.
6.4.1. Guarantor shall furnish to Bank the following financial information, in
each instance prepared in accordance with generally accepted accounting
principles consistently applied:
(a) Annual Report: as soon as available and in any event within 105 days after
the end of each fiscal year, an annual audited consolidated financial statement
for the Guarantor and its Consolidated Subsidiaries (including the Company) to
the Trustee and to the Bank during the term of the Letter of Credit [including
therein the balance sheet of the Guarantor and its Consolidated Subsidiaries as
of the end of such fiscal year and the statements of operations of the Guarantor
and its Consolidated Subsidiaries for such fiscal year, setting forth in
comparative form the corresponding figures for the preceding fiscal year,]
prepared in accordance with GAAP consistently applied, all in reasonable detail
and in each case duly certified by independent certified public accountants of
recognized standing acceptable to the Bank, and by the chief financial or chief
accounting officer of the Guarantor, together with a certificate of said
accounting firm stating that, in the statements of the Guarantor and its
consolidated subsidiaries (including the Company) for such fiscal year, it did
not discover that an Event of Default (or an event which, with notice or the
lapse of time or both, would constitute an Event of Default) had occurred at any
time during such fiscal year, or, if an Event of Default (or such other event)
did occur, the nature thereof.
(b) Quarterly Report: as soon as available and in any event within sixty (60)
days after the end of each of the first three (3) quarters of each fiscal year
of the Guarantor and its consolidated subsidiaries (including the Company),
during the term of the Letter of Credit, management prepared consolidated
financial statements, including a balance sheet, income statement and cash flow
statement prepared in accordance with GAAP, in form and substance satisfactory
to the Bank for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter, to the Trustee and to the Bank during the
term of the Letter of Credit.
(c) Management Letters: the Guarantor will submit annual management letters, if
any, for the Guarantor, from the independent certified public accountants for
the Guarantor.
(d) SEC Reports. Promptly after sending or filing, copies of all proxy
statements, financial statements and other notices and reports to the Trustee
and the Bank when the Guarantor sends to its shareholders as well as copies of
all regular, annual, periodic and special reports and all Registration
Statements filed with the Securities and Exchange Commission or similar
government authority or with any national security exchange succeeding to the
functions of the Securities and Exchange Commission (other than those on Form
S-8), including, without limitation, Forms 10Q and 10K.
6.4.2. Guarantor shall furnish to Bank, with each set of financial statements
described in Section 6.4.1(a)-(c) above, a compliance certificate signed by
Guarantor's chief financial or chief accounting officer (a) certifying that: (i)
all representations and warranties of Guarantor set forth in this Guaranty or
any other Loan Document remain true and correct; (ii) none of the covenants of
Guarantor contained in this Guaranty or any other Loan Document has been
breached; and (iii) to its knowledge, no event has occurred which, with the
giving of notice or the passage of time, or both, would constitute an Event of
Default under this Guaranty or any other Loan Document. In addition, Guarantor
shall promptly notify Bank of the occurrence of any default, Event of Default,
adverse litigation or material adverse change in its financial condition; and
(b) showing the calculations of the financial covenants set forth in Section 6.8
hereof.
6.5. Taxes and Other Charges. Guarantor shall prepare and timely file all
federal, state and local tax returns required to be filed by Guarantor and
promptly pay and discharge all taxes, assessments, water and sewer rents, and
other governmental charges imposed upon Guarantor or on any of Guarantor's
property when due, but in no event after interest or penalties commence to
accrue thereon or become a lien upon such property, except for those taxes,
assessments, water and sewer rents, and other governmental charges then being
contested in good faith by Guarantor by appropriate proceedings and for which
Guarantor established on its books, a reserve for the payment thereof in
accordance with GAAP, and so long as such contest: (i) operates to prevent
collection, stay any proceedings which may be instituted to enforce payment of
such item, and prevent a sale of Guarantor's property to pay such item; (ii) is
maintained and prosecuted with due diligence; and (iii) shall not have been
terminated or discontinued adversely to Guarantor. Guarantor shall submit to
Bank, upon request, an affidavit signed by Guarantor certifying that all
federal, state and local income tax returns have been filed to date and all real
property taxes, assessments and other governmental charges with respect to
Guarantor's properties have been paid to date.
6.6. Security Interest in Property of Guarantor. Guarantor hereby grants to Bank
a lien upon and continuing security interest in all property of Guarantor, now
or hereafter in the possession of Bank or any Affiliate in any capacity
whatsoever, including, without limitation, any balance or share of any deposit,
trust or agency account (whether general or special, time or demand, matured or
unmatured, fixed or contingent, liquidated or unliquidated), and all property
and assets of Guarantor now or hereafter subject to a security agreement,
pledge, mortgage, assignment or other document or agreement granting Bank or any
Affiliate a security interest therein or lien or encumbrance thereon
("Guarantor's Property"), as security for the performance of this Guaranty and
the payment of the Liabilities, which security interest shall be enforceable and
subject to all the provisions of this Guaranty, as if Guarantor's Property were
specifically pledged hereunder, and the proceeds of Guarantor's Property may be
applied to payment of the Liabilities at any time following the occurrence of a
default or Event of Default under the Reimbursement Agreement, this Guaranty or
any other Loan Document.
6.7. Indemnification.
6.7.1. Guarantor hereby indemnifies and agrees to protect, defend and hold
harmless Bank, any entity which "controls" Bank within the meaning of Section 15
of the Securities Act of 1933, as amended, or is under common control with Bank,
and any member, officer, director, official, agent, employee or attorney of
Bank, and their respective heirs, administrators, executors, successors and
assigns (collectively, the "Indemnified Parties"), from and against any and all
losses, damages, expenses or liabilities of any kind or nature and from any
suits, claims or demands, including reasonable attorneys' fees incurred in
investigating or defending such claim, suffered by any of them and caused by,
relating to, arising out of, resulting from, or in any way connected with the
Loan Documents or the transactions contemplated therein (unless determined by a
final judgment of a court of competent jurisdiction to have been caused solely
by the gross negligence or willful misconduct of the Indemnified Parties)
including, without limitation: (i) disputes with any architect, general
contractor, subcontractor, materialman or supplier, or on account of any act or
omission to act by Bank in connection with the Mortgaged Premises; (ii) losses,
damages (including consequential damages), expenses or liabilities sustained by
Bank in connection with any environmental inspection, monitoring, sampling or
cleanup of the Mortgaged Premises required or mandated by any applicable
environmental law; (iii) any untrue statement of a material fact contained in
information submitted to Bank by Guarantor or the omission of any material fact
necessary to be stated therein in order to make such statement not misleading or
incomplete; (iv) the failure of Guarantor to perform any obligations herein
required to be performed by Guarantor; and (v) the ownership, construction,
occupancy, operation, use or maintenance of the Mortgaged Premises.
6.7.2. In case any action shall be brought against Bank or any other Indemnified
Party in respect to which indemnity may be sought against Guarantor, Bank or
such other Indemnified Party shall promptly notify Guarantor and Guarantor shall
assume the defense thereof, including the employment of counsel selected by
Guarantor and satisfactory to Bank, the payment of all costs and expenses and
the right to negotiate and consent to settlement. The failure of Bank to so
notify Guarantor shall not relieve Guarantor of any liability it may have under
the foregoing indemnification provisions or from any liability which it may
otherwise have to Bank or any of the other Indemnified Parties. Bank shall have
the right, at its sole option, to employ separate counsel in any such action and
to participate in the defense thereof, all at Guarantor's sole cost and expense.
Guarantor shall not be liable for any settlement of any such action effected
without its consent, but if settled with Guarantor's consent, or if there be a
final judgment for the claimant in any such action, Guarantor agrees to
indemnify and save harmless Bank from and against any loss or liability by
reason of such settlement or judgment.
6.7.3. The provisions of this Section 6.7. shall survive the repayment or other
satisfaction of the Liabilities.
6.8. Financial Covenants. Guarantor shall comply with the financial covenants,
if any, hereinafter provided.
6.8.1. Current Assets and Liabilities. The Guarantor and its Consolidated
Subsidiaries will maintain Current Assets in an amount which is not less than
one hundred twenty percent (120%) of Current Liabilities.
6.8.2. Tangible Net Worth. The Guarantor and its Consolidated Subsidiaries'
Consolidated Tangible Net Worth as at the end of any of its fiscal years during
the term of this Agreement shall be equal to not less than (a) One Hundred Forty
Million Dollars ($140,000,000) plus (b) Six Million Dollars ($6,000,000)
multiplied by the number of full fiscal years which have elapsed since the end
of the 1994 fiscal year. If the Guarantor changes its fiscal year, the minimum
Tangible Net Worth as at the end of the new fiscal year end shall be equal to
the minimum Tangible Net Worth which would have been required had the fiscal
year end not been changed, plus Six Million Dollars ($6,000,000) multiplied by a
fraction the numerator of which is the number of months between the previous
fiscal year end and the new fiscal year end and the denominator of which is
twelve (12).
6.8.3. Total Indebtedness. The Guarantor and its Consolidated Subsidiaries will
not permit total indebtedness of the Guarantor and its Consolidated Subsidiaries
in the aggregate to exceed one hundred eighty percent (180%) of such
Consolidated group's Tangible Net Worth.
6.8.4. Long-Term Liabilities. The Guarantor and its Consolidated Subsidiaries
will not permit Long-Term Liabilities to exceed sixty percent (60%) of the
Capitalization.
6.8.5. Indebtedness for Borrowed Money. Neither the Guarantor nor the Company
will borrow any funds except pursuant to the following types of borrowings: (a)
borrowings to finance the acquisition of real or personal property (including
capital leases) secured by a security interest encumbering such personal
property, provided that the amount of any such encumbrance does not exceed the
greater of the purchase price or fair market value of such property, (b)
borrowings from Bank hereunder, and (c) the indebtedness described on Schedule B
attached hereto. The foregoing exceptions, in the aggregate, are subject,
however, to the provisions of Sections 6.8.2 and 6.8.3 hereof. Nothing herein
contained shall be deemed in any way to limit the right and ability of the
Guarantor and the Company to post letters of credit or to incur trade
indebtedness in the ordinary course of their respective businesses, to the
extent such activities are otherwise permitted under this Agreement.
Section 7. EVENTS OF DEFAULT.
Each of the following shall constitute a default (each, an "Event of Default")
hereunder:
7.1. Non-payment when due of any sum required to be paid to Bank by the Company
or the Guarantor under any of the Loan Documents;
7.2. A breach of any covenant contained in Section 6.8 hereof;
7.3. A breach by Guarantor of any other term, covenant, condition, obligation or
agreement under this Guaranty, and the continuance of such breach for a period
of thirty (30) days after written notice thereof shall have been given to
Guarantor;
7.4. Any representation or warranty made by Guarantor in this Guaranty shall
prove to be false, incorrect or misleading in any material respect as of the
date when made; or
7.5. An Event of Default under any of the other Loan Documents.
Section 8. REMEDIES.
Upon an Event of Default, all liabilities of Guarantor hereunder shall become
immediately due and payable without demand or notice and, in addition to any
other remedies provided by law, Bank may:
8.1. Enforce the obligations of Guarantor under this Guaranty.
8.2. To the extent permitted by law, and regardless of the adequacy of any
collateral or other means of obtaining repayment of the Liabilities, Bank shall
have the right immediately and without notice or other act, and is specifically
authorized hereby, to setoff against any of the Liabilities any sum owed by Bank
or any Affiliate in any capacity to Guarantor whether due or not, or any of
Guarantor's Property, even if effecting such setoff results in a loss or
reduction of interest to Guarantor or the imposition of a penalty applicable to
the early withdrawal of time deposits. If such setoff creates an overdraft in
any account held by Bank or any Affiliate, Bank may charge Guarantor an
administrative fee in an amount established from time to time by Bank. Bank
shall be deemed to have exercised such right of setoff and to have made a charge
against Guarantor's Property immediately upon the occurrence of the Event of
Default, even though the actual book entries may be made at some time
subsequent.
8.3. Perform any covenant or agreement of Guarantor in default hereunder (but
without obligation to do so) and in that regard pay such money as may be
required or as Bank may reasonably deem expedient. Any costs, expenses or fees,
including reasonable attorneys' fees and costs, incurred by Bank in connection
with the foregoing shall be included in the Liabilities guaranteed hereby and
secured by the other Loan Documents, and shall be due and payable on demand,
together with interest at three percent (3%) per annum above the rate of
interest then in effect under the Reimbursement Agreement, such interest to be
calculated from the date of such advance to the date of repayment thereof. Any
such action by Bank shall not be deemed to be a waiver or release of Guarantor
hereunder and shall be without prejudice to any other right or remedy of Bank.
8.4. From time to time and without advertisement or demand upon or notice to the
Company or Guarantor of right of redemption, to sell, re-sell, assign, transfer
and deliver all or part of Guarantor's Property, at any brokers' board or
exchange or at public or private sale, for cash or on credit or for future
delivery, and in connection therewith may grant options and may impose
reasonable conditions such as requiring any purchaser of any security so held to
represent that such security is purchased for investment purposes only. Upon
each such sale, Bank may purchase all or any part of Guarantor's Property being
sold, free from and discharged of all trusts, claims, rights of redemption and
equities of Guarantor. In case of each such sale, or of any proceeding to
collect any of the Liabilities, Guarantor shall pay all costs and expenses of
every kind for collection, sale or delivery, including reasonable attorneys'
fees, and after deducting such costs and expenses from the proceeds of sale or
collection, Bank may apply any residue to the Liabilities and Guarantor shall
continue to be liable for any deficiency, with interest.
Section 9. CONTINUING ENFORCEMENT OF GUARANTY
9.1. If, after receipt of any payment of all or any part of the Liabilities,
Bank is compelled or agrees, for settlement purposes, to surrender such payment
to any person or entity for any reason (including, without limitation, a
determination that such payment is void or voidable as a preference or
fraudulent conveyance, an impermissible setoff, or a diversion of trust funds),
then this Guaranty and the other Loan Documents shall continue in full force and
effect or be reinstated, as the case may be, and Guarantor shall be liable for,
and shall indemnify, defend and hold harmless Bank with respect to the full
amount so surrendered. The provisions of this Section shall survive the
termination of this Guaranty and the other Loan Documents and shall remain
effective notwithstanding the payment of the Liabilities, the termination of the
Reimbursement Agreement, the cancellation or the Letter of Credit, this Guaranty
or any other Loan Document, the release of any security interest, lien or
encumbrance securing the Liabilities or any other action which Bank may have
taken in reliance upon its receipt of such payment. Any cancellation, release or
other such action shall be deemed to have been conditioned upon any payment of
the Liabilities having become final and irrevocable.
9.2. Settlement of any claim by Bank against the Company, whether in any
proceeding or not, and whether voluntary or involuntary, shall not reduce the
amount due under the terms of this Guaranty except to the extent of the amount
actually paid by the Company or any other obligated party and legally retained
by Bank in connection with the settlement.
Section 10. MISCELLANEOUS.
10.1. Disclosure of Financial Information. Bank is hereby authorized to disclose
any financial or other information about Guarantor to any regulatory body or
agency having jurisdiction over Bank or to any present, future or prospective
participant or successor in interest in any loan or other financial
accommodation made by Bank to the Company or Guarantor. The information provided
may include, without limitation, amounts, terms, balances, payment history,
return item history and any financial or other information about Guarantor.
Guarantor agrees to indemnify, defend, release Bank, and hold Bank harmless, at
Guarantor's cost and expense, from and against any and all lawsuits, claims,
actions, proceedings or suits against Bank or against Guarantor and Bank,
arising out of or relating to Bank's reporting or disclosure of such
information. Such indemnity shall survive the repayment or other satisfaction of
the Liabilities.
10.2. Remedies Cumulative. The rights and remedies of Bank, as provided herein
and in any other Loan Document, and all warrants of attorney contained herein
and therein, shall be cumulative and concurrent, may be pursued separately,
successively or together, may be exercised as often as occasion therefor shall
arise, and shall be in addition to any other rights or remedies conferred upon
Bank at law or in equity. The failure, at any one or more times, of Bank to
exercise any such right or remedy shall in no event be construed as a waiver or
release thereof. Bank shall have the right to take any action it deems
appropriate without the necessity of resorting to any collateral securing this
Guaranty.
10.3. Integration. This Guaranty and the other Loan Documents constitute the
sole agreement of the parties with respect to the transaction contemplated
hereby and supersede all oral negotiations and prior writings with respect
thereto.
10.4. Attorney's Fees and Expenses. If Bank retains the services of counsel by
reason of a claim of a default or an Event of Default hereunder or under any of
the other Loan Documents, or on account of any matter involving this Guaranty,
or for examination of matters subject to Bank's approval under the Loan
Documents, all costs of suit and all reasonable attorneys' fees (and/or
allocated fees of Bank's in-house legal counsel) and such other reasonable
expenses so incurred by Bank shall forthwith, on demand, become due and payable
and shall be secured hereby.
10.5. No Implied Waiver. Bank shall not be deemed to have modified or waived any
of its rights or remedies hereunder unless such modification or waiver is in
writing and signed by Bank, and then only to the extent specifically set forth
therein. A waiver in one event shall not be construed as continuing or as a
waiver of or bar to such right or remedy on a subsequent event.
10.6. No Third Party Beneficiary. Guarantor and Bank do not intend the benefits
of this Guaranty to inure to any third party and notwithstanding any term,
condition or provision hereof or of any other Loan Document to the contrary, no
third party (including the Company) shall have any status, right or entitlement
under this Guaranty.
10.7. Partial Invalidity. The invalidity or unenforceability of any one or more
provisions of this Guaranty shall not render any other provision invalid or
unenforceable. In lieu of any invalid or unenforceable provision, there shall be
added automatically a valid and enforceable provision as similar in terms to
such invalid or unenforceable provision as may be possible.
10.8. Binding Effect. The covenants, conditions, waivers, releases and
agreements contained in this Guaranty shall bind, and the benefits thereof shall
inure to, the parties hereto and their respective heirs, executors,
administrators, successors and assigns; provided, however, that this Guaranty
cannot be assigned by Guarantor without the prior written consent of Bank, and
any such assignment or attempted assignment by Guarantor shall be void and of no
effect with respect to Bank.
10.9. Modifications. This Guaranty may not be supplemented, extended, modified
or terminated except by an agreement in writing and signed by Guarantor and
Bank.
10.10. Sales or Participations. Bank may from time to time sell or assign, in
whole or in part, or grant participations in the Letter of Credit or the
Reimbursement Agreement, and/or the obligations evidenced thereby. The holder of
any such sale, assignment or participation, if the applicable agreement between
Bank and such holder so provides, shall be: (a) entitled to all of the rights,
obligations and benefits of Bank; and (b) deemed to hold and may exercise the
rights of setoff or banker's lien with respect to any and all obligations of
such holder to Guarantor, in each case as fully as though Guarantor were
directly indebted to such holder. Bank may in its discretion give notice to
Guarantor of such sale, assignment or participation; however, the failure to
give such notice shall not affect any of Bank's or such holder's rights
hereunder.
10.11. Jurisdiction. Guarantor irrevocably appoints each and every owner,
partner and/or officer of Guarantor as its attorneys upon whom may be served, by
regular or certified mail at the address set forth below, any notice, process or
pleading in any action or proceeding against it arising out of or in connection
with this Guaranty or any other Loan Document; and Guarantor hereby consents
that any action or proceeding against it be commenced and maintained in any
court within the State of New Jersey or in the United States District Court for
any District of New Jersey by service of process on any such owner, partner
and/or officer; and Guarantor agrees that the courts of the State of New Jersey
and the United States District Court for any District of New jersey shall have
jurisdiction with respect to the subject matter hereof and the person of
Guarantor and all collateral securing the obligations of Guarantor. Guarantor
agrees not to assert any defense to any action or proceeding initiated by Bank
based upon improper venue or inconvenient forum. Guarantor agrees that any
action brought by Guarantor shall be commenced and maintained only in a court in
the federal judicial district or county in which Bank has its principal place of
business in New Jersey.
10.12. Notices. All notices and communications under this Guaranty shall be in
writing and shall be given by either (a) hand delivery, (b) first class mail
(postage prepaid), or (c) reliable overnight commercial courier (charges
prepaid) to the addresses listed in this Guaranty. Notice shall be deemed to
have been given and received: (i) if by hand delivery, upon delivery; (ii) if by
mail, three (3) calendar days after the date first deposited in the United
States mail; and (iii) if by overnight courier, on the date scheduled for
delivery. A party may change its address by giving written notice to the other
party as specified herein.
10.13. Governing Law. This Guaranty shall be governed by and construed in
accordance with the substantive laws of the State of New Jersey without
reference to conflict of laws principles.
10.14. Joint and Several Liability. If Guarantor consists of more than one
person or entity, the word "Guarantor" shall mean each of them and their
liability shall be joint and several.
10.15. Waiver of Jury Trial. GUARANTOR AND BANK AGREE THAT ANY SUIT, ACTION OR
PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT BY BANK OR GUARANTOR, ON OR
WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR THE DEALINGS OF THE
PARTIES WITH RESPECT HERETO OR THERETO, SHALL BE TRIED ONLY BY A COURT AND NOT
BY A JURY. BANK AND GUARANTOR EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR
PROCEEDING. FURTHER, GUARANTOR WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER,
IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE,
CONSEQUENTIAL OR OTHER DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
GUARANTOR ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A SPECIFIC AND MATERIAL
ASPECT OF THIS GUARANTY AND THAT BANK WOULD NOT EXTEND CREDIT TO THE COMPANY IF
THE WAIVERS SET FORTH IN THIS SECTION WERE NOT A PART OF THIS GUARANTY.
IN WITNESS WHEREOF, Guarantor, intending to be legally bound, has duly executed
and delivered this Guaranty and Suretyship Agreement as of the day and year
first above written.
ATTEST
Name: Robert L. LaPenta, Jr.
Title: Assistant Secretary
BURLINGTON COAT FACTORY
WAREHOUSE CORPORATION
BY:
Name: Mark Nesci
Title: Vice President
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Exhibit 10.67
September 21, 2001
Liz Fetter
2888 Sacramento Street
San Francisco, California 94115
Dear Liz,
As a result of our recent discussions, it is with pleasure that I confirm our
verbal offer for your employment with QRS Corporation. The following summarizes
our offer:
POSITION
President and CEO and Member of the Board of Directors
REPORTING TO
Peter R. Johnson, Chairman of the Board.
LOCATION
Richmond, California
START DATE
As soon as possible but no later than October 15th, 2001
MISSION STATEMENT
As a key executive of QRS, you should ensure continued focus on the long-term
mission of QRS:
•QRS pioneers and delivers business intelligence, technology and services that
improve profitability for trading partners in the global retail supply chain.
•QRS enables these trading partners to increase revenue, decrease cost of sales
and improve the return on sales by up to 5 percentage points.
•QRS products and services ensure the right product, at the right price, is in
the right place, at the right time.
•QRS gets it right, all the time and in every way.
In addition, you will have continuing, significant responsibility for the
development of QRS' vision, values, structure, management process and people.
KEY OBJECTIVES
(i)As a member of the Board of Directors, protect the interests of all
shareholders; while providing the Chairman and Board members with advice and
counsel to assist them ensure that our corporate objectives are met.
(ii)As a member of the Corporate Management Committee (CMC), work in cooperation
with the other CMC team members to realize the company's mission and strategy.
(iii)As CEO, succeed in all Key Result Areas
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KEY RESULT AREAS
As a key executive of QRS, your focus for the remainder of 2001 and in 2002
should be on successfully addressing the critical issues facing QRS. The
following specific objectives have been put forward to encourage more discussion
between us during the next several weeks:
A.Ensure QRS values, mission, and management process are understood and accepted
ensuring commitment to, and appropriate growth of these components of the QRS
culture and process, including the effective integration of these mission,
values and management process within QRS and its various units and locations.
B.Meet or exceed the plan for the remainder of 2001 and quarter-by-quarter for
2002.
C.Significantly improve performance, execution, efficacy and enthusiasm for the
task at hand promoting a culture where performance is measured (at all levels of
the organization) and people are held accountable.
D.Ensure that QRS' product strategy is congruent with identified customer needs
and market opportunities and that the products, their pricing and promotion,
establish and maintain our competitive advantage, correctly positioning QRS to
exploit those needs and opportunities for the current year and for the long
term.
E.Ensure the timely development and implementation an effective strategic and
annual planning process including SWOT, competitive analysis, the development of
market and customer based three-year strategic plans, critical issue based 2002
operating plan and budgets, and the achievement of agreed upon growth and
profitability levels.
F.Ensure the continued and growing satisfaction of our key customers across all
geography and sectors, with particular attention to North American GMA.
G.Continue to develop the company's organization and people.
H.Improve the quality of our products and services
I.Promote QRS with our customers / prospects and the financial community and
ensure QRS and Tradeweave are well recognized and highly respected brand names.
J.Support the Board in its consideration of and implementation of strategic
options that maximize shareholder value including but not limited to:
a)Organic growth from current markets and products accelerated by new,
internally funded extensions of markets and products and optionally, minor
acquisitions, and
b)A major acquisition to bring significant growth and increased valuation to the
company, in a targeted strategic area, including any necessary external
investment to maintain sufficient control and liquidity for QRS shareholders, or
c)Sale of the company to a strategic acquirer so as to better ensure execution
of the QRS mission and strategy while maximizing shareholder value and
minimizing risk.
In short, we want you to significantly improve execution, performance and
shareholder value.
ANNUAL COMPENSATION
Your annual compensation will be administered by me and reviewed by the
Compensation Committee of the Board of Directors.
Key elements of our agreement that impact compensation are as follows:
(i)Your annual base compensation will be $350,000 or $29,166.66 per month. QRS
employees are paid semi-monthly (i.e., on the fifteenth and last working day of
each month).
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(ii)In addition, you will receive annual incentive compensation of $300,000 that
will be administered by me and reviewed by the Compensation Committee.
During 2001 your short-term incentive compensation will depend on your start
date, but assuming October 15th, it should approximate $62,500.
During 2001 and 2002 you will receive an advance of $8,333.33 each month, or an
advance of $100,000 on an annual basis, of your annual incentive compensation,
which amounts shall be non-reimbursable and deemed earned.
Notwithstanding the above, the annual total target compensation (base
compensation plus incentive at 100%), shall not be less than $650,000 and for
2001 the total target compensation (base compensation plus incentive at 100%)
will depend on your start date, but again assuming October 15th, it should
approximate $135,500.
Your compensation, including incentives, will be reviewed in the first quarter
of 2002 and each year thereafter (unless there is a change in objectives,
locations, etc., in which case it will be reviewed at that time), to ensure that
it continues to be equitable, appropriate to the location and provide
appropriate incentives and support to the agreed objectives.
REIMBURSEMENT
QRS will reimburse you for all business expenses reasonably incurred by you in
the performance of your duties hereunder. You will adhere to QRS' travel and
entertainment polices and procedures, submit expense reports with appropriate
vouchers, receipts, and other substantiation of such expenses within thirty
(30) days after they are incurred and you should expect prompt reimbursement.
ANNUAL INCENTIVE COMPENSATION COMPONENTS
1.General Corporate Financial Objectives (80%)—Incentive compensation payment is
subject to the achievement of the Company's overall financial objectives as
defined by the most recent 2001 Plan as approved by the Board of Directors.
Should the Company not achieve these financial objectives, incentive
compensation will be subjectively determined based upon your performance against
your objectives and the Company's determination as to available incentive
compensation funding.
A.Achieve * in QRS Revenue (40%)—Paid at year-end on a pro rata basis from a
minimum of 95% of plan and linearly thereafter with results to 105% of plan. The
payout rate doubles on revenue performance over 105% of plan. There is a maximum
payout of $120,000 on this incentive for 2001.
B.Achieve * in QRS Earnings Before Interest, Tax, Depreciation and Amortization
(EBITDA) (40%)—Paid at year-end on a pro rata basis from a minimum of 95% of
plan and linearly thereafter with results to 105% of plan. The payout rate
doubles on earnings performance over 105% of plan. There is a maximum payout of
$120,000 on this incentive for 2001.
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*Certain confidential information contained in this document, marked by
asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.
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2.Personal Strategies and Objectives (20%)—Incentive compensation payment is
subject to fulfillment of your specific objectives as CEO. While key objectives
and key result areas have been noted above to measure your performance for
incentive compensation, such measurements assume the overall performance of you
and your direct reporting organization in the achievement of Company
responsibilities, customer services levels, employee satisfaction and turnover,
and the support of overall Company objectives.
LONG TERM INCENTIVES
It will be recommended that you receive a stock option grant of 300,000 shares
in accordance with the defined plan, copies of which are available for your
review. This recommendation will be presented to the Compensation Committee of
the Board of Directors at their first meeting subsequent to your start date. The
grant date will be the date the Board approves the grant, and the option price
will be established by the closing price of the stock on that date.
200,000 of these options will vest over a four-year period with 25% vesting on
the first anniversary of your employment and the remainder vesting in equal
monthly increments thereafter.
100,000 of these options will vest based on specific performance. Specifically,
options to purchase another 25,000 shares of common stock in QRS will be granted
to you and will be considered to be fully vested when you accomplish the 2001
revenue and profit plan described above. In addition, options to purchase an
additional 75,000 shares of common stock (i.e., for a total of 100,000
performance-based options) in QRS will be granted to you and will be considered
to be fully vested when the company establishes and maintains a stock price of
more than $30 for more than 15 days. In any event these performance-based
options will vest on the sixth anniversary of your employment.
BENEFITS
In addition to the benefits available to all QRS associates as defined in the
Employee Handbook; as a Senior Vice President and Officer you are provided with
additional benefits as follows:
Disability Insurance—The Company shall purchase and maintain in effect
disability insurance sufficient to provide you with an income equal to 66% of
your base compensation while you are disabled and unable to perform the duties
of your current employment with QRS. You will have the option of continuing this
additional disability insurance coverage at your own expense in the event of the
termination of your employment. This additional insurance benefit is taxable and
will be reported for tax purposes as additional income to you.
Liability Insurance—The Company shall purchase and maintain in effect sufficient
Officer's liability insurance to provide you with reasonable coverage, including
the provision of legal counsel and/or reimbursement of appropriate legal fees
you pay personally, against all liability claims and judgments arising from your
legal exercise of your duties as an Officer of QRS, including any actions filed
after you cease your duties as an Officer or in the event of the termination of
your employment. The Company shall also provide in its bylaws, a full
indemnification for you as a QRS officer, to the maximum extent permissible
under Delaware law.
TERMINATION AND SEVERANCE
This position is for no set period or term and just as you have the right to
resign your position, at any time, for any reason, QRS reserves the right to
terminate your employment, at any time, with or without cause, with or without
notice.
For the period ending twelve months from your start date (i.e. on or before
October 2002), in the event your employment is terminated without cause, you
will become entitled to twelve (12) months of severance pay equal in the
aggregate to your targeted total annual compensation and benefits at the level
in effect at the time of your termination. After that initial period (i.e.,
after October 2002), in the event your employment is terminated without cause,
you will become entitled to twelve (12) months of severance pay equal in the
aggregate to your base compensation and benefits at the level in effect at
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the time of your termination. Your severance payments will be made in accordance
with the Company's standard payroll practices for current employees and will be
subject to the Company's collection of all applicable withholding taxes.
For purposes of this agreement, termination "for cause" shall mean a termination
of your employment for any of the following reasons: (1) your failure to
substantially perform the material duties of your position with the Company
after a written demand for substantial performance is delivered to you by the
Company which specifically identifies the manner in which you have not
substantially performed those duties and which provides a reasonable period for
you to cure those deficiencies; (2) a material breach by you of your obligations
under any confidential or proprietary information agreements with the Company or
of any of your fiduciary obligations as an officer of the Company, (3) your
failure to follow in a material respect the reasonable policies or directives
established on an employee-wide basis by the Company, after written notice to
you indicating the policies or directives with which you are not in material
compliance, (4) any willful misconduct on your part having a material
detrimental effect on the Company or (5) any unauthorized activity on your part
which creates a material conflict of interest between you and the Company after
you have been provided with a reasonable opportunity to refrain from that
activity.
CHANGE OF CONTROL BENEFITS
A.Should there occur a Corporate Transaction or a Change in Control (as those
terms are defined in the Company's 1993 Stock Option/Stock Issuance Plan) and
either (i) your employment is subsequently terminated without cause or (ii) you
subsequently resign by reason of a material change in your base compensation,
your targeted annual incentive compensation, your annual total target
compensation, or your benefits (for this purpose, 15% will be deemed a material
reduction), a material reduction in your duties or responsibilities, or a change
in your principal place of employment by more than 50 miles, then you will be
entitled to twelve (12) months of severance pay equal in the aggregate to your
targeted total annual compensation and benefits at the level in effect at the
time of your termination or resignation or (if greater) at the level in effect
immediately prior to the Corporate Transaction or Change in Control. Your
severance payments will be made in accordance with the Company's standard
payroll practices for current employees and will be subject to the Company's
collection of all applicable withholding taxes.
B.Except to the extent otherwise provided in paragraph C below, should a
Corporate Transaction or Change in Control occur during your period of
employment with the Company, then (i) all of your outstanding options will,
immediately prior to the specified effective date for the Corporate Transaction
or Change in Control, become exercisable for all the shares at the time subject
to those options, whether or not those options are to be assumed or replaced
with a cash incentive program, and those accelerated options may be exercised
for all or any portion of the option shares as fully vested shares; and (ii) all
of your unvested shares of QRS stock will immediately vest at the time of such
Corporate Transaction or Change in Control.
C.However, the following limitation will be in effect for (i) all of your
unvested shares of QRS stock and (ii) any unvested options which are to be
assumed by the successor entity (or parent company) or otherwise continued in
effect or which are to be replaced with a cash incentive program which preserves
the spread existing at the time of such Corporate Transaction or Change in
Control on any shares for which your options are not otherwise at that time
exercisable (the excess of the fair market value of those shares over the
exercise price):
The accelerated vesting of those unvested shares and options will be limited to
the extent and only to the extent necessary to assure that the parachute payment
attributable to the accelerated vesting of those shares and options would not
constitute an excess parachute payment under Internal Revenue Code
Section 280G(b).
To the extent one of more of your options or unvested shares do not vest on an
accelerated basis upon a Corporate Transaction or Change in Control by reason of
such limitation, those options
--------------------------------------------------------------------------------
will continue to become exercisable in accordance with the original exercise
schedule indicated in the respective grant notices for those options, and those
unvested shares will continue to vest in accordance with the original vesting
schedule set forth in the applicable Restricted Stock Agreements. However,
should either (i) your employment be terminated without cause or (ii) you resign
by reason of a material change in your base compensation, your targeted annual
incentive compensation, your annual total target compensation, or your benefits
(for this purpose, 15% will be deemed a material reduction), a material
reduction in your duties or responsibilities, or a change in your principal
place of employment by more than 50 miles, at the time of such Corporate
Transaction or Change in Control or within twenty four (24) months thereafter,
then each of your outstanding options, to the extent not otherwise fully
exercisable at that time, shall automatically accelerate and become immediately
exercisable for all the option shares and may be exercised for any or all of
those shares as fully vested shares at any time prior to the expiration or
sooner termination of the option term. In addition, all of your unvested shares
will immediately vest upon such a termination of employment or resignation.
D.Any of your options which are assumed by the successor entity (or parent
company) in the Corporate Transaction or are otherwise continue in effect
following the Change in Control transaction shall be appropriately adjusted to
apply and pertain to the number and class of securities which would have been
issued to you in the consummation of such Corporate Transaction or Change in
Control had the options been exercised immediately prior to such event.
Appropriate adjustments shall also be made to the option prices payable per
share, provided the aggregate option prices payable shall remain the same.
EMPLOYMENT AT WILL
Your employment in the position of Chief Executive Officer will remain an
Employment At Will. This means that your position is for no set period or term
and just as you have the right to resign your position, at any time, for any
reason, QRS reserves the right to terminate your employment, at any time, with
or without cause and with or without notice. If any contrary representation has
been made to you, this letter supersedes it. Neither subsequent agreement
contrary to this nor any amendment to this term can be made unless it is in
writing and signed by both of us and copied to the Chairman of the Compensation
Committee.
I trust the above meets your approval. However, should you have any questions or
concerns, you should not hesitate to contact either Garth Saloner or myself. For
our part we look forward, with tremendous enthusiasm, to you joining QRS and our
ongoing relationship.
Sincerely,
/s/ Peter R. Johnson
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Peter R. Johnson, Chairman of the Board
c.c.: Garth Saloner—Chairman of the Compensation Committee
I accept this ongoing position with QRS Corporation on these terms and
conditions on the terms above and understand and agree that it supersedes any
other agreement, written or oral, I may have with QRS with respect to employment
or compensation by QRS including salary, incentive, options, termination and
severance.
/s/ Elizabeth Fetter
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Liz Fetter September 24, 2001
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Date
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QuickLinks
Exhibit 10.67
|
CREDIT AGREEMENT
BY AND AMONG
NORSTAN, INC.
U.S. BANK NATIONAL ASSOCIATION
HARRIS TRUST AND SAVINGS BANK
M&I MARSHALL & ILSLEY BANK
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
Table of Contents
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS Section 1.1 Defined Terms.
Section 1.2 Accounting Terms and Calculations. Section 1.3 Computation of Time
Periods. Section 1.4 Other Definitional Terms. ARTICLE II TERMS OF THE CREDIT
FACILITIES Section 2.1 Lending Commitments; Purposes. Section 2.2 Procedure for
Revolving Loans. Section 2.3 Notes. Section 2.4 Interest Rates, Interest
Payments and Default Interest. Section 2.5 Repayment; Payment to Holding
Account. Section 2.6 Mandatory and Optional Prepayments. Section 2.7 Issuance
and Renewal of Letter of Credit Drawings; Repayments; Bank Participations.
Section 2.8 Optional Reduction of Revolving Commitment Amounts or Termination of
Revolving Commitments. Section 2.9 Unused Revolving Commitment Fees. Section
2.10 Letter of Credit Fees. Section 2.11 Computation. Section 2.12 Certain Fees.
Section 2.13 Payments. Section 2.14 Revolving Commitment Ending Date. Section
2.15 Use of Loan Proceeds. Section 2.16 Capital Adequacy. Section 2.17
Collection of Accounts and Payments. ARTICLE III CONDITIONS PRECEDENT Section
3.1 Conditions of Initial Loans. Section 3.2 Conditions Precedent to all Loans.
ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.1 Organization, Standing,
Etc. Section 4.2 Authorization and Validity. Section 4.3 No Conflict; No
Default. Section 4.4 Government Consent. Section 4.5 Financial Statements and
Condition. Section 4.6 Litigation. Section 4.7 Environmental, Health and Safety
Laws. Section 4.8 ERISA. Section 4.9 Federal Reserve Regulations. Section 4.10
Title to Property; Leases; Liens; Subordination. Section 4.11 Taxes. Section
4.12 Trademarks, Patents. Section 4.13 Burdensome Restrictions. Section 4.14
Force Majeure. Section 4.15 Investment Company Act. Section 4.16 Public Utility
Holding Company Act. Section 4.17 Retirement Benefits. Section 4.18 Full
Disclosure. Section 4.19 Subsidiaries. Section 4.20 Primary Distribution
Facilities.
Section 4.21 Not less than 90% of the aggregate Inventory (determined at cost)
of the Borrower and the Subsidiaries is stored at the Primary Distribution
Facilities. ARTICLE V AFFIRMATIVE COVENANTS Section 5.1 Financial Statements and
Reports. Section 5.2 Corporate Existence. Section 5.3 Insurance. Section 5.4
Payment of Taxes and Claims. Section 5.5 Inspection. Section 5.6 Maintenance of
Properties. Section 5.7 Books and Records. Section 5.8 Compliance. Section 5.9
Notice of Litigation. Section 5.10 ERISA. Section 5.11 Environmental Matters;
Reporting. Section 5.12 Landlord Waivers. Section 5.13 First Intercreditor
Agreement. Section 5.14 Restructuring Plan. Section 5.15 Canadian Perfection
Instruments. Within 1- days of any written request by the Agent or its counsel,
the Borrower shall, or will cause any applicable Subsidiary to execute and
deliver to the Agent (a) such documents or instruments in a form prescribed by
the Agent to perfect the Agent’s security interest in any Collateral located in
Canada or any province thereof. ARTICLE VI NEGATIVE COVENANTS Section 6.1
Merger. Section 6.2 Sale of Assets. Section 6.3 Plans. Section 6.4 Change in
Nature of Business. Section 6.5 Subsidiaries. Section 6.6 Negative Pledges;
Subsidiary Restrictions. Section 6.7 Restricted Payments. Section 6.8 Capital
Expenditures. Section 6.9 Subordinated Debt. Section 6.10 Investments. Section
6.11 Indebtedness. Section 6.12 Liens. Section 6.13 Contingent Obligations.
Section 6.14 Transactions with Affiliates. Section 6.15 Intentionally Omitted.
Section 6.16 Minimum EBITDA. Section 6.17 Cash Flow Leverage Ratio. Section 6.18
Adjusted Leverage Ratio. Section 6.19 [Interest Coverage Ratio. Section 6.20
Loan Proceeds. Section 6.21 Ericsson Documents. ARTICLE VII EVENTS OF DEFAULT
AND REMEDIES` Section 7.1 Events of Default. Section 7.2 Remedies. Section 7.3
Offset. ARTICLE VIII THE AGENT Section 8.1 Appointment and Authorization.
Section 8.2 Note Holders. Section 8.3 Consultation With Counsel. Section 8.4
Loan Documents. Section 8.5 U.S. Bank and Affiliates. Section 8.6 Action by
Agent. Section 8.7 Credit Analysis. Section 8.8 Notices of Event of Default,
Etc. Section 8.9 Indemnification. Section 8.10 Payments and Collections. Section
8.11 Sharing of Payments. Section 8.12 Advice to Banks. Section 8.13
Resignation. Section 8.14 Defaulting Bank.
ARTICLE IX MISCELLANEOUS Section 9.1 Modifications. Section 9.2 Expenses.
Section 9.3 Waivers, etc. Section 9.4 Notices. Section 9.5 Taxes. Section 9.6
Successors and Assigns; Disposition of Loans; Transferees. Section 9.7
Confidentiality of Information. Section 9.8 Governing Law and Construction.
Section 9.9 Consent to Jurisdiction. Section 9.10 Survival of Agreement. Section
9.11 Indemnification. Section 9.12 Captions. Section 9.13 Entire Agreement.
Section 9.14 Counterparts. Section 9.15 Borrower Acknowledgements. Section 9.16
Effect of Existing Credit Agreement. Section 9.17 Reaffirmation of Security
Documents. Section 9.18 General Release. Section 9.19 Events of Default under
Existing Credit Agreement and Waiver. EXHIBIT A Borrowing Base Certificate
Exhibit B Revolving Note Exhibit C Term Note A Exhibit D Term Note B Exhibit E
Term Note C Schedule 1.1B Commitment Amounts Schedule 4.6 Litigation Schedule
4.19 Subsidiaries Schedule 4.20 Primary Distribution Facilities Schedule 6.10
Investments Schedule 6.11 Indebtedness Schedule 6.12 Liens Schedule 6.13
Contingent Obligations
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 20,
2000, is by and among NORSTAN, INC., a Minnesota corporation (the “Borrower”),
the banks which are signatories hereto (individually, a “Bank” and,
collectively, the “Banks”) and U.S. BANK NATIONAL ASSOCIATION, a national
banking association, one of the Banks, as agent for the Banks (in such capacity,
the “Agent”).
RECITALS
A. The Borrower, the Banks and the Agent are parties to a Credit
Agreement dated as of July 23, 1996, as amended by a First Amendment dated as of
October 11, 1996, a Second Amendment dated as of September 26, 1997, a Third
Amendment dated as of March 20, 1998, a Fourth Amendment dated as of July 23,
1998, a Fifth Amendment dated as of September 28, 1998, a Sixth Amendment dated
as of October 21, 1998, a Seventh Amendment dated as of May 31, 1999, an Eighth
Amendment dated January 25, 2000, a Ninth Amended dated as of April 26, 2000, a
Tenth Amendment dated as of June 30, 2000 and an Eleventh Amendment dated as of
July 28, 2000 (as so amended, the “Existing Credit Agreement”).
B. Pursuant to the Existing Credit Agreement, as of the Closing
Date, the Banks have advanced, and there remain outstanding, Revolving Loans (as
defined in the Existing Credit Agreement) in the aggregate principal amount of
$67,950,000 (the “Existing Revolving Loans”). Further, pursuant to the Credit
Agreement, the Existing Defaults (as defined below) have occurred and are
continuing as of the Closing Date.
C. The Borrower has requested the Banks to waive the Existing
Defaults and restructure the credit facilities under the Existing Credit
Agreement. The Banks are willing to waive the Existing Defaults and restructure
the credit facilities upon the terms and subject to the conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and adequacy of which is hereby acknowledged,
the parties hereto hereby amend and restate the Existing Credit Agreement in the
entirety and agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms. As used in this Agreement the following
terms shall have the following respective meanings (and such meanings shall be
equally applicable to both the singular and plural form of the terms defined, as
the context may require):
“Accounts”: With respect to any Person, the aggregate unpaid
obligations of customers and other account debtors to such Person arising out of
the sale or lease of goods or rendition of services by such Person on an open
account or deferred payment basis.
“Account Debtors”: As defined in the Security Agreement executed by
the Borrower or any Subsidiary (as the context may require).
“Adjusted Leverage Ratio”: At the time of any determination, the
ratio of (a) Total Indebtedness to (b) Tangible Net Worth, all as determined in
accordance with GAAP.
“Advance”: Any portion of the outstanding Revolving Loans by a Bank.
“Affiliate”: When used with reference to any Person, (a) each Person
that, directly or indirectly, controls, is controlled by or is under common
control with, the Person referred to, (b) each Person which beneficially owns or
holds, directly or indirectly, five percent or more of any class of voting stock
of the Person referred to (or if the Person referred to is not a corporation,
five percent or more of the equity interest), (c) each Person, five percent of
more of the voting stock (or if such Person is not a corporation, five percent
or more of the equity interest) of which is beneficially owned or held, directly
or indirectly, by the Person referred to, and (d) each of such Person’s
officers, directors, joint venturers and partners. The term control (including
the terms “controlled by” and “under common control with”) means the possession,
directly, of the power to direct or cause the direction of the management and
policies of the Person in question.
“Agent”: As defined in the opening paragraph hereof.
“Agent Fee”: As defined in Section 2.12.
“Aggregate Revolving Commitment Amounts”: As of any date, the sum of
the Revolving Commitment Amounts of all the Banks on such date.
“Aggregate Revolving Outstandings”: As of any date, the sum of the
Revolving Outstandings of all Banks on such date.
“Applicable Lending Office”: For each Bank, the office of such Bank
identified pursuant to Section 9.4 or such other domestic or foreign office of
such Bank (or of an Affiliate of such Bank) as such Bank may specify from time
to time to the Agent and the Borrower as the office by which its Advances are to
be made and maintained.
“Applicable Margin”: With respect to:
(a) the Revolving Loans – 2.50%;
(b) the Term A Loans – 3.50%; provided, that, on and after
January 31, 2001, the Applicable Margin with respect to Term A Loans shall be
increased to 4.50%;
(c) the Term B Loans – 3.50%; provided, that, on and after
January 31, 2001, the Applicable Margin with respect to the Term B Loans shall
be increased to 4.50%; and
(d) the Term C Loans – 3.50%.
“Bank”: As defined in the opening paragraph hereof.
“Board”: The Board of Governors of the Federal Reserve System or any
successor thereto.
“Borrower”: As defined in the opening paragraph hereof.
“Borrower Loan Documents”: This Agreement, the Notes, the Warrant,
and the Security Documents to which the Borrower is a party.
“Borrowing Base”: As of any date of determination, the sum of the
following:
(a) 70% of the lower of face amount or fair market value of
Eligible Accounts, plus
(b) 30% of the lower of cost (determined on a first–in, first–out
basis) or fair market value of Eligible Inventory, plus
(c) the Borrowing Base Supplement.
“Borrowing Base Certificate”: A certificate in the form of Exhibit A
hereto.
“Borrowing Base Deficiency”: At the time of any determination, the
amount, if any, by which Aggregate Revolving Outstandings exceed the Borrowing
Base.
“Borrowing Base Supplement”: $5,000,000.
“Business Day”: Any day (other than a Saturday, Sunday or legal
holiday in the State of Minnesota) on which national banks are permitted to be
open in Minneapolis, Minnesota, and Chicago, Illinois.
“Canadian Account”: As defined in Section 2.17(d).
“Capital Expenditures”: For any period, the sum of all amounts that
would, in accordance with GAAP, be included as additions to property, plant and
equipment on a consolidated statement of cash flows for the Borrower during such
period, in respect of (a) the acquisition, construction, improvement,
replacement or betterment of land, buildings, machinery, equipment or of any
other fixed assets or leaseholds, (b) to the extent related to and not included
in (a) above, materials, contract labor (excluding expenditures properly
chargeable to repairs or maintenance in accordance with GAAP), and (c) other
capital expenditures and other uses recorded as capital expenditures or similar
terms having substantially the same effect (including expenditures for
nonrecurrent tangible assets such as software).
“Capitalized Lease”: A lease of (or other agreement conveying the
right to use) real or personal property with respect to which at least a portion
of the rent or other amounts thereon constitute Capitalized Lease Obligations.
“Capitalized Lease Obligations”: As to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real or personal property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP (including Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board) and, for purposes
of this Agreement, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP (including such Statement No.
13).
“Closing Date”: December 20, 2000.
“Collateral”: As defined in the Security Agreement executed by the
Borrower or any Subsidiary (as the context may require).
“Collateral Account”: As defined in Section 2.17(a).
“Contingent Obligation”: With respect to any Person at the time of
any determination, without duplication, 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 otherwise: (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase of) any direct or indirect security therefor, (b)
to purchase property, securities or services for the purpose of assuring the
owner of such Indebtedness of the payment of such Indebtedness, (c) to maintain
working capital, equity capital or other financial statement condition of the
primary obligor so as to enable the primary obligor to pay such Indebtedness or
otherwise to protect the owner thereof against loss in respect thereof, or (d)
entered into for the purpose of assuring in any manner the owner of such
Indebtedness of the payment of such Indebtedness or to protect the owner against
loss in respect thereof; provided, that the term “Contingent Obligation” shall
not include endorsements for collection or deposit, in each case in the ordinary
course of business.
“Default”: Any event which, with the giving of notice (whether such
notice is required under Section 7.1, or under some other provision of this
Agreement, or otherwise) or lapse of time, or both, would constitute an Event of
Default.
“Defaulting Bank”: At any time, any Bank that, at such time (a) has
failed to make a Loan or any Advances thereunder required pursuant to the terms
of this Agreement, including the funding of any participation in accordance with
the terms of this Agreement, (b) has failed to pay to the Agent or any Bank an
amount owed by such Bank pursuant to the terms of this Agreement, or (c) has
been deemed insolvent or has become subject to a bankruptcy, receivership or
insolvency proceeding, or to a receiver, trustee or similar official.
“Deposit Day”: As defined in Section 2.17(b).
“Dollars” and “$”: Lawful money of the United States of America.
“EBITDA”: For any period of determination, the sum of the
consolidated net income of the Borrower before deductions for income taxes,
Interest Expense, depreciation and amortization, and calculated prior to
extraordinary gains, all as determined in accordance with GAAP.
“Eligible Accounts”: The right of the Borrower or any Eligible
Subsidiary to receive payment for goods sold or services rendered, including any
such right evidenced by instruments or chattel paper and any such right
constituting retainage items or costs in excess of billings, provided such right
to payment:
(a) has arisen out of the sale of goods or the performance of
services by the Borrower or any Eligible Subsidiary within the United States or
Canada, or, if such goods are sold or services performed outside the United
States or Canada, is backed by a letter of credit issued or confirmed by a bank
chartered under the laws of the United States or of any State;
(b) is the valid, binding and legally enforceable obligation of
the obligor and such right to payment has not been subordinated by the Borrower
or any Eligible Subsidiary to any other claim against the obligor and such
obligor is not (i) the Borrower, or a Subsidiary or an Affiliate of the
Borrower, (ii) a Person who is a shareholder, director, officer or employee of
the Borrower, (iii) a debtor under any proceeding under the Bankruptcy Code or
comparable provision of state or foreign law, (iv) an assignor for the benefit
of creditors, (v) the United States or any department, agency or instrumentality
thereof, unless Borrower or such Subsidiary shall have complied with the
Assignment of Claims Act in the case of the United States or any agency or
instrumentality thereof, or (vi) a province, county or local governmental
authority (other than a state authority or any agency, department or
instrumentality thereof), or agency, department or instrumentality thereof;
(c) is assignable pursuant to the Uniform Commercial Code;
(d) is subject to a perfected first security interest in favor of
the Agent and is free and clear of any other Lien;
(e) is not subject to any claimed offset, counterclaim or other
defense with respect thereto, but only to the extent of such claimed offset,
counterclaim or other defense;
(f) except as provided in subsection (h) of this definition, is
not unpaid more than 90 days (or, in the case of invoices for goods sold, or
services rendered, by Norstan Network Services, Inc., 60 days) from the date of
the relevant invoice;
(g) is evidenced by a written invoice delivered to the Account
Debtor with respect thereto;
(h) does not constitute progress or final payment obligations for
computer or telephone systems delivered, and to be installed, by the Borrower or
a Subsidiary, unless (i) the related inventory or equipment has been
sufficiently identified to the applicable invoice and (ii) the related account
is not unpaid more than 60 days from the date of the applicable invoice;
(i) is not a right to payment arising under a lease of equipment
by the Borrower or any Eligible Subsidiary to any Person;
(j) is not owed by an obligor located in New Jersey, Minnesota
or Indiana, unless the Borrower or the applicable Eligible Subsidiary is in
compliance with applicable laws of the same states with respect to which failure
to comply would impair the Borrower's or such Eligible Subsidiary’s ability to
enforce its rights with respect to such Account;
(k) is not subject to any repurchase obligations (other than
normal customer service warranties relating to inventory sold by the Borrower
which have not been invoked by the applicable customer) on the part of the
Borrower or any Eligible Subsidiary or any accrued return privilege on the part
of such obligor; and
(l) is not owing by an obligor for which 25% or more of the
aggregate Accounts (measured based upon the face amount of such Accounts) owing
by such obligor to the Borrower or any Subsidiary are past due beyond the
periods set forth in subsections (f) or (h), as applicable, of this definition;
provided, that the Majority Banks shall, notwithstanding the foregoing, have the
right, in the reasonable exercise of their discretion, to establish reserves
against the aggregate amount of Eligible Accounts. Satisfaction of the
conditions specified in clauses (a) through (l) of this definition shall be
determined each month by the Agent in the reasonable exercise of its discretion.
“Eligible Inventory”: All inventory held by the Borrower or any
Eligible Subsidiary as raw materials or finished product held for sale in the
ordinary course of business (including work in process, but excluding supplies)
and which:
(a) is subject to a perfected, first priority security interest
in favor of the Agent free and clear of all other Liens and is not leased to any
Person;
(b) is located at one of the locations set forth in the Security
Agreements or in any schedule delivered pursuant thereto as a location at which
inventory is kept, and if such location constitutes a Primary Distribution
Facility, the Agent has received a landlord's or warehouseman's waiver in form
and substance acceptable to the Agent covering the inventory kept at such
location,
(c) is not in transit to any location other than a location set
forth in the Security Agreements or in any schedule delivered pursuant thereto
as a location at which inventory is kept;
(d) is not so identified to a contract to sell that it is
evidenced by an Account;
(e) is of good and merchantable quality free from any defects
which would affect the market value thereof;
(f) is not, as reasonably determined by the Agent, nonsaleable
in the ordinary course of the Borrower's or any Subsidiary's business;
(g) is insured against loss or damage in accordance with the
provisions of this Agreement and the applicable Security Agreement;
(h) is not subject to or covered by a negotiable document of
title, including, without limitation, negotiable warehouse receipts and
negotiable bills of lading;
(i) is not stored in a public warehouse or held by any Person as
bailee, unless the terms of such storage or bailment are satisfactory to the
Agent;
(j) it complies with all standards imposed by any governmental
agency having regulatory authority over such goods and/or their use, manufacture
or sale;
(k) does not constitute slow-selling or obsolete inventory which
have been identified as such on the Borrower’s books and records in accordance
with its past practices and with GAAP; and
(l) does not constitute over-ordered custom switches;
provided, that the Majority Banks shall, notwithstanding the foregoing, have the
right, in the reasonable exercise of their discretion, to establish reserves
against the aggregate amount of Eligible Inventory. Satisfaction of the
conditions specified in clauses (a) through (l) of this definition shall be
determined each month by the Agent in the reasonable exercise of its discretion.
“Eligible Subsidiary”: Any Guarantor other than (a) Norstan Canada
and Norstan-UK Limited and (b) with respect to any determination of Eligible
Inventory, NFS and Norstan Consulting, Inc.
“Ericsson Acquisition”: Any transaction or series of
contemporaneously consummated transactions to be completed pursuant to the
Ericsson Acquisition Documents whereby NCI shall acquire the assets comprising
the United States and Canada distribution channels of Ericsson, Inc.
“Ericsson Acquisition Documents”: All agreements, instruments,
certificates and other documents, each in form and substance acceptable to the
Borrower and the Banks, to be executed and delivered by the Borrower or any
Subsidiary pursuant to or in connection with the Ericsson Acquisition, as the
same may be supplemented, amended or otherwise modified in a manner acceptable
to the Banks
“ERISA”: The Employee Retirement Income Security Act of 1974, as
amended.
“ERISA Affiliate”: Any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower is a member and
which is treated as a single employer under Section 414 of the Code.
“Event of Default”: Any event described in Section 7.1.
“Excess Cash Flow”: As of end of each fiscal quarter of the Borrower,
commencing with the fiscal quarter ending on or about January 31, 2001,
determined for such quarter on a consolidated basis for the Borrower and its
Subsidiaries in accordance with GAAP, the remainder of
(a) the sum, without duplication, of (i) EBITDA for such period,
and (ii) extraordinary cash income, if any, business interruption insurance
proceeds, if any, and cash gains attributable to sales of assets outside the
ordinary course of business (but net of taxes, expenses and reserves for
indemnification, and exclusive of any gains realized in connection with any
transaction contemplated by Section 2.6(c) so long as the Net Proceeds of such
transaction are applied in the manner set forth in Section 2.6(c)), if any,
during such period to the extent that any such extraordinary cash income, such
insurance proceeds or such cash gain is not included in EBITDA for such period,
minus
(b) the sum, without duplication, of (i) income taxes paid in
cash or accrued by the Borrower or any Subsidiary during such period, (ii) the
aggregate amount of Capital Expenditures, if any (but only to the extent such
Capital Expenditures were permissible under Section 6.8 during such period)
minus Indebtedness incurred to finance such Capital Expenditures and secured
solely by Liens on the property acquired, and (iii) Interest Expense actually
paid during such period.
“Existing Credit Agreement”: As defined in Recital A of this
Agreement.
“Existing Defaults”: As defined in Section 9.19.
“Existing Revolving Loans”: As defined in Recital B of this
Agreement.
“Existing Letter of Credit”: Letter of Credit No. [76528] in the
original face amount of $3,500,000 issued by U.S. Bank for the account of the
Borrower in favor of Bank of Montreal.
“Federal Funds Rate”: For any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day and (b) if such rate is not so published for any
Business Day, the Federal Funds Rate for such Business Day shall be the average
rate quoted to U.S. Bank on such Business Day on such transactions as determined
by the Agent.
“Fleet”: Fleet Business Credit Corporation.
“Fleet Intercreditor Agreement”: An intercreditor agreement between
the Agent, Fleet, the Borrower and any appropriate Subsidiary in form and
substance acceptable to the Banks and Fleet, as the same may be amended,
restated or otherwise modified from time to time.
“Funding Reserve”: As defined in Section 2.1(a).
“GAAP”: Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of any date of
determination.
“Guarantors”: Norstan Financial Services, Inc., a Minnesota
corporation; Norstan Communications, Inc., a Minnesota corporation; Norstan
Network Services, Inc.; a Minnesota corporation; Norstan International, Inc., a
Minnesota corporation; Norstan-UK Limited, a corporation incorporated in London,
England; Norstan Consulting Holding Company, a Minnesota corporation; Norstan
Consulting, Inc., a Minnesota corporation; Norstan Canada, Ltd., a Canadian
corporation; Connaissance Consulting, LLC, a Minnesota limited liability
company; Vibes Technologies, Inc., a Minnesota corporation; Norstan Canada, Inc.
a Minnesota corporation; Norstan Information Systems, Inc., a Minnesota
corporation; and Norstan Network Services of New Hampshire, Inc., a New
Hampshire corporation.
“Guaranties”: Separate Guaranties given by the Guarantors in favor of
the Agent and the Banks, as any of the same may be amended, restated or
otherwise modified from time to time.
“Holding Account”: A deposit account belonging to the Agent for the
benefit of the Banks into which the Borrower may be required to make deposits
pursuant to the provisions of this Agreement, such account to be under the sole
dominion and control of the Agent and not subject to withdrawal by the Borrower,
with any amounts therein to be held for application toward any drawings made
under the Existing Letter of Credit. The Holding Account shall be a money
market savings account or substantial equivalent (or other appropriate
investment medium as the Borrower may from time to time request and to which the
Agent in its sole discretion shall have consented) and shall bear interest in
accordance with the terms of similar accounts held by the Agent for its
customers.
"Immediately Available Funds": Funds with good value on the day and
in the city in which payment is received.
“Indebtedness”: With respect to any Person at the time of any
determination, 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 evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person upon which interest charges are customarily paid
or accrued, (d) all obligations of such Person under conditional sale or other
title retention agreements relating to property purchased by such Person, (e)
all obligations of such Person issued or assumed as the deferred purchase price
of property or services, (f) all obligations of others secured by any Lien on
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all Capitalized Lease Obligations of such
Person, (h) all obligations of such Person in respect of interest rate
protection agreements, (i) all obligations of such Person, actual or contingent,
as an account party in respect of letters of credit or bankers’ acceptances, (j)
all obligations of any partnership or joint venture as to which such Person is
or may become personally liable, and (k) all Contingent Obligations of such
Person to the extent that such Contingent Obligations are or should be
classified as liabilities on the balance sheet of such Person in accordance with
GAAP.
“Interest Coverage Ratio”: As of the last day of any month, the ratio
of (a) EBITDA for such month, to (b) Interest Expense, in each case determined
for said period in accordance with GAAP.
“Interest Expense”: For any period of determination, the aggregate
consolidated amount, without duplication, of interest paid, accrued or scheduled
to be paid in respect of any Indebtedness of the Borrower, including (a) all but
the principal component of payments in respect of conditional sale contracts,
Capitalized Leases and other title retention agreements, (b) commissions,
discounts and other fees and charges with respect to letters of credit and
bankers’ acceptance financings and (c) net costs under interest rate protection
agreements, but excluding the cost of goods sold incurred in the ordinary course
of business by the Borrower or any Subsidiary in connection with any sale or
discounting of the NFS Lease Accounts or Norstan Canada Lease Accounts, in each
case determined in accordance with GAAP.
“Inventory”: With respect to any Person, goods held for sale or lease
or to be furnished under contracts of service by such entity, raw materials, and
work in process or materials used or consumed in the business of such Person.
“Investment”: The acquisition, purchase, making or holding of any
stock or other security, any loan, advance, contribution to capital, extension
of credit (except for 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), any acquisitions of real or personal
property (other than real and personal property acquired in the ordinary course
of business) and any purchase or commitment or option to purchase stock or other
debt or equity securities of or any interest in another Person or any integral
part of any business or the assets comprising such business or part thereof.
The amount of any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment.
“LaSalle Intercreditor Agreement: An intercreditor agreement between
the Agent, LaSalle National Bank, the Borrower and any appropriate Subsidiary in
form and substance acceptable to the Bank and LaSalle National Bank, as the same
may be amended, restated or otherwise modified from time to time.
“Letter of Credit Fee”: As defined in Section 2.10.
“Lien”: With respect to any Person, any security interest, mortgage,
pledge, lien, charge, encumbrance, title retention agreement or analogous
instrument or device (including the interest of each lessor under any
Capitalized Lease), in, of or on any assets or properties of such Person, now
owned or hereafter acquired, whether arising by agreement or operation of law.
“Loan”: A Revolving Loan, a Term A Loan, a Term B Loan or a Term C
Loan.
“Loan Documents”: This Agreement, the Notes, the Warrant Documents
and the Security Documents.
“Lock Box”: As defined in Section 2.17(a).
“Majority Banks”: As of any date of determination, such Banks, other
than Defaulting Banks, holding at least 100% of the aggregate unpaid principal
amount of the Notes, excluding Notes held by Defaulting Banks or, if no Loans
are at the time outstanding hereunder, such Banks other than Defaulting Banks
whose Total Percentages aggregate at least 100% of the Aggregate Revolving
Outstandings (with Total Percentages being computed without reference to the
Revolving Commitment Amounts of Defaulting Banks).
“Multiemployer Plan”: A multiemployer plan, as such term is defined
in Section 4001 (a) (3) of ERISA, which is maintained (on the Closing Date,
within the five years preceding the Closing Date, or at any time after the
Closing Date) for employees of the Borrower or any ERISA Affiliate.
“NCI”: Norstan Communications, Inc.
“Net Proceeds”: With respect to the sale or disposition of property,
sale of capital stock and offering of debt securities by the Borrower or a
Subsidiary, or other non-recurring event, an amount equal to (a) the cash
(including deferred cash proceeds) and other consideration received by the
Borrower or a Subsidiary in connection with such transaction or event, minus (b)
the sum of (i) the unpaid principal balance on the date of any such sale or
offering of any Indebtedness that is secured by a Lien not proscribed by Section
6.12 and affecting such property, and which is required to be repaid on the date
of such sale or offering, (ii) any closing costs or selling costs arising in
connection with such sale or offering, and (iii) any sales or income tax paid or
payable by the Borrower in connection with such transaction or event (excluding
any tax for which the Borrower is reimbursed by the purchaser).
“NFS”: Norstan Financial Services, Inc., a Minnesota corporation.
“NFS Lease Account”: An Account arising from a lease of Inventory by
NFS.
“Norstan Canada”: Norstan Canada, Ltd., a Canadian corporation.
“Norstan Canada Lease Account”: An Account arising from a lease of
Inventory by Norstan Canada.
“Note”: A Term A Note, a Term B Note, a Term C Note or a Revolving
Note.
“Obligations”: The Borrower’s obligations in respect of the due and
punctual payment of principal and interest (including, without limitation and to
the extent permitted by law, interest accruing after the commencement of a case
by or against the Borrower under the United States Bankruptcy Code) on the Notes
and Unpaid Drawings when and as due, whether by acceleration or otherwise and
all fees (including Unused Revolving Commitment Fees and Letter of Credit Fees),
expenses, indemnities, reimbursement and other obligations of the Borrower under
this Agreement, any other Borrower Loan Document, and any letter of credit
application and reimbursement agreement executed and delivered by the Borrower
to U.S. Bank in connection with the issuance of the Existing Letter of Credit,
in all cases whether now existing or hereafter arising or incurred.
“Payment Item”: As defined in Section 2.17(a).
“PBGC”: The Pension Benefit Guaranty Corporation, established
pursuant to Subtitle A of Title IV of ERISA, and any successor thereto or to the
functions thereof.
“Person”: Any natural person, corporation, partnership, joint
venture, firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether acting
in an individual, fiduciary or other capacity.
“Plan”: Each employee benefit plan (whether in existence on the
Closing Date or thereafter instituted), as such term is defined in Section 3 of
ERISA, maintained for the benefit of employees, officers or directors of the
Borrower or of any ERISA Affiliate.
“Primary Distribution Facilities”: The primary distribution
facilities of the Borrower and the Subsidiaries described on Schedule 1.1A.
“Prohibited Transaction”: The respective meanings assigned to such
term in Section 4975 of the Code and Section 406 of ERISA.
“Reference Rate”: The rate of interest from time to time publicly
announced by the Agent as its “reference rate.” The Agent may lend to its
customers at rates that are at, above or below the Reference Rate. For purposes
of determining any interest rate hereunder or under any other Loan Document
which is based on the Reference Rate, such interest rate shall change as and
when the Reference Rate shall change.
“Regulatory Change”: Any change after the Closing Date in federal,
state or foreign laws, regulations, guidelines or orders or the adoption or
making after such date of any interpretations, directives or requests applying
to a class of banks including any Bank under any federal, state or foreign laws,
regulations, guidelines or orders (whether or not having the force of law) by
any court or governmental or monetary authority charged with the interpretation
or administration thereof.
“Reportable Event”: A reportable event as defined in Section 4043 of
ERISA and the regulations issued under such Section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation has waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided that a failure to meet the minimum
funding standard of Section 412 of the Code and of Section 302 of ERISA shall be
a Reportable Event regardless of the issuance of any such waivers in accordance
with Section 412(d) of the Code.
“Restricted Payments”: With respect to the Borrower, collectively,
all dividends or other distributions of any nature (cash, securities other than
common stock of the Borrower, assets or otherwise), and all payments on any
class of equity securities (including warrants, options or rights therefor)
issued by the Borrower, whether such securities are authorized or outstanding on
the Closing Date or at any time thereafter and any redemption or purchase of, or
distribution in respect of, any of the foregoing, whether directly or
indirectly.
“Restructuring Plan”: As defined in Section 3.1(b).
“Revolving Commitment”: With respect to a Bank, the agreement of such
Bank to make Revolving Loans to the Borrower in an aggregate principal amount
outstanding at any time not to exceed such Bank’s Revolving Commitment Amount
upon the terms and subject to the conditions and limitations of this Agreement.
“Revolving Commitment Amount”: With respect to a Bank, initially the
amount set opposite such Bank’s name on Schedule 1.1B hereto (as such Schedule
may from time to time be amended) as its Revolving Commitment Amount, but as the
same may be from time to time increased or reduced as provided in Section 2.6(d)
or Section 2.8.
“Revolving Commitment Ending Date”: As defined in Section 2.14.
“Revolving Commitment Percentage”: With respect to any Bank, the
percentage equivalent of a fraction, the numerator of which is the Revolving
Commitment Amount of such Bank and the denominator of which is the Aggregate
Revolving Commitment Amounts.
“Revolving Loan”: As defined in Section 2.1.
“Revolving Loan Date”: The date of the making of any Revolving Loans
hereunder.
“Revolving Note”: A promissory note of the Borrower in the form of
Exhibit B hereto.
“Revolving Outstandings”: As of any date of determination with
respect to any Bank, the sum of (a) the aggregate unpaid principal balance of
Advances outstanding under such Bank’s Revolving Note on such date, (b) an
amount equal to the aggregate stated amount of the Existing Letter of Credit
multiplied by such Bank’s Revolving Commitment Percentage, and (c) an amount
equal to the aggregate amount of Unpaid Drawings on such date (after applying
any funds held in the Holding Account to the payment thereof) multiplied by such
Bank’s Revolving Commitment Percentage.
“Revolving Outstandings Percentage”: As of any date of determination
with respect to any Bank, the percentage equivalent of a fraction the numerator
of which is the Revolving Outstandings of such Bank on such date and the
denominator of which is the Aggregate Revolving Outstandings on such date.
“Security Agreements”: Collectively, the separate Security Agreements
of the Borrower and the Guarantors pursuant to which the Agent is granted, for
the benefit of the Banks, a security interest in the personal property described
therein, as the same may hereafter be amended, supplemented, extended, restated
or otherwise modified from time to time, each in form and substance satisfactory
to the Agent.
“Siemens”: Siemens Business Communication Systems, Inc.
“Security Documents”: The Guaranties, the Security Agreements and
any collateral assignment documents executed and delivered by the Borrower or
any Subsidiary under Section 3.1(a)(xv).
“Subordinated Debt”: Any Indebtedness of the Borrower or any
Subsidiary, now existing or hereafter created, incurred or arising, which is
subordinated in right of payment to the payment of the Obligations in a manner
and to an extent (a) that Majority Banks have approved in writing prior to the
creation of such Indebtedness, or (b) as to any Indebtedness of the Borrower or
any Subsidiary existing on the date of this Agreement, that Majority Banks have
approved as Subordinated Debt in a writing delivered by Majority Banks to the
Borrower on or prior to the Closing Date.
“Subsidiary”: Any corporation or other entity of which securities or
other ownership interests having ordinary voting power for the election of a
majority of the board of directors or other Persons performing similar functions
are owned by the Borrower either directly or through one or more Subsidiaries.
“Tangible Net Worth”: As of any date of determination, the sum of the
amounts set forth on the consolidated balance sheet of the Borrower as the sum
of the common stock, preferred stock, additional paid-in capital, retained
earnings, unamortized cost of stock and foreign currency translation adjustments
of the Borrower (excluding treasury stock), less the book value of all assets of
the Borrower and its Subsidiaries that would be treated as intangibles under
GAAP, including all such items as goodwill, trademarks, trade names, service
marks, copyrights, patents, licenses, unamortized debt discount and expenses and
the excess of the purchase price of the assets of any business acquired by the
Borrower or any of its Subsidiaries over the book value of such assets.
“Termination Date”: The earliest of (a) the Revolving Commitment
Ending Date, (b) the date on which the Revolving Commitments are terminated
pursuant to Section 7.2 hereof or (c) the date on which the Revolving Commitment
Amounts are reduced to zero pursuant to Section 2.8 hereof.
“Term A Loan”: As defined in Section 2.1.
“Term B Loan”: As defined in Section 2.1.
“Term C Loan”: As defined in Section 2.1.
“Term A Loan Commitment Amount”: With respect to a Bank, the amount
set opposite such Bank's name on Schedule 1.1B as its Term A Loan Commitment
Amount.
“Term B Loan Commitment Amount”: With respect to a Bank, the amount
set opposite such Bank's name on Schedule 1.1B as its Term B Loan Commitment
Amount.
“Term C Loan Commitment Amount”: With respect to a Bank, the amount
set opposite such Bank's name on Schedule 1.1B as its Term C Loan Commitment
Amount.
“Term A Loan Percentage”: With respect to any Bank, the percentage
equivalent of a fraction, the numerator of which is the amount of the Term A
Loan Commitment Amount of such Bank and the denominator of which is the sum of
the Term A Loan Commitment Amounts of all the Banks.
“Term B Loan Percentage”: With respect to any Bank, the percentage
equivalent of a fraction, the numerator of which is the amount of the Term B
Loan Commitment Amount of such Bank and the denominator of which is the sum of
the Term B Loan Commitments Amounts of all the Banks.
“Term C Loan Percentage”: With respect to any Bank, the percentage
equivalent of a fraction, the numerator of which is the amount of the Term C
Loan Commitment Amount of such Bank and the denominator of which is the sum of
the Term C Loan Commitments Amounts of all the Banks.
“Term A Note”: A promissory note of the Borrower in the form of
Exhibit C hereto.
“Term B Note”: A promissory note of the Borrower in the form of
Exhibit D hereto.
“Term C Note”: A promissory note of the Borrower in the form of
Exhibit E hereto.
“Total Indebtedness”: At the time of any determination, the amount,
on a consolidated basis, of all Indebtedness of the Borrower and its
Subsidiaries as determined in accordance with GAAP.
“Total Percentage”: With respect to any Bank, the percentage
equivalent of a fraction, the numerator of which is the sum of the Revolving
Commitment Amount of such Bank (or, if the Revolving Commitments have been
terminated, the Revolving Outstandings of such Bank), the outstanding Term A
Loans, Term B Loans and Term C Loans of such Bank and the denominator of which
is the sum of the Aggregate Revolving Commitment Amounts (or, if the Revolving
Commitments have terminated, the Aggregate Revolving Outstandings) and the
outstanding Term A Loans, Term B Loans and Term C Loans of all the Banks.
“Unpaid Drawing”: As defined in Section 2.7(b).
“Unpaid Drawing Repayment Loan”: As defined in Section 2.15.
“Unused Revolving Commitment”: With respect to any Bank as of any
date of determination, the amount by which such Bank’s Revolving Commitment
Amount exceeds such Bank’s Revolving Outstandings on such date.
“Unused Revolving Commitment Fees”: As defined in Section 2.9.
“U.S. Bank”: U.S. Bank National Association, in its individual
corporate capacity.
“Warrant Issuance Agreement”: Warrant Issuance Agreement dated
concurrently herewith between the Borrower and the Banks, as the same may be
amended, restated or otherwise modified from time to time.
“Warrant Registration Agreement”: Registration Rights Agreement dated
concurrently herewith between the Borrower and the Banks, as the same may be
amended, restated or otherwise modified from time to time.
“Warrants”: Warrants for the purchase of the Borrower’s common stock
issued from time to time by the Borrower to the Banks pursuant to the Warrant
Issuance Agreement.
“Warrant Documents”: The Warrant Registration Agreement, the Warrant
Issuance Agreement and the Warrants.
Section 1.2 Accounting Terms and Calculations. Except as may be
expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder shall be made
in accordance with GAAP. To the extent any change in GAAP affects any
computation or determination required to be made pursuant to this Agreement,
such computation or determination shall be made as if such change in GAAP had
not occurred unless the Borrower and Majority Banks agree in writing on an
adjustment to such computation or determination to account for such change in
GAAP.
Section 1.3 Computation of Time Periods. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
unless otherwise stated the word “from” means “from and including” and the word
“to” or “until” each means “to but excluding.”
Section 1.4 Other Definitional Terms. The words “hereof,” “herein”
and “hereunder” and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. References to Sections, Exhibits, schedules and like references are
to this Agreement unless otherwise expressly provided. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation”. Unless the context in which used herein otherwise clearly
requires, “or” has the inclusive meaning represented by the phrase “and/or”.
ARTICLE II
TERMS OF THE CREDIT FACILITIES
Section 2.1 Lending Commitments; Purposes. On the terms and subject
to the conditions hereof, each Bank severally agrees to make the following
lending facilities available to the Borrower:
(a) Revolving Loans. Each Bank severally shall make available a
revolving credit facility available as loans (each, a “Revolving Loan” and,
collectively, the “Revolving Loans”) to the Borrower on a revolving basis at any
time and from time to time from the Closing Date to the Termination Date, during
which period the Borrower may borrow, repay and reborrow in accordance with the
provisions hereof, provided, that no Revolving Loan will be made in any amount
which, after giving effect thereto, would cause the Aggregate Revolving
Outstandings to exceed the lesser of Aggregate Revolving Commitment Amounts or
the Borrowing Base, provided, further, that the initial Revolving Loans will not
be made if, after giving effect to such Loans, the excess of the Borrowing Base
(calculated exclusive of the Borrowing Base Supplement) over the Aggregate
Revolving Outstandings is less than $3,000,000 (the “Funding Reserve”).
(b) Term A Loans. Upon the Closing Date, each Bank shall make
available to the Borrower a term loan (each being a “Term A Loan” and,
collectively, the “Term A Loans”) in an amount by such Bank equal to its Term A
Loan Commitment Amount, which Term A Loans shall refinance $15,000,000 of the
Existing Revolving Loan Obligations.
(c) Term B Loans. Upon the Closing Date, each Bank shall make
available to the Borrower a term loan (each being a “Term B Loan” and,
collectively, the “Term B Loans”) in an amount by such Bank equal to its Term B
Loan Commitment Amount, which Term B Loans shall refinance $15,000,000 of the
Existing Revolving Loan Obligations.
(d) Term C Loans. Upon the Closing Date, each Bank shall make
available to the Borrower a term loan (each being a “Term C Loan” and,
collectively, the “Term C Loans”) in an amount by such Bank equal to its Term C
Loan Commitment Amount, which Term C Loans shall refinance $18,000,000 of the
Existing Revolving Loans Obligations.
Section 2.2 Procedure for Revolving Loans.
(a) Any request by the Borrower for Revolving Loans hereunder
shall be in writing, or by telephone promptly confirmed in writing or by
facsimile transmission, and must be given so as to be received by the Agent not
later than 1:00 P.M. (Minneapolis time) on the requested Revolving Loan Date
(which shall be a Business Day). Each request for Revolving Loans hereunder
shall be irrevocable and shall be deemed a representation by the Borrower that
on the requested Revolving Loan Date and after giving effect to the requested
Revolving Loans the applicable conditions specified in Article III have been and
will be satisfied. Each request for Revolving Loans hereunder shall specify (i)
the requested Revolving Loan Date, (ii) the aggregate amount of Revolving Loans
to be made on such date, which shall be in a minimum amount of $200,000 or, if
more, an integral multiple of $100,000, (iii) a calculation acceptable to the
Agent of the availability under the Borrowing Base on the requested Revolving
Loan Date, after giving effect to the requested Revolving Loans, and (iv) if
such Revolving Loans are to be Unpaid Drawing Repayment Loans, the Unpaid
Drawing or Unpaid Drawings which are to be repaid with the proceeds of such
Unpaid Drawing Repayment Loans. Without in any way limiting the Borrower’s
obligation to confirm in writing any telephone request for Revolving Loans
hereunder, the Agent may rely on any such request which it believes in good
faith to be genuine; and the Borrower hereby waives the right to dispute the
Agent’s record of the terms of such telephone request, absent gross negligence
or willful misconduct on the part of the Agent. The Agent shall promptly notify
each other Bank of the receipt of such request, the matters specified therein,
and of such Bank’s ratable share (based on such Bank’s Revolving Commitment
Percentage) of the requested Revolving Loans. On the date of the requested
Revolving Loans, each Bank shall provide its share of the requested Revolving
Loans to the Agent in Immediately Available Funds not later than 4:00 P.M.
(Minneapolis time). Unless the Agent determines that any applicable condition
specified in Article III has not been satisfied, the Agent will make available
to the Borrower at the Agent’s principal office in Minneapolis, Minnesota in
Immediately Available Funds not later than 5:00 P.M. (Minneapolis time) on the
requested Revolving Loan Date the amount of the requested Revolving Loans. If
the Agent has made a Revolving Loan to the Borrower on behalf of a Bank but has
not received the amount of such Revolving Loan from such Bank by the time herein
required, such Bank shall pay interest to the Agent on the amount so advanced at
the Federal Funds Rate from the date of such Revolving Loan to the date funds
are received by the Agent from such Bank, such interest to be payable with such
remittance from such Bank of the principal amount of such Revolving Loan
(provided, however, that the Agent shall not make any Revolving Loan on behalf
of a Bank if the Agent has received prior notice from such Bank that it will not
make such Revolving Loan). If the Agent does not receive payment from such Bank
by the next Business Day after the date of any Revolving Loan, the Agent shall
be entitled to recover such Revolving Loan, with interest thereon at the rate
then applicable to such Revolving Loan, on demand, from the Borrower, without
prejudice to the Agent’s and the Borrower’s rights against such Bank. If such
Bank pays the Agent the amount herein required with interest at the overnight
Federal Funds rate before the Agent has recovered from the Borrower, such Bank
shall be entitled to the interest payable by the Borrower with respect to the
Revolving Loan in question accruing from the date the Agent made such Revolving
Loan. The Borrower shall provide to the Agent each Business Day, by not later
than 4:00 P.M. (Minneapolis time) on such Business Day, a reconciliation in
writing or by telecopier showing (i) the total amount of Revolving Loans on such
day, (ii) whether such Revolving Loans constituted Unpaid Drawing Repayment
Loans, and (iii) in the case of Unpaid Drawing Repayment Loans, the Unpaid
Drawing or Unpaid Drawings repaid with the proceeds of such Unpaid Drawing
Repayment Loans. The Agent shall provide copies of such reconciliation to the
Banks on a monthly basis.
(b) Whenever any Unpaid Drawing exists for which there are not
then funds in the Holding Account to cover the same and with respect to which
the Agent has not otherwise received a request from the Borrower for Unpaid
Drawing Repayment Loans pursuant to Section 2.2(a), the Borrower shall
nevertheless, be deemed to have requested the Banks to make Unpaid Drawing
Repayment Loans to pay such Unpaid Drawing and the Agent shall give the other
Banks notice to that effect, specifying the amount of such Unpaid Drawing and
the amount of the Unpaid Drawing Repayment Loan to be made by such Bank with
respect thereto, in which event each Bank is authorized (and the Borrower does
here so authorize each Bank) to, and shall, make an Unpaid Drawing Repayment
Loan to the Borrower in an amount equal to such Bank’s Revolving Commitment
Percentage of the balance of the Unpaid Drawing which remains unpaid after
applying any funds in the Holding Account to the payment thereof. The Agent
shall notify each Bank by 1:00 P.M. (Minneapolis time) on the date such Unpaid
Drawing occurs of the amount of the Unpaid Drawing Repayment Loan to be made by
such Bank. Notices received after such time shall be deemed to have been
received on the next Business Day. Each Bank shall then make such Unpaid
Drawing Repayment Loan (regardless of noncompliance with the applicable
conditions precedent specified in Article III hereof and regardless of whether
an Event of Default then exists) and each Bank shall provide the Agent with the
proceeds of such Unpaid Drawing Repayment Loan in Immediately Available Funds,
at the office of the Agent, not later than 4:00 P.M. (Minneapolis time) on the
day on which such Bank received such notice (or, in the case of notices received
after 1:00 P.M., Minneapolis time, is deemed to have received such notice). The
Agent shall apply the proceeds of such Unpaid Drawing Repayment Loans directly
to reimburse itself for such Unpaid Drawing. If any portion of any such amount
paid to the Agent is recovered by or on behalf of the Borrower from the Agent in
bankruptcy, by assignment for the benefit of creditors or otherwise, the loss of
the amount so recovered shall be ratably shared between and among the Banks in
the manner contemplated by Section 8.11 hereof. If at the time the Banks make
funds available to the Agent pursuant to the provisions of this Section, the
applicable conditions precedent specified in Article III shall not have been
satisfied, the Borrower shall pay to the Agent for the account of the Banks
interest on the funds so advanced at a floating rate per annum equal to the sum
of the Reference Rate plus the Applicable Margin for Revolving Loans plus two
percent (2.00%).
Section 2.3 Notes. The Revolving Loans of each Bank shall be
evidenced by a single Revolving Note payable to the order of such Bank in a
principal amount equal to such Bank's Revolving Commitment Amount originally in
effect. The Term A Loan of each Bank shall be evidenced by a Term A Note
payable to the order of such Bank in the principal amount equal to such Bank's
Term A Loan Commitment Amount. The Term B Loan of each Bank shall be evidenced
by a Term B Note payable to the order of such Bank in the principal amount equal
to such Bank's Term B Loan Commitment Amount. The Term C Loan of each Bank
shall be evidenced by a Term C Note payable to the order of such Bank in the
principal amount equal to such Bank's Term C Loan Commitment Amount. Each Bank
shall enter in its ledgers and records the amount of its Term A Loan, its Term B
Loan, its Term C Loan and each Revolving Loan, the various Advances made and the
payments made thereon, and each Bank is authorized by the Borrower to enter on a
schedule attached to its Term A Note, Term B Note, Term C Note or Revolving
Note, as appropriate, a record of such Term A Loan, Term B Loan, Term C Loan
Revolving Loans, Advances and payments; provided, however that the failure by
any Bank to make any such entry or any error in making such entry shall not
limit or otherwise affect the obligation of the Borrower hereunder and on the
Notes, and, in all events (a) the principal amounts owing by the Borrower in
respect of the Revolving Notes shall be the aggregate amount of all Revolving
Loans made by the Banks less all payments of principal thereof made by the
Borrower, (b) the principal amount owing by the Borrower in respect of the Term
A Notes shall be the aggregate amount of all Term A Loans made by the Banks less
all payments of principal thereof made by the Borrower, (c) the principal amount
owing by the Borrower in respect of the Term B Notes shall be the aggregate
amount of all Term B Loans made by the Banks less all payments of principal
thereof made by the Borrower, and (c) the principal amount owing by the Borrower
in respect of the Term C Notes shall be the aggregate amount of all Term C Loans
made by the Banks less all payments of principal thereof made by the Borrower.
Section 2.4 Interest Rates, Interest Payments and Default Interest.
Interest shall accrue and be payable on the Loans as follows:
(a) Each Loan shall bear interest on the unpaid principal amount
thereof at a rate per annum equal to the sum of (i) the Reference Rate, plus
(ii) the Applicable Margin for such Loan.
(b) Upon the occurrence of any Event of Default, each Loan shall,
at the option of the Majority Banks, bear interest until paid in full at a rate
per annum equal to the sum of the rate otherwise applicable to such Loan plus
2.0%. The Agent shall furnish the Borrower with prompt written notice of the
exercise of the option under the foregoing sentence.
(c) Interest shall be payable on the last day of each month;
provided, that interest under Section 2.4 (b) shall be payable on demand.
Section 2.5 Repayment; Payment to Holding Account.
(a) Revolving Loans. The Revolving Loans, together with all
accrued and unpaid interest thereon, shall be due and payable on the Termination
Date;
(b) Term A Loan. The Term A Loan, together with all accrued and
unpaid interest thereon, shall be due and payable on March 30, 2001;
(c) Term B Loan. The Term B Loan shall be payable as follows (a)
an installment of principal in the amount of $10,000,000 shall be due and
payable on March 30, 2001
and (b) an installment equal to all remaining principal thereon, and
all accrued and unpaid interest thereon, shall be due and payable on June 29,
2001;
(d) Term C Loan. The Term C Loan, together with all accrued and
unpaid interest thereon, shall be due and payable on June 29, 2001; and
(e) Payment to Holding Account. The Borrower shall pay to the
Holding Account on the Termination Date an amount equal to the aggregate face
amount of the Existing Letter of Credit.
Section 2.6 Mandatory and Optional Prepayments.
(a) Optional Prepayments. The Borrower may prepay Loans, in
whole or in part, at any time, without premium or penalty. Amounts paid (unless
following an acceleration or upon termination of the Revolving Commitments in
whole) or prepaid on Revolving Loans under this Section 2.6 may be reborrowed
upon the terms and subject to the conditions and limitations of this Agreement.
Amounts paid or prepaid on Term A Loan, Term B Loan or Term C Loan may not be
reborrowed. Amounts paid or prepaid on the Loans under this Section 2.6 shall
be for the account of each Bank in proportion to its share of Loans being
prepaid.
(b) Mandatory Prepayment of Revolving Loans.
(i) If at any time the Aggregate Revolving Outstandings exceed
the Aggregate Revolving Commitment Amounts (including but not limited to any
excess caused by a reduction in the Revolving Commitment Amounts pursuant to
Section 2.6(d) or Section 2.8 hereof), the Borrower shall repay the Revolving
Notes in an aggregate amount equal to such excess, which prepayment shall be
apportioned among the Banks’ Revolving Notes in accordance with their respective
Revolving Outstandings Percentages.
(ii) Revolving Loans shall be prepaid in accordance with the
provisions of Section 2.17(b).
(c) Mandatory Prepayments Due to Asset Sales and Securities
Issuances. On the date of the occurrence of any of the following events, the
Borrower shall prepay the Loans in an aggregate amount of 100% of the Net
Proceeds received in cash by the Borrower or any Subsidiary as a result of any
of the following events: (A) sales or other transfers of NFS Lease Accounts and
Norstan Canada Lease Accounts, and the related leases and equipment that are
authorized by Section 6.2(d) and (e); (B) sales of any assets of the Borrower or
any Subsidiary, other than sales of inventory in the ordinary course of business
or sales of obsolete or worn-out equipment (but this subsection 2.6(c) does not
authorize any such sales, which are subject to Section 6.2 hereof); or (C) any
public or private sale or offering by the Borrower of its capital stock or debt
securities. Any such prepayments shall be applied, in the following order by
the Agent to the Loans ratably to each Bank according to its Revolving
Commitment Percentage, Term A Loan Percentage, Term B Loan Percentage or Term C
Loan Percentage, as applicable: (i) first, to unpaid principal balance of the
Term A Loan, (ii) second, to the unpaid principal balance of the Term B Loan, in
the order of the maturities of the installments thereon, (iii) third, to the
unpaid principal balance of the Term C Loan, (iv) fourth, to the unpaid
principal balance of the Revolving Loans (other than the reimbursement
obligations with respect to the Existing Letter of Credit) and (v) fifth, to the
Holding Account in the amount of the aggregate face amount of the Existing
Letter of Credit.
(d) Permanent Reduction and Conditional Increase of Revolving
Commitments. If and only if, prior to March 30, 2001, the Term A Loans and Term
B Loans are prepaid by prepayments applied to such Loans pursuant to Section
2.6(c) in an amount not less than $15,000,000, then the Revolving Commitment
Amounts shall be increased ratably by an amount equal to ten percent of the
aggregate amount of such prepayments, provided, that, notwithstanding the
foregoing, the Revolving Commitment Amounts which are from time to time in
effect shall be reduced ratably by any prepayments applied to the Revolving
Loans or paid to the Holding Account pursuant to Section 2.6(c). Except as
provided in the preceding sentence, accounts prepaid pursuant to Section 2.6(c)
cannot be reborrowed.
(e) Borrowing Base Deficiency. If at any time a Borrowing Base
Deficiency exists, the Borrower shall immediately pay on the principal of the
Revolving Loans an amount equal to such Borrowing Base Deficiency. Amounts paid
on the Revolving Loans under this Section 2.6(e) shall be for the account of
each Bank in proportion to its share of outstanding Revolving Loans. If, after
paying all outstanding Revolving Loans, a Borrowing Base Deficiency still
exists, the Borrower shall pay into the Holding Account an amount equal to the
amount of the remaining Borrowing Base Deficiency.
(f) Excess Cash Flow. On or before 30 days after the end of the
Borrower’s fiscal quarters ending January 31, 2001 and April 30, 2001, the
Borrower shall prepay the Term C Loans in an amount equal to 50% of the Excess
Cash Flow for such fiscal quarter. Amounts paid on the Term C Loans under this
Section 2.6(f) shall be for the account of each Bank according to its Term C
Loan Percentage.
Section 2.7 Issuance and Renewal of Letter of Credit Drawings;
Repayments; Bank Participations.
(a) Existing Letter of Credit. The Existing Letter of Credit
shall be deemed to be issued and outstanding under this Agreement on the Closing
Date. U.S. Bank shall have no obligation to renew or extend the Existing Letter
of Credit or to issue any other letter of credit for the account of the
Borrower.
(b) Repayment. In the event of any drawing on the Existing
Letter of Credit, the Borrower shall reimburse U.S. Bank for such drawing by
12:00 noon (Minneapolis time) on the day such drawing is honored by U.S. Bank.
Any amount by which the Borrower has failed to reimburse U.S. Bank for the full
amount of such drawing under the Existing Letter of Credit by 12:00 noon
(Minneapolis time) on the date U.S. Bank honored such drawing, until reimbursed
from the proceeds of Unpaid Drawing Repayment Loans or out of funds available in
the Holding Account, is an “Unpaid Drawing.”
(c) Participations. Each Bank hereby purchases, and U.S. Bank
hereby sells to each Bank, an undivided fractional risk participation interest,
equal to such Bank’s Revolving Percentage of the Existing Letter of Credit, in
all drawings (including Unpaid Drawings) made and honored under the Existing
Letter of Credit, in U.S. Bank’s reimbursement rights with respect to drawings
(including Unpaid Drawings) made and honored under the Existing Letter of Credit
(as set forth herein and in any letter of credit application and reimbursement
agreement form executed by the Borrower in favor of U.S. Bank in connection with
the issuance of the Existing Letter of Credit). Upon receipt of the notice given
by the Agent pursuant to Section 2.2(b) hereof, each Bank shall pay to U.S. Bank
its pro rata share, based on its Revolving Commitment Percentage, of any Unpaid
Drawing, less the amount, if any, of the Unpaid Drawing Repayment Loan made by
such Bank with respect to such Unpaid Drawing, by not later than 3:00 p.m.
(Minneapolis time) on the day on which such Bank received such notice (or, in
the case of notices received after 1:00 p.m., Minneapolis time, is deemed to
have received such notice). If U.S. Bank has not received such participation
payment from such Bank by the time required in the preceding sentence such Bank
shall pay interest to U.S. Bank at the Federal Funds Rate on the amount of such
participation payment from the date on which such notice was received or was
deemed to have been received, as the case may be, to the date such participation
payment is received by U.S. Bank, such interest to be payable with the
remittance of such participation payment by such Bank. If U.S. Bank does not
receive such participation payment from such Bank by the next Business Day after
the date such notice was given (or was deemed given) by U.S. Bank to such Bank,
U.S. Bank shall be entitled to receive interest on such participation payment at
the Federal Funds Rate, without prejudice to U.S. Bank’s rights against such
Bank. The obligations of each Bank to make payment to U.S. Bank of such Bank’s
participation payments with respect to Unpaid Drawings pursuant to this Section
2.7(c), and U.S. Bank’s right to receive the same, shall be absolute and
unconditional under any and all circumstances and irrespective of any rights of
setoff, counterclaim, withholding, reduction or other defense to payment which
any Bank may have or have had against U.S. Bank, the Borrower or any other
Person.
(d) Indemnification of U.S. Bank. To the extent that U.S. Bank
is not reimbursed or indemnified by the Borrower or to the extent that any
amounts so received by U.S. Bank are required to be returned to the Borrower or
any statutory representative of the Borrower for any reason whatsoever, each
other Bank will reimburse and indemnify U.S. Bank on demand for and against its
pro rata share, based on its Revolving Commitment Percentage, of the amount of
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed upon, incurred by or asserted against U.S. Bank
in its capacity as such, acting pursuant hereto or in any way relating to or
arising out of this Agreement, the Existing Letter of Credit, or any action
taken or omitted to be taken by U.S. Bank under this Agreement or the Existing
Letter of Credit, including, without limitation, any amounts (herein called
“Disgorgement Amounts”) received by U.S. Bank from or on behalf of the Borrower
in reimbursement of an Unpaid Drawing which are rescinded in whole or in part or
which U.S. Bank may be otherwise required to pay or repay in whole or in part to
the Borrower, any statutory representative of the Borrower or creditors of the
Borrower acting as such statutory representative; provided, however, that except
with respect to Disgorgement Amounts, as to which the liability of each Bank to
reimbursement and indemnify U.S. Bank in accordance with its Revolving
Commitment Percentage shall be absolute and unconditional under all
circumstances whatsoever, no other Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from U.S. Bank’s own gross negligence
or willful misconduct. The obligations of the Banks to U.S. Bank under this
Section 2.7(d) shall survive the termination of this Agreement and the
expiration of the Existing Letters of Credit. Nothing in this Section 2.7(d)
shall be deemed to prejudice the right of any Bank to recover from U.S. Bank any
amounts paid by such Bank to U.S. Bank pursuant to this Section 2.7(d) in the
event that it is determined by a court of competent jurisdiction that the
payment with respect to the Existing Letter of Credit by U.S. Bank, in respect
of which payment was made by such Bank, constituted gross negligence or willful
misconduct on the part of U.S. Bank.
(e) Obligations Absolute. The obligation of the Borrower under
Section 2.7(b) to repay U.S. Bank for any amount drawn on the Existing Letter of
Credit and to repay the Banks for any Unpaid Drawing Repayment Loans shall be
absolute, unconditional and irrevocable, shall continue for so long as the
Existing Letter of Credit is outstanding notwithstanding any termination of this
Agreement, and shall be paid strictly in accordance with the terms of this
Agreement, under all circumstances whatsoever, including without limitation the
following circumstances:
(i) Any lack of validity or enforceability of the Existing
Letter of Credit;
(ii) The existence of any claim, setoff, defense or other right
which the Borrower may have or claim at any time against any beneficiary,
transferee or holder of the Existing Letter of Credit (or any Person for whom
any such beneficiary, transferee or holder may be acting), the Agent or any Bank
or any other Person, whether in connection with the Existing Letter of Credit,
this Agreement, the transactions contemplated hereby, or any unrelated
transaction; or
(iii) Any statement or any other document presented under the
Existing Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect whatsoever.
Neither the Agent nor any Bank nor officers, directors or employees of any
thereof shall be liable or responsible for, and the obligations of the Borrower
to the Agent and the Banks shall not be impaired by:
(A) The use which may be made of the Existing Letter of Credit or
for any acts or omissions of any beneficiary, transferee or holder thereof in
connection therewith;
(B) The validity, sufficiency or genuineness of documents, or of
any endorsements thereon, even if such documents or endorsements should, in
fact, prove to be in any or all respects invalid, insufficient, fraudulent or
forged;
(C) The acceptance by the Agent of documents that appear on their
face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary; or
(D) Any other action of the Agent in making or failing to make
payment under the Existing Letter of Credit if in good faith and in conformity
with U.S. or foreign laws, regulations or customs applicable thereto.
Notwithstanding the foregoing, the Borrower shall have a claim against U.S.
Bank, and U.S. Bank shall be liable to the Borrower, to the extent, but only to
the extent, of any direct, as opposed to consequential, damages suffered by the
Borrower which the Borrower proves were caused by the U.S. Bank's own willful
misconduct or gross negligence in determining whether documents presented under
the Existing Letter of Credit comply with the terms thereof.
Section 2.8 Optional Reduction of Revolving Commitment Amounts or
Termination of Revolving Commitments. The Borrower may, at any time, upon not
less than three Business Days prior written notice to the Banks, reduce the
Revolving Commitment Amounts, ratably, with any such reduction in a minimum
aggregate amount for all the Banks of $1,000,000, or, if more, in an integral
multiple of $500,000; provided, however, that the Borrower may not at any time
reduce the Aggregate Revolving Commitment Amounts below the Aggregate Revolving
Outstandings. The Borrower may, at any time when the Existing Letters of Credit
is no longer outstanding, upon not less than three Business Days prior written
notice to the Banks, terminate the Revolving Commitments in their entirety.
Upon termination of the Revolving Commitments pursuant to this Section, the
Borrower shall pay to the Agent for the account of the Banks the full amount of
all outstanding Advances, all accrued and unpaid interest thereon, all unpaid
Unused Revolving Commitment Fees accrued to the date of such termination, and
all other unpaid obligations of the Borrower to the Agent and the Banks
hereunder and shall pay into the Holding Account an amount equal to the
aggregate face amount of the Existing Letter of Credit.
Section 2.9 Unused Revolving Commitment Fees. The Borrower shall pay
to the Agent for the account of each Bank fees (the “Unused Revolving Commitment
Fees”) in an amount determined by applying a rate of one-quarter of one percent
(0.25%) per annum to the average daily Unused Revolving Commitment of such Bank
for the period from the Closing Date to the Termination Date. Such Unused
Revolving Commitment Fees are payable in arrears on each January 31, April 30,
July 31 and October 31 and on the Termination Date.
Section 2.10 Letter of Credit Fees. On January 31, 2001, the
Borrower shall pay to the Agent, for the account of the Banks, fees
(collectively, “Letter of Credit Fees”) with respect to the Existing Letter of
Credit in an amount equal to 2.5 percent of the original face amount of the
Existing Letter of Credit, provided, that, if, during the period from January
31, 2001 to January 31, 2002, the Existing Letter of Credit is cancelled without
being drawn, each Bank shall severally refund to the Borrower a portion of the
Letter of Credit Fee previously paid to such Bank by the Borrower equal to the
product of (i) the amount of the Letter of Credit Fee paid to such Bank
multiplied by (ii) a fraction, the numerator of which is the number of days
between (but not including) the day the Existing Letter of Credit is cancelled
and January 31, 2002 and the denominator of which is 365. Each Bank may set off
any refund of the Letter of Credit Fees contemplated by the forgoing sentence
against any amounts due and payable to such Bank on the date such refund is
payable. The Borrower shall pay to U.S. Bank for its own account, on demand,
all fees customarily charged by U.S. Bank with respect to the issuance, renewal,
amendment, administration or payment of the Existing Letter of Credit.
Section 2.11 Computation. Unused Revolving Commitment Fees
and interest on Loans shall be computed on the basis of actual days elapsed and
a year of 360 days.
Section 2.12 Certain Fees.
2.12(a) Agent Fee. The Borrower shall pay to the Agent, for its
separate account, fees (“Agent Fees”) as provided for in a separate letter
agreement between the Borrower and the Agent.
2.12(b) Borrowing Base Fee. If at anytime during any calendar month,
the Aggregate Revolving Outstandings exceeds the Borrowing Base (calculated
exclusive of the Borrowing Base Supplement) by any amount, the Borrower shall,
on or before the 10th day of the next following month, pay to the Agent for the
ratable benefit of the Banks a non-refundable fee in the amount of $2,000.00.
Section 2.13 Payments. Payments and prepayments of principal
of, and interest on, the Notes and all fees, expenses and other obligations
under this Agreement payable to the Agent or the Banks shall be made without
setoff or counterclaim in Immediately Available Funds not later than 1:00 P.M.
(Minneapolis time) on the dates called for under this Agreement and the Notes to
the Agent at its main office in Minneapolis, Minnesota. Funds received after
such time shall be deemed to have been received on the next Business Day. The
Agent will promptly distribute in like funds to each Bank its ratable share of
each such payment of principal, interest, Unused Revolving Commitment Fees and
Letter of Credit Fees received by the Agent for the account of the Banks.
Whenever any payment to be made hereunder or on the Revolving Notes shall be
stated to be due on a day which is not a Business Day, such payment shall be
made on the next succeeding Business Day and such extension of time, in the case
of a payment of principal, shall be included in the computation of any interest
on such principal payment.
Section 2.14 Revolving Commitment Ending Date. The
“Revolving Commitment Ending Date” is June 29, 2001.
Section 2.15 Use of Loan Proceeds. The Term A Loan, the
Term B Loan and Term C Loan shall each refinance a portion (equal to the
principal amount of such Loan) of the Existing Revolving Loans. The initial
Revolving Loans shall be used to refinance the Existing Revolving Loans and to
pay the fees, costs and expenses of the Agent and the Banks payable pursuant to
this Agreement. The proceeds of any subsequent Revolving Loans shall be used
for (i) repayment to U.S. Bank of Unpaid Drawings (any such Revolving Loan being
also referred to herein as an “Unpaid Drawing Repayment Loan”) and (ii) other
general corporate purposes of the Borrower. No part of the proceeds of any
Loans shall be used, directly or indirectly, to purchase or carry any margin
stock (as defined in Regulation U of the Board) or to extend credit to others
for the purpose of purchasing or carrying such margin stock.
Section 2.16 Capital Adequacy. In the event that any
Regulatory Change reduces or shall have the effect of reducing the rate of
return on any Bank’s capital or the capital of its parent corporation (by an
amount such Bank deems material) as a consequence of its Revolving Commitment
and/or its Loans and/or the Existing Letter of Credit or any Bank’s obligations
to make Revolving Loans to cover Letters of Credit to a level below that which
such Bank or its parent corporation could have achieved but for such Regulatory
Change (taking into account such Bank’s policies and the policies of its parent
corporation with respect to capital adequacy), then the Borrower shall, within
five days after written notice and demand from such Bank (with a copy to the
Agent), pay to such Bank additional amounts sufficient to compensate such Bank
or its parent corporation for such reduction. Any determination by such Bank
under this Section and any certificate as to the amount of such reduction given
to the Borrower by such Bank shall be final, conclusive and binding for all
purposes, absent manifest error.
Section 2.17 Collection of Accounts and Payments.
(a) Collection of Accounts and Payments; Collateral Accounts.
Prior to the Closing Date, the Borrower has established three post office boxes
maintained by the Bank (each, a “Lock Box”). From and after the Closing Date,
each Lock Box shall be under the sole dominion and control of the Agent for the
benefit of the Banks. The Borrower shall cause, and shall cause each Subsidiary
(other than Norstan Canada) to cause, all Account Debtors of the Borrower or
such Subsidiary to direct all monies, checks, notes, drafts or any other payment
relating to, or proceeds of, Accounts or other Collateral (individually, a
“Payment Item,” and collectively, “Payment Items”) to a Lock Box. When the
Borrower or any Subsidiary (other than Norstan Canada) (or any shareholders,
directors, officers, employees, agents or those Persons acting for or in concert
with the Borrower or such Subsidiary) shall receive or come into the possession
or control of any Payment Item or Payment Items, including without limitation
any Payment Item directed to a Lock Box, then, immediately upon receipt thereof,
except as otherwise permitted in a writing signed by the Agent, the Borrower,
such Subsidiary or other party shall deposit the same or cause the same to be
deposited, in kind in precisely the form in which such Payment Item was received
(with all Payment Items endorsed if necessary for collection) to a Lock Box or
deliver such Payment Items, so endorsed, to the Agent for deposit into a Lock
Box. All Payment Items deposited to any Lock Box will be transferred each
Business Day by the Agent from such Lock Box to a collateral account maintained
by the Agent for the ratable benefit of the Banks (the “Collateral Account”).
All Payment Items, both before and after deposit into the Collateral Account,
shall be the sole and exclusive property of the Agent for the ratable benefit of
the Banks.
(b) Distributions from Collateral Account. Each Business Day on
which Payment Items have been deposited into the Collateral Account (the
“Deposit Day”), the Agent shall apply the funds represented by the Payment Items
by automated clearing house transfer as follows: (a) first, to the Banks ratably
in accordance with their Revolving Commitment Percentages for application to the
principal outstanding upon the Revolving Loans, and (b) second, if no Event of
Default is continuing, to the Borrower; provided, that, if an Event of Default
is continuing, the Agent shall apply such funds to the Obligations in such order
of application deemed appropriate by the Majority Banks. Such transmittal shall
be effective one (1) day Business Day after the Deposit Day. In the event that
a Payment Item or Payment Items deposited in the Collateral Account are returned
uncollected, the Agent may debit any separate general or operating account
maintained with the Agent by the Borrower by an amount equal to the sum of such
returned or uncollected Payment Items or debit the Collateral Account, and, if
such returned or uncollected Payment Items are not satisfied by debit against
any separate general or operating account maintained with the Agent by the
Borrower, the Agent may seek direct reimbursement from the Borrower in an amount
or the Collateral Account equal to the sum of such returned or uncollected
Payment Items. The Borrower agrees to reimburse the Agent, for any and all
returned or uncollected Payment Items received by the Agent. If any returned or
uncollected Payment Items are not satisfied by a debit against the separate
general or operating accounts maintained with the Agent by the Borrower or by
direct reimbursement from the Borrower, the Agent may make an Advance under the
Revolving Commitments in an amount equal to the sum of the returned or
uncollected Payment Items. In the event that the Revolving Commitments shall
have been terminated, or if an Advance under the Revolving Commitments is not
made for any reason whatsoever, and to the extent that the Borrower has failed
to reimburse the Agent for such returned or uncollected Payment Items, the Banks
shall indemnify the Agent ratably from any liability pursuant to such returned
or uncollected Payment Items in accordance with Section 8.9.
(c) Fees and Expenses of Agent. The Borrower agrees to pay the
Agent any and all reasonable fees, costs and expenses, including without
limitation, the Agent’s customary fee for lock box account services, which the
Agent incurs in connection with the Lock Boxes and collection of any Payment
Item hereunder. As to Payment Items received by the Agent in currency other than
U.S. Dollars, the Secured Party may, in the Secured Party’s sole discretion,
convert such Payment Items to U.S. Dollars in accordance with its customary
practices for the purpose of application of such Payment Items in accordance
with the provisions hereof.
(d) Canadian Account. The Borrower shall cause Norstan Canada to
direct all proceeds from the sale of all Collateral owned by Norstan Canada to
an account (the "Canadian Account") maintained with Bank of Montreal. Such
account shall be an operating account for Norstan Canada from which it may draw
amounts necessary for its operations subject to the provisions and limitations
of this Agreement. Within fifteen days following execution and delivery of this
Agreement, the Borrower shall provide to the Agent a letter, in form and
substance acceptable to the Agent, signed by an authorized officer of the
Borrower addressed to the Bank of Montreal irrevocably authorizing such bank to
honor the instructions of the Agent with respect to disposition of amounts on
deposit in the Canadian Account. The Agent at any time may contact such bank to
verify the amount of the funds in the Canadian Account. After the occurrence of
an Event of Default, and during the continuance thereof, the Agent may instruct
such bank to forward to the Agent for deposit in the Collection Account all
amounts held in the Canadian Account.
(e) Effect of Security Agreement. The terms of this Section 2.17
shall apply notwithstanding anything to the contrary contained in the Security
Agreement of the Borrower.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 Conditions of Initial Loans. The making of the initial
Revolving Loans, the Term A Loans, the Term B Loans and the Term C Loans shall
be subject to the prior or simultaneous fulfillment of the following conditions:
(a) Documents. The Agent shall have received the following, in
form and substance acceptable to the Agent, in sufficient counterparts (except
for the Notes and the fee letter described in clause xxii below) for each Bank:
(i) A Revolving Note, a Term A Note, a Term B Note and a Term C
Note, drawn to the order of each Bank in the appropriate amount, executed by a
duly authorized officer (or officers) of the Borrower and dated the Closing
Date.
(ii) A Consent and Agreement of Guarantors in the form prescribed
by the Banks and dated the Closing Date, executed by a duly authorized officer
of such Guarantor
(iii) The Warrant Issuance Agreement and the Warrant Registration
Agreement, each in the form prescribed by the Banks and dated the Closing Date,
each duly executed by the Borrower.
(iv) A copy of the corporate resolution of the Borrower
authorizing the execution, delivery and performance of the Borrower Loan
Documents, certified as of the Closing Date by the Secretary or an Assistant
Secretary of the Borrower.
(v) An incumbency certificate showing the names and titles and
bearing the signatures of the officers of the Borrower authorized to execute the
Borrower Loan Documents and to request Revolving Loans hereunder, certified as
of the Closing Date by the Secretary or an Assistant Secretary of the Borrower
(vi) A copy of the Articles of Incorporation of the Borrower with
all amendments thereto, certified by the appropriate governmental official of
the jurisdiction of its incorporation as of a date acceptable to the Agent.
(vii) A certificate of good standing for the Borrower in the
jurisdiction of its incorporation and in any state where the nature of its
operation requires it to obtain authorization to do business as a foreign
corporation, certified by the appropriate governmental officials as of a date
acceptable to the Banks.
(viii) A copy of the bylaws of the Borrower, certified as of the
Closing Date by the Secretary or an Assistant Secretary of the Borrower.
(ix) A copy of the corporate resolution of each Guarantor
authorizing the execution, delivery and performance of the Guarantor’s Consent.
(x) An incumbency certificate for each Guarantor showing the
names and titles and bearing the signatures of the officers of such Guarantor
authorized to execute the Guarantor’s Consent, certified as of the Closing Date
by the Secretary or an Assistant Secretary of such Guarantor.
(xi) A copy of the Articles of Incorporation of each Guarantor
with all amendments thereto, certified by the appropriate governmental official
of the jurisdiction of its incorporation as of a date acceptable to the Agent.
(xii) A certificate of good standing for each Guarantor in the
jurisdiction of its incorporation and in any state in which the nature of its
operations requires it to obtain authorization to do business as a foreign
corporation, certified by the appropriate governmental officials as of a date
acceptable to the Agent.
(xiii) A copy of the bylaws of each Guarantor, certified as of the
Closing Date by the Secretary or an Assistant Secretary of such Guarantor.
(xiv) The Borrower shall furnished to the Agent a list, in a form
reasonably acceptable to the Agent, of all patents, trademarks and copyrights
owned by the Borrower or any Subsidiary and recorded with the U.S. Office of
Patents and Trademarks or U.S. Office of Copyrights, as applicable.
(xv) The Agent shall have received collateral assignment documents
in a form reasonably acceptable to the Agent, covering the security interest
granted to the Agent in the applicable Security Agreement in the patents,
trademarks and copyrights registered by the Borrower or any Subsidiary and
recordable with the U.S. Office of Patents and Trademarks or U.S. Office of
Copyrights, as applicable, duly executed by the Borrower or such Subsidiary.
(xvi) Insurance certificates in form and substance acceptable to the
Agent and listing the Agent as loss payee thereon and as additional insured,
indicating that the Borrower and each Subsidiary has obtained insurance of the
type specified in this Agreement and in the Security Agreements.
(xvii) A completed field survey and collateral audit by the Agent’s
examiners in form and substance acceptable to the Banks.
(xviii) An initial Borrowing Base Certificate, completed as of the
Closing Date and otherwise in form and substance acceptable to the Agent.
(xix) A certificate executed by a duly authorized officer of the
Borrower certifying that the agreements between NCI and Siemens, and between
certain affiliates of Siemens and Communications Networks, Inc have not been
amended or otherwise modified since copies of such agreements were previously
furnished to the Banks, that such agreements remain in full force and effect as
of the Closing Date, there exists no default or event of default under such
agreements and neither the Borrower nor any Subsidiary has received a notice of
termination of any such agreements.
(xx) [Reserved].
(xxi) [Reserved].
(xxii) A fee letter setting forth the Agent Fee, duly executed by
the Borrower.
(xxiii) Proper financing statements (Form UCC-1) executed and
suitable for filing under the Uniform Commercial Code for all jurisdictions as
may be necessary or, in the opinion of the Agent, desirable to perfect the Liens
created under the Security Agreements.
(xxiv) Completed UCC, tax lien and judgment and Canadian lien
searches for the Borrower and the Subsidiaries in such jurisdications deemed
appropriate by the Banks and otherwise satisfactory to the Banks demonstrating
that there are no Liens superior to the Liens of the Banks in the property of
the Borrower.
(xxv) A list in form and substance acceptable to the Banks showing
all locations where the Borrower or any Subsidiary stores any inventory or
equipment and the approximate value, on a cost basis, of all inventory and
equipment stored at such locations as of the Closing Date.
(xxvi) The Banks shall have confirmed that, upon the funding of the
Loans including the initial Revolving Loans, all accrued and unpaid interest
upon the existing revolving loans under the Existing Credit Agreement shall be
paid in full on the Closing Date, either from the proceeds of such Loans or from
cash furnished by the Borrower at Closing Date.
(b) Retention of Advisor. The Borrower shall have retained an
investment banker or other financial advisor reasonably acceptable to the Banks,
by one or more agreements reasonably acceptable to the Banks, for the purpose of
assisting the Borrower in developing a strategy to maximize the value of the
Borrower's assets and minimize the Obligations, by asset dispositions (including
identifying any non-strategic assets for divestiture), financing or re-financing
from other lenders or otherwise, and in any event including specific actions to
be taken to reduce the Obligations, the dates by which such actions are to be
completed, and the expected dollar amounts of such reductions (the
"Restructuring Plan"), and either such Restructuring Plan has been delivered to
the Banks or the Borrower and its advisor have set a date acceptable to the
Lenders for delivery of the Restructuring Plan.
(c) Amendment Fee. The Borrower shall have paid to the Agent for
the ratable benefit of the Banks a nonrefundable, amendment fee in the amount of
0.25% of the sum of the Aggregate Revolving Commitments, the Term A Loans, the
Term B Loans and the Term C Loans, which amount shall be fully earned.
(d) Opinion. The Borrower shall have requested Maslon, Edelman
Borman & Brand, its counsel, to prepare a written opinion, addressed to the
Banks and dated the Closing Date, covering matters acceptable to the Banks and
their counsel, and such opinion shall have been delivered to the Agent in
sufficient counterparts for each Bank.
(e) Compliance. The Borrower shall have performed and complied
with all agreements, terms and conditions contained in this Agreement required
to be performed or complied with by the Borrower prior to or simultaneously with
the Closing Date.
(f) Funding Reserve. As a condition to the making of the
initial Revolving Loan, the Borrower shall satisfy the requirements of
Section 2.1(a) with respect to the Funding Reserve.
(g) Other Matters. All corporate and legal proceedings relating
to the Borrower and the Guarantors and all instruments and agreements in
connection with the transactions contemplated by this Agreement shall be
satisfactory in scope, form and substance to the Agent, the Banks and their
special counsel, and the Agent shall have received all information and copies of
all documents, including records of corporate proceedings, as any Bank or such
special counsel may reasonably have requested in connection therewith, such
documents where appropriate to be certified by proper corporate or governmental
authorities.
(h) Fees and Expenses. The Agent shall have received for itself
and for the account of the Banks and PriceWaterhouse Coopers, as applicable, all
fees and other amounts due and payable by the Borrower on or prior to the
Closing Date, including the fees and expenses of the Agent, the Banks,
PriceWaterhouse Coopers or counsel to the Agent or the Banks payable pursuant to
Section 9.2.
Section 3.2 Conditions Precedent to all Loans. The making hereunder
of any Revolving Loans (including the initial Revolving Loans), Term A Loans,
Term B Loans and Term C Loans and the renewal of the Existing Letter of Credit
shall be subject to the fulfillment of the following conditions:
(a) Representations and Warranties. The representations and
warranties contained in Article IV shall be true and correct on and as of the
Closing Date and on the date of each Revolving Loan or the date of renewal of
the Existing Letter of Credit, with the same force and effect as if made on such
date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on the Closing Date and on the date of each Revolving
Loan or the date of renewal of the Existing Letter of Credit or will exist after
giving effect to the Revolving Loans made on such date or the date the Existing
Letter of Credit is renewed.
(c) Notices and Requests. In the case of Revolving Loans the
Agent shall have received the Borrower’s request for such Revolving Loans as
required under Section 2.2 (except as otherwise provided in Section 2.2 (b)).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement, to grant the
Revolving Commitments and to make the Loans hereunder, and to induce U.S. Bank
to renew the Existing Letter of Credit, the Borrower represents and warrants to
the Banks:
Section 4.1 Organization, Standing, Etc. The Borrower is a
corporation duly incorporated and validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to carry on its business as now conducted, to
enter into this Agreement and to issue the Notes and to perform its obligations
under the Borrower Loan Documents. Each Subsidiary is a corporation duly
incorporated and validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now conducted, to enter into the Loan
Documents to which it is a party and to perform its obligations under such Loan
Documents. Each of the Borrower and the Subsidiaries (a) holds all certificates
of authority, licenses and permits necessary to carry on its business as
presently conducted in each jurisdiction in which it is carrying on such
business, except where the failure to hold such certificates, licenses or
permits would not have a material adverse effect on the business, operations,
property, assets or condition, financial or otherwise, of the Borrower and the
Subsidiaries taken as a whole, and (b) is duly qualified and in good standing as
a foreign corporation in each jurisdiction in which the character of the
properties owned, leased or operated by it or the business conducted by it makes
such qualification necessary and the failure so to qualify would permanently
preclude the Borrower or such Subsidiary from enforcing its rights with respect
to any assets or expose the Borrower or such Subsidiary to any liability, which
in either case would be material to the Borrower and the Subsidiaries taken as a
whole.
Section 4.2 Authorization and Validity. The execution, delivery and
performance by the Borrower and each Subsidiary of the Loan Documents to which
it is a party have been duly authorized by all necessary corporate action by the
Borrower or such Subsidiary, and this Agreement constitutes, and the Notes and
other Loan Documents when executed will constitute, the legal, valid and binding
obligations of the Borrower or each Subsidiary party thereto, enforceable
against the Borrower or such Subsidiary in accordance with their respective
terms, subject to limitations as to enforceability which might result from
bankruptcy, insolvency, moratorium and other similar laws affecting creditors’
rights generally and subject to limitations on the availability of equitable
remedies.
Section 4.3 No Conflict; No Default. The execution, delivery and
performance by the Borrower or any Subsidiary of the Loan Documents to which it
is a party will not (a) violate any provision of any law, statute, rule or
regulation or any order, writ, judgment, injunction, decree, determination or
award of any court, governmental agency or arbitrator presently in effect having
applicability to the Borrower or such Subsidiary, (b) violate or contravene any
provision of the Articles of Incorporation, bylaws or other organizational
documents of the Borrower or such Subsidiary, or (c) result in a breach of or
constitute a default under any indenture, loan or credit agreement or any other
agreement, lease or instrument to which the Borrower or such Subsidiary is a
party (except for the transaction documents existing on the Closing Date between
NFS and Fleet) or by which it or any of its properties may be bound or result in
the creation of any Lien thereunder. Neither the Borrower nor any Subsidiary is
in default under or in violation of any such law, statute, rule or regulation,
order, writ, judgment, injunction, decree, determination or award or (except as
provided in the forgoing sentence) any such indenture, loan or credit agreement
or other agreement, lease or instrument in any case in which the consequences of
such default or violation could have a material adverse effect on the business,
operations, properties, assets or condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole.
Section 4.4 Government Consent. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority is required
on the part of the Borrower or any Subsidiary to authorize, or is required in
connection with the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, the Loan Documents to which it is
a party.
Section 4.5 Financial Statements and Condition. The Borrower’s
audited consolidated financial statements as at April 30, 2000 and its unaudited
financial statements as at October 28, 2000 as heretofore furnished to the
Banks, have been prepared in accordance with GAAP on a consistent basis (except
for year-end audit adjustments as to the interim statements) and fairly present
the financial condition of the Borrower and its Subsidiaries as at such dates
and the results of their operations and changes in financial position for the
respective periods then ended. As of the dates of such financial statements,
neither the Borrower nor any Subsidiary had any material obligation, contingent
liability, liability for taxes or long-term lease obligation which is not
reflected in such financial statements or in the notes thereto. Other than as
may have been previously disclosed to the Banks in writing, since October 28,
2000 there has been no material adverse change in the business, operations,
property, assets or condition, financial or otherwise, of the Borrower and its
Subsidiaries taken as a whole.
Section 4.6 Litigation. Except as disclosed in Schedule 4.6 hereto,
there are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Subsidiary or any
of their properties before any court or arbitrator, or any governmental
department, board, agency or other instrumentality which, if determined
adversely to the Borrower or such Subsidiary, would have a material adverse
effect on the business, operations, property or condition (financial or
otherwise) of the Borrower and the Subsidiaries taken as a whole or on the
ability of the Borrower or any Subsidiary to perform its obligations under the
Loan Documents.
Section 4.7 Environmental, Health and Safety Laws. Except as
disclosed on Schedule 4.7, there does not exist any violation by the Borrower or
any Subsidiary of any applicable federal, state or local law, rule or regulation
or order of any government, governmental department, board, agency or other
instrumentality relating to environmental, pollution, health or safety matters
which will or threatens to impose a material liability on the Borrower or a
Subsidiary or which would require a material expenditure by the Borrower or such
Subsidiary to cure. Except as disclosed on Schedule 4.7, neither the Borrower
nor any Subsidiary has received any notice to the effect that any part of its
operations or properties is not in material compliance with any such law, rule,
regulation or order or notice that it or its property is the subject of any
governmental investigation evaluating whether any remedial action is needed to
respond to any release of any toxic or hazardous waste or substance into the
environment, which non-compliance or remedial action could reasonably be
expected to have a material adverse effect on the business, operations,
properties, assets or condition (financial or otherwise) of the Borrower and its
Subsidiaries taken as a whole.
Section 4.8 ERISA. Each Plan complies with all material applicable
requirements of ERISA and the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and the Code setting forth
those requirements. No Reportable Event has occurred and is continuing with
respect to any Plan. All of the minimum funding standards applicable to such
Plans have been satisfied and there exists no event or condition which would
permit the institution of proceedings to terminate any Plan under Section 4042
of ERISA. The current value of the Plans’ benefits guaranteed under Title IV of
ERISA does not exceed the current value of the Plans’ assets allocable to such
benefits.
Section 4.9 Federal Reserve Regulations. Neither the Borrower nor
any Subsidiary is engaged principally or as one of its important activities in
the business of extending credit for the purpose of purchasing or carrying
margin stock (as defined in Regulation U of the Board). The value of all margin
stock owned by the Borrower does not constitute more than 25% of the value of
the assets of the Borrower.
Section 4.10 Title to Property; Leases; Liens;
Subordination. Each of the Borrower and the Subsidiaries has (a) good and
marketable title to its real properties and (b) good and sufficient title to, or
valid, subsisting and enforceable leasehold interest in, its other material
properties, including all real properties, other properties and assets, referred
to as owned by the Borrower and its Subsidiaries in the most recent financial
statement referred to in Section 4.5 (other than property disposed of since the
date of such financial statements in the ordinary course of business). None of
such properties owned by the Borrower or any Subsidiary is subject to a Lien,
except as allowed under Section 6.12. Neither the Borrower nor any Subsidiary
subordinated any of its rights under any obligation owing to it to the rights of
any other person.
Section 4.11 Taxes. Each of the Borrower and the
Subsidiaries has filed all federal, state and local tax returns required to be
filed and has paid or made provision for the payment of all taxes due and
payable pursuant to such returns and pursuant to any assessments made against it
or any of its property and all other taxes, fees and other charges imposed on it
or any of its property by any governmental authority (other than taxes, fees or
charges the amount or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of the Borrower). No
material tax Liens have been filed and no material claims are being asserted
with respect to any such taxes, fees or charges. The charges, accruals and
reserves on the books of the Borrower in respect of taxes and other governmental
charges are adequate and the Borrower knows of no proposed material tax
assessment against it or any Subsidiary or any basis therefor.
Section 4.12 Trademarks, Patents. Each of the Borrower and
the Subsidiaries possesses or has the right to use all of the patents,
trademarks, trade names, service marks and copyrights, and applications
therefor, and all technology, know-how, processes, methods and designs used in
or necessary for the conduct of its business, without known conflict with the
rights of others.
Section 4.13 Burdensome Restrictions. Neither the Borrower
nor any Subsidiary is a party to or otherwise bound by any indenture, loan or
credit agreement or any lease or other agreement or instrument or subject to any
charter, corporate or partnership restriction which would foreseeably have a
material adverse effect on the business, properties, assets, operations or
condition (financial or otherwise) of the Borrower or such Subsidiary or on the
ability of the Borrower or any Subsidiary to carry out its obligations under any
Loan Document.
Section 4.14 Force Majeure. Since the date of the most
recent financial statement referred to in Section 4.5, the business, properties
and other assets of the Borrower and the Subsidiaries have not been materially
and adversely affected in any way as the result of any fire or other casualty,
strike, lockout, or other labor trouble, embargo, sabotage, confiscation,
condemnation, riot, civil disturbance, activity of armed forces or act of God.
Section 4.15 Investment Company Act. Neither the Borrower
nor any Subsidiary is an “investment company” or a company “controlled” by an
investment company within the meaning of the Investment Company Act of 1940, as
amended.
Section 4.16 Public Utility Holding Company Act. Neither the
Borrower nor any Subsidiary is a “holding company” or a “subsidiary company” of
a holding company or an “affiliate” of a holding company or of a subsidiary
company of a holding company within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
Section 4.17 Retirement Benefits. Under Statement of
Financial Accounting Standard No. 106 of the Financial Accounting Standards
Board and the accounting rules with respect thereto, the present value of the
expected cost to the Borrower and the Subsidiaries of post-retirement medical
and insurance benefits with respect to employees, as estimated by the Borrower
in accordance with GAAP is not material.
Section 4.18 Full Disclosure. Subject to the following
sentence, neither the financial statements referred to in Section 4.5 nor any
other certificate, written statement, exhibit or report furnished by or on
behalf of the Borrower in connection with or pursuant to this Agreement contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements contained therein not misleading.
Certificates or statements furnished by or on behalf of the Borrower to the
Banks consisting of projections or forecasts of future results or events have
been prepared in good faith and based on good faith estimates and assumptions of
the management of the Borrower, and the Borrower has no reason to believe that
such projections or forecasts are not reasonable.
Section 4.19 Subsidiaries. Schedule 4.19 sets forth as of
the date of this Agreement a list of all Subsidiaries and the number and
percentage of the shares of each class of capital stock owned beneficially or of
record by the Borrower or any Subsidiary therein, and the jurisdiction of
incorporation of each Subsidiary. Except as otherwise indicated in
Schedule 4.19, all shares of each Subsidiary owned by the Borrower or by any
other Subsidiary are validly issued and fully paid and nonassessable.
Section 4.20 Registered Intellectual Property. The
collateral assignment documents furnished by the Borrower or any Subsidiary to
the Agent pursuant to Section 3.1(a)(xv) list all patents, trademarks and
copyrights registered by the Borrower or any Subsidiary and recorded with the
U.S. Office of Patents and Trademarks or U.S. Office of Copyrights, as
applicable.
ARTICLE V
AFFIRMATIVE COVENANTS
Until any obligation of the Banks hereunder to make the Loans, and any
obligation of U.S. Bank to renew the Existing Letters of Credit shall have
expired or been terminated and the Notes and all of the other Obligations have
been paid in full, and no amount is available to be drawn under the under the
Existing Letter of Credit, unless the Majority Banks shall otherwise consent in
writing:
Section 5.1 Financial Statements and Reports. The Borrower will
furnish to the Banks:
(a) As soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower, (i) the consolidated and
consolidating financial statements of the Borrower and the Subsidiaries
consisting of at least statements of operations, cash flows and shareholders’
equity and a consolidated balance sheet as at the end of such year, setting
forth in each case in comparative form corresponding figures from the previous
annual audit, and with respect to the consolidated statements, certified without
qualification by Arthur Andersen or other independent certified public
accountants of recognized national standing selected by the Borrower and
acceptable to the Agent, (ii) the consolidated financial statements of the
Borrower and the Subsidiaries consisting of at least statements of operations
and a consolidated balance sheet as at the end of such year, and (iii) a
statement of the Borrower’s Contingent Obligations as at the end of such fiscal
year.
(b) Together with the audited financial statements required under
Section 5.1 (a)(i), a statement by the accounting firm performing such audit to
the effect that it has reviewed this Agreement and that in the course of
performing its examination nothing came to its attention that caused it to
believe that any Default or Event of Default exists, or, if such Default or
Event of Default exists, describing its nature.
(c) As soon as available and in any event within 45 days after
the end of each month of the Borrower, (i) unaudited consolidated and
consolidating statements of operations for the Borrower and the Subsidiaries for
such month and for the year to date and cash flows for the period from the
beginning of such fiscal year to the end of such month and a consolidated
balance sheet of the Borrower as at the end of such month, setting forth in
comparative form (i) figures for the corresponding period for the preceding
fiscal year and (ii) figures for the corresponding period appearing in the
budgeted financial statements furnished by the Borrower to the Banks as of the
Closing Date, each accompanied by a certificate signed by the chief financial
officer of the Borrower stating that such financial statements present fairly
the financial condition of the Borrower and the Subsidiaries and that the same
have been prepared in accordance with GAAP.
(d) As soon as practicable and in any event within 45 days after
the end of each month of the Borrower, a statement signed by the chief financial
officer of the Borrower demonstrating in reasonable detail compliance (or
noncompliance, as the case may be) with Sections 6.8, 6.16, 6.18 and 6.19 as at
the end of such month and stating that as at the end of such month there did not
exist any Default or Event of Default or, if such Default or Event of Default
existed, specifying the nature and period of existence thereof and what action
the Borrower proposes to take with respect thereto.
(e) [Reserved].
(f) Immediately upon any officer of the Borrower becoming aware
of any Default or Event of Default, a notice describing the nature thereof and
what action the Borrower proposes to take with respect thereto.
(g) Immediately upon any officer of the Borrower becoming aware
of the occurrence, with respect to any Plan, of any Reportable Event or any
Prohibited Transaction, a notice specifying the nature thereof and what action
the Borrower proposes to take with respect thereto, and, when received, copies
of any notice from PBGC of intention to terminate or have a trustee appointed
for any Plan.
(h) Promptly upon the mailing or filing thereof, copies of all
financial statements, reports and proxy statements mailed to the Borrower’s
shareholders, and copies of all registration statements, periodic reports and
other documents filed with the Securities and Exchange Commission (or any
successor thereto) or any national securities exchange.
(i) Promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower or any Subsidiary
shall have sent to its stockholders.
(j) Promptly after the sending or filing thereof, copies of all
regular and periodic financial reports (including all Form 10-K and Form 10-Q
reports) which the Borrower or any Subsidiary shall file with the Securities and
Exchange Commission or any national securities exchange.
(k) [Reserved].
(l) As soon as practicable and in any event within 30 days after
the end of each month, a Borrowing Base Certificate signed by an appropriate
financial officer of the Borrower, reporting the Borrowing Base as of the last
day of the month just ended, and on the first Business Day of each week updated
information with respect to the gross amount of Accounts together with a
calculation of the amount available for borrowing, certified by an appropriate
financial officer of the Borrower.
(m) From time to time, such other information regarding the
business, operation and financial condition of the Borrower and the Subsidiaries
as any Bank may reasonably request.
Section 5.2 Corporate Existence. The Borrower will maintain, and
cause each Subsidiary to maintain, its corporate existence in good standing
under the laws of its jurisdiction of incorporation and its qualification to
transact business in each jurisdiction where failure so to qualify would
permanently preclude the Borrower or such Subsidiary from enforcing its rights
with respect to any material asset or would expose the Borrower or such
Subsidiary to any material liability; provided, however, that nothing herein
shall prohibit the merger or liquidation of any Subsidiary allowed under Section
6.1.
Section 5.3 Insurance. The Borrower shall maintain, and shall cause
each Subsidiary to maintain, with financially sound and reputable insurance
companies such insurance as may be required by law and such other insurance in
such amounts and against such hazards as is customary in the case of reputable
firms engaged in the same or similar business and similarly situated.
Section 5.4 Payment of Taxes and Claims. The Borrower shall file,
and cause each Subsidiary to file, all tax returns and reports which are
required by law to be filed by it and will pay, and cause each Subsidiary to
pay, before they become delinquent all taxes, assessments and governmental
charges and levies imposed upon it or its property and all claims or demands of
any kind (including but not limited to those of suppliers, mechanics, carriers,
warehouses, landlords and other like Persons) which, if unpaid, might result in
the creation of a Lien upon its property; provided that the foregoing items need
not be paid if they are being contested in good faith by appropriate
proceedings, and as long as the Borrower’s or such Subsidiary’s title to its
property is not materially adversely affected, its use of such property in the
ordinary course of its business is not materially interfered with and adequate
reserves with respect thereto have been set aside on the Borrower’s or such
Subsidiary’s books in accordance with GAAP.
Section 5.5 Inspection. The Borrower shall permit any Person
designated by the Agent or any Bank to visit and inspect any of the properties,
corporate books and financial records of the Borrower and the Subsidiaries, to
examine and to make copies of the books of accounts and other financial records
of the Borrower and the Subsidiaries, and to discuss the affairs, finances and
accounts of the Borrower and the Subsidiaries with, and to be advised as to the
same by, its officers at such reasonable times and intervals as the Agent or
such Bank may designate. So long as no Event of Default exists, such visits,
inspections, audits and examinations shall be at the expense of the Agent and
the Banks, but any such visits, inspections, audits and examinations shall be at
the expense of the Borrower if such visits, inspections, audits and examinations
(a) are made while any Event of Default is continuing, or (b) constitute the
quarterly audit of the Borrowing Base to be conducted by the Agent.
Section 5.6 Maintenance of Properties. The Borrower will maintain,
and cause each Subsidiary to maintain, its properties used or useful in the
conduct of its business in good condition, repair and working order, and
supplied with all necessary equipment, and make all necessary repairs, renewals,
replacements, betterments and improvements thereto, all as may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
Section 5.7 Books and Records. The Borrower will keep, and will
cause each Subsidiary to keep, adequate and proper records and books of account
in which full and correct entries will be made of its dealings, business and
affairs.
Section 5.8 Compliance. The Borrower will comply, and will cause
each Subsidiary to comply, in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject; provided, however, that failure so to comply shall not be a
breach of this covenant if such failure does not have, or is not reasonably
expected to have, a materially adverse effect on the properties, business,
prospects or condition (financial or otherwise) of the Borrower or such
Subsidiary and the Borrower or such Subsidiary is acting in good faith and with
reasonable dispatch to cure such noncompliance.
Section 5.9 Notice of Litigation. The Borrower will give prompt
written notice to the Agent of the commencement of any action, suit or
proceeding before any court or arbitrator or any governmental department, board,
agency or other instrumentality affecting the Borrower or any Subsidiary or any
property of the Borrower or a Subsidiary or to which the Borrower or a
Subsidiary is a party in which an adverse determination or result could have a
material adverse effect on the business, operations, property or condition
(financial or otherwise) of the Borrower and the Subsidiaries taken as a whole
or on the ability of the Borrower or any Subsidiary to perform its obligations
under this Agreement and the other Loan Documents, stating the nature and status
of such action, suit or proceeding.
Section 5.10 ERISA. The Borrower will maintain, and cause
each Subsidiary to maintain, each Plan in compliance with all material
applicable requirements of ERISA and of the Code and with all material
applicable rulings and regulations issued under the provisions of ERISA and of
the Code and will not and not permit any of the ERISA Affiliates to (a) engage
in any transaction in connection with which the Borrower or any of the ERISA
Affiliates would be subject to either a civil penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code, in either
case in an amount exceeding $50,000, (b) fail to make full payment when due of
all amounts which, under the provisions of any Plan, the Borrower or any ERISA
Affiliate is required to pay as contributions thereto, or permit to exist any
accumulated funding deficiency (as such term is defined in Section 302 of ERISA
and Section 412 of the Code), whether or not waived, with respect to any Plan in
an aggregate amount exceeding $100,000 or (c) fail to make any payments in an
aggregate amount exceeding $100,000 to any Multiemployer Plan that the Borrower
or any of the ERISA Affiliates may be required to make under any agreement
relating to such Multiemployer Plan or any law pertaining thereto.
Section 5.11 Environmental Matters; Reporting. The Borrower
will observe and comply with, and cause each Subsidiary to observe and comply
with, all laws, rules, regulations and orders of any government or government
agency relating to health, safety, pollution, hazardous materials or other
environmental matters to the extent non-compliance could result in a material
liability or otherwise have a material adverse effect on the Borrower and the
Subsidiaries taken as a whole. The Borrower will give the Agent prompt written
notice of any violation as to any environmental matter by the Borrower or any
Subsidiary and of the commencement of any judicial or administrative proceeding
relating to health, safety or environmental matters (a) in which an adverse
determination or result could result in the revocation of or have a material
adverse effect on any operating permits, air emission permits, water discharge
permits, hazardous waste permits or other permits held by the Borrower or any
Subsidiary which are material to the operations of the Borrower or such
Subsidiary, or (b) which will or threatens to impose a material liability on the
Borrower or such Subsidiary to any Person or which will require a material
expenditure by the Borrower or such Subsidiary to cure any alleged problem or
violation.
Section 5.12 Landlord Waivers. Upon the written request of
the Agent, the Borrower shall undertake its commercially reasonable best efforts
to obtain, and to cause its Subsidiaries that have granted security interests to
the Agent to obtain, the execution of landlord waivers in form and substance
acceptable to the Agent by the lessor with respect to any of the Borrower’s or
such Subsidiaries’ business premises (each, a “Lessor”), whereby each such
Lessor would, among other things, acknowledge the security interest in favor of
the Agent and the Banks in the Borrower’s or such Subsidiaries’ assets and agree
to allow the Agent and the Banks to have access to the leased premises in order
to enforce such security interest or protect such collateral. The foregoing
obligations of the Borrower are in addition to its obligations under Section 8
of the Security Agreements.
Section 5.13 Intercreditor Agreements. Upon the written
request by the Agent, the Borrower will undertake its commercially reasonable
best efforts to obtain the execution and delivery of (a) the Fleet Intercreditor
Agreement by Fleet, the Borrower and any Subsidiary party thereto and (b) the
LaSalle Intercreditor Agreement by LaSalle, the Borrower and any Subsidiary
party thereto.
Section 5.14 Restructuring Plan. The Borrower shall furnish
the completed Restructuring Plan to the Banks by the date specified pursuant to
Section 3.1(b), which Restructuring Plan shall: (i) contain the Borrower's and
its advisor's estimate of the value of the Borrower's assets, (ii) detail the
expected timing for implementation and completion of the Restructuring Plan and
the manner in which the Borrower proposes to operate its business during the
period through completion of the Restructuring Plan, and (iii) identify any
advisors, brokers or other professionals proposed to be retained by the Borrower
to implement the transactions contemplated by the Restructuring Plan.
Section 5.15 Canadian Perfection Instruments. Within 5 days
of any written request by the Agent or its counsel, the Borrower shall, or shall
cause any applicable Subsidiary to, execute and deliver to the Agent such
documents or instruments in a form prescribed by the Agent to perfect the
Agent’s security interest in any Collateral located in Canada or any province
thereof. In addition to its obligations under Section 9.2, the Borrower shall
pay upon demand the reasonable fees and expenses of counsel retained by the
Agent in Canada to prepare and record the documents and instruments referred to
in the forgoing sentence and to prepare any customary opinion letters reflecting
the perfection of the Agent’s security interests effected by such documents and
instruments.
ARTICLE VI
NEGATIVE COVENANTS
Until any obligation of the Banks hereunder to make the Loans, and any
obligation of U.S. Bank to renew the Existing Letters of Credit shall have
expired or been terminated and the Notes and all of the other Obligations have
been paid in full, and no amount is available to be drawn under the Existing
Letter of Credit, unless the Majority Banks shall otherwise consent in writing:
Section 6.1 Merger. The Borrower will not merge or consolidate or
enter into any analogous reorganization or transaction with any Person or
liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution)
or permit any Subsidiary to do any of the foregoing; provided, however, any
Subsidiary may be merged with or liquidated into the Borrower or any
wholly-owned Subsidiary (if the Borrower or such wholly-owned Subsidiary is the
surviving corporation).
Section 6.2 Sale of Assets. The Borrower will not, and will not
permit any Subsidiary to, sell, transfer, lease or otherwise convey all or any
substantial part of its assets except for:
(a) sales and leases of Inventory in the ordinary course of
business or ordinary course sales of obsolete or worn-out equipment;
(b) sales or transfers by a Subsidiary to the Borrower or a
wholly-owned subsidiary;
(c) [Reserved].
(d) sales or other transfers of (including the granting of
security interests in) NFS Lease Accounts and related leases, equipment and
servicing arrangements made by NFS or NCI in connection with the financing of
NFS Lease Accounts (and related NFS leases), subject to the following
conditions: (i) the Net Proceeds of such financing are applied pursuant to
Section 2.6(c), (ii) the terms of such financing are (A) without recourse to the
Borrower (except as provided in Section 6.13(d)) and (B) either without recourse
to NFS and NCI or with recourse to NFS only in an amount which does not exceed
20% of the amount of the financing with respect to such NFS leases (exclusive of
damages resulting from the gross negligence or willful misconduct of NFS or
breach of representations or warranties by NFS), (iii) the advance rate on such
NFS leases under such financing must be at least 80% of the total present value
of the rental streams under such NFS leases and (iv) no Event of Default is
continuing or would result therefrom; and
(e) sales or other transfers of (including the granting of
security interests in) Norstan Canada Lease Accounts and related leases and
equipment made by Norstan Canada in connection with the financing of Norstan
Canada Lease Accounts (and related Norstan Canada leases), subject to the
following conditions: (i) the terms of such financing are (A) without recourse
to the Borrower (except as provided in Section 6.13(d)) and (B) either without
recourse to Norstan Canada or with recourse to Norstan Canada only in an amount
which does not exceed 30% of the amount of the financing with respect to such
Norstan Canada leases (exclusive of damages resulting from the gross negligence
or willful misconduct of Norstan Canada or breach of representations or
warranties by Norstan Canada), (ii) the advance rate on such Norstan Canada
leases under such financing must be at least 80% of the total present value of
the rental streams under such Norstan Canada leases, (iii) the Net Proceeds of
any such financing are applied pursuant to Section 2.6(c) and (iv) no Event of
Default is continuing or would result therefrom.
Upon the consummation of any transaction of the type specified in
Sections 6.2(d) and (e) between NFS or Norstan Canada (as applicable) and a
financial institution, the Agent will execute and deliver to such financial
institution UCC-3 financing statements in form and substance reasonably
acceptable to such financial institution to partially release its security
interest in the property subject to such transaction, provided that the Agent
shall have no obligation to deliver any such release if such delivery is not
required pursuant to the Fleet Intercreditor Agreement, LaSalle Intercreditor
Agreement or other intercreditor agreement applicable to such transaction. The
Borrower will furnish to the Agent not less than 10 days' written notice prior
to the consummation of any transaction specified in Sections 6.2(d) and 6.2(e).
Section 6.3 Plans. The Borrower will not permit, and will not allow
any Subsidiary to permit, any event to occur or condition to exist which would
permit any Plan to terminate under any circumstances which would cause the Lien
provided for in Section 4068 of ERISA to attach to any assets of the Borrower or
any Subsidiary; and the Borrower will not permit the underfunded amount of Plan
benefits guaranteed under Title IV of ERISA to exceed $100,000.
Section 6.4 Change in Nature of Business. The Borrower will not, and
will not permit any Subsidiary to, make any material change in the nature of the
business of the Borrower or such Subsidiary, as carried on at the date hereof,
except for changes in business related to the communications and information
technology industries.
Section 6.5 Subsidiaries. After the date of this Agreement, the
Borrower will not, and will not permit any Subsidiary to, form or acquire any
corporation or limited liability company which would thereby become a
Subsidiary.
Section 6.6 Negative Pledges; Subsidiary Restrictions. The Borrower
will not, and will not permit any Subsidiary to, enter into any agreement, bond,
note or other instrument with or for the benefit of any Person other than the
Banks which would rohibit the Borrower or such Subsidiary from granting, or
otherwise limit the ability of the Borrower or such Subsidiary to grant, to the
Banks any Lien on any assets or properties of the Borrower or such Subsidiary
(except as may be provided in any documents evidencing or securing Indebtedness
incurred by NFS or Norstan Canada in connection with any financing of NFS Lease
Accounts and Norstan Canada Lease Accounts (and related leases) permitted under
Section 6.2, with respect to the NFS Lease Accounts and Norstan Canada Lease
Accounts so financed and any related service arrangements). The Borrower will
not permit any Subsidiary to place or allow any restriction, directly or
indirectly, on the ability of such Subsidiary to (a) pay dividends or any
distributions on or with respect to such Subsidiary’s capital stock or (b) make
loans or other cash payments to the Borrower.
Section 6.7 Restricted Payments. The Borrower will not make any
Restricted Payments.
Section 6.8 Capital Expenditures. The Borrower will not, and will
not permit any Subsidiary to, make Capital Expenditures in an amount exceeding,
on a consolidated basis in the following amounts for the following period: (a)
during the period from the Closing Date through January 31, 2001, $1,350,000,
(b) during the period from February 1, 2001 through April 20, 2001, $1,350,000
and (c) during the period from May 1, 2001 through June 30, 2001, $1,350,000.
Section 6.9 Subordinated Debt. The Borrower will not, and will not
permit any Subsidiary to, (a) make any scheduled payment of the principal of or
interest on any Subordinated Debt which would be prohibited by the terms of such
Subordinated Debt and any related subordination agreement; (b) directly or
indirectly make any prepayment on or purchase, redeem or defease any
Subordinated Debt or offer to do so (whether such prepayment, purchase or
redemption, or offer with respect thereto, is voluntary or mandatory); (c) amend
or cancel the subordination provisions applicable to any Subordinated Debt; (d)
take or omit to take any action if as a result of such action or omission the
subordination of such Subordinated Debt, or any part thereof, to the Obligations
might be terminated, impaired or adversely affected; or (e) omit to give the
Agent prompt notice of any notice received from any holder of Subordinated Debt,
or any trustee therefor, or of any default under any agreement or instrument
relating to any Subordinated Debt by reason whereof such Subordinated Debt might
become or be declared to be due or payable.
Section 6.10 Investments. The Borrower will not, and will
not permit any Subsidiary to, acquire for value, make, have or hold any
Investments, except:
(a) Investments existing on the date of this Agreement;
(b) Travel advances to management personnel and employees in the
ordinary course of business;
(c) Investments in readily marketable direct obligations issued
or guaranteed by the United States or any agency thereof and supported by the
full faith and credit of the United States;
(d) Certificates of deposit or bankers’ acceptances issued by any
commercial bank organized under the laws of the United States or any State
thereof which has (i) combined capital and surplus of at least $100,000,000, and
(ii) a credit rating with respect to its unsecured indebtedness from a
nationally recognized rating service that is satisfactory to the Agent;
(e) Commercial paper given the highest rating by a nationally
recognized rating service;
(f) Repurchase agreements relating to securities issued or
guaranteed as to principal and interest by the United States of America;
(g) Other readily marketable Investments in debt securities which
are reasonably acceptable to the Majority Banks;
(h) Any existing Investment by the Borrower or any Subsidiary in
the stock of any Subsidiary;
(i) Loans and advances by the Borrower in the ordinary course of
business (i) to NFS that do not exceed at any one time an aggregate of (A) prior
the consummation of any financing pursuant to Section 6.2(d) occurring after the
Closing Date, $9,000,000 and (B) from and after the consummation of any
financing pursuant to Section 6.2(d) occurring after the Closing Date,
$8,000,000; and (ii) to Norstan Canada to finance lease account receivables that
do not exceed at any one time an aggregate of $6,000,000; provided that, in each
case, no Event of Default is then continuing or would result therefrom;
(j) Loans and advances by the Borrower to any Subsidiary (other
than those specified in the forgoing paragraph (i)) made in the ordinary course
of business to finance the normal operations of such Subsidiary, provided that
no Event of Default is then continuing or would result therefrom;
(k) Indebtedness of any Subsidiary to the Borrower on account of
unpaid dividends owed by that Subsidiary to the Borrower;
(l) Loans to officers and employees of the Borrower or any
Subsidiary in the ordinary course of business (other than indebtedness of the
kind described in the following paragraph (m)) not exceeding at any one time an
aggregate amount of $1,350,000 as to the Borrower and all Subsidiaries combined;
(m) Indebtedness of employees to the Borrower arising under the
Borrower’s employee personal computer purchase program in the ordinary course of
business, so long as the aggregate amount of such Indebtedness outstanding at
any one time does not exceed $50,000;
(n) Advances in the form of progress payments, prepaid rent or
security deposits, each in the ordinary course of business;
(o) Investments comprised of leases of Inventory to, and
outstanding contracts with, customers of the Borrower or any Subsidiary, each in
the ordinary course of business;
(p) Such other investments of the Borrower exceeding $10,000 in
market value for each such investment, as are in existence on the date hereof
and listed in Schedule 6.10 hereto, but not any renewal or extension thereof
(except for renewals or extensions of Investments reasonably determined by the
Borrower to be not material in amount); and
(q) The Ericsson Acquisition, provided that each Bank has
consented in writing in advance in its sole discretion to the form and substance
of the Ericsson Acquisition Documents.
provided, however, that any Investments under clauses (c), (d), (e) or (f) above
shall mature within one year of the acquisition thereof by the Borrower or a
Subsidiary.
Section 6.11 Indebtedness. The Borrower will not, and will
not permit any Subsidiary to, incur, create, issue, assume or suffer to exist
any Indebtedness, except:
(a) The Obligations.
(b) Current Liabilities, other than for borrowed money, incurred
in the ordinary course of business.
(c) Indebtedness existing on the date of this Agreement and
disclosed on Schedule 6.11 hereto, but not including any extension or
refinancing thereof.
(d) Indebtedness secured by Liens permitted under Section 6.12
hereof.
(e) Indebtedness of the Borrower under lines of credit for
foreign exchange transactions and for wire transfers and daylight overdrafts.
(f) Indebtedness of NFS incurred in connection with any
financing of NFS Lease Accounts permitted under Section 6.2(d).
(g) Indebtedness of Norstan Canada incurred in connection with
any financing of Norstan Canada Lease Accounts permitted under Section 6.2(e).
(h) Indebtedness incurred by Norstan Canada for working capital
which is secured by the Existing Letter of Credit; provided that the aggregate
principal amount of such Indebtedness shall not exceed the aggregate face amount
of the Existing Letter of Credit.
(i) Subordinated Indebtedness and renewals thereof.
(j) Contingent Obligations permitted under Section 6.13.
(k) Indebtedness of any Subsidiary to the Borrower permitted by
Section 6.10.
(l) Indebtedness constituting seller financing incurred in
connection with the Ericsson Acquisition, provided that each Bank has consented
in writing in advance in its sole discretion to the form and substance of the
Ericsson Acquisition Documents.
Section 6.12 Liens. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist any Lien, or
enter into, or make any commitment to enter into, any arrangement for the
acquisition of any property through conditional sale, lease-purchase or other
title retention agreements, with respect to any property now owned or hereafter
acquired by the Borrower or a Subsidiary, except:
(a) Liens existing on the date of this Agreement and disclosed on
Schedule 6.12 hereto.
(b) Deposits or pledges to secure payment of workers’
compensation, unemployment insurance, old age pensions or other social security
obligations, in the ordinary course of business of the Borrower or a Subsidiary.
(c) Liens for taxes, fees, assessments and governmental charges
not delinquent or to the extent that payment therefor shall not at the time be
required to be made in accordance with the provisions of Section 5.4.
(d) Liens of carriers, warehousemen, mechanics and materialmen,
and other like Liens arising in the ordinary course of business, for sums not
due or to the extent that payment therefor shall not at the time be required to
be made in accordance with the provisions of Section 5.4.
(e) Liens incurred or deposits or pledges made or given in
connection with, or to secure payment of, indemnity, performance or other
similar bonds.
(f) Encumbrances in the nature of zoning restrictions, easements
and rights or restrictions of record on the use of real property and landlord’s
Liens under leases on the premises rented, which do not materially detract from
the value of such property or impair the use thereof in the business of the
Borrower or a Subsidiary.
(g) The interest of any lessor under any Capitalized Lease
entered into after the Closing Date or purchase money Liens on property acquired
after the Closing Date; provided, that, (i) the Indebtedness secured thereby is
otherwise permitted by this Agreement and (ii) such Liens are limited to the
property acquired and do not secure Indebtedness other than the related
Capitalized Lease Obligations or the purchase price of such property.
(h) Purchase money mortgages, liens, or security interests (which
term for purposes of this subsection shall include conditional sale agreements
or other title retention agreements and leases in the nature of title retention
agreements) upon or in property acquired after the date hereof, or mortgages,
liens or security interests existing in such property at the time of acquisition
thereof, or, in the case of any corporation which thereafter becomes a
Subsidiary, mortgages, liens or security interests upon or in its property,
existing at the time such corporation becomes a Subsidiary, provided that no
such mortgage, lien or security interest extends or shall extend to or cover any
property of the Borrower or any Subsidiary, as the case may be, other than the
property then being acquired and fixed improvements then or thereafter erected
thereon.
(i) Mortgages, liens, pledges and security interests created by
any Subsidiary as security for Indebtedness owing to the Borrower or to another
Subsidiary.
(j) Liens arising out of a judgment or judgments against the
Borrower or any Subsidiary for the payment of money in an aggregate amount not
exceeding $300,000 with respect to which an appeal is being prosecuted and a
stay of execution pending such appeal has been secured.
(k) Liens against the NFS Lease Accounts, Norstan Canada Lease
Accounts and related servicing arrangements securing any financing permitted
under Sections 6.2(d) or 6.2(e).
(l) Purchase money liens granted by NCI to Ericsson, Inc.
against inventory sold by Ericsson, Inc. or its affiliates to NCI, provided that
each Bank has consented in writing in advance in its sole discretion to the form
and substance of the Ericsson Acquisition Documents.
Section 6.13 Contingent Obligations. The Borrower will not,
and will not permit any Subsidiary to, be or become liable on any Contingent
Obligations except:
(a) Contingent Obligations existing on the date of this Agreement
and described on Schedule 6.13 hereto; and;
(b) The Borrower’s guaranty of the indemnity obligations of NFS
and Norstan Canada under any financing permitted to be incurred by NFS or
Norstan Canada under Section 6.2 and which indemnity obligations relate to
breaches of obligations, representations and warranties, failure to perfect
security interests and breaches of administration or other services to be
performed by NFS or Norstan Canada under any lease.
Section 6.14 Transactions with Affiliates. Except as
expressly permitted by this Agreement, the Borrower will not, nor will it permit
any of its Subsidiaries to, directly or indirectly: (a) make any Investment in
an Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
Property to an Affiliate if the aggregate book value of all properties
transferred, sold, leased, assigned or otherwise disposed of at any time would
exceed $100,000; (c) merge into or consolidate with or purchase or acquire
Property from an Affiliate; or (d) enter into any other transaction directly or
indirectly with or for the benefit of an Affiliate (including, without
limitation, guarantees and assumptions of obligations of an Affiliate); provided
that (x) any Affiliate who is an individual may serve as a director, officer or
employee of the Borrower or any of its Subsidiaries and receive reasonable
compensation for his or her services in such capacity and (y) the Borrower and
its Subsidiaries may enter into transactions (other than extensions of credit by
the Borrower or any of its Subsidiaries to an Affiliate) providing for the
leasing of Property, the rendering or receipt of services or the purchase or
sale of inventory and other Property in the ordinary course of business if the
monetary or business consideration arising therefrom would be substantially as
advantageous to the Borrower and its Subsidiaries as the monetary or business
consideration which would obtain in a comparable transaction with a Person not
an Affiliate.
Section 6.15 Intentionally Omitted.
Section 6.16 Minimum EBITDA. The Borrower will not permit
EBITDA, as of the last day of the Borrower’s fiscal months ended on or about the
following dates for such fiscal month, to be less than the following indicated
amounts:
Fiscal Month Ended On or About
--------------------------------------------------------------------------------
Minimum EBITDA
--------------------------------------------------------------------------------
December 31, 2000 ($250,000) January 31, 2001 ($150,000) February
28, 2001 $2,195,000 March 31, 2001 $2,359,000 April 30, 2001
$2,095,000 May 31, 2001 $1,659,000 June 30, 2001 $1,685,000
Section 6.17 [Reserved].
Section 6.18 Adjusted Leverage Ratio. The Borrower will not
permit the Adjusted Leverage Ratio, as of the last day of the Borrower’s fiscal
months ended on or about the following dates for such fiscal month, to be
greater than the following indicated amounts:
Fiscal Month Ended On or About
--------------------------------------------------------------------------------
Maximum Adjusted Leverage Ratio
--------------------------------------------------------------------------------
December 31, 2000 12.1 to 1.0 January 31, 2001 14.0 to 1.0
February 28, 2001 13.7 to 1.0 March 31, 2001 13.2 to 1.0 April 30,
2001 12.9 to 1.0 May 31, 2001 12.9 to 1.0 June 30, 2001 13.0 to 1.0
Section 6.19 Interest Coverage Ratio. The Borrower will not
permit the Interest Coverage Ratio, as of the last day of the Borrower’s fiscal
months ended on or about the following dates for such fiscal month, to be less
than the following indicated amounts:
Fiscal Month Ended On or About
--------------------------------------------------------------------------------
Minimum Interest Coverage Ratio
--------------------------------------------------------------------------------
December 31, 2000 (0.3) to 1.0 January 31, 2001 (0.3) to 1.0
February 28, 2001 3.9 to 1.0 March 31, 2001 3.6 to 1.0 April 30,
2001 4.2 to 1.0 May 31, 2001 3.5 to 1.0 June 30, 2001 2.8 to 1.0
Section 6.20 Loan Proceeds. The Borrower will not, and will
not permit any Subsidiary to, use any part of the proceeds of any Loan directly
or indirectly, and whether immediately, incidentally or ultimately, (a) to
purchase or carry margin stock (as defined in Regulation U of the Board) or to
extend credit to others for the purpose of purchasing or carrying margin stock
or to refund Indebtedness originally incurred for such purpose or (b) for any
purpose which entails a violation of, or which is inconsistent with, the
provisions of Regulations G, U or X of the Board.
Section 6.21 Ericsson Documents. The Borrower will not
default under any Ericsson Acquisition Document, nor agree to any amendment,
modification, cancellation, or termination of any Ericsson Acquisition Document.
Section 6.22 Inventory Value. As of any date of
determination, the Borrower will not, and will not permit any Subsidiary to,
permit any Inventory of the Borrower or any Subsidiary having an aggregate value
at cost in excess of 30% of the aggregate value at cost of all of the Inventory
of the Borrower and the Subsidiaries to be stored at a location other than the
Primary Distribution Facilities.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default. The occurrence of any one or more of
the following events shall constitute an Event of Default:
(a) The Borrower shall fail to make when due, whether by
acceleration or otherwise, any payment of principal of or interest on any Note
or any other Obligation required to be made to the Agent or any Bank pursuant to
this Agreement.
(b) Any representation or warranty made by or on behalf of the
Borrower, any Subsidiary or any Guarantor in this Agreement or any other Loan
Document or by or on behalf of the Borrower, any Subsidiary or any Guarantor in
any certificate, statement, report or document herewith or hereafter furnished
to any Bank or the Agent pursuant to this Agreement or any other Loan Document
shall prove to have been false or misleading in any material respect on the date
as of which the facts set forth are stated or certified.
(c) The Borrower shall fail to comply with Sections 2.17, 5.2,
5.3, 5.12, 5.13, 5.14 or 5.15 hereof, or any Section of Article VI hereof.
(d) The Borrower shall fail to comply with any other agreement,
covenant, condition, provision or term contained in this Agreement (other than
those hereinabove set forth in this Section 7.1) and such failure to comply
shall continue for 30 calendar days after whichever of the following dates is
the earliest: (i) the date the Borrower gives notice of such failure to the
Banks, (ii) the date the Borrower should have given notice of such failure to
the Banks pursuant to Section 5.1, or (iii) the date the Agent or any Bank gives
notice of such failure to the Borrower.
(e) The Borrower, any Subsidiary or any Guarantor shall become
insolvent or shall generally not pay its debts as they mature or shall apply
for, shall consent to, or shall acquiesce in the appointment of a custodian,
trustee or receiver of the Borrower, such Subsidiary or such Guarantor or for a
substantial part of the property thereof or, in the absence of such application,
consent or acquiescence, a custodian, trustee or receiver shall be appointed for
the Borrower, a Subsidiary or a Guarantor or for a substantial part of the
property thereof and shall not be discharged within 30 days, or the Borrower,
any Subsidiary or a Guarantor shall make an assignment for the benefit of
creditors.
(f) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by or
against the Borrower, a Subsidiary or any Guarantor, and, if instituted against
the Borrower, a Subsidiary or any Guarantor, shall have been consented to or
acquiesced in by the Borrower, such Subsidiary or such Guarantor, or shall
remain undismissed for 30 days, or an order for relief shall have been entered
against the Borrower, such Subsidiary or such Guarantor.
(g) Any dissolution or liquidation proceeding not permitted by
Section 6.1 shall be instituted by or against the Borrower or a Subsidiary or
any dissolution or liquidation proceeding shall be instituted by or against any
Guarantor, and, if instituted against the Borrower, any Subsidiary or any
Guarantor, shall be consented to or acquiesced in by the Borrower, such
Subsidiary or such Guarantor or shall remain for 45 days undismissed.
(h) A judgment or judgments for the payment of money in excess of
the sum of $300,000 in the aggregate shall be rendered against the Borrower or a
Subsidiary and the Borrower or such Subsidiary shall not discharge the same or
provide for its discharge in accordance with its terms, or procure a stay of
execution thereof, prior to any execution on such judgment by such judgment
creditor, within 30 days from the date of entry thereof, and within said period
of 30 days, or such longer period during which execution of such judgment shall
be stayed, appeal therefrom and cause the execution thereof to be stayed during
such appeal.
(i) The maturity of any material Indebtedness of the Borrower
(other than Indebtedness under this Agreement and any Indebtedness existing on
the Closing Date of NFS to Fleet) or a Subsidiary shall be accelerated by reason
of default, or the Borrower or a Subsidiary shall fail to pay any such material
Indebtedness when due (after the lapse of any applicable grace period) or, in
the case of such Indebtedness payable on demand, when demanded (after the lapse
of any applicable grace period), or any event shall occur or condition shall
exist shall continue for more than the period of grace, if any, applicable
thereto and shall have the effect of causing, or permitting the holder of any
such Indebtedness or any trustee or other Person acting on behalf of such holder
to cause, such material Indebtedness to become due prior to its stated maturity
or to realize upon any collateral given as security therefor. For purposes of
this Section, Indebtedness of the Borrower or a Subsidiary shall be deemed
“material” if it exceeds $1,000,000 as to any item of Indebtedness or in the
aggregate for all items of Indebtedness with respect to which any of the events
described in this Section 7.1(i) has occurred.
(j) Any execution or attachment shall be issued whereby any
substantial part of the property of the Borrower or any Subsidiary 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.
(k) Any Guarantor shall repudiate or purport to revoke its
Guaranty, or any Guaranty for any reason shall cease to be in full force and
effect as to the Guarantor executing and delivering the same or shall be
judicially declared null and void as to such Guarantor.
(l) 50% or more of any class of the capital stock of the
Borrower shall come to be owned by a single Person, or by two or more Persons
acting together in holding such stock for a common purpose.
(m) The Borrower shall cease to be the sole shareholder of the
stock of any Guarantor.
(n) Any distribution agreement pursuant to which the Borrower or
any Subsidiary sells, installs and/or services new private communications
systems for Siemens is canceled or terminates and is not renewed; provided,
however, that an Event of Default shall not exist under this Section 7.1(n) if
and for so long as both the Borrower and Siemens are negotiating for a renewal
of such distribution agreement in good faith and with reasonable diligence.
(o) Any Security Document shall, at any time, cease to be in full
force and effect or shall be judicially declared null and void, or the validity
or the enforceability thereof shall be contested by the Borrower or any
Guarantor.
(p) Any default or event of default (however denominated) shall
occur under any Security Document or any Warrant Document..
(q) The maturity of any Indebtedness existing on the date hereof
of NFS to Fleet shall be accelerated by reason of default, or NFS shall fail to
pay any such Indebtedness when due (after the lapse of any applicable grace
period), or any event shall occur or condition shall exist (other than an event
of default existing on the Closing Date arising due to any act or omission
occurring on or prior to the Closing Date) shall continue for more than the
period of grace, if any, applicable thereto and shall have the effect of
permitting the holder of any such Indebtedness to cause such Indebtedness to
become due prior to its stated maturity, or the holder of such Indebtedness
shall take any action (other than acceleration) to realize upon any collateral
given as security therefor.
Section 7.2 Remedies. If (a) any Event of Default described in
Sections 7.1(e), (f) or (g) shall occur with respect to the Borrower, the
Revolving Commitments shall automatically terminate (except as provided in
Section 2.2(b)) and the Notes and all other Obligations shall automatically
become immediately due and payable, the Borrower shall without demand pay into
the Holding Account an amount equal to the aggregate face amount of the Existing
Letters of Credit; or (b) any other Event of Default shall occur and be
continuing, then, upon receipt by the Agent of a request in writing from the
Majority Banks, the Agent shall (i) declare the Revolving Commitments
terminated, whereupon the Revolving Commitments shall terminate (except as
provided in Section 2.2(b)), (ii) declare the outstanding unpaid principal
balance of the Notes, the accrued and unpaid interest thereon and all other
Obligations to be forthwith due and payable, whereupon the Notes, all accrued
and unpaid interest thereon and all such Obligations shall immediately become
due and payable, in each case without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived, anything in this
Agreement or in the Notes to the contrary notwithstanding, (iii) demand that the
Borrower pay into the Holding Account an amount equal to the aggregate face
amount of the Existing Letters of Credit, whereupon the Borrower shall pay such
amount, (v) exercise all rights and remedies under any of the Loan Documents,
and (vi) enforce all rights and remedies under any applicable law.
Section 7.3 Offset. In addition to the remedies set forth in Section
7.2, upon the occurrence of any Event of Default and thereafter while the same
be continuing, the Borrower hereby irrevocably authorizes each Bank to set off
any Obligations owed to such Bank against all deposits and credits of the
Borrower with, and any and all claims of the Borrower against, such Bank. Such
right shall exist whether or not such Bank shall have made any demand hereunder
or under any other Loan Document, whether or not the Obligations, or any part
thereof, or deposits and credits held for the account of the Borrower is or are
matured or unmatured, and regardless of the existence or adequacy of any
collateral, guaranty or any other security, right or remedy available to such
Bank or the Banks. Each Bank agrees that, as promptly as is reasonably possible
after the exercise of any such setoff right, it shall notify the Borrower of its
exercise of such setoff right; provided, however, that the failure of such Bank
to provide such notice shall not affect the validity of the exercise of such
setoff rights. Nothing in this Agreement shall be deemed a waiver or
prohibition of or restriction on any Bank to all rights of banker’s Lien, setoff
and counterclaim available pursuant to law.
ARTICLE VIII
THE AGENT
The following provisions shall govern the relationship of the Agent
with the Banks.
Section 8.1 Appointment and Authorization. Each Bank appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such respective powers under the Loan Documents as are delegated to the Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto. Neither the Agent nor any of its directors, officers or employees
shall be liable for any action taken or omitted to be taken by it under or in
connection with the Loan Documents, except for its own gross negligence or
willful misconduct. The Agent shall act as an independent contractor in
performing its obligations as Agent hereunder and nothing herein contained shall
be deemed to create any fiduciary relationship among or between the Agent, the
Borrower or the Banks.
Section 8.2 Note Holders. The Agent may treat the payee of any Note
as the holder thereof until written notice of transfer shall have been filed
with it, signed by such payee and in form satisfactory to the Agent.
Section 8.3 Consultation With Counsel. The Agent may consult with
legal counsel selected by it with reasonable care and shall not be liable for
any action taken or suffered in good faith by it in accordance with the advice
of such counsel.
Section 8.4 Loan Documents. The Agent shall not be under a duty to
examine or pass upon the validity, effectiveness, genuineness or value of any of
the Loan Documents or any other instrument or document furnished pursuant
thereto, and the Agent shall be entitled to assume that the same are valid,
effective and genuine and what they purport to be.
Section 8.5 U.S. Bank and Affiliates. With respect to its Revolving
Commitment and the Loans made by it, U.S. Bank shall have the same rights and
powers under the Loan Documents as any other Bank and may exercise the same as
though it were not the Agent consistent with the terms thereof, and U.S. Bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrower as if it were not the Agent.
Section 8.6 Action by Agent. Except as may otherwise be expressly
stated in this Agreement, the Agent shall be entitled to use its discretion with
respect to exercising or refraining from exercising any rights which may be
vested in it by, or with respect to taking or refraining from taking any action
or actions which it may be able to take under or in respect of, the Loan
Documents. The Agent shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Majority Banks, and such instructions shall be binding upon
all holders of Notes; provided, however, that the Agent shall not be required to
take any action which exposes the Agent to personal liability or which is
contrary to the Loan Documents or applicable law. The Agent shall incur no
liability under or in respect of any of the Loan Documents by acting upon any
notice, consent, certificate, warranty or other paper or instrument believed by
it to be genuine or authentic or to be signed by the proper party or parties and
to be consistent with the terms of this Agreement.
Section 8.7 Credit Analysis. Each Bank has made, and shall continue
to make, its own independent investigation or evaluation of the operations,
business, property and condition, financial and otherwise, of the Borrower in
connection with entering into this Agreement and has made its own appraisal of
the creditworthiness of the Borrower. Except as explicitly provided herein, the
Agent has no duty or responsibility, either initially or on a continuing basis,
to provide any Bank with any credit or other information with respect to such
operations, business, property, condition or creditworthiness, whether such
information comes into its possession on or before the first Event of Default or
at any time thereafter.
Section 8.8 Notices of Event of Default, Etc. In the event that the
Agent shall have acquired actual knowledge of any Event of Default or Default,
the Agent shall promptly give notice thereof to the Banks.
Section 8.9 Indemnification. Each Bank agrees to indemnify the
Agent, as Agent (to the extent not reimbursed by the Borrower), ratably
according to such Bank’s share of the Aggregate Revolving Commitment Amounts
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on or incurred by the Agent in
any way relating to or arising out of the Loan Documents or any action taken or
omitted by the Agent under the Loan Documents, provided that no Bank shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent’s gross negligence or willful misconduct. No payment by any Bank
under this Section shall relieve the Borrower of any of its obligations under
this Agreement.
Section 8.10 Payments and Collections. All funds received by
the Agent in respect of any payments made by the Borrower on the Term A Notes
shall be distributed forthwith by the Agent among the Banks, in like currency
and funds as received, ratably according to each Bank's Term A Loan Percentage.
All funds received by the Agent in respect of any payments made by the Borrower
on the Term B Notes shall be distributed forthwith by the Agent among the Banks,
in the currency and funds as received, ratably according to each Bank's Term B
Loan Percentage. All funds received by the Agent in respect of any payments
made by the Borrower on the Term C Notes shall be distributed forthwith by the
Agent among the Banks, in the currency and funds as received, ratably according
to each Bank's Term C Loan Percentage. All funds received by the Agent in
respect of (a) any payments made by the Borrower on the Revolving Notes, (b) any
reimbursement payments made by the Borrower with respect to Unpaid Drawings that
were funded by Unpaid Drawing Repayment Loans and/or participation payments made
by the Banks under Section 2.7(b), and (c) any payments by the Bank of Revolving
Commitment Fees, shall be distributed forthwith by the Agent among the Banks, in
like currency and funds as received, ratably according to each Bank’s Revolving
Outstandings Percentage. All funds received by the Agent in respect of any
payments made by the Borrower for Letter of Credit Fees shall be distributed
forthwith by the Agent among the Banks, in like currency and funds as received,
ratably according to each Bank’s Revolving Commitment. After any Event of
Default has occurred, all funds received by the Agent, whether as payments by
the Borrower or as realization on collateral or on any Guaranties, shall (except
as may otherwise be required by law) be distributed by the Agent in the
following order: (a) first to the Agent or any Bank who has incurred
unreimbursed costs of collection with respect to any Obligations hereunder,
ratably to the Agent and each Bank in the proportion that the costs incurred by
the Agent or such Bank bear to the total of all such costs incurred by the Agent
and all Banks; (b) next to the Agent for the account of the Banks (in accordance
with their respective Revolving Percentages) for application on the Notes and
Unpaid Drawings; (c) next to the Agent for the account of the Banks (in
accordance with their respective Revolving Outstandings Percentages) for any
unpaid Revolving Commitment Fees owing by the Borrower hereunder; (d) next to
the Agent for the account of the Banks (in accordance with their respective
Revolving Commitment Percentages) for any unpaid Letter of Credit Fees owing by
the Borrower; and (e) last to the Agent to be held in the Holding Account to
cover the Existing Letter of Credit. The provisions of this Section 8.10 shall
not apply to payments of the issuance, amendment, drawing and other fees and
out-of-pocket expenses of U.S. Bank under Section 2.10, and the Agent Fee under
Section 2.12, respectively.
Section 8.11 Sharing of Payments. If any Bank shall receive
and retain any payment, voluntary or involuntary, whether by setoff, application
of deposit balance or security, or otherwise, in respect of the Obligations
owing to such Bank under this Agreement or the Notes in excess of such Bank’s
share, as determined under this Agreement, of the Obligations then due and
payable to the Banks under this Agreement, then such Bank shall purchase from
the other Banks for cash and at face value and without recourse, such
participation in the Notes held by such other Banks as shall be necessary to
cause such excess payment to be shared ratably as aforesaid with such other
Banks; provided, that if such excess payment or part thereof is thereafter
recovered from such purchasing Bank, the related purchases from the other Banks
shall be rescinded ratably and the purchase price restored as to the portion of
such excess payment so recovered, but without interest. Subject to the
participation purchase obligation above, each Bank agrees to exercise any and
all rights of setoff, counterclaim or banker’s lien first fully against any
Notes and participations therein held by such Bank, next to any other
Indebtedness of the Borrower to such Bank arising under or pursuant to this
Agreement and to any participations held by such Bank in Obligations of the
Borrower arising under or pursuant to this Agreement, and only then to any other
Obligations of the Borrower to such Bank.
Section 8.12 Advice to Banks. The Agent shall forward to the
Banks copies of all notices, financial reports and other communications received
hereunder from the Borrower by it as Agent, excluding, however, notices, reports
and communications which by the terms hereof are to be furnished by the Borrower
directly to each Bank.
Section 8.13 Resignation. If at any time U.S. Bank shall
deem it advisable, in its sole discretion, it may submit to each of the Banks
and the Borrower a written notification of its resignation as Agent under this
Agreement, such resignation to be effective upon the appointment of a successor
Agent, but in no event later than 30 days from the date of such notice. Upon
submission of such notice, the Majority Banks may appoint a successor Agent.
Section 8.14 Defaulting Bank.
(a) Remedies Against a Defaulting Bank. In addition to the
rights and remedies that may be available to the Agent or the Borrower under
this Agreement or applicable law, if at any time a Bank is a Defaulting Bank
such Defaulting Bank's right to participate in the administration of the Loans,
this Agreement and the other Loan Documents, including without limitation, any
right to vote in respect of, to consent to or to direct any action or inaction
of the Agent or to be taken into account in the calculation of the Majority
Banks, shall be suspended while such Bank remains a Defaulting Bank. If a Bank
is a Defaulting Bank because it has failed to make timely payment to the Agent
of any amount required to be paid to the Agent hereunder (without giving effect
to any notice or cure periods), in addition to other rights and remedies which
the Agent or the Borrower may have under the immediately preceding provisions or
otherwise, the Agent shall be entitled (i) to collect interest from such
Defaulting Bank on such delinquent ayment for the period from the date on which
the payment was due until the date on which the payment is made at the Federal
Funds Rate, (ii) to withhold or setoff and to apply in satisfaction of the
defaulted payment and any related interest, any amounts otherwise payable to
such Defaulting Bank under this Agreement or any other Loan Document until such
defaulted payment and related interest has been paid in full and such default no
longer exists and (iii) to bring an action or suit against such Defaulting Bank
in a court of competent jurisdiction to recover the defaulted amount and any
related interest. Any amounts received by the Agent in respect of a Defaulting
Bank's Loans shall not be paid to such Defaulting Bank and shall be held
uninvested by the Agent and either applied against the purchase price of such
Loans under the following subsection (b) or paid to such Defaulting Bank upon
the default of such Defaulting Bank being cured.
(b) Purchase from Defaulting Bank. Any Bank that is not a
Defaulting Bank shall have the right, but not the obligation, in its sole
discretion, to acquire all of a Defaulting Bank's Commitments. If more than one
Bank exercises such right, each such Bank shall have the right to acquire such
proportion of such Defaulting Bank's Commitments on a pro rata basis. Upon any
such purchase, the Defaulting Bank's interest in its Loans and its rights
hereunder (but not its liability in respect thereof or under the Loan Documents
or this Agreement to the extent the same relate to the period prior to the
effective date of the purchase) shall terminate on the date of purchase, and the
Defaulting Bank shall promptly execute all documents reasonably requested to
surrender and transfer such interest to the purchaser. The purchase price for
the Commitments of a Defaulting Bank shall be equal to the amount of the
principal balance of the Loans outstanding and owed by the Borrower to the
Defaulting Bank. The purchaser shall pay to the Defaulting Bank in Immediately
Available Funds on the date of such purchase the principal of and accrued and
unpaid interest and fees on the Loans made by such Defaulting Bank hereunder (it
being understood that such accrued and unpaid interest and fees may be paid pro
rata to the purchasing Bank and the Defaulting Bank by the Agent at a
subsequent date upon receipt of payment of such amounts from the Borrower).
Prior to payment of such purchase price to a Defaulting Bank, the Agent shall
apply against such purchase price any amounts retained by the Agent pursuant to
the last sentence of the immediately preceding subsection (a). The Defaulting
Bank shall be entitled to receive amounts owed to it by the Borrower under the
Loan Documents which accrued prior to the date of the default by the Defaulting
Bank, to the extent the same are received by the Agent from or on behalf of the
Borrower. There shall be no recourse against any Bank or the Agent for the
payment of such sums except to the extent of the receipt of payments from any
other party or in respect of the Loans.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Modifications. Notwithstanding any provisions to the
contrary herein, any term of this Agreement may be amended with the written
consent of the Borrower; provided that no amendment, modification or waiver of
any provision of this Agreement or any other Loan Document or consent to any
departure therefrom by the Borrower or other party thereto shall in any event be
effective unless the same shall be in writing and signed by the Majority Banks,
and then such amendment, modification, waiver or consent shall be effective only
in the specific instance and for the purpose for which given. Notwithstanding
the foregoing, no such amendment, modification, waiver or consent shall:
(a) Reduce the rate or extend the time of payment of interest
thereon, or reduce the amount of the principal thereof, or modify any of the
provisions of any Note with respect to the payment or repayment thereof, without
the consent of the holder of each Note so affected; or
(b) Increase the amount or extend the time of any Revolving
Commitment of any Bank, without the consent of such Bank; or
(c) Reduce the rate or extend the time of payment of any fee
payable to a Bank, without the consent of the Bank affected; or
(d) Amend the definition of Majority Banks or otherwise reduce
the percentage of the Banks required to approve or effectuate any such
amendment, modification, waiver, or consent, without the consent of all the
Banks; or
(e) Amend any of Sections 2 or any of the foregoing Sections 9.1
(a) through (d) or this Section 9.1 (e) without the consent of all the Banks; or
(f) Amend any provision of this Agreement relating to the Agent
in its capacity as Agent without the consent of the Agent; or
(g) Amend any provision of this Agreement relating to the
Existing Letter of Credit without the consent of U.S. Bank; or
(h) Release any Guarantor from its obligations under its
Guaranty; or
(i) Except as may otherwise be expressly provided in any of the
other Loan Documents, release any material portion of collateral securing all or
any part of the Obligations without the consent of all the Banks.
Section 9.2 Expenses. Whether or not the transactions contemplated
hereby are consummated, the Borrower agrees to reimburse the Agent and each Bank
upon demand for all reasonable out-of-pocket expenses paid or incurred by the
Agent or such Bank (including filing and recording costs and fees and expenses
of Dorsey & Whitney, counsel to the Agent and the fees and expenses of
PriceWaterhouse Coopers, financial consultant to the Banks), in connection with
the negotiation, preparation, approval, review, execution, delivery, amendment,
modification and interpretation of this Agreement and the other Loan Documents
and any commitment letters, letters of intent, financial analyses or term sheets
relating thereto. The Borrower shall also reimburse the Agent and, after the
occurrence of an Event of Default, each Bank upon demand for all reasonable
out-of-pocket expenses (including expenses of legal counsel) paid or incurred by
the Agent or any Bank in connection with the collection and enforcement of this
Agreement and any other Loan Document. The obligations of the Borrower under
this Section shall survive any termination of this Agreement.
Section 9.3 Waivers, etc. No failure on the part of the Agent or the
holder of a Revolving Note to exercise and no delay in exercising any power or
right hereunder or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any power or right preclude
any other or further exercise thereof or the exercise of any other power or
right. The remedies herein and in the other Loan Documents provided are
cumulative and not exclusive of any remedies provided by law.
Section 9.4 Notices. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed; provided, however, that
any notice to the Agent or any Bank under Article II hereof shall be deemed to
have been given only when received by the Agent or such Bank.
Section 9.5 Taxes. The Borrower agrees to pay, and save the Agent
and the Banks harmless from all liability for, any stamp or other taxes which
may be payable with respect to the execution or delivery of this Agreement or
the issuance of the Revolving Notes, which obligation of the Borrower shall
survive the termination of this Agreement.
Section 9.6 Successors and Assigns; Disposition of Loans;
Transferees. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that the
Borrower may not assign its rights or delegate its obligations hereunder or
under any other Borrower Loan Document without the prior written consent of all
the Banks. Each Bank may at any time, with the written consent of the Agent
sell, assign, transfer, grant participations in, or otherwise dispose of
equivalent pro rata portions of its Revolving Commitment, the Loans and/or
Advances (each such interest so disposed of being herein called a “Transferred
Interest”) to banks or other financial institutions (“Transferees”). The
Borrower agrees that each Transferee shall be entitled to the benefits of
Sections 2.16 and 9.2 with respect to its Transferred Interest and that each
Transferee may exercise any and all rights of banker’s Lien, setoff and
counterclaim as if such Transferee were a direct lender to the Borrower. If any
Bank makes any assignment to a Transferee, then upon notice to the Borrower such
Transferee, to the extent of such assignment (unless otherwise provided
therein), shall become a “Bank” hereunder and shall have all the rights and
obligations of such Bank hereunder and such Bank shall be released from its
duties and obligations under this Agreement to the extent of such assignment.
Notwithstanding the sale by any Bank of any participation hereunder, no
participant shall be deemed to be or have the rights and obligations of a Bank
hereunder except that any participant shall have a right of setoff under Section
7.3 as if it were such Bank and the amount of its participation were owing
directly to such participant by the Borrower.
Section 9.7 Confidentiality of Information. The Agent and each Bank
shall use reasonable efforts to assure that information about the Borrower and
its operations, affairs and financial condition, not generally disclosed to the
public or to trade and other creditors, which is furnished to the Agent or such
Bank pursuant to the provisions hereof is used only for the purposes of this
Agreement and any other relationship between any Bank and the Borrower and shall
not be divulged to any Person other than the Banks, their Affiliates and their
respective officers, directors, employees and agents, except: (a) to their
attorneys and accountants, (b) in connection with the enforcement of the rights
of the Banks hereunder and under the Notes and the Guaranties or otherwise in
connection with applicable litigation, (c) in connection with assignments and
participations and the solicitation of prospective assignees and participants
referred to in the immediately preceding Section, and (d) as may otherwise be
required or requested by any regulatory authority having jurisdiction over any
Bank or by any applicable law, rule, regulation, judicial process or legal
process, the opinion of such Bank’s counsel concerning the making of such
disclosure to be binding on the parties hereto. No Bank shall incur any
liability to the Borrower by reason of any disclosure permitted by this Section
9.7.
Section 9.8 Governing Law and Construction. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT AND THE NOTES SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT
TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE
UNITED STATES APPLICABLE TO NATIONAL BANKS. Whenever possible, each provision
of this Agreement and the other Loan Documents and any other statement,
instrument or transaction contemplated hereby or thereby or relating hereto or
thereto shall be interpreted in such manner as to be effective and valid under
such applicable law, but, if any provision of this Agreement, the other Loan
Documents or any other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto shall be held to be prohibited or
invalid under such applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement, the other Loan
Documents or any other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto.
Section 9.9 Consent to Jurisdiction.
AT THE OPTION OF THE AGENT, THIS AGREEMENT AND THE OTHER BORROWER LOAN
DOCUMENTS MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING
IN HENNEPIN COUNTY, MINNESOTA; AND THE BORROWER CONSENTS TO THE JURISDICTION AND
VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN ANOTHER
JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR
INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE AGENT AT ITS
OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE
JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Section 9.10 Survival of Agreement. All representations,
warranties, covenants and agreement made by the Borrower herein or in the other
Borrower Loan Documents and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be deemed to have been relied upon by the Banks and shall survive
the making of the Revolving Loans by the Banks and the execution and delivery to
the Banks by the Borrower of the Notes, regardless of any investigation made by
or on behalf of the Banks, and shall continue in full force and effect as long
as any Obligation is outstanding and unpaid and so long as the Revolving
Commitments have not been terminated; provided, however, that the obligations of
the Borrower under Section 9.2, 9.5 and 9.11 shall survive payment in full of
the Obligations and the termination of the Revolving Commitments.
Section 9.11 Indemnification. The Borrower hereby agrees to
defend, protect, indemnify and hold harmless the Agent and the Banks and their
respective Affiliates and the directors, officers, employees, attorneys and
agents of the Agent and the Banks and their respective Affiliates (each of the
foregoing being an “Indemnitee” and all of the foregoing being collectively the
“Indemnitees”) from and against any and all claims, actions, damages,
liabilities, judgments, costs and expenses (including all reasonable fees and
disbursements of counsel which may be incurred in the investigation or defense
of any matter) imposed upon, incurred by or asserted against any Indemnitee,
whether direct, indirect or consequential and whether based on any federal,
state, local or foreign laws or regulations (including securities laws,
environmental laws, commercial laws and regulations), under common law or on
equitable cause, or on contract or otherwise:
(a) by reason of, relating to or in connection with the
execution, delivery, performance or enforcement of any Loan Document, any
commitments relating thereto, or any transaction contemplated by any Loan
Document; or
(b) by reason of, relating to or in connection with any credit
extended or used under the Loan Documents or any act done or omitted by any
Person, or the exercise of
any rights or remedies thereunder, including the acquisition of any
collateral by the Banks by way of foreclosure of the Lien thereon, deed or bill
of sale in lieu of such foreclosure or otherwise;
provided, however, that the Borrower shall not be liable to any Indemnitee for
any portion of such claims, damages, liabilities and expenses resulting from
such Indemnitee’s gross negligence or willful misconduct. In the event this
indemnity is unenforceable as a matter of law as to a particular matter or
consequence referred to herein, it shall be enforceable to the full extent
permitted by law.
This indemnification applies, without limitation, to any act,
omission, event or circumstance existing or occurring on or prior to the later
of the Termination Date or the date of payment in full of the Obligations,
including specifically Obligations arising under clause (b) of this Section.
The indemnification provisions set forth above shall be in addition to any
liability the Borrower may otherwise have. Without prejudice to the survival of
any other obligation of the Borrower hereunder the indemnities and obligations
of the Borrower contained in this Section shall survive the payment in full of
the other Obligations.
Section 9.12 Captions. The captions or headings herein and
any table of contents hereto are for convenience only and in no way define,
limit or describe the scope or intent of any provision of this Agreement.
Section 9.13 Entire Agreement. This Agreement and the other
Borrower Loan Documents embody the entire agreement and understanding between
the Borrower, the Agent and the Banks with respect to the subject matter hereof
and thereof. This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof. Nothing contained in this Agreement or
in any other Loan Document, expressed or implied, is intended to confer upon any
Persons other than the parties hereto any rights, remedies, obligations or
liabilities hereunder or thereunder.
Section 9.14 Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 9.15 Borrower Acknowledgements. The Borrower hereby
acknowledges that (a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement, the other Loan Documents, (b) neither
the Agent nor any Bank has any fiduciary relationship to the Borrower, the
relationship being solely that of debtor and creditor, (c) no joint venture
exists between the Borrower and the Agent or any Bank, and (d) neither the Agent
nor any Bank undertakes any responsibility to the Borrower to review or inform
the Borrower of any matter in connection with any phase of the business or
operations of the Borrower and the Borrower shall rely entirely upon its own
judgment with respect to its business, and any review, inspection or supervision
of, or information supplied to, the Borrower by the Agent or any Bank is for the
protection of the Banks and neither the Borrower nor any third party is entitled
to rely thereon.
Section 9.16 Effect of Existing Credit Agreement. This
Agreement amends and replaces in its entirety the Existing Credit Agreement,
provided, that the obligations of the Borrower incurred under the Existing
Credit Agreement shall continue under this Agreement, and shall not in any
circumstance be terminated, extinguished or discharged hereby but shall
hereafter be governed by the terms of this Agreement.
Section 9.17 Reaffirmation of Security Documents. The
Borrower confirms to and agrees with the Banks and the Agent that (a) the
Obligations are and continue to be secured by the security interest granted by
the Borrower in favor of the Agent under the Security Documents to which it is a
party, and all of the terms, conditions, provisions, agreements, requirements,
promises, obligations, duties, covenants and representations of the Borrower
under such documents and any and all other documents and agreements entered into
with respect to the Obligations are incorporated herein by reference and are
hereby ratified and affirmed in all respects by the Borrower and (b) each
reference to the “Credit Agreement@ in each Security Document to which it is a
party shall be deemed to be a reference to this Agreement, as the same may be
amended, restated or modified from time to time.
Section 9.18 General Release. The Borrower hereby releases
and discharges the Agent and each Bank, and each of their officers, directors,
employees, agents and attorneys, from any and all claims, actions and
liabilities of any kind or nature that it or any one claiming through or under
the Borrower ever had or may now have, whether now known or hereafter
discovered, arising out of or in any way relating to: (i) any lending
relationship or loan commitment between the Agent, the Banks and the Borrower
prior to the date of this Agreement; (ii) the Loan Documents and the Existing
Credit Agreement; or (iii) the negotiations preceding the execution and delivery
of this Agreement.
Section 9.19 Events of Default under Existing Credit
Agreement and Waiver. Upon the Closing Date, each Bank and the Agent hereby
waives all Defaults and Events of Defaults existing on the Closing Date (the
“Existing Defaults”) under the Existing Credit Agreement. The Bank’s and the
Agent’s agreement to waive the Existing Defaults is limited to the express terms
thereof, and nothing herein shall be deemed a waiver or forbearance by the Banks
or the Agent of any other term, condition, representation or covenant applicable
to the Borrower or any Guarantor under the Existing Credit Agreement or this
Agreement and related loan documents (including but not limited to any Defaults
or Events of Default that may occur from and after the Closing Date under this
Agreement). Neither any prior waivers or forbearance periods granted by the
Agent and the Banks, nor the waivers by the Banks and the Agent set forth herein
(x) shall constitute a waiver of or any agreement to forbear with respect to any
Default or Event of Default (if any) under any Loan Document, other than the
waiver provided herein with respect to the Existing Defaults under the Existing
Credit Agreement, or (y) shall be, or be deemed to be, a course of action with
respect thereto upon which the Borrower may rely in the future, and the Borrower
hereby expressly waives any claim to such effect.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
NORSTAN, INC.
By: ___/s/ James C. Granger___________
Its: ____President & CEO____________
Address:
5101 Shady Oak Road
Minnetonka, MN 55343
Attention: Robert J. Vold
With copies to:
Mr. Clark Whitmore
Maslon Edelman Borman &Brand
3300 Norwest Center
Minneapolis, MN 55402
U.S. BANK NATIONAL
ASSOCIATION,
as Agent and as a Bank
By: __/s/ David C. Larsen_____________
Its: __Vice President_ ______________
Address:
U.S. Bank Place
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: David Larsen
MPFP2516
HARRIS TRUST AND SAVINGS
BANK
By: ___/s/ Lawrence Mizera____________
Its: _____Vice President________________
Address:
111 West Monroe Street
4th Floor East
Chicago, IL 60603
Attention: Catherine C. Ciolek
Telecopier: (312) 461-2591
M&I MARSHALL & ILSLEY
BANK
By: __/s/ John W. Howard_____________
Its: ____V.P.________________________
By: __/s/ Doug Pudvah_______________
Its: ____V. P._______________________
Address for Notices:
4135 Multifoods Tower
33 South Sixth Street
Minneapolis, MN 55402
Attention: John (Chip) Howard
Telecopier: (612) 332-6745
WELLS FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION
By: ____/s/ William J. Kennedy________
Its: ____Vice President _______________
Address:
MAC N9314-050
730 Second Avenue South, #500
Minneapolis, MN 55479
Attention: William J. Kennedy
Telecopier: (612) 667-1054
|
EXHIBIT 10.28
ASSET PURCHASE AGREEMENT
By and Between
INVITROGEN CORPORATION
and
CIPHERGEN BIOSYSTEMS, INC.
Dated as of June 25, 2001
1. Sale and Delivery of the Assets 1.1 Delivery of the Assets 1.2
Further Assurances 1.3 Purchase Price 1.4 Assumption of Liabilities; Etc
1.5 Allocation of Purchase Price 1.6 The Closing 2. Representations of
the Seller 2.1 Organization 2.2 Capitalization of BSA and BSG 2.3
Authorization; Consents and Approvals; No Violations 2.4 Ownership and
Condition of the Assets 2.5 Reports and Financial Statements 2.6 Absence of
Undisclosed Liabilities 2.7 Litigation 2.8 Inventory 2.9 Fixed Assets
2.10 Leases 2.11 Change in Financial Condition and Assets 2.12 Tax Matters
2.13 Accounts Receivable 2.14 Contracts and Commitments 2.15 Compliance with
Agreements and Laws 2.16 Employee Relations and Benefit Plans 2.17 Customers
2.18 Suppliers 2.19 Names and Other Intangible Property 2.20 Real Estate
2.21 Powers of Attorney 2.22 Brokers 2.23 No Illegal or Improper
Transactions 2.24 Environmental Matters 2.25 Product Warranties; Liabilities
2.26 Bankruptcy 2.27 Insurance 2.28 Books and Records 3.
Representations of the Buyer 3.1 Organization and Authority 3.2
Authorization 3.3 No Conflicts; Consents 3.4 Brokers 4. Access to
Information; Confidentiality; Public Announcements 4.1 Access to
Management, Properties and Records 4.2 Confidentiality 4.3 Public
Announcements 5. Pre-Closing Covenants of the Seller 5.1 Conduct of
Business 5.2 Absence of Material Changes 5.3 Taxes 5.4 Communication with
Customers and Suppliers 5.5 Compliance with Laws 5.6 Continuing Obligation
to Inform 6. Reasonable Best Efforts to Obtain Satisfaction of Conditions
7. Employment Matters 8. Conditions to Obligations of the Buyer
8.1 Continued Truth of Representations and Warranties of the Seller; Compliance
with Covenants and Obligations 8.2 Corporate Proceedings 8.3 Consents of
Third Parties 8.4 Adverse Proceedings 8.5 Update 8.6 Closing Deliveries
8.7 Closing Balance Sheet 8.8 Collaboration Agreement 8.9 Opinion of Works
Council 8.10 Governmental Approvals 9. Conditions to Obligations of the
Seller 9.1 Continued Truth of Representations and Warranties of the
Buyer; Compliance with Covenants and Obligations 9.2 Corporate Proceedings
9.3 Consents of Third Parties 9.4 Adverse Proceedings 9.5 Closing Deliveries
9.6 Collaboration Agreement 9.7 Opinion of Works Council 9.8 Governmental
Approvals 10. Termination of Representations and Warranties 11.
Post-Closing Agreements 11.1 Proprietary Information 11.2 No
Solicitation or Hiring of Former Employees 11.3 Non-Competition Agreement
11.4 Use of Name 11.5 Cooperation in Litigation 11.6 Access to Books and
Records 11.7 Intangible Property Cooperation 11.8 Beckman Obligations
12. Termination of Agreement 12.1 Termination by Lapse of Time 12.2
Termination by Agreement of the Parties 12.3 Termination by Buyer or Seller By
Reason of Breach 12.4 Effect of Termination 13. Fees and Expenses
14. Indemnification 14.1 Survival of Representations and Warranties 14.2
Indemnification Provisions for Benefit of Buyer 14.3 Indemnification
Provisions for Benefit of Seller 14.4 Matters Involving Third Parties 14.5
Adjustments to Indemnification Payments 14.6 Mitigation of Loss 14.7
Remedies 15. Transfer and Sales Tax 16. Notices 17. Successors
and Assigns 18. Entire Agreement; Amendments; Attachments 19.
Governing Law 20. Section Heading 21. Severability 22.
Counterparts 23. No Third Party Beneficiaries 24. Translations
INDEX OF EXHIBITS
Exhibit A Instrument of Assumption
Exhibit B Current Balance Sheet
Exhibit C Bill of Sale
Exhibit D Beckman Obligations
Exhibit E Bill of Sale
INDEX OF SCHEDULES
SCHEDULE 1.1 (b)(i) Excluded Assets SCHEDULE 1.4 (a)(i) Assumed
Liabilities/Accounts, Accounts Payable and Accrued Expenses SCHEDULE 1.4 (a)(ii)
Assumed Liabilities/Contracts SCHEDULE 1.4 (a)(iii) Assumed Liabilities /Other
Liabilities and Obligations SCHEDULE 1.5 Allocation of Purchase Price SCHEDULE
2.3 Consents and Approvals SCHEDULE 2.4(a) Ownership and Condition of the
Assets/Encumbrances SCHEDULE 2.4(b) Ownership of the Assets/Permitted
Encumbrances SCHEDULE 2.6 Absence of Undisclosed Liabilities SCHEDULE 2.7
Litigation SCHEDULE 2.8 Inventory SCHEDULE 2.9 Fixed Assets SCHEDULE 2.10 Leases
SCHEDULE 2.11 Change in Financial Condition and Assets SCHEDULE 2.12 Tax Matters
SCHEDULE 2.13 Accounts Receivable SCHEDULE 2.14 Contracts and Commitments
SCHEDULE 2.15 Compliance with Agreements and Laws SCHEDULE 2.16(a) Employees
SCHEDULE 2.16(b) Employee Relations and Benefit Plans SCHEDULE 2.17 Customers
SCHEDULE 2.18 Suppliers SCHEDULE 2.19(a) Intangible Property SCHEDULE 2.19(b)
Non-Exclusive Intangible Property SCHEDULE 2.19(c) Names SCHEDULE 2.21 Powers of
Attorney SCHEDULE 2.27 Insurance Policies SCHEDULE 3.2 Consents and Approvals
ASSET PURCHASE AGREEMENT
Asset Purchase Agreement (this “Agreement”) made as of the 25th day
of June, 2001 by and between Invitrogen Corporation, a Delaware corporation with
its principal office at 1600 Faraday Avenue, Carlsbad, California 92008 (the
“Seller”), and Ciphergen Biosystems, Inc., a Delaware corporation with its
principal office at 6611 Dumbarton Circle, Fremont, California 94555 (the
“Buyer”).
Preliminary Statement
The Buyer desires to purchase, and the Seller desires to sell, the
business of the Seller which is conducted under the name “BioSepra”, including
but not limited to the manufacture and sale of chromatographic media for process
scale chromatographic purification of proteins (including any such business
conducted through subsidiaries) (collectively, the “Business”), together with
substantially all of the assets held directly or indirectly by Seller solely for
use in the Business, for the consideration set forth below and the assumption of
certain of the Seller’s liabilities set forth below, subject to the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Sale and Delivery of the Assets.
1.1 Delivery of the Assets.
(a) Subject to and upon the
terms and conditions of this Agreement, at the closing of the transactions
contemplated by this Agreement (the “Closing”), the Seller shall sell, transfer,
convey, assign and deliver to the Buyer, and the Buyer shall purchase from the
Seller, the following properties, assets and other claims, rights and interests
of the Seller which relate to or are used or held for use solely in connection
with the Business:
(i) all
inventories of finished goods and packaging materials and similar items of the
Seller which exist on the Closing Date (as defined below);
(ii) all prepaid
expenses, advance payments and security deposits existing on the Closing Date;
(iii) all rights and
benefits under the Contracts (as defined below) set forth on Schedule 2.14
attached hereto (collectively, the “Assumed Contracts”);
(iv) all operating
data and records, including without limitation, books (other than corporate
minute and stock record books), records and accounts, correspondence, research
and development files, drug master files, production records, technical,
accounting, manufacturing, quality control and procedural manuals, customer
lists, customer complaint files, sales and marketing literature, purchase orders
and invoices and employment records;
(v) all of Seller’s
right, title and interest in and to all of the outstanding shares of capital
stock, with any dividends pertaining to the 2001 fiscal year and all subsequent
fiscal years attached, of BioSepra, S.A. (the “BSA Shares”), a subsidiary of the
Seller (“BSA”);
(vi) all of Seller’s
right, title and interest in and to the intangible property which is listed on
Schedule 2.19(a) attached hereto (collectively, the “Intangible Property”);
(vii) the name and all
goodwill associated with the name “BioSepra” and all other tradenames and
trademarks of Seller used solely in the Business, including without limitation
all of Seller’s right, title and interest in the Intangible Property listed on
Schedule 2.19(a);
(viii) the toll-free
telephone number (800) 752–5277;
(ix) all rights to
the Internet website address http://www.biosepra.com;
(x) all rights,
claims, warranty rights or other similar rights of the Seller, under express or
implied warranties from suppliers;
(xi) all
non-competition agreements in favor of the Seller; and
(xii) except as
provided in Section 1.1(b) hereof, all other assets, properties, claims, rights
and interests of the Seller which exist on the Closing Date, of every kind and
nature and description, whether tangible or intangible, real, personal or mixed,
wherever located, which relate to or are used or held for use solely in
connection with the Business.
(b) Notwithstanding the
provisions of paragraph (a) above, the assets, properties, claims, rights and
interests of Seller to be transferred to the Buyer under this Agreement shall
not include (i) those assets of the Seller listed on Schedule 1.1(b)(i) attached
hereto; or (ii) any Contracts to which the Seller is a party or by which it is
bound, other than the Assumed Contracts ((i) and (ii) together, the “Excluded
Assets”).
(c) The Assumed Contracts, BSA
Shares, Intangible Property and other properties, assets and business of the
Seller described in paragraph (a) above, other than the Excluded Assets, shall
be referred to collectively as the “Assets.”
1.2 Further Assurances. At any time and from
time to time after the Closing, at the Buyer’s request, the Seller promptly
shall execute and deliver such instruments of sale, transfer, conveyance,
assignment and confirmation, and take such other action as the Buyer may
reasonably request to transfer, convey and assign to the Buyer, and to confirm
the Buyer’s title to, all of the Assets, to put the Buyer in actual possession
and operating control thereof, to assist the Buyer in exercising all rights with
respect thereto and to carry out the purpose and intent of this Agreement.
Without limiting the generality of the foregoing, the Seller shall execute such
applications to governmental authorities, consents and other documents and take
such other action as Buyer may reasonably request in order to enable the Buyer
to use and register, as the Buyer may desire, the name “BioSepra” and any
variation thereof and all other tradenames and trademarks of Seller used solely
in the Business.
From time to time after the Closing, but on no less than a monthly
basis, (a) the Buyer shall pay to the Seller any amount of cash or other
remittances received by it from accounts receivable of the Seller or which the
Buyer is not otherwise entitled under the provisions of this Agreement to retain
and (b) the Seller shall pay to the Buyer any amount of any cash or other
remittances received by it from accounts receivable of BSA or which the Seller
is not otherwise entitled under the provisions of this Agreement to retain.
1.3 Purchase Price.
(a) The purchase price for the
Assets shall be Twelve Million Dollars ($12,000,000.00) plus the amount of the
Assumed Liabilities (as defined herein), as determined and adjusted pursuant to
this Agreement (the “Purchase Price”). At the Closing, the Buyer shall deliver
to the Seller the aggregate sum of Twelve Million Dollars ($12,000,000.00), (i)
less the amount of any downward adjustments made pursuant to Section 1.3(b) and
(ii) plus the amount of any upward adjustments made pursuant to Section 1.3(b),
payable by wire transfer of immediately available funds to an account designated
by the Seller.
(b) On the Closing Date, the
Seller shall deliver to the Buyer (1) the most recently available month-end
combined balance sheet of the Seller relating to the Business and of BSA and BSG
(as defined herein) certified by the Vice President—Finance of the Seller (the
“Closing Balance Sheet”) and (2) a certificate of the Vice President—Finance of
the Seller certifying the amount of cash and cash equivalents of BSA (the “Cash
Amount”) as of the Closing Date (the “Closing Cash Certificate”). The Closing
Balance Sheet shall be prepared on a basis consistent with that of the Current
Balance Sheet (as defined below). Except as set forth on the Closing Balance
Sheet or as described in the notes thereto, the Closing Balance Sheet shall be
prepared in accordance with United States generally accepted accounting
principles (“GAAP”) applied on a consistent basis.
(i) If net assets
as set forth on the Closing Balance Sheet (“Closing Net Assets”) are less than
Five Million Four Hundred Twenty Two Thousand One Hundred Two Dollars
($5,422,102.00) (the “Net Assets Target Amount”), the amount of the Purchase
Price to be paid to the Seller in cash at the Closing will be reduced on a
dollar-for-dollar basis by the amount of such deficiency, and if the Closing Net
Assets are more than the Net Assets Target Amount, the amount of the Purchase
Price to be paid to the Seller in cash at the Closing will be increased on a
dollar-for-dollar basis by the amount of such excess.
(ii) The amount of
the Purchase Price to be paid to the Seller in cash at the Closing will be
increased on a dollar-for-dollar basis by the Cash Amount set forth on the
Closing Cash Certificate.
(c) No later than 60 days after
the Closing Date, the Seller shall deliver to the Buyer (1) a combined balance
sheet of the Seller relating to the Business and of BSA and BSG as of the
Closing Date certified by the Vice President – Finance of the Seller to be true,
correct and complete (the “Closing Date Balance Sheet”), (2) a certificate of
the Vice President—Finance of the Seller certifying the Cash Amount as of the
Closing Date (the “Closing Date Cash Certificate”) and (3) a true, correct and
complete list and amount, as of the Closing Date, of each item referenced in
Section 8.5 hereof. Except as set forth on the Closing Date Balance Sheet or as
described in the notes thereto, the Closing Date Balance Sheet shall be prepared
in accordance with GAAP applied on a consistent basis. The Closing Date Balance
Sheet shall be prepared on a basis consistent with that of the Current Balance
Sheet, except as described in Section 1.3(d) below.
(d) There shall be recorded on
the Closing Date Balance Sheet an asset or liability, as the case may be, for
the net Intercompany Accounts (as defined below), which asset or liability shall
be taken into account in determining net assets on the Closing Date Balance
Sheet. In addition, net assets as set forth on the Closing Date Balance Sheet
shall be subject to further adjustment as follows (net assets as set forth on
the Closing Date Balance Sheet and as further adjusted pursuant to this Section
1.3(d) being referred to as the “Closing Date Net Assets”): (i) if net
Intercompany Accounts results in an asset on the Closing Date Balance Sheet, net
assets as set forth on the Closing Date Balance Sheet shall be reduced by the
amount of such asset; or (ii) if net Intercompany Accounts results in a
liability on the Closing Date Balance Sheet, net assets as set forth on the
Closing Date Balance Sheet shall be increased by the amount of such liability.
“Intercompany Accounts” shall mean all amounts that are (a) owed by BSA or BSG
to the Seller or any of its direct or indirect subsidiaries (other than BSA or
BSG) or (b) owed by the Seller or any of its direct or indirect subsidiaries
(other than BSA or BSG) to BSA or BSG, in each case pursuant to bona fide
obligations.
(e) No later than 60 days after
delivery of the Closing Date Balance Sheet and the Closing Date Cash
Certificate, the Buyer shall complete a review thereof and shall inform the
Seller in writing that the Closing Date Balance Sheet and the Closing Date Cash
Certificate are acceptable or shall object thereto in writing setting forth a
specific description of the Buyer’s objections. If the Buyer objects to the
Closing Date Balance Sheet or the Closing Date Cash Certificate and the Seller
does not agree with the Buyer’s objections or such objections are not resolved
on a mutually agreeable basis within 30 days of the Seller’s receipt of Buyer’s
objections, any such disagreement shall be promptly submitted to a mutually
acceptable “big five” accounting firm that is unaffiliated with either party or
that is acceptable to Buyer and Seller (the “Unaffiliated Firm”). The
Unaffiliated Firm shall resolve such dispute within 30 days after said
Unaffiliated Firm’s engagement by the parties. The decision of such Unaffiliated
Firm shall be final and binding upon the Seller and the Buyer and its fees,
costs and expenses shall be borne by the party against whom the Unaffiliated
Firm shall rule.
(f) If Closing Date Net Assets
as set forth on the Closing Date Balance Sheet as finally determined pursuant to
the preceding paragraph are more or less than the Net Assets Target Amount, the
Purchase Price will be increased or decreased, respectively, and the Buyer or
the Seller, as the case may be, will pay to the other cash in an amount equal to
such excess or deficiency, taking into account any adjustments previously made
pursuant to subparagraph (b)(i) above. Likewise, if the Cash Amount as set
forth on the Closing Date Cash Certificate as finally determined pursuant to the
preceding paragraph is more or less than the amount set forth on the Closing
Cash Certificate, the Purchase Price will be increased or reduced, respectively,
and the Buyer or the Seller, as the case may be, will pay to the other cash in
an amount equal to such excess or deficiency. Any payments pursuant to this
paragraph shall be made within 10 business days of determination by wire
transfer of immediately available funds to an account specified by the Buyer or
the Seller, as the case may be.
(g) All Intercompany Accounts
will be deemed fully paid and discharged as of the Closing Date through the
adjustments to the Purchase Price set forth in Section 1.3(f) above which, as
between the Seller and its direct or indirect subsidiaries (other than BSA or
BSG), on the one hand, and BSA and BSG, on the other hand, shall constitute a
final settlement of all such Intercompany Accounts. Following the Closing, each
of the Seller and the Buyer shall be responsible for settling all Intercompany
Accounts with their respective subsidiaries.
1.4 Assumption of Liabilities; Etc.
(a) At the Closing, on the terms
and subject to the conditions of this Agreement, the Buyer shall execute and
deliver an Instrument of Assumption of Liabilities (the “Instrument of
Assumption”) substantially in the form attached hereto as Exhibit A, pursuant to
which it shall assume and agree to perform, pay and discharge in accordance with
their terms the following liabilities, obligations and commitments of the Seller
which relate to the Business or the Assets:
(i) Those
accounts, accounts payable and accrued expenses of Seller which are set forth on
Schedule 1.4(a)(i) attached hereto;
(ii) All
obligations of the Seller continuing after the Closing under the Assumed
Contracts which become due and payable or are required to be performed after the
Closing Date; and
(iii) Those other
liabilities and obligations of the Seller which relate to the Business or the
Assets which are specifically set forth on Schedule 1.4(a)(iii) attached hereto.
The foregoing liabilities and obligations are collectively referred to as the
“Assumed Liabilities.”
(b) The Seller shall be
responsible for and satisfy any and all of the liabilities, obligations and
commitments of the Seller not assumed by Buyer pursuant to Section 1.4(a) hereof
(the “Excluded Liabilities”). Without limiting the foregoing, Buyer shall not
assume, pay or discharge, and shall not be liable for any liability, commitment
or expense of Seller as a result of or arising from any of the following:
(i) Seller’s
obligations and liabilities arising under this Agreement;
(ii) any liability
of the Seller for Taxes (as defined in Section 2.12) arising from the operation
of the Business on or prior to the Closing Date or arising out of the sale by
the Seller of the Assets pursuant to this Agreement other than with respect to
Taxes or charges as set forth in Section 15 below;
(iii) all
accounting, consulting, finders, investment banking, legal and similar fees and
expenses incurred by the Seller in connection with the negotiation of this
Agreement and the consummation of the transactions contemplated hereby;
(iv) any liabilities
or obligations of Seller under any contracts, commitments, arrangements or
agreements relating solely to the Excluded Assets;
(v) any liability or
obligation, including, without limitation, any liability for the Seller’s
attorney’s fees or expenses, resulting from litigation, if any, which results
from the circumstances disclosed in Schedule 2.7; and
(vi) any infringement
or alleged infringement of any patent, trademark, trade name, copyright or other
property right of any other person or entity arising out of any action of Seller
on or prior to the Closing Date or any misappropriation or misuse of any trade
secret or confidential or proprietary invention, discovery, process, formula,
know-how, technology or information or any other right of another person or
entity arising out of any action of Seller on or prior to the Closing Date.
1.5 Allocation of Purchase Price. The
aggregate amount of the Purchase Price shall be allocated among the Assets for
all purposes (including Tax and financial accounting purposes) in form and
substance to be mutually agreed upon by Buyer and Seller, provided that the
amount of the Purchase Price allocated to the BSA Shares shall not be less than
$6,805,674.00. The parties shall file all Tax Returns (as defined in Section
2.12(a) hereof) in a manner consistent with such allocation; provided, however,
that if any taxing authority makes or proposes an allocation with respect to the
Assets which differs materially from such allocation, each of the Buyer and the
Seller shall have the right, at its election and expense, to contest such taxing
authority’s determination. In the event of such a contest, the other party
agrees to cooperate reasonably with the contesting party and shall have the
right to file such protective claims or returns as may be reasonably required to
protect its interest. Each party shall provide the other party with all notices
and information reports filed with taxing authorities and agencies with respect
to the allocation of the Purchase Price.
1.6 The Closing. The Closing shall take place
at the offices of Fulbright & Jaworski L.L.P., 801 Pennsylvania Avenue North
West, Washington, D.C. at 10:00 a.m., Eastern Standard Time, on July 27, 2001 or
at such other place, time or date as may be mutually agreed upon by the parties
hereto. The transfer of the Assets by the Seller to the Buyer shall be deemed to
occur at the close of business, Washington, D.C. time, on the date of the
Closing (the “Closing Date”).
2. Representations of the Seller.
The Seller represents and warrants to the Buyer as follows, except
as set forth on the Disclosure Schedules attached hereto. Disclosure on any
Schedule hereto of an item in response to one section of this Agreement shall
constitute disclosure in response to every section of this Agreement,
notwithstanding the fact that no cross-reference is made; provided, however,
only if it is reasonably apparent on the face of the listing that the listed
item is such a responsive matter. Disclosure of any item not otherwise required
to be disclosed shall not create any inference of materiality. To the extent
that a representation or warranty set forth below is by its language made
subject to a knowledge or awareness qualifier, such representation and warranty
means the actual knowledge or awareness as of the date of execution of this
Agreement of any officer of Seller, BSA or BSG involved in the Business.
2.1 Organization. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite power and authority (corporate and
other) to own its properties, to carry on its business, including the Business,
as now being conducted, to execute and deliver this Agreement and the agreements
contemplated herein, and to consummate the transactions contemplated hereby and
thereby. BSA is a French societe anonyme duly organized, validly existing, and
duly registered with the “Registre de Commerce et des Societes de Pontoise”
under the number B331502641 and has all requisite power and authority to own its
properties and to carry on its business as now being conducted. BioSepra GmbH
(“BSG”) is a German corporation duly organized, validly existing and duly
registered with the Commercial Register of the Local Court (Amtsgericht),
Frankfurt am Main, under No. HRB 39846. The Seller, BSA and BSG are each duly
qualified to do business and in good standing in all jurisdictions in which
their ownership or leasing of property or the character of their business
requires such qualification, except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect (as defined herein). For
purposes of this Agreement, the term “Material Adverse Effect” means an effect
which is, or would reasonably be expected to be, materially adverse to the
Business or the Assets, taken as a whole. Copies of the bylaws, share transfer
register (“registre des mouvements de titres”), shareholder accounts (“comptes
d’actionnaires”) and “extrait K-bis” of BSA and copies of the Articles of
Incorporation of BSG, each as amended to date, have been previously delivered to
the Buyer, are complete and correct, and no amendments have been made thereto or
have been authorized since the date thereof.
2.2 Capitalization of BSA and BSG. BSA has a
share capital of FF 21,300,000 divided into 213,000 shares of FF 100 each. All
of such shares have been duly and validly issued, are fully paid and
nonassessable and are held of record and beneficially by the Seller, except that
six shares are held of record by minority shareholders in accordance with
requirements of French law and will be transferred to the Seller prior to the
Closing. BSG has a share capital of DM350,000 (the “BSG Shares”). All of such
BSG Shares have been duly and validly issued and are fully paid and
nonassessable. The Seller owns the BSA Shares owned by it on the date hereof
and will, at the Closing, own all of the BSA Shares, free and clear of all
Encumbrances (as herein defined). BSA owns all of the BSG Shares on the date
hereof and will, at the Closing, own all of the BSG Shares, free and clear of
all Encumbrances. None of the BSA Shares or the BSG Shares were issued in
violation of any preemptive rights, rights of first refusal or similar rights.
There are no outstanding options, warrants, convertible securities, calls,
rights, commitments, preemptive rights, agreements, instruments or
understandings of any character to which the Seller, BSA or BSG is a party or by
which the Seller, BSA or BSG is bound, obligating Seller, BSA or BSG to issue,
deliver or sell, or cause to be issued, delivered or sold, contingently or
otherwise, additional shares of capital stock of BSA or BSG or any securities or
obligations convertible into or exchangeable for such shares or to grant, extend
or enter into any such option, warrant, convertible security, call, right,
commitment, preemptive right or agreement. There are no outstanding obligations,
contingent or otherwise, to which the Seller, BSA or BSG is a party or by which
the Seller, BSA or BSG is bound, obligating Seller, BSA or BSG to purchase,
redeem or otherwise acquire any capital stock of BSA or BSG, including the BSA
Shares and the BSG Shares. None of the Seller, BSA or BSG is a party to any
voting trust agreement or other contract, agreement, arrangement, commitment,
plan or understanding restricting transfer or otherwise relating to voting,
dividend or other rights with respect to the capital stock of BSA or BSG,
including the BSA Shares and the BSG Shares. BSA does not have, directly or
indirectly, any legal or beneficial interest in any subsidiary, partnership,
joint venture or other entity, other than BSG. BSG has not (i) entered into any
agreements, contracts, guarantees, understandings or other commitments (written
or oral), (ii) engaged in any commercial operations, or (iii) incurred any
liabilities or become subject to any obligations of any nature (matured or
unmatured, fixed or contingent).
2.3 Authorization; Consents and Approvals; No
Violations. (a) The execution and delivery of this Agreement by the Seller,
and the agreements provided for herein, and the consummation by the Seller of
all transactions contemplated hereby and thereby, have been duly authorized by
all requisite corporate action. This Agreement has been, and each other
agreement contemplated hereby to which the Seller is a party will be, duly
executed and delivered by the Seller. This Agreement and all such other
agreements and obligations entered into and undertaken in connection with the
transactions contemplated hereby to which the Seller is a party constitute or
will, when executed and delivered, constitute the valid and legally binding
obligations of the Seller, enforceable against the Seller in accordance with
their respective terms.
(b) Assuming that all consents,
approvals, authorizations and other actions described in this Section 2.3 or
listed on Schedule 2.3 attached hereto have been obtained and all filings and
obligations described in this Section 2.3 or listed on Schedule 2.3 attached
hereto have been made, the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or result in the
loss of a material benefit under, or result in the creation of any Encumbrance
upon any of the Assets or any of the properties or assets of BSA or BSG under,
any provision of (i) the Certificate of Incorporation or the Bylaws of Seller,
as amended to date, (ii) any provision of the comparable charter or organization
documents of each of BSA and BSG, each as amended to date, (iii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license to which Seller, BSA or BSG
is a party or to which Seller, BSA or BSG is bound (iv) any judgment, order,
decree, statute, law, rule or regulation applicable to Seller, BSA or BSG, the
Assets or any of the properties or assets of BSA or BSG, other than, in the case
of clauses (ii), (iii) or (iv), any such violations, defaults, rights, losses,
or Encumbrances that, individually or in the aggregate, would not have a
Material Adverse Effect, materially impair the ability of Seller to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
(c) No filing or registration
with, or authorization, consent or approval of, any United States (federal and
state), foreign or supranational court, commission, governmental body,
regulatory agency, authority or tribunal (a “Governmental Entity”) is required
by or with respect to Seller, BSA or BSG in connection with the execution and
delivery of this Agreement by Seller, or is necessary for the consummation of
the transactions contemplated by this Agreement, except (i) applicable
requirements, if any, of applicable securities laws or the Nasdaq Stock Market,
and (ii) such other consents, orders, authorizations, registrations, approvals,
declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate, have a Material Adverse Effect, materially
impair the ability of Seller to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby.
2.4 Ownership and Condition of the Assets.
Schedule 2.4(a) attached hereto sets forth a true, correct and complete list of
all liens, mortgages, security interests, restrictions, pledges, charges and
encumbrances (collectively, the “Encumbrances”) affecting the Assets or the
Business. The Seller, BSA or BSG is, and at the Closing will be, the true and
lawful owner of or will have valid and subsisting leasehold interests in or
valid licenses to use, all of the Assets and all other assets used or held for
use in connection with the Business, and upon payment therefor by Buyer, Buyer
will have good and marketable title thereto, or valid and subsisting leasehold
interests in or valid licenses to use such assets free and clear of all
Encumbrances of any kind, except for those created by Buyer and except as set
forth on Schedule 2.4(b) attached hereto (the “Permitted Encumbrances”). The
Assets and the assets of BSA and BSG, taken as a whole, constitute all the
properties and assets relating to or used or held for use solely in connection
with the Business during the past 12 months (except inventory sold, cash used in
the Business, accounts receivable collected, prepaid expenses realized,
contracts fully performed, properties or assets replaced by equivalent or
superior properties or assets, in each case in the ordinary course of the
Business, and Excluded Assets). Except for the Excluded Assets, there are no
assets or properties used solely in the conduct of the Business and owned by any
person or entity other than the Seller or BSA or BSG that will not be leased or
licensed to the Buyer under valid, current leases or licenses following the
Closing. The Assets and all assets of BSA and BSG are in adequate operating
condition and are adequate for the purposes for which they are currently used or
held for use. To the knowledge of the Seller, there are no facts or conditions
affecting the Assets which could, individually or in the aggregate, reasonably
be expected to interfere in any material respect with the use, occupancy or
operation thereof as currently used, occupied or operated, or their adequacy for
such use, occupancy or operation.
2.5 Reports and Financial Statements. The
Seller has made available to the Buyer true, correct and complete copies of the
audited accounts of BSA relating to the financial years ended December 31, 1998,
1999 and 2000, together with the Annexes thereto (the “BSA Accounts”). The BSA
Accounts have been prepared on the basis of a going concern and conform to the
French “Plan Comptable”; they fairly present BSA’s financial position and of its
results of operations and cash flows for the relevant date and financial year.
The BSA Accounts make appropriate provision for bad or doubtful debts and for
the depreciation of Inventory. Neither the Seller nor BSA has received a
written notice from an official body or from its auditors concerning a failure
to observe legal requirements relating to the preparation of the BSA Accounts.
The preparation of the BSA Accounts has not been subject to any significant
change as to the accounting methods, principles or practices used by BSA and/or
Seller, or to a specific accounting practice (in particular, without limitation,
in respect of the accounting principles, the notes to the accounts relating to
reserves, to depreciation and to rates used), which would otherwise give a
misleading comparison between the accounts for one period and the next.
2.6 Absence of Undisclosed Liabilities.
Attached hereto as Exhibit B is a true, correct and complete copy of the
unaudited combined balance sheet of Seller relating to the Business and of BSA
and BSG as of December 31, 2000 (the “Current Balance Sheet”). The Current
Balance Sheet is in accordance with the books and records of the Seller, BSA and
BSG and was prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby (except as may be indicated therein or in
the notes thereto). Seller does not have any liability or obligation, secured
or unsecured, whether accrued, absolute, contingent, unasserted or otherwise,
affecting the Assets or the Business, and BSA and BSG do not have any liability
or obligation, secured or unsecured, whether accrued, absolute, contingent,
unasserted or otherwise, except as and to the extent with respect to any of the
foregoing (a) reflected and reserved against in the Current Balance Sheet, (b)
incurred in the ordinary course of the Business after the date of the Current
Balance Sheet (none of which individually or in the aggregate would have a
Material Adverse Effect) or (c) set forth on Schedule 2.6 attached hereto.
Except as disclosed on the Current Balance Sheet, as required by French law or
as disclosed on Schedule 2.6, none of the employees of the Business is now, or
will by passage of time hereafter become, entitled to receive any vacation time,
vacation pay or severance pay attributable to services rendered prior to
December 31, 2000.
2.7 Litigation. Except as set forth on
Schedule 2.7 attached hereto, none of the Seller (only to the extent related to
the Business), BSA or BSG or any of their respective officers or directors (in
their capacity as such and only to the extent related to the Business), is a
party to, nor to the Seller’s knowledge threatened with, and none of the Assets
or any of the assets or properties of BSA or BSG is subject to, any litigation,
suit, action, investigation, proceeding or controversy before any court,
administrative agency or other governmental authority, whether at common law,
civil law or in equity nor to Seller’s knowledge is there any basis therefor.
2.8 Inventory. Schedule 2.8 attached hereto
sets forth a true, correct and complete list of all inventories of finished
goods and packaging materials and similar items of Seller and its subsidiaries
other than BSA and BSG which relate to or are used or held for use solely in
connection with the Business and all other inventory of the Business of BSA and
BSG as of December 31, 2000 (the “Balance Sheet Date”), including raw materials,
works in progress, goods supplied to BSA or BSG by suppliers, goods on
consignment, office supplies, maintenance supplies, and all other goods
customarily sold by BSA or BSG (whether located on any of their respective
premises, in transit to or from such premises, in other storage facilities, or
otherwise), and Schedule 2.8 identifies whether such inventory is owned by
Seller, Seller’s affiliates other than BSA and BSG, BSA or BSG (collectively,
the “Inventory”). Schedule 2.8, as updated pursuant to Sections 8.5 and 1.3(c)
hereof, shall set forth a true, correct and complete list, in accordance with
GAAP, of the Inventory of the Business as of the date of the Closing Balance
Sheet (the “Interim Date”) and as of the Closing Date, respectively, including a
description and valuation thereof. The Inventory listed on Schedule 2.8
comprises all of the Inventory of the Business on the Balance Sheet Date and all
of the Inventory reflected on the Current Balance Sheet, and the Inventory
listed on Schedule 2.8 as updated pursuant to Sections 8.5 and 1.3(c) will
comprise all of the Inventory of the Business as of the Interim Date and as of
the Closing Date, respectively, and all of the Inventory reflected on the
Closing Balance Sheet and on the Closing Date Balance Sheet. All of such
Inventory was acquired and has been maintained in the ordinary course of the
Business; consists of a quality, quantity and condition usable, leasable or
saleable in the ordinary course of the Business in accordance with GAAP; is
valued at the lower of cost or market, with allowances for excess and obsolete
materials and materials below standard quality determined in accordance with
GAAP and consistent with the Current Balance Sheet and the BSA Accounts and is
not subject to any material write-down or write-off. None of Seller, BSA or BSG
is under any obligation or has any liability with respect to the return of the
Inventory of the Business in the possession of wholesalers or retailers or any
Inventory previously sold to other customers except in a manner consistent with
past practice.
2.9 Fixed Assets. Schedule 2.9 attached
hereto sets forth a true, correct and complete list, of all fixed assets of BSA
and BSG (the “Fixed Assets”) as of the Balance Sheet Date, including a
description thereof. Schedule 2.9, as updated pursuant to Sections 8.5 and
1.3(c) hereof, shall set forth a true, correct and complete list of all Fixed
Assets as of the Interim Date and as of the Closing Date, respectively,
including a description thereof. The Fixed Assets listed on Schedule 2.9
comprise all of the Fixed Assets on the Balance Sheet Date and all of the Fixed
Assets reflected on the Current Balance Sheet, and the Fixed Assets listed on
Schedule 2.9 as updated pursuant to Sections 8.5 and 1.3(c) will comprise all of
the Fixed Assets as of the Interim Date and as of the Closing Date,
respectively, and all of the Fixed Assets reflected on the Closing Balance Sheet
and on the Closing Date Balance Sheet, respectively. All of the Fixed Assets are
in adequate operating condition and repair, normal wear and tear excepted, are
usable in the regular and ordinary course of the Business as conducted by the
Seller, BSA and BSG prior to the Closing Date and conform in all material
respects to all applicable statutes, rules, regulations and ordinances of every
governmental authority having jurisdiction over any of them, and constitute all
of the Fixed Assets necessary to operate the Business as currently conducted by
BSA and BSG.
2.10 Leases. Schedule 2.10 attached hereto sets
forth a true, correct and complete list as of the date hereof of all licenses to
use and leases of real property and equipment, identifying separately each
ground lease, to which BSA is a party (the “Leases”) and any and all capital
expenditures made or committed or agreed to be made under any of the Leases.
True, correct and complete copies of the Leases, and all amendments,
modifications and supplemental agreements thereto, have previously been
delivered by the Seller to the Buyer. BSA enjoys peaceful and undisturbed
possession under all such Leases. The Leases are in full force and effect, are
binding and enforceable against BSA and, to the Seller’s knowledge, each of the
other parties thereto, in accordance with their respective terms and, except as
set forth on Schedule 2.10, have not been modified or amended since the date of
delivery to the Buyer. No party to any Lease has sent written notice to the
other claiming that such party is in default thereunder, which default remains
uncured. Except as set forth on Schedule 2.10 attached hereto, BSA is not in
breach of or default in the performance of any covenant, agreement or condition
contained in any Lease. Neither the Seller nor BSA has received written notice
of any violation of any applicable zoning ordinance, building code, use or
occupancy restriction or any condemnation action or proceeding with respect to
any of the premises under the Leases nor is Seller aware of any basis therefor.
2.11 Change in Financial Condition and Assets.
Except as set forth on Schedule 2.11 attached hereto, since the Balance Sheet
Date, there has been no material adverse change in any of the Assets or any
assets of BSA or BSG used in the Business or in the condition, financial or
otherwise, of the Business.
Without limiting the foregoing, except as set forth on Schedule
2.11, since the Balance Sheet Date, (a) neither BSA nor BSG has: (i) borrowed
any amount or incurred or become subject to any liability, except current
liabilities, liabilities under Contracts entered into and borrowings under
banking facilities disclosed in the Schedules hereto; (ii) discharged or
satisfied any Encumbrance or paid any obligation or liability other than current
liabilities shown on the Current Balance Sheet (including regularly scheduled
payments (but not prepayments) of long-term debt) and current liabilities
incurred since the Balance Sheet Date in the ordinary course of the Business;
(iii) failed to pay or discharge when due its liabilities or obligations;
(iv) mortgaged, pledged or subjected to an Encumbrance any of its assets,
tangible or intangible, (v) sold, assigned or transferred any of its tangible
assets except in the ordinary course of the Business consistent with past
practices; (vi) sold, assigned, transferred or granted any license with respect
to any Intangible Property; (vii) made commitments or agreements for capital
expenditures exceeding in the aggregate $25,000; (viii) received written notice
of any actual or threatened labor trouble or strike or union organizing effort;
(ix) granted any severance or termination pay; (x) except as set forth on
Schedule 2.16, increased any compensation or benefits payable to any of its
directors, officers, employees, independent contractors or consultants; (xi)
made any material change in any method of accounting or accounting practice;
(xii) declared, set aside or paid any dividend or made any distribution on any
shares of its capital stock (whether in cash or in kind), or issued, sold,
redeemed, purchased or acquired any shares (including any options, warrants or
other rights with respect thereto) of its capital stock; (xiii) undertaken any
revaluation of any of its assets, including, without limitation, writing down
the value of Inventory or writing off notes or accounts receivables other than
in the ordinary course of Business consistent with past practices; (xiv) made
any material Tax election inconsistent with past practices or settled or
compromised any material Tax liability; (xv) suffered any event causing a
Material Adverse Effect, (xvi) suffered any material damage or destruction
whether or not covered by insurance; (xvii) made any change in the manner or
rate of billing or collections; or (xviii) entered into any commitment to do any
of the foregoing; and (b) the Seller has not taken any of the foregoing actions
or suffered any of the foregoing events, in each case with respect to the
Business, except as otherwise contemplated hereby.
2.12 Tax Matters. (a) Each of BSA and BSG has
filed all Tax Returns (as hereinafter defined) that it has been required to file
(taking into account all extensions) through and including the date hereof. All
such Tax Returns reflect all liabilities for Taxes for the periods covered by
such Tax Returns. All Taxes owed by BSA and BSG (whether or not shown on any Tax
Return) have been fully and timely paid when due or provided for. Except as
disclosed on Schedule 2.12, none of BSA or BSG is currently the beneficiary of
any extension of time within which to file any Tax Return. There are no liens
on any of the Assets or the assets of BSA or BSG that arose in connection with
any failure (or alleged failure) to pay any Tax, other than any Tax which is not
yet due and payable or which is being contested in good faith through
appropriate proceedings and for which adequate reserves exist on BSA’s or BSG’s
books. For purposes of this Agreement, “Tax” shall mean any federal, state,
local, municipal or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
gains, environmental (including taxes under Section 59A of the Internal Revenue
Code of 1986, as amended (the “Code”)), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty or addition thereto,
whether disputed or not, and “Tax Return” shall mean any return, declaration,
report, claim for refund or information return or statement relating to Taxes,
including any schedule or attachment thereto and any amendment thereof.
(b) Each of BSA and BSG has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid by it or owing by it to any employee, independent
contractor, creditor, stockholder or other third party.
(c) Except as set forth on
Schedule 2.12, none of BSA, Seller or BSG has received written notice from any
authority of such authority’s intent to assess any additional Taxes against BSA
or BSG with respect to any period for which Tax Returns have been filed nor is
Seller aware of any basis therefor. Schedule 2.12 indicates those Tax Returns
with respect to BSA and BSG for taxable periods ended on or after December 31,
1997 that have been audited by a taxing authority, and that currently are the
subject of audit by a taxing authority. The Seller has made available to the
Buyer correct and complete copies of all BSA’s and BSG’s income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by BSA or BSG since January 1, 1998. Neither BSA nor BSG has waived any
statute of limitations in respect of the assessment and collection of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.
(d) None of the Assumed
Liabilities is an obligation to make a payment that will not be deductible under
Section 280G of the Code. None of the Seller, BSA or BSG has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code. Neither BSA nor BSG is a party to any Tax allocation or sharing
agreement. Neither BSA nor BSG (i) has been a member of an affiliated group
(within the meaning of Section 1504 of the Code) filing a consolidated U.S.
federal income Tax Return (other than a group of which the Seller or BioSepra
Inc. was the common parent), and (ii) is liable for the Taxes of any other
person under Treas. Reg. § 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract or otherwise.
(e) BSA does not benefit from
any advantageous tax regime or social security regime granted by law or by a
specific ruling from any French governmental or local authority that may be
challenged, either in part or in whole, as a result of the sale of the BSA
Shares.
(f) All material elections and
consents with respect to any Tax (or the computation thereof) affecting BSA or
BSG as of the date hereof are indicated on the Tax Returns if and to the extent
required to be indicated thereon or are set forth on Schedule 2.12. After the
date hereof, no election or consent with any respect to any Tax (or computation
thereof) affecting BSA or BSG will be made without written consent of the Buyer
(which consent shall not be unreasonably withheld or delayed).
(g) The unpaid taxes of BSA and
BSG have not (i) exceeded, as of the Balance Sheet Date, the reserve for Tax
liability (rather than in any reserve for deferred Taxes established to reflect
timing difference between book and Tax income) set forth on the face of the
Current Balance Sheet (rather than in any notes thereto), or (ii) exceeded that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of BSA and BSG in filing its Tax
Returns.
(h) BSA is not party to any “acte
anormal de gestion”, being defined as a transaction or arrangement under which
it may be required to pay for any asset or any services or facilities an amount
which is in excess of the market value of such asset, services or facilities, or
will receive any payment for an asset, services or facilities that it had
supplied or provided, or is liable to supply or provide, which is less than the
market value of such asset, services or facilities.
2.13 Accounts Receivable. Schedule 2.13
attached hereto sets forth a true, correct and complete list of all accounts,
accounts receivable, notes and notes receivable of BSA (collectively the
“Accounts Receivable”), including an aging thereof, as of the Balance Sheet
Date. Schedule 2.13, as updated pursuant to Sections 8.5 and 1.3(c) hereof,
shall set forth a true, correct and complete list of the Accounts Receivable of
BSA as of the Interim Date and as of the Closing Date, respectively, including
an aging thereof. The Accounts Receivable listed on Schedule 2.13 comprise all
of the Accounts Receivable of BSA as of the Balance Sheet Date and all of the
Accounts Receivable of BSA reflected on the Current Balance Sheet, and the
Accounts Receivable listed on Schedule 2.13 as updated pursuant to Sections 8.5
(other than Intercompany Accounts) and 1.3(c) will comprise all of the Accounts
Receivable of BSA as of the Interim Date and as of the Closing Date,
respectively, and all of the Accounts Receivable of BSA reflected on the Closing
Balance Sheet (other than Intercompany Accounts) and on the Closing Date Balance
Sheet, respectively. All of the Accounts Receivable of BSA are valid and genuine
and have arisen solely out of bona fide sales and deliveries of goods,
performance of services and other business transactions. The Seller, BSA and BSG
have fully performed all obligations with respect thereto which they were
obligated to perform prior to the date of the Current Balance Sheet, the Closing
Balance Sheet or the Closing Date Balance Sheet, as applicable.
2.14 Contracts and Commitments.
(a) Schedule 2.14 attached
hereto contains a true, complete and correct list of the following contracts,
arrangements, commitments and agreements, whether written or oral (collectively,
“Contracts”) (other than a Contract which is an Excluded Asset), (x) by which
any of the Assets are bound or affected, (y) to which Seller is a party or by
which it is bound solely in connection with the Business or any of the Assets
and (z) to which BSA or BSG is a party or by which any of their assets or
properties are bound or affected:
(i) all loan
agreements, indentures, mortgages and guaranties;
(ii) all Contracts
which involve payments or receipts of more than $20,000 under which full
performance (including payment) has not been rendered by all parties thereto;
(iii) all agency,
distributor, sales representative and similar agreements;
(iv) all Contracts
with any stockholder, director, officer or Affiliate of the Seller, BSA or BSG;
(v) all leases,
whether operating, capital or otherwise, which involve payments of more than
$20,000 per year;
(vi) any license to
or for any Intangible Property (other than customary end user license agreements
to readily available software);
(vii) Contracts
containing any covenant not to compete obligating Seller, BSA or BSG with
respect to the Business; or
(viii) any other
material Contract not included in subparagraphs (i) – (vii) above.
(b) Except as set forth on
Schedule 2.14 attached hereto:
(i) each Contract
is in full force and effect and is a valid and binding agreement of the Seller,
BSA or BSG, as the case may be, enforceable against the Seller, BSA or BSG, as
the case may be, in accordance with its terms and the Seller does not have any
knowledge that any Contract is not a valid binding agreement of the other
parties thereto;
(ii) none of the
Seller, BSA or BSG is in breach of or default under any Contract and to the
knowledge of Seller no event has occurred which with the passage of time or
giving of notice or both would constitute a default, result in a loss of rights
or an acceleration of an obligation or result in the creation of any Encumbrance
thereunder or pursuant thereto; and
(iii) to the
knowledge of the Seller, there is no existing breach or default by any other
party to any Contract, no event has occurred which with the passage of time or
giving of notice or both would constitute a default, result in a loss of rights
or an acceleration of an obligation or result in the creation of any Encumbrance
thereunder or pursuant thereto; and
(c) Except as set forth on
Schedule 2.3 or Schedule 2.14, the continuation, validity, enforceability and
effectiveness of each Contract will not be affected by the consummation of the
transactions contemplated by this Agreement.
(d) True, correct and complete
copies of all written Contracts and true, correct and complete summaries of all
oral Contracts have previously been made available by the Seller to the Buyer.
(e) No party to any Contract has
repudiated any provision thereof and communicated such repudiation to the
Seller, and there are no negotiations pending or in progress to revise any
material terms of any Contract.
(f) Except for Contracts set
forth on Schedule 2.14, (i) no Contracts which are purchase contracts continue
for a period of more than 12 months or are for quantities or amounts in excess
of the normal, ordinary, usual and current requirements of the Business and (ii)
no Contracts obligate the Seller, BSA or BSG to sell products or to render
services pursuant to terms and conditions the Seller, BSA or BSG cannot
reasonably expect to satisfy or fulfill in their entirety.
2.15 Compliance with Agreements and Laws. The
Seller, BSA and BSG have all material licenses, permits, certificates,
authorizations and approvals including environmental, health and safety and
employee health and safety permits, from foreign, federal, state and local
authorities necessary to conduct the Business as currently conducted
(collectively, the “Permits”), all of which Permits are set forth on Schedule
2.15. All of the Permits identified in Schedule 2.15 are in full force and
effect, and no party thereto is in default under any of such Permits and no
event has occurred and no condition exists which with the giving of notice, the
passage of time or both, would constitute a default thereunder. No action or
claim is pending or, to Seller’s knowledge, threatened, to revoke or terminate
any Permit identified in Schedule 2.15. None of the Seller (solely with respect
to the Business), BSA or BSG is in material violation of any law, rule,
regulation, ordinance or court or administrative order (including, without
limitation, those relating to building, zoning, environmental, disposal of
hazardous substances, land use, health and safety and employee health and safety
matters). Except as set forth on Schedule 2.15 attached hereto, none of the
Seller, BSA or BSG has received any written notice or communication from any
foreign, federal, state or local governmental or regulatory authority or
otherwise of any such violation relating to the Business or the Assets, and to
Seller’s knowledge, no such notice or communication is threatened. BSA is ISO
9001 certified. The Seller believes that its production and documentation
procedures are consistent with Good Manufacturing Practices as prescribed by the
United States Food and Drug Administration as applicable to a supplier to the
pharmaceutical industry.
2.16 Employee Relations and Benefit Plans.
(a) Schedule 2.16(a) attached
hereto sets forth a true, correct and complete list of the names, the rate of
compensation (and the portions thereof attributable to salary and bonuses,
respectively) and location of (i) all current officers, employees and
independent contractors of and consultants to BSA (the “BSA Employees”) and (ii)
of all current officers, employees and independent contractors of and
consultants to Seller who devote a material portion of their time to the
Business and to whom Buyer shall make an offer of employment in accordance with
Section 7 (the “Affected Employees”). BSG does not employ any employees,
independent contractors or consultants.
(b) Except as set forth on
Schedule 2.16(b) hereto:
(i) BSA is in
compliance in all material respects with all foreign, municipal and French laws
respecting employment, employee benefit plans and employment practices, terms
and conditions of employment, and wages and hours, and is not engaged in any
unfair labor practice, and there are no arrears in the payment of wages or
social security taxes.
(ii) None of the
BSA Employees are currently represented by any labor union.
(iii) There is no
unfair labor practice complaint against BSA pending before the French Labour
Inspectorate or any federal, state, local or foreign agency.
(iv) There is no
pending labor strike or other labor trouble or grievance affecting the BSA
Employees (including, without limitation, any organizational drive targeted
directly or indirectly at the BSA Employees).
(v) Neither the
Seller nor, except as may be required by French law, BSA, has any liability for
salary, commissions, bonuses, vacation, sick leave, maternity leave or other
compensation, fringe benefits or termination or severance benefits due to the
BSA Employees except as will be set forth or reserved for on the Closing Balance
Sheet and the Closing Date Balance Sheet.
(vi) No employment
contract of any of the BSA Employees contains provisions for compensation in the
event of redundancy or retirement which are more favorable than those under the
law governing the said contract or the applicable collective bargaining
agreement.
(vii) Neither BSA nor
the Seller has given any written undertakings to any of the BSA Employees,
including, but without limitation, to increase salaries, pay any bonus, grant
any profit share or supplementary pension or other individual advantage, which
has not been duly provided for in the BSA Accounts.
(viii) No employment
contract of any BSA Employee provides for payment of damages, interest or
compensation, which exceeds that stipulated by applicable law or by the
applicable collective bargaining agreement.
(ix) No BSA Employee
with the status of “cadre” (executive) has given notice to resign, or has
received a redundancy notice. No sums are owing to former BSA Employees as a
result of any redundancy, dismissal or resignation that are not reflected in the
BSA Accounts. No BSA Employee having received a redundancy notice has, on the
date hereof, requested preferential treatment for re-employment.
(x) Except as
provided for by law or in any applicable collective bargaining agreement, there
are no schemes, agreements or arrangements in existence which grant special
benefits to any BSA Employees, including, in particular, with respect to
supplementary pension and retirement rights. As such, there are no
superannuation, pension, life assurance, death benefit, sickness or accident
benefit schemes or arrangements in existence which grant to any BSA Employees
supplementary benefits other than those required by law.
(xi) With respect to
the BSA Employees, BSA and the Seller have complied in all material respects
with all applicable French labor, social security, health and safety at work
regulations, including, without limitation, in relation to redundancy,
employees’ representation and social security contributions. In particular, the
elections of personnel representatives have been duly held within the correct
time limits and any necessary consultation with personnel representatives, works
councils and trade union representatives has been carried out in accordance with
all applicable laws and regulations.
(xii) There are no
current disputes between BSA or the Seller and any trade union or similar
organization with respect to the BSA Employees.
(xiii) Neither BSA nor
the Seller is in breach of its statutory obligations concerning the health and
safety at work of the BSA Employees, nor has it received written notice of any
claim against it by any employee or third party relating to an accident.
(xiv) Except as
provided for by law or in any applicable collective bargaining agreement, none
of the BSA Employees are subject to any obligation under any subscription
program, share-option or profit-sharing schemes reserved to its employees.
(xv) The only
collective bargaining agreement applicable to BSA Employees is disclosed in
Schedule 2.16(b).
(xvi) Each of the BSA
Employees is employed exclusively in the business of BSA and no BSA Employee is
currently on secondment (“detache”) to the Seller, any affiliate of the Seller
or any third party.
2.17 Customers. Schedule 2.17 attached hereto
sets forth a true, correct and complete list of the names and addresses of all
customers of the Seller, of BSA or BSG which individually accounted for more
than 5% of the total sales of the Business in the fiscal year ended December 31,
2000. The Seller has not received written notice from any of the customers
listed on Schedule 2.17 that such customer intends to cease purchasing from the
Seller, BSA or BSG or to decrease the amount of purchases from the Seller, BSA
or BSG.
2.18 Suppliers. Schedule 2.18 attached hereto
sets forth a true, correct and complete list of the names and addresses of all
suppliers of the Seller, BSA and BSG which individually accounted for more than
5% of the total purchases of the Business for the fiscal year ended December 31,
2000. The Seller has not received written notice from any of the suppliers
listed on Schedule 2.18 that such supplier intends to cease selling to the
Seller, BSA or BSG or to alter the amount of such sales to the Seller, BSA or
BSG.
2.19 Trade Names and Other Intangible Property.
(a) Schedule 2.19(a) attached hereto sets forth a true, correct and complete
list of all trademarks, patents, patent applications, invention records, lab
notebooks, procedures (“SOPs”) and research and development activity reports of
the Seller which relate primarily to or are used or held for use in connection
with the Business (other than an Excluded Asset as set forth in Schedule
1.1(b)(i)) and all trademarks, patents, patent applications, invention records,
lab notebooks, SOPs and research and development activity reports of BSA. True,
correct and complete copies of all licenses and other agreements relating to the
Intangible Property have been previously made available by the Seller to the
Buyer and are listed on Schedule 2.14. All such licenses and agreements are in
full force and effect and neither the Seller nor BSA or, to the Seller’s
knowledge, any of the other parties to such licenses or agreements is in breach
of any provision of, or in default under any of the terms of, such licenses or
agreements and, to the Seller’s knowledge, no condition exists which, with the
passage of time, the giving of notice, or both, would result in a breach or
default. Assuming that all consents and approvals set forth on Schedule 2.3
have been obtained, the consummation of the transactions contemplated by this
Agreement neither constitutes a breach of nor causes a termination of any such
license or agreement.
(b) Schedule 2.19(b) attached
hereto sets forth a true, correct and complete list, and where appropriate, a
description, of all Intangible Property set forth in Schedule 2.19(a) to which
neither Seller nor BSA’s rights are exclusive. Except as otherwise disclosed in
Schedule 2.19(b) attached hereto, the Seller or BSA exclusively owns or has the
exclusive right to use all Intangible Property listed on Schedule 2.19(a).
Seller has not wrongfully utilized or misappropriated the trade secrets of any
third party. The Intangible Property set forth in Schedule 2.19(a) is sufficient
to enable the Seller and BSA to conduct the Business as presently conducted by
the Seller and BSA.
(c) To Seller’s knowledge, no
person or entity is infringing upon, is in violation of, or is misappropriating
or misusing any of the Intangible Property. Except as set forth in Schedule
2.19(b), subsequent to the Closing, no other party, including but not limited
to, any current or former director, officer, stockholder, employee or consultant
of the Seller or BSA will own, have an interest in or have the right to use any
Intangible Property which is being utilized in the Business (other than an
Excluded Asset as set forth in Schedule 1.1(b)(i). Except as disclosed in
Schedule 2.19(b), there is no pending or, to the Seller’s knowledge, threatened
claim or litigation against the Seller or BSA contesting its right to use any
Intangible Property nor to Seller’s knowledge is there any basis therefor.
Except as disclosed in Schedule 2.19(b), there is no pending or, to the Seller’s
knowledge, threatened claim or litigation against the Seller or BSA asserting
the misappropriation or misuse of any trade secret or any confidential or
proprietary invention, discovery, process, formula, know-how, technology or
information of another nor to Seller’s knowledge is there any basis therefor.
Except as disclosed in Schedule 2.19(b), there is no pending or, to the Seller’s
knowledge, threatened claim or litigation against the Seller or BSA asserting
that the Seller or BSA has violated or infringed any patent nor to Seller’s
knowledge is there any basis therefor. Except as disclosed in Schedule 2.19(b),
there is no pending or, to the Seller’s knowledge, threatened claim or
litigation against the Seller or BSA asserting that the Seller or BSA has
violated or infringed any trademark, trade name, copyright or other property
right of another nor to Seller’s knowledge is there any basis therefor. This
Agreement and the consummation of the transactions contemplated hereby will not
affect the continuation, validity and effectiveness of any right in the
Intangible Property being transferred to Buyer or owned by BSA. Since May 17,
1999, the Seller (solely with respect to the Business) and BSA have not
conducted business under any corporate, trade or fictitious name other than the
names listed on Schedule 2.19(c) hereto.
2.20 Real Estate. Neither BSA nor BSG owns any
real property, except for fixtures or other installations on the premises leased
by BSA or BSG which may be considered real property.
2.21 Powers of Attorney. Except as set forth on
Schedule 2.21 attached hereto, none of BSA or BSG has any general or special
powers of attorney outstanding (whether as grantor or grantee thereof).
2.22 Brokers. The Seller represents and
warrants that none of the Seller, BSA or BSG has engaged any broker or finder or
incurred any liability for brokerage fees, commissions or finder’s fees in
connection with the transactions contemplated by this Agreement.
2.23 No Illegal or Improper Transactions. None
of the Seller (solely with respect to the Business), BSA or BSG has offered,
paid or agreed to pay to any person or entity (including any governmental
official) or solicited, received or agreed to receive from any person or entity,
directly or indirectly, any money or thing of value for the purpose or with the
intent of (a) obtaining or maintaining business for the Seller, BSA or BSG, (b)
facilitating the purchase or sale of any product or service, or (c) avoiding the
imposition of any fine or penalty, in any such case in any manner which is in
violation of any applicable ordinance, regulation or law.
2.24 Environmental Matters. (a) The Seller
(solely with respect to the Business), BSA and BSG have complied in all material
respects with all Environmental Laws. There is no pending or, to the Seller’s
knowledge, threatened civil or criminal litigation, written notice of violation,
formal administrative proceeding or investigation, inquiry or information
request by any person or entity relating to any Environmental Law involving the
Seller (solely with respect to the Business), BSA and BSG nor to Seller’s
knowledge is there any basis therefor. For purposes of this Agreement,
“Environmental Law” means any federal, state, local or foreign law, statute,
code, rule, regulation, ordinance, order or consent decree relating to
pollution, hazardous substances or waste, natural resources, the environment or
occupational health and safety, including, without limitation, the Resource
Conservation and Recovery Act (42 U.S.C. §6901, et seq., as amended), the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
§9601, et seq., as amended), the Toxic Substance Act (15 U.S.C. §2601 et seq.,
as amended), the Clean Water Act (33 U.S.C. §466, et seq., as amended), the
Clean Air Act (42 U.S.C. §7401, et seq., as amended) and federal and state
environmental cleanup programs.
(b) BSA has obtained all
requisite environmental permits relating to the Business and such permits are in
full force and effect. The environmental permits do not materially limit or
affect the processes, methods, capacity or operating hours of the persons
carrying on the Business as currently carried on. No material capital
expenditure is currently required by BSA in relation to environmental matters
relating to the Business in order to comply with, extend, renew or obtain any
environmental permit or comply with Environmental Laws. To the Seller’s
knowledge, transfer of the BSA Shares and the transactions contemplated
hereunder will not result in (i) the variation, limitation or revocation of any
environmental permit or (ii) any environmental permit not being extended,
renewed or granted. To the Seller’s knowledge, none of the real properties on
which BSA carries on the Business is contaminated, and no pollution or
contamination has migrated to or otherwise affected any other property used in
the Business. All environmental audits and other assessments, reviews and
reports relating solely to the Business in possession or control of the Seller
or BSA have been disclosed to the Buyer.
2.25 Product Warranties; Liabilities.
(a) Except as set forth in
Schedule 2.7, none of Seller, BSA or BSG has any outstanding material disputes
concerning products or services of the Business with any customers. None of
Seller, BSA or BSG has any outstanding material disputes concerning goods or
services provided by any supplier.
(b) The Seller has furnished the
Buyer with the terms of sale containing the warranties or guarantees of products
and services that are in effect in the conduct of the Business. There are no
pending or, to knowledge of the Seller, threatened claims against the Seller,
BSA or BSG under any warranty or guaranty.
2.26 Bankruptcy. BSAis not the subject of any
procedure for its judicial receivership (“redressement judiciaire”) or any
similar or equivalent procedure or liquidation (“liquidation judiciaire”), and
no judicial administrator (“administrateur judiciaire”) or liquidator has been
appointed in respect of it. Neither BSA nor the Seller has commenced
negotiations with one or more of BSA’s creditors with a view to the general
readjustment or rescheduling of its indebtedness, nor has it made a general
assignment for the benefit of its creditors. No receiver or arbitrator
(“conciliateur”) has been appointed in the context of amicable receivership
(“reglement amiable” or “mandataire ad hoc”) proceedings in respect of BSA.
2.27 Insurance. Schedule 2.27 sets forth all
insurance policies maintained by BSA or BSG (including any self-insurance
arrangements) and the type and amounts of coverage thereunder. All of such
policies are in full force and effect and will be maintained until the Closing,
none of BSA or BSG is delinquent with respect to any premium payments thereon,
no written notice of cancellation has been received, and there is no existing
default thereunder, and such insurance, together with the insurance maintained
by Seller with respect to the Business, is of the type and in the amount
customary for businesses such as the Business.
2.28 Books and Records. The general ledgers and
books of account of BSA and BSG, all federal, state, local and foreign income,
franchise, property and other tax returns filed by BSA or BSG and all other
books and records of BSA and BSG are complete and correct in all material
respects and have been maintained in accordance with good business practice and
in accordance with all applicable procedures required by laws and regulations.
3. Representations of the Buyer.
The Buyer represents and warrants to the Seller as follows, except
as set forth on the respective Schedules attached hereto:
3.1 Organization and Authority. The Buyer is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite power and authority
(corporate and other) to own its properties and to carry on its business as now
being conducted. The Buyer has full power to execute and deliver this Agreement
and the other agreements contemplated hereby and to consummate the transactions
contemplated hereby and thereby.
3.2 Authorization. The execution and delivery
of this Agreement by the Buyer, and the agreements provided for herein, and the
consummation by the Buyer of all transactions contemplated hereby and thereby,
have been duly authorized by all requisite corporate action. This Agreement and
all such other agreements and written obligations entered into and undertaken in
connection with the transactions contemplated hereby to which the Buyer is a
party constitute or will, when executed and delivered, constitute the valid and
legally binding obligations of the Buyer, enforceable against the Buyer in
accordance with their respective terms. This Agreement has been, and each other
agreement contemplated hereby to which the Buyer is a party will be, duly
executed and delivered by the Buyer.
3.3 No Conflicts; Consents. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not, result
in any violation of, constitute a default (with or without notice or lapse of
time, or both) under, or require the approval or consent of its shareholders or
any other person or entity under, (i) the Certificate of Incorporation or
By-laws of Buyer, (ii) any judgment, order, decree, statute, law, rule or
regulation applicable to Buyer or its properties or assets, or (iii) any
material agreement or instrument, permit, concession, franchise or license to
which Buyer is a party or by which Buyer is bound. The execution and delivery
of this Agreement by Buyer, and the consummation by the Buyer of the
transactions contemplated by this Agreement will not require any action by or in
respect of, or consent or approval of, or filing with, any Governmental Entity,
except as required except for such approvals or filings the failure of which to
obtain will not, individually or in the aggregate, have a material adverse
effect on Buyer’s ability to perform its obligations hereunder or to consummate
the transactions contemplated hereby.
3.4 Brokers. The Buyer represents and
warrants that it has not engaged any broker or finder or incurred any liability
for brokerage fees, commissions or finder’s fees in connection with the
transactions contemplated by this Agreement.
4. Access to Information; Confidentiality; Public
Announcements.
4.1 Access to Management, Properties and
Records. From the date of this Agreement until the Closing Date, the Seller
shall afford the officers, attorneys, accountants and other authorized
representatives of the Buyer access upon reasonable notice and during normal
business hours to all management personnel, offices, properties, books and
records (including without limitation Tax reports, returns and related
materials) of BSA and of the Seller relating solely to the Business, so that the
Buyer may have full opportunity to make such investigation as it shall desire to
make of the management, business, properties and affairs of BSA and of the
Seller relating solely to the Business. The Seller shall furnish to the Buyer
such financial and operating data and other information as to the Assets and the
Business as the Buyer shall reasonably request.
4.2 Confidentiality. All information which
shall have been furnished by the Seller to the Buyer in connection with the
transactions contemplated hereby or as provided pursuant to this Section 4 shall
be subject to the terms of that confidentiality agreement between the Buyer and
the Seller dated May 11, 2001 (the “Confidentiality Agreement”). The
Confidentiality Agreement shall continue in full force and effect until the
Closing, at which time the obligations of the Buyer under the Confidentiality
Agreement shall terminate but only in respect of that information furnished
pursuant to this Agreement or the Confidentiality Agreement relating exclusively
to the Assets and to the Business.
4.3 Public Announcements. The parties agree
that prior to the Closing Date, except as otherwise required by law, any and all
public announcements concerning this Agreement and the purchase of the Business
by the Buyer shall be subject to the approval of both parties, which approval
shall not be unreasonably withheld.
In the event that either party is required to issue a press release
or make a public announcement or filing by law, it will notify the other party
prior to the release of any such public announcement or filing and will provide
to the other a copy of any such public announcement or filing. Buyer
acknowledges that Seller intends to make a public announcement upon the
execution of this Agreement.
5. Pre-Closing Covenants of the Seller.
The Seller covenants that from and after the date hereof and until
the Closing Date:
5.1 Conduct of Business. The Seller, BSA and
BSG shall carry on the Business in the ordinary course and shall not make or
institute any material changes in methods of manufacture, purchase, sale,
shipment or delivery, lease, management, accounting, computation of Taxes or
operation, except as agreed to in writing by the Buyer. Each of the Seller, BSA
and BSG shall (a) use commercially reasonable efforts to maintain, preserve and
protect the Assets and the Business, and (b) comply in all material respects
with all laws, ordinances, rules, regulations and orders applicable to the
Business.
5.2 Absence of Material Changes. Without the
prior written consent of the Buyer, the Seller shall not, solely with respect to
the Business, and BSA shall not, in any case:
(a) Acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business of any corporation, partnership, joint
venture, association, or other business organization or division thereof;
(b) Make any election or give any
consent under the Code or the Tax statutes of any state or other jurisdiction or
make any termination, revocation or cancellation of any such election or any
consent or compromise or settle any claim for past or present Tax due;
(c) Fail to operate the Business
or to maintain its books, accounts and records with respect to the Business in
the ordinary course of business consistent with past practices;
(d) Knowingly cause or permit to
occur any of the events or occurrences described in Section 2.11; or
(e) Amend its or other governing
documents;
(f) Authorize for issuance,
issue, sell, pledge, or deliver (whether through the issuance or granting of
additional options, warrants, commitments, subscriptions, rights to purchase, or
otherwise) any stock of any class or any securities exercisable for the purchase
of, or convertible into, shares of stock of any class (other than the issuance
of (i) shares of its capital stock or options to purchase its capital stock
pursuant to an existing option plan in the ordinary course of business, and (ii)
shares of its capital stock pursuant to the exercise of rights outstanding on
the date of this Agreement);
(g) Split, combine, or reclassify
any shares of its capital stock (whether by merger, consolidation,
reorganization or otherwise), declare, set aside, or pay any dividend or other
distribution (whether in cash, stock, or property or any combination thereof) in
respect of its capital stock, or redeem or otherwise acquire any shares of its
capital stock or its other securities; or amend or alter any material term of
any of its outstanding securities;
(h) Other than trade payables
incurred and use of existing credit facilities in the ordinary course of
business and consistent with past practice and other than intercompany
indebtedness, create, incur or assume any indebtedness for borrowed money, or
assume, guarantee, endorse, or otherwise agree to become liable or responsible
for the obligations of any other person, or make any loans, advances or capital
contributions to (other than reasonable travel advances for Business purposes),
or investments in, any other person; or create, incur or assume any Encumbrance
on any Asset;
(i) Except as set forth in
Schedule 5.2, (i) increase in any manner the compensation of any of its
directors, officers, employees, or consultants, or accelerate the payment of any
such compensation, except anniversary date salary increases for employees in the
ordinary course of business and in a manner consistent with past practices or as
required by existing contractual commitments or applicable law; (ii) pay or
accelerate or otherwise modify the payment, vesting exercisability, or other
feature or requirement of any pension, retirement allowance, severance, change
of control, stock option, or other employee benefit to any such director,
officer, employee or consultant or (iii) except as required by existing
contractual commitments or applicable laws, commit itself to any additional or
increase pension, profit-sharing, bonus, incentive, deferred compensation, group
insurance, severance, change of control, retirement or other benefit, plan,
agreement, or arrangement, or to any employment or consulting agreement, with or
for the benefit of any person, or amend any such plans or any of such agreements
in existence on the date hereof (except any amendment required by law or that
would not materially increase benefits under the relevant plan);
(j) Except in the ordinary
course of business and consistent with past practice or pursuant to contractual
obligations existing on the date hereof, sell, transfer, mortgage, or otherwise
dispose of or encumber any Assets;
(k) Except as set forth in
Schedule 2.11 with respect to the Zirconia suite, make or agree to make any
capital expenditure or expenditures, except for capital expenditures of $ 10,000
or less individually and of $50,000 or less in the aggregate;
(l) Except in the ordinary
course of business, enter into or terminate, or amend, extend, renew or
otherwise modify in any material respect (including, but not limited to, by
default or by failure to act) any joint ventures or any other agreements,
protocols or work plans pursuant to agreements with third parties, commitments,
or contracts (except agreements, commitments, or contracts expressly provided
for or contemplated by this Agreement);
(a) Enter into any contract,
plan, agreement, understanding, arrangement or obligation that restricts its, or
after the consummation of the transactions contemplated hereunder would restrict
BSA’s, BSG’s or the Buyer’s ability to conduct any line of business;
(m) Change in any material
respect its general credit policy as to sales of inventories or collection of
receivables or its inventory consignment practices;
(n) Remove or permit to be
removed from any building, facility, or real property any material machinery,
equipment, fixture, vehicle, or other personal property or parts thereof, except
in the ordinary course of business consistent with past practice, other than any
Excluded Asset;
(o) Alter or revise its
accounting principles, procedures, methods, or practices in any material
respect, except as required by applicable law or regulation or by a change in
GAAP or it’s equivalent in France or Germany and concurred with by Seller’s,
BSA’s or BSG’s independent public accountants;
(p) Institute, settle, or
compromise any claims, action, suit, or proceeding pending or threatened by or
against it involving amounts in excess of $50,000, at law or in equity or before
any government body or any nongovernmental self-regulatory agency;
(q) Knowingly take any action, or
knowingly fail to take any action that would render any representation,
warranty, covenant, or agreement of Seller in this Agreement inaccurate or
breached such that the conditions in Section 8.1 will not be satisfied as of the
Closing Date; or
(r) Agree or consent, whether in
writing or otherwise, to do any of the foregoing.
5.3 Taxes. BSA or BSG shall, on a timely
basis, prepare in compliance with all applicable regulations and file all Tax
Returns for and pay any and all Taxes which shall become due on or prior to the
Closing Date, provided that the Seller shall furnish the Buyer with a copy of
any Tax Return of BSA or BSG at least 10 days prior to its filing date.
5.4 Communication with Customers and
Suppliers. The Seller, BSA and the Buyer will cooperate in communicating with
suppliers and customers of the Business regarding the transfer of the Assets to
the Buyer.
5.5 Compliance with Laws. Except as set forth
in Schedule 2.15, the Seller, BSA or BSG will comply with all laws and
regulations which are applicable to either Seller’s ownership of the Assets or
to the conduct of the Business and will perform and comply with all Contracts,
commitments and obligations by which each are bound and which, in the case of
the Seller, relate solely to the Business.
5.6 Continuing Obligation to Inform. From
time to time prior to the Closing, the Seller will deliver or cause to be
delivered to the Buyer supplemental information concerning events subsequent to
the date hereof which would render any statement, representation or warranty in
this Agreement or any information contained in any Schedule inaccurate or
incomplete in any material respect at any time after the date hereof until the
Closing Date.
6. Reasonable Best Efforts to Obtain Satisfaction of
Conditions.
The Seller and the Buyer covenant and agree to use their reasonable
best efforts and the Seller covenants to cause BSA to use its reasonable best
efforts to obtain the satisfaction of the conditions to closing specified in
this Agreement. In particular, the Seller shall, and shall cause BSA to, seek
and use reasonable best efforts to obtain all consents and approvals set forth
on Schedule 2.3.
7. Employment Matters.
(a) Prior to the Closing, but
subject to the consummation of the transactions contemplated by this Agreement,
Buyer shall offer employment to each of the Affected Employees, which employment
shall become effective as of the day after the Closing Date.
(b) The initial salary and wage
compensation payable to each Affected Employee by Buyer shall be, in the
aggregate, substantially equivalent to that provided to such individual by
Seller immediately prior to the Closing.
(c) Buyer shall provide the
Affected Employees with employee benefits that are, in the aggregate, comparable
to those benefits provided to similarly situated employees of Buyer (other than
any such benefits consisting of or based on any equity securities). Buyer shall
provide credit for eligibility and vesting purposes for all Affected Employees’
period of service with Seller or its predecessors for purposes of any of Buyer’s
employee benefit plans or programs provided to Affected Employees, including
vacation and compensatory and fringe benefit plans and programs, but solely to
the extent such prior service credit does not result in the duplication of
benefits.
(d) Any individual who is
employed under a written employment agreement that is being assumed by Buyer
pursuant to Section 1.1(a)(iii) shall be deemed to be an Affected Employee for
all purposes of this Agreement.
(e) Buyer agrees to pay and be
obligated for any severance obligation or liability of Seller arising from or
related to any Affected Employee who does not accept Buyer’s offer of
employment.
(f) The representations,
warranties, covenants and agreements contained in this Section 7 are for the
sole benefit of the parties hereto, and the Affected Employees are not intended
to be and shall not be construed as beneficiaries hereof.
8. Conditions to Obligations of the Buyer.
The obligations of the Buyer under this Agreement are subject to
the fulfillment, on or before the Closing Date, of the following conditions
precedent, each of which may be waived in writing in the sole discretion of the
Buyer:
8.1 Continued Truth of Representations and
Warranties of the Seller; Compliance with Covenants and Obligations. The
representations and warranties of the Seller contained in this Agreement
(including the Schedules hereto) shall be true and correct in all respects on
and as of the Closing Date as though such representations and warranties were
made on and as of such date, except for any representation or warranty which
speaks as of a specified date, in which case such representation or warranty
shall be true in all respects as if made on such specified date, and except in
any case for any inaccuracies of representations and warranties that
individually and in the aggregate have not had, or would not have a Material
Adverse Effect. The Seller and BSA shall have performed and complied in all
material respects with all covenants, obligations, and agreements required by
this Agreement to be performed or complied with by them prior to or at the
Closing Date.
8.2 Corporate Proceedings. All corporate and
other proceedings required to be taken on the part of the Seller to authorize or
carry out this Agreement and to convey, assign, transfer and deliver the Assets
shall have been taken and shall be reasonably satisfactory to Buyer and its
counsel.
8.3 Consents of Third Parties. The Seller
shall have received all requisite consents and approvals and shall have made all
requisite notifications or filings set forth on Schedule 2.3 attached hereto,
and copies thereof shall be delivered to the Buyer at or prior to the Closing.
8.4 Adverse Proceedings. No injunction or
order shall be in effect prohibiting consummation of the transactions
contemplated hereby, and no action or proceeding by or before any court or other
governmental body shall have been instituted or threatened by any governmental
body or person whatsoever which shall seek to restrain, prohibit or invalidate
the transactions contemplated by this Agreement. No federal, state, local or
foreign statute, rule or regulation shall have been enacted the effect of which
would be to prohibit, restrict, impair or delay the consummation of the
transactions contemplated hereby.
8.5 Update. The Seller shall have provided
the Buyer with a true, correct and complete list and amount, as of the Interim
Date, of the Accounts Receivable of BSA, including an aging thereof, the Fixed
Assets and the Inventory.
8.6 Closing Deliveries. The Buyer shall have
received at or prior to the Closing each of the following documents:
(a) a bill of sale substantially
in the form attached hereto as Exhibit C;
(b) such instruments of
conveyance, assignment and transfer, in form and substance reasonably
satisfactory to the Buyer, as the Buyer shall reasonably request, including
without limitation patent, trademark and copyright assignments;
(c) such certificates of the
Seller’s officers and such other documents evidencing satisfaction of the
conditions specified in this Section 8 as the Buyer shall reasonably request;
(d) a certificate of the
Secretary of the Seller attesting to the incumbency of the Seller’s officers and
the authenticity of the resolutions authorizing the transactions contemplated by
the Agreement;
(e) cross receipt executed by
the Buyer and the Seller;
(f) opinions of counsel to the
Seller and BSA in form reasonably acceptable to Buyer and its counsel;
(g) a certified copy of the share
transfer register (“registre des mouvement de titres”) and of the shareholders
accounts (“comptes d’actionnaires”) evidencing that at Closing the Seller is the
sole owner of all of the BSA Shares;
(h) a share transfer form (“ordre
de mouvement de titres”) relating to the BSA Shares duly executed by the Seller
in favor of the Buyer;
(i) resignations of the
officers and directors of BSA and BSG;
(j) copies of the by-laws and
“extrait K-bis” of BSA dated no earlier than 8 days before the date of the
Closing, certified by the Seller as true, correct and complete;
(k) a certified copy of the
minutes (reproduced on the official register) of the meeting of the Board of
Directors of BSA approving (i) the transfer of the BSA Shares and (ii) the Buyer
as a new shareholder of BSA;
(l) a bill of sale
substantially in the form attached hereto as Exhibit E; and
(m) such other documents,
instruments or certificates as the Buyer may reasonably request.
8.7 Closing Balance Sheet. The Buyer shall
have received the Closing Balance Sheet certified by the Seller’s Vice President
– Finance.
8.8 Collaboration Agreement. The parties
shall have entered into a collaboration agreement covering the joint development
during the six-month period following the Closing, of a series of proteomics
products targeting the benchtop biologist.
8.9 Opinion of Works Council. An opinion of
the works council (“comité d’ enterprise”) of BSA, as described in Schedule 2.3
of the Disclosure Schedule, shall have been delivered to BSA.
8.10 Governmental Approvals. All governmental
agencies, departments, bureaus, commissions and similar bodies, with which a
filing or notification must be made or given or whose consent, authorization or
approval is necessary under any applicable law, rule, order or regulation for
the consummation by the Seller of the transactions contemplated by this
Agreement shall have consented to, authorized, permitted or approved such
transactions, and such consents, authorizations, approvals, filings or
notifications shall be reasonably satisfactory to the Buyer and its counsel, and
copies thereof shall be delivered to the Buyer at or prior to the Closing.
9. Conditions to Obligations of the Seller.
The obligations of the Seller under this Agreement are subject to
the fulfillment, on or before the Closing Date, of the following conditions
precedent, each of which may be waived in writing at the sole discretion of the
Seller:
9.1 Continued Truth of Representations and
Warranties of the Buyer; Compliance with Covenants and Obligations. The
representations and warranties of the Buyer contained in this Agreement
(including the Schedules hereto) shall be true in all respects on and as of the
Closing Date as though such representations and warranties were made on and as
of such date, except for any representation or warranty which speaks as of a
specified date, in which case such representation or warranty shall be true in
all respects as if made on such specified date, and except in any case for any
inaccuracies of representations and warranties that individually and in the
aggregate have not had or would not have a Material Adverse Effect. The Buyer
shall have performed and complied in all material respects with all covenants,
obligations, and agreements required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.
9.2 Corporate Proceedings. All corporate and
other proceedings required to be taken on the part of the Buyer to authorize or
carry out this Agreement shall have been taken and shall be reasonably
satisfactory to Seller and its counsel.
9.3 Consents of Third Parties. The Buyer
shall have received all requisite consents and approvals and shall have made all
requisite notifications or filings set forth on Schedule 3.2 and copies thereof
shall be delivered to the Seller at or prior to the Closing.
9.4 Adverse Proceedings. No injunction or
order shall be in effect prohibiting consummation of the transactions
contemplated hereby, and no action or proceeding by or before any court or other
governmental body shall have been instituted or threatened by any governmental
body or person whatsoever which shall seek to restrain, prohibit or invalidate
the transactions contemplated by this Agreement or which might affect the right
of the Seller to transfer the Assets. No federal, state, local or foreign
statute, rule or regulation shall have been enacted the effect of which would be
to prohibit, restrict, impair or delay the consummation of the transactions
contemplated hereby.
9.5 Closing Deliveries. The Seller shall have
received at or prior to the Closing each of the following documents:
(a) such certificates of the
Buyer’s officers and such other documents evidencing satisfaction of the
conditions specified in this Section 9 as the Seller shall reasonably request;
(b) a certificate of the
Secretary of the Buyer attesting to the incumbency of the Buyer’s officers and
the authenticity of the resolutions authorizing the transactions contemplated by
this Agreement;
(c) Instrument of Assumption of
Liabilities executed by the Buyer;
(d) payment of the Purchase
Price, as adjusted in accordance with the terms of this Agreement;
(e) cross receipt executed by
the Buyer and the Seller;
(f) an opinion of counsel to the
Buyer in form reasonably acceptable to Seller and its counsel; and
(g) such other documents,
instruments or certificates as the Seller may reasonably request.
9.6 Collaboration Agreement. The parties
shall have entered into a collaboration agreement covering the joint development
during the six-month period following the Closing, of a series of proteomies
products targeting the benchtop biologist.
9.7 Opinion of Works Council. An opinion of
the works council (“comité d’ enterprise”)of BSA, as described in Schedule 2.3
of the Disclosure Schedule, shall have been delivered to BSA.
9.8 Governmental Approvals. All governmental
agencies, departments, bureaus, commissions and similar bodies, with which a
filing or notification must be made or given or whose consent, authorization or
approval is necessary under any applicable law, rule, order or regulation for
the consummation by the Buyer of the transactions contemplated by this Agreement
shall have consented to, authorized, permitted or approved such transactions,
and such consents, authorizations, approvals, filings or notifications shall be
reasonably satisfactory to the Seller and its counsel, and copies thereof shall
be delivered to the Seller at or prior to the Closing.
10. Termination of Representations and Warranties. All
representations and warranties made by the parties herein, in the Schedules
hereto or in any instrument or document furnished pursuant to this Agreement
shall survive the Closing in accordance with Section 14 below. All covenants
made by the parties herein, in the Schedules hereto or in any instrument or
document furnished pursuant to this Agreement shall survive the Closing.
11. Post-Closing Agreements.
11.1 Proprietary Information. The Seller agrees
that from and after the Closing Date the Seller shall hold in confidence, and
shall cause its officers, directors and personnel to hold in confidence, all
knowledge and information of a secret or confidential nature with respect to the
Business and shall not disclose, publish or make use of the same without the
consent of the Buyer, except to the extent that such information shall have
become public knowledge other than by breach of this Agreement by the Seller.
The Seller agrees that the remedy at law for any breach of this
Section 11 would be inadequate and that the Buyer shall be entitled to seek
injunctive relief in addition to any other remedy it may have upon breach of any
provision of this Section 11.
11.2 No Solicitation or Hiring of Former
Employees. Except with respect to employees of Buyer, BSA or BSG who, following
the Closing, may be terminated by Buyer, BSA or BSG for a period of two years
after the Closing Date, the Seller shall not solicit any person who was an
employee of either the Seller (solely with respect to the Business), BSA or BSG
on the date hereof or on the Closing Date to terminate his or her employment
with the Buyer, BSA or BSG or any of their affiliates or to become an employee
of either the Seller or any of its affiliates.
11.3 Non-Competition Agreement.
(a) For a period of three years
after the Closing Date, neither the Seller nor any affiliate thereof shall,
directly or indirectly, as owner, partner, joint venturer, stockholder, or in
any capacity whatsoever engage in, become financially interested in, render any
consultation or business advice with respect to, or have any connection with any
business involving process scale chromatographic purification of proteins, in
the United States or any other country in which the Seller or any affiliate
thereof conducted such business during the two years prior to the Closing Date.
Notwithstanding the foregoing, Buyer acknowledges that Seller and its affiliates
are engaged worldwide in the provision of raw materials for process scale
production of proteins and agrees that, in relation to such activities, Seller
and its affiliates may engage in relationships with vendors of materials useful
for process scale chromatographic purification of proteins, including but not
limited to Buyer, and that such activities shall not constitute a violation of
the foregoing non-competition provision. In addition, Buyer acknowledges and
agrees that, in furtherance of the business of the Seller and its affiliates to
sell raw materials for process scale production of proteins, Seller and its
affiliates may make recommendations to their customers relative to materials for
process scale chromatographic purification of proteins, and that such activities
shall not constitute a violation of the foregoing non-competition provision.
Further, Buyer recognizes that an affiliate of Seller based in New Zealand makes
and sells directly and through Seller and its other affiliates certain
chromatographic materials for process scale chromatography of proteins,
generally for customer applications different than those addressed by the
Business. The continuation, growth and diversification of such business by
Seller and its affiliates shall not constitute a breach of the foregoing
non-competition provision, provided that neither Seller nor any of its
affiliates shall employ in such business any intellectual property purchased
hereunder by Buyer and shall not through this New Zealand affiliate or otherwise
make, sell or distribute chromatographic materials for process scale
chromatography of proteins for customer applications directly equivalent to
those addressed by the Business without the prior written consent of Buyer.
(b) The Seller hereby waives, to
the extent permitted by law, any and all right to contest the validity of this
Section 11.3 on the ground of the breadth of its geographic or product and
service coverage or length of term. The Seller agrees that damages are an
inadequate remedy for any breach of this provision and that the Buyer shall,
whether or not it is pursuing any potential remedies at law, be entitled to seek
equitable relief in the form of preliminary and permanent injunctions upon any
breach of this non-competition provision.
11.4 Use of Name. Following the Closing Date,
the Seller agrees not to use, and to cause its affiliates not to use, the name
“BioSepra” or any derivation thereof or any name which is confusingly similar
thereto or any other tradenames or trademarks of Seller used solely in the
Business in connection with any business whatsoever; provided, however, that
Seller shall be entitled to use such names following the Closing Date solely to
the extent that the names appear on business and financial reports and catalogs
of the Seller printed prior to the Closing Date. Notwithstanding the foregoing,
following the Closing Date, Seller shall not initiate any new business
relationships of any form under such names.
11.5 Cooperation in Litigation. Each party
hereto will cooperate with the other in the defense or prosecution of any
litigation or proceeding already instituted or which may be instituted hereafter
against or by such party relating to or arising out of the conduct of the
Business prior to or after the Closing Date (other than litigation arising out
of the transactions contemplated by this Agreement). The party requesting such
cooperation shall pay the out-of- pocket expenses (including reasonable legal
fees and disbursements) of the party providing such cooperation and of its
officers, directors, employees and agents reasonably incurred in connection with
providing such cooperation, but shall not be responsible to reimburse the party
providing such cooperation for such party’s time spent in such cooperation or
the salaries or costs of fringe benefits or similar expenses paid by the party
providing such cooperation to its officers, directors, employees and agents
while assisting in the defense or prosecution of any such litigation or
proceeding.
11.6 Access to Books and Records. The Seller
shall have the right for a period of six years following the Closing Date to
have reasonable access, upon prior written notice, to such books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other records that are transferred to the Buyer
pursuant to the terms of this Agreement. The Buyer shall not destroy any such
books, records or accounts retained by it without first providing the Seller
with the opportunity to obtain or copy such books, records or accounts.
11.7 Intangible Property Cooperation. The
Seller covenants and agrees that, at the request of the Buyer, the Seller will
communicate to the Buyer all information known to the Seller relating to the
Intangible Property transferred hereby, and that, at the expense of the Buyer,
the Seller will execute and deliver any papers, make all rightful oaths, testify
in any legal proceedings and perform all other lawful acts reasonably deemed
necessary by the Buyer to obtain, register, patent, perfect title, enforce or
defend such Intangible Property or to assist the Buyer in defending against
claims related to such Intangible Property in the United States and worldwide.
11.8 Beckman Obligations. Buyer acknowledges
that Seller is obligated to make available to Beckman Instruments, Inc.
(“Beckman”) certain products, as set forth in Exhibit D hereto. Buyer covenants
and agrees from and after the Closing Date to make available to Beckman, on the
terms set forth in Exhibit D, such quantities of the Products (as such term is
defined in such Exhibit) as may be requested by Beckman from time to time
following the Closing.
12. Termination of Agreement.
12.1 Termination by Lapse of Time. This
Agreement may be terminated by either the Buyer or the Seller, if the
transactions contemplated hereby have not been consummated within 60 days of the
date hereof, unless such date is extended by the written consent of the parties
hereto (provided that the right to terminate this Agreement under this Section
12.1 shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure of the
conditions precedent to the transactions contemplated by this Agreement to occur
on or before such date and such failure constitutes a breach of this Agreement).
12.2 Termination by Agreement of the Parties.
This Agreement may be terminated by the mutual written agreement of the parties
hereto.
12.3 Termination by Buyer or Seller By Reason of
Breach. This Agreement may be terminated by the Seller, if at any time prior to
the Closing there shall occur a material breach of any of the representations,
warranties or covenants of the Buyer or the failure by the Buyer to perform any
material condition or obligation hereunder, and may be terminated by the Buyer,
if at any time prior to the Closing there shall occur a material breach of any
of the representations, warranties or covenants of the Seller or the failure of
the Seller to perform any material condition or obligation hereunder; provided
that in either case the party alleged to be in material breach shall have
received written notice of such material breach or material nonperformance and
such material breach or material non-performance has remained uncured for a
period of ten (10) days after such notice has been received.
12.4 Effect of Termination. In the event of
termination of this Agreement as provided herein, this Agreement shall
immediately become void and there shall be no liability or obligation on the
part of either the Seller or the Buyer, or their subsidiaries and their
respective officers, directors, stockholders or affiliates, except to the extent
that such termination results from the willful breach by a party of any of its
representations, warranties or covenants set forth in this Agreement; provided
that the provisions of Section 4.3 and Section 13 of this Agreement shall remain
in full force and effect and survive any termination of this Agreement.
13. Fees and Expenses.
(a) Except as set forth in this
Section 13, the Buyer and the Seller shall each pay their own expenses in
connection with this Agreement and the transactions contemplated hereby.
(b) The Buyer shall pay all
expenses related to the relocation after Closing of the Inventory transferred to
Buyer under this Agreement.
14. Indemnification.
14.1 Survival of Representations and
Warranties. All of the representations and warranties contained in this
Agreement shall survive the Closing hereunder and continue in full force and
effect for a period of twelve (12) months thereafter, provided, however, that
(i) that the representations and warranties relating to Taxes and compliance
with Environmental Laws shall survive and remain in full force and effect for
the period equal to the statute of limitations relating thereto in the
applicable jurisdiction; and (ii) the representations and warranties set forth
in Sections 2.2 and 2.4 (insofar as they relate to the ownership of the BSA
Shares, the BSG Shares and the Assets), 2.22, 3.2 and 3.4 shall survive and
remain in full force and effect without any limitation; and provided, further,
that any representation or warranty with respect to which a bona fide written
claim shall have been made or an action at law or in equity shall have commenced
before such date, shall survive (but only with respect to, and to the extent of,
such claim) until the final resolution of such claim or action, including all
applicable periods for appeal.
14.2 Indemnification Provisions for Benefit of
Buyer. In the event Seller breaches (or in the event any third party alleges
facts that, if true, would mean Seller has breached) any of its representations,
warranties and covenants contained herein, and Buyer makes a written claim for
indemnification against Seller within the applicable survival period, then
Seller agrees to indemnify Buyer and its affiliates and their respective
officers, directors and stockholders (each, a “Buyer Indemnified Party”) from
and against the entirety of any Adverse Consequences (as hereinafter defined)
they may suffer through and after the date of the claim for indemnification
(including any after the end of any applicable survival period) resulting from,
arising out of, or relating to the breach (or the alleged breach); provided,
however, that Seller shall not have any obligation to indemnify any Buyer
Indemnified Party from and against any Adverse Consequences resulting from,
arising out of, or relating to the breach (or alleged breach) of any
representation or warranty of Seller until the Buyer Indemnified Parties have,
in the aggregate, suffered Adverse Consequences by reason of all such breaches
(or alleged breaches) in excess of a $150,000 (the “Basket Amount”) aggregate
threshold (at which point Seller will be obligated to indemnify the Buyer
Indemnified Parties from and against all Adverse Consequences in excess of the
threshold amount) and provided further that Seller’s maximum liability arising
out of the transactions contemplated by this Agreement shall not exceed the
Purchase Price (the “Seller’s Liability Limitation”), except for fraud.
“Adverse Consequences” means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement (with the approval of the other party if required pursuant to the
provisions of this Section 14), liabilities, obligations, Taxes, liens, losses,
expenses and fees, including court costs and reasonable attorneys’ fees and
expenses incurred in investigation or defense of any of the same or asserting
its rights hereunder. Notwithstanding anything to the contrary in the
foregoing, solely for purposes of determining whether a Buyer Indemnified Party
has suffered Adverse Consequences resulting from a breach of the representation
and warranty of Seller contained in Section 2.15 hereof, such representation and
warranty shall be deemed to be made without any materiality qualifiers.
(a) Seller agrees to indemnify
the Buyer Indemnified Parties from and against the entirety of any Adverse
Consequences they may suffer resulting from, arising out of, or relating to, any
liability of Seller which is not an Assumed Liability.
14.3 Indemnification Provisions for Benefit of
Seller. In the event Buyer breaches (or in the event any third party alleges
facts that, if true, would mean Buyer has breached) any of its representations,
warranties and covenants contained herein, and Seller makes a written claim for
indemnification against Buyer within the applicable survival period, then Buyer
agrees to indemnify Seller and its affiliates and their respective officers,
directors and stockholders (each, a “Seller Indemnified Party”) from and against
the entirety of any Adverse Consequences they may suffer through and after the
date of the claim for indemnification (including any Adverse Consequences after
the end of any applicable survival period) resulting from, arising out of, or
relating to the breach (or the alleged breach); provided, however, that Buyer
shall not have any obligation to indemnify any Seller Indemnified Party from and
against any Adverse Consequences resulting from, arising out of, or relating to
the breach (or alleged breach) of any representation or warranty of Buyer until
the Seller Indemnified Parties have, in the aggregate, suffered Adverse
Consequences by reason of all such breaches (or alleged breaches) in excess of
the Basket Amount (at which point Buyer will be obligated to indemnify the
Seller Indemnified Parties from and against all Adverse Consequences in excess
of the Basket Amount), and provided further that Buyer’s maximum liability
arising out of the transactions contemplated by this Agreement shall not exceed
the Purchase Price, except for fraud.
(a) Buyer agrees to indemnify
the Seller Indemnified Parties from and against the entirety of any Adverse
Consequences they may suffer resulting from, arising out of, or relating to any
Assumed Liability.
14.4 Matters Involving Third Parties. If any
third party shall notify any Buyer Indemnified Party or any Seller Indemnified
Party (the “Indemnified Party”) with respect to any matter (a “Third Party
Claim”) which may give rise to a claim for indemnification against any other
party (the “Indemnifying Party”) under this Section 14, then the Indemnified
Party shall promptly notify the Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party in notifying the
Indemnifying Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party thereby
is prejudiced.
(a) Any Indemnifying Party will
have the right to defend the Indemnified Party against the Third Party Claim
with counsel of its choice reasonably satisfactory to the Indemnified Party so
long as (i) the Indemnifying Party notifies the Indemnified Party in writing
within fifteen (15) days after the Indemnified Party has given notice of the
Third Party Claim that the Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of or relating to the Third Party
Claim, and (ii) the Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently.
(b) So long as the Indemnifying
Party is conducting the defense of the Third Party Claim in accordance with
Section 14.4(b) above, (i) the Indemnified Party may retain separate co-counsel
at its sole cost and expense and participate in the defense of the Third Party
Claim, (ii) the Indemnified Party will not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be withheld, delayed or
conditioned unreasonably) provided that the Indemnifying Party shall not be
required to consent to any judgment or settlement unless it shall provide for a
full release of such Indemnifying Party without liability or obligation, and
(iii) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (not to be withheld, delayed or
conditioned unreasonably), provided that the Indemnified Party shall not be
required to consent to any judgment or settlement unless it shall provide for a
full release of such Indemnified Party without liability or obligation.
(c) In the event any of the
conditions in Section 14.4(b) above is or becomes unsatisfied, however, (i) the
Indemnified Party may defend against, the Third Party Claim, and (ii) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys’ fees and expenses).
14.5 Adjustments to Indemnification Payments.
Any payment made by one party to another party pursuant to this Section 14 in
respect of any claim shall be net of (i) any tax benefit realized by such party
as a result of such party’s deduction of such payment for federal and/or state
income tax purposes, and (ii) any insurance proceeds realized by and paid to the
Indemnified Party in respect of such claim.
14.6 Mitigation of Loss. The party entitled to
indemnification shall take all commercially reasonable steps to mitigate all
Adverse Consequences upon and after becoming aware of any event that would be
reasonably likely to give rise to any Adverse Consequences that are
indemnifiable hereunder.
14.7 Remedies. Other than for claims of fraud,
and any right to specific performance or injunctive relief which may exist under
Section 4.2 and Section 11, the right of each party to seek indemnification from
the other party pursuant to Section 14 shall be the sole and exclusive right of
each party against the other party for any breach of any representation,
warranty or covenant contained herein.
(a) No party shall be liable to
the other party for indemnification pursuant to Section 14 or otherwise for
breach of a representation or warranty which breach (or the facts giving rise to
such breach) was known by or disclosed in writing to the other party at or prior
to the Closing Date.
15. Transfer and Sales Tax.
Each of the Seller, BSA and the Buyer, as the case may be, shall be
responsible for and shall pay (a) all sales, use and transfer Taxes, and (b) all
governmental charges, if any, upon the sale or transfer of any of the Assets
hereunder, in each case, to the extent such party is required by local law or
custom to pay such Taxes or charges. In furtherance of the foregoing, and not
by way of limitation thereof, Buyer shall pay any transfer Taxes under French
law relating to or arising out of the Buyer’s purchase of the BSA Shares within
one (1) month of the Closing Date. If the Buyer or the Seller, as the case may
be, shall fail to pay such amounts on a timely basis, the other party may pay
such amounts to the appropriate governmental authority or authorities, and the
Buyer or the Seller, as the case may be, shall promptly reimburse such other
party for any amounts so paid.
16. Notices.
Any notices or other communications required or permitted hereunder
shall be sufficiently given if delivered personally or sent by federal express
or comparable courier service, registered or certified mail, postage prepaid,
addressed as follows or to such other address of which the parties may have
given notice:
To the Seller Invitrogen Corporation 1600 Faraday Avenue Carlsbad,
California 92008 Attn: General Counsel With a copy to: Fulbright &
Jaworski L.L.P. 666 Fifth Avenue New York, New York 10103 Attn: Mara H.
Rogers, Esq. To the Buyer: Ciphergen Biosystems, Inc. 6611 Dumbarton
Circle Fremont, California 94555 Attn: Matthew Hogan With copies to:
Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, California
94304 Attn: Michael O’ Donnell, Esq.
Unless otherwise specified herein, such notices or other
communications shall be deemed received (a) on the date delivered, if delivered
personally; (b) five business days after being sent, if sent by registered or
certified mail or (c) two business days after being sent by federal express or
comparable courier service.
17. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that the
Buyer and the Seller may not assign their respective obligations hereunder
without the prior written consent of the other party; provided, however, that
the Buyer may assign this Agreement, and its rights and obligations hereunder,
to a subsidiary or affiliate of Buyer. Any assignment in contravention of this
provision shall be void. No assignment shall release the Buyer from any
obligation or liability under this Agreement.
18. Entire Agreement; Amendments; Attachments.
(a) This Agreement, all
Schedules and Exhibits hereto, and all agreements and instruments to be
delivered by the parties pursuant hereto represent the entire understanding and
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior oral and written and all contemporaneous oral
negotiations, commitments and understandings between such parties. The Buyer and
the Seller may amend or modify this Agreement, in such manner as may be agreed
upon, by a written instrument executed by the Buyer and the Seller.
(b) The Exhibits and Schedules
attached hereto or to be attached hereafter are hereby incorporated as integral
parts of this Agreement.
19. Governing Law.
This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to the conflicts of laws
principles thereof.
20. Section Heading.
The section headings are for the convenience of the parties and in
no way alter, modify, amend, limit, or restrict the contractual obligations of
the parties.
21. Severability.
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
22. Counterparts.
This Agreement may be executed in two counterparts, each of which
shall be deemed to be an original, but both of which shall be one and the same
document.
23. No Third Party Beneficiaries.
Except as set forth in Section 14, nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any person
other than the parties hereto and their successors or assigns any rights or
remedies under or by reason of this Agreement.
24. Translations.
Solely as a courtesy to Buyer, Seller has provided Buyer with and
will continue to provide Buyer with (in accordance with Section 4.1) English
translations which are in Seller’s possession (the “Translations”) of certain
French language Contracts and other documents relating to the Business (the
“French Documents”). The parties hereby agree that (i) Seller makes no
representation, warranty or covenant regarding the accuracy, completeness or
truthfulness of the Translations, (ii) Buyer has had the opportunity to review
the French language versions of the French Documents in their entirety and to
have the French Documents translated on its behalf and has not relied on the
Translations in making its decision to enter into this Agreement, (iii) a
reference to any of the French Documents, whether in this Agreement, the
Exhibits or Schedules hereto or any of the other agreements contemplated hereby,
shall be deemed a reference to the French language version of such French
Document and not to the Translation thereof and (iv) in any dispute between the
parties relating to any French Document (whether such dispute is an Adverse
Consequence or not), the French language version of such French Document, and
not the Translation or any other translation thereof, shall control.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of and on the date first above written.
CIPHERGEN BIOSYSTEMS, INC. By: /s/ William E. Rich
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Name: William E. Rich
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Title: President & CEO
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INVITROGEN CORPORATION By: /s/ John D. Thompson
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Name: John D. Thompson
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Title: Vice President, Corporate Development
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into on May 8, 2001 by
and between Richard M. Rodstein, an individual (the "Executive"), and K2 Inc., a
Delaware corporation (the "Company").
W I T N E S S E T H
WHEREAS, the Executive is currently the President and Chief Executive
Officer of the Company, and has been serving in such position without an
employment agreement; and
WHEREAS, the Company and the Executive mutually desire that an employment
agreement be entered into setting forth their mutual rights and obligations in
respect of the Executive's employment;
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties do hereby agree as follows:
A G R E E M E N T
1. EMPLOYMENT BY THE COMPANY AND TERM.
(a) POSITION AND REPORTING. Subject to the terms set forth herein, the
Company agrees to employ the Executive as President and Chief Executive Officer
and the Executive hereby accepts such employment. During the term of the
Executive's employment, the Executive will report solely and directly to the
Board of Directors of the Company (the "Board"). During the term of the
Executive's employment, the Company will nominate and recommend the Executive
for re-election as a director at each annual meeting of stockholders coinciding
with the expiration of his term as a director.
(b) FULL TIME AND BEST EFFORTS. During the term of his employment with the
Company, the Executive will devote substantially all of his business time and
use his best efforts to advance the business and welfare of the Company, except
for sick leave, vacations and approved leaves of absence. During the term of the
Executive's employment, he will not engage in any other employment or business
activities that would be directly harmful or detrimental to, or that may compete
with, the business and affairs of the Company, or that would interfere with his
duties hereunder. However, the foregoing will not prevent the Executive from
devoting a reasonable amount of time to personal investment, civic and
charitable activities.
(c) DUTIES. The Executive will perform such duties as are customarily
associated with his position in a corporation of the size and nature of the
Company, consistent with the Bylaws of the Company and as reasonably required by
the Board.
(d) COMPANY POLICIES. The employment relationship between the parties will
be governed by the general employment policies and practices of the Company,
including but not limited to those relating to protection of confidential
information and assignment of inventions, except that when the terms of this
Agreement differ from or are in conflict with the Company's general employment
policies or practices, this Agreement will control.
(e) TERM. The term of this Agreement will begin as of May 8, 2001 and end on
May 7, 2004 (such three-year period, the "Employment Term"), unless extended and
subject to the provisions for termination set forth herein. This Agreement shall
automatically be extended for a period of one year following the Employment Term
or any extension thereof unless the Company shall have notified the Executive,
in writing, of its election not to extend this Agreement not less than 120 nor
more than 150 days prior to the expiration of this Agreement.
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2. COMPENSATION AND BENEFITS.
(a) SALARY. The Executive will receive for services to be rendered hereunder
a base salary at the annual rate of $400,000 payable at least as frequently as
monthly and subject to payroll deductions as may be necessary or customary in
respect of the Company's salaried employees (the "Base Salary"). The Base Salary
will be subject to review at least annually and to increase at such times and in
such amounts as the Board may approve.
(b) PARTICIPATION IN BENEFIT PLANS. During the term of the Executive's
employment, the Executive will be entitled to participate in any insurance,
hospitalization, medical, dental, health, accident, disability or similar plan
or program of the Company now existing or established hereafter to the extent
that he is eligible under the general provisions thereof. The Company may, in
its sole discretion and from time to time, amend, eliminate or establish
additional benefit programs as it deems appropriate. The Executive will also
participate in all fringe benefits offered by the Company to any of its senior
executives.
3. INCENTIVE, BONUS AND OPTION PLANS.
During the Executive's employment, the Executive will be entitled to
participate, on terms and conditions that are appropriate to his position and
responsibilities at the Company and are no less favorable than those applying to
other senior executives of the Company, in any incentive, bonus, deferred
compensation, retirement, stock option and other compensation plans of the
Company currently or hereafter made available by the Company to senior
executives of the Company.
4. PERQUISITES, VACATIONS AND REIMBURSEMENT OF EXPENSES.
During the term of the Executive's employment:
(a) The Company will furnish the Executive with, and the Executive will be
allowed full use of, office facilities, automobiles, secretarial and clerical
assistance and other Company property and services commensurate with his
position and of at least comparable quality, nature and extent to those made
available to other senior executives of the Company from time to time;
(b) The Executive will be allowed vacations and leaves of absence with pay
on a basis no less favorable than that applying to other senior executives of
the Company;
(c) The Company will reimburse the Executive for all monies which he has
expended for purposes of the Company's business, such reimbursement to be
effected in accordance with Company reimbursement policies and procedures from
time to time in effect.
5. TERMINATION OF EMPLOYMENT.
(a) DEFINITIONS. The following definitions will apply to Sections 5 and 6 as
applicable:
(i) CAUSE. The term "Cause" means: (A) conviction of a felony involving
moral turpitude, or (B) willful gross neglect or willful gross misconduct in
carrying out Executive's duties under this Agreement, resulting in material
economic harm to the Company, unless Executive believed in good faith that such
conduct was in, or not contrary to, the best interests of the Company.
(ii) DISABILITY. The term "Disability" means the inability of the Executive
due to illness (mental or physical), accident, or otherwise, to perform his
duties for any period of 180 consecutive days, as determined by an independent
physician selected by the Company and reasonably acceptable to the Executive or
his legal representative. Any return to work from a period of disability must be
authorized by the Executive's physician.
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(iii) GOOD REASON. The term "Good Reason" means: (A) a material breach of
this Agreement by the Company; (B) without the Executive's prior written
consent, assignment to the Executive of duties materially inconsistent in any
respect with his position or any other action by the Company that results in a
material diminution in the Executive's position, authority, duties or
responsibilities, it being expressly understood that a change in the Executive's
reporting responsibility so that he does not report directly and solely to the
Board will constitute "Good Reason"; (C) any transaction in which the Company
becomes a subsidiary of another corporation or which is described in
clause (iii) or (iv) of the definition of "Change in Control" in Section 6(a)
below; (D) reduction, without the Executive's prior written consent, of the
Executive's Base Salary, or his bonus or other cash incentive compensation
opportunity, for any reason other than in connection with the termination of his
employment or in connection with, and proportionate to, a Company-wide pay
reduction; (E) any material reduction of fringe benefits provided to the
Executive for any reason other than in connection with the termination of the
Executive's employment or in connection with any change to the Company's benefit
programs applicable to all Company employees generally made in the normal course
of business; (F) assignment of the Executive, without his prior written consent,
to a Company office located more than 20 miles from the Executive's current
office location; (G) election by the Company not to extend the term of this
Agreement in accordance with Section 1(e) hereof; or (H) the Company's failure
to obtain an agreement from any successor or assign of the Company to assume and
to agree to perform this Agreement. A change in the formula, methodology or
factors considered in determining incentive cash incentive compensation shall
not by itself constitute a reduction of the Executive's incentive compensation
opportunity for purposes of clause (D) above.
(iv) NOTICE OF TERMINATION. The term "Notice of Termination" means a notice
which indicates the specific termination provision in this Agreement relied upon
and sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of employment under the provision so indicated.
Any purported termination of employment by the Company or by the Executive must
be communicated by written Notice of Termination to the other party hereto in
accordance with Section 11(a) hereof. With respect to any termination of
employment by the Executive for Good Reason, the Executive will have 120 days
following the occurrence of any event described in Section 5(a)(iii) to provide
the Company with Notice of Termination, and may not do so thereafter.
(v) SEVERANCE TERM. The term "Severance Term" means the remaining period of
the Employment Term as of a Termination Date or two full years, whichever is
longer.
(vi) TERMINATION DATE. The term "Termination Date" means: (i) if the
Executive terminates his employment for Good Reason, the date that is 60 days
after Notice of Termination is given and (ii) if the Executive's employment is
terminated by the Company other than for Cause, death or Disability, the date
that is 30 days after Notice of Termination is given.
(b) TERMINATION BY THE COMPANY FOR CAUSE. The Board may terminate the
Executive's employment with the Company at any time for Cause, immediately upon
notice to the Executive of the circumstances leading to such termination for
Cause. In the event that the Executive's employment is terminated for Cause, the
Executive will receive payment for all accrued salary and vacation time through
the Termination Date, which in this event will be the date upon which Notice of
Termination is given. The Company will have no further obligation to pay
severance of any kind whether under this Agreement or otherwise nor to make any
payment in lieu of notice.
(c) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The Executive will have
the right, at his election, to terminate his employment with the Company by
written notice to the Company to that effect for a period of 120 days following
any occurrence constituting Good Reason; PROVIDED, HOWEVER, that termination for
Good Reason will not be effective until the Executive
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gives written notice specifying the occurrence constituting Good Reason and,
PROVIDED that if such occurrence is curable, the Company fails to correct it
within 10 days after the receipt of the applicable notice.
(d) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR GOOD
REASON. In the event that the Executive's employment is terminated by the
Company (other than pursuant to Section 5(b)) or such employment is terminated
by the Executive for Good Reason (and in either such case the Executive is not
entitled to benefits pursuant to Section 6(b)), the Company agrees to pay or
provide to the Executive as termination compensation the following:
(i) A single lump sum payment, payable in cash within five days of the
Termination Date, equal to the sum of:
(A) the accrued portion of any Base Salary and vacation through the
Termination Date; plus
(B) an amount representing bonus and all other cash incentive compensation
for such period determined by multiplying:
(I) the average of such bonus and other cash incentive compensation accrued
for each of the three preceding full years, by
(II) the fraction of the year of termination elapsed prior to the
Termination Date; plus
(C) the present value of:
(I) the Executive's Base Salary in effect upon the Termination Date for the
Severance Term, plus
(II) incentive compensation for the Severance Term, based upon the
Executive's average bonus and all other cash incentive compensation accrued for
each of the three preceding full years,
less standard withholdings for tax and social security purposes. For the purpose
of determining present value, future payments will be discounted at an interest
rate equal to the short-term borrowing rate of the Company.
(ii) All stock options, restricted stock or other equity awards then held by
Employee will automatically be deemed amended, without further action on the
part of the Company or the Executive, so that (A) all options will be fully
vested and not subject to forfeiture or expiration by reason of the Executive's
termination, and will be subject to exercise in full for one year from the
Termination Date; and (B) all restricted stock or other equity awards will be
fully vested and all restrictions thereon will lapse.
(iii) Continuation of benefits as follows:
(A) All benefits provided under Section 2(b) will continue for the remaining
period of the Severance Term. Notwithstanding the foregoing, to the extent any
such benefit cannot be provided through the applicable plan of the Company, the
Company will provide such benefit outside of the plan or will provide a cash
lump sum payment equal to the value of such additional benefit.
(B) The Company shall meet its obligation under (A) above, in connection
with its group medical/dental plan for the period ending on the earlier to occur
of: (i) the end of the Severance Term or (ii) the date the Executive ceases to
be eligible for continuation coverage under the Company's group medical/dental
plan pursuant to the provisions of COBRA, by
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providing the continuation of such coverage at Company expense, contingent upon
the Executive's timely election of such coverage under COBRA.
(C) To the extent required to avoid adverse tax consequences under
Section 105(h) of the Internal Revenue Code of 1986 (the "Code"), the Company's
payments under this Section 5(d)(iii) will be recognized by the Executive in his
taxable income and the Executive will receive, in addition, a "gross-up" payment
covering the tax liability attributable to such recognized income consistent
with principles of paragraph 6(c)(v), below.
(iv) Additional credited service for retirement benefits under all
retirement plans, including supplemental retirement plans (if any), equivalent
to the Severance Term.
(e) TERMINATION BY REASON OF DEATH OR DISABILITY. This Agreement will
terminate upon the death of the Executive; and the Executive's employment
hereunder may be terminated by the Executive or the Company, at either of their
election, upon the Executive's Disability. In the event the Executive's
employment is terminated as the result of death or Disability, except as set
forth in the following sentence, the Executive, or his estate or legal
representative, will be entitled to receive the accrued portion of any Base
Salary and vacation through the Termination Date, plus any unreimbursed business
expenses, plus for the remainder of the Employment Term: (i) periodically not
less frequently than monthly in accordance with the Company's normal payroll
practice, payments at the rate of his then Base Salary; and (ii) at the normal
and customary time for payment of bonuses and all other cash incentive
compensation, amounts equal to the average of such payments accrued for each of
the three full preceding years; in each case subject to any applicable
withholdings for tax and social security purposes. The payments provided in this
Section 5(e) will be reduced by the amount of any payments made to the Executive
pursuant to any disability or life insurance policy provided by the Company for
this purpose, which insurance policy is in addition to any other insurance
benefits provided to the Executive as a benefit hereunder.
6. BENEFITS UPON CHANGE OF CONTROL.
(a) DEFINITIONS. In addition to the definitions provided in Section 5, the
following definition will apply to this Section 6:
CHANGE IN CONTROL. The term "Change in Control" means the occurrence of any
of the following events after the date of this Agreement: (i) the acquisition by
any individual, entity or group within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(a "Person"), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the combined voting power
of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors ("Voting Securities"); PROVIDED, HOWEVER,
that the following acquisitions will not constitute a Change in Control: (A) any
acquisition by the Company, (B) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (C) any acquisition by the Executive (or a group
including the Executive); (ii) a change in the composition of a majority of the
Board within a three-year period, which change has not been approved by a
majority of the persons then surviving as Directors who also comprised the Board
immediately prior to the commencement of such period; or (iii) the consummation
of any reorganization, merger or consolidation other than a reorganization,
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 60% of the combined voting power of the Voting
Securities of the Company or such surviving entity outstanding immediately after
such reorganization, merger or consolidation; or (iv) the consummation of a plan
of complete liquidation of the Company or of an agreement for the sale
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or disposition by the Company (in one transaction or a series of transactions)
of all or substantially all of the Company's assets.
(b) ELIGIBILITY FOR BENEFITS. The Company agrees to pay to the Executive the
benefits specified in Section 6(c) hereof if (i) there is a Change in Control
during the term of this Agreement and (ii) within the period commencing on the
date of the Change in Control, or (if earlier) the date of any agreement by the
Company to enter into the transaction resulting in such Change in Control, and
ending two years after the Change in Control (A) the Company terminates the
employment of the Executive for any reason other than Cause, death or Disability
or (B) the Executive voluntarily terminates employment with the Company for Good
Reason. A Change of Control will be deemed to have occurred during the term of
this Agreement, for purposes of this paragraph 6(b), if an agreement is entered
into during the term of this Agreement for a transaction resulting in a Change
of Control, notwithstanding that the Change of Control transaction is not
completed until after the term of this Agreement.
(c) BENEFITS UPON TERMINATION OF EMPLOYMENT. If the Executive is entitled to
benefits pursuant to Section 6(b) hereof, in lieu of any payments and benefits
provided in Section 5 the Company agrees to pay or provide to the Executive as
termination compensation the following:
(i) A single lump sum payment, payable in cash within five days of the
Termination Date, equal to the sum of:
(A) the accrued portion of any Base Salary and vacation through the
Termination Date; plus
(B) an amount representing bonus and all other cash incentive compensation
for such period determined by multiplying:
(I) the average of such bonus and other cash incentive compensation accrued
for each of the three preceding full years, by
(II) the fraction of the year of termination elapsed prior to the
Termination Date; plus
(C) 299% of the sum of:
(I) the Executive's Base Salary in effect upon the Termination Date plus
(II) the Executive's average bonus and all other cash incentive compensation
accrued for each of the three preceding full years.
(ii) All stock options, restricted stock or other equity awards then held by
Employee will automatically be deemed amended, without further action on the
part of the Company or the Executive, so that (A) all options will be fully
vested and not subject to forfeiture or expiration by reason of the Executive's
termination, and will be subject to exercise in full for the remainder of their
stated term; and (B) all restricted stock or other equity awards will be fully
vested and all restrictions thereon will lapse.
(iii) Continuation of benefits as follows:
(A) All benefits provided under Section 2(b) will continue for the remaining
period of the Severance Term. Notwithstanding the foregoing, to the extent any
such benefit cannot be provided through the applicable plan of the Company, the
Company will provide such benefit outside of the plan or will provide a cash
lump sum payment equal to the value of such additional benefit.
(B) The Company shall meet its obligation under (A) above, in connection
with its group medical/dental plan for the period ending on the earlier to occur
of: (i) the end of the
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Severance Term or (ii) the date the Executive ceases to be eligible for
continuation coverage under the Company's group medical/dental plan pursuant to
the provisions of COBRA, by providing the continuation of such coverage at
Company expense, contingent upon the Executive's timely election of such
coverage under COBRA.
(C) To the extent required to avoid adverse tax consequences under
Section 105(h) of the Internal Revenue Code of 1986 (the "Code"), the Company's
payments under this Section 6(c)(iii) will be recognized by the Executive in his
taxable income and the Executive will receive, in addition, a "gross-up" payment
covering the tax liability attributable to such recognized income consistent
with principles of paragraph 6(c)(v), below.
(iv) Additional credited service for retirement benefits under all
retirement plans, including supplemental retirement plans (if any), equivalent
to the remaining period of the Employment Term.
(v) In the event that any amount or benefit that may be paid or otherwise
provided to the Executive by the Company or any affiliated company, whether
pursuant to this Agreement or otherwise (collectively, "Covered Payments"), is
or may become subject to the tax imposed under Code Section 4999 ("Excise Tax"),
the Company will pay to the Executive a "Reimbursement Amount" equal to the
total of: (A) any Excise Tax on the Covered Payments, plus (B) any Federal,
state, and local income taxes, employment and excise taxes (including the Excise
Tax) on the Reimbursement Amount (but without reduction for any Federal, state,
or local income or employment taxes on such Covered Payments), plus (C) the
product of any deductions disallowed for Federal, state or local income tax
purposes because of the inclusion of the Reimbursement Amount in the Executive's
adjusted gross income multiplied by the highest applicable marginal rate of
Federal, state, and local income taxation, respectively, for the calendar year
in which the Reimbursement Amount is to be paid. For purposes of this
Section 6(c)(v), the Executive will be deemed to pay (Y) Federal income taxes at
the highest applicable marginal rate of Federal income taxation for the calendar
year in which the Reimbursement Amount is to be paid and (Z) any applicable
state and local income taxes at the highest applicable marginal rate of taxation
for the calendar year in which such Reimbursement Amount is to be paid, net of
the maximum reduction in Federal income taxes which could be obtained from the
deduction of such state or local taxes if paid in such year (determined without
regard to limitations on deductions based upon the amount of the Executive's
adjusted gross income).
(d) CHANGES TO BENEFITS. In the event the Board desires to approve a merger
to be accounted for as a "pooling of interests," the Executive will, in good
faith, negotiate with the Company concerning such changes in the foregoing
payments and benefits (if any) as may be necessary in order to achieve such
accounting treatment. The parties acknowledge that the Executive's obligation to
negotiate in good faith hereunder will not require him to accept a material
reduction in the net after tax benefits provided to him hereunder or in any
alternative agreement or arrangement.
7. NO OBLIGATION TO MITIGATE DAMAGES.
In the event of a termination of the Executive's employment for any reason,
the Executive will not be required to seek other employment or to mitigate any
of the Company's obligations under this Agreement, and no amount payable
hereunder will be reduced (a) by any claim the Company may assert against the
Executive or (b) by any compensation or benefits earned by the Executive as a
result of employment by another employer, self-employment or from any other
source after such termination of employment with the Company; PROVIDED, HOWEVER,
that the benefits provided pursuant to Sections 5(d)(iii) and 6(c)(iii)(A) will
terminate at such time as the Executive becomes eligible for comparable benefits
as the result of employment by another Person.
7
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8. PROPRIETARY INFORMATION OBLIGATIONS.
During the Executive's employment pursuant to this Agreement, the Executive
will have access to and become acquainted with confidential and proprietary
information of the Company and its subsidiaries, including, but not limited to,
information or plans regarding customer relationships, personnel, or sales,
marketing, and financial operations and methods; trade secrets; formulas;
devices; secret inventions; processes; and other compilations of information,
records, and specifications (collectively, "Proprietary Information"). The
Executive will not disclose any such Proprietary Information directly or
indirectly, or use it in any way, either during the Executive's employment
pursuant to this Agreement or at any time thereafter, except as required in the
course of his employment for the Company or as authorized in writing by the
Company. All files, records, documents, computer-recorded information, drawings,
specifications, equipment and similar items relating to the business of the
Company or its subsidiaries, whether prepared by the Executive or otherwise
coming into his possession, will remain the exclusive property of the Company or
its subsidiaries, as the case may be, and may not be removed from the premises
of the Company under any circumstances whatsoever without the prior written
consent of the Company, except when (and only for the period) necessary to carry
out the Executive's duties hereunder, and if removed must be immediately
returned to the Company upon any termination of his employment; PROVIDED,
HOWEVER, that the Executive may retain copies of documents reasonably related to
his interest as a shareholder and any documents that were personally owned,
which copies and the information contained therein the Executive agrees not to
use for any business purpose. Notwithstanding the foregoing, Proprietary
Information will not include (a) information which is or becomes generally
public knowledge or public except through disclosure by the Executive in
violation of this Agreement and (b) information that may be required to be
disclosed by applicable law.
9. NON-INTERFERENCE.
While employed by the Company and for a period of one year after termination
of this Agreement, the Executive agrees not to interfere with the business of
the Company or any subsidiary of the Company by directly or indirectly
soliciting, attempting to solicit, or otherwise inducing, any employee of the
Company or any subsidiary of the Company to terminate his or her employment in
order to become an employee, consultant or independent contractor to or for any
other employer.
10. NON-COMPETITION.
The Executive agrees that, during the Employment Term, he will not, without
the prior consent of the Company, directly or indirectly, have an interest in,
be employed by, or be connected with, as an employee, consultant, officer,
director, partner, stockholder or joint venturer, in any person or entity
owning, managing, controlling, operating or otherwise participating or assisting
in any business which is in competition with the business of the Company, in any
location, unless the Executive's employment is terminated by the Company without
Cause or by the Executive for Good Reason; PROVIDED, HOWEVER, that the foregoing
will not prevent the Executive from being a stockholder of less than 1% of the
issued and outstanding securities of any class of a corporation listed on a
national securities exchange or designated as national market system securities
on an interdealer quotation system by the National Association of Securities
Dealers, Inc.
8
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11. MISCELLANEOUS.
(a) NOTICES. Any notices provided hereunder must be in writing and will be
deemed effective upon the earlier of two days following personal delivery
(including personal delivery by telecopy or telex), or the fourth day after
mailing by first class mail to the recipient at the address indicated below:
To the Company:
K2 Inc.
4900 South Eastern Avenue
Los Angeles, CA 90040
Attn: Secretary
Telecopier No: (213) 724-0667
With a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Andrew E. Bogen, Esq.
Telecopier: (213) 229-7520
To the Executive:
RICHARD RODSTEIN
K2 Inc.
4900 South Eastern Avenue
Los Angeles, CA 90040
or to such other address or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.
(b) SEVERABILITY. Any provision of this Agreement which is deemed invalid,
illegal or unenforceable in any jurisdiction will, as to that jurisdiction and
subject to this Section be ineffective to the extent of such invalidity,
illegality or unenforceability, without affecting in any way the remaining
provisions hereof in such jurisdiction or rendering that or any other provisions
of this Agreement invalid, illegal, or unenforceable in any other jurisdiction.
If any covenant should be deemed invalid, illegal or unenforceable because its
scope is considered excessive, such covenant will be modified so that the scope
of the covenant is reduced only to the minimum extent necessary to render the
modified covenant valid, legal and enforceable.
(c) ENTIRE AGREEMENT. This document constitutes the final, complete, and
exclusive embodiment of the entire agreement and understanding between the
parties related to the subject matter hereof and supersedes and preempts any
prior or contemporaneous understandings, agreements, or representations by or
between the parties, written or oral.
(d) COUNTERPARTS. This Agreement may be executed on separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to
the benefit of and be enforceable by the Executive and the Company, and their
respective successors and assigns, except that the Executive may not assign any
of his duties hereunder and he may not assign any of his rights hereunder
without the prior written consent of the Company.
(f) AMENDMENTS. No amendments or other modifications to this Agreement may
be made except by a writing signed by both parties. No amendment or waiver of
this Agreement requires the
9
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consent of any individual, partnership, corporation or other entity not a party
to this Agreement. Nothing in this Agreement, express or implied, is intended to
confer upon any third person any rights or remedies under or by reason of this
Agreement.
(g) CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the laws of the State of
California without giving effect to principles of conflicts of law.
12. ARBITRATION.
(a) Any disputes or claims arising out of or concerning the Executive's
employment or termination by the Company, whether arising under theories of
liability or damages based upon contract, tort or statute, will be determined
exclusively by arbitration before a single arbitrator in accordance with the
employment arbitration rules of the American Arbitration Association, except as
modified by this Agreement. The arbitrator's decision will be final and binding
on both parties. Judgment upon the award rendered by the arbitrator may be
entered in any court of competent jurisdiction. In recognition of the fact that
resolution of any disputes or claims in the courts is rarely timely or cost
effective for either party, the Company and the Executive enter this mutual
agreement to arbitrate in order to gain the benefits of a speedy, impartial and
cost-effective dispute resolution procedure.
(b) Any arbitration will be held in the Executive's place of employment with
the Company. The arbitrator must be an attorney with substantial experience in
employment matters, selected by the parties alternately striking names from a
list of five such persons provided by the American Arbitration Association (AAA)
office located nearest to the place of employment, following a request by the
party seeking arbitration for a list of five such attorneys with substantial
professional experience in employment matters. If either party fails to strike
names from the list, the arbitrator will be selected from the list by the other
party.
(c) Each party will have the right to take the deposition of one individual
and any expert witness designated by the other party. Each party will also have
the right to propound requests for production of documents to any party and the
right to subpoena documents and witnesses for the arbitration. Additional
discovery may be made only where the arbitrator selected so orders upon a
showing of substantial need. The arbitrator will have the authority to entertain
a motion to dismiss and/or a motion for summary judgment by any party and will
apply the standards governing such motions under the Federal Rules of Civil
Procedure.
(d) The Company and the Executive agree that they will attempt, and they
intend that they and the arbitrator should use their best efforts in that
attempt, to conclude the arbitration proceeding and have a final decision from
the arbitrator within 120 days from the date of selection of the arbitrator;
PROVIDED, HOWEVER, that the arbitrator will be entitled to extend such 120-day
period for one additional 120-day period. The arbitrator will deliver a written
award with respect to the dispute to each of the parties, who must promptly act
in accordance therewith.
(e) The Company will pay any and all reasonable fees and expenses incurred
by the Executive in seeking to obtain or enforce any rights or benefits provided
by this Agreement, including all reasonable attorneys' and experts' fees and
expenses, accountants' fees and expenses, and court costs (if any) that may be
incurred by the Executive in pursuing a claim for payment of compensation or
benefits or other right or entitlement under this Agreement, PROVIDED that the
Executive is successful as to at least part of the disputed claim by reason of
litigation, arbitration or settlement.
(f) In a contractual claim under this Agreement, the arbitrator must act in
accordance with the terms and provisions of this Agreement and applicable legal
principles and will have no authority to add, delete or modify any term or
provision of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of
the date it is last executed below by either party.
/s/ RICHARD RODSTEIN
--------------------------------------------------------------------------------
Richard Rodstein
K2 INC.
By:
/s/ JOHN J. RANGEL
--------------------------------------------------------------------------------
John J. Rangel
Senior Vice President-Finance
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QuickLinks
EMPLOYMENT AGREEMENT
W I T N E S S E T H
A G R E E M E N T
|
Ex10-ee
EXECUTION COPY
U.S. $250,000,000
THREE YEAR CREDIT AGREEMENT
Dated as January 19, 2001
Among
BAUSCH & LOMB INCORPORATED
as
Borrower
and
THE INITIAL LENDERS NAMED HEREIN
as
Initial Lenders
and
CITIBANK, N.A.
as
Administrative Agent
and
SALOMON SMITH BARNEY INC.
as
Arranger
and
FLEET NATIONAL BANK
as
Documentation Agent
and
THE CHASE MANHATTAN BANK
as
Syndication Agent
Table of Contents
ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS
Page
SECTION 1.01
Certain Defined Terms
1
SECTION 1.02
Computation of Time Periods
8
SECTION 1.03
Accounting Terms
9
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01
The Advances
9
SECTION 2.02
Making the Advances
9
SECTION 2.03
Fees
10
SECTION 2.04
Termination or Reduction of the Commitments
10
SECTION 2.05
Repayment
10
SECTION 2.06
Interest
10
SECTION 2.07
Interest Rate Determination
11
SECTION 2.08
Optional Conversion of Advances
11
SECTION 2.09
Optional Prepayments
12
SECTION 2.10
Increased Costs
12
SECTION 2.11
Illegality
12
SECTION 2.12
Payments and Computations
12
SECTION 2.13
Taxes
13
SECTION 2.14
Sharing of Payments, Etc.
15
SECTION 2.15
Use of Proceeds
15
SECTION 2.16
Evidence of Debt
15
ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01
Condtions Precedent to Effectiveness of Section 2.01
15
SECTION 3.02
Conditions Precedent to Each Borrowing
17
SECTION 3.03
Determinations under Section 3.01
17
ARTICLE IV REPRESENTATIONS AND WARRANTIES
SECTION 4.01
Representations and Warranties of the Borrower
17
ARTICLE V COVENANTS OF THE BORROWER
SECTION 5.01
Affirmative Covenants
19
SECTION 5.02
Negative Covenants
21
SECTION 5.03
Financial Covenants
22
ARTICLE VI EVENTS OF DEFAULT
SECTION 6.01
Events of Default
23
ARTICLE VII THE AGENT
SECTION 7.01
Authorization and Action
24
SECTION 7.02
Agent's Reliance, Etc.
25
SECTION 7.03
Citibank and Affiliates
25
SECTION 7.04
Lender Credit Decision
25
SECTION 7.05
Indemnification
25
SECTION 7.06
Successor Agent
26
ARTICLE VIII MISCELLANEOUS
SECTION 8.01
Amendments, Etc.
26
SECTION 8.02
Notices, Etc.
26
SECTION 8.03
No Waiver; Remedies
27
SECTION 8.04
Costs and Expenses
27
SECTION 8.05
Right of Set-Off
28
SECTION 8.06
Binding Effect
28
SECTION 8.07
Assignments and Particpations
28
SECTION 8.08
Confidentiality
30
SECTION 8.09
Governing Law
30
SECTION 8.10
Execution in Counterparts
30
SECTION 8.11
Jurisdiction, Etc.
31
SECTION 8.12
Waiver of Jury Trial
32
Schedules
Schedule 1 - List of Applicable Lending Office
Schedule 3.01(b) - Disclosed Litigation
Schedule 4.01(j) - Existing Liens
Schedule 4.01(n) - Significant Subsidiaries
Schedule 5.02(d) - Existing Debt
Exhibits
Exhibit A - Form of Promissory Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Opinion of Counsel for the Borrower
THREE YEAR CREDIT AGREEMENT
Dated as of January 19, 2001
BAUSCH & LOMB INCORPORATED, a New York corporation (the "Borrower"), the banks,
financial institutions and other institutional lenders (the "Initial Lenders")
listed on the signature pages hereof, SALOMON SMITH BARNEY INC., as arranger,
FLEET NATIONAL BANK, as documentation agent, THE CHASE MANHATTAN BANK, as
syndication agent, and CITIBANK, N.A. ("Citibank"), as administrative agent (the
"Agent") for the Lenders (as hereinafter defined), agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01 Certain Defined Terms As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Advance" means an advance by a Lender to the Borrower pursuant to Article II,
and refers to a Base Rate Advance or a Eurodollar Rate Advance (each of which
shall be a "Type" of Advance).
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person. For purposes of this
definition, the term "control" (including the terms "controlling", "controlled
by" and "under common control with") of a Person means the possession, direct or
indirect, of the power to vote 5% or more of the Voting Stock of such Person or
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or otherwise.
"Agent's Account" means the account of the Agent maintained by the Agent at
Citibank with its office at 399 Park Avenue, New York, New York 10043, Account
No. 36852248, Attention: Bank Loan Syndications.
"Applicable Lending Office" means, with respect to each Lender, such Lender's
Domestic Lending Office in the case of a Base Rate Advance and such Lender's
Eurodollar Lending Office in the case of a Eurodollar Rate Advance.
"Applicable Margin" means, as of any date (a) for Base Rate Advances, 0.00% per
annum and (b) for Eurodollar Rate Advances, a percentage per annum determined by
reference to the Public Debt Rating in effect on such date as set forth below:
Public Debt Rating
S&P/Moody's
Applicable Margin for
Eurodollar Rate Advances
Level 1
BBB and Baa2
0.600%
Level 2
Lower than Level 1 but at least BBB or Baa2
0.675%
Level 3
Lower than Level 2 but at least BBB- and Baa3
0.800%
Level 4
Lower than Level 3 but at least BBB- or Baa3
1.025%
Level 5
Lower than Level 4
1.225%
"Applicable Percentage" means, as of any date, a percentage per annum determined
by reference to the Public Debt Rating in effect on such date as set forth
below:
Public Debt Rating
S&P/Moody's
Applicable
Percentage
Level 1
BBB and Baa2
0.150%
Level 2
Lower than Level 1 but at least BBB or Baa2
0.175%
Level 3
Lower than Level 2 but at least BBB- and Baa3
0.200%
Level 4
Lower than Level 3 but at least BBB- or Baa3
0.225%
Level 5
Lower than Level 4
0.275%
"Assignment and Acceptance" means an assignment and acceptance entered into by a
Lender and an Eligible Assignee, and accepted by the Agent, in substantially the
form of Exhibit C hereto.
"Base Rate" means a fluctuating interest rate per annum in effect from time to
time, which rate per annum shall at all times be equal to the highest of:
(a)
the rate of interest announced publicly by Citibank in New York, New York, from
time to time, as Citibank's base rate;
(b)
the sum (adjusted to the nearest 1/4 of 1% or, if there is no nearest 1/4 of 1%,
to the next higher 1/4 of 1%) of (i) 1/2 of 1% per annum, plus (ii) the rate
obtained by dividing (A) the latest three-week moving average of secondary
market morning offering rates in the United States for three-month certificates
of deposit of major United States money market banks, such three-week moving
average (adjusted to the basis of a year of 360 days) being determined weekly on
each Monday (or, if such day is not a Business Day, on the next succeeding
Business Day) for the three-week period ending on the previous Friday by
Citibank on the basis of such rates reported by certificate of deposit dealers
to and published by the Federal Reserve Bank of New York or, if such publication
shall be suspended or terminated, on the basis of quotations for such rates
received by Citibank from three New York certificate of deposit dealers of
recognized standing selected by Citibank, by (B) a percentage equal to 100%
minus the average of the daily percentages specified during such three-week
period by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including, but not
limited to, any emergency, supplemental or other marginal reserve requirement)
for Citibank with respect to liabilities consisting of or including (among other
liabilities) three-month U.S. dollar non-personal time deposits in the United
States, plus (iii) the average during such three-week period of the annual
assessment rates estimated by Citibank for determining the then current annual
assessment payable by Citibank to the Federal Deposit Insurance Corporation (or
any successor) for insuring U.S. dollar deposits of Citibank in the United
States; and
(c)
1/2 of one percent per annum above the Federal Funds Rate.
"Base Rate Advance" means an Advance that bears interest as provided in
Section 2.06(a)(i).
"Borrowing" means a borrowing consisting of Advances of the same Type made on
the same day by the Lenders.
"Business Day" means a day of the year on which banks are not required or
authorized by law to close in New York City and, if the applicable Business Day
relates to any Eurodollar Rate Advances, on which dealings are carried on in the
London interbank market.
"Commitment" has the meaning specified in Section 2.01.
"Confidential Information" means information that the Borrower furnishes to the
Agent or any Lender in a writing designated as confidential, but does not
include any such information that is or becomes generally available to the
public or that is or becomes available to the Agent or such Lender from a source
other than the Borrower.
"Consolidated" refers to the consolidation of accounts in accordance with GAAP.
"Convert", "Conversion" and "Converted" each refers to a conversion of Advances
of one Type into Advances of the other Type pursuant to Section 2.07 or 2.08.
"Debt" of any Person means, without duplication, (a) all indebtedness of such
Person for borrowed money, (b) all obligations of such Person for the deferred
purchase price of property or services (other than trade payables not overdue by
more than 60 days incurred in the ordinary course of such Person's business),
(c) all obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all obligations of such Person created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all obligations of such Person as
lessee under leases that have been or should be, in accordance with GAAP,
recorded as capital leases, (f) all obligations, contingent or otherwise, of
such Person in respect of acceptances, letters of credit or similar extensions
of credit, (g) all net obligations of such Person in respect of Hedge
Agreements, (h) all Debt of others referred to in clauses (a) through (g) above
or clause (i) below guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person through an
agreement (1) to pay or purchase such Debt or to advance or supply funds for the
payment or purchase of such Debt, (2) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Debt or to assure the holder of such
Debt against loss, (3) to supply funds to or in any other manner invest in the
debtor (including any agreement to pay for property or services irrespective of
whether such property is received or such services are rendered), primarily for
the purpose of enabling the debtor to make payment of such Debt or to assure the
holder of such Debt against loss or (4) otherwise to assure a creditor against
loss, and (i) all Debt referred to in clauses (a) through (h) above secured by
(or for which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Debt.
"Debt for Borrowed Money" of any Person means all items that, in accordance with
GAAP, would be classified as notes payable, long term debt or current portion of
long term debt on a Consolidated balance sheet of such Person.
"Default" means any Event of Default or any event that would constitute an Event
of Default but for the requirement that notice be given or time elapse or both.
"Disclosed Litigation" has the meaning specified in Section 3.01(b).
"Domestic Lending Office" means, with respect to any Lender, the office of such
Lender specified as its "Domestic Lending Office" opposite its name on
Schedule I hereto or in the Assignment and Acceptance pursuant to which it
became a Lender, or such other office of such Lender as such Lender may from
time to time specify to the Borrower and the Agent.
"EBITDA" means, for any period, net income (or net loss) plus the sum of
(a) interest expense, (b) income tax expense, (c) depreciation expense,
(d) amortization expense, (e) other non-cash non-recurring charges and (f)
extraordinary or unusual losses deducted in calculating net income less
extraordinary or unusual gains added in calculating net income, in each case
determined in accordance with GAAP for such period.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a Lender; and
(iii) any other Person approved by the Agent and, unless an Event of Default
has occurred and is continuing at the time any assignment is effected in
accordance with Section 8.07, any other Person approved by the Borrower, such
approval not to be unreasonably withheld or delayed; provided, however, that
neither the Borrower nor an Affiliate of the Borrower shall qualify as an
Eligible Assignee.
"Environmental Action" 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, Environmental Permit or Hazardous
Materials or arising from alleged injury or threat of injury 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
any 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, judgment, decree or judicial or agency
interpretation, policy or guidance relating to pollution or protection of the
environment, health, safety or 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 amended
from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of ERISA is a
member of the Borrower's controlled group, or under common control with the
Borrower, within the meaning of Section 414 of the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable event, within the
meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day
notice requirement with respect to such event has been waived by the PBGC, or
(ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without
regard to subsection (2) of such Section) are met with respect to a contributing
sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event
described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA
is reasonably expected to occur with respect to such Plan within the following
30 days; (b) the application for a minimum funding waiver with respect to a
Plan; (c) the provision by the administrator of any Plan of a notice of intent
to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including any
such notice with respect to a plan amendment referred to in Section 4041(e) of
ERISA); (d) the cessation of operations at a facility of the Borrower or any
ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA;
(e) the withdrawal by the Borrower or any ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a substantial employer, as
defined in Section 4001(a)(2) of ERISA; (f) the conditions for the imposition of
a lien under Section 302(f) of ERISA shall have been met with respect to any
Plan; (g) the adoption of an amendment to a Plan requiring the provision of
security to such Plan pursuant to Section 307 of ERISA; or (h) the institution
by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of
ERISA, or the occurrence of any event or condition described in Section 4042 of
ERISA that constitutes grounds for the termination of, or the appointment of a
trustee to administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D
of the Board of Governors of the Federal Reserve System, as in effect from time
to time.
"Eurodollar Lending Office" means, with respect to any Lender, the office of
such Lender specified as its "Eurodollar Lending Office" opposite its name on
Schedule I hereto or in the Assignment and Acceptance pursuant to which it
became a Lender (or, if no such office is specified, its Domestic Lending
Office), or such other office of such Lender as such Lender may from time to
time specify to the Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period for each Eurodollar Rate
Advance comprising part of the same Borrowing, an interest rate per annum equal
to the rate per annum obtained by dividing (a) the rate per annum (rounded
upward to the nearest whole multiple of 1/16 of 1% per annum) appearing on
Telerate Markets Page 3750 (or any successor page) as the London interbank
offered rate for deposits in U.S. dollars at approximately 11:00 A.M. (London
time) two Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period or, if for any reason such rate is not
available, the average (rounded upward to the nearest whole multiple of 1/16 of
1% per annum, if such average is not such a multiple) of the rate per annum at
which deposits in U.S. dollars is offered by the principal office of each of the
Reference Banks in London, England to prime banks in the London interbank market
at 11:00 A.M. (London time) two Business Days before the first day of such
Interest Period in an amount substantially equal to such Reference Bank's
Eurodollar Rate Advance comprising part of such Borrowing to be outstanding
during such Interest Period and for a period equal to such Interest Period
(subject, however, to the provisions of Section 2.07) by (b) a percentage equal
to 100% minus the Eurocurrency Rate Reserve Percentage for such Interest Period.
"Eurodollar Rate Advance" means an Advance that bears interest as provided in
Section 2.06(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for all Eurodollar
Rate Advances comprising part of the same Borrowing means the reserve percentage
applicable two Business Days before the first day of such Interest Period under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for a member bank of the Federal Reserve System in
New York City with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of liabilities
that includes deposits by reference to which the interest rate on Eurodollar
Rate Advances is determined) having a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"GAAP" has the meaning specified in Section 1.03.
"Hazardous Materials" means (a) petroleum and petroleum products, byproducts or
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.
"Hedge Agreements" means interest rate swap, cap or collar agreements, interest
rate future or option contracts, currency swap agreements, currency future or
option contracts and other similar agreements.
"Interest Period" means, for each Eurodollar Rate Advance comprising part of the
same Borrowing, the period from the date of such Eurodollar Rate Advance or the
date of the Conversion of any Base Rate Advance into such Eurodollar Rate
Advance until the last day of the period selected by the Borrower pursuant to
the provisions below and, thereafter, each subsequent period commencing on the
last day of the immediately preceding Interest Period and ending on the last day
of the period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three or six months or
if available from all Lenders, nine or twelve months, as the Borrower may, upon
notice received by the Agent not later than 11:00 A.M. (New York City time) on
the third Business Day prior to the first day of such Interest Period, select;
provided, however, that:
(i)
the Borrower may not select any Interest Period that ends after the Termination
Date;
(ii)
Interest Periods commencing on the same date for Eurodollar Rate Advances
comprising part of the same Borrowing shall be of the same duration;
(iii)
whenever the last day of any Interest Period would otherwise occur on a day
other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day, provided, however, that,
if such extension would cause the last day of such Interest Period to occur in
the next following calendar month, the last day of such Interest Period shall
occur on the next preceding Business Day; and
(iv)
whenever the first day of any Interest Period occurs on a day of an initial
calendar month for which there is no numerically corresponding day in the
calendar month that succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such Interest Period
shall end on the last Business Day of such succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
"Lenders" means the Initial Lenders and each Person that shall become a party
hereto pursuant to Section 8.07.
"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.
"Material Adverse Change" means any material adverse change in the business,
condition (financial or otherwise), operations, performance, properties or
prospects of the Borrower or the Borrower and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the business,
condition (financial or otherwise), operations, performance, properties or
prospects of the Borrower or the Borrower and its Subsidiaries taken as a whole,
(b) the rights and remedies of the Agent or any Lender under this Agreement or
any Note or (c) the ability of the Borrower to perform its obligations under
this Agreement or any Note.
"Material Subsidiary" of the Borrower means, at any time, any Subsidiary of the
Borrower having (a) Consolidated assets with a value of not less than 5% of the
total value of the Consolidated assets of the Borrower and it Subsidiaries or
(b) Consolidated sales of not less than 5% of the Consolidated sales of the
Borrower and its Subsidiaries, in each case as of the end of or from the most
recently completed fiscal quarter of the Borrower.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Borrower or any ERISA Affiliate and at least one Person other than the Borrower
and the ERISA Affiliates or (b) was so maintained and in respect of which the
Borrower or any ERISA Affiliate could have liability under Section 4064 or 4069
of ERISA in the event such plan has been or were to be terminated.
"Note" means a promissory note of the Borrower payable to the order of any
Lender, delivered pursuant to a request made under Section 2.16 in substantially
the form of Exhibit A hereto, evidencing the aggregate indebtedness of the
Borrower to such Lender resulting from the Advances made by such Lender.
"Notice of Borrowing" has the meaning specified in Section 2.02.
"PBGC" means the Pension Benefit Guaranty Corporation (or any successor).
"Permitted Liens" means such of the following as to which no enforcement,
collection, execution, levy or foreclosure proceeding shall have been commenced
or as to which are not being contested by appropriate proceedings with
appropriate reserves: (a) Liens for taxes, assessments and governmental charges
or levies to the extent not required to be paid under Section 5.01(b) hereof;
(b) Liens imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's Liens and other similar Liens arising in the ordinary
course of business securing obligations that are not overdue for a period of
more than 30 days; (c) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or statutory
obligations or bids or tenders or surety, appeal or performance bonds in the
ordinary course of business; and (d) easements, rights of way and other
encumbrances on title to real property that do not render title to the property
encumbered thereby unmarketable or materially adversely affect the use of such
property for its present purposes.
"Person" means an individual, partnership, corporation (including a business
trust), joint stock company, trust, unincorporated association, joint venture,
limited liability company or other entity, or a government or any political
subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Public Debt Rating" means, as of any date, the lowest rating that has been most
recently announced by either S&P or Moody's, as the case may be, for any class
of non-credit enhanced long-term senior unsecured debt issued by the Borrower.
For purposes of the foregoing, (a) if only one of S&P and Moody's shall have in
effect a Public Debt Rating, the Applicable Margin and the Applicable Percentage
shall be determined by reference to the available rating; (b) if neither S&P nor
Moody's shall have in effect a Public Debt Rating, the Applicable Margin and the
Applicable Percentage will be set in accordance with Level 4 under the
definition of "Applicable Margin" or "Applicable Percentage", as the case may
be; (c) if any rating established by S&P or Moody's shall be changed, such
change shall be effective as of the date on which such change is first announced
publicly by the rating agency making such change; and (d) if S&P or Moody's
shall change the basis on which ratings are established, each reference to the
Public Debt Rating announced by S&P or Moody's, as the case may be, shall refer
to the then equivalent rating by S&P or Moody's, as the case may be.
"Reference Banks" means Citibank, Fleet National Bank and The Chase Manhattan
Bank.
"Register" has the meaning specified in Section 8.07(c).
"Required Lenders" means at any time Lenders owed at least 60% of the then
aggregate unpaid principal amount of the Advances owing to Lenders, or, if no
such principal amount is then outstanding, Lenders having at least 60% of the
Commitments.
"S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Borrower or any ERISA Affiliate and no Person other than the Borrower and the
ERISA Affiliates or (b) was so maintained and in respect of which the Borrower
or any ERISA Affiliate could have liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated.
"SPC" has the meaning specified in Section 8.07(f) hereto.
"Subsidiary" of any Person means any corporation, partnership, joint venture,
limited liability company, trust or estate of which (or in which) more than 50%
of (a) the issued and outstanding capital stock having ordinary voting power to
elect a majority of the Board of Directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such limited
liability company, partnership or joint venture or (c) the beneficial interest
in such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"Termination Date" means the earlier of January 19, 2004 and the date of
termination in whole of the Commitments pursuant to Section 2.04 or 6.01.
"Voting Stock" means capital stock issued by a corporation, or equivalent
interests in any other Person, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of directors (or
persons performing similar functions) of such Person, even if the right so to
vote has been suspended by the happening of such a contingency.
SECTION 1.02 Computation of Time Periods In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
SECTION 1.03 Accounting Terms All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles consistent with those applied in the preparation of the financial
statements referred to in Section 4.01(e) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01 The Advances Each Lender severally agrees, on the terms and
conditions hereinafter set forth, to make Advances to the Borrower from time to
time on any Business Day during the period from the Effective Date until the
Termination Date in an aggregate amount not to exceed at any time outstanding
the amount set forth opposite such Lender's name on the signature pages hereof
or, if such Lender has entered into any Assignment and Acceptance, set forth for
such Lender in the Register maintained by the Agent pursuant to Section 8.07(c),
as such amount may be reduced pursuant to Section 2.04 (such Lender's
"Commitment"). Each Borrowing shall be in an aggregate amount of $5,000,000 or
an integral multiple of $1,000,000 in excess thereof and shall consist of
Advances of the same Type made on the same day by the Lenders ratably according
to their respective Commitments. Within the limits of each Lender's Commitment,
the Borrower may borrow under this Section 2.01, prepay pursuant to Section 2.09
and reborrow under this Section 2.01.
SECTION 2.02 Making the Advances (a) Each Borrowing shall be made on
notice, given not later than 11:00 A.M. (New York City time) on the third
Business Day prior to the date of the proposed Borrowing in the case of a
Borrowing consisting of Eurodollar Rate Advances, or the date of the proposed
Borrowing in the case of a Borrowing consisting of Base Rate Advances, by the
Borrower to the Agent, which shall give to each Lender prompt notice thereof by
telecopier or telex. Each such notice of a Borrowing (a "Notice of Borrowing")
shall be by telephone, confirmed immediately in writing, or telecopier or telex,
in substantially the form of Exhibit B hereto, specifying therein the requested
(i) date of such Borrowing, (ii) Type of Advances comprising such Borrowing,
(iii) aggregate amount of such Borrowing, and (iv) in the case of a Borrowing
consisting of Eurodollar Rate Advances, initial Interest Period for each such
Advance. Each Lender shall, before 1:00 P.M. (New York City time) on the date
of such Borrowing, make available for the account of its Applicable Lending
Office to the Agent at the Agent's Account, in same day funds, such Lender's
ratable portion of such Borrowing. After the Agent's receipt of such funds and
upon fulfillment of the applicable conditions set forth in Article III, the
Agent will make such funds available to the Borrower at the Agent's address
referred to in Section 8.02.
(b)
Anything in subsection (a) above to the contrary notwithstanding, (i) the
Borrower may not select Eurodollar Rate Advances for any Borrowing if the
aggregate amount of such Borrowing is less than $5,000,000 or if the obligation
of the Lenders to make Eurodollar Rate Advances shall then be suspended pursuant
to Section 2.07 or 2.11 and (ii) the Eurodollar Rate Advances may not be
outstanding as part of more than twelve separate Borrowings.
(c)
Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In
the case of any Borrowing that the related Notice of Borrowing specifies is to
be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each
Lender against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified in such Notice of
Borrowing for such Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss, cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Advance to be made by such Lender as part of such Borrowing
when such Advance, as a result of such failure, is not made on such date. Such
indemnification shall be paid upon presentation to the Borrower of a reasonably
detailed statement of such loss, cost or expense certified by an officer of such
Lender.
(d)
Unless the Agent shall have received notice from a Lender prior to the date of
any Borrowing that such Lender will not make available to the Agent such
Lender's ratable portion of such Borrowing, the Agent may assume that such
Lender has made such portion available to the Agent on the date of such
Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Lender shall not
have so made such ratable portion available to the Agent, such Lender and the
Borrower severally agree to repay to the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Agent, at (i) in the case of the Borrower, the interest rate
applicable at the time to Advances comprising such Borrowing and (ii) in the
case of such Lender, the Federal Funds Rate. If such Lender shall repay to the
Agent such corresponding amount, such amount so repaid shall constitute such
Lender's Advance as part of such Borrowing for purposes of this Agreement.
(e)
The failure of any Lender to make the Advance to be made by it as part of any
Borrowing shall not relieve any other Lender of its obligation, if any,
hereunder to make its Advance on the date of such Borrowing, but no Lender shall
be responsible for the failure of any other Lender to make the Advance to be
made by such other Lender on the date of any Borrowing.
SECTION 2.03 Fees (a) Facility Fee. The Borrower agrees to pay to the Agent
for the account of each Lender a facility fee on the aggregate amount of such
Lender's Commitment from the Effective Date in the case of each Initial Lender
and from the effective date specified in the Assignment and Acceptance pursuant
to which it became a Lender in the case of each other Lender until the
Termination Date at a rate per annum equal to the Applicable Percentage in
effect from time to time, payable in arrears quarterly on the last day of each
March, June, September and December, commencing March 31, 2001, and on the
Termination Date.
(b)
Agent's Fees
. The Borrower shall pay to the Agent for its own account such fees as have been
agreed between the Borrower and the Agent.
SECTION 2.04 Termination or Reduction of the Commitments The Borrower shall
have the right, upon at least three Business Days' notice to the Agent, to
terminate in whole or permanently reduce ratably in part the unused portions of
the respective Commitments of the Lenders, provided that each partial reduction
shall be in the aggregate amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof.
SECTION 2.05 Repayment The Borrower shall repay to the Agent for the ratable
account of the Lenders on the Termination Date the aggregate principal amount of
the Advances then outstanding.
SECTION 2.06 Interest (a) Scheduled Interest. The Borrower shall pay
interest on the unpaid principal amount of each Advance owing to each Lender
from the date of such Advance until such principal amount shall be paid in full,
at the following rates per annum:
(i)
Base Rate Advances
. During such periods as such Advance is a Base Rate Advance, a rate per annum
equal at all times to the sum of (x) the Base Rate in effect from time to time
plus (y) the Applicable Margin in effect from time to time, payable in arrears
quarterly on the last day of each March, June, September and December during
such periods and on the date such Base Rate Advance shall be Converted or paid
in full.
(ii)
Eurodollar Rate Advances
. During such periods as such Advance is a Eurodollar Rate Advance, a rate per
annum equal at all times during each Interest Period for such Advance to the sum
of (x) the Eurodollar Rate for such Interest Period for such Advance plus
(y) the Applicable Margin in effect from time to time, payable in arrears on the
last day of such Interest Period and, if such Interest Period has a duration of
more than three months, on each day that occurs during such Interest Period
every three months from the first day of such Interest Period and on the date
such Eurodollar Rate Advance shall be Converted or paid in full.
(b)
Default Interest
. Upon the occurrence and during the continuance of an Event of Default, the
Borrower shall pay interest on (i) the unpaid principal amount of each Advance
owing to each Lender, payable in arrears on the dates referred to in
clause (a)(i) or (a)(ii) above, at a rate per annum equal at all times to 2% per
annum above the rate per annum required to be paid on such Advance pursuant to
clause (a)(i) or (a)(ii) above and (ii) to the fullest extent permitted by law,
the amount of any interest, fee or other amount payable hereunder that is not
paid when due, from the date such amount shall be due until such amount shall be
paid in full, payable in arrears on the date such amount shall be paid in full
and on demand, at a rate per annum equal at all times to 2% per annum above the
rate per annum required to be paid on Base Rate Advances pursuant to
clause (a)(i) above.
SECTION 2.07 Interest Rate Determination (a) Each Reference Bank agrees to
furnish to the Agent timely information for the purpose of determining each
Eurodollar Rate. If any one or more of the Reference Banks shall not furnish
such timely information to the Agent for the purpose of determining any such
interest rate, the Agent shall determine such interest rate on the basis of
timely information furnished by the remaining Reference Banks. The Agent shall
give prompt notice to the Borrower and the Lenders of the applicable interest
rate determined by the Agent for purposes of Section 2.06(a)(i) or (ii) and the
rate, if any, furnished by each Reference Bank for the purpose of determining
the interest rate under Section 2.06(a)(ii).
(b)
If, with respect to any Eurodollar Rate Advances, the Required Lenders notify
the Agent that the Eurodollar Rate for any Interest Period for such Advances
will not adequately reflect the cost to such Required Lenders of making, funding
or maintaining their respective Eurodollar Rate Advances for such Interest
Period, the Agent shall forthwith so notify the Borrower and the Lenders,
whereupon (i) each Eurodollar Rate Advance will automatically, on the last day
of the then existing Interest Period therefor, Convert into a Base Rate Advance,
and (ii) the obligation of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended until the Agent shall notify the
Borrower and the Lenders that the circumstances causing such suspension no
longer exist.
(c)
If the Borrower shall fail to select the duration of any Interest Period for any
Eurodollar Rate Advances in accordance with the provisions contained in the
definition of "Interest Period" in Section 1.01, the Agent will forthwith so
notify the Borrower and the Lenders and such Advances will automatically, on the
last day of the then existing Interest Period therefor, Convert into Base Rate
Advances.
(d)
On the date on which the aggregate unpaid principal amount of Eurodollar Rate
Advances comprising any Borrowing shall be reduced, by payment or prepayment or
otherwise, to less than $5,000,000, such Advances shall automatically Convert
into Base Rate Advances.
(e)
Upon the occurrence and during the continuance of any Event of Default, (i) each
Eurodollar Rate Advance will automatically, on the last day of the then existing
Interest Period therefor, Convert into a Base Rate Advance and (ii) the
obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended.
(f)
If Telerate Markets Page 3750 is unavailable and fewer than two Reference Banks
furnish timely information to the Agent for determining the Eurodollar Rate for
any Eurodollar Rate Advances,
(i)
the Agent shall forthwith notify the Borrower and the Lenders that the interest
rate cannot be determined for such Eurodollar Rate Advances,
(ii)
each such Advance will automatically, on the last day of the then existing
Interest Period therefor, Convert into a Base Rate Advance (or if such Advance
is then a Base Rate Advance, will continue as a Base Rate Advance), and
(iii)
the obligation of the Lenders to make, or to Convert Advances into, Eurodollar
Rate Advances shall be suspended until the Agent shall notify the Borrower and
the Lenders that the circumstances causing such suspension
SECTION 2.08 Optional Conversion of Advances The Borrower may on any
Business Day, upon notice given to the Agent not later than 11:00 A.M. (New York
City time) on the third Business Day prior to the date of the proposed
Conversion and subject to the provisions of Sections 2.07 and 2.11, Convert all
Advances of one Type comprising the same Borrowing into Advances of the other
Type; provided, however, that any Conversion of Eurodollar Rate Advances into
Base Rate Advances shall be made only on the last day of an Interest Period for
such Eurodollar Rate Advances, any Conversion of Base Rate Advances into
Eurodollar Rate Advances shall be in an amount not less than the minimum amount
specified in Section 2.02(b) and no Conversion of any Advances shall result in
more separate Borrowings than permitted under Section 2.02(b). Each such notice
of a Conversion shall, within the restrictions specified above, specify (i) the
date of such Conversion, (ii) the Advances to be Converted, and (iii) if such
Conversion is into Eurodollar Rate Advances, the duration of the initial
Interest Period for each such Advance. Each notice of Conversion shall be
irrevocable and binding on the Borrower.
SECTION 2.09 Optional Prepayments The Borrower may, upon notice at least two
Business Days' prior to the date of such prepayment, in the case of Eurodollar
Rate Advances, and not later than 11:00 A.M. (New York City time) on the date of
such prepayment, in the case of Base Rate Advances, to the Agent stating the
proposed date and aggregate principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay the outstanding principal amount of
the Advances comprising part of the same Borrowing in whole or ratably in part,
together with accrued interest to the date of such prepayment on the principal
amount prepaid; provided, however, that (x) each partial prepayment shall be in
an aggregate principal amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof and (y) in the event of any such prepayment of a
Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the
Lenders in respect thereof pursuant to Section 8.04(c).
SECTION 2.10 Increased Costs (a) If, due to either (i) the introduction of
or any change in or in the interpretation of any law or regulation or (ii) the
compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), there shall be
any increase in the cost to any Lender of agreeing to make or making, funding or
maintaining Eurodollar Rate Advances (excluding for purposes of this Section
2.10 any such increased costs resulting from (i) Taxes or Other Taxes (as to
which Section 2.13 shall govern) and (ii) changes in the basis of taxation of
overall net income or overall gross income by the United States or by the
foreign jurisdiction or state under the laws of which such Lender is organized
or has its Applicable Lending Office or any political subdivision thereof), then
the Borrower shall from time to time, upon demand by such Lender (with a copy of
such demand to the Agent), pay to the Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such increased cost.
A certificate as to the amount of such increased cost, submitted to the Borrower
and the Agent by an authorized officer of such Lender, shall be conclusive and
binding for all purposes, absent manifest error.
(b)
If any Lender determines that compliance with any law or regulation or any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by such Lender or any corporation
controlling such Lender and that the amount of such capital is increased by or
based upon the existence of such Lender's commitment to lend hereunder and other
commitments of this type, then, upon demand by such Lender (with a copy of such
demand to the Agent), the Borrower shall pay to the Agent for the account of
such Lender, from time to time as specified by such Lender, additional amounts
sufficient to compensate such Lender or such corporation in the light of such
circumstances, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the existence of such Lender's commitment
to lend hereunder. A certificate as to such amounts submitted to the Borrower
and the Agent by an authorized officer of such Lender shall be conclusive and
binding for all purposes, absent manifest error.
SECTION 2.11 Il1egality Notwithstanding any other provision of this
Agreement, if any Lender shall notify the Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful,
or any central bank or other governmental authority asserts that it is unlawful,
for any Lender or its Eurodollar Lending Office to perform its obligations
hereunder to make Eurodollar Rate Advances or to fund or maintain Eurodollar
Rate Advances hereunder, (i) each Eurodollar Rate Advance will automatically,
upon such demand, Convert into a Base Rate Advance and (ii) the obligation of
the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall
be suspended until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
SECTION 2.12 Payments and Computations (a) The Borrower shall make each
payment hereunder and under the Notes, irrespective of any right of counterclaim
or set-off, not later than 11:00 A.M. (New York City time) on the day when due
in U.S. dollars to the Agent at the Agent's Account in same day funds. The Agent
will promptly thereafter cause to be distributed like funds relating to the
payment of principal or interest or facility fees ratably (other than amounts
payable pursuant to Section 2.10, 2.13 or 8.04(c)) to the Lenders for the
account of their respective Applicable Lending Offices, and like funds relating
to the payment of any other amount payable to any Lender to such Lender for the
account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon its acceptance of an
Assignment and Acceptance and recording of the information contained therein in
the Register pursuant to Section 8.07(d), from and after the effective date
specified in such Assignment and Acceptance, the Agent shall make all payments
hereunder and under the Notes in respect of the interest assigned thereby to the
Lender assignee thereunder, and the parties to such Assignment and Acceptance
shall make all appropriate adjustments in such payments for periods prior to
such effective date directly between themselves.
(b)
The Borrower hereby authorizes each Lender, if and to the extent payment owed to
such Lender is not made when due hereunder or under the Note held by such
Lender, to charge from time to time against any or all of the Borrower's
accounts with such Lender any amount so due.
(c)
All computations of interest based on the Base Rate shall be made by the Agent
on the basis of a year of 365 or 366 days, as the case may be, and all
computations of interest based on the Eurodollar Rate or the Federal Funds Rate
and of facility fees shall be made by the Agent on the basis of a year of 360
days, in each case for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest or
facility fees are payable. Each determination by the Agent of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(d)
Whenever any payment hereunder or under the Notes shall be stated to be due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest or facility fee, as the case may be;
provided, however, that, if such extension would cause payment of interest on or
principal of Eurodollar Rate Advances to be made in the next following calendar
month, such payment shall be made on the next preceding Business Day.
(e)
Unless the Agent shall have received notice from the Borrower prior to the date
on which any payment is due to the Lenders hereunder that the Borrower will not
make such payment in full, the Agent may assume that the Borrower has made such
payment in full to the Agent on such date and the Agent may, in reliance upon
such assumption, cause to be distributed to each Lender on such due date an
amount equal to the amount then due such Lender. If and to the extent the
Borrower shall not have so made such payment in full to the Agent, each Lender
shall repay to the Agent forthwith on demand such amount distributed to such
Lender together with interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.13 Taxes (a) Any and all payments by the Borrower hereunder or
under the Notes shall be made, in accordance with Section 2.12, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, taxes imposed on
its overall net income, and franchise taxes imposed on it in lieu of net income
taxes, by the jurisdiction under the laws of which such Lender or the Agent (as
the case may be) is organized or any political subdivision thereof and, in the
case of each Lender, taxes imposed on its overall net income, and franchise
taxes imposed on it in lieu of net income taxes, by the jurisdiction of such
Lender's Applicable Lending Office or any political subdivision thereof (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities in respect of payments hereunder or under the Notes being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Lender or the Agent, (i) the sum payable shall be increased as may
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.13) such Lender or
the Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.
(b)
In addition, the Borrower shall pay any present 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 the Notes or from the execution,
delivery or registration of, performing under, or otherwise with respect to,
this Agreement or the Notes (hereinafter referred to as "Other Taxes").
(c)
The Borrower shall indemnify each Lender and the Agent for and hold it harmless
against the full amount of Taxes or Other Taxes (including, without limitation,
taxes of any kind imposed by any jurisdiction on amounts payable under this
Section 2.13) imposed on or paid by such Lender or the Agent (as the case may
be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be made within 30
days from the date such Lender or the Agent (as the case may be) makes written
demand therefor.
(d)
Within 30 days after the date of any payment of Taxes, the Borrower shall
furnish to the Agent, at its address referred to in Section 8.02, the original
or a certified copy of a receipt evidencing such payment. In the case of any
payment hereunder or under the Notes by or on behalf of the Borrower through an
account or branch outside the United States or by or on behalf of the Borrower
by a payor that is not a United States person, if the Borrower determines that
no Taxes are payable in respect thereof, the Borrower shall furnish, or shall
cause such payor to furnish, to the Agent, at such address, an opinion of
counsel acceptable to the Agent stating that such payment is exempt from Taxes.
For purposes of this subsection (d) and subsection (e), the terms "United
States" and "United States person" shall have the meanings specified in
Section 7701 of the Internal Revenue Code.
(e)
Each Lender organized under the laws of a jurisdiction outside the United
States, on or prior to the date of its execution and delivery of this Agreement
in the case of each Initial Lender and on the date of the Assignment and
Acceptance pursuant to which it becomes a Lender in the case of each other
Lender, and from time to time thereafter as requested in writing by the Borrower
(but only so long as such Lender remains lawfully able to do so), shall provide
each of the Agent and the Borrower with two original Internal Revenue Service
forms W-8BEN or W-8ECI, as appropriate, or any successor or other form
prescribed by the Internal Revenue Service, certifying that such Lender is
exempt from or entitled to a reduced rate of United States withholding tax on
payments pursuant to this Agreement or the Notes. If the form provided by a
Lender at the time such Lender first becomes a party to this Agreement indicates
a United States interest withholding tax rate in excess of zero, withholding tax
at such rate shall be considered excluded from Taxes unless and until such
Lender provides the appropriate forms certifying that a lesser rate applies,
whereupon withholding tax at such lesser rate only shall be considered excluded
from Taxes for periods governed by such form; provided, however, that, if at the
date of the Assignment and Acceptance pursuant to which a Lender assignee
becomes a party to this Agreement, the Lender assignor was entitled to payments
under subsection (a) in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Lender assignee on such date. If any form or
document referred to in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form W-8BEN
or W-8ECI, that the Lender reasonably considers to be confidential, the Lender
shall give notice thereof to the Borrower and shall not be obligated to include
in such form or document such confidential information.
(f)
For any period with respect to which a Lender has failed to provide the Borrower
with the appropriate form described in Section 2.13(e) (other than if such
failure is due to a change in law occurring subsequent to the date on which a
form originally was required to be provided, or if such form otherwise is not
required under subsection (e) above), such Lender shall not be entitled to
indemnification under Section 2.13(a) or (c) with respect to Taxes imposed by
the United States by reason of such failure; provided, however, that should a
Lender become subject to Taxes because of its failure to deliver a form required
hereunder, the Borrower shall take such steps as the Lender shall reasonably
request to assist the Lender to recover such Taxes.
(g)
Any Lender claiming any additional amounts payable pursuant to this Section 2.13
agrees to use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to change the jurisdiction of its Eurodollar
Lending Office if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts that may thereafter accrue and
would not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender.
(h)
If any Lender determines, in its sole discretion, that it has actually and
finally realized, by reason of a refund, deduction or credit of any Taxes paid
or reimbursed by the Borrower pursuant to subsection (a) or (c) above in respect
of payments under the Credit Agreement or the Notes, a current monetary benefit
that it would otherwise not have obtained, and that would result in the total
payments under this Section 2.13 exceeding the amount needed to make such Lender
whole, such Lender shall pay to the Borrower, with reasonable promptness
following the date on which it actually realizes such benefit, an amount equal
to the lesser of the amount of such benefit or the amount of such excess, in
each case net of all out-of-pocket expenses in securing such refund, deduction
or credit.
SECTION 2.14 Sharing of Payments, Etc If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of the Advances owing to it (other than pursuant to
Section 2.10, 2.13 or 8.04(c)) in excess of its ratable share of payments on
account of the Advances obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in the Advances owing to
them as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.14 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
SECTION 2.15 Use of Proceeds The proceeds of the Advances shall be available
(and the Borrower agrees that it shall use such proceeds) solely for general
corporate purposes of the Borrower and its Subsidiaries, including acquisitions.
SECTION 2.16 Evidence of Debt (a) Each Lender shall maintain in accordance
with its usual practice an account or accounts evidencing the indebtedness of
the Borrower to such Lender resulting from each Advance owing to such Lender
from time to time, including the amounts of principal and interest payable and
paid to such Lender from time to time hereunder in respect of Advances. The
Borrower agrees that upon notice by any Lender to the Borrower (with a copy of
such notice to the Agent) to the effect that a Note is required or appropriate
in order for such Lender to evidence (whether for purposes of pledge,
enforcement or otherwise) the Advances owing to, or to be made by, such Lender,
the Borrower shall promptly execute and deliver to such Lender a Note payable to
the order of such Lender in a principal amount up to the Commitment of such
Lender.
(b)
The Register maintained by the Agent pursuant to Section 8.07(d) shall include a
control account, and a subsidiary account for each Lender, in which accounts
(taken together) shall be recorded (I) the date and amount of each Borrowing
made hereunder, the Type of Advances comprising such Borrowing and, if
appropriate, the Interest Period applicable thereto, (ii) the terms of each
Assignment and Acceptance delivered to and accepted by it, (iii) the amount of
any principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iv) the amount of any sum received by the
Agent from the Borrower hereunder and each Lender's share thereof.
(c)
Entries made in good faith by the Agent in the Register pursuant to subsection
(b) above, and by each Lender in its account or accounts pursuant to subsection
(a) above, shall be prima facie evidence of the amount of principal and interest
due and payable or to become due and payable from the Borrower to, in the case
of the Register, each Lender and, in the case of such account or accounts, such
Lender, under this Agreement, absent manifest error; provided, however, that the
failure of the Agent or such Lender to make an entry, or any finding that an
entry is incorrect, in the Register or such account or accounts shall not limit
or otherwise affect the obligations of the Borrower under this Agreement.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01 Conditions Precedent to Effectiveness of Section
2.01 Section 2.01 of this Agreement shall become effective on and as of the
first date (the "Effective Date") on which the following conditions precedent
have been satisfied:
(a)
Other than as publicly disclosed prior to the Effective Date, there shall have
occurred no Material Adverse Change since December 25, 1999.
(b)
There shall exist no action, suit, investigation, litigation or proceeding
affecting the Borrower or any of its Subsidiaries pending or threatened before
any court, governmental agency or arbitrator that (i) could be reasonably likely
to have a Material Adverse Effect other than the matters described on
Schedule 3.01(b) hereto (the "Disclosed Litigation") or (ii) purports to affect
the legality, validity or enforceability of this Agreement or any Note or the
consummation of the transactions contemplated hereby, and there shall have been
no adverse change in the status, or financial effect on the Borrower or any of
its Subsidiaries, of the Disclosed Litigation from that described on
Schedule 3.01(b) hereto.
(c)
The Lenders shall have been given such access to the management, records, books
of account, contracts and properties of the Borrower and its Subsidiaries as
they shall have requested.
(d)
All governmental and third party consents and approvals necessary in connection
with the transactions contemplated hereby shall have been obtained (without the
imposition of any conditions that are not acceptable to the Lenders) and shall
remain in effect, and no law or regulation shall be applicable in the reasonable
judgment of the Lenders that restrains, prevents or imposes materially adverse
conditions upon the transactions contemplated hereby.
(e)
The Borrower shall have notified the Agent in writing as to the proposed
Effective Date.
(f)
The Borrower shall have paid all accrued and invoiced fees and expenses of the
Agent and the Lenders (including the accrued and invoiced fees and expenses of
counsel to the Agent).
(g)
On the Effective Date, the following statements shall be true and the Agent
shall have received for the account of each Lender a certificate signed by a
duly authorized officer of the Borrower, dated the Effective Date, stating that:
(i)
The representations and warranties contained in Section 4.01 are correct on and
as of the Effective Date, and
(ii)
No event has occurred and is continuing that constitutes a Default.
(h)
The Agent shall have received on or before the Effective Date the following,
each dated such day, in form and substance satisfactory to the Agent and (except
for the Notes) in sufficient copies for each Lender:
(i)
The Notes to the order of the Lenders, to the extent requested pursuant to
Section 2.16.
(ii)
Certified copies of the resolutions of the Board of Directors of the Borrower
approving this Agreement and the Notes, and of all documents evidencing other
necessary corporate action and governmental approvals, if any, with respect to
this Agreement and the Notes.
(iii)
A certificate of the Secretary or an Assistant Secretary of the Borrower
certifying the names and true signatures of the officers of the Borrower
authorized to sign this Agreement and the Notes and the other documents to be
delivered hereunder.
(iv)
A favorable opinion of [Robert Stiles], counsel for the Borrower, substantially
in the form of Exhibit D hereto and as to such other matters as any Lender
through the Agent may reasonably request.
(v)
A favorable opinion of Shearman & Sterling, counsel for the Agent, in form and
substance satisfactory to the Agent.
(i)
The Borrower shall have terminated the commitments, and paid in full all Debt,
interest, fees and other amounts outstanding, under all of its bilateral credit
agreements.
SECTION 3.02 Conditions Precedent to Each Borrowing The obligation of each
Lender to make an Advance on the occasion of each Borrowing shall be subject to
the conditions precedent that the Effective Date shall have occurred and on the
date of such Borrowing (a) the following statements shall be true (and each of
the giving of the applicable Notice of Borrowing and the acceptance by the
Borrower of the proceeds of such Borrowing shall constitute a representation and
warranty by the Borrower that on the date of such Borrowing such statements are
true):
(i)
the representations and warranties contained in Section 4.01 are correct on and
as of the date of such Borrowing, before and after giving effect to such
Borrowing and to the application of the proceeds therefrom, as though made on
and as of such date, and
(ii)
no event has occurred and is continuing, or would result from such Borrowing or
from the application of the proceeds therefrom, that constitutes a Default;
and (b) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.
SECTION 3.03 Determinations Under Section 3.01 For purposes of determining
compliance with the conditions specified in Section 3.01, each Lender shall be
deemed to have consented to, approved or accepted or to be satisfied with each
document or other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to the Lenders unless an officer of the Agent
responsible for the transactions contemplated by this Agreement shall have
received notice from such Lender prior to the date that the Borrower, by notice
to the Lenders, designates as the proposed Effective Date, specifying its
objection thereto. The Agent shall promptly notify the Lenders of the occurrence
of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Borrower The Borrower
represents and warrants as follows:
(a)
The Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York.
(b)
The execution, delivery and performance by the Borrower of this Agreement and
the Notes to be delivered by it, and the consummation of the transactions
contemplated hereby, are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene (i) the
Borrower's charter or by-laws or (ii) law or any contractual restriction binding
on or affecting the Borrower.
(c)
No authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body or any other third party is
required for the due execution, delivery and performance by the Borrower of this
Agreement or the Notes to be delivered by it.
(d)
This Agreement has been, and each of the Notes to be delivered by it when
delivered hereunder will have been, duly executed and delivered by the Borrower.
This Agreement is, and each of the Notes when delivered hereunder will be, the
legal, valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with their respective terms.
(e)
The Consolidated balance sheet of the Borrower and its Subsidiaries as at
December 25, 1999, and the related Consolidated statements of income and cash
flows of the Borrower and its Subsidiaries for the fiscal year then ended,
accompanied by an opinion of PricewaterhouseCoopers, LLP, independent public
accountants, and the Consolidated balance sheet of the Borrower and its
Subsidiaries as at September 23, 2000 and the related Consolidated statements of
income and cash flows of the Borrower and its Subsidiaries for the nine months
then ended, duly certified by the chief financial officer of the Borrower,
copies of which have been furnished to each Lender, fairly present, subject, in
the case of said balance sheet as at September 23, 2000 and said statements of
income and cash flows for the nine months then ended, to year-end audit
adjustments, the Consolidated financial condition of the Borrower and its
Subsidiaries as at such dates and the Consolidated results of the operations of
the Borrower and its Subsidiaries for the periods ended on such dates, all in
accordance with generally accepted accounting principles consistently applied.
Other than as publicly disclosed prior to the Effective Date, since December 25,
1999, there has been no Material Adverse Change.
(f)
There is no pending or threatened action, suit, investigation, litigation or
proceeding, including, without limitation, any Environmental Action, affecting
the Borrower or any of its Subsidiaries before any court, governmental agency or
arbitrator that (i) could be reasonably likely to have a Material Adverse Effect
(other than the Disclosed Litigation) or (ii) purports to affect the legality,
validity or enforceability of this Agreement or any Note or the consummation of
the transactions contemplated hereby, and there has been no adverse change in
the status, or financial effect on the Borrower or any of its Subsidiaries, of
the Disclosed Litigation from that described on Schedule 3.01(b) hereto.
(g)
The Borrower is not engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulation U
issued by the Board of Governors of the Federal Reserve System), and no proceeds
of any Advance will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock.
(h)
Each of the Borrower and its Subsidiaries has good title to, or valid leasehold
interests in, all its real and personal property material to its business,
except for defects in title that do not interfere with its ability to conduct
its business as currently conducted or to utilize such properties for their
intended purposes and that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
(i)
Each of the Borrower and its Subsidiaries owns, or is licensed to use, all
trademarks, trade names, copyrights, patents and other intellectual property
material to its business, and the use thereof by the Borrower and its
Subsidiaries does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
(j)
Schedule 4.01(j) is a complete and correct list of each Lien securing Debt of
any Person outstanding on the date hereof the aggregate principal or face amount
of which equals or exceeds (or may equal or exceed) $10,000,000 and covering any
property of the Borrower or any of its Subsidiaries, and the aggregate Debt
secured (or that may be secured) by each such Lien and the property covered by
each such Lien is correctly described in Schedule 4.01(j).
(k)
Each of the Borrower and its Subsidiaries is in compliance with all laws,
regulations and orders of any governmental authority applicable to it or its
property and all indentures, agreements and other instruments binding upon it or
its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
(l)
Neither the Borrower nor any of its Subsidiaries is (i) an "investment company"
as defined in, or subject to regulation under, the Investment Company Act of
1940 or (ii) a "holding company" as defined in, or subject to regulation under,
the Public Utility Holding Company Act of 1935.
(m)
Each of the Borrower and its Subsidiaries has timely filed or caused to be filed
all tax returns and reports required to have been filed and has paid or caused
to be paid all taxes required to have been filed and has paid or caused to be
paid all taxes required to have been paid by it, except (i) taxes that are being
contested in good faith by appropriate proceedings and for which such Person has
set aside on its books reserves where required by GAAP or (ii) to the extent
that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
(n)
Attached hereto a Schedule 4.01(n) is a list of each Material Subsidiary of the
Borrower on the date hereof.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01 Affirmative Covenants So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder, the Borrower will:
(a)
Compliance with Laws, Etc
. Comply, and cause each of its Subsidiaries to comply, with all applicable
laws, rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA and Environmental Laws to the extent that the
failure to do so could reasonably be expected to result in a Material Adverse
Effect.
(b)
Payment of Taxes, Etc
. Pay and discharge, and cause each of its Subsidiaries to pay and discharge,
before the same shall become delinquent, (i) all taxes, assessments and
governmental charges or levies imposed upon it or upon its property and (ii) all
lawful claims that, if unpaid, might by law become a Lien upon its property;
provided, however, that neither the Borrower nor any of its Subsidiaries shall
be required to pay or discharge any such tax, assessment, charge or claim that
is being contested in good faith and by proper proceedings and as to which
appropriate reserves are being maintained, unless and until any Lien resulting
therefrom attaches to its property and enforcement, collection, execution, levy
or foreclosure proceedings shall have been commenced with respect to one or more
such taxes, assessments, charges, levies or claims that, either individually or
in the aggregate, are material.
(c)
Maintenance of Insurance
. Maintain, and cause each of its Subsidiaries to maintain, insurance with
responsible and reputable insurance companies or associations in such amounts
and covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower or such Subsidiary operates.
(d)
Preservation of Corporate Existence, Etc
. Preserve and maintain, and cause each of its Material Subsidiaries to preserve
and maintain, its corporate existence, rights (charter and statutory) and
franchises; provided, however, that the Borrower and its Material Subsidiaries
may consummate any merger or consolidation permitted under Section 5.02(b) and
provided further that neither the Borrower nor any of its Material Subsidiaries
shall be required to preserve any right or franchise if the Board of Directors
of the Borrower or such Subsidiary shall reasonably determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Borrower or such Subsidiary, as the case may be, and that the loss thereof
is not disadvantageous in any material respect to the Borrower, such Subsidiary
or the Lenders.
(e)
Visitation Rights
. At any reasonable time and from time to time, permit the Agent or any of the
Lenders or any agents or representatives thereof, to examine and make copies of
and abstracts from the records and books of account of, and visit the properties
of, the Borrower and any of its Subsidiaries, and to discuss the affairs,
finances and accounts of the Borrower and any of its Subsidiaries with any of
their officers or directors and with their independent certified public
accountants.
(f)
Keeping of Books
. Keep, and cause each of its Material Subsidiaries to keep, proper books of
record and account, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Borrower and each such
Subsidiary in accordance with generally accepted accounting principles in effect
from time to time.
(g)
Maintenance of Properties, Etc.
Maintain and preserve, and cause each of its Material Subsidiaries to maintain
and preserve, all of its properties that are used or useful in the conduct of
its business in good working order and condition, ordinary wear and tear
excepted.
(h)
Reporting Requirements
. Furnish to the Lenders:
(i)
as soon as available and in any event within 60 days after the end of each of
the first three quarters of each fiscal year of the Borrower, a Consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of such quarter
and Consolidated statements of income and cash flows of the Borrower and its
Subsidiaries for the period commencing at the end of the previous fiscal year
and ending with the end of such quarter, duly certified (subject to year-end
audit adjustments) by the chief financial officer, treasurer or controller of
the Borrower as having been prepared in accordance with generally accepted
accounting principles and certificates of the chief financial officer, treasurer
or controller of the Borrower as to compliance with the terms of this Agreement
and setting forth in reasonable detail the calculations necessary to demonstrate
compliance with Section 5.03, provided that in the event of any change in GAAP
used in the preparation of such financial statements, the Borrower shall also
provide, if necessary for the determination of compliance with Section 5.03, a
statement of reconciliation conforming such financial statements to GAAP;
(ii)
as soon as available and in any event within 105 days after the end of each
fiscal year of the Borrower, a copy of the audited annual report for such year
for the Borrower and its Subsidiaries, containing a Consolidated balance sheet
of the Borrower and its Subsidiaries as of the end of such fiscal year and
Consolidated statements of income and cash flows of the Borrower and its
Subsidiaries for such fiscal year, in each case accompanied by an opinion
acceptable to the Required Lenders by PricewaterhouseCoopers, LLP or other
independent public accountants acceptable to the Required Lenders, provided that
in the event of any change in GAAP used in the preparation of such financial
statements, the Borrower shall also provide, if necessary for the determination
of compliance with Section 5.03, a statement of reconciliation conforming such
financial statements to GAAP;
(iii)
as soon as possible and in any event within five days after the occurrence of
each Default continuing on the date of such statement, a statement of the chief
financial officer, treasurer or controller of the Borrower setting forth details
of such Default and the action that the Borrower has taken and proposes to take
with respect thereto;
(iv)
promptly after the sending or filing thereof, copies of all reports that the
Borrower sends to any of its securityholders, and copies of all reports and
registration statements that the Borrower or any Subsidiary files with the
Securities and Exchange Commission or any national securities exchange;
(v)
promptly after the commencement thereof, notice of all actions and proceedings
before any court, governmental agency or arbitrator affecting the Borrower or
any of its Subsidiaries of the type described in Section 4.01(f); and
(vi)
such other information respecting the Borrower or any of its Subsidiaries as any
Lender through the Agent may from time to time reasonably request.
Reports required to be delivered pursuant to clauses (i), (ii) and (iv) above
shall be deemed to have been delivered on the date on which such report is
posted on the SEC's website at www.sec.gov, and such posting shall be deemed to
satisfy the reporting requirements of clauses (i), (ii) and (iv) above; provided
that the Borrower shall deliver paper copies of the certificate required by
clauses (i), (ii), (iii) and (v) above to the Agent and each of the Lenders
until such time as the Agent shall provide the Borrower written notice
otherwise.
SECTION 5.02 Negative Covenants So long as any Advance shall remain unpaid
or any Lender shall have any Commitment hereunder, the Borrower will not:
(a)
Liens, Etc.
Create or suffer to exist, or permit any of its Subsidiaries to create or suffer
to exist, any Lien on or with respect to any of its properties, whether now
owned or hereafter acquired, or assign, or permit any of its Subsidiaries to
assign, any right to receive income, other than:
(i)
Permitted Liens,
(ii)
purchase money Liens upon or in any real property or equipment acquired or held
by the Borrower or any Subsidiary in the ordinary course of business to secure
the purchase price of such property or equipment or to secure Debt incurred
solely for the purpose of financing the acquisition of such property or
equipment, or Liens existing on such property or equipment at the time of its
acquisition (other than any such Liens created in contemplation of such
acquisition that were not incurred to finance the acquisition of such property)
or extensions, renewals or replacements of any of the foregoing for the same or
a lesser amount, provided, however, that no such Lien shall extend to or cover
any properties of any character other than the real property or equipment being
acquired, and no such extension, renewal or replacement shall extend to or cover
any properties not theretofore subject to the Lien being extended, renewed or
replaced, provided further that the aggregate principal amount of the
indebtedness secured by the Liens referred to in this clause (ii) shall not
exceed $100,000,000 at any time outstanding,
(iii)
the Liens existing on the Effective Date and described on Schedule 4.01(j)
hereto,
(iv)
arising under the Borrower's receivables securitization transaction as described
in the Trade Receivables Purchase and Sell Agreement dated March 20, 1997 among
the Borrower, First Skelligs International Finance Company Limited and Citicorp
Finance Ireland Limited,
(v)
Liens arising in connection with any court action or other legal proceeding so
long as no Default under Section 6.01(f) has occurred and is continuing,
(vi)
other Liens securing Debt in an aggregate principal amount not to exceed
$25,000,000 at any time outstanding, and
(vii)
the replacement, extension or renewal of any Lien permitted by clause (iii)
above upon or in the same property theretofore subject thereto or the
replacement, extension or renewal (without increase in the amount or change in
any direct or contingent obligor) of the Debt secured thereby.
(b)
Mergers, Etc.
Merge or consolidate with or into, or convey, transfer, lease or otherwise
dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to,
any Person, or permit any of its Material Subsidiaries to do so, except that (I)
any Material Subsidiary of the Borrower may merge or consolidate with or into,
or dispose of assets to, any other Subsidiary of the Borrower, (ii) any
Subsidiary of the Borrower may merge into or dispose of assets to the Borrower
and (iii) the Borrower may merge with any other Person so long as the Borrower
is the surviving corporation, provided, in each case, that no Default shall have
occurred and be continuing at the time of such proposed transaction or would
result therefrom.
(c)
Accounting Changes
. Make or permit, or permit any of its Subsidiaries to make or permit, any
change in accounting policies or reporting practices, except as required or
permitted by generally accepted accounting principles.
(d)
Subsidiary Debt
. Permit any of its Subsidiaries to create or suffer to exist, any Debt other
than:
(i)
Debt owed to the Borrower or to a wholly owned Subsidiary of the Borrower,
(ii)
Debt existing on the Effective Date and described on Schedule 5.02(d) hereto
(the "Existing Debt"), and any Debt extending the maturity of, or refunding or
refinancing, in whole or in part, the Existing Debt, provided that the principal
amount of such Existing Debt shall not be increased above the principal amount
thereof outstanding immediately prior to such extension, refunding or
refinancing, and the direct and contingent obligors therefor shall not be
changed, as a result of or in connection with such extension, refunding or
refinancing,
(iii)
Debt secured by Liens permitted by Section 5.02(a)(ii) or (iv),
(iv)
unsecured Debt incurred in the ordinary course of business aggregating for all
of the Borrower's Subsidiaries not more than $200,000,000 at any one time
outstanding, and
(v)
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
(e)
Change in Nature of Business
. Make, or permit any of its Subsidiaries to make, any material change in the
nature of its business as carried on at the date hereof, taken as a whole.
(f)
Restrictive Agreements
. Directly or indirectly enter into, incur or permit to exist, or permit any of
its Subsidiaries to enter into, incur or permit to exist, any agreement or other
arrangement that prohibits, restricts or imposes any condition upon (i) the
ability of the Borrower or any Subsidiary to create, incur or permit to exist
any Lien upon any of its property or assets or (ii) the ability of any
Subsidiary to pay dividends or other distributions with respect to any shares of
its capital stock or to make or repay loans or advances to the Borrower or any
other Subsidiary or to guarantee Debt of the Borrower or any other Subsidiary;
provided that (A) the foregoing shall not apply to restrictions and conditions
imposed by law or by this Agreement, (B) the foregoing shall not apply to
restrictions and conditions that could not be reasonably expected to cause a
material adverse effect on the ability of the Borrower to perform any of its
obligations under this Agreement, (C) the foregoing shall not apply to
restrictions and conditions existing on the date hereof (but shall apply to any
extension or renewal of, or any amendment or modification expanding the scope
of, any such restriction or condition), (D) the foregoing shall not apply to
customary restrictions and conditions contained in agreements relating to the
sale of a Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder, (E) clause (i) above shall not apply to restrictions or
conditions imposed by any agreement relating to secured Debt permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Debt and (F) clause (i) above shall not apply to customary
provisions in leases and licenses restricting the assignment thereof.
(g)
Use of Proceeds
. Use, or permit any of its Subsidiaries to use, the proceeds of any Advances to
purchase or carry margin stock (within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System)or to extend credit to others for the
purpose of purchasing or carrying margin stock.
SECTION 5.03 Financial Covenants So long as any Advance shall remain unpaid
or any Lender shall have any Commitment hereunder, the Borrower will:
(a)
Leverage Ratio
. Maintain a ratio of Consolidated Debt for Borrowed Money to Consolidated
EBITDA of the Borrower and its Subsidiaries for the four fiscal quarters then
ended of not greater than 3.0:1.0.
(b)
Fixed Charge Coverage Ratio
. Maintain a ratio of Consolidated EBITDA of the Borrower and its Subsidiaries
for the four fiscal quarters then ended to interest payable on, and amortization
of debt discount in respect of, all Debt for Borrowed Money during such period,
by the Borrower and its Subsidiaries of not less than 4.5:1.0.
ARTICLE VI
EVENTS OF DEFAULT
SECTIONS 6.01 Events of Default If any of the following events ("Events of
Default") shall occur and be continuing:
(a)
The Borrower shall fail to pay any principal of any Advance when the same
becomes due and payable; or the Borrower shall fail to pay any interest on any
Advance or make any other payment of fees or other amounts payable under this
Agreement or any Note within three Business Days after the same becomes due and
payable; or
(b)
Any representation or warranty made by the Borrower herein or by the Borrower
(or any of its officers) in connection with this Agreement shall prove to have
been incorrect in any material respect when made; or
(c)
(i) The Borrower shall fail to perform or observe any term, covenant or
agreement contained in Section 5.01(d), (e) or (h), 5.02 or 5.03, or (ii) the
Borrower shall fail to perform or observe any other term, covenant or agreement
contained in this Agreement on its part to be performed or observed if such
failure shall remain unremedied for 30 days after the earlier of (i) written
notice thereof shall have been given to the Borrower by the Agent or any Lender
and (ii) a responsible financial officer of the Borrower otherwise becomes aware
of such failure; or
(d)
The Borrower or any of its Subsidiaries shall fail to pay any principal of or
premium or interest on any Debt that is outstanding in a principal or notional
amount of at least $25,000,000 in the aggregate (but excluding Debt outstanding
hereunder) of the Borrower or such Subsidiary (as the case may be), when the
same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other event shall occur or condition
shall exist under any agreement or instrument relating to any such Debt and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Debt; or any
such Debt shall be declared to be due and payable, or required to be prepaid or
redeemed (other than by a regularly scheduled required prepayment or
redemption), purchased or defeased, or an offer to prepay, redeem, purchase or
defease such Debt shall be required to be made, in each case prior to the stated
maturity thereof; or
(e)
The Borrower or any of its Material Subsidiaries shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower or
any of its Material Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted against it
(but not instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 60 days, or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property) shall occur; or
the Borrower or any of its Material Subsidiaries shall take any corporate action
to authorize any of the actions set forth above in this subsection (e); or
(f)
Any judgments or orders for the payment of money in excess of $25,000,000 in the
aggregate shall be rendered against the Borrower or any of its Subsidiaries and
either (i) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order or (ii) other than in respect of a settlement order,
there shall be any period of 30 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect or (iii) the Borrower or any of its
Subsidiaries shall be in default under a settlement order; or
(g)
Any non-monetary judgment or order shall be rendered against the Borrower or any
of its Subsidiaries that could be reasonably expected to have a Material Adverse
Effect, and there shall be any period of 30 consecutive days during which a stay
of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(h)
(i) Any Person or two or more Persons acting in concert shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934), directly or
indirectly, of Voting Stock of the Borrower (or other securities convertible
into such Voting Stock) representing 30% or more of the combined voting power of
all Voting Stock of the Borrower; or (ii) during any period of up to 24
consecutive months, commencing before or after the date of this Agreement,
individuals who at the beginning of such 24-month period were directors of the
Borrower shall cease for any reason to constitute a majority of the board of
directors of the Borrower; or (iii) any Person or two or more Persons acting in
concert shall have acquired by contract or otherwise, or shall have entered into
a contract or arrangement that, upon consummation, will result in its or their
acquisition of the power to exercise, directly or indirectly, a controlling
influence over the management or policies of the Borrower; or
(i)
The Borrower or any of its ERISA Affiliates shall incur, or shall be reasonably
likely to incur liability in excess of $25,000,000 in the aggregate as a result
of one or more of the following: (i) the occurrence of any ERISA Event; (ii) the
partial or complete withdrawal of the Borrower or any of its ERISA Affiliates
from a Multiemployer Plan; or (iii) the reorganization or termination of a
Multiemployer Plan;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the Notes,
all interest thereon and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Notes, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; provided, however, that in the event of an actual or
deemed entry of an order for relief with respect to the Borrower under the
Federal Bankruptcy Code, (A) the obligation of each Lender to make Advances
shall automatically be terminated and (B) the Notes, all such interest and all
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01 Authorization and Action Each Lender hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement as are delegated to the Agent by
the terms hereof, together with such powers and discretion as are reasonably
incidental thereto. As to any matters not expressly provided for by this
Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding upon all Lenders
and all holders of Notes; provided, however, that the Agent shall not be
required to take any action that exposes the Agent to personal liability or that
is contrary to this Agreement or applicable law. The Agent agrees to give to
each Lender prompt notice of each notice given to it by the Borrower pursuant to
the terms of this Agreement.
SECTION 7.02 Agent's Reliance, Etc Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the Lenders for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the Agent:
(i) may treat the Lender that made any Advance as the holder of the Debt
resulting therefrom until the Agent receives and accepts an Assignment and
Acceptance entered into by such Lender, as assignor, and an Eligible Assignee,
as assignee, as provided in Section 8.07; (ii) may consult with legal counsel
(including counsel for the Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of the Borrower or to inspect the property (including the
books and records) of the Borrower; (v) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; and (vi) shall incur no liability under or in respect
of this Agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopier, telegram or telex) believed
by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03 Citibank and Affiliates With respect to its Commitment, the
Advances made by it and the Note issued to it, Citibank shall have the same
rights and powers under this Agreement as any other Lender and may exercise the
same as though it were not the Agent; and the term "Lender" or "Lenders" shall,
unless otherwise expressly indicated, include Citibank in its individual
capacity. Citibank and its Affiliates may accept deposits from, lend money to,
act as trustee under indentures of, accept investment banking engagements from
and generally engage in any kind of business with, the Borrower, any of its
Subsidiaries and any Person who may do business with or own securities of the
Borrower or any such Subsidiary, all as if Citibank were not the Agent and
without any duty to account therefor to the Lenders.
SECTION 7.04 Lender Credit Decision Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements referred to in Section 4.01 and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
SECTION 7.05 Indemnification The Lenders agree to indemnify the Agent (to
the extent not reimbursed by the Borrower), ratably according to the respective
principal amounts of the Notes then held by each of them (or if no Notes are at
the time outstanding or if any Notes are held by Persons that are not Lenders,
ratably according to the respective amounts of their Commitments), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of this Agreement or any action
taken or omitted by the Agent under this Agreement (collectively, the
"Indemnified Costs"), provided that no Lender shall be liable for any portion of
the Indemnified Costs resulting from the Agent's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender agrees to reimburse
the Agent promptly upon demand for its ratable share of any out-of-pocket
expenses (including counsel fees) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
to the extent that the Agent is not reimbursed for such expenses by the
Borrower. In the case of any investigation, litigation or proceeding giving rise
to any Indemnified Costs, this Section 7.05 applies whether any such
investigation, litigation or proceeding is brought by the Agent, any Lender or a
third party.
SECTION 7.06 Successor Agent The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower and may be removed at any
time with or without cause by the Required Lenders. Upon any such resignation or
removal, the Required Lenders shall have the right to appoint a successor Agent
with the consent, so long as no Event of Default shall have occurred and be
continuing, of the Borrower (which consent shall not be unreasonably withheld or
delayed). If no successor Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $50,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent, and the
retiring Agent shall thereupon be discharged from its duties and obligations
under this Agreement. After any retiring Agent's resignation or removal
hereunder as Agent, the provisions of this Article VII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.
SECTION 7.07 Other Agents Each Lender hereby acknowledges that none of the
documentation agent, the syndication agent or any other Lender designated as any
"Agent" (other than the Agent) on the signature pages hereof has any liability
hereunder other than in its capacity as a Lender.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Amendments, Etc No amendment or waiver of any provision of this
Agreement or the Notes, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Required Lenders, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by all the Lenders, do any of the following: (a) waive any of the
conditions specified in Section 3.01, (b) increase the Commitments of the
Lenders or subject the Lenders to any additional obligations, (c) reduce the
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder,
(e) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Notes, or the number of Lenders, that shall be required
for the Lenders or any of them to take any action hereunder, or (f) amend this
Section 8.01; and provided further that (x) no amendment, waiver or consent
shall, unless in writing and signed by the Agent in addition to the Lenders
required above to take such action, affect the rights or duties of the Agent
under this Agreement or any Note and (y) no amendment, waiver or consent of
Section 8.07(f) shall, unless in writing and signed by each Lender that has
granted a funding option to an SPC in addition to the Lenders required above to
take such action, affect the rights or duties of such Lender or SPC under this
Agreement or any Note.
SECTION 8.02 Notices, Etc All notices and other communications provided for
hereunder shall be in writing (including telecopier, telegraphic or telex
communication) and mailed, telecopied, telegraphed, telexed or delivered, if to
the Borrower, at its address at One Bausch & Lomb Place, Rochester, New York
14604, Attention: Treasurer; if to any Initial Lender, at its Domestic Lending
Office specified opposite its name on Schedule I hereto; if to any other Lender,
at its Domestic Lending Office specified in the Assignment and Acceptance
pursuant to which it became a Lender; and if to the Agent, at its address at Two
Penns Way, New Castle, Delaware 19720, Attention: Bank Loan Syndications
Department; or, as to the Borrower or the Agent, at such other address as shall
be designated by such party in a written notice to the other parties and, as to
each other party, at such other address as shall be designated by such party in
a written notice to the Borrower and the Agent. All such notices and
communications shall, when mailed, telecopied, telegraphed or telexed, be
effective when deposited in the mails, telecopied, delivered to the telegraph
company or confirmed by telex answerback, respectively, except that notices and
communications to the Agent pursuant to Article II, III or VII shall not be
effective until received by the Agent. Delivery by telecopier of an executed
counterpart of any amendment or waiver of any provision of this Agreement or the
Notes or of any Exhibit hereto to be executed and delivered hereunder shall be
effective as delivery of a manually executed counterpart thereof.
SECTION 8.03 No Waiver; Remedies No failure on the part of any Lender or the
Agent to exercise, and no delay in exercising, any right hereunder or under any
Note shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 8.04 Costs and Expenses (a) The Borrower agrees to pay upon
presentation of reasonably detailed invoices all costs and expenses of the Agent
in connection with the preparation, execution, delivery, administration,
modification and amendment of this Agreement, the Notes and the other documents
to be delivered hereunder, including, without limitation, (A) all due diligence,
syndication (including printing, distribution and bank meetings),
transportation, computer, duplication, appraisal, consultant, and audit expenses
and (B) the reasonable fees and expenses of counsel for the Agent with respect
thereto and with respect to advising the Agent as to its rights and
responsibilities under this Agreement. The Borrower further agrees to pay upon
presentation of reasonably detailed invoices all costs and expenses of the Agent
and the Lenders, if any (including, without limitation, reasonable counsel fees
and expenses), in connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Agreement, the Notes and the other
documents to be delivered hereunder, including, without limitation, reasonable
fees and expenses of counsel for the Agent and each Lender in connection with
the enforcement of rights under this Section 8.04(a).
(b)
The Borrower agrees to indemnify and hold harmless the Agent and each Lender and
each of their Affiliates and their officers, directors, employees, agents and
advisors (each, an "Indemnified Party") from and against any and all claims,
damages, losses, liabilities and expenses (including, without limitation,
reasonable fees and expenses of counsel) that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or in
connection with or by reason of (including, without limitation, in connection
with any investigation, litigation or proceeding or preparation of a defense in
connection therewith) (i) the Notes, this Agreement, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of the
Advances or (ii) the actual or alleged presence of Hazardous Materials on any
property of the Borrower or any of its Subsidiaries or any Environmental Action
relating in any way to the Borrower or any of its Subsidiaries, except to the
extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct. In the
case of an investigation, litigation or other proceeding to which the indemnity
in this Section 8.04(b) applies, such indemnity shall be effective whether or
not such investigation, litigation or proceeding is brought by the Borrower, its
directors, equityholders or creditors or an Indemnified Party or any other
Person, whether or not any Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby are consummated. The
Borrower also agrees not to assert any claim against the Agent, any Lender, any
of their Affiliates, or any of their respective directors, officers, employees,
attorneys and agents, on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to the
Notes, this Agreement, any of the transactions contemplated herein or the actual
or proposed use of the proceeds of the Advances. Nothing in this Section 8.04(b)
shall be deemed, construed or given effect to relieve or release the Agent or
any Lender from any liability for breach of contract arising from a failure by
such party to perform its contractual obligations hereunder.
(c)
If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is
made by the Borrower to or for the account of a Lender other than on the last
day of the Interest Period for such Advance, as a result of a payment or
Conversion pursuant to Section 2.07(d) or (e), 2.09 or 2.11, acceleration of the
maturity of the Notes pursuant to Section 6.01 or for any other reason or by an
Eligible Assignee to a Lender other than on the last day of the Interest Period
for such Advance upon an assignment of rights and obligations under this
Agreement pursuant to Section 8.07 as a result of a demand by the Borrower
pursuant to Section 8.07(a), the Borrower shall, upon demand by such Lender
(with a copy of such demand to the Agent), pay to the Agent for the account of
such Lender any amounts required to compensate such Lender for any additional
losses, costs or expenses that it may reasonably incur as a result of such
payment or Conversion, including, without limitation, any loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by any Lender to fund or maintain such Advance. Such indemnification
shall be paid upon presentation to the Borrower or a reasonably detailed
statement of such loss, cost or expense certified by an officer of such Lender.
(d)
Without prejudice to the survival of any other agreement of the Borrower
hereunder, the agreements and obligations of the Borrower contained in
Sections 2.10, 2.13 and 8.04 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under the Notes.
SECTION 8.05 Right of Set-off Upon (i) the occurrence and during the
continuance of any Event of Default and (ii) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender and each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender or such
Affiliate to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement and the Note held by such Lender, whether or not such Lender shall
have made any demand under this Agreement or such Note and although such
obligations may be unmatured. Each Lender agrees promptly to notify the Borrower
after any such set-off and application, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of each Lender and its Affiliates under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
that such Lender and its Affiliates may have.
SECTION 8.06 Binding Effect This Agreement shall become effective (other
than Section 2.01, which shall only become effective upon satisfaction of the
conditions precedent set forth in Section 3.01) when it shall have been
executed by the Borrower and the Agent and when the Agent shall have been
notified by each Initial Lender that such Initial Lender has executed it and
thereafter shall be binding upon and inure to the benefit of the Borrower, the
Agent and each Lender and their respective successors and assigns, except that
the Borrower shall not have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Lenders.
SECTION 8.07 Assignments and Participations (a) Each Lender may, and if
demanded by the Borrower (following a demand by such Lender pursuant to Section
2.10 or 2.13) upon at least five Business Days' notice to such Lender and the
Agent will, assign to one or more Persons all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and any Note or Notes held
by it); provided, however, that (i) each such assignment shall be of a constant,
and not a varying, percentage of all rights and obligations under this
Agreement, (ii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an assignment of all of a
Lender's rights and obligations under this Agreement, the amount of the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $5,000,000 or an
integral multiple of $1,000,000 in excess thereof, (iii) each such assignment
shall be to an Eligible Assignee, (iv) each such assignment made as a result of
a demand by the Borrower pursuant to this Section 8.07(a) shall be arranged by
the Borrower after consultation with the Agent and shall be either an assignment
of all of the rights and obligations of the assigning Lender under this
Agreement or an assignment of a portion of such rights and obligations made
concurrently with another such assignment or other such assignments that
together cover all of the rights and obligations of the assigning Lender under
this Agreement, (v) no Lender shall be obligated to make any such assignment as
a result of a demand by the Borrower pursuant to this Section 8.07(a) unless and
until such Lender shall have received one or more payments from either the
Borrower or one or more Eligible Assignees in an aggregate amount at least equal
to the aggregate outstanding principal amount of the Advances owing to such
Lender, together with accrued interest thereon to the date of payment of such
principal amount and all other amounts payable to such Lender under this
Agreement and (vi) the parties to each such assignment shall execute and deliver
to the Agent, for its acceptance and recording in the Register, an Assignment
and Acceptance, together with any Note subject to such assignment and a
processing and recordation fee of $3,500 payable by the parties to each such
assignment, provided, however, that in the case of each assignment made as a
result of a demand by the Borrower, such recordation fee shall be payable by the
Borrower except that no such recordation fee shall be payable in the case of an
assignment made at the request of the Borrower to an Eligible Assignee that is
an existing Lender, and (vii) any Lender may, without the approval of the
Borrower and the Agent, assign all or a portion of its rights to any of its
Affiliates. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, (x) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).
(b)
By executing and delivering an Assignment and Acceptance, the Lender assignor
thereunder and the assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee confirms that it is an Eligible Assignee;
(vi) such assignee appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers and discretion under this
Agreement as are delegated to the Agent by the terms hereof, together with such
powers and discretion as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to be performed by
it as a Lender.
(c)
The Agent shall maintain at its address referred to in Section 8.02 a copy of
each Assignment and Acceptance delivered to and accepted by it and a register
for the recordation of the names and addresses of the Lenders and the Commitment
of, and principal amount of the Advances owing to, each Lender from time to time
(the "Register"). The entries in the Register shall be conclusive and binding
for all purposes, absent manifest error, and the Borrower, the Agent and the
Lenders may treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower or any Lender at any reasonable time and from
time to time upon reasonable prior notice.
(d)
Upon its receipt of an Assignment and Acceptance executed by an assigning Lender
and an assignee representing that it is an Eligible Assignee, together with any
Note or Notes subject to such assignment, the Agent shall, if such Assignment
and Acceptance has been completed and is in substantially the form of Exhibit C
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrower. Within five Business Days after its receipt of such notice, the
Borrower, at its own expense, shall execute and deliver to the Agent in exchange
for the surrendered Note a new Note to the order of such Eligible Assignee in an
amount equal to the Commitment assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained a Commitment hereunder, a
new Note to the order of the assigning Lender in an amount equal to the
Commitment retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of Exhibit A
hereto.
(e)
Each Lender may sell participations to one or more banks or other entities
(other than the Borrower or any of its Affiliates) in or to all or a portion of
its rights or obligations under this Agreement (including, without limitation,
all or a portion of its Commitment, the Advances owing to it and the Note or
Notes held by it); provided, however, that (i) such Lender's obligations under
this Agreement (including, without limitation, its Commitment to the Borrower
hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all purposes of
this Agreement, (iv) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and (v) no participant
under any such participation shall have any right to approve any amendment or
waiver of any provision of this Agreement or any Note, or any consent to any
departure by the Borrower therefrom, except to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on, the Notes or
any fees or other amounts payable hereunder, in each case to the extent subject
to such participation, or postpone any date fixed for any payment of principal
of, or interest on, the Notes or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation.
(f)
Each Lender may grant to a special purpose funding vehicle (an "SPC") the option
to fund all or any part of any Advance that such Lender is obligated to fund
under this Agreement (and upon the exercise by such SPC of such option to fund,
such Lender's obligations with respect to such Advance shall be deemed satisfied
to the extent of any amounts funded by such SPC); provided, however, that (i)
such Lender's obligations under this Agreement (including, without limitation,
its Commitment to the Borrower hereunder) shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the Borrower, the Administrative Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement, (iv) any such option granted to an SPC shall not constitute a
commitment by such SPC to fund any Advance, (v) neither the grant nor the
exercise of such option to an SPC shall increase the costs or expenses or
otherwise increase or change the obligations of the Borrower under this
Agreement (including, without limitation, its obligations under Section 2.09)
(vi) the SPC shall be bound by the provisions of Section 8.08 and (vii) no SPC
shall have any right to approve any amendment or waiver of any provision of this
Agreement or any Note, nor any consent to any departure by the Borrower
therefrom, except to the extent that such amendment, waiver or consent would
reduce the principal of, or interest on, the Notes or any fees or other amounts
payable hereunder, in each case to the extent subject to such grant of funding
option, or postpone any date fixed for any payment of principal of, or interest
on, the Notes or any fees or other amounts payable hereunder, in each case to
the extent subject to such grant of funding option. Each party to this Agreement
hereby agrees that no SPC shall be liable for any indemnity or payment under
this Agreement for which a Lender would otherwise be liable. Subject to the
foregoing provisions of this clause (f), an SPC shall have all the rights of the
granting Lender. An SPC may assign or participate all or a portion of its
interest in any Advances to the granting Lender or to any financial institution
providing liquidity or credit support to or for the account of such SPC without
paying any processing fee therefor and, in connection therewith may disclose on
a confidential basis any information relating to the Borrower to any rating
agency, commercial paper dealer or provider of any surety, guarantee or credit
or liquidity enhancements to such SPC. In furtherance of the foregoing, each
party hereto agrees (which agreements shall survive the termination of this
Agreement) that, prior to the date that is one year and one day after the
payment in full of all outstanding commercial paper or other senior indebtedness
of any SPC, it will not institute against, or join any other Person in
instituting against, such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under the laws of the United States or any
State thereof.
(g)
Any Lender may, in connection with any assignment, designation, participation or
grant of funding option or proposed assignment, designation, participation or
grant of funding option pursuant to this Section 8.07, disclose to the assignee,
designee, participant or SPC or proposed assignee, designee, participant or SPC,
any information relating to any Borrower furnished to such Lender by or on
behalf of such Borrower; provided that, prior to any such disclosure, the
assignee, designee, participant or SPC or proposed assignee, designee,
participant or SPC shall agree to preserve the confidentiality of any
Confidential Information relating to any Borrower received by it from such
Lender.
(h)
Notwithstanding any other provision set forth in this Agreement, any Lender may
at any time create a security interest in all or any portion of its rights under
this Agreement (including, without limitation, the Advances owing to it and any
Note held by it) in favor of any Federal Reserve Bank in accordance with
Regulation A of the Board of Governors of the Federal Reserve System.
SECTION 8.08 Confidentiality Neither the Agent nor any Lender or SPC shall
disclose any Confidential Information to any other Person without the consent of
the Borrower, other than (a) to the Agent's or such Lender's Affiliates and
their officers, directors, employees, agents and advisors and, as contemplated
by Section 8.07(f), to actual or prospective assignees and participants, and
then only on a confidential basis, (b) as required by any law, rule or
regulation or judicial process and (c) as requested or required by any state,
federal or foreign authority or examiner regulating banks or banking.
SECTION 8.09 Governing Law This Agreement and the Notes shall be governed
by, and construed in accordance with, the laws of the State of New York.
SECTION 8.10 Execution in Counterparts This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by telecopier shall
be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 8.11 Jurisdiction, Etc (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, 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 any such New York State court 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 any party may
otherwise have to bring any action or proceeding relating to this Agreement or
the Notes in the courts of any jurisdiction.
(b)
Each of the parties hereto irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the Notes in any New York 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.
SECTION 8.12 Waiver of Jury Trial Each of the Borrower, the Agent and the
Lenders hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to this Agreement or the Notes or the actions of the
Agent or any Lender in the negotiation, administration, performance or
enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
BAUSCH & LOMB INCORPORATED
By /s/______________________________
Alan H. Resnick
Title: Corporate Vice-President & Treasurer
CITIBANK, NA.,
as Agent
By /s/______________________________
Carolyn A. Kee
Title: Vice President
Initial Lenders
Commitment
$50,000,000
BANK OF AMERICA, N.A.
By /s/_____________________________________
Philip S. Durand
Title: Principal
$50,000,000
THE CHASE MANHATTAN BANK
By /s/______________________________________
Stephen P. Rochford
Title: Vice President
$50,000,000
CITIBANK, N.A.
By /s/______________________________________
Carolyn A. Kee
Title: Vice President
$50,000,000
FLEET NATIONAL BANK
By /s/______________________________________
Martin K. Birmingham
Title: Regional President
$30,000,000
NORTHERN TRUST COMPANY
By /s/______________________________________
Russell R. Rockenbach
Title: Sr.Vice President
$20,000,000
ALLIED IRISH BANK
By /s/______________________________________
Paul Carey
Title: Managing Director
$250,000,000 Total of the Commitments
SCHEDULE I
BAUSCH & LOMB INCORPORATED
THREE YEAR CREDIT AGREEMENT
APPLICABLE LENDING OFFICES
Name of Initial Lender
Domestic Lending Office
Eurodollar Lending Office
Allied Irish Bank
405 Park Avenue
New York, NY 10022
Attn: Paul Carey
T: 212 515-6755
F: 212 339-339-8006
405 Park Avenue
New York, NY 10022
Attn: Paul Carey
T: 212 515-6755
F: 212 339-339-8006
Bank of America, N.A.
101 North Tryon Street, 15th Floor
Charlotte, NC 28255
Attn: Debra Glenn
T: 704 387-9919
F: 704 409-0091
101 North Tryon Street, 15th Floor
Charlotte, NC 28255
Attn: Debra Glenn
T: 704 387-9919
F: 704 409-0091
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081
Attn: Concetta Prainito
T: 212 552-7241
F: 212 552-7500
One Chase Manhattan Plaza
New York, NY 10081
Attn: Concetta Prainito
T: 212 552-7241
F: 212 552-7500
Citibank, N.A.
Two Penns Way
New Castle, DE 19720
Attn: Loan Syndications
Two Penns Way
New Castle, DE 19720
Attn: Loan Syndications
Fleet National Bank
One East Avenue
Rochester, NY 14638
Attn: Sheila Hanley
T: 716 546-9020
F: 716 546-9800
One East Avenue
Rochester, NY 14638
Attn: Sheila Hanley
T: 716 546-9020
F: 716 546-9800
Northern Trust Company
50 S. LaSalle
Chicago, IL 60675
Attn: Linda Honda
T: 312 444-4715
F: 312 630-6015
50 S. LaSalle
Chicago, IL 60675
Attn: Linda Honda
T: 312 444-4715
F: 312 630-6015
Schedule 3.01(b)
to
Three Year Credit Agreement
Dated as of January 19, 2001
DISCLOSED LITIGATION
In several actions, the company is defending against claims that its
long-standing policy of selling contact lenses only to licensed professionals
was adopted in conspiracy with others to eliminate alternative channels of trade
from the disposable contact lens market. These matters include (i) a
consolidated action in the United States District Court for the Middle District
of Florida filed in June 1994 by the Florida Attorney General, and now includes
claims by the attorneys general for 21 other states, and (ii) individual actions
pending in California and Tennessee state courts. The company insists that its
policy was adopted lawfully as a means of ensuring effective distribution of its
products and safeguarding consumers' health.
Schedule 4.01(j)
Bausch & Lomb Incorporated
Existing Liens
(000's)
Entity
Debt
Lien
Amount
Bausch & Lomb Incorporated
Skelligs (Factoring Program)
US Accounts Receivable
$75,000
Schedule 4.01(n)
Bausch & Lomb Incorporated
Material Subsidiaries
Percentage
Consolidated
Consolidated
Subsidiary
Assets (a)
Sales (b)
Bausch & Lomb Ireland
22.78%
7.96%
B&L Surgical Inc.
21.37%
19.67%
Bausch & Lomb (Bermuda) limited
16.56%
0.00%
Group Chauvin
9.17%
2.07%
B&L European Phamraceuticals
8.20%
0.00%
B&L BV (Netherlands)
5.68%
13.24%
Bausch & Lomb Japan
4.98%
12.32%
Bausch & Lomb Pharmaceuticals
4.52%
7.38%
(a) Including intercompany receivables
(b) Including intercompany sales
Schedule 5.02(d)
Bausch & Lomb Incorporated
Outstanding Debt
(000's)
At December 30, 2000
Description of Debt
CUSIP
Maturity Date
Interest
Rate
Short-Term
Long-Term
US
Medium Term Notes
07171JAD8
08-Sep-03
Fixed
5.950%
$85,000
Portable Notes
07171JAE6
12-Aug-26
Fixed
6.560
100,000
Notes
071707AC7
15-Dec-04
Fixed
6.750
194,600
Purtable/Callable Notes
071707AF0
01-Aug-11
Fixed
6.150
97,000
Purtable/Callable Notes
071707AD5
01-Aug-13
Fixed
6.375
100,000
Purtable/Callable Notes
071707AE3
01-Aug-25
Fixed
6.500
100,000
Debentures
071707AG8
01-Aug-28
Fixed
7.125
194,000
Industrial Development Bonds
-
07-Jul-05
Floating
-
8,500
Skelligs (Factoring Program)
-
05-Apr-02
Floating
1 mo. LIBOR
less 0.15%
75,000
Accounting Reclass - Cash
Overdrafts
-
-
-
-
$10,083
Other
-
Various
Various
Various
460
Sub-total US
10,083
954,560
Non-US
B&L Japan
-
-
Floating
-
20,484
B&L Japan
4,453
B&L Turkey
1,000
Group Chauvin
Various
Various
Various
773
6,485
Other
Various
Various
Various
268
126
Sub-total Non-US
22,525
11,064
Total Debt
$32,608
$965,624
EXHIBIT A - FORM OF
PROMISSORY NOTE
U.S.$_______________
Dated: _______________, 20__
FOR VALUE RECEIVED, the undersigned, BAUSCH & LOMB INCORPORATED, a New York
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
_________________________ (the "Lender") for the account of its Applicable
Lending Office on the Termination Date (each as defined in the Credit Agreement
referred to below) the principal sum of U.S.$[amount of the Lender's Commitment
in figures] or, if less, the aggregate principal amount of the Advances made by
the Lender to the Borrower pursuant to the Credit Agreement dated as of January
19, 2001 among the Borrower, the Lender and certain other lenders parties
thereto, Salomon Smith Barney Inc., as arranger, Fleet National Bank, as
documentation agent, The Chase Manhattan Bank, as syndication agent, and
Citibank, N.A., as Agent for the Lender and such other lenders (as amended or
modified from time to time, the "Credit Agreement"; the terms defined therein
being used herein as therein defined) outstanding on the Termination Date.
The Borrower promises to pay interest on the unpaid principal amount
of each Advance from the date of such Advance until such principal amount is
paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Citibank, N.A., as Agent, at 399 Park Avenue, New York, New
York 10043, in same day funds. Each Advance owing to the Lender by the Borrower
pursuant to the Credit Agreement, and all payments made on account of principal
thereof, shall be recorded by the Lender and, prior to any transfer hereof,
endorsed on the grid attached hereto which is part of this Promissory Note.
This Promissory Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement. The Credit Agreement, among
other things, (i) provides for the making of Advances by the Lender to the
Borrower from time to time in an aggregate amount not to exceed at any time
outstanding the U.S. dollar amount first above mentioned, the indebtedness of
the Borrower resulting from each such Advance being evidenced by this Promissory
Note, and (ii) contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.
BAUSCH & LOMB INCORPORATED
By_______________________________________
Title
ADVANCES AND PAYMENTS OF PRINCIPAL
Date
Amount of Advance
Amount of Principal Paid or Prepaid
Unpaid Principal Balance
Notation Made By
EXHIBIT B - FORM OF
NOTICE OF BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
Two Penns Way
New Castle, Delaware 19720 [Date]
Attention: Bank Loans Syndication Department
Ladies and Gentlemen:
The undersigned, Bausch & Lomb Incorporated, refers to the Credit
Agreement, dated as of January 19, 2001 (as amended or modified from time to
time, the "Credit Agreement", the terms defined therein being used herein as
therein defined), among the undersigned, certain Lenders parties thereto,
Salomon Smith Barney Inc., as arranger, Fleet National Bank, as documentation
agent, The Chase Manhattan Bank, as syndication agent, and Citibank, N.A., as
Agent for said Lenders, and hereby gives you notice, irrevocably, pursuant to
Section 2.02 of the Credit Agreement that the undersigned hereby requests a
Borrowing under the Credit Agreement, and in that connection sets forth below
the information relating to such Borrowing (the "Proposed Borrowing") as
required by Section 2.02(a) of the Credit Agreement:
(i)
The Business Day of the Proposed Borrowing is _______________, 20__.
(ii)
The Type of Advances comprising the Proposed Borrowing is [Base Rate Advances]
[Eurodollar Rate Advances].
(iii)
The aggregate amount of the Proposed Borrowing is $_______________.
(iv)
[The initial Interest Period for each Eurodollar Rate Advance made as part of
the Proposed Borrowing is __________ month[s].]
The undersigned hereby certifies that the following statements are true on the
date hereof, and will be true on the date of the Proposed Borrowing:
(A)
the representations and warranties contained in Section 4.01 of the Credit
Agreement are correct, before and after giving effect to the Proposed Borrowing
and to the application of the proceeds therefrom, as though made on and as of
such date; and
(B)
no event has occurred and is continuing, or would result from such Proposed
Borrowing or from the application of the proceeds therefrom, that constitutes a
Default.
Very truly yours,
BAUSCH & LOMB INCORPORATED
By_______________________________________
Title:
EXHIBIT C - FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of January 19, 2001
(as amended or modified from time to time, the "Credit Agreement") among Bausch
& Lomb Incorporated, a New York corporation (the "Borrower"), the Lenders (as
defined in the Credit Agreement), Salomon Smith Barney Inc., as arranger, Fleet
National Bank, as documentation agent, The Chase Manhattan Bank, as syndication
agent, and Citibank, N.A., as administrative agent for the Lenders (the
"Agent"). Terms defined in the Credit Agreement are used herein with the same
meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 hereto
agree as follows:
1.
The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby
purchases and assumes from the Assignor, an interest in and to the Assignor's
rights and obligations under the Credit Agreement as of the date hereof equal to
the percentage interest specified on Schedule 1 hereto of all outstanding rights
and obligations under the Credit Agreement. After giving effect to such sale and
assignment, the Assignee's Commitment and the amount of the Advances owing to
the Assignee will be as set forth on Schedule 1 hereto.
2.
The Assignor (i) represents and warrants that it is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any adverse claim; (ii) makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any other instrument or document furnished pursuant
thereto; (iii) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrower or the performance or
observance by the Borrower of any of its obligations under the Credit Agreement
or any other instrument or document furnished pursuant thereto[; and
(iv) attaches the Note held by the Assignor and requests that the Agent exchange
such Note for a new Note payable to the order of the Assignee in an amount equal
to the Commitment assumed by the Assignee pursuant hereto or new Notes payable
to the order of the Assignee in an amount equal to the Commitment assumed by the
Assignee pursuant hereto and the Assignor in an amount equal to the Commitment
retained by the Assignor under the Credit Agreement, respectively, as specified
on Schedule 1 hereto].
3.
The Assignee (i) confirms that it has received a copy of the Credit Agreement,
together with copies of the financial statements referred to in Section 4.01
thereof and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this Assignment and
Acceptance; (ii) agrees that it will, independently and without reliance upon
the Agent, the Assignor or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement;
(iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers and
discretion under the Credit Agreement as are delegated to the Agent by the terms
thereof, together with such powers and discretion as are reasonably incidental
thereto; (v) agrees that it will perform in accordance with their terms all of
the obligations that by the terms of the Credit Agreement are required to be
performed by it as a Lender; and (vi) attaches any U.S. Internal Revenue Service
forms required under Section 2.13 of the Credit Agreement.
4.
Following the execution of this Assignment and Acceptance, it will be delivered
to the Agent for acceptance and recording by the Agent. The effective date for
this Assignment and Acceptance (the "Effective Date") shall be the date of
acceptance hereof by the Agent, unless otherwise specified on Schedule 1 hereto.
5.
Upon such acceptance and recording by the Agent, as of the Effective Date,
(i) the Assignee shall be a party to the Credit Agreement and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Lender thereunder and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Credit Agreement.
6.
Upon such acceptance and recording by the Agent, from and after the Effective
Date, the Agent shall make all payments under the Credit Agreement and the Notes
in respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and facility fees with respect thereto) to the
Assignee. The Assignor and Assignee shall make all appropriate adjustments in
payments under the Credit Agreement and the Notes for periods prior to the
Effective Date directly between themselves.
7.
This Assignment and Acceptance shall be governed by, and construed in accordance
with, the laws of the State of New York.
8.
This Assignment and Acceptance may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of
Schedule 1 to this Assignment and Acceptance by telecopier shall be effective as
delivery of a manually executed counterpart of this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
Schedule 1 to this Assignment and Acceptance to be executed by their officers
thereunto duly authorized as of the date specified thereon.
Schedule 1
to
Assignment and Acceptance
Percentage interest assigned:
_____%
Assignee's Commitment:
$_______________
Aggregate outstanding principal amount of Advances assigned:
$_______________
Principal amount of Note payable to Assignee:
$_______________
Principal amount of Note payable to Assignor:
$_______________
Effective Date1: _______________, 200_
[NAME OF ASSIGNOR], as Assignor
By________________________________________
Title:
Dated: _______________, 200_
[NAME OF ASSIGNEE], as Assignee
By________________________________________
Title:
Domestic Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
Accepted [and Approved]2 this
__________ day of _______________, 200_
CITIBANK, N.A., as Agent
By_______________________________
Title:
[Approved this __________ day of _______________, 200_
1
This date should be no earlier than five Business Days after the delivery of
this Assignment and Acceptance to the Agent.
2
Required if the Assignee is an Eligible Assignee soley by reason of clause (iii)
of the definition of "Eligible Assignee".
BAUSCH & LOMB INCORPORATED
By_______________________________1
Title:
1 Required if the Assignee is an Eligible Assignee solely by reason of
clause (iii) of the
definition to "Eligible Assignee".
January 19, 2001
To each of the Lenders parties
to the Credit Agreement dated
as of January 19, 2001
among Bausch & Lomb Incorporated,
said Lenders and Citibank, N.A.,
as Agent for said Lenders, and
to Citibank, N.A., as Agent
Bausch & Lomb Incorporated
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 3.01(h)(iv) of
the Credit Agreement, dated as of January 19, 2001 (the "Credit Agreement"),
among Bausch & Lomb Incorporated (the "Borrower"), the Lenders parties thereto,
Salomon Smith Barney Inc., as arranger, Fleet National Bank, as documentation
agent, The Chase Manhattan Bank, as syndication agent, and Citibank, N.A., as
Agent for said Lenders. Terms defined in the Credit Agreement are used herein as
therein defined.
I am Senior Counsel for the Borrower, and in that capacity, I am
familiar with the preparation, execution and delivery of the Credit Agreement.
In that connection, we have examined:
(1)
The Credit Agreement.
(2)
The documents furnished by the Borrower pursuant to Article III of the Credit
Agreement.
(3)
The Certificate of Incoporation of the Borrower and all amendments thereto (the
"Charter").
(4)
The by-laws of the Borrower and all amendments thereto (the "By-laws").
(5)
A certificate of the Secretary of State of New York, dated January 16, 2001,
attesting to the continued corporate existence and good standing of the Borrower
in that State.
I have also examined the originals, or copies certified to my satisfaction, of
such other corporate records of the Borrower, certificates of public officials
and of officers of the Borrower, and agreements, instruments and other
documents, as I have deemed necessary as a basis for the opinions expressed
below. As to questions of fact material to such opinions, I have, when
relevevant facts were not independently established by me, relied upon
statements of the Borrower or its officers or of public officials. I have
assumed the due execution and delivery, pursuant to due authorization, of the
Credit Agreement by the Initial Lenders and the Agent.
The opinions expressed below are limited to the law of the State of
New York and the Federal law of the United States.
Based upon the foregoing and upon such investigation as I have deemed
necessary, I am of the following opinion:
1.
The Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York.
2.
The execution, delivery and performance by the Borrower of the Credit Agreement
and the Notes, and the consummation of the transactions contemplated thereby,
are within the Borrower's corporate powers, have been duly authorized by all
necessary corporate action, and do not contravene (i) the Charter or the By-laws
or (ii) any law, rule or regulation applicable to the Borrower (including,
without limitation, Regulation X of the Board of Governors of the Federal
Reserve System) or (iii) any contractual or legal restriction contained in any
document listed in the Certificate or, to the best of our knowledge, contained
in any "material contract" of the Company, as such term is defined pursuant to
the Securities Exchange Act of 1934. The Credit Agreement and the Notes have
been duly executed and delivered on behalf of the Borrower.
3.
No authorization, approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body or any other third party is
required for the due execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes.
4.
The Credit Agreement is, and after giving effect to the initial Borrowing, the
Notes will be, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms.
5.
To the best of our knowledge, there are no pending or overtly threatened actions
or proceedings against the Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator that purport to affect the legality, validity,
binding effect or enforceability of the Credit Agreement or any of the Notes or
the consummation of the transactions contemplated thereby or, except as
described in the Company's filings with the Securities and Exchange Commission
pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934,
that are likely to have a materially adverse effect upon the financial condition
or operations of the Borrower or any of its Subsidiaries.
The opinions set forth above are subject to the following
qualifications:
(a)
The opinion in paragraph 4 above as to enforceability is subject to the effect
of any applicable bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or similar
law affecting creditors' rights generally.
(b)
The opinion in paragraph 4 above as to enforceability is subject to the effect
of general principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing (regardless of whether
considered in a proceeding in equity or at law).
(c)
No opinion is expressed as to (i) Section 2.14 of the Credit Agreement insofar
as it provides that any Lender purchasing a participation from another Lender
pursuant thereto may exercise set-off or similar rights with respect to such
participation and (ii) the effect of the law of any jurisdiction other than the
State of New York wherein any Lender may be located or wherein enforcement of
the Credit Agreement or the Notes may be sought, including, without limitation,
any such law that limits the rates of interest legally chargeable or
collectible.
Very truly yours,
/s/________________________
A. Robert D. Bailey
ARDB/jd
BAUSCH & LOMB INCORPORATED
OFFICER'S CERTIFICATE
(Three Year Credit Agreement)
This Certificate is given by Alan H. Resnick, Vice President and
Treasurer of BAUSCH & LOMB INCORPORATED, a New York corporation (the
"Borrower"), pursuant to Section 3.02 of the Three Year Credit Agreement, dated
as of January 19, 2001, between and among the Borrower, the Lenders party
thereto, SALOMON SMITH BARNEY INC., as arranger, FLEET NATIONAL BANK, as
documentation agent, THE CHASE MANHATTAN BANK, as syndication agent, and
CITIBANK, N.A., as administrative agent, (the "Credit Agreement"). Capitalized
terms not otherwise defined in this Certificate shall have the meaning
attributed to them in the Credit Agreement. The undersigned hereby certifies
that, to the best of his knowledge:
1.
The representations and warranties of the Borrower in Section 4.01 of the Credit
Agreement are true and correct as of the date hereof; and
2.
As of the date hereof, there is no Default which has occurred and is continuing.
IN WITNESS WHEREOF, the undersigned has signed and delivered this
certificate pursuant to the Credit Agreement
Dated: January 19, 2001
/s/______________________________
Alan H. Resnick
Vice President and Treasurer
One Bausch & Lomb
Place 716 338 6010
Rochester NY
14604-2701 Fax 716 338 8706
Jean F. Geisel
Corporate Secretary
CERTIFICATION
I, Jean F. Geisel, Secretary of Bausch & Lomb Incorporated ("the
Company"), a New York Corporation, do hereby certify that on April 22, 1986, the
Board of Directors of the Company elected Alan H. Resnick as Vice President and
Treasurer of the Company and that he has duly held such office at all times from
April 22, 1986, to and including the date hereof, and has full power and
authority to act on behalf of the Company;
And I further certify that the following resolution was adopted at a
meeting of the Board of Directors of said Company on December 14, 1993, that a
quorum was at all times present and acting, that the passage of said resolution
was in all respects legal, and that said resolution is in full force and effect
as of the date hereof:
RESOLVED:
That the Chairman of the Board, the President, the Vice President - Finance, the
Treasurer and the Assistant Treasurer are each authorized to do the following
for this Company:
1.
To open and maintain bank accounts in any bank he may select for the deposit of
the funds of this Company by its officers, agents and employees, and to
designate those officers and other employees of the Company who may sign checks,
drafts and other instruments having to do with the receipt, deposit and
disbursement of such funds in connection with each of said bank accounts, and
any bank shall be authorized to honor such checks, drafts and other instruments
including when drawn to the individual order of any person whose name appears
thereon as signer;
2.
To specify the circumstances, if any, under which facsimile signatures may be
used on checks written on said accounts, and any bank shall be authorized to
honor such checks regardless of by whom or by what means the actual or purported
facsimile signature thereon may have been affixed thereto if such facsimile
signature resembles the facsimile specimens from time to time with said bank;
3.
To apply for the issuance of letters of credit of any nature, including those
utilizing Bankers' acceptances up to 120 days for short term financing, in favor
of such beneficiaries as to him seem advisable, and in connection therewith to
execute and deliver such instructions, agreements and other documents as may be
necessary or desirable;
4.
To arrange for the rental by the Company of safe deposit boxes or the use of
night depository boxes, and to sign any agreements and other documents relating
thereto; and
5.
To specify the circumstances under which instructions to, or information, from,
banks or other financial institutions, including the making or authorizing of
payments, transfers, or other orders, may be made by electronic or similar
means.
6.
To execute and deliver on behalf of the Company any other instructions,
agreements, hypothecations, pledges, assignments, indemnities, guarantees, trust
receipts, statements and any other documents or instruments relating to the
banking affairs of the Company.
In witness whereof, I have hereto set my hand this 19th day of January 2001.
/s/_____________________________
Jean F. Geisel
Secretary
One Bausch & Lomb
Place 716 338 6010
Rochester NY
14604-2701 Fax 716 338 8706
Jean F. Geisel
Corporate Secretary
CERTIFICATION OF INCUMBENCY
I, Jean F. Geisel, Secretary of Bausch & Lomb Incorporated ("the
Company"), a New York Corporation, do hereby certify that on April 22, 1986, the
board of Directors of the Company elected Alan H. Resnick as Vice President and
Treasurer of the Company, that he has duly held such office at all times since
April 22, 1986, to and including the date hereof, and that he has full power and
authority to act on behalf of the Company.
In witness whereof, I have hereto set my hand this 19th day of January
2001.
/s/__________________________
Jean F. Geisel
Secretary
SHERMAN & STERLING
FAX: 212-848-7179
599 LEXINGTON AVENUE
ABU DJABI
TELEX: 667290 WUI
NEW YORK, N.Y. 10022-6069
BEIJING
212 848-4000
DUSSELDORF
FRANKFURT
January 19, 2001
HONG KONG
WRITER'S DIRECT NUMBER:
LONDON
MENLO PARK
NEW YORK
To the Initial Lenders party to the
PARIS
Credit Agreement referred to
SAN FRANCISCO
below and to Citibank, N.A., as
SINGAPORE
Agent
TOKYO
TORONTO
WASHINGTON, D.C.
Ladies and Gentlemen:
We have acted as special New York counsel to Citibank, N.A., as Agent, in
connection with the preparation, execution and delivery of the Three Year Credit
Agreement dated as of January 19, 2001 (the "Credit Agreement"), among Bausch &
Lomb Incorporated, a Delaware corporation (the "Borrower"), and each of you
(each a "Lender"). Unless otherwise defined herein, terms defined in the Credit
Agreement are used herein as therein defined.
In that connection, we have examined a counterpart of the Credit Agreement
executed by the Borrower, the Revolving Credit Notes executed by the Borrower
and delivered on the date hereof (for purposes of this opinion letter, the
"notes") and, to the extent relevant to our opinion expressed below, the other
documents delivered by the Borrower pursuant to Section 3.01 of the Credit
Agreement.
In our examination of the Credit Agreement, the Notes and such other documents,
we have assumed, without independent investigation (a) the due execution and
delivery of the Credit Agreement by all parties thereto and of the Notes by the
Borrower, (b) the genuineness of all signatures, (c) the authenticity of the
originals of the documents submitted to us and (d) the conformity to originals
of any documents submitted to us as copies.
In addition, we have assumed, without independent investigation, that (i) the
Borrower is duly organized and validly existing under the laws of the
jurisdiction of its organization and has full power and authority (corporate and
otherwise) to execute, deliver and perform the Credit Agreement and the Notes
and (ii) the execution, delivery and performance by the Borrower of the Credit
Agreement and the Notes have been duly authorized by all necessary action
(corporate or otherwise) and do not (A) contravene the certificate of
incorporation, bylaws or other constituent documents of the Borrower, (B)
conflict with or result in the breach of any document or instrument binding on
the Borrower or (C) violate or require any governmental or regulatory
authorization or other action under any law, rule or regulation applicable to
the Borrower other than New York law or United States federal law applicable to
borrowers generally or, assuming the correctness of the Borrower's statements
made as representations and warranties in Section 4.01(c) of the Credit
Agreement, applicable to the Borrower. We have also assumed that the Credit
Agreement is the legal, valid and binding obligation of each Lender, enforceable
against such Lender in accordance with its terms.
Based upon the foregoing examination and assumptions and upon such other
investigation as we have deemed necessary and subject to the qualifications set
forth below, we are of the opinion that the Credit Agreement and each of the
Notes are the legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their respective terms.
Our opinion is subject to the following qualifications:
(i)
Our opinion above is subject to the effect of any applicable bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar law affecting creditors'
rights generally.
(ii)
Our opinion above is also subject to the effect of general principles of equity,
including (without limitation) concepts of materiality, reasonableness, good
faith and fair dealing (regardless of whether considered in a proceeding in
equity or at law).
(iii)
We express no opinion as to the enforceability of the indemnification provisions
set forth in Section 9.04 of the Credit Agreement to the extent enforcement
thereof is contrary to public policy regarding the exculpation of criminal
violations, intentional harm and acts of gross negligence or recklessness.
(iv)
Our opinion above is limited to the law of the State of New York and the federal
law of the United States of America and we do not express any opinion herein
concerning any other law. Without limiting the generality of the foregoing, we
express no opinion as to the effect of the law of a jurisdiction other than the
State of New York wherein any Lender may be located or wherein enforcement of
the Credit Agreement or any of the Notes may be sought that limits the rates of
interest legally chargeable or collectible.
A copy of this opinion letter may be delivered by any of you to any Person that
becomes a Lender in accordance with the provisions of the Credit Agreement. Any
such Lender may rely on the opinion expressed above as if this opinion letter
were addressed and delivered to such Lender on the date hereof.
This opinion letter speaks only as of the date hereof. We expressly disclaim any
responsibility to advise you or any other Lender who is permitted to rely on the
opinion expressed herein as specified in the next preceding paragraph of any
development or circumstance of any kind including any change of law or fact that
may occur after the date of this opinion letter even though such development,
circumstance or change may affect the legal analysis, a legal conclusion or any
other matter set forth in or relating to this opinion letter. Accordingly, any
Lender relying on this opinion letter at any time should seek advice of its
counsel as to the proper application of this opinion letter at such time.
Very truly yours,
/s/________________________
Sherman & Sterling
WEH:SLH |
EXHIBIT 10.6
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement"), dated as of January
31, 2001, between Ticketmaster (the "Company"), and Terry Barnes ("Executive").
WHEREAS the Company and USA Networks, Inc., a Delaware corporation, have
entered into a Contribution Agreement dated as of November 20, 2000 (the
"Contribution Agreement"), pursuant to which, inter alia, Ticketmaster
Corporation, an Illinois corporation and affiliate of the Company, will become a
wholly owned subsidiary of the Company;
WHEREAS Ticketmaster Corporation and Executive are parties to an amended and
restated employment agreement, dated January 31, 2000 (the "Prior Agreement"),
WHEREAS the parties now wish to amend and restate the Prior Agreement in its
entirety as set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the parties
hereto agree as follows:
1. Definitions. The following terms shall have the indicated meanings when
used in this Agreement, unless the context requires otherwise:
(a) "Base Salary" shall mean the annual rate of $600,000.
(b) "Benefit Plan" shall mean each vacation pay, sick pay, retirement,
welfare, medical, dental, disability, life insurance, deferred compensation,
incentive compensation, stock option or other employee benefit plan, program or
arrangement, if any,
(c) "Board of Directors" shall mean the Board of Directors of the Company.
(d) "Cause" shall have the meaning ascribed to that term in Section 7.
(e) "Consulting Period" shall have the meaning ascribed to that term in
Section 9(a).
(f) "Customer" shall have the meaning ascribed to that term in Section
9(d).
(g) "Disability" shall have the meaning ascribed to the term in Section
6(a).
(h) "Disability Period" shall have the meaning ascribed to that term in
Section 6(a).
(i) "Effective Date" means the Closing Date as defined in the Contribution
Agreement.
(j) "Proprietary Information" shall have the meaning ascribed to that term
in Section 10.
(k) "Ticketmaster Businesses" shall have the meaning ascribed to that term
in Section 9(b).
2. Employment. The Company hereby agrees to employ Executive, and
Executive hereby agrees to be employed by the Company, on the terms and subject
to the conditions set forth herein.
3. Term of Employment. The term of employment (the "Term") covered
hereunder shall commence on the Effective Date and end on January 31, 2004,
unless earlier terminated as herein provided.
4. Position and Duties. Executive shall serve as Co-Chairman of the
Company. Subject to the authority of the Board of Directors, Executive shall
have all of the powers and duties incident to the office of Co-Chairman and such
other powers and duties as may from time to time be prescribed by the Board of
Directors. Executive agrees to serve without further compensation, if elected or
appointed thereto, as an officer or a director of any of the Company's domestic
or foreign subsidiaries or affiliates (as such term is defined in Rule 405 of
Regulation C promulgated under the Securities Act of 1933, as amended). During
Executive's employment by the Company, he will be entitled to indemnification as
an officer of the Company (and, if so elected, an an officer or director of any
of the Company's domestic and foreign subsidiaries or affiliates) in the manner
provided by the Illinois Business
--------------------------------------------------------------------------------
Corporation Act of 1983, as amended, and the Company's Articles of Incorporation
and By-Laws, as amended.
5. Exclusive Duties. During Executive's employment by the Company,
Executive shall devote his entire working time, attention and energies to the
business of the Company and its subsidiaries and affiliates and will not take
any actions of the kind described in Section 9(b), 9(c) and 9(d).
6. Compensation and Other Benefits.
(a) Base Salary. Except as otherwise provided in Section 7(c), during the
Term, the Company shall pay to Executive the Base Salary. Except as otherwise
provided in Section 7(c), the Base Salary shall be paid to Executive in
accordance with the Company's regular payroll practices with respect to senior
management compensation, subject to Section 7(b).
(b) Annual Bonuses. During the Term, Executive shall be eligible to
receive annual bonus compensation at the sole discretion of the Board of
Directors.
(c) Expenses. Executive shall be entitled to receive prompt reimbursement
from the Company for all documented business expenses incurred by him in the
performance of his duties hereunder, provided that Executive properly accounts
therefor in accordance with the Company's reimbursement policy, including,
without limitation, the submission of supporting evidence as reasonably
requested by the Company.
(d) Stock Options. In consideration of Executive's entering into this
Agreement and as an inducement to continue employment with the Company, in
addition to any stock options granted to Executive prior to the date hereof,
Executive shall be granted under the Company's 1999 Stock Plan (the "Plan") a
non- qualified stock option (the "Option") to purchase 250,000 shares of
Ticketmaster Online-Citysearch, Inc. Class B common stock (the "Common Stock"),
as authorized by, and pursuant to the terms determined by, the Compensation
Committee of the Board of Directors in accordance with the terms and conditions
of the Plan.
(e) Restricted Stock. As of December 20, 1999, Executive was granted
25,000 shares of Restricted Stock of USA Networks, Inc. (the "Restricted
Stock"). The Restricted Stock shall vest and no longer be subject to any
restrictions in three equal installments on each of the following dates:
(i) January 31, 2002, (ii) October 31, 2002 and (iii) June 30, 2003 (the
"Restriction Period"). In the event that the employment of Executive with the
Company is terminated during the Restriction Period due to death, Disability, or
by the Company without Cause, all unvested shares of Restricted Stock shall
immediately vest and no longer be subject to restriction. Except as provided in
the preceding sentence, in the event that the employment of the Executive with
the Company shall terminate during the Restriction Period, all shares shall be
forfeited by the Executive effective immediately upon such termination.
(f) Fringe Benefits. During the Term, Executive shall be entitled to
participate in and receive benefits under all of the Company's Benefit Plans
generally available to senior management of the Company. To the extent not
covered by the Company's Benefit Plans, Executive shall be entitled to
reimbursement from the Company for all reasonable medical and health expenses
incurred by Executive for his benefit or for the benefit of his dependents.
(g) Insurance. The Company agrees to maintain in effect during the term
hereof insurance on Executive's life payable to his estate or his named
beneficiary or beneficiaries in the amount of $1,500,000; provided, however,
that Executive shall reimburse the Company for any and all premiums paid by the
Company with respect to such insurance in excess of the preferred or select
premium rate for non-smokers. In addition, so long as Executive is insurable at
standard insurable rate (which rates shall in no event increase during any year
by a percentage greater than the percentage increase in the consumer price index
for all urban workers (1967=100) over the
–2–
--------------------------------------------------------------------------------
indexed figure for the immediately preceding year, in cash case measured as of
the month of February), the Company agrees to also maintain in effect during the
term hereof a disability insurance policy with coverage substantially equivalent
to the coverage under the disability insurance policy now in effect with respect
to Executive.
(h) Vacations. During the term hereof, Executive shall be entitled to sick
leave and paid holidays consistent with the Company's sick leave and holiday
policy for senior management and up to three weeks paid vacation per year (or
such other vacation time as is consistent with the Company's policy for senior
management).
7. Termination. (a) The Company or Executive may terminate the employment
of Executive hereunder in the event that Executive shall become disabled as a
result of bodily injury or physical or mental illness (whether or not
occupational) to such extent that in the sole opinion of the Board of Directors,
based upon competent medical advice, he can no longer perform the duties of
Co-Chairman of the Company and such condition continues for a period of no less
than 120 days during any consecutive twelve-month period (a "Disability").
(b) The Company may also terminate the employment of Executive hereunder
upon Executive's death or for Cause. For purposes hereof, "Cause" shall mean
(i) fraud, theft, misappropriation of funds or conviction of a felony,
(ii) Executive's engagement in illegal conduct tending to place Executive or the
Company or its subsidiaries or affiliates in disrepute, (iii) dereliction or
gross misconduct in Executive's performance of his duties as an employee of the
Company or the failure of Executive to perform his duties in a manner consistent
with the instructions of the Board of Directors or (iv) violation by Executive
of any of his material covenants contained in this Agreement, including, without
limitation, Section 8, 9 and 10. Notwithstanding the foregoing, before the
Company may terminate the employment of Executive for Cause, the Company shall
deliver to Executive not less than ten business days prior written notice of the
Company's intention to terminate Executive's employment together with a
statement of the basis for such termination, and Executive shall be afforded
(i) an opportunity to respond to the Company during such ten-business day period
and (ii) in the event that the basis for such termination is clause (iii) or
(iv) above, an opportunity to remedy the situation resulting in the Company's
determination to terminate for Cause so long as such situation is non-repetitive
in nature.
(c) Commencing after January 1, 2002, Executive may terminate this Agreement
for any reason or no reason upon six months' prior written notice to the
Company. If Executive gives such notice of termination to the Company, the
payment of Executive's Base Salary for the immediately succeeding six-month
period shall be restructured so that (i) during such immediately succeeding
six-month period, the aggregate amount payable shall be $150,000, and (ii) the
remaining $150,000 of Executive's Base Salary for such period shall be payable
to Executive in equal monthly installments over the twenty-four-month period
immediately following termination of this Agreement, so long as Executive shall
have continued to perform his covenants, duties and obligations under
Sections 9(b), 9(c), and 9(d). Such monthly payments shall be in addition to and
not in lieu of the payment due to Executive during the Consulting Period
pursuant to Section 9(a).
(d) Except as otherwise provided in Section 7(b), upon the termination of
Executive's employment for any reason, Executive shall be entitled to receive
Base Salary through the date of such termination plus all accrued but
unreimbursed expenses. In addition, upon the termination of Executive's
employment for any reason (other than for or by virtue of Cause, death,
Disability or Executive's voluntary termination of employment, including,
without limitation, pursuant to Section 7(c)), the Company shall continue to be
responsible for the payment of all Base Salary for the remainder of the term
hereof; provided, however, that Executive shall have a duty to mitigate
commencing of the first anniversary of the date of termination; and, further
provided that
–3–
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Executive shall perform his covenants, duties and obligations under
Sections 9(b), 9(c) and 9(d) during the remainder of the term hereof.
8. Developmental Rights. Executive agrees that any developments by way of
invention, design, copyright, trademark or other matters which may be developed
or perfected by him during the Term, and which relate to the business of the
Company or its subsidiaries or affiliates, shall be the property of the Company
without any interest therein by Executive, and Executive will, at the request
and expense of the Company, apply for and prosecute letters patent thereon in
the United States or in foreign countries if the Company so requests, and will
assign and transfer the same to the Company together with any letters patent,
copyrights, trademarks and applications therefor; provided, however, that the
foregoing shall not apply to an invention that Executive develops entirely on
his own time without using the Company's, or any of its subsidiaries or
affiliates', equipment, supplies, facilities or trade secret information except
for those inventions that either:
(a) relate at the time of conception or reduction to practice of the
invention to the Company's business or the business of any of its subsidiaries
or affiliates, or actual or demonstrably anticipated research or development of
the Company or its subsidiaries or affiliates; or
(b) result from any work performed by Executive for the Company or any of
its subsidiaries or affiliates.
9. Consulting.
(a) Consulting Services. During the two-year period commencing immediately
upon the the termination of Executive's employment for any reason (other than
Executive's death) (the "Consulting Period"), Executive shall be available for
consultation with the Company and its subsidiaries and affiliates concerning
their general operations and the industries in which they engage in business. In
addition, during the Consulting Period, Executive will aid, assist and consult
with the Company and its subsidiaries and affiliates with respect to their
dealings with clients and the enhancement of their recognition and reputation.
During the Consulting Period, Executive shall devote such time and energies to
the affairs of the Company and its subsidiaries and affiliates as may be
reasonably required to carry out his duties hereunder without jeopardizing
Executive's then full-time, non-Ticketmaster Business employment opportunities;
provided, however, that Executive shall not be obligated to devote more than 50
hours per year to the performance of such duties. In consideration of
Executive's consulting services, and in consideration of Executive's covenants
contained in this Section 9, the Company shall pay to Executive $30,000 during
each full year of the Consulting Period, payable in equal monthly installments.
The Company further agrees to reimburse Executive for all reasonable and
necessary business expenses incurred by Executive in the performance of his
consulting services in accordance with the Company's reimbursement policy,
including, without limitation, the submission of supporting evidence as
reasonably required by the Company.
(b) Covenant Not to Compete. During the Consulting Period, Executive shall
not, without the prior written consent of the Company, directly or indirectly
engage in or assist any activity which is the same as, similar to or competitive
with the Ticketmaster Businesses (other than on behalf of the Company or any of
its subsidiaries or affiliates) including, without limitation, whether such
engagement or assistance is an officer, director, proprietor, employee, partner,
investor (other than as a holder of less than 5% of the outstanding capital
stock of a publicly traded corporation), guarantor, consultant, advisor, agent,
sales representative or other participant, anywhere in the world that the
Company or any of its subsidiaries or affiliates has been engaged, including,
without limitation, the United States, Canada, Mexico, England, Ireland,
Scotland, Europe and Australia. Nothing herein shall limit Executive's ability
to own interests in or manage entities which sell tickets as an incidental part
of their primary businesses (e.g. cable networks, on-line computer
–4–
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services, sport teams, arenas, hotels, cruise lines, theatrical and movie
productions and the like) and which do not hold themselves out generally as
competitors of the Company or any of its subsidiaries or affiliates. The
"Ticketmaster Businesses" shall mean the computerized sale of tickets for
sporting, theatrical, cinematic, live theatrical, musical or any other events on
behalf of various venues and promoters through distribution channels currently
being utilized by the Company or any of its subsidiaries or affiliates.
(c) Solicitation of Employees. During the Consulting Period, Executive
shall not (i) directly or indirectly induce or attempt to induce (regardless of
who initiates the contact) any person then employed (whether part-time or
full-time) by the Company or any of its subsidiaries or affiliates, whether as
an officer, employee, consultant, adviser or independent contractor, to leave
the employ of the Company or to cease providing or otherwise alter the services
then provided to the Company or to any of its subsidiaries or affiliates or
(ii) in any other manner engage or employ or seek to engage or employ any such
person (whether or not for compensation) as an officer, employee, consultant,
adviser or independent contractor in connection with the operation of any
business which is the same as or similar to any of the Ticketmaster Businesses.
(d) Non-Solicitation of Customers. During the Consulting Period, Executive
shall not solicit any Customers of the Company or any of its subsidiaries or
affiliates or encourage (regardless of who initiates the contact) any such
Customers to use the facilities or services of any competitor of the Company or
any of its subsidiaries or affiliates. "Customer" shall mean any person who
engages the Company or any of its subsidiaries or affiliates to sell, on its
behalf as agent, tickets to the public.
10. Confidentiality. Executive shall not at any time during the term or
for a period of sixty months after termination of employment disclose disclose
(except as may be required by law) or use, except in the pursuit of the business
of the Company or any of its subsidiaries or affiliates, any Proprietary
Information. "Proprietary Information" means all information known or intended
to be known only to employees of the Company or any of its subsidiaries or
affiliates in a confidential relationship with the Company or any of its
subsidiaries or affiliates relating to technical matters pertaining to the
business of the Company or any of its subsidiaries or affiliates, their clients
and their customers, that was learned by Executive in the course of employment
by the Company, including (without limitation) any proprietary knowledge, trade
secrets, data, formula, information and client and customer lists and all
papers, resumes, and records (including computer records) of the documents
containing such Proprietary Information, but shall not include any information
within the public domain. Executive agrees not to remove any documents, records
or other information from the premises of the Company or any of its subsidiaries
or affiliates containing any such Proprietary Information, except in the pursuit
of the business of the Company or any of its subsidiaries or affiliates, and
acknowledges that such documents, records and other information are the
exclusive property of the Company or its subsidiaries or affiliates. Upon
termination of Executive's employment, Executive shall immediately return all
Proprietary Information of the Company and all copies thereof to the Company.
11. General Provisions.
(a) Expenses. All costs and expenses incurred by either of the parties in
connection with this Agreement and any transactions contemplated hereby shall be
paid by that party.
(b) Notices. All notices, demands and other communications hereunder shall
be in writing and shall be given or made (and shall be deemed to have been duly
given or made upon receipt) by delivery in person, by overnight courier service,
by cable, by telecopy, by telegram, by telex or by registered or certified mail
to the respective parties at the following addresses (or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 11(b)):
–5–
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If to the Company:
Ticketmaster
3701 Wilshire Blvd., 9th Floor
Los Angeles, CA 90010
Attention: General Counsel
Telecopy No.: 213-382-2416
(ii) If to Executive:
Terry Barnes
717 N. Camden Dr.
Beverly Hills, CA 90210
Telecopy No.: (310) 276-1115
(c) Headings. The descriptive headings contained in the Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(d) Successors; Binding Agreement. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
devisees, legatees, executors, administrators, successors and personal or legal
representatives. If Executive is domiciled in a community property state or a
state that has adopted the Uniform Marital Property Act or equivalent or if
Executive is domiciled in a state that grants to his spouse any other marital
rights in Executive's assets (including, without limitation, dower rights or a
right to elect against Executive's will or to claim a forced share of
Executive's estate), this Agreement shall also inure to the benefit of, and
shall also be binding upon, his spouse. If Executive should die, all amounts
owed to him hereunder shall be paid in accordance with the terms of this
Agreement to Executive's designee or, if there no such designee, to Executive's
heirs, devisees, legatees or executors or administrators of Executive's estate,
as appropriate.
(e) Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under existing or future laws effective during
the term of this Agreement, such provisions shall be fully severable, the
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement. Furthermore, in lieu of such illegal, invalid
or unenforceable provision, there shall be added automatically as part of this
Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
(f) Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof and thereof and
supersedes all prior agreements and understandings, both written and oral,
between the Company and Executive with respect to the subject matter hereof and
thereof, including, without limitation, the Prior Agreement; provided, however,
that in the event that the Contribution Transaction is terminated, this
Agreement shall be void ab initio and of no application or effect.
(g) Assignment. This Agreement and the rights and duties hereunder are not
assignable by Executive. This Agreement and the rights and duties hereunder may
not be assigned by the Company without the express written consent of Executive
(which consent may be granted or withheld in the sole discretion of Executive),
except that such consent shall not be required in order for the Company to
assign this Agreement or the rights or duties hereunder to an affiliate of the
Company or to a third party in connection with the merger or consolidation of
the Company with, or the sale of all or substantially all of the assets or
business of the Company to, that third party.
–6–
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(h) Amendment; Waiver. This Agreement may not be amended or modified
except by an instrument in writing signed by, or on behalf of, the Company and
Executive. Either party to this Agreement may (a) extend the time for the
performance of any of the obligations or other acts of the other party or
(b) waive compliance with any of the agreements or conditions of the other party
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party to be bound thereby. Any waiver
of any term or condition shall not be construed as a waiver of any subsequent
breach or a subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term on condition, of this Agreement. The
failure of any party to assert any of its rights hereunder shall not constitute
a waiver of any such rights.
(i) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Illinois, applicable to contracts
executed in and to be performed entirely within that state.
(j) Jurisdiction and Venue. The parties hereto agree that all actions or
proceedings initiated by either party hereto and arising directly or indirectly
out of this Agreement which are brought pursuant to judicial proceedings shall
be litigated in a Federal or state court located in the State of California. The
parties hereto expressly submit and consent in advance to such jurisdiction and
agree that service of summons and complaint or other process or papers may be
made by registered or certified mail addressed to the relevant party at the
address to which notices are to be sent pursuant to Section 11(b) of this
Agreement. The parties hereto waive any claim that a Federal or state court
located in the State of California is an inconvenient forum or an improper forum
based on lack of venue.
(k) Equitable Relief. Executive acknowledges that the covenants contained
in Sections 9 and 10 are reasonable and necessary to protect the legitimate
interests of the Company, that in the absence of such covenants the Company
would not have entered into this Agreement, that any breach or threatened breach
of such covenants will result in irreparable injury to the Company and that the
remedy at law for such breach or threatened breach would be inadequate.
Accordingly, the Executive agrees that the Company, in addition to any other
rights or remedies which it may have, shall be entitled to seek such equitable
and injunctive relief as may be available from any court of competent
jurisdiction to restrain Executive from any breach or threatened breach of such
covenants.
(l) Attorneys' Fees. If any legal action or other proceeding is brought
for the enforcement of this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
(m) Counterparts. This Agreement may be executed in one or more
counterparts and by the parties hereto in separate counterparts, each of which
when executed shall be deemed to be an original while all of which taken
together shall constitute one and the same instrument.
–7–
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IN WITNESS WHEREOF, the Company and Executive have executed this Agreement
as of the date and year first written above.
TICKETMASTER
By:
/s/ [ILLEGIBLE]
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Title: Executive Vice President &
General Counsel
/s/ TERRY BARNES
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TERRY BARNES
–8–
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|
EXHIBIT 10.6
STEINER LEISURE LIMITED
AMENDED AND RESTATED
1996 SHARE OPTION AND INCENTIVE PLAN
1.
Purpose
The purpose of the Steiner Leisure Limited Amended and Restated 1996 Share
Option and Incentive Plan (hereinafter referred to as this "Plan") is to (i)
assist Steiner Leisure Limited (the "Company") in attracting and retaining
highly qualified officers, key employees, directors and consultants for the
successful conduct of its business; (ii) provide incentives and rewards for
persons eligible for awards which are directly linked to the financial
performance of the Company in order to motivate such persons to achieve
long-range performance goals; and (iii) allow persons receiving awards to
participate in the growth of the Company.
2.
Definitions
2.1
"Board" means the Board of Directors of the Company.
2.2
"Change in Control" A Change in Control of the Company shall be deemed to occur
if any of the following circumstances have occurred after the closing of an
initial public offering of the Shares:
(i)
any transaction as a result of which a change in control of the Company would be
required to be reported in response to Item 1(a) of the Current Report on Form
8-K as in effect on the date hereof, pursuant to Sections 13 or 15(d) of the
Exchange Act, whether or not the Company is then subject to such reporting
requirement, otherwise than through an arrangement or arrangements consummated
with the prior approval of the Board;
(ii)
any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act (a) becomes the "beneficial owner," as defined in Rule 13d-3 under
the Exchange Act, of more than 20% of the then outstanding voting securities of
the Company, otherwise than through a transaction or transactions arranged by,
or consummated with the prior approval of, the Board or (b) acquires by proxy or
otherwise the right to vote for the election of directors, for any merger or
consolidation of the Company or for any other matter or question, more than 20%
of the then outstanding voting securities of the Company, otherwise than through
an arrangement or arrangements consummated with the prior approval of the Board;
(iii)
during any period of 24 consecutive months (not including any period prior to
the adoption of this Plan), Present Directors and/or New Directors cease for any
reason to constitute a majority of the Board. For purposes of the preceding
sentence, "Present Directors" shall mean individuals who, at the beginning of
such consecutive 24 month period, were members of the Board and "New Directors"
shall mean any director whose election by the Board or whose nomination for
election by the Company's shareholders was approved by a vote of at least
two-thirds of the Directors then still in office who were Present Directors or
New Directors;
(iv)
any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act that is the "beneficial owner" as defined in Rule 13d-3 under the
Exchange Act of 20% or more of the then outstanding voting securities of the
Company commences soliciting proxies; and
(v)
with respect to a particular Employee, there occurs a "change in control," as
such term is defined under any employment agreement or service agreement between
the Company or any direct or indirect subsidiary thereof and such Employee,
entered into before or after the date of adoption of this Plan (a "Change in
Control Agreement"), which provides for, upon such change in control, the
acceleration of the vesting of Share Options or otherwise affects awards that
may be made under this Plan; provided, however, that this Section 2.2.(v)
applies only with respect to the award or awards accelerated, or otherwise
affected by such change in control under such Change in Control Agreement.
2.3. "Code" means the United States Internal Revenue Code of 1986,
as currently in effect or hereafter amended.
2.4. "Committee" means the committee appointed to administer this
Plan in accordance with Section 4 of this Plan.
2.5. "Disability" means "permanent and total disability" as defined
in Section 22(e)(3) of the Code.
2.6 "Employee" means any employee of the Company or any direct or
indirect subsidiary of the Company (a "Subsidiary"), including officers of the
Company and any Subsidiary, as well as such officers who are also directors of
the Company.
2.7. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.8. "Exercise Payment" means a payment described in Section 8 upon
the exercise of a Share Option.
2.9. "Fair Market Value," unless otherwise required by any applicable
provision of the Code or any regulations issued thereunder, means, as of any
date, the mean of the high and low prices reported per Share on the applicable
date (i) as quoted on the Nasdaq National Market or the Nasdaq Small Cap Market
(each, a "Nasdaq Market") or (ii) if not traded on a Nasdaq Market, as reported
by any principal national securities exchange in the United States on which it
is then traded (or if the Shares have not been quoted or reported, as the case
may be, on such date, on the first day prior thereto on which the Shares were
quoted or reported, as the case may be), except that in the case of a Share
Appreciation Right that is exercised for cash during the first three (3) days of
the ten (10) day period set forth in Section 7.4 of this Plan, "Fair Market
Value" means the highest daily closing price per Share as reported on such
Nasdaq Market or exchange during such ten (10) day period. Notwithstanding the
foregoing, if a Share Appreciation Right is exercised during the sixty (60) day
period commencing on the date of a Change in Control, the Fair Market Value for
purposes of determining the Share Appreciation shall be the highest of (i) the
Fair Market Value per Share, as determined under the preceding sentence; (ii)
the highest Fair Market Value per Share during the ninety (90) day period ending
on the date of exercise of the SAR; (iii) the highest price per Share shown on
Schedule 13D or an amendment thereto filed pursuant to Section 13(d) of the
Exchange Act by any person holding 20% of the combined voting power of the
Company's then outstanding voting securities; or (iv) the highest price paid or
to be paid per Share pursuant to a tender or exchange offer as determined by the
Committee. If the Shares are not reported or quoted on a Nasdaq Market or a
national securities exchange, its Fair Market Value shall be as determined in
good faith by the Committee.
2.10. "Incentive Share Option" or "ISO" means any Share Option
granted to an Employee pursuant to this Plan which is designated as such by the
Committee and which complies with Section 422 of the Code or any successor
provision.
2.11. "Non-qualified Share Option" means any Share Option granted to
a Participant pursuant to this Plan which is not an ISO.
2.12. "Option Price" means the purchase price of one Share upon
exercise of a Share Option.
2.13. "Performance Award" means an award described in Section 10 of
this Plan.
2.14. "Retirement" means retirement from employment by the Company
or any Subsidiary by a Participant who has attained the normal retirement age
under any applicable retirement plan (which is qualified under Section 401(a) of
the Code) of the Company in which such Participant participates.
2.15. "Restricted Shares" means Shares subject to restrictions on
the transfer of such Shares, conditions of forfeitability of such Shares or any
other limitations or restrictions as determined by the Committee.
2.16. "Settlement Date" means, (i) with respect to any Share
Appreciation Rights that have been exercised, the date or dates upon which cash
payment is to be made to the Participant, or in the case of Share Appreciation
Rights that are to be settled in Shares, the date or dates upon which such
Shares are to be delivered to the Participant; (ii) with respect to Performance
Awards, the date or dates upon which Shares are to be delivered to the
Participant; (iii) with respect to Exercise Payments, the date or dates upon
which payment thereof is to be made; and (iv) with respect to grants of Shares,
including Restricted Shares, the date or dates upon which such Shares are to be
delivered to the Participant, in each case determined in accordance with the
terms of the grant (including any award agreement) under which any such award
was made.
2.17. "Share" or "Shares" means the common shares of the Company.
2.18. "Share" Appreciation" means the excess of the Fair Market
Value per Share over the Option Price of the related Share, as determined by the
Committee.
2.19. "Share Appreciation Right" or "SAR" means an award that
entitles a Participant to receive an amount described in Section 7.2.
2.20. "Share Option" or "Option" means an award that entitles a
Participant to purchase one Share for each Option granted.
3.
Participation
.
The participants in this Plan ("Participants") shall be those persons who are
selected to participate in this Plan by the Committee and who are (i) Employees
serving in managerial, administrative or professional positions, (ii) directors
of the Company or (iii) consultants to the Company or any Subsidiary.
4.
Administration
.
This Plan shall be administered and interpreted by a committee of two or more
members of the Board appointed by the Board. Members of the Committee shall be
"Non-Employee Directors" as that term is defined for purposes of Rule
16b-3(b)(3)(i) under the Exchange Act. All decisions and acts of the Committee
shall be final and binding upon all Participants. The Committee shall: (i)
determine the number and types of awards to be made under this Plan; (ii) set
the Option Price, the number of Options to be awarded and the number of Shares
to be awarded out of the total number of Shares available for award; (iii)
establish any applicable administrative regulations to further the purpose of
this Plan; (iv) approve forms of award agreements between a Participant and the
Company; and (v) take any other action desirable or necessary to interpret,
construe or implement the provisions of this Plan. Prior to the appointment of
the Committee by the Board, or if the Committee shall not be in existence at any
time during the term of this Plan, this Plan shall be administered and
interpreted by the Board and, in such case, all references to the Committee
herein shall be deemed to refer to the Board.
5
Awards
.
5.1. Form of Awards. Awards under this Plan may be in any of the
following forms (or a combination thereof): (I) Share Options; (ii) Share
Appreciation Rights; (iii) Exercise Payment rights; (iv) grants of Shares,
including Restricted Shares; or (v) Performance Awards. The Committee may
require that any or all awards under this Plan be made pursuant to an award
agreement between the Participant and the Company. Such award agreements shall
be in such form as the Committee may approve from time to time. The Committee
may accelerate awards and waive conditions and restrictions on any awards to the
extent it may deem appropriate.
5.2. Maximum Amount of Shares Available. The total number of Shares
(including Restricted Shares, if any) granted, or covered by Options granted,
under this Plan during the term of this Plan shall not exceed 5,000,000. Solely
for the purpose of computing the total number of Shares optioned or granted
under this Plan, there shall not be counted any Shares which have been forfeited
and any Shares covered by Options which, prior to such computation, have
terminated in accordance with their terms or have been canceled by the
Participant or the Company.
5.3. Adjustment in The Event of Recapitalization, Etc. In the event
of any change in the outstanding Shares of the Company by reason of any share
split, share dividend, recapitalization, merger, consolidation, combination or
exchange of shares or other similar corporate change or in the event of any
special distribution to the shareholders, the Committee shall make such
equitable adjustments in the number of Shares and prices per Share applicable to
Options then outstanding and in the number of Shares which are available
thereafter for Option awards or other awards, both under this Plan as a whole
and with respect to individuals, as the Committee determines are necessary and
appropriate. Any such adjustment shall be conclusive and binding for all
purposes of this Plan.
6.
Share Options
.
6.1. Grant of Award. The Company may award Options to purchase
Shares, including Restricted Shares (hereinafter referred to as "Share Option
Awards") to such Participants as the Committee authorizes and under such terms
as the Committee establishes. The Committee shall determine with respect to each
Share Option Award, and designate in the grant whether a Participant is to
receive an ISO or a Non-qualified Share Option.
6.2. Option Price. The Option Price per Share subject to a Share
Option Award shall be specified in the grant, but, to the extent any Share
Option is an Incentive Share Option, the Option Price in no event shall be less
than the Fair Market Value per Share on the date of grant. Notwithstanding the
foregoing, if the Participant to whom an ISO is granted owns, at the time of the
grant, more than ten percent (10%) of the combined voting power of the Company,
the Option Price per Share subject to such grant shall be not less than one
hundred ten percent (110%) of the Fair Market Value.
6.3. Terms of Option. A Share Option that is an ISO shall not be
transferable by the Participant other than as permitted under Section 422 of the
Code or any successor provision, and, during the Participant's lifetime, shall
be exercisable only by the Participant. Non-qualified Share Options may be
subject to such restrictions on transferability and exercise as may be provided
for by the Committee in the terms of the grant thereof. A Share Option shall be
of no more than ten (10) years' duration, except that an ISO granted to a
Participant who, at the time of the grant, owns Shares representing more than
ten percent (10%) of the combined voting power of the Company shall by its terms
be of no more than five (5) years' duration. A Share Option by its terms shall
vest in a Participant to whom it is granted and be exercisable only after the
earliest of: (i) such period of time as the Committee shall determine and
specify in the grant, but, with respect to Employees, in no event less than one
(1) year following the date of grant of such award; (ii) the Participant's
death; or (iii) a Change in Control.
6.4 Exercise of Option. A Non-qualified Share Option is only
exercisable by a Participant who is an Employee while such Participant is in
active employment with the Company or a Subsidiary or within thirty (30) days
after termination of such employment, except (i) during the three-year period
after a Participant's death, Disability or Retirement; (ii) during a three-year
period commencing on the date of a Participant's termination of employment by
the Company or a Subsidiary other than for cause; (iii) during a three-year
period commencing on the date of termination, by the Participant or the Company
or a Subsidiary, of employment after a Change in Control unless such termination
of employment is by the Company or a Subsidiary for cause; or (iv) if the
Committee decides that it is in the best interest of the Company to permit other
exceptions. A Non-qualified Share Option may not be exercised pursuant to this
paragraph after the expiration date of the Share Option.
An ISO is only exercisable by a Participant while the Participant is in active
employment with the Company or a Subsidiary or within thirty (30) days after
termination of such employment, except (i) during a one-year period after a
Participant's death, where the Option is exercised by the estate of the
Participant or by any person who acquired such Option by bequest or inheritance;
(ii) during a three-month period commencing on the date of the Participant's
termination of employment other than due to death, a Disability or by the
Company or a Subsidiary other than for cause; or (iii) during a one-year period
commencing on the Participant's termination of employment on account of
Disability. An ISO may not be exercised pursuant to this paragraph after the
expiration date of the Share Option.
An Option may be exercised with respect to part or all of the Shares subject to
the Option by giving written notice to the Company of the exercise of the
Option. The Option Price for the Shares for which an Option is exercised shall
be paid on or within ten (10) business days after the date of exercise in cash
(by certified or bank cashier's check), in whole Shares owned by the Participant
prior to exercising the Option, in a combination of cash and such Shares or on
such other terms and conditions as the Committee may approve. The value of any
Share delivered in payment of the Option Price shall be its Fair Market Value on
the date the Option is exercised.
6.5. Limitation Applicable to ISOS. The aggregate Fair Market Value,
determined as of the date the related Share Option is granted, of all Shares
with respect to which an ISO is exercisable for the first time by a Participant
in any one calendar year, under this Plan or any other share option plan
maintained by the Company, shall not exceed $100,000.
7.
Share Appreciation Rights
.
7.1 General. The Committee may, in its discretion, grant SARs to
Participants who have received a Share Option Award. The SARs may relate to such
number of Shares, not exceeding the number of Shares that the Participant may
acquire upon exercise of a related Share Option, as the Committee determines in
its discretion. Upon exercise of a Share Option by a Participant, the SAR
relating to the Share covered by such exercise shall terminate. Upon termination
or expiration of a Share Option, any unexercised SAR related to that Option
shall also terminate. Upon exercise of SARs, such rights and the related Share
Options, to the extent of an equal number of Shares shall be surrendered to the
Committee, and such SARs and the related Share Options shall terminate.
7.2 Award. Upon a Participant's exercise of some or all of the
Participant's SARs, the Participant shall receive an amount equal to the value
of the Share Appreciation for the number of SARs exercised, payable in cash,
Shares, Restricted Shares, or a combination thereof, at the discretion of the
Committee.
7.3 Form of Settlement. The Committee shall have the discretion to
determine the form in which payment of an SAR will be made, or to permit an
election by the Participant to receive cash in full or partial settlement of the
SAR. Unless otherwise specified in the grant of the SAR, if a Participant
exercises an SAR during the sixty (60) day period commencing on the date of a
Change in Control, the form of payment of such SAR shall be cash, provided that
such SAR was granted at least six (6) months prior to the date of exercise, and
shall be Shares if such SAR was granted six (6) months or less prior to the date
of the exercise. Settlement for exercised SARs may be deferred by the Committee
in its discretion to such date and under such terms and conditions as the
Committee may determine.
7.4. Restrictions on Cash Exercise. Except in the case of an SAR
that was granted at least six (6) months prior to exercise and is exercised for
cash during the sixty (60) day period commencing on the date of the Change in
Control, any election by a Participant to receive cash in full or partial
settlement of the SAR, as well as any exercise by a Participant of the
Participant's SAR for such cash, shall be made only during the period beginning
on the third business day following the date of release of the quarterly or
annual summary statements of sales and earnings and ending on the twelfth
business day following such date.
7.5. Restrictions. An SAR is only vested, exercisable and
transferable during the period when the Share Option to which it is related is
also vested, exercisable and transferable, respectively. If the Participant is a
person subject to Section 16 of the Exchange Act, the SAR may not be exercised
within six (6) months after the grant of the related Share Option, unless
otherwise permitted by law.
8
Exercise Payments
.
The Committee may grant to Participants holding Share Options the
right to receive payments in connection with the exercise of a Participant's
Share Options ("Exercise Payments") relating to such number of Shares covered by
such Share Options, and subject to such restrictions and pursuant to such other
terms as the Committee may determine. Exercise Payments shall be in an amount
determined by the Committee in its discretion, which amount shall not be greater
than 60% of the excess of the Fair Market Value (as of the date of exercise)
over the Option Price of the Shares acquired upon the exercise of the Option. At
the discretion of the Committee, the Exercise Payment may be made in cash,
Shares, including Restricted Shares, or a combination thereof.
9.
Grants of Shares
.
9.1. Awards. The Committee may grant, either alone or in addition to
other awards granted under this Plan, Shares (including Restricted Shares) to
such Participants as the Committee authorizes and under such terms (including
the payment of a purchase price) as the Committee establishes. The Committee, in
its discretion, may also make a cash payment to a Participant granted Shares or
Restricted Shares under this Plan to allow such Participant to satisfy tax
obligations arising out of receipt of such Shares or Restricted Shares.
9.2. Restricted Share Terms. Awards of Restricted Shares shall be
subject to such terms and conditions as are established by the Committee. Such
terms and conditions may include, but are not limited to, the requirement of
continued service with the Company, achievement of specified business objectives
and other measurements of individual or business unit performance, the manner in
which such Restricted Shares are held, the extent to which the holder of such
Restricted Shares has rights of a shareholder and the circumstances under which
such Restricted Shares shall be forfeited. The Participant shall not be
permitted to sell, assign, transfer, pledge or otherwise encumber Shares
received pursuant to this Section 9 prior to the date on which any applicable
restriction established by the Committee lapses. The Participant shall have,
with respect to Restricted Shares, all of the rights of a shareholder of the
Company, including the right to vote the Restricted Shares and the right to
receive any dividends, unless the Committee shall otherwise provide in the grant
of such Restricted Shares. Restricted Shares may not be sold or transferred by
the Participant until any restrictions that have been established by the
Committee have lapsed. Upon the termination of employment of a Participant who
is an Employee during the period any restrictions are in effect, all Restricted
Shares shall be forfeited without compensation to the Participant unless
otherwise provided in the grant of such Restricted Shares.
10.
Performance Awards
.
The Committee may grant, either alone or in addition to other awards granted
under this Plan, awards of Shares based on the attainment, over a specified
period, of individual performance targets or other parameters to such
Participants as the Committee authorizes and under such terms as the Committee
establishes. Performance Awards shall entitle the Participant to receive an
award if the measures of performance established by the Committee are met. The
Committee, shall determine the times at which Performance Awards are to be made
and all conditions of such awards. The Participant shall not be permitted to
sell, assign, transfer, pledge or otherwise encumber Shares received pursuant to
this Section 10 prior to the date on which any applicable restriction or
performance period established by the Committee lapses. Performance Awards may
be paid in Shares, Restricted Shares or other securities of the Company, cash or
any other form of property that the Committee shall determine. Unless otherwise
provided in the Performance Award, a Participant who is an Employee must be an
Employee at the end of the performance period in order to receive a Performance
Award, unless the Participant dies, has reached Retirement or incurs a
Disability or under such other circumstances as the Committee may determine.
11.
General Provisions
.
11.1. Any assignment or transfer of any awards granted under this
Plan may be effected only if such assignment or transfer does not violate the
terms of the award.
11.2. Nothing contained herein shall require the Company to
segregate any monies from its general funds, or to create any trusts, or to make
any special deposits for any immediate or deferred amounts payable to any
Participant for any year.
11.3. Participation in this Plan shall not affect the Company's
right to discharge a Participant or constitute an agreement of employment
between a Participant and the Company.
11.4 This Plan shall be interpreted in accordance with, and the
enforcement of this Plan shall be governed by, the laws of The Bahamas, subject
to any applicable United States federal or state securities laws.
11.5. The headings preceding the text of the sections of this Plan
have been inserted solely for convenience of reference and do not affect the
meaning or interpretation of this Plan.
12.
Amendment, Suspension or Termination
.
12.1. General Rule. Except as otherwise required under applicable
rules of a Nasdaq Market or a securities exchange or other market where the
securities of the Company are traded or applicable law, the Board may suspend,
terminate or amend this Plan, including, but not limited to, such amendments as
may be necessary or desirable resulting from changes in the United States
federal income tax laws and other applicable laws, without the approval of the
Company's shareholders or Participants; provided, however, that no such action
shall adversely affect any awards previously granted to a Participant without
the Participant's consent.
12.2. Compliance With Rule 16B-3. With respect to any person subject
to Section 16 of the Exchange Act, transactions under this Plan are intended to
comply with the requirements of Rule 16b-3 under the Exchange Act, as applicable
during the term of this Plan. To the extent that any provision of this Plan or
action of the Committee or its delegates fail to so comply, it shall be deemed
null and void.
13.
Effective Date and Duration of Plan.
This Plan shall be effective on August 15, 1996. No award shall be granted under
this Plan subsequent to August 15, 2006.
14.
Tax Withholding.
The Company shall have the right to (i) make deductions from any settlement of
an award, including delivery or vesting of Shares, or require that Shares or
cash, or both, be withheld from any award, in each case in an amount sufficient
to satisfy withholding of any foreign, federal, state or local taxes required by
law or (ii) take such other action as may be necessary or appropriate to satisfy
any such withholding obligations. The Committee may determine the manner in
which such tax withholding shall be satisfied and may permit Shares (rounded up
to the next whole number) to be used to satisfy required tax withholding based
on the Fair Market Value of such Shares as of the Settlement Date of the
applicable award. |
EXHIBIT 10a
July 21, 1999
_______________
_______________
_______________
_______________
Dear ________:
The Board of Directors (the "Board") of The Montana Power Company and the
Personnel Committee (the "Committee") of the Board have determined that it is in
the best interests of the Company (as hereinafter defined) and its shareholders
for the Company to enter into this agreement with you to pay you termination
compensation in the event you should leave the employ of the Company under the
circumstances described below.
The Board and the Committee recognize the valuable services you render and want
to assure your continued and active participation in the Company's business
affairs. They also realize that the possibility of a Change in Control (as
hereafter defined) of the Company is unsettling to you and other senior
executives of the Company. Therefore, this agreement is being made to protect
you against some of the possible consequences of a Change in Control and thereby
to induce you to continue to serve the Company. In particular, the Board and the
Committee believe it important, should the Company receive proposals from third
parties with respect to its future, to enable you, without being influenced by
the uncertainties of your own situation, to contribute to the assessment of such
proposals, to the end that the Board may be competently and objectively advised
whether a proposal would be in the best interests of the Company, its
shareholders, employees and customers, and the communities which it serves and
to participate in such other actions regarding such proposals as the Board might
determine to be appropriate. The Board and the Committee also wish to
demonstrate to executives of the Company that the Company is concerned with the
welfare of its executives.
1. Cash Severance
In view of the foregoing and in consideration of your agreement to remain
employed with the Company, the Company will pay you as termination compensation
a single sum amount, determined as provided below, in the event that within
three years after a Change in Control of the Company your employment with the
Company (i) is terminated by the Company during the Term (as defined below in
section 6.3) (other than (a) for Cause (as hereafter defined) or (b) due to
Disability or your death) or (ii) is terminated by you for Good Reason (as
hereafter defined) during the Term, such payment to be made within five (5)
business days of the effective date of any such termination. Your employment
shall be deemed to have been terminated following such Change in Control by the
Company without Cause or by you for Good Reason (a) if you reasonably
demonstrate that your employment was terminated prior to a Change in Control
without Cause (1) at the request of a Person who has entered into an agreement
with the Company the consummation of which will constitute a Change in Control
(or who has taken other steps reasonably calculated to effect a Change in
Control) or (2) otherwise in connection with, as a result of or in anticipation
of a Change in Control, or (b) if you terminate your employment for Good Reason
prior to a Change in Control and you reasonably demonstrate that the
circumstance(s) or events(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control. Your right to terminate your
employment for Good Reason shall not be affected by your incapacity due to
physical or mental illness. Your continued employment shall not constitute your
consent to, or a waiver of your rights with respect to, any act or failure to
act constituting Good Reason hereunder. The single sum compensation so payable
shall be equal to 299.9% of the sum of (i) the highest annual rate of base
salary paid or payable to you during the thirty-six (36) month period
immediately preceding the month in which the Change in Control occurred, and
(ii) the highest annual bonus paid or determined payable to you during such
thirty-six (36) month period.
2. Other Severance.
In addition, in the event your employment with the Company terminates as
described in Section 1 above, within three years after a Change in Control of
the Company:
(a) Your participation in and rights and benefits under the Company's Pension
Plan, any corresponding Plan of a subsidiary company or any other successor
retirement or pension plan adopted by the Company ("the Plan") shall be governed
by the terms of the Plan; provided, however that you shall be paid, at the same
time that cash severance benefit payments are distributed to you under this
agreement, an additional benefit in cash equal to 200% of the Company's annual
contribution to your account under the Plan for the Plan Year (as defined in the
Plan) immediately preceding the date you terminated employment with the Company.
a. You will receive a lump sum payment equal to the present value of the cost
to provide welfare benefits comparable to those you were receiving under the
Company's life insurance plan, health plan, dental plan, disability plan and
other welfare benefit plans, immediately prior to any Potential Change in
Control, for three years after the termination of your employment.
b. You will receive a single lump sum payment equal to your Target
Bonus (as defined in the Company's EVA Incentive Plan) for the year in which the
Change in Control occurred, multiplied by a fraction having a numerator equal to
the number of days you were employed by the Company during the year in which the
Change in Control occurred and a denominator equal to 365. In addition, any
positive EVA bonus bank balances at the date of termination will be added, and
any negative EVA bonus bank balances at the date of termination will be
subtracted, which may result in a net bonus amount that is no less than zero.
3. Special Reimbursement
In the event that you become entitled to payments and/or benefits under this
agreement, if any payment or benefits paid or payable, or received or to be
received, by you or on your behalf in connection with a Change in Control or
termination of your employment, whether any such payments or benefits are
pursuant to the terms of this agreement or any other plan, arrangement or
agreement with the Company, any of its subsidiaries, any Person, or
otherwise(the "Total Payments") will or would be subject to the excise tax
imposed by Section 4999 of the Code, or any successor or similar provision
thereto (the "Excise Tax"), the Company shall pay to you an additional amount
(the "Gross-Up Payment") such that the net amount retained by you, after
deduction of any Excise Tax on the Total Payments and any federal, state and
local income tax and Excise Tax upon the payments provided for in this Section
3, but before deduction for any federal, state or local income tax on the Total
Payments, shall be equal to the Total Payments.
3.1 For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax:
(a) the Total Payments shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, unless, in the opinion of tax counsel selected by the
Company's independent auditors (and reasonably acceptable to you), such payments
or benefits (in whole or in part) do not constitute parachute payments, or such
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4)(B) of the Code or are otherwise not subject to the Excise Tax;
(b) the value of any non-cash benefits or any deferred payment or benefit shall
be determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
3.2 For purposes of determining the amount of the Gross-Up Payment, you shall be
deemed to pay federal income taxes at the highest marginal rate of federal
income taxation for the calendar year in which the Gross-Up Payment is to be
made and applicable state and local income taxes at the highest marginal rate of
taxation for the calendar year in which the Gross-Up Payment is to be made, net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account hereunder
at the time the Gross-Up Payment is made, you shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction plus interest on
the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder at the time the Gross-Up Payment is made (including
by reason of any payment the existence or amount of which cannot be determined
at the time of the Gross-Up Payment), the Company shall make an additional
Gross-Up Payment in respect of such excess (plus any interest payable with
respect to such excess at the rate provided above for repayments) at the time
that the amount of such excess is finally determined. You and the Company shall
each reasonably cooperate with the other in connection with any administrative
or judicial proceedings concerning the existence or amount of liability for
Excise Tax with respect to any payments received by you from the Company or
otherwise in connection with any Change in Control or termination of your
employment.
3.3 The Gross-Up Payment or portion thereof provided for above shall be paid not
later than the thirtieth day following the date of your termination, provided,
however, that if the amount of such Gross-Up Payment or portion thereof cannot
be finally determined on or before such day, the Company shall pay to you on
such day an estimate, as determined by the Company's independent auditors, of
the minimum amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined, but in no event later
than the forty-fifth day after the date of your termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to you,
payable on the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code).
4. Certain Definitions
4.1 For purposes of this agreement, a "Change in Control" means and shall be
deemed to occur if:
(a) the Shareholders of the Company approve the dissolution or liquidation of
the Company; or
(b) there occurs a reorganization, merger, or consolidation of the Company,
other than a reorganization, merger or consolidation with respect to which all
or substantially all of the individuals and entities who were "beneficial
owners" (as defined below), immediately prior to such reorganization, merger or
consolidation, of the combined voting power of the Company's then outstanding
securities beneficially own, directly or indirectly, immediately after any such
reorganization, merger or consolidation, more than eighty percent (80%) of the
combined voting power of the securities of the corporation resulting from such
reorganization, merger or consolidation in substantially the same proportions as
their respective ownership, immediately prior to any such reorganization, merger
or consolidation, of the combined voting power of the Company's securities; or
(c) there occurs the sale, exchange, transfer, or other disposition of shares of
stock of the Company (or shares of the stock of any Person (as hereafter
defined) that is a shareholder of the Company) in one or more transactions,
related or unrelated, to one or more Persons if, as a result of such
transactions, any Person is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934 (the "Exchange Act")),
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person(s) any securities acquired directly
from the Company) representing more than 20% of the combined voting power of the
then outstanding stock of the Company; or
(d) there occurs any transaction which the Company is required to disclose
pursuant to Item 1(a) of Form 8-K (as filed pursuant to Rule 13a-11 or Rule
15d-11 of the Exchange Act); or
(e) during any period of twenty-four (24) consecutive months (not including any
period prior to December 31, 1998), individuals who constitute the Board at the
beginning of such period (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any individual becoming a
director (other than a director designated by a Person who has entered into an
agreement with the Company or an affiliate of the Company to effect a
transaction described in clauses (a), (b), (c), (e), or (f) of this definition
or any such individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitations of proxies or consents) subsequent to the beginning of
such period whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least two-thirds of the directors
then still in office and comprising the Incumbent Board at the beginning of such
period or whose election or nomination for election was previously so approved
(either by a specific vote or by approval of the proxy statement of the Company
in which such individual is named as a nominee for director, without objection
to such nomination) shall be considered as though such individual were a member
of the Incumbent Board; or
(f) there occurs the sale of all or substantially all the assets of the Company;
or
(g) the Board determines, in its sole discretion, that a Change in Control has
occurred.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding your
employment activities with the Company or any of its subsidiaries) of any Person
or group of Persons which includes, is directly affiliated with or is wholly or
partly controlled by one or more executive officers of the Company and in which
you actively participate.
4.2 For purposes of this agreement, "Potential Change in Control" shall mean and
be deemed to have occurred if:
(i) the Company enters into a letter of intent or a definitive agreement, the
consummation of which would result in the occurrence of a Change of Control;
(ii) the Company or any Person publicly announces an intention to take actions
which, if consummated, would constitute a Change in Control; and/or
(iii) any Person becomes the "beneficial owner" (as defined above), directly or
indirectly, of securities of the Company representing ten percent (10%) or more
of the combined voting power of the Company's then outstanding securities, or
any Person increases such Person's beneficial ownership of such securities by
five (5) percentage points or more over the percentage so owned by such Person
on December 31, 1998.
4.3 For the purposes of this agreement, unless the context requires otherwise,
"Company" shall mean and include The Montana Power Company and any successor to
its business and/or assets which assumes (either expressly, by operation of law
or otherwise) and/or agrees to perform this agreement by operation of law or
otherwise (except in determining whether or not any Change in Control has
occurred in connection with such succession).
4.4 For purposes of this agreement, "Person" shall mean and include any
individual, corporation, partnership, group, association or other "person," as
such term is used in Section 3(a) (9) of the Exchange Act, as modified and use
in Sections 13(d) and 14(d) there of, other than (i) the Company, or any
subsidiary of the Company, (ii) any trustee or other fiduciary holding
securities under any employee benefit plan(s) sponsored by the Company or any
such subsidiary (iii) an underwriter temporarily holding securities pursuant to
an offering of such securities, or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
character and proportions as their ownership of stock of the Company .
4.5 For purposes of this agreement, "Normal Retirement Date" shall have the
meaning set forth in the Plan.
4.6 For purposes of this agreement, "Disability" shall mean and be deemed the
reason for the termination by the Company of your employment, if, as a result of
your incapacity due to physical or mental illness, (i) you shall have been
absent from the full-time performance of your duties with the Company for a
period of six (6) consecutive months, (ii) the Company gives you a notice of
termination for Disability, and (iii) within thirty 30 Days after such notice of
termination is given, you do not return to the full-time performance of your
duties.
4.7 For purposes of this agreement, "Cause" shall mean (i) the willful and
continued failure by you to perform substantially your duties with the Company
(other than any such failure resulting from your incapacity due to physical or
mental illness) after a demand for substantial performance is delivered to you
by the Chairman of the Board or Chief Executive Officer or President of the
Company which demand specifically identifies the manner in which such executive
believes that you have not substantially performed your duties or (ii) the
continued and willful engaging by you in conduct which is demonstrably and
materially injurious to the Company and/or its subsidiaries, monetarily or
otherwise; provided that no act, or failure to act, on your part shall be
considered "willful" unless done, or omitted to be done, by you in bad faith and
without reasonable belief that your action or omission was in, or not opposed
to, the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Company's Chief Executive Officer or other duly authorized
senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by you
in good faith and in the best interest of the Company and its subsidiaries. The
cessation of your employment shall not be deemed to be for Cause unless and
until there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice of any such meeting is provided to you and you are given an
opportunity, together with counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, you are guilty of the conduct described
in clause (i) or (ii) above, and specifying the particulars thereof in detail.
4.8 For purposes of this agreement, "Good Reason" shall mean the occurrence
(without your prior express written consent) of any of the following acts or
failure to act:
(a) the assignment to you of any duties inconsistent with your positions,
duties, responsibilities and status with the Company immediately prior to any
Potential Change in Control, or an adverse and substantial change in your
reporting responsibilities, titles, or offices or any removal of you from or any
failure to re-elect you to any of such positions or offices, as you may hold
immediately prior to any such Potential Change in Control, except in connection
with the termination of your employment for disability, retirement or as a
result of your death, or by you other than for Good Reason;
(b) the reduction by the Company in your rate of salary per annum as in effect
immediately prior to any Potential Change in Control;
(c) a failure by the Company to continue in effect any retirement or benefit
plan of the Company (including, but not limited to the Plan, the Deferred
Savings and Employee Stock Ownership Plan, the Long-Term Incentive Plan,
executive bonus plan, deferred compensation plan, supplemental or excess benefit
plan, benefit restoration plan or similar plan of the Company) in which you are
participating immediately prior to any Potential Change in Control,
substantially in the form then in effect, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan or arrangement) has been
made with respect to such plan, or the failure by the Company or a subsidiary to
continue your participation therein (or in such substitute or alternative plan
or arrangement) on a basis not materially less favorable, both in terms of the
amount of benefits provided and the level of your participation relative to
other participants, as existed at the time of the Potential Change in Control;
(d) the failure by the Company to continue you and, if applicable, your family's
participation in any life insurance plan, retiree or other medical plan,
accident plan, hospitalization plan, health plan, dental plan, disability plan
or other welfare benefit plan) in which you (or if applicable your family) are
participating immediately prior to a Change in Control, or any successor to any
such plans, at least the same participation and benefit level to which you were
entitled immediately prior to such Potential Change in Control, the taking of
any action by the Company or a subsidiary which would directly or indirectly
materially reduce any of such benefits or deprive you of any material fringe
benefits enjoyed by you at the time of the Potential Change in Control, or the
failure by the Company or a subsidiary to provide you with the number of paid
vacation days to which you are entitled in accordance with the Company's or a
subsidiary's normal vacation policy in effect at the time of the Potential
Change in Control;
(e) the relocation of the office or place where you normally report for work to
a location more than twenty (20) miles distant from the location where you
normally reported for work immediately prior to the Potential Change in Control,
except for required travel in respect of the Company's business to an extent
substantially consistent with your business travel obligations as of the date of
any Potential Change in Control;
(f) the failure by the Company to provide you with the number of paid vacation
days to which you are entitled on the basis of your years of service with the
Company in accordance with the Company's normal vacation policy as in effect
immediately prior to any Potential Change in Control;
(g) the failure by the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform this agreement; and/or
(h) a termination by you for any reason during the thirty (30) day period
immediately following the first anniversary of any Change in Control.
5. Legal Fees. If at any time you shall (i) institute legal proceedings to
enforce any of the provisions of this agreement, and without regard to whether
or not, as a result thereof, you become entitled to monetary or other relief
from the Company (whether by way of judgment, settlement or otherwise),or (ii)
become involved in any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment provided to you, the
Company shall, in addition to paying or otherwise providing any such or other
relief, reimburse you for all reasonable expenses incurred by you resulting from
or in connection with such audit or proceedings, including (without limitation)
your attorneys' fees and expenses, except in the case of (i) above if a court
determines that your initiation of or legal position in such legal proceedings
was frivolous or advanced in bad faith. Any monetary relief to which you shall
become entitled shall bear interest at the highest legal rate allowable from the
date of termination of your employment. The Company also agrees to reimburse you
for all reasonable expenses, including (without limitation) your attorneys' fees
and expenses, incurred by you in connection with litigation concerning this
agreement instituted by third parties, whether on behalf of the Company or not.
The Company agrees that litigation concerning this agreement, whether instituted
by you, the Company, or third parties, shall not be grounds for withholding
payment to you of the termination compensation and other benefits provided for
herein or elsewhere and such termination compensation and other benefits shall
be paid to you notwithstanding such litigation.
6. Miscellaneous.
6.1 The termination compensation and other benefits provided herein are in lieu
of, and not in addition to, compensation and benefits provided to other
employees by The Montana Power Company Termination Benefits Upon Change in
Control Policy. The Company agrees that you are not required to seek other
employment or to attempt in any way to reduce any amounts payable to you by the
Company pursuant to this agreement. Further, the amount of any payment or
benefit provided for by this Agreement shall not be reduced by any compensation
earned by you as the result of employment by another employer, by retirement
benefits, or offset against any amount claimed to be owed by you to the Company
or any of its subsidiaries, or otherwise.
6.2 This agreement shall be binding upon and inure to the benefit of you and
your estate and the Company and any successor of the Company.
6.3 This agreement shall be effective on the date checked below next to your
signature and shall continue in effect through December 31, 2002; provided,
however, that commencing on January 1, 2002 and each January 1 thereafter the
term of this agreement shall be extended for additional one year periods unless,
prior to June 30 of the preceding year you or the Company shall have given
written notice to the other that this agreement shall not be so extended;
provided, further, however, that if a Change in Control occurs during the
initial term, or any extension term, of this agreement, the agreement shall
continue in full force and effect for a period of not less than thirty-six (36)
months beyond the month in which the Change in Control occurred (the "Term").
This binding severance agreement is not and should not be characterized as a
contract of employment.
6.4 Prior to a Change in Control, and except as otherwise provided herein, this
agreement does not impose on the Company any obligation to change or not to
change the status of your employment, or to change or not to change any policies
or practices regarding conditions of employment or termination of employment.
6.5 This agreement shall be governed by the laws of the state of Montana without
regard to the principles of conflict of laws thereof.
6.6 You shall hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to the Company or
any of its affiliated companies, and their respective businesses, which shall
have been obtained by you during your employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by direct or indirect acts by you in violation of this agreement). After
termination of your employment with the Company, you shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event, however,
shall an asserted violation of the provisions of this Section 6.6 constitute a
basis for deferring or withholding any amounts otherwise payable to you under
this agreement.
If you are in agreement with the foregoing, please so indicate by signing and
returning to the Company the enclosed copy of this letter, whereupon this letter
shall constitute a binding agreement between you and the Company.
Very truly yours,
THE MONTANA POWER COMPANY
AGREED:
Effective date: ___ July , 1999 ___January 1, 2000
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EXHIBIT 10.40
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made as of March 20,
2001, by and among Guitar Center Stores, Inc., a Delaware corporation, with a
principal place of business located at 5155 Clareton Drive, Agoura Hills,
California 91301 ("Buyer"), and American Music Group, Ltd., a New York
corporation, with a principal place of business located at 310 West Jefferson
Street, Syracuse, New York 13202, Eastern Musical Supply Co., Inc., a New York
corporation, with a principal place of business located at 106 Gray Road, West
Falmouth, Maine 04105, Lyons Music, Inc., a New York corporation, with a
principal place of business located at 130 E. St. Charles Road, Suite B, Carol
Stream, Illinois 60188-2075, American Music, Inc., a Florida corporation, with a
principal place of business located at 667 Florida Central Parkway, Longwood,
Florida 32750, American Musical Instruments, Inc., a New York corporation, with
a principal place of business located at 2710 West Bell Road, Suite 1200,
Phoenix, Arizona 85023, Giardinelli Band Instrument Co., Inc., a New York
corporation, with a principal place of business located at 7845 Maltage Drive,
Liverpool, New York 13090, Central Music Supply, Inc., a New York corporation,
with a principal place of business located at 310 West Jefferson Street,
Syracuse, New York 13202, and GBI, Inc., a New York corporation, with a
principal place of business located at 7845 Maltage Drive, Liverpool, New York
13092 (each, a "Seller" and, collectively, the "Sellers"), and the stockholders
of Sellers each of whom is listed on the signature pages hereto (each, a
"Stockholder" and, collectively, the "Stockholders"), pursuant to the following
terms and conditions.
Recitals:
A. Sellers now own and wish to sell all of their assets, properties and
rights to Buyer on the terms and subject to the conditions set forth herein
below.
B. Buyer wishes to purchase such assets from Sellers (the "Acquisition").
C. Each of the Sellers and Buyer has approved the Acquisition.
Agreement:
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants and agreements contained herein and other good and valuable
consideration, the adequacy of which is hereby acknowledged, Buyer, the Sellers
and the Stockholders hereby agree as follows:
1. Definitions.
"Acquisition" shall have the meaning set forth in Recital B.
"Action" means any action, order, writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding, investigation or dispute.
"Adjustment Amount" shall have the meaning set forth in Section 2.7(c).
"Agreement" shall have the meaning set forth in the preamble.
"Ancillary Agreements" means the Noncompete Agreements.
"Assets" shall have the meaning set forth in Section 2.1.
"Assumed Liabilities" means (a) the Liabilities of the Sellers shown on the
December 31, 2000 balance sheet included in the Financial Statements, (b) the
Liabilities of the Sellers incurred in the ordinary course of business of the
Sellers consistent with past practice during the period commencing on January 1,
2001 and ending on the Closing Date (other than Employee Plan Liabilities or any
Breach); (c) the Liabilities set forth in Section 1(a) of the Seller Disclosure
Schedule, if any; and (d) the employment obligations identified in Section 6.9;
provided, however, that in no event shall the Assumed Liabilities include
(x) any Taxes of any Seller arising from any event prior to or in connection
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with the Closing or (y) any obligations of any Seller or any Stockholder for the
payment of brokerage, investment banking, legal, accounting and similar fees and
expenses arising in connection with the transactions contemplated by this
Agreement.
"Auditor" shall have the meaning set forth in Section 2.7(b).
"Average Parent Common Stock Price" shall mean the average closing price of
the Parent Common Stock on the Nasdaq National Market as reported in the Wall
Street Journal for the five Trading Days ending on the second Trading Day
immediately prior to the Closing Date.
"Benefit Arrangement" means any employment, consulting, severance or other
similar contract, arrangement or policy (written or oral) and each plan,
arrangement, program, agreement or commitment (written or oral) providing for
insurance coverage (including, without limitation, any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, life, health or
accident benefits (including, without limitation, any "voluntary employees'
beneficiary association" as defined in Section 501(c)(9) of the Code providing
for the same or other benefits) or for deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation rights, stock purchases or other
forms of incentive compensation or post-retirement insurance, compensation or
benefits which (a) is not a Welfare Plan, Pension Plan or Multiemployer Plan,
(b) is entered into, maintained, contributed to or required to be contributed
to, as the case may be, by any Seller or any ERISA Affiliate or under which any
Seller or any ERISA Affiliate may incur any liability, and (c) covers any
employee or former employee of any Seller or any ERISA Affiliate (with respect
to their relationship with such any entity).
"Books and Records" means (a) all product, business and marketing plans,
sales and promotional literature and artwork relating to the business of any
Seller or the Assets, (b) all books, records, lists, ledgers, financial data,
files, reports, product and design manuals, plans, drawings, Tax Returns,
technical manuals and operating records of every kind relating to the business
of any Seller or the Assets (including records and lists of customers,
distributors, suppliers and personnel) and (c) all telephone and fax numbers
used in the business of any Seller, in each case whether maintained as hard copy
or stored in computer memory and whether owned by any Seller or its affiliates.
"Breach" shall have the meaning set forth in Section 3.12.
"Business" shall have the meaning set forth in Section 2.1.
"Buyer" shall have the meaning set forth in the preamble.
"Buyer Disclosure Schedule" means the written disclosure schedule of Buyer
delivered to the Seller Representative prior to the date hereof, a copy of which
is attached hereto.
"Buyer Indemnified Party" shall have the meaning set forth in Section 10.1.
"Cash" means cash and cash equivalents, including marketable securities and
short-term investments, calculated in accordance with GAAP applied on a
consistent basis.
"Cash Consideration" shall mean an amount in cash equal to $14,408,032
(Fourteen Million Four Hundred Eight Thousand Thirty-Two Dollars) minus the
Adjustment Amount, if any.
"Cash Holdback" means an amount in cash equal to $2,075,000 (Two Million
Seventy-Five Thousand Dollars).
"Claim" shall have the meaning set forth in Section 10.2.
"Claim Notice" shall have the meaning set forth in Section 10.2.
"Closing" shall have the meaning set forth in Section 2.4.
"Closing Date" shall have the meaning set forth in Section 2.4.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Contracts" means all agreements, contracts, Leases (whether for real or
personal property), purchase orders, undertakings, covenants not to compete,
employment agreements, confidentiality agreements, licenses, instruments,
obligations and commitments to which any Seller is a party or by which any
Seller or any of the Assets are bound or affected, whether written or oral.
"Court Order" means any judgment, decision, consent decree, injunction,
ruling or order of any foreign, federal, state or local court or governmental
agency, department or authority that is binding on any Person or its property
under applicable law.
"Damages" shall mean any damage, claim, loss, cost, Tax, Liability or
expense, including, without limitation, court costs and expenses of
investigation, reasonable attorney's fees and costs, diminution of value,
response action, removal action or remedial action.
"Default" means (a) a breach of or default under any Contract or Lease,
(b) the occurrence of an event that with or without the passage of time or the
giving of notice or both would constitute a breach of or default under any
Contract or Lease or (c) the occurrence of an event that with or without the
passage of time or the giving of notice or both would give rise to a right of
termination, renegotiation or acceleration, or the modification of the terms or
conditions, under any Contract or Lease.
"Deferred Revenue Adjustment" shall have the meaning set forth in
Section 2.7(d).
"Depreciated Inventory" means those items of Inventory which the Sellers, or
any of them, have depreciated for accounting purposes such that the book value
of those items is zero or a nominal amount.
"Designated Employees" shall have the meaning set forth in Section 6.9(a).
"Determination Date" shall have the meaning set forth in Section 2.7(b).
"Employee Plans" means all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.
"Employee Plan Liabilities" means any Liabilities under or with respect to
any Employee Plans, without regard to whether such Liabilities are Liabilities
of such Employee Plans, any Seller or any ERISA Affiliate.
"Employees" means all officers and directors of any Seller and all other
Persons employed by any Seller on a full or part-time basis together with all
persons retained as "independent contractors" as of the relevant date.
"Employment Agreement" means the Employment Agreement, by and between Buyer
and David Fleming dated even herewith.
"Encumbrance" means any claim, lien, pledge, option, charge, easement, Tax
assessment, Security Interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes any agreement to give any of the
foregoing in the future, and any contingent sale or other title retention
agreement or Lease in the nature thereof.
"Environmental Condition" means the state of the environment, including
natural resources (e.g., flora and fauna), soil, surface water, ground water,
any present or potential drinking water supply, subsurface strata or ambient
air, relating to or arising out of the use, handing, storage, treatment,
recycling, generation, transportation, release, spilling, leaking, pumping,
pouring, emptying, discharging, injecting, escaping, leaching, disposal, dumping
or threatened release of Hazardous Substances by any Seller or any of their
respective predecessors of successors in interest, or by any of their respective
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agents, Representatives, employees or independent contractors when acting in
such capacity on behalf of any Seller.
"Environmental Laws" means all applicable federal, state, district and local
laws, all rules or regulations promulgated thereunder, and all orders, consent
orders, judgments, notices, permits or demand letters issued, promulgated or
entered pursuant thereto, relating to pollution or protection of the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), including, without limitation, (a) laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, industrial materials, wastes or other substances into
the environment and (b) laws relating to the identification, generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
recovery, transport or other handling of pollutants, contaminants, chemicals,
industrial materials, wastes or other substances. Environmental Laws shall
include, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Toxic
Substances Control Act, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended, the Clean
Water Act, as amended, the Safe Drinking Water Act, as amended, the Clean Air
Act, as amended, the Occupational Safety and Health Act, as amended, and all
analogous laws promulgated or issued by any state or other governmental
authority.
"Environmental, Health and Safety Liability" means any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to: (a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products); (b) fines, penalties,
judgments, awards, settlements, legal or administrative proceedings, damages,
losses, claims, demands and response, investigative, remedial, or inspection
costs and expenses arising under Environmental Law or Occupational Safety and
Health Law; (c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any governmental body or any other Person) and for any natural
resource damages; or (d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety and
Health Law. The terms "removal," "remedial," and "response action," include the
types of activities covered by CERCLA.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any entity which is (or at any relevant time was) a
member of a "controlled group of corporations" with, under "common control"
with, or a member of an "affiliated service group" with, or otherwise required
to be aggregated with, any Seller as set forth in Section 414(b), (c), (m) or
(o) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Liabilities" shall have the meaning set forth in Section 2.2(b).
"Facilities" means all offices, stores, warehouses, administration
buildings, manufacturing facilities, plants and all real property and related
facilities owned or leased by any Seller, all as identified or listed in
Section 3.4(b) and Section 3.4(c) of the Seller Disclosure Schedule.
"Financial Statements" means the balance sheets of each Seller (or its
predecessor, as the case may be) as of December 31, 2000 and the related
statements of income, changes in stockholders' equity and cash flows, of each
Seller for the year ended December 31, 2000, in each case which are provided to
Buyer by Sellers.
4
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"Fixtures and Equipment" means all of the furniture, fixtures, furnishings,
machinery, computer hardware and other tangible personal property owned or
leased by any Seller, wherever located.
"Funded Debt" shall have the meaning set forth in Section 3.8.
"GAAP" means United States generally accepted accounting principles.
"Hazardous Substances" means all pollutants, contaminants, chemicals, wastes
and any other carcinogenic, ignitable, corrosive, reactive, toxic or otherwise
hazardous substances or materials (whether solids, liquids or gases) subject to
regulation, control or remediation under Environmental Laws.
"Holdback Amount" shall mean an amount equal to $2,500,000 (Two Million Five
Hundred Thousand Dollars) to be represented by the Cash Holdback and the Shares
Holdback.
"Holdback Notice" shall have the meaning set forth in Section 11.3.
"Holdback Period" shall mean the period commencing on the Closing Date and
ending on the Determination Date.
"Indemnified Party" shall have the meaning set forth in Section 10.2.
"Indemnifying Party" shall have the meaning set forth in Section 10.2.
"Intangible Assets" means an asset, such as goodwill, Intellectual Property
rights or similar assets, with no physical properties.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto
and all patents, patent applications and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith and all applications, registrations and renewals in connection
therewith, (c) all copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (d) all mask works and all
applications, registrations and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes, techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Inventory" means all merchandise owned and intended for resale, lease or
rental.
"Investor" shall have the meaning set forth in Section 4.4(a).
"Lease" means a real property lease or a personal property lease, as
applicable.
"Leased Property" shall have the meaning set forth in Section 3.4(c).
"Liability" means any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
any type whatsoever, whether accrued or unaccrued, absolute or contingent,
matured or unmatured, liquidated or unliquidated, known or unknown, asserted or
unasserted, due or to become due.
"LIFO Reserve" means that the inventory valuation reserve for the last-in
first-out method as reflected in the Books and Records of the Sellers.
"Low Estimate" shall have the meaning set forth in Section 2.7(c).
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"Material Adverse Effect" or "Material Adverse Change" or a similar phrase
means, with respect to any Person, (a) any material adverse effect on or change
with respect to (i) the business, operations, assets (taken as a whole),
Liabilities (taken as a whole), condition (financial or otherwise), results of
operations or prospects of such Person and its Subsidiaries, taken as a whole,
or (ii) the right or ability of such Person to consummate any of the
transactions contemplated hereby or (b) any event or condition which, with the
passage of time, the giving or receipt of notice or the occurrence or
nonoccurrence of any other circumstance, action or event, would reasonably be
expected to constitute a "Material Adverse Effect" on or "Material Adverse
Change" with respect to such Person.
"Multiemployer Plan" means any "multiemployer plan," as defined in
Section 4001(a)(3) or 3(37) of ERISA, which (a) any Seller or any ERISA
Affiliate maintains, administers, contributes to or is required to contribute
to, or, after September 25, 1980, maintained, administered, contributed to or
was required to contribute to, or under which any Seller or any ERISA Affiliate
may incur any liability and (b) covers any employee or former employee of any
Seller or any ERISA Affiliate (with respect to their relationship with any such
entity).
"Negative Spending Adjustment" shall have the meaning set forth in
Section 2.8(b).
"Noncompete Agreement" shall have the meaning set forth in
Section 2.5(a)(iii).
"Occupational Safety and Health Law" means any legal requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards.
"Parent" shall mean Guitar Center, Inc., a Delaware corporation.
"Parent Common Stock" shall mean the common stock, par value $0.01 per
share, of Parent.
"Parent Options" shall have the meaning set forth in Section 5.5(b).
"Parent SEC Reports" shall have the meaning set forth in Section 5.6.
"Party" shall mean any Person who is a party to this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" means any "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) which (a) any Seller or
any ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, within the five (5) years prior to the Closing Date,
maintained, administered, contributed to or was required to contribute to, or
under which any Seller or any ERISA Affiliate may incur any liability
(including, without limitation, any contingent liability) and (b) covers any
employee or former employee of any Seller or any ERISA Affiliate (with respect
to their relationship with any such entity).
"Permits" means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, necessary or desirable for
the past, present or anticipated conduct or operation of the business of any
Seller or ownership of the Assets.
"Permitted Encumbrances" means (a) statutory liens of landlords, liens of
carriers, warehousepersons, mechanics and materialpersons incurred in the
ordinary course of business for sums (i) not yet due and payable or (ii) being
contested in good faith if, in either case, an adequate reserve shall have been
made therefor in such Person's financial statements, (b) liens incurred or
deposits made in connection with workers' compensation, unemployment insurance
and other similar types of social security programs or to secure the performance
of tenders, statutory obligations, surety and appeal bonds, bids, Leases,
government contracts, performance and return of money bonds and similar
obligations, in each case in the ordinary course of business consistent with
past practice, (c) easements, rights-of-way, restrictions and other similar
charges or encumbrances, in each case which do not
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interfere with the ordinary conduct of business by any Seller and do not
materially detract from the value of the property upon which such encumbrance
exists and (d) liens securing Taxes, assessments and governmental charges not
yet delinquent.
"Person" means an individual, partnership, limited liability company,
corporation, association joint stock company, trust, joint venture,
unincorporated organization or governmental entity (or any department, agency or
political subdivision thereof).
"Proprietary Rights" means any or all of, and all rights in, arising out of,
or associated with, the following: (a) U.S. and foreign patents and applications
therefor and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof, (b) U.S. and foreign
trademarks, service marks, trade dress, logos, trade names and corporate names
and the goodwill associated therewith and registrations and applications for
registration thereof, (c) U.S. and foreign copyrights and registrations and
applications for registration thereof, (d) U.S. and foreign mask work rights and
registrations and applications for registration thereof, (e) trade secrets,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, technical data, works of
authorship and confidential business information (including financial, marketing
and business data, pricing and cost information, business and marketing plans
and customer and supplier lists and information), (f) all computer software,
including all source code, object code, firmware, development tools, files,
records and data, all media on which any of the foregoing is recorded, all Web
addresses, sites and domain names; (g) all databases and data collections and
all rights therein throughout the world; (h) any similar, corresponding or
equivalent rights to any of the foregoing, (i) licenses granting any rights with
respect to any of the foregoing and (j) all drawings, designs, renderings,
specifications and other documentation embodying or related to any of the
foregoing.
"Purchase Consideration" shall mean the Cash Consideration and the Share
Consideration.
"Regulations" means any laws, statutes, ordinances, regulations, rules,
notice requirements, court decisions, agency guidelines, and orders of any
foreign, federal, state or local government and any other governmental
department or agency, including without limitation energy, motor vehicle safety,
public utility, zoning, building and health codes, Environmental Laws,
occupational safety and health and laws respecting employment practices,
employee documentation, terms and conditions of employment and wages and hours.
"Related Party" means (i) any officer, director or stockholder of any
Seller, and any officer, director, partner, manager associate or relative of
such officers, directors and stockholders, (ii) any Person in which any Seller
or any stockholder of any Seller or any affiliate, associate or relative of any
such Person has any direct or indirect interest and (iii) any direct or indirect
trustee or beneficiary of any stockholder of any Seller.
"Representative" means, with respect to any Person, any officer, director,
principal, attorney, accountant, agent, employee, financing source or other
representative of such Person.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, lien, Encumbrance, charge or
other security interest, other than (a) mechanic's, materialmen's and similar
liens, (b) liens for Taxes not yet due, (c) purchase money liens and liens
securing rental payments under capital lease arrangements and (d) other liens
arising in the ordinary course of business of Sellers and not incurred in
connection with the borrowing of money.
"Seller" shall have the meaning set forth in the preamble.
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"Seller Disclosure Schedule" means the written disclosure schedule of
Sellers delivered to Buyer prior to the date hereof, a copy of which is attached
hereto.
"Seller Indemnified Party" shall have the meaning set forth in Section 10.1.
"Seller Representative" shall mean Robert A. Scheiwiller.
"Selmer Contract" shall mean the Agreement, dated as of September 1, 1985,
by and between The Selmer Company and Lyon's Music, Inc.
"Share Consideration" means the number of shares of Parent Common Stock
equal to $2,516,968 (Two Million Five Hundred Sixteen Thousand Nine Hundred
Sixty-Eight Dollars) divided by the Average Parent Common Stock Price.
"Shares Holdback" means the number of shares of Parent Common Stock equal to
$425,000 (Four Hundred Twenty-Five Thousand Dollars) divided by the Average
Parent Common Stock Price, rounded down to the nearest whole share; provided,
however, that if Buyer exercises its option pursuant to the last sentence of
Section 2.3, then "Shares Holdback" means an amount in cash equal to $425,000
(Four Hundred Twenty-Five Thousand Dollars).
"Stockholder" shall have the meaning set forth in the preamble.
"Stockholder Disclosure Schedule" means the written disclosure schedule of
the Stockholders delivered to Buyer prior to the date hereof, a copy of which is
attached hereto.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the vote of sufficient securities to elect a majority of the
directors.
"Tax" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including Taxes under Section 59A of the Code),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest, penalty
or addition thereto, whether disputed or not.
"Tax Return" means any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) including information returns, and any
documents with respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other
information.
"Third Party Claim" shall have the meaning set forth in Section 10.2.
"Trading Day" means any day on which the Nasdaq National Market is open and
available for at least five hours for the trading of securities.
"Unearned Accounts Receivable" means, as of a particular date, the aggregate
amount to be recognized as revenue in future accounting periods with respect to
all "Rent-to-Purchase" contracts validly outstanding, such amount to be
calculated on a nominal basis (i.e., not reduced to present value). For
comparison purposes, the amount of Unearned Accounts Receivable for the Business
as of December 31, 2000 was $23,692,000 (Twenty-Three Million Six Hundred
Ninety-Two Thousand Dollars).
"Welfare Plan" means any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, which (a) any Seller or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or under which any
Seller or any ERISA Affiliate may incur any liability and (b) covers any
employee or former employee of any Seller or any ERISA Affiliate (with respect
to their relationship with any such entity).
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"Year End Financial Statements" shall have the meaning set forth in
Section 2.7(a).
"Year End Unearned Accounts Receivable" shall have the meaning set forth in
Section 2.7(a).
2. Purchase and Sale of Assets; Closing.
2.1 Purchase of Assets. Upon the terms and subject to the conditions
contained herein, Buyer hereby agrees to purchase from each Seller, and each
Seller hereby agrees to sell, transfer, convey and deliver to Purchaser at the
Closing, any and all of such Seller's rights, title and interest in and to all
assets, properties and rights of such Seller or used in or useful in connection
with such Seller's business of marketing, renting, selling, leasing or otherwise
providing musical instruments, as well as other products, parts, materials,
supplies and services related to the marketing, rental, sale, lease or other
distribution of musical instruments (the "Business"), including, without
limitation, all of such Seller's (a) real property, leaseholds and subleaseholds
therein, improvements, fixtures and fittings thereon and easements,
rights-of-way and other appurtenants thereto (such as appurtenant rights in and
to public streets), (b) tangible personal property (such as machinery,
equipment, inventories, manufactured and purchased parts, goods in process and
finished goods, furniture, automobiles, trucks, tractors, trailers, tools, jigs
and dies), (c) Intellectual Property, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies against
infringements thereof and rights to protection of interests therein under the
laws of all jurisdictions, (d) leases, subleases and rights thereunder,
(e) agreements, contracts, indentures, mortgages, instruments, Security
Interests, guaranties other similar arrangements and rights thereunder,
(f) accounts, notes and other receivables, (g) securities (such as the capital
stock in its Subsidiaries, if any), (h) claims, deposits, prepayments, refunds,
causes of action, choses in action, rights of recovery, rights of setoff and
rights of recoupment (including any such item relating to the payment of Taxes),
(i) franchises, approvals, permits, licenses, orders, registrations,
certificates, variances and similar rights obtained from governments and
governmental agencies, (j) books, records, ledgers, files, documents,
correspondence, lists, customer information databases, studies, plans, samples,
goodwill, plats, architectural plans, drawings and specifications, creative
materials, advertising and promotional materials, Web sites and domain names,
studies, reports and other printed or written materials, (k) operating systems,
servers, PCs and other computer hardware, (l) Cash and (m) any and all goodwill
related to the Business or any of the foregoing (collectively, the "Assets");
provided, however, that the Assets shall not include (i) the corporate charter,
qualifications to conduct business as a foreign corporation, arrangements with
registered agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, stock transfer books, blank stock
certificates and other documents relating to the organization, maintenance and
existence of any Seller as a corporation, (ii) the rights of any Seller under
this Agreement or (iii) the Selmer Contract.
2.2 Liabilities of Sellers and the Stockholders.
(a) Assumed Liabilities. Upon the terms and subject to the conditions set
forth herein, as of the Closing Buyer shall assume only the Assumed Liabilities.
Buyer agrees to pay, perform and discharge the Assumed Liabilities. Buyer hereby
agrees to indemnify and hold each Seller and each Stockholder harmless from any
and all claims, costs, expenses, liabilities, losses or damages, including
attorneys' fees and court costs, relating to or arising out of the Assumed
Liabilities.
(b) Excluded Liabilities. Each Seller and each Stockholder acknowledges that
Buyer is not purchasing, assuming or becoming responsible for any Liability
including, without limitation, any Employee Plan Liability and any liability for
Taxes of (i) any Seller or any Stockholder or (ii) the Assets or any portion
thereof arising from any event prior to or in connection with the Closing
(collectively, the "Excluded Liabilities"), in each case other than the Assumed
Liabilities. Each Seller hereby agrees, and each Stockholder hereby agrees to
cause Sellers, to pay, perform and discharge the Excluded Liabilities. Each
Seller and each Stockholder hereby agree to jointly and severally indemnify and
hold Buyer harmless from any and all claims, costs, expenses, liabilities,
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losses or damages, including attorneys' fees and court costs, relating to or
arising out of the Excluded Liabilities, no matter when incurred.
2.3 Purchase Consideration. In consideration of the purchase of the Assets
and each Seller's and each Stockholder's covenants and agreements set forth in
this Agreement, Buyer agrees (a) to pay to Sellers an aggregate amount of cash
equal to the Cash Consideration, of which (i) an amount equal to the Cash
Consideration less the Cash Holdback shall be delivered on the Closing Date and
(ii) the Cash Holdback shall become an element of the Holdback Amount and, upon
the terms and subject to the conditions specified in Section 11, be delivered
promptly after the Determination Date and (b) to issue to Sellers the Share
Consideration for distribution to the Investor, of which (x) a number of shares
of Parent Common Stock equal to the Share Consideration less the Shares Holdback
will be delivered on the Closing Date and (y) the Shares Holdback shall become
an element of the Holdback Amount and, upon the terms and subject to the
conditions specified in Section 11, be delivered promptly after the
Determination Date. Notwithstanding the foregoing, Buyer shall have the right,
in its sole discretion, to pay to Sellers, in lieu of issuing the Share
Consideration pursuant to clause (b) of the immediately preceding sentence, an
aggregate amount of cash equal to $2,516,968 (Two Million Five Hundred Sixteen
Thousand Nine Hundred Sixty-Eight Dollars), of which $2,091,968 (Two Million
Ninety-One Thousand Nine Hundred Sixty-Eight Dollars) shall be delivered on the
Closing Date and $425,000 (Four Hundred Twenty-Five Thousand Dollars) shall
constitute the Shares Holdback and, upon the terms and subject to the conditions
specified in Section 11, delivered promptly after the Determination Date. The
Parties agree that all Shares of Parent Common Stock acquired by the Investor
pursuant to this Agreement (including, without limitation, any shares of Parent
Common Stock constituting a portion of the Shares Holdback), shall be deemed to
have been acquired by the Investor on the Closing Date for purposes of
Rule 144(d)(3)(iii) under the Securities Act.
2.4 Closing. The closing of the Acquisition (the "Closing") shall be held
at 9:00 a.m., local time, on the second business day following the satisfaction
or waiver of all conditions to the obligations of the parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective parties shall take at the Closing) (the "Closing Date") at the
offices of Latham & Watkins located at 633 West Fifth Street, Los Angeles,
California 90071, unless the parties otherwise agree. The Assets will be
transferred to Buyer at the Closing on the Closing Date, and each of the Sellers
and each of the Stockholders will do all things that are deemed necessary by
Buyer for the valid transfer of the Assets.
2.5 Closing Obligations.
(a) Seller Deliveries. Each Seller shall deliver or cause to be delivered to
Buyer at and as of the Closing Date:
(i) assignments (including Intellectual Property, Lease and Contract
transfer documents) in the forms attached hereto as Exhibit 2.5(a)(i) and such
other instruments of sale, transfer, conveyance and assignment as Buyer and its
counsel may request;
(ii) an executed and notarized Bill of Sale transferring such Seller's
right, title and interest in and to the Assets in the form attached hereto as
Exhibit 2.5(a)(ii) and such other instruments of sale, transfer, conveyance and
assignment as Buyer and its counsel may request;
(iii) an Agreement Not to Compete in the form of Exhibit 2.5(a)(iii) (each,
a "Noncompete Agreement");
(iv) an IRS Form W-9;
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(v) a certificate to the effect that representations and warranties of each
Seller and each Stockholder contained in this Agreement were accurate as of the
date of this Agreement and are accurate as of the Closing Date as if made on the
Closing Date;
(vi) a legal opinion of Byrne, Costello & Pickard, P.C., counsel to Sellers,
dated as of the Closing Date in the form of Exhibit 2.5(a)(v);
(vii) a payoff letter in form reasonably satisfactory to Buyer with respect
to any Assumed Liability which constitutes indebtedness for borrowed money or
outstanding letter of credit or similar obligation set forth in Section 3.8 of
the Seller Disclosure Schedule; and
(viii) the non-disturbance agreement(s) pursuant to Section 3.4(c), if any.
(b) Stockholder Deliveries. Each Stockholder shall deliver or cause to be
delivered to Buyer at and as of the Closing:
(i) with respect to David Fleming only, the Employment Agreement;
(ii) a Noncompete Agreement;
(iii) an IRS Form W-9;
(iv) a certificate to the effect that the representations and warranties of
each Seller and such Stockholder contained in this Agreement were accurate as of
the date of this Agreement and are accurate as of the Closing Date as if made on
the Closing Date; and
(v) a legal opinion of Byrne, Costello & Pickard, P.C., counsel to the
Stockholders, dated as of the Closing Date in the form of Exhibit 2.5(a)(v).
(c) Buyer's Deliveries. Buyer shall deliver or cause to be delivered to
Sellers at and as of the Closing:
(i) immediately available funds in an aggregate amount equal to the Cash
Consideration less the Cash Holdback by wire transfer to the bank account(s)
designated by Sellers;
(ii) subject to the exercise of Buyer's option set forth in the last
sentence of Section 2.3, the Share Consideration less the Shares Holdback,
registered in the Investor's name;
(iii) a counterpart signature page to the Employment Agreement;
(iv) a counterpart signature page to each Noncompete Agreement; and
(v) a certificate to the effect that the representations and warranties of
Buyer contained in this Agreement were accurate as of the date of this Agreement
and are accurate as of the Closing Date as if made on the Closing Date.
2.6 Allocation. The Parties agree to allocate the Purchase Consideration
(and all other capitalizable costs) among the Assets and the Noncompete
Agreements for all purposes (including financial accounting and Tax purposes) in
accordance with the allocation schedule attached hereto as Exhibit 2.6. The
Parties will file all Tax Returns in a manner consistent with such allocation.
The Cash Consideration and the Share Consideration shall be distributed among
the Sellers and the Stockholders as set forth on Exhibit 2.6. Execution of this
Agreement by the Sellers and the Stockholders represents their express agreement
to such allocation.
2.7 Deferred Revenue Adjustment.
(a) Calculation of Unearned Accounts Receivable. As soon as reasonably
practicable following December 31, 2001, Buyer shall cause to be prepared and
delivered to the Seller Representative financial statements with respect to the
Business (the "Year End Financial Statements") as of and for the period ended
December 31, 2001 and a calculation of Unearned Accounts Receivable as of
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December 31, 2001 ("Year End Unearned Accounts Receivable"). The Year End
Financial Statements shall (i) be prepared in accordance with GAAP, (ii) fairly
present the financial position of the Business as of and for the period ended
December 31, 2001 and (iii) reflect all adjustments required to be included on
financial statements under GAAP. The Sellers and the Stockholders shall provide
all assistance reasonably requested by Buyer in connection with the preparation
of the Year End Financial Statements and the calculation of Year End Unearned
Accounts Receivable, including, without limitation, access by Buyer and its
Representatives to their respective records to the extent reasonably related to
Buyer's preparation of the Year End Financial Statements.
(b) Resolution of Disputes as to Year End Unearned Accounts Receivable. Upon
delivery of the Year End Financial Statements and the related calculation of
Year End Unearned Accounts Receivable, Buyer will provide the Seller
Representative and his Representatives full access to Buyer's records to the
extent reasonably related to the Seller Representative's evaluation of the
calculation of Year End Unearned Accounts Receivable. If the Seller
Representative shall disagree with the calculation Year End Unearned Accounts
Receivable, he shall notify Buyer of such disagreement in writing, setting forth
in reasonable detail the particulars of such disagreement, within thirty
(30) days after his receipt of the calculation of Year End Unearned Accounts
Receivable. In the event that the Seller Representative does not provide such a
notice of disagreement within such thirty (30) day period, the Seller
Representative shall be deemed to have accepted the calculation of Year End
Unearned Accounts Receivable delivered by Buyer, which shall be final, binding
and conclusive on the Sellers for the purposes of determining the Adjustment
Amount. In the event any such notice of disagreement is timely provided, Buyer
and the Seller Representative shall use commercially reasonable efforts for a
period of thirty (30) days (or such longer period as they may mutually agree) to
resolve any disagreements with respect to the calculation of Year End Unearned
Accounts Receivable. If, at the end of such period, they are unable to resolve
such disagreements, then an independent accounting firm of recognized national
standing mutually selected by Buyer and the Seller Representative (the
"Auditor") shall resolve any remaining disagreements. The Auditor shall
determine as promptly as practicable whether the calculation of Year End
Unearned Accounts Receivable was made in accordance with the standards set forth
in Section 2.7(a) and (only with respect to the remaining disagreements
submitted to the Auditor) whether and to what extent (if any) Year End Unearned
Accounts Receivable requires adjustment. The Auditor shall promptly deliver to
Buyer and the Seller Representative its determination in writing, which
determination shall be made subject to the definitions and principles set forth
in this Agreement and shall be (i) consistent with either the position of the
Seller Representative or Buyer or (ii) between the positions of the Seller
Representative and Buyer. The fees and expenses of the Auditor shall be paid
one-half by Buyer and one-half by the Stockholders. The determination of the
Auditor shall be final, conclusive and binding on the parties. The date on which
Year End Unearned Accounts Receivable is finally determined in accordance with
this Section 2.7(b) is hereinafter referred as to the "Determination Date."
(c) The Sellers and the Stockholders, jointly and severally, covenant to
Buyer that Year End Unearned Accounts Receivable will be not less than
$26,681,000 (the "Low Estimate").
(d) If, but only if, (i) Year End Unearned Accounts Receivable is less than
the Low Estimate and/or (ii) the Seller Representative consents to an increase
in sales, general and administrative expenses proposed by Buyer pursuant to
Section 2.8(a), there shall be calculated the "Adjustment Amount" equal to the
Deferred Revenue Adjustment, if any, plus the Negative Spending Adjustment, if
any; provided, however, that the absolute value of the Adjustment Amount shall
not be greater than $2,500,000 (Two Million Five Hundred Thousand Dollars). The
"Deferred Revenue
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Adjustment," which may only be a negative amount, shall be equal to (x) $0.72
(Seventy-Two Cents) multiplied by (y) Year End Unearned Accounts Receivable
minus the Low Estimate.
In the event of such a negative Adjustment Amount, then upon final
determination of Year End Unearned Accounts Receivable in accordance with
Section 2.7(b), the Cash Holdback and the Shares Holdback otherwise payable or
issuable, as the case may be, by Buyer pursuant to Section 11 shall be reduced
on a pro rata basis by an aggregate amount equal to the absolute value of the
Adjustment Amount. In the event that the Holdback Amount has been reduced to
compensate any Buyer Indemnified Party for any Damages as a result of any
inaccuracy or breach of any representation, warranty, covenant or agreement of
any Seller or any Stockholder pursuant to the provisions of Section 11 such that
the Adjustment Amount exceeds the Holdback Amount, any such unpaid Adjustment
Amount shall be promptly remitted to Buyer by the Sellers and the Stockholders
in cash.
2.8 Operation of Assets; Negative Spending Adjustment.
(a) The Parties agree that, upon the occurrence of the Closing, (i) all
rights to operate and manage the Business shall immediately and fully vest with
Buyer, which shall be free to operate the Assets for the exclusive benefit of
Buyer in its sole and absolute discretion and (ii) any and all rights of each
Seller and each Stockholder to participate in the Business in any respect shall
terminate. The Parties further agree that the Low Estimate was established based
on the expense budget for the Business for 2001 prepared by the Sellers and
attached as Exhibit 2.8. In the event that Buyer concludes that this budget will
prove inadequate (x) to support the activities of the Business or (y) to achieve
the Low Estimate, Buyer will propose to the Seller Representative an increase in
sales, general and administrative expenditures and seek the consent of the
Seller Representative (which consent shall not be unreasonably withheld or
delayed) with respect to such proposal.
(b) In the event that the Seller Representative consents to an increase in
sales, general and administrative expenses proposed by Buyer pursuant to
Section 2.8(a), then sales, general and administrative expenditures shall be
increased by such amount. The "Negative Spending Adjustment," which may only be
a negative amount, shall mean (i) budgeted sales, general and administrative
expenses as set forth in Exhibit 2.8 minus (ii) actual sales, general and
administrative expenditures as proposed by Buyer and consented to by the Seller
Representative pursuant to this Section 2.8. In the event that the Seller
Representative does not consent to an increase in sales, general and
administrative expenses proposed by Buyer pursuant to Section 2.8(a), then the
Negative Spending Adjustment shall be zero.
3. Representations and Warranties of the Sellers and the Stockholders. As an
inducement of Buyer to enter into this Agreement, each Seller and each
Stockholder hereby makes, jointly and severally, as of the date hereof and as of
the Closing Date, the following representations and warranties to Buyer, except
as otherwise set forth in the Seller Disclosure Schedule; provided, however,
that the representations and warranties set forth in Sections 3.6, 3.14(a),
3.14(b) and 3.21(l) are made without regard to any disclosure made in the Seller
Disclosure Schedule. The sections of the Seller Disclosure Schedule are numbered
to correspond to the various subsections of this Section 3 setting forth certain
exceptions to the representations and warranties contained in this Section 3 and
certain other information called for by this Agreement. Unless otherwise
specified, no disclosure made in any particular section of the Seller Disclosure
Schedule shall be deemed made in any other section of the Seller Disclosure
Schedule unless expressly made therein (by cross-reference or otherwise) or the
Seller Disclosure Schedule otherwise expressly and completely discloses the
specific exception.
3.1 Organization and Good Standing.
(a) Each Seller is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, with full
corporate power and authority to conduct its
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business as presently conducted, to own or use the properties and assets that it
purports to own or use and to perform all its obligation under each Contract.
Each Seller is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification. Section 3.1(a) of the
Seller Disclosure Schedule contains a complete and accurate list of all states
or other jurisdictions in which any Seller is qualified to do business as a
foreign corporation.
(b) Each Seller has delivered to Buyer complete and correct copies of its
articles or certificate of incorporation, as the case may be, and its bylaws,
and any amendment thereto.
(c) No Seller has, nor has any Seller ever had, any Subsidiary.
(d) Other than capital stock owned by the Stockholders, no Seller has issued
and outstanding any shares of capital stock or any options, warrants,
convertible securities or rights of any kind to purchase or otherwise acquire
any shares of capital stock or other securities of any Seller.
3.2 Authorization. Each Seller has all necessary corporate or other power
and authority to enter into this Agreement and the Ancillary Agreements to which
it is a party and has taken all corporate or other action necessary to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. This Agreement has been duly executed and
delivered by each Seller, and this Agreement is, and upon execution and delivery
thereof each Ancillary Agreement will be, a valid and binding obligation of each
Seller, enforceable against each Seller in accordance with its terms, except
that enforceability may be limited by the effect of (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors or (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
3.3 Bank Accounts. Section 3.3 of the Seller Disclosure Schedule contains
a list of all bank accounts and safe deposit boxes of each Seller and the
persons authorized to draw thereon or having access thereto.
3.4 Real Property.
(a) General. Each Seller leases all real property necessary for the conduct
of the Business as presently conducted, and the Facilities are in such operating
condition and repair, subject to normal wear and tear, as is necessary for the
conduct of the Business in compliance with applicable legal requirements. There
is no deferred maintenance, nor any significant pending maintenance
requirements, with respect to any Facility. The Facilities are identified in
Section 3.4(a) of the Seller Disclosure Schedule.
(b) Owned Real Property. There are no Facilities owned by any Seller or to
be acquired by any Seller prior to the Closing Date.
(c) Leased Real Property. Section 3.4(c) of the Seller Disclosure Schedule
sets forth all Leases pursuant to which Facilities are leased by any Seller,
true and correct copies of which have been delivered to Buyer. Such Leases
constitute all Leases, subleases or other occupancy agreements pursuant to which
any Seller occupies or uses Facilities. Each Seller has good and valid leasehold
title to, and enjoys peaceful and undisturbed possession of, all leased property
described in such Leases (the "Leased Property"), free and clear of any and all
Encumbrances other than any Permitted Encumbrances which would not permit the
termination of the Lease therefor by the lessor or otherwise adversely affect
the rights of any Seller under any such Lease; provided, however, that the
foregoing shall not prohibit the existence of preexisting mortgages of the
Leased Property, to the extent that Buyer is the beneficiary of an enforceable,
written non-disturbance agreement executed by the mortgagor and the mortgagee of
such Leased Property, substantially in
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the form attached hereto as Exhibit 3.4(c). With respect to each such parcel of
Leased Property, (i) there are no pending or, to the knowledge of any Seller,
threatened, condemnation proceedings relating to, or any pending or, to the
knowledge of any Seller, threatened, Actions relating to, any Seller's leasehold
interests in such Leased Property or any portion thereof, (ii) no Seller nor, to
any Seller's knowledge, any third party has entered into any sublease, license,
option, right, concession or other agreement or arrangement, written or oral,
granting to any Person the right to use or occupy such Leased Property or any
portion thereof or interest therein, except in connection with a Permitted
Encumbrance, and (iii) no Seller has received notice of any pending or
threatened special assessment relating to such Leased Property or otherwise has
any knowledge of any pending or threatened special assessment relating thereto.
With respect to each Lease listed in Section 3.4(c) of the Seller Disclosure
Schedule, (i) there has been no Default under any such Lease by any Seller or,
to any Seller's knowledge, by any other Person, (ii) the execution, delivery and
performance of this Agreement and the Noncompete Agreements and the consummation
of the transactions contemplated hereby and thereby (including, without
limitation, assignment of the Lease to Buyer) will not cause (with or without
notice and with or without the passage of time) a Default under any such Lease,
(iii) to each Seller's knowledge, such Lease is a valid and binding obligation
of the lessor, is in full force and effect with respect to and is enforceable by
the applicable Seller in accordance with its terms, (iv) no action has been
taken by any Seller, and to each Seller's knowledge no event has occurred which,
with notice or lapse of time or both, would permit termination, modification or
acceleration by a party thereto other than any Seller without such Seller's
consent under any such Lease, (v) no Person has repudiated any term thereof or
threatened to any Seller to terminate, cancel or not renew any such Lease and
(vi) no Seller has assigned, transferred, conveyed, mortgaged or encumbered any
interest therein or in any Leased Property subject thereto (or any portion
thereof).
3.5 Personal Property.
(a) General. Each Seller owns or leases all personal property Assets
necessary for the conduct of the Business as presently conducted, and the
personal property Assets are in such operating condition and repair, subject to
normal wear and tear, as is necessary for the conduct of the Business in
compliance with applicable legal requirements. There is no deferred maintenance,
nor any significant pending maintenance requirements, with respect to any
personal property Assets. The personal property owned or leased by the Sellers
is located solely on the premises identified in Section 3.4(a) of the Seller
Disclosure Schedule.
(b) Owned Personal Property. Except as set forth in Section 3.5(b) of the
Seller Disclosure Schedule, each Seller has good and marketable title to all
such personal property Assets owned by it, free and clear of any and all
Encumbrances, except Permitted Encumbrances. With respect to each such item of
personal property Assets, (i) there are no Leases, subleases, licenses, options,
rights, concessions or other agreements, written or oral, granting to any party
or parties the right of use of any portion of such item of personal property,
(ii) there are no outstanding options or rights of first refusal in favor of any
other party to purchase any such item of personal property or any portion
thereof or interest therein and (iii) there are no parties (other than any
Seller) who are in possession of or who are using any such item of personal
property.
(c) Leased Personal Property. Section 3.5(c) of the Seller Disclosure
Schedule sets forth all Leases for personal property involving annual payments
in excess of $5,000, true and correct copies of which have been delivered or
made available to Buyer. Each Seller has good and valid leasehold title to all
Fixtures and Equipment, vehicles and other tangible personal property Assets
leased by it from third parties, free and clear of any and all Encumbrances
other than Permitted Encumbrances.
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With respect to each Lease listed in Section 3.5(c) of the Seller Disclosure
Schedule, (i) there has been no Default under such Lease by any Seller, or, to
any Seller's knowledge, by any other Person, (ii) the execution, delivery and
performance of this Agreement and the Noncompete Agreements and the consummation
of the transactions contemplated hereby and thereby will not cause (with or
without notice and with or without the passage of time) a Default under any such
Lease, (iii) to each Seller's knowledge, such Lease is a valid and binding
obligation of the lessor, is in full force and effect and is enforceable by the
applicable Seller in accordance with its terms, (iv) no action has been taken by
any Seller and, to each Seller's knowledge, no event has occurred which, with
notice or lapse of time or both, would permit termination, modification or
acceleration by a party thereto other than by such Seller without the applicable
Seller's consent under any such Lease, (v) no Person has repudiated any term
thereof or threatened to terminate, cancel or not renew any such Lease and
(vi) no Seller has assigned, transferred, conveyed, mortgaged or encumbered any
interest therein or in any leased personal property subject thereto (or any
portion thereof).
3.6 Environmental Matters. Notwithstanding any disclosure made in the
Seller Disclosure Schedule, each Seller is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable under,
any Environmental Law. Notwithstanding any disclosure made in the Seller
Disclosure Schedule, no Seller has any basis to expect, nor has any other Person
for whose conduct any Seller is or may be held to be responsible received, any
actual or threatened order, notice, or other communication from (i) any Person
or private citizen acting in the public interest or (ii) the current or prior
owner or operator of any Facility, of any actual or potential violation or
failure to comply with any Environmental Law, or of any actual or threatened
obligation to undertake or bear the cost of any Environmental, Health and Safety
Liability with respect to any of the Facilities or any other properties or
assets (whether real, personal or mixed) in which any Seller has had an
interest. Notwithstanding any disclosure made in the Seller Disclosure Schedule,
no underground tank or other underground storage receptacle for Hazardous
Substances is currently located on any Facility, and there have been no releases
of any Hazardous Substances from any such underground tank or related piping and
there have been no releases of Hazardous Substances in quantities exceeding the
reportable quantities as defined under federal or state law on, upon or into any
Facility other than those authorized by Environmental Laws. In addition and
notwithstanding any disclosure made in the Seller Disclosure Schedule, to the
knowledge of each Seller, there have been no such releases by predecessors of
any Seller and no releases in quantities exceeding the reportable quantities as
defined under federal or state law on, upon or into any real property in the
immediate vicinity of any of the Facilities other than those authorized by
Environmental Laws which, through soil or ground water contamination, may have
come to be located on the properties of any Seller. Notwithstanding any
disclosure made in the Seller Disclosure Schedule, no Seller is party, whether
as a direct signatory or as successor, assign or third-party beneficiary, or
otherwise bound, to any Lease or any Contract under which any Seller is
obligated by or entitled to the benefits of, directly or indirectly, any
representation, warranty, indemnification, covenant, restriction or other
undertaking concerning any Environmental Condition. Notwithstanding any
disclosure made in the Seller Disclosure Schedule, no Seller has released any
other Person from any claim under any Environmental Law or waived any rights
concerning any Environmental Condition.
3.7 Contracts.
(a) Disclosure. Section 3.7(a) of the Seller Disclosure Schedule sets forth
a complete and accurate list of all of the Contracts of the following
categories:
(i) Contracts not made in the ordinary course of business;
(ii) license agreements or royalty agreements involving any form of
Proprietary Rights, whether any Seller is the licensor or licensee thereunder
(excluding licenses that are commonly available on standard commercial terms,
such as software "shrink-wrap" licenses);
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(iii) confidentiality and non-disclosure agreements (whether any Seller is
the beneficiary or the obligated party thereunder);
(iv) Contracts or commitments involving future expenditures or Liabilities
in excess of $10,000 after the date hereof or otherwise material to the business
of any Seller or the Assets;
(v) Contracts or commitments relating to commission arrangements with others
that are material to the business of any Seller;
(vi) employment contracts, consulting contracts, severance agreements,
"stay-bonus" agreements and similar arrangements, including Contracts (A) to
employ or terminate executive officers or other personnel and other contracts
with present or former officers or directors of any Seller or (B) that will
result in the payment by, or the creation of any Liability of any Seller, the
Stockholders or Buyer to pay any severance, termination, "golden parachute," or
other similar payments to any present or former personnel following termination
of employment or otherwise as a result of the consummation of the transactions
contemplated by this Agreement;
(vii) indemnification agreements;
(viii) promissory notes, loans, agreements, indentures, evidences of
indebtedness, letters of credit, guarantees, or other instruments relating to an
obligation to pay money, whether any Seller shall be the borrower, lender or
guarantor thereunder (excluding credit provided by any Seller in the ordinary
course of business to buyers of its products and obligations to pay vendors in
the ordinary course of business consistent with past practice);
(ix) Contracts containing covenants limiting the freedom of any Seller, or
any officer, director, employee or affiliate of any Seller, to engage in any
line of business or compete with any Person that relates directly or indirectly
to the business of any Seller or Buyer's business;
(x) Any Contract with the federal, state or local government or any agency
or department thereof;
(xi) Any Contract or other arrangement with a Related Party;
(xii) Leases of real or personal property involving annual payments of more
than $10,000; and
(xiii) Any other Contract under which the consequences of a Default or
termination would reasonably be expected to have a Material Adverse Effect on
any Seller, individually or in the aggregate.
Complete and accurate copies of all of the Contracts listed in
Section 3.7(a) of the Seller Disclosure Schedule, including all amendments and
supplements thereto, have been made available to Buyer.
(b) Absence of Defaults. Except as set forth in Section 3.7(b) of the Seller
Disclosure Schedule, all of the Contracts are valid and binding obligations of
the applicable Seller and enforceable against such Seller and, to each Seller's
knowledge, the other parties thereto in accordance with their terms with no
existing or, to each Seller's knowledge, threatened Default or dispute by Seller
or, to each Seller's knowledge, any other party thereto. Each Seller has
fulfilled, or taken all action necessary to enable it to fulfill when due, all
of its material obligations under each of such Contracts. To each Seller's
knowledge, all parties to such Contracts have complied with the provisions
thereof, no party is in Default thereunder and no notice of any claim of Default
has been given to any Seller.
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(c) Product Warranty. No Seller has committed any act, and there has been no
omission, which may result in, and there has been no occurrence which may give
rise to, product liability or Liability for breach of warranty (whether covered
by insurance or not) on any Seller's part, with respect to products designed,
manufactured, assembled, marketed, rented, leased, sold, repaired, maintained,
delivered or installed or services rendered prior to or on the Closing Date
which could reasonably be expected to result in Liability to any Seller
exceeding $10,000 in the aggregate.
(d) Rental Contracts. All contracts pertaining to the rental or lease of
items of Inventory are valid, binding and enforceable against all parties
thereto.
3.8 No Conflict or Violation; Consents. None of the execution, delivery or
performance of this Agreement or any Ancillary Agreement, the consummation of
the transactions contemplated hereby or thereby, nor compliance by any Seller
with any of the provisions hereof or thereof, will (a) violate or conflict with
any provision of any Seller's governing documents, (b) violate, conflict with,
or result in a breach of or constitute a Default (with or without notice or the
passage of time) under, or result in the termination of, or accelerate the
performance required by, or result in a right to terminate, accelerate, modify
or cancel under, or require a notice under, or result in the creation of any
Encumbrance upon any of its respective assets under, any Contract, Lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, security interest or
other arrangement to which any Seller is a party or by which any Seller is bound
or to which the Assets or any portion thereof are subject, (c) violate any
applicable Regulation or Court Order or (d) impose any Encumbrance on any Assets
or the business of any Seller. Except as set forth in Section 3.8 of the Seller
Disclosure Schedule, no notices to, declaration, filing or registration with,
approvals or consents of, or assignments by, any Persons (including any federal,
state or local governmental or administrative authorities) are necessary to be
made or obtained by any Seller in connection with the execution, delivery or
performance of this Agreement or any Ancillary Agreement or the consummation of
the transactions contemplated hereby or thereby. As of the date hereof, the
Assumed Liabilities do not, and as of the Closing will not, include any
indebtedness for borrowed money (including, without limitation, any capital
Lease) or outstanding letter of credit or similar obligation except as set forth
in Section 3.8 of the Seller Disclosure Schedule (the "Funded Debt"). Except as
set forth in Section 3.8 of the Seller Disclosure Schedule, each such obligation
may be prepaid at any time upon tender of the outstanding principal amount and
accrued but unpaid interest without payment of any premium, pre-payment fee or
similar charge or expense.
3.9 Permits. Section 3.9 of the Seller Disclosure Schedule sets forth a
complete list of all Permits, all of which are as of the date hereof, and will
be as of the Closing Date, in full force and effect. Each Seller and its
predecessors have, and at all times have had, all Permits required under any
applicable Regulation in the operation of its business or in its ownership of
the Assets, and owns or possesses such Permits free and clear of all
Encumbrances other than Permitted Encumbrances. No Seller is in Default, nor, to
each Seller's knowledge, has any Seller received any notice of any claim of
Default, with respect to any such Permit. Except as otherwise governed by law,
all such Permits are renewable by their terms or in the ordinary course of
business without the need to comply with any special qualification procedures or
to pay any amounts other than routine filing fees and, except as set forth in
Section 3.9 of the Seller Disclosure Schedule, will not be adversely affected by
the completion of the transactions contemplated by this Agreement.
3.10 Financial Statements; Books and Records.
(a) General. The Financial Statements of each Seller are complete, are in
accordance with such Seller's Books and Records and fairly present the financial
condition, results of operations, cash flows and changes in stockholders' equity
of such Seller as of the dates and for the periods indicated thereby, in
accordance with GAAP consistently applied throughout the periods covered
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thereby (except as otherwise expressly indicated in the notes to the Financial
Statements and, in the case of interim financial statements, for the lack of
footnotes.
(b) Internal Controls. Each Seller maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed with management's authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in accordance with GAAP
and to maintain accountability for assets, (iii) access to assets is permitted
only in accordance with management's authorization and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(c) Books and Records. The Books and Records of each Seller, in reasonable
detail, accurately and fairly reflect the activities of such Seller and its
business and have been provided to Buyer for its inspection.
(d) All Accounts Recorded. No Seller has engaged in any transaction,
maintained any bank account or used any corporate funds except for transactions,
bank accounts or funds which have been and are reflected in the normally
maintained Books and Records.
(e) Corporate Records. Each Seller's stock records and minute books that
have been made available to Buyer fully reflect all minutes of meetings,
resolutions and other material actions and proceedings of its stockholders and
board of directors and all committees thereof, all issuances, transfers and
redemptions of capital stock of which such Seller is aware and contain true,
correct and complete copies of its articles, or certificate, as the case may be,
of incorporation and bylaws and all amendments thereto through the date hereof.
3.11 Absence of Certain Changes or Events. Except as set forth in
Section 3.11 of the Seller Disclosure Schedule, since December 31, 2000 there
has not been any:
(a) Material Adverse Change related to the business of any Seller or the
Assets;
(b) failure to operate the business of any Seller in the ordinary course
consistent with past practice so as to preserve such business intact and to
preserve the continued services of each Seller's employees and the goodwill of
suppliers, customers and others having business relations with any Seller or its
Representatives;
(c) resignation or termination of any Employee, or any increase in the rate
of compensation payable or to become payable to any Employee or Representative
of Seller, including the making of any loan to, or the payment, grant or accrual
of any bonus, incentive compensation, service award or other similar benefit to,
any such Person, or the addition to, modification of, or contribution to any
Employee Plan;
(d) any payment, loan or advance of any amount to or in respect of, or the
sale, transfer or lease of any properties or the Assets to, or entering into of
any contract with, any Related Party except regular compensation to Employees on
historical rates and terms (it being understood that all such payments to any
Stockholder or any Related Party are identified in Section 3.11(d) of the Seller
Disclosure Schedule);
(e) except in the ordinary course of business consistent with past practice,
sale, assignment, license, transfer or Encumbrance (other than Permitted
Encumbrances) of any of the Assets, tangible or intangible, singly or in the
aggregate;
(f) new Contracts, or extensions, modifications, terminations or renewals
thereof, except where entered into, modified or terminated in the ordinary
course of business consistent with past practice;
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(g) to each Seller's knowledge, actual or threatened termination of any
material customer account or group of accounts or actual or threatened material
reduction in purchases or royalties payable by any such customer or occurrence
of any event that is likely to result in any such termination or reduction;
(h) except in the ordinary course of business consistent with past practice,
disposition or lapsing of any of any Seller's Proprietary Rights, in whole or in
part;
(i) any disclosure of any trade secret, process or know-how to any Person
not an Employee or not otherwise subject to a non-disclosure agreement or
fiduciary obligation of confidentiality;
(j) change in accounting methods or practices by any Seller;
(k) revaluation by any Seller of any of the Assets or any portion thereof,
including writing off or establishing reserves with respect to inventory, notes
or accounts receivable;
(l) damage, destruction or loss (whether or not covered by insurance)
materially adversely affecting the Assets or the business or prospects of any
Seller;
(m) declaration, setting aside or payment of any dividend or distribution of
cash, property or otherwise in respect of any capital stock of any Seller or any
redemption, purchase or other acquisition of any equity securities of any
Seller;
(n) issuance or reservation for issuance by any Seller of, or commitment of
it to issue or reserve for issuance, any shares of capital stock or other equity
securities or obligations or securities convertible into or exchangeable for
shares of capital stock or other equity securities;
(o) increase, decrease or reclassification of the capital stock of any
Seller;
(p) amendment of the articles, or certificate, as the case may be, of
incorporation or bylaws of any Seller;
(q) capital expenditure or execution of any lease or any incurring of
Liability therefor by any Seller, involving payments or obligations in excess of
$20,000 in the aggregate;
(r) failure to pay any material obligation of any Seller when due or other
change in any Seller's practices regarding payment of operating expenses and
accounts payable;
(s) cancellation of any indebtedness or waiver of any rights of substantial
value to any Seller, except in the ordinary course of business consistent with
past practice;
(t) indebtedness incurred by any Seller for borrowed money or any
commitment to borrow money entered into by such Seller, or any loans made or
agreed to be made by any Seller;
(u) liability incurred by any Seller except in the ordinary course of
business consistent with past practice, or any increase or change in any
assumptions underlying or methods of calculating any bad debt, contingency or
other reserves;
(v) payment, discharge or satisfaction of any Liabilities of any Seller
other than the payment, discharge or satisfaction in the ordinary course of
business consistent with past practice of Liabilities reflected or reserved
against in the Financial Statements or incurred in the ordinary course of
business consistent with past practice since December 31, 2000;
(w) acquisition of any equity interest in any other Person; or
(x) agreement by any Seller directly or indirectly to do any of the
foregoing.
3.12 Liabilities. No Seller has any Liabilities or obligations (absolute,
accrued, contingent or otherwise) except (i) Liabilities which are reflected and
properly reserved against in the Financial Statements, (ii) Liabilities incurred
in the ordinary course of business consistent with past practice since
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the date of the Financial Statements and (iii) Liabilities arising under the
Contracts set forth in Section 3.7(a) of the Seller Disclosure Schedule or
otherwise expressly identified in Section 3.12 of the Seller Disclosure
Schedule. None of the Liabilities described in this Section 3.12 relates to any
breach of Contract, breach of warranty, tort, infringement or violation of law
or arose out of any Action (collectively, a "Breach").
3.13 Litigation. There is no Action pending or, to each Seller's
knowledge, threatened or anticipated (a) against, relating to or affecting any
Seller, any of the Assets or any of their respective Employees as such,
(b) which seeks to enjoin or obtain damages in respect of the transactions
contemplated hereby or (c) with respect to which there is a reasonable
likelihood of a determination which would prevent any Seller from consummating
the transactions contemplated hereby. None of the Actions, if adversely
determined against any Seller, its directors or officers, or any other Person
could reasonably be expected to result in a loss to such Seller, individually or
in the aggregate, in excess of $10,000. To each Seller's knowledge, there is no
basis for any Action, which if adversely determined against any Seller, its
directors or officers, or any other Person could reasonably be expected to
result in a loss to such Seller, individually or in the aggregate, in excess of
$10,000. There are presently no outstanding judgments, decrees or orders of any
court or any governmental or administrative agency against or affecting any
Seller or its business or any of the Assets. Section 3.13 of the Seller
Disclosure Schedule contains a complete and accurate description of all Actions
since any Seller's organization to which any Seller or any predecessor has been
a party or which relate to any of the Assets or Employees of any Seller, or any
such Actions which were settled prior to the institution of formal proceedings,
with the exception of Actions in which the sole involvement of the Sellers, or
any of them, is as plaintiff and in the ordinary course of business in which the
amount in controversy is less than or equal to $10,000 in the aggregate.
3.14 Labor Matters.
(a) General. No Seller is a party to any labor agreement with respect to its
Employees with any labor organization, group or association, and no Seller has
experienced any attempt by organized labor or its representatives to make such
Seller conform to demands of organized labor relating to its Employees or to
enter into a binding agreement with organized labor that would cover any of such
Seller's Employees. Notwithstanding any disclosure made in the Seller Disclosure
Schedule, there is no unfair labor practice charge or complaint against any
Seller pending before the National Labor Relations Board or any other
governmental agency arising out of any Seller's activities, and no Seller has
knowledge of any facts or information which would give rise thereto; there is no
labor strike or labor disturbance pending or threatened against any Seller nor
is any grievance currently being asserted against it; and no Seller has
experienced a work stoppage or other labor difficulty. Notwithstanding any
disclosure made in the Seller Disclosure Schedule, there are no material
controversies pending or, to each Seller's knowledge, threatened between any
Seller and any of its Employees, and no Seller is aware of any facts which could
reasonably result in any such controversy.
(b) Compliance. Notwithstanding any disclosure made in the Seller Disclosure
Schedule, each Seller is in compliance with all applicable Regulations
respecting employment practices, terms and conditions of employment, wages and
hours, equal employment opportunity, and the payment of social security and
similar Taxes and is not engaged in any unfair labor practice. Notwithstanding
any disclosure made in the Seller Disclosure Schedule, no Seller is liable for
any claims for past due wages or any penalties for failure to comply with any of
the foregoing.
(c) Severance Obligations. No Seller has entered into any severance,
"stay-bonus" or similar arrangement in respect of any present or former Employee
that will result in any obligation (absolute or contingent) of Buyer or any
Seller to make any payment to any present or former Employee following
termination of employment (voluntary or involuntary) or upon consummation
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of the transactions contemplated by this Agreement (whether or not employment is
continued for any specified period after the Closing Date). Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in the acceleration or vesting of
any other rights of any Person to benefits under any Employee Plan.
(d) Highly Compensated Employees. Attached hereto as Section 3.14(d) of the
Seller Disclosure Schedule is a list of the names of all present Employees with
total compensation exceeding $75,000 in the fiscal year ending December 31, 2000
and their current compensation payable by any Seller.
3.15 Employees' Proprietary Rights. No Seller is aware that any of its
Employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of such Employee's efforts to promote the interests of any Seller or
that would conflict with such Seller's business as conducted. Neither the
execution nor delivery of this Agreement and the Ancillary Agreements, nor the
carrying on of each Seller's business by such Seller's Employees, nor the
conduct of any Seller's business as conducted, will, to the best of each
Seller's knowledge, conflict with or result in a breach of the terms, conditions
or provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such Employees is now obligated. No Seller
believes it is or will be necessary to utilize any Proprietary Rights of any of
its Employees (or people it currently intends to hire) created prior to their
employment by such Seller.
3.16 Employee Benefit Plans. Section 3.16 of the Seller Disclosure
Schedule contains a complete list of Employee Plans. True and complete copies of
each of the following documents have been delivered by Sellers to Buyer:
(i) each Employee Plan (and, if applicable, related trust agreements, annuity
contracts or other funding instruments) and all amendments thereto, all summary
plan descriptions, summary of material modifications (as defined in ERISA) and
all written interpretations and descriptions thereof which any Seller generally
has distributed to participants therein, the number of and a general description
of the level of employees covered by each Benefit Arrangement and a complete
description of any Employee Plan which is not in writing, (ii) for the three
(3) most recent plan years, Annual Reports on Form 5500 Series required to be
filed with any governmental agency for each Welfare Plan, (iii) a description of
complete age, salary, service and related data as of the last day of the last
plan year for each Seller's employees and former employees, and (iv) a
description setting forth the amount of any liability of each Seller as of the
Closing Date for payments more than thirty (30) calendar days past due with
respect to any Welfare Plan.
(a) Pension Plans
(i) The funding method used in connection with each Pension Plan which is
subject to the minimum funding requirements of ERISA is acceptable and the
actuarial assumptions used in connection with funding each such plan are
reasonable. As of the last day of the last plan year of each Pension Plan and as
of the Closing Date, the "amount of unfunded benefit liabilities" as defined in
Section 4001(a)(18) of ERISA (but excluding from the definition of "current
value" of "assets" of such Pension Plan, accrued but unpaid contributions) did
not and will not exceed zero. No "accumulated funding deficiency" (for which an
excise tax is due or would be due in the absence of a waiver) as defined in
Section 412 of the Code or as defined in Section 302(a)(2) of ERISA, whichever
may apply, has been incurred with respect to any Pension Plan with respect to
any plan year, whether or not waived. No Seller nor any ERISA Affiliate has
failed to pay when due any "required installment," within the meaning of
Section 412(m) of the Code and Section 302(e) of ERISA, whichever may apply,
with respect to any Pension Plan. No Seller nor any ERISA Affiliate is subject
to any lien imposed under Section 412(n) of the Code or Section 302(f) of ERISA,
whichever may apply, with respect to
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any Pension Plan. No Seller nor any ERISA Affiliate has any liability for unpaid
contributions with respect to any Pension Plan.
(ii) No Seller nor any ERISA Affiliate is required to provide security to a
Pension Plan which covers or has covered employees or former employees of any
Seller or a Subsidiary under Section 401(a)(29) of the Code.
(iii) Each Pension Plan and each related trust agreement, annuity contract
or other funding instrument which covers or has covered employees or former
employees of any Seller or a Subsidiary (with respect to their relationship with
such entities) is qualified and tax-exempt under the provisions of Code Sections
401(a) (or 403(a), as appropriate) and 501(a) and has been so qualified during
the period from its adoption to date.
(iv) Each Pension Plan, each related trust agreement, annuity contract or
other funding instrument which covers or has covered employees or former
employees of any Seller or a Subsidiary (with respect to their relationship with
such entities) presently complies and has been maintained in compliance with its
terms and, both as to form and in operation, with the requirements prescribed by
any and all statutes, orders, rules and regulations which are applicable to such
plans, including but not limited to ERISA and the Code.
(v) Each Seller has paid all premiums (and interest charges and penalties
for late payment, if applicable) due the PBGC with respect to each Pension Plan
for each plan year thereof for which such premiums are required. No Seller nor
any ERISA Affiliate has engaged in, or is a successor or parent corporation to
an entity that has engaged in, a transaction described in Section 4069 of ERISA.
There has been no "reportable event" (as defined in Section 4043(b) of ERISA and
the PBGC regulations under such Section) with respect to any Pension Plan. No
filing has been made by any Seller or any ERISA Affiliate with the PBGC, and no
proceeding has been commenced by the PBGC, to terminate any Pension Plan. No
condition exists and no event has occurred that could constitute grounds for the
termination of any Pension Plan by the PBGC. No Seller nor any ERISA Affiliate
has, at any time, (A) ceased operations at a facility so as to become subject to
the provisions of Section 4068(e) of ERISA, (B) withdrawn as a substantial
employer so as to become subject to the provisions of Section 4063 of ERISA, or
(C) ceased making contributions on or before the Closing Date to any Pension
Plan subject to Section 4064(a) of ERISA to which any Seller or any ERISA
Affiliate made contributions during the five years prior to the Closing Date.
(b) Multiemployer Plans. No Seller nor any ERISA Affiliate has ever
maintained any Liability with respect to a Multiemployer Plan, and no Liability
will arise or be imposed on any Seller or any ERISA Affiliate under, or with
respect to, any Multiemployer Plan.
(c) Welfare Plans. Each Welfare Plan which covers or has covered employees
or former employees of any Seller (with respect to their relationship with such
Seller) currently complies in all material respects and has been maintained in
compliance in all material respects with its terms and, both as to form and
operation, with the requirements prescribed by any and all statutes, orders,
rules and regulations which are applicable to such Welfare Plan, including,
without limitation, ERISA and the Code. Except as required by Section 4980B of
the Code or Part 6 of Title 1, Subtitle B of ERISA, none of any Seller, any
ERISA Affiliate or any Welfare Plan has any present or future obligation to make
any payment to, or with respect to any present or former employee of any Seller
or any ERISA Affiliate pursuant to, any retiree medical benefit plan, or other
retiree Welfare Plan, and no condition exists which would prevent any Seller or
an ERISA Affiliate from amending or terminating any such benefit plan or such
Welfare Plan. Each Welfare Plan which covers or has covered employees or former
employees of any Seller (with respect to their relationship with Seller) and
which is a "group health plan," as defined in Section 607(1) of ERISA, presently
complies in all material respects with and has been operated in compliance in
all
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material respects with provisions of Part 6 of Title I, Subtitle B of ERISA and
Sections 162(k) and 4980B of the Code at all times. No Seller nor any ERISA
Affiliate has, at any time, maintained, contributed to or had any obligation to
maintain or contribute to any Welfare Plan that is a "multiemployer plan," as
defined in Section 3(37) of ERISA. The insurance policies or other funding
instruments, if any, for each Welfare Plan provide coverage for each employee,
consultant, independent contractor or retiree of each Seller or any of its
Subsidiaries (and, if applicable, their respective dependents) who has been
advised by any Seller, whether through an Employee Plan or otherwise, that he or
she is covered by such Welfare Plan.
(d) Benefit Arrangements. Each Benefit Arrangement presently complies and
has been maintained in compliance in all material respects with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such Benefit Arrangement, including, without
limitation, the Code. Except as provided by law or in any employment agreement
set forth in Section 3.16(d) of the Seller Disclosure Schedule, the employment
of all persons presently employed or retained by each Seller is terminable at
will without prior notice.
(e) Deductibility of Payments. There is no contract, agreement, plan or
arrangement covering any employee or former employee of any Seller (with respect
to such employee's relationship with such Seller) that, individually or
collectively, requires the payment by any Seller of any amount (i) that is not
deductible under Section 162(a)(1) or 404 of the Code or (ii) that is an "excess
parachute payment" pursuant to Section 280G of the Code.
(f) Fiduciary Duties and Prohibited Transactions. No Seller nor any plan
fiduciary of any Welfare Plan or Pension Plan which covers or has covered
employees or former employees of any Seller or any ERISA Affiliate has engaged
in, or has any liability in respect of, any transaction in violation of Sections
404 or 406 of ERISA or any "prohibited transaction," as defined in
Section 4975(c)(1) of the Code, for which no exemption exists under Section 408
of ERISA or Section 4975(c)(2) or (d) of the Code, or has otherwise violated the
provisions of Part 4 of Title I, Subtitle B of ERISA so as to create any
liability of any Seller or any of its Subsidiaries or any Employee Plan. No
Seller has participated in a violation of Part 4 of Title I, Subtitle B of ERISA
by any plan fiduciary of any Welfare Plan so as to create any material liability
of any Seller, and no Seller nor its Subsidiaries have been assessed any civil
penalty under Section 502(l) of ERISA.
(g) Litigation. There is no action, order, writ, injunction, judgment or
decree outstanding or claim (other than routine claims for benefits), suit,
litigation, proceeding, arbitration proceeding, governmental audit or
investigation relating to or seeking benefits under any Employee Plan that is
pending or, to the knowledge of each Seller, anticipated or threatened against
any Seller, any ERISA Affiliate or any Employee Plan.
(h) No Amendments. No Seller nor any ERISA Affiliate has announced to
employees, former employees, consultants or directors an intention to create, or
otherwise created, a legally binding commitment to adopt any additional Employee
Plan which is intended to cover employees or former employees of any Seller
(with respect to their relationship with such Seller) or to amend or modify any
existing Employee Plan which covers or has covered employees or former employees
of any Seller or any of its Subsidiaries (with respect to their relationship
with such Seller or any of its Subsidiaries).
(i) No Acceleration or Creation of Rights. Except as set forth in
Section 3.16(i) of the Seller Disclosure Schedule, neither the execution and
delivery of this Agreement or the Ancillary Agreements by any Seller nor the
consummation of the transactions contemplated hereby or the related transactions
will result in the acceleration or creation of any rights of any person to
benefits under any Employee Plan (including, without limitation, the
acceleration of the vesting or exercisability of any stock options, the
acceleration of the vesting of any restricted stock or the
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acceleration or creation of any rights under any severance, parachute or change
in control agreement).
(j) Full Funding. All payments or contributions due with respect to any
Employee Plan have been timely made or deposited, as applicable and no Seller
nor any ERISA Affiliate has any Liability for any unpaid or untimely
contributions with respect to any Employee Plan.
(k) No Other Material Liability. No event has occurred in connection with
which any Seller, any ERISA Affiliate or any Employee Plan, directly or
indirectly, could be subject to any material Liability (A) under any statute,
regulation or governmental order relating to any Employee Plan or (B) pursuant
to any obligation of any Seller to indemnify any person against Liability
incurred under any such statute, regulation or order as they relate to the
Employee Plans.
3.17 Transactions with Related Parties. Except for (x) employment
agreements and other compensation arrangements disclosed in Section 3.17 of the
Seller Disclosure Schedule and (y) their respective equity interests in any
Seller, no Related Party has (a) borrowed or loaned money or other property to
any Seller which has not been repaid or returned, (b) any contractual
relationship or other claims, express or implied, of any kind whatsoever against
any Seller or (c) any interest in any property (including, without limitation,
any Proprietary Rights) used by any Seller.
3.18 Compliance with Law. Each Seller and its predecessors have conducted
the business of such Seller in compliance with all applicable Regulations and
Court Orders. No Seller has received any notice to the effect that, or has
otherwise been advised that, such Seller or any predecessor is not in compliance
with any such Regulations or Court Orders, and no Seller nor any predecessor has
any reason to anticipate that any existing circumstances are likely to result in
a violation of any of the foregoing.
3.19 Intellectual Property.
(a) General. Section 3.19(a) of the Seller Disclosure Schedule sets forth
with respect to each Seller's Proprietary Rights: (i) for each invention
material to the business of each Seller, whether or not patented, the date of
conception and reduction to practice, names of inventors, priority date of
patent applications (if any), and issue dates of any issued patents, (ii) for
each trademark, tradename or service mark, whether or not registered, the date
first used, the application serial number or registration number, the class of
goods covered, the nature of the goods or services, the countries in which the
names or mark is used and the expiration date for each country in which a
trademark has been registered, (iii) for each copyrighted work, whether or not
registered, the date of creation and first publication of the work, the number
and date of registration for each country in which a copyright application has
been registered, (iv) for each mask work (if any), whether or not registered,
the date of first commercial exploitation and if registered, the registration
number and date of registration, (v) a description of all Trade secrets that are
material to the business of each Seller, (vi) all such Proprietary Rights in the
form of licenses, and (vii) for any URL or domain name, the registration date,
any renewal date and name of registry. True and correct copies of all
Proprietary Rights (including all pending applications, application related
documents and materials and written materials relating to Trade secrets) owned,
controlled or used by or on behalf of any Seller or in which any Seller has any
interest whatsoever have been provided or made available to Buyer.
(b) Adequacy. Each Seller's Proprietary Rights are all those necessary for
the normal conduct of the Business as presently conducted including the
procurement, distribution, rental, lease and sale of all products and services
currently under development, planned for development or in practice.
(c) Royalties and Licenses. Except as set forth in Section 3.19(c) of the
Seller Disclosure Schedule, no Seller has any obligation to compensate any
Person for the use of any of its
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Proprietary Rights nor has any Seller granted to any Person any license, option
or other rights to use in any manner any of its Proprietary Rights, whether
requiring the payment of royalties or not.
(d) Ownership. Each Seller owns or has a valid right to use its Proprietary
Rights, and such Proprietary Rights will not cease to be valid rights of such
Seller by reason of the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby.
(e) Absence of Claims. No Seller has received (i) any notice alleging, or
otherwise has knowledge of facts that might give rise to, invalidity with
respect to any of such Seller's Proprietary Rights or (ii) any notice of alleged
infringement of any rights of others due to any activity by such Seller. Each
Seller's use of its Proprietary Rights in its past and current products does not
and would not infringe upon or otherwise violate the valid rights of any third
party anywhere in the United States. No other Person has notified any Seller
that it is claiming any ownership of or right to use any Proprietary Rights of
any Seller, or, to each Seller's knowledge, is infringing upon any such
Proprietary Rights in any way.
(f) Protection of Proprietary Rights. All of the pending applications for
each Seller's Proprietary Rights have been duly filed and, to each Seller's
knowledge, all other actions to protect such Proprietary Rights have been taken.
Each Seller has taken reasonable steps necessary or appropriate (including,
entering into appropriate confidentiality and nondisclosure agreements with
officers, directors, subcontractors, consultants, Employees, licensees and
customers in connection with the Assets) to safeguard and maintain the secrecy
and confidentiality of, and the proprietary rights in, the Proprietary Rights
that are material to each Seller's business. No Seller has knowledge of any
breach of any such confidentiality or nondisclosure agreement by any party
thereto.
3.20 Assets Necessary to Continue to Conduct Business. The Assets
constitute all of the assets, properties and rights used in, necessary or useful
in connection with the conduct of the Business, and upon consummation of the
transactions contemplated by this Agreement Buyer will obtain the resources
necessary to conduct the Business as previously conducted by Sellers. The
Business is conducted solely through the Sellers. No interest in any asset,
property or right used in, necessary or useful in connection with the conduct of
the Business is held, directly or indirectly, by any Person other than the
Sellers. None of the Assets constitute securities, including, without
limitation, any capital stock of any Subsidiary of any Seller.
3.21 Tax Matters.
(a) Filing of Tax Returns. Each Seller has duly and timely filed with the
appropriate taxing authorities all Tax Returns required to be filed through the
date hereof. All such Tax Returns filed are complete and accurate in all
respects. All Taxes owed by any Seller (whether or not shown on any Tax Return)
have been paid. Except as set forth in Section 3.21(a) of the Seller Disclosure
Schedule, no Seller is currently the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where any Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
(b) Payment of Taxes. Each Seller's unpaid Taxes (i) did not, as of the date
of the Financial Statements, exceed the reserve for Tax Liability (excluding any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the balance sheets contained in
such Seller's Financial Statements (or in any notes thereto), and (ii) will not
exceed that reserve as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of such Seller in
filing its Tax Returns. The consummation by Buyer of the transactions
contemplated by this Agreement will not result in the
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imposition of any Tax on Buyer or any Assets except as set forth in
Section 3.21(b) of the Seller Disclosure Schedule.
(c) Audits, Investigations or Claims. No deficiencies for Taxes have been
claimed, proposed or assessed by any taxing or other governmental authority
against any Seller. There are no pending or, to each Seller's knowledge,
threatened audits, investigations, disputes or claims or other Actions for or
relating to any Liability for Taxes with respect to any Seller, and there are no
matters under discussion by any Seller with any governmental authorities, or
known to any Seller, with respect to Taxes that are reasonably likely to result
in an additional Liability for Taxes with respect to any Seller. Audits of
federal, state and local Tax Returns by the relevant taxing authorities have
been completed for the periods set forth in Section 3.21(c) of the Seller
Disclosure Schedule and, except as set forth in the Seller Disclosure Schedule,
no Seller nor any predecessor has been notified that any taxing authority
intends to audit a Tax Return for any other period. Each Seller has delivered to
Buyer complete and accurate copies of federal, state and local Tax Returns of
such Seller and its predecessors for all tax years since such Seller's
inception, and complete and accurate copies of all examination reports and
statements of deficiencies assessed against or agreed to by Seller since its
inception. Except as set forth in Section 3.21(c) of the Seller Disclosure
Schedule, no Seller has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.
(d) Lien. There are no Encumbrances for Taxes (other than for current Taxes
not yet due and payable) on any of the Assets or any shares of any Seller's
capital stock.
(e) Tax Elections. All elections with respect to Taxes affecting any Seller,
or the Assets, as of the date hereof are set forth in Section 3.21(e) of the
Seller Disclosure Schedule. No Seller has: (i) consented at any time under
Section 341(f)(1) of the Code to have the provisions of Section 341(f)(2) of the
Code apply to any disposition of any Assets; (ii) agreed, or is required, to
make any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise; (iii) made an election, or is required, to treat
any Asset as owned by another Person pursuant to the provisions of
Section 168(f) of the Code or as tax-exempt bond financed property or tax-exempt
use property within the meaning of Section 168 of the Code; (iv) acquired and
does not own any assets that directly or indirectly secure any debt the interest
on which is tax exempt under Section 103(a) of the Code; (v) made and will not
make a consent dividend election under Section 565 of the Code; (vi) elected at
any time to be treated as an S corporation within the meaning of Sections 1361
and 1362 of the Code; or (vii) made any of the foregoing elections or is
required to apply any of the foregoing rules under any comparable state or local
Tax provision.
(f) Prior Affiliated Groups. No Seller is nor has any Seller ever been a
member of an affiliated group of corporations within the meaning of Section 1504
of the Code or any group that has filed a combined, consolidated or unitary Tax
Return. No Seller has Liability for the Taxes of any Person (other than such
Seller) (i) under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local or foreign law), (ii) as a transferee or successor,
(iii) by contract or (iv) otherwise.
(g) Tax Sharing Agreements. There are no Tax-sharing agreements or similar
arrangements (including indemnity arrangements) with respect to or involving any
Seller, the Assets or the business of any Seller and, after the Closing Date,
none of any Seller, the Assets or the business of any Seller shall be bound by
any such Tax-sharing agreements or similar arrangements or have any Liability
thereunder for amounts due in respect of periods prior to the Closing Date.
(h) Partnerships and Single Member LLC's. No Seller (i) is subject to any
joint venture, partnership, or other arrangement or contract which is treated as
a partnership for Tax purposes, (ii) owns a single member limited liability
company which is treated as a disregarded entity, (iii) is
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a shareholder of a "controlled foreign corporation" as defined in Section 957 of
the Code (or any similar provision of state, local or foreign law) or (iv) is a
"personal holding company" as defined in Section 542 of the Code (or any similar
provision of state, local or foreign law).
(i) No Withholding. No Seller has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897 of the Code, and none of any
Seller's stockholders is a "foreign person" as defined in Section 1445(f)(3) of
the Code. Each Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any Employee,
Representative, independent contractor, creditor, stockholder or other third
party. The transactions contemplated herein are not subject to the Tax
withholding provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code or of any other provision of law.
(j) International Boycott. No Seller has ever participated in nor is any
Seller participating in an international boycott within the meaning of
Section 999 of the Code.
(k) Permanent Establishment. No Seller has nor has any Seller ever had a
permanent establishment in any foreign country, as defined in any applicable Tax
treaty or convention between the United States of America and such foreign
country.
(l) Florida Sales Tax Audit. Notwithstanding any disclosure made in the
Seller Disclosure Schedule, the audit being conducted by the State of Florida
with respect to the sales tax of American Music, Inc. from March 1994 through
February 1999 will not result in Liability to Buyer in excess of $5,000 (Five
Thousand Dollars).
3.22 Insurance. Section 3.22 of the Seller Disclosure Schedule contains a
complete and accurate list of all policies or binders of insurance (showing as
to each policy or binder the carrier, policy number, coverage limits, expiration
dates, annual premiums, a general description of the type of coverage provided
and any pending claims thereunder) of which any Seller is the owner, insured or
beneficiary. All of such policies are sufficient for (i) compliance with all
Regulations and all of the Contracts, (ii) covering all reasonably foreseeable
damage to and liabilities or contingencies relating to the applicable Seller's
conduct of its business and (iii) providing replacement cost insurance coverage
for all of the Assets, Fixtures and Equipment and all leasehold improvements. No
Seller is in Default under any of such policies or binders, nor failed to give
any notice or to present any material claim under any such policy or binder in a
due and timely fashion. There are no facts known to any Seller upon which an
insurer might be justified in reducing or denying coverage or increasing
premiums on existing policies or binders. There are no outstanding unpaid claims
under any such policies or binders. Such policies and binders are in full force
and effect on the date hereof and shall be kept in full force and effect by each
Seller through the Closing Date.
3.23 Accounts Receivable. The accounts and notes receivable reflected in
the Financial Statements, and all accounts or notes receivable arising since the
date thereof, represent bona fide claims against debtors for sales, services
performed or other charges arising on or before the date of recording thereof,
and all the goods delivered and services performed which gave rise to said
accounts were delivered or performed in accordance with the applicable orders,
Contracts or customer requirements.
3.24 Inventory. The value at which the Inventory is shown on the Financial
Statements has been determined in accordance with the normal valuation policy of
the Sellers, consistently applied and in accordance with GAAP. The Inventory and
the specific items acquired or manufactured subsequent to the date of the
Financial Statements consists only of items of quality and quantity commercially
usable and saleable in the ordinary course of business, except for any items of
obsolete material or material below standard quality, all of which have been
written down to net realizable market value, or for which adequate reserves have
been provided in the Financial Statements, and the present quantity of
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all Inventory is reasonable in the present circumstances of the Business.
Section 3.24 of the Seller Disclosure Schedule contains a complete and accurate
list of all Inventory as of the date of the Financial Statements and the
addresses at which such Inventory is located.
3.25 Purchase Commitments and Outstanding Bids. As of the date of this
Agreement, the aggregate of all Contracts for the purchase of products or
services by all Sellers, other than in the ordinary course of business, does not
exceed $20,000. No outstanding purchase or outstanding lease commitment of any
Seller presently is in excess of the normal, ordinary and usual requirements of
the business of such Seller or was made at any price in excess of the now
current market price or contains terms and conditions more onerous than those
usual and customary in such Seller's business. There are outstanding no pending
obligations to lease real property other than to those identified in
Section 3.4(c) of the Seller Disclosure Schedule.
3.26 Customers and Suppliers.
(a) Customers. Section 3.26(a) of the Seller Disclosure Schedule sets forth
a complete and accurate list of the names and addresses of the ten
(10) customers with the greatest dollar volume of purchases from Sellers during
the last fiscal year and during the last fiscal quarter, showing the approximate
total purchases in dollars from each Seller from each such customer during such
fiscal year. Since December 31, 2000, there has been no adverse change in the
business relationship of any Seller with any customer named in Section 3.26(a)
of the Seller Disclosure Schedule. No Seller has received any written
communication from any customer named in Section 3.26(a) of the Seller
Disclosure Schedule of any intention to return, terminate or materially reduce
purchases from or supplies to any Seller.
(b) Suppliers. Section 3.26(b) of the Seller Disclosure Schedule sets forth
a complete and accurate list of the names and addresses of the ten
(10) suppliers with the greatest dollar volume of sales to Sellers during the
last fiscal year and during the last fiscal quarter, showing the approximate
total purchases in dollars by each Seller from each such supplier during such
fiscal year. Since December 31, 2000, there has been no adverse change in the
business relationship of any Seller with any supplier named in Section 3.26(b)
of the Seller Disclosure Schedule. No Seller has received any written
communication from any supplier named in Section 3.26(b) of the Seller
Disclosure Schedule of any intention to return, terminate or materially reduce
purchases from or supplies to any Seller.
3.27 Brokers; Transactions Costs. No Seller has entered into or will enter
into any contract, agreement, arrangement or understanding with any Person which
has or will result in the obligation of Buyer or any Seller to pay any finder's
fee, brokerage commission, legal, accounting or similar payment in connection
with the transactions contemplated hereby.
3.28 No Other Agreements to Sell the Assets. No Seller nor any Stockholder
has any legal obligation, absolute or contingent, to any other Person to sell
the Assets or any portion thereof or to sell any capital stock of any Seller or
to effect any merger, consolidation or other reorganization of any Seller or to
enter into any agreement with respect thereto, except pursuant to this
Agreement.
3.29 Foreign Corrupt Practices Act. No Seller nor any predecessor, nor to
each Seller's knowledge, any agent, employee or other Person associated with or
acting on behalf of any Seller or any predecessor has, directly or indirectly,
used any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, made any unlawful
payment to foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns from corporate funds, violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or made any
bribe, rebate, payoff, influence payment, kickback or other similar unlawful
payment.
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3.30 Financial Projections; Operating Plan. Each Seller has made available
to Buyer certain financial projections with respect to the such Seller's
business which projections were prepared for internal use only. No Seller makes
any representation or warranty regarding the accuracy of such projections or as
to whether such projections will be achieved, except that each Seller represents
and warrants that such projections were prepared in good faith, represent
management's present operating plan and are based on assumptions believed by it
to be reasonable as of the date of this Agreement.
3.31 Approvals. Section 3.31 of the Seller Disclosure Schedule contains a
list of all material approvals or consents relating to the Business conducted by
each Seller which are required to be given to or obtained by any Seller from any
Person in connection with the consummation of the transactions contemplated by
this Agreement.
3.32 Material Misstatements or Omissions. No representations or warranties
by any Seller in this Agreement or in any document, written information,
exhibit, statement, certificate or schedule heretofore or hereinafter furnished
by any Seller or any of its Representatives to Buyer or any of its
Representatives pursuant hereto, or in connection with the transactions
contemplated by this Agreement contains or will contain any untrue statement of
a material fact, or omits or will omit to state any material fact necessary to
make the statements or facts contained therein not misleading.
4. Additional Representations and Warranties of the Stockholders. As an
inducement of Buyer to enter into this Agreement and in addition to the
representations and warranties of the Stockholders set forth in Section 3 above,
each Stockholder hereby makes, severally and not jointly, as of the date hereof
and as of the Closing Date, the following representations and warranties to
Buyer, except as otherwise set forth in the Stockholder Disclosure Schedule,
provided that the representations and warranties made in Section 4.4 shall be
deemed made solely by the Investor. The sections of the Stockholder Disclosure
Schedule are numbered to correspond to the various subsections of this Section 4
setting forth certain exceptions to the representations and warranties contained
in this Section 4 and certain other information called for by this Agreement.
Unless otherwise specified, no disclosure made in any particular section of the
Stockholder Disclosure Schedule shall be deemed made in any other section of the
Stockholder Disclosure Schedule unless expressly made therein (by
cross-reference or otherwise) or the Stockholder Disclosure Schedule otherwise
expressly and completely discloses the specific exception.
4.1 Authorization. Such Stockholder has all necessary power and authority
to enter into this Agreement and the Ancillary Agreements to which it is a party
and has taken all action necessary to consummate the transactions contemplated
hereby and thereby and to perform its obligations hereunder and thereunder. This
Agreement has been duly executed and delivered by such Stockholder, and this
Agreement is, and upon the execution and delivery thereof each Ancillary
Agreement will be, a valid and binding obligation of such Stockholder,
enforceable against such Stockholder in accordance with its terms, except that
enforceability may be limited by the effect of (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors or (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
4.2 No Conflict or Violation; Consents. None of the execution, delivery or
performance of this Agreement or any Ancillary Agreement to which such
Stockholder is a party, the consummation of the transactions contemplated hereby
or thereby, nor compliance by such Stockholder with any of the provisions hereof
or thereof, will violate, conflict with, or result in a breach of or constitute
a Default (with or without notice or the passage of time) under, or result in
the termination of, or accelerate the performance required by, or result in a
right to terminate, accelerate, modify or cancel under, or require a notice
under, or result in the creation of any Encumbrance upon any of its respective
assets under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to
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which such Stockholder is a party or by which such Stockholder is bound or to
which any of its assets are subject. Except as set forth in Section 4.2 of the
Stockholder Disclosure Schedule, no notices to, declaration, filing or
registration with, approvals or consents of, or assignments by, any Persons
(including any federal, state or local governmental or administrative
authorities) are necessary to be made or obtained by such Stockholder in
connection with the execution, delivery or performance of this Agreement or any
Ancillary Agreement to which such Stockholder is a party or the consummation of
the transactions contemplated hereby or thereby.
4.3 Brokers; Transaction Costs. No Stockholder has entered into nor will
any Stockholder enter into any contract, agreement, arrangement or understanding
with any Person which has or will result in the obligation of Buyer or any
Seller to pay any finder's fee, brokerage commission, legal, accounting, or
similar payment in connection with the transactions contemplated hereby.
4.4 Securities Laws Representations.
(a) The Share Consideration to be issued pursuant to this Agreement will be
distributed by Sellers solely to David Fleming (the "Investor"), and no other
Person (including, without limitation, any Seller or other Stockholder) will
have any record or beneficial interest therein. The Investor (i) is an
"accredited investor" as such term is defined in Rule 501(a) promulgated under
the Securities Act; (ii) is receiving the shares of Parent Common Stock acquired
by him for investment for his own account and not with a view to, or for resale
in connection with, the distribution or other disposition thereof; (iii) has
been given the opportunity to obtain any information or documents relating to,
and to ask questions and receive answers about, Parent and the business and
prospects of Parent which he deems necessary to evaluate the merits and risks
related to his investment in such shares and to verify the information received,
and the Investor's knowledge and experience in financial and business matters
are such that he is capable of evaluating the merits and risks of his receipt of
such shares. Without limiting the generality of the foregoing, the Investor
acknowledges that he has received and reviewed copies of (i) Parent's Annual
Report on Form 10-K for the years ended December 31, 1999 and 2000,
(ii) Parent's Proxy Statement on Schedule 14A for the Annual Meeting of
Stockholders held on May 2, 2000, (iii) Parent's Quarterly Reports on Form 10-Q
for the quarters ending March 31, 2000, June 30, 2000 and September 20, 2000 and
(iv) Parent's Report on Form 8-K dated February 14, 2001.
(b) The Investor's financial condition is such that he can afford to bear
the economic risk of holding the shares of Parent Common Stock acquired by him
for an indefinite period of time and has adequate means for providing for the
Investor's current needs and contingencies and to suffer a complete loss of his
investment in such shares of Parent Common Stock.
(c) All information that the Investor has provided to Parent or Buyer
concerning himself, his jurisdiction of domicile and his financial position is
correct and complete.
(d) The Investor has been advised that (i) the issuance of shares of Parent
Common Stock to the Investor will not have been registered under the Securities
Act, (ii) such shares may need to be held indefinitely, and the Investor must
continue to bear the economic risk of the investment in such shares unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available, (iii) there may not be a public market for such
shares, (iv) when and if such shares may be disposed of without registration in
reliance on Rule 144 promulgated under the Securities Act, such disposition can
be made only in limited amounts in accordance with the terms and conditions of
such Rule unless the requirements of Rule 144(k) are satisfied, (v) if the
Rule 144 exemption is not available, public sale without registration will
require compliance with
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an exemption under the Securities Act and (vi) a restrictive legend in the
following form shall be placed on the certificates representing such shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR QUALIFIED UNDER
ANY APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS"), HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
QUALIFICATION UNDER THE STATE ACTS OR EXEMPTIONS FROM SUCH REGISTRATION OR
QUALIFICATION REQUIREMENTS (INCLUDING, IN THE CASE OF THE SECURITIES ACT, THE
EXEMPTION AFFORDED BY RULE 144). UNLESS WAIVED BY GUITAR CENTER, INC., GUITAR
CENTER, INC. SHALL BE FURNISHED WITH AN OPINION OF COUNSEL IN FORM SATISFACTORY
TO IT OPINING AS TO THE AVAILABILITY OF EXEMPTIONS FROM SUCH REGISTRATION AND
QUALIFICATION AS A PRECONDITION TO ANY SUCH TRANSFER.
4.5 Material Misstatements or Omissions. No representations or warranties
by such Stockholder in this Agreement or in any document, written information,
exhibit, statement, certificate or schedule heretofore or hereinafter furnished
by such Stockholder or any of its Representatives to Buyer or any of its
Representatives pursuant hereto, or in connection with the transactions
contemplated by this Agreement contains or will contain any untrue statement of
a material fact, or omits or will omit to state any material fact necessary to
make the statements or facts contained therein not misleading.
5. Buyer's Representations and Warranties. As an inducement of each Seller and
each Stockholder to enter into this Agreement, Buyer hereby makes, as of the
date hereof and as of the Closing Date, the following representations and
warranties to each Seller and to each Stockholder, except as otherwise set forth
in the Buyer Disclosure Schedule, provided that the representations and
warranties contained in Section 5.5 and Section 5.6 shall be made solely to the
Investor. The sections of the Buyer Disclosure Schedule are numbered to
correspond to the various subsections of this Section 5 setting forth certain
exceptions to the representations and warranties contained in this Section 5 and
certain other information called for by this Agreement. Unless otherwise
specified, no disclosure made in any particular section of the Buyer Disclosure
Schedule shall be deemed made in any other section of the Buyer Disclosure
Schedule unless expressly made therein (by cross-reference or otherwise) or the
Buyer Disclosure Schedule otherwise expressly and completely discloses the
specific exception
5.1 Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with full
corporate power and authority to conduct its business as presently being
conducted.
5.2 Authorization. Buyer has all necessary corporate power and authority
to enter into this Agreement and the Ancillary Agreements and has taken all
corporate action necessary to consummate the transactions contemplated hereby
and thereby and to perform its obligations hereunder and thereunder. This
Agreement has been duly executed and delivered by Buyer, and this Agreement is,
and upon execution and delivery thereof each Ancillary Agreement will be, a
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms, except that enforceability may be limited by the effect of
(a) bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors or (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
5.3 No Conflict or Violation; Consents. Except as set forth in Section 5.3
of the Buyer Disclosure Schedule, none of the execution, delivery or performance
of this Agreement or any Ancillary Agreement, the consummation of the
transactions contemplated hereby or thereby, nor compliance by
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Buyer with any of the provisions hereof or thereof, will (a) violate or conflict
with any provision of Buyer's governing documents, (b) violate, conflict with,
or result in a breach of or constitute a Default (with or without notice or the
passage of time) under, or result in the termination of, or accelerate the
performance required by, or result in a right to terminate, accelerate, modify
or cancel under, or require a notice under, or result in the creation of any
Encumbrance upon any of its respective assets under, any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, security interest or
other arrangement to which Buyer is a party or by which Buyer is bound or to
which the assets of Buyer are subject, (c) violate any applicable Regulation or
Court Order or (d) impose any Encumbrance on the business of Buyer. Except as
set forth in Section 5.3 of the Buyer Disclosure Schedule, no notices to,
declaration, filing or registration with, approvals or consents of, or
assignments by, any Persons (including any federal, state or local governmental
or administrative authorities) are necessary to be made or obtained by Buyer in
connection with the execution, delivery or performance of this Agreement or any
Ancillary Agreement or the consummation of the transactions contemplated hereby
or thereby.
5.4 Brokers; Transactions Costs. Buyer has not entered into and will not
enter into any contract, agreement, arrangement or understanding with any Person
which has or will result in the obligation of any Seller to pay any finder's
fee, brokerage commission, legal, accounting or similar payment in connection
with the transactions contemplated hereby.
5.5 Capitalization of Parent.
(a) As of the date of this Agreement, Parent has authorized under its
Restated Certificate of Incorporation 50,000,000 shares of Parent Common Stock
and 5,000,000 shares of preferred stock, par value $0.01 per share. As of
December 31, 2000, Parent had outstanding 22,086,129 shares of Parent Common
Stock and no shares of any other class of capital stock.
(b) Except for shares reserved for issuance upon the exercise of options
granted or available for grant under Parent's stock option and stock purchase
plans (collectively, the "Parent Options") and any agreements made herein, there
are no outstanding options, warrants, convertible securities or rights of any
kind to purchase or otherwise acquire any shares of capital stock or other
securities of Parent.
(c) All outstanding shares of Parent Common Stock issued or to be issued
upon exercise of any of the Parent Options will be validly issued, fully paid
and non-assessable. There are no preemptive rights with respect to the Parent
Common Stock.
(d) The shares of Parent Common Stock to be issued pursuant to the terms of
this Agreement have been duly authorized and, when issued in accordance with the
terms hereof, will be validly issued, fully paid and nonassessable. Assuming
that the representations of the Investor set forth in this Agreement are true
and correct, the issuance of such shares of Parent Common Stock is exempt from
registration under the Securities Act.
5.6 SEC Reports; Financial Statements. Buyer has made available to the
Investor a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by Parent with the SEC (as such
documents have since the time of their filing been amended, the "Parent SEC
Reports"), which are all the documents (other than preliminary material) that
Parent was required to file with the SEC since December 31, 2000. As of their
respective dates, the Parent SEC Reports complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such Parent
SEC Reports or such other forms, reports or other documents, and none of the
Parent SEC Reports contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
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they were made, not misleading. The financial statements of Parent included in
the Parent SEC Reports complied as of their respective dates of filing with the
SEC as to form in all material respects with applicable accounting requirements
and with the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with GAAP applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Form 10-Q of the SEC) and
fairly present (subject, in the case of the unaudited statements, to normal,
recurring audit adjustments, which were not individually or in the aggregate
material) in all material respects the consolidated financial position of Parent
and its Subsidiaries as at the dates thereof and the results of its operations
and cash flows for the periods then ended.
6. Covenants.
6.1 General. Each of the Parties will use all reasonable commercial
efforts to take all action and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including the satisfaction, but not waiver, of closing conditions).
Each Seller and each Stockholder agrees that at any time and from time to time
it will execute and deliver to Buyer such further instruments or documents and
take such further actions as may be required to give effect to the transactions
contemplated by this Agreement.
6.2 Notices and Consents. Each Seller and each Stockholder will give any
notices to third parties, and will use its reasonable best efforts to obtain any
third party consents, that the Buyer may request in connection with the
consummation of the transactions contemplated by this Agreement. Each of the
Parties will give any notices to, make any filings with and use its reasonable
best efforts to obtain any authorizations, consents and approvals of governments
and governmental agencies required in connection with the consummation of the
transactions contemplated by this Agreement.
6.3 Access and Investigation. Each Seller will, and will cause its
Representatives to, (a) afford Buyer and its Representatives full access to such
Seller's personnel, premises, properties (including subsurface testing if deemed
appropriate), contracts, Books and Records and other documents and data,
(b) furnish Buyer and its Representatives with copies of all such contracts,
Books and Records and other existing documents and data as Buyer may request and
(c) furnish Buyer and its Representatives with such additional financial,
operating and other data and information as Buyer may request.
6.4 Operation and Preservation of Business of Sellers. During the period
between the date of this Agreement and the Closing, no Seller shall engage in
any practice, take any action or enter into any transaction outside the ordinary
course of business of such Seller. Without limiting the generality of the
foregoing, during the period between the date of this Agreement and the Closing
no Seller shall (a) declare, set aside or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase or otherwise
acquire any of its capital stock or revise the compensation of any Stockholder
or Related Party, (b) pay any amount to any third party with respect to any
Liability or obligation (including any costs and expenses such Seller has
incurred or may incur in connection with this Agreement and the transactions
contemplated hereby) or otherwise engage in any practice, take any action or
enter into any transaction of the sort described in Section 3.8 or Section 3.11
above, (c) do any other action which would (i) cause any representation or
warranty of any Seller or any Stockholder in this Agreement to become untrue or
(ii) that is not in the ordinary course of business consistent with past
practice or (d) directly or indirectly take, agree to take or otherwise permit
to occur any of the actions described in clauses 6.4(a) through (c). During the
period between the date of this Agreement and the Closing, each Seller will keep
its business and properties intact, including its present operations, physical
facilities, working conditions and relationships with lessors, licensors,
suppliers, customers and employees.
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6.5 Required Approvals and Provision of Financial Data. As promptly as
practicable after the date of this Agreement, each Seller will make all filings
required by any Regulation to be made by it in order to consummate the
transactions contemplated by this Agreement. Each Seller will (a) cooperate with
Buyer with respect to all filings that Buyer elects to make or is required by
any Regulation to make in connection with the transactions contemplated by this
Agreement, and (b) cooperate with Buyer in obtaining all required consents.
6.6 Notification. Each Seller and each Stockholder shall promptly notify
Buyer in writing if it becomes aware of (a) any fact or condition that causes or
constitutes a breach of any representation or warranty of any Seller or any
Stockholder contained in this Agreement or (b) the occurrence after the date of
this Agreement of any fact or condition that would cause or constitute a breach
of any such representation or warranty had such representation or warranty been
made as of the time of occurrence or discovery of such fact or condition. No
disclosure by any Party pursuant to this Section 6.6, however, shall be deemed
to amend or supplement its respective Disclosure Schedule or to prevent or cure
any misrepresentation, breach of warranty or breach of covenant.
6.7 No Negotiation. During the period between the date of this Agreement
and the Closing, no Seller nor any Stockholder shall, directly or indirectly,
sell, transfer, pledge, hypothecate, encumber or otherwise dispose or surrender
possession of, the Assets or any portion thereof or any interest therein, except
in the ordinary course of business consistent with past practice. Until such
time, if any, as this Agreement is terminated pursuant to Section 9, neither any
Seller or nor any Stockholder will, directly or indirectly, solicit, initiate or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any inquiries or
proposals from, any Person (other than Buyer) relating to any transaction
involving the sale of the Assets or any portion thereof or any capital stock of
any Seller, or any merger, consolidation, business combination or similar
transaction involving any Seller, and each Seller and each Stockholder shall
immediately notify Buyer in writing of any such inquiries or proposals.
6.8 Accrued Salaries and Lease Payments. Prior to the Closing, each Seller
shall pay all accrued and unpaid salaries, accrued and unpaid lease payments and
all other accrued and unpaid amounts due and owing from such Seller.
6.9 Employee Matters.
(a) Section 6.9(a) of the Seller Disclosure Schedule sets forth the list of
the employees of each Seller that are to become employees of Buyer (the
"Designated Employees"), together with a summary of the material terms of each
such Person's current employment. Buyer agrees to make an offer of employment to
each such Designated Employee on terms no less favorable than presently
applicable to such Designated Employee as set forth in Section 6.9(a) of the
Seller Disclosure Schedule and to assume any employment contract identified in
Section 3.7(a) of the Seller Disclosure Schedule. Each Seller shall terminate
the employment of all Designated Employees immediately prior to the Closing, and
each Seller and each Stockholder shall cooperate with and use its reasonable
best efforts to assist Buyer in its efforts to secure satisfactory employment
arrangements with the Designated Employees.
(b) Nothing contained in this Agreement shall confer upon any Designated
Employee any right with respect to employment, or continuance thereof, with
Buyer, nor shall anything herein interfere with the right of Buyer to terminate
the employment of any of the Designated Employees at any time, with our without
cause and with or without prior notice, or restrict Buyer in the exercise of its
independent business judgment in modifying any of the terms and conditions of
the employment of the Designated Employees.
6.10 Consent to Assignment of Lease. Notwithstanding the provisions
contained in any Lease, in the event that Buyer desires to assign any Lease to a
third party each Seller and each Stockholder
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agrees, and shall cause each of its affiliates, not to arbitrarily or
unreasonably withhold any consent required to effect such assignment.
7. Buyer's Conditions to Closing. Buyer's obligation to purchase the Assets
and to take the other actions required to be taken by Buyer at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Buyer, in whole or in part,
in Buyer's sole discretion):
7.1 Accuracy of Representations of Sellers and Stockholders. All of the
representations and warranties of each Seller and each Stockholder contained in
this Agreement shall have been accurate as of the date of this Agreement and
shall be accurate as of the Closing Date as if made on the Closing Date.
7.2 Performance of Sellers and Stockholders.
(a) All of the covenants and obligations that any Seller and/or any
Stockholder are required to perform or to comply with pursuant to this Agreement
at or prior to the Closing shall have been duly performed and complied with.
(b) Each document required to be delivered by any Seller and/or any
Stockholder pursuant to Section 2.5 or any other provision of this Agreement or
any Ancillary Agreement shall have been delivered, and each of the other
covenants and obligations of Sellers and Stockholders in Section 6 shall have
been performed and complied with.
(c) Buyer shall have received from all Sellers and/or all Stockholders all
financial statements, schedules and notes thereto and all other information
concerning each Seller each and Stockholder, reasonably required by Buyer.
7.3 Additional Conditions.
(a) Buyer shall have completed, to the satisfaction of Buyer in its sole
discretion, its due diligence review of the Assets and Assumed Liabilities and
such related documents and accounts of Sellers and the Stockholders as may be
requested by Buyer or its Representatives (it being understood, however, that
such review shall have no effect on the ability of Buyer to rely on the
representations, warranties and covenants of Sellers and the Stockholders);
(b) Buyer shall have received certificates confirming payment by the
Stockholders of any sales Taxes due with regard to the operation of the Business
prior to the Closing;
(c) all applicable state bulk sales law requirements shall have been
complied with;
(d) all necessary consents from government agencies and third parties to
permit Buyer to continue to operate the Business as contemplated by this
Agreement shall have been obtained and be in full force and effect;
(e) Buyer shall have available to it on terms acceptable to it in its sole
discretion the funds required to complete the Acquisition, including to
refinance the Funded Debt, which shall not exceed $16,600,000 (Sixteen Million
Six Hundred Thousand Dollars) in the aggregate;
(f) this Agreement shall have been approved by Parent's Board of Directors;
and
(g) all applicable legal requirements shall have been complied with.
7.4 No Proceedings. There shall not be existing or threatened any Action
or other proceeding (a) involving any challenge to, or seeking damages or other
relief in connection with, any of the transactions contemplated by this
Agreement, or (b) that may have the effect of preventing, delaying, making
illegal or otherwise interfering with any of the transactions contemplated by
this Agreement.
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7.5 No Claim Regarding Asset Ownership or Sale Proceeds. There shall not
have been made or threatened by any Person any claim asserting that any Seller
is not, or the Sellers collectively are not, (a) the rightful owner(s) of, or
have an ownership interest in, the Assets, or (b) entitled to all or any portion
of the Purchase Consideration.
7.6 No Prohibition. Neither the consummation nor the performance of any of
the transactions contemplated by this Agreement or any Ancillary Agreement will,
directly or indirectly (with or without notice or lapse of time), contravene, or
conflict with, or result in a material violation of, or cause Buyer or any
Person affiliated with Buyer to suffer any Material Adverse Change under,
(a) any applicable Regulation or Court Order or (b) any Regulation or Court
Order that has been published, introduced, or otherwise proposed by or before
any governmental agency.
7.7 Approval of Documentation. The form and substance of all certificates,
instruments, opinions and other documents delivered to Buyer under this
Agreement shall be reasonably satisfactory to Buyer and its counsel, and Buyer
shall have received copies of such documents and instruments as Buyer and its
counsel may request in connection with the transactions contemplated by this
Agreement.
7.8 Force Majeure. All or any material part of the Assets shall not have
been materially and adversely affected in any way by any act of God, fire,
flood, war, legislation (proposed or enacted) or other event or occurrence,
whether or not covered by insurance.
7.9 Release of Liens, Claims, etc. Prior to the Closing, Buyer shall have
received releases, in form and substance satisfactory to Buyer, of all
Encumbrances against the Assets, and Buyer shall be satisfied that, as a result,
the Sellers have good and marketable title to the Assets, free and clear of any
Encumbrances.
7.10 No Material Adverse Change. There shall not have occurred any
Material Adverse Change with respect the Assets or the Sellers.
8. Sellers' Conditions to Closing. Sellers' obligation to sell the Assets and
to take the other actions required to be taken by Sellers at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Sellers, in whole or in part
in Sellers' sole discretion):
8.1 Accuracy of Representations of Buyer. All of the representations and
warranties of Buyer contained in this Agreement shall have been accurate as of
the date of this Agreement and shall be accurate as of the Closing Date as if
made on the Closing Date.
8.2 Performance of Buyer.
(a) All of the covenants and obligations that Buyer is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing shall
have been performed and complied with.
(b) Each document required to be delivered by Buyer pursuant to Section 2.5
or any other provision of this Agreement or any Ancillary Agreement shall have
been delivered, and each of the other covenants and obligations of Buyer in
Section 6 shall have been performed and complied with.
8.3 Consents. Each of the consents identified in Section 5.3 of the Buyer
Disclosure Schedule shall have been obtained.
8.4 No Proceedings. There shall not be existing or threatened any Action
or other proceeding (a) involving any challenge to, or seeking damages or other
relief in connection with, any of the transactions contemplated by this
Agreement, or (b) that may have the effect of preventing, delaying, making
illegal or otherwise interfering with any of the transactions contemplated by
this Agreement.
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8.5 No Prohibition. Neither the consummation nor the performance of any of
the transactions contemplated by this Agreement or any Ancillary Agreement will,
directly or indirectly (with or without notice or lapse of time), materially
contravene, or conflict with, or result in a material violation of, or cause any
Seller or any Stockholder or any Person affiliated with any Seller or any
Stockholder to suffer any Material Adverse Change under, (a) any applicable
Regulation or Court Order or (b) any Regulation or Court Order that has been
published, introduced, or otherwise proposed by or before any governmental
agency.
8.6 Approval of Documentation. The form and substance of all certificates,
instruments, opinions and other documents delivered to Sellers and the
Stockholders under this Agreement shall be reasonably satisfactory to such
Sellers and Stockholders and their respective counsel, and the Sellers and the
Stockholders shall have received copies of such documents and instruments as
they and their respective counsel may request in connection with the
transactions contemplated by this Agreement.
9. Termination.
9.1 Termination Rights. This Agreement may be terminated at any time prior
to the Closing by:
(a) mutual written consent of Buyer, Sellers and the Stockholders;
(b) Buyer, any Seller or any Stockholder if the Closing shall not have
occurred on or before April 30, 2001; provided, however, that this provision
shall not be available (i) to Buyer if any Seller or any Stockholder has the
right to terminate this Agreement pursuant to Section 9.1(e) or (ii) to any
Seller or any Stockholder if Buyer has the right to terminate this Agreement
pursuant to Section 9.1(c);
(c) Buyer if there is a material breach of any representation or warranty
set forth in Section 3 or Section 4 or any covenant or agreement to be complied
with or performed by any Seller or any Stockholder pursuant to the terms of this
Agreement or the failure of a condition to the obligations of Buyer set forth in
Section 7 to be satisfied (and such condition is not waived in writing by Buyer)
on or prior to the Closing Date, or the occurrence of any event which results or
would result in the failure of a condition to the obligations of Buyer set forth
in Section 7 to be satisfied on or prior to the Closing Date; provided, however,
that such breach or failure is through no fault of Buyer and, provided further,
that Sellers or the Stockholders have not cured such failure upon fifteen
(15) days' written notice from Buyer;
(d) Buyer if Buyer, in its sole discretion, is not satisfied with the
results of its due diligence review of the Assets and Assumed Liabilities and
related documents and accounts of Sellers and the Stockholders pursuant to
Section 7.3(a); or
(e) any Seller or any Stockholder if there is a material breach of any
representation or warranty set forth in Section 5 or of any covenant or
agreement to be complied with or performed by Buyer pursuant to the terms of
this Agreement or the failure of a condition to the obligations of Sellers set
forth in Section 8 to be satisfied (and such condition is not waived in writing
by Seller) on or prior to the Closing Date; provided, however, that such breach
is through no fault of any Seller or any Stockholder and, provided further, that
Buyer has not cured such failure upon fifteen (15) days' written notice from
Sellers or the Stockholders, as applicable.
9.2 Effect of Termination. In the event of termination of this Agreement,
each Party will redeliver all documents, work papers and other material of any
other Party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the Party furnishing the same
or, in the alternative, destroy such materials and, upon request, confirm such
destruction in writing. Whether or not the Closing takes place, the Stockholders
waive, and will cause the Sellers to waive, any cause of action, right or claim
arising out of the access of Buyer or its Representatives to
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any trade secrets or other confidential information of the Seller, except for
the intentional competitive misuse by Buyer of such trade secrets or
confidential information.
10. Indemnity; Remedies.
10.1 Indemnification. Each Seller and each Stockholder agree, jointly and
severally, to fully defend, indemnify and hold Buyer, Parent and each of their
respective officers, directors, employees and affiliates (each, a "Buyer
Indemnified Party") harmless from and against any and all Damages as a result of
(a) the Excluded Liabilities or (b) any inaccuracy or breach of any
representation, warranty, covenant or agreement of any Seller contained herein
or in any Ancillary Agreement or instrument delivered by any Seller pursuant
hereto or thereto. Each Seller agrees, jointly and severally, and each
Stockholder agrees, severally and not jointly, to fully defend, indemnify and
hold the Buyer Indemnified Parties harmless from and against any and all Damages
as a result of any inaccuracy or breach of any representation, warranty,
covenants or agreement of such Stockholder contained herein or in any Ancillary
Agreement or instrument delivered by such Stockholder pursuant hereto or
thereto. Buyer agrees to fully defend, indemnify and hold each Seller and each
Stockholder and their respective officers, directors, employees and affiliates
(each, a "Seller Indemnified Party") harmless from and against any and all
Damages as a result of (a) the Assumed Liabilities or (b) any inaccuracy or
breach of any representation, warranty, covenant or agreement of Buyer contained
herein or in any Ancillary Agreement or instrument delivered by Buyer pursuant
hereto or thereto. The right to indemnification, payment of Damages or other
remedy based on such representations, warranties, covenants and agreements will
not be affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or in accuracy of or compliance with, any such representation,
warranty, covenant or agreement.
10.2 Procedures for Claims. If a claim for Damages (a "Claim") is to be
made by a person entitled to indemnification hereunder, the person claiming such
indemnification (the "Indemnified Party") shall give written notice (a "Claim
Notice") to the indemnifying person (the "Indemnifying Party") reasonably
promptly after the Indemnified Party becomes aware of any fact, condition or
event which may give rise to Damages for which indemnification may be sought
under this Section 10, provided that if the Indemnified Party is a Seller
Indemnified Party, such Claim Notice shall only be valid if it is delivered by
the Seller Representative, and provided further that if the Indemnified Party is
a Buyer Indemnified Party, such Claim Notice shall be valid if it is delivered
to the Seller Representative. The failure of any Indemnified Party to give
timely notice hereunder shall not affect rights to indemnification hereunder,
except and only to the extent that, the Indemnifying Party demonstrates actual
material damage caused by such failure, and then only to the extent thereof. In
the case of a Claim involving the assertion of a claim by a third party (whether
pursuant to a lawsuit, other legal action or otherwise, a "Third-Party Claim"),
if the Indemnifying Party shall acknowledge in writing to the Indemnified Party
that the Indemnifying Party shall be obligated to indemnify the Indemnified
Party under the terms of its indemnity hereunder in connection with such
Third-Party Claim, then (A) the Indemnifying Party shall be entitled and, if it
so elects, shall be obligated at its own cost, risk and expense, (1) to take
control of the defense and investigation of such Third-Party Claim and (2) to
pursue the defense thereof in good faith by appropriate actions or proceedings
promptly taken or instituted and diligently pursued, including, without
limitation, to employ and engage attorneys of its own choice reasonably
acceptable to the Indemnified Party to handle and defend the same, and (B) the
Indemnifying Party shall be entitled (but not obligated), if it so elects, to
compromise or settle such claim, which compromise or settlement shall be made
only with the written consent of the Indemnified Party, such consent not to be
unreasonably withheld. In the event the Indemnifying Party elects to assume
control of the defense and investigation of such lawsuit or other legal action
in accordance with this Section 10.2, the Indemnified Party may, at its own cost
and expense, participate in the investigation, trial and defense of such
Third-Party Claim, provided that if the named persons to a
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lawsuit or other legal action include both the Indemnifying Party and the
Indemnified Party and the Indemnified Party has been advised by counsel that
there may be one or more legal defenses available to such Indemnified Party that
are different from or additional to those available to the Indemnifying Party,
the Indemnified Party shall be entitled, at the Indemnifying Party's cost, risk
and expense, to retain one firm of separate counsel of its own choosing. If the
Indemnifying Party fails to assume the defense of such Third-Party Claim in
accordance with this Section 10.2 within ten (10) calendar days after receipt of
the Claim Notice, the Indemnified Party against which such Third-Party Claim has
been asserted shall (upon delivering notice to such effect to the Indemnifying
Party) have the right to undertake, at the Indemnifying Party's cost, risk and
expense, the defense, compromise and settlement of such Third-Party Claim on
behalf of and for the account of the Indemnifying Party; provided that such
Third-Party Claim shall not be compromised or settled without the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld. In the event the Indemnifying Party assumes the defense of the claim,
the Indemnifying Party shall keep the Indemnified Party reasonably informed of
the progress of any such defense, compromise or settlement, and in the event the
Indemnified Party assumes the defense of the claim, the Indemnified Party shall
keep the Indemnifying Party reasonably informed of the progress of any such
defense, compromise or settlement. The Indemnifying Party shall be liable for
any settlement of any Third-Party Claim effected pursuant to and in accordance
with this Section 10.2 and for any final judgment (subject to any right of
appeal), and the Indemnifying Party agrees to indemnify and hold harmless each
Indemnified Party from and against any and all Damages by reason of such
settlement or judgment.
10.3 Remedies. Buyer, each Seller and each Stockholder acknowledge and
agree that the other parties hereto would be irreparably damaged in the event
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. Accordingly, each of the
Parties hereto agrees that he, she or it each shall be entitled to an injunction
or injunctions to prevent breaches of any of the provisions of this Agreement to
enforce specifically this Agreement in any action instituted in any court of the
United States or any state having competent jurisdiction as provided for in this
Agreement, in addition to any other remedy to which such Party may be entitled,
at law or in equity.
11. Holdback Amount.
11.1 Compensation of Buyer Indemnified Parties. The Holdback Amount shall
be available (a) to offset any Adjustment Amount pursuant to Section 2.7 and/or
(b) to compensate any Buyer Indemnified Party for any Damages (whether or not
involving a Third Party Claim), incurred or sustained by such Buyer Indemnified
Party as a result of (i) the Excluded Liabilities or (ii) any inaccuracy or
breach of any representation, warranty, covenant or agreement of any Seller or
any Stockholder contained herein or in any instrument delivered by any Seller or
any Stockholder pursuant to this Agreement as provided for in Section 10. The
Parties agree that (i) any reduction in the Holdback Amount otherwise payable to
Sellers shall be applied against the Cash Holdback and the Shares Holdback on a
pro rata basis and (ii) the value of each share of Parent Common Stock
constituting a portion of the Shares Holdback shall, for all purposes, be equal
to the Average Parent Common Stock Price. Buyer, each Seller and each
Stockholder each acknowledge that any such Damages would relate to unresolved
contingencies existing on the Closing Date, which if resolved on the Closing
Date would have led to a reduction in the Purchase Consideration.
11.2 Satisfaction of Claims. Buyer shall have the right to reduce the
amount of the Holdback Amount to be delivered by Buyer to Sellers after the
Closing Date by an amount that is necessary in the reasonable judgment of Buyer
to satisfy any pending unpaid (a) Adjustment Amount or (b) claim for
indemnification pursuant to Section 10, which claims have been or are specified
in written notice to the Seller Representative prior to such date that the
Holdback Amount was otherwise due to be remitted by Buyer. Promptly after the
later of (x) the Determination Date and (y) the date on which all
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such claims, if any, have been resolved, Buyer shall deliver to Sellers the
remaining portion of any Holdback Amount, if any, not required to satisfy such
claims.
11.3 Procedures. Upon receipt by the Seller Representative, at any time on
or before the last day of the Holdback Period, of written notice from Buyer (a
"Holdback Notice") (i) stating that a Buyer Indemnified Party has paid or
properly accrued or reasonably anticipates that it will have to pay or accrue
Damages as a result of (a) the Excluded Liabilities or (b) any inaccuracy or
breach of any representation, warranty, covenant or agreement of any Seller or
any Stockholder contained herein or in any instrument delivered pursuant to this
Agreement, as the case may be and (ii) specifying in reasonable detail the
individual items of Damages included in the amount so stated, the date each such
item was paid or properly accrued, or the basis for such anticipated liability,
the Seller Representative shall have thirty (30) days to review and, if it
disagrees with any matter set forth in the Holdback Notice, object in writing to
such Holdback Notice. In case the Seller Representative shall not object in
writing to any claim or claims made in any Holdback Notice within such 30-day
period, the Sellers and the Stockholders shall be deemed to have agreed to the
Holdback Notice and to the reduction of the Holdback Amount as set forth
therein. Delivery of a Holdback Notice shall not foreclose or limit any other
remedy available to a Buyer Indemnified Party under this Agreement, at law or in
equity.
11.4 Resolution of Disputes. In case the Seller Representative shall
object in writing to any claim or claims made in any Holdback Notice within the
30-day period provided for in Section 11.3, the Seller Representative and Buyer
shall attempt in good faith to agree upon the rights of the respective Parties
with respect to each of such claims. If the Seller Representative and Buyer
should so agree, such agreement shall be set forth in writing and signed by both
parties. If no such agreement can be reached after good faith negotiation,
either Buyer or the Seller Representative may pursue all remedies available to
it under the provisions of this Agreement, at law or in equity.
12. Seller Representative; Power of Attorney.
12.1 Seller Representative. The Seller Representative is appointed as
agent and attorney-in-fact for each Seller and each Stockholder, to give and
receive notices and communications, to object to Buyer's calculation of Year End
Unearned Accounts Receivable, to consent to an increase in sales, general and
administrative expenses proposed by Buyer pursuant to Section 2.8, to object to
any matter set forth in any Claim Notice or Holdback Notice, to agree to,
negotiate, enter into settlements and compromises of, and commence or pursue
legal action and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in the
judgment of the Seller Representative for the accomplishment of the foregoing.
Such agency may be changed by the Sellers and the Stockholders from time to time
upon not less than thirty (30) days prior written notice to Buyer; provided,
however, that the Seller Representative may not be removed unless holders of at
least a two-thirds interest in the Holdback Amount agree to such removal and to
the identity of the substituted Seller Representative. Any vacancy in the
position of Seller Representative may be filled by approval of the holders of a
majority in interest of the Holdback Amount. No bond shall be required of the
Seller Representative, and the Seller Representative shall not receive
compensation for his services. Notices or communications to or from the Seller
Representative shall constitute notice to or from each of the Sellers and each
of the Stockholders.
12.2 Exculpation. The Seller Representative shall not be liable for any
act done or omitted hereunder as Seller Representative while acting in good
faith and in the exercise of reasonable judgment.
12.3 Actions of the Seller Representative. A decision, act, consent or
instruction of the Seller Representative shall constitute a decision for all of
the Sellers and the Stockholders and shall be final, binding and conclusive upon
each of such Sellers and Stockholders. Buyer may rely exclusively upon any such
decision, act, consent or instruction of the Seller Representative as being the
decision, act, consent or instruction of every such Seller. Buyer is hereby
relieved from any liability to any person for
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any acts done by them in accordance with such decision, act, consent or
instruction of the Seller Representative.
13. General Provisions.
13.1 Applicable Law. The execution, performance and interpretation of this
Agreement shall be governed by, and construed and enforced in accordance with,
the internal laws of the State of California, without regard to that State's
choice of law rules.
13.2 Notices. All notices required or permitted to be given under this
Agreement shall be in writing, and will be deemed given on the date of receipt
if delivered in person, or on the date of mailing if mailed by overnight courier
or registered or certified mail, postage prepaid, return receipt requested, to
the applicable Party at its address indicated in the preamble or the signatures
pages, as the case may be, to this Agreement. Any Party may change its address
for purposes of this Agreement by giving fifteen (15) days' prior written notice
of such change of address to the other Party in the manner described in this
Section 13.2.
13.3 Binding Effect; Assignment. No Seller nor any Stockholder shall
assign any of its or his rights, or delegate any of its or his obligations under
this Agreement to any third party without the prior written consent of Buyer.
This Agreement is binding upon, and shall inure solely to the benefit of, the
parties hereto and their respective heirs, personal representatives, successors
and permitted assigns. This Agreement is not intended to benefit, and shall not
be construed as benefiting, any third party, and no third party shall have
standing to enforce any provision of this Agreement.
13.4 Modification. No purported modification, amendment or waiver of any
term of this Agreement shall be effective unless it is in writing, subsequent to
this Agreement and signed by all parties hereto.
13.5 Expenses. Buyer, each Seller and each Stockholder shall each pay its
or his own respective legal, accounting, advisory and other fees, and other
out-of-pocket expenses incurred in connection with the transactions contemplated
herein and will not look to any other Party for any contribution toward such
expenses.
13.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same agreement. Facsimile copies shall
also be deemed originals.
13.7 Severability. Buyer, each Seller and each Stockholder agree that the
provisions of this Agreement are severable and separate and that the
unenforceability of any specific provision or part of any provision shall not
affect the validity of any other provision or term of this Agreement.
13.8 Entire Agreement. This Agreement, together with the Ancillary
Agreements, constitutes the entire agreement of Buyer, each Seller and each
Stockholder with respect to the subject matter hereof and supersedes any and all
prior and contemporaneous understandings or agreements, whether oral or written,
concerning such subject matter, including, without limitation, the letter of
intent dated as of October 6, 2000. Each Party acknowledges that it enters into
this Agreement without relying on any statement by the other Party which is not
specifically set forth in this Agreement.
13.9 Interpretation of Agreement.
(a) The words "hereof," "herein" and "hereunder" and words of similar import
when used in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement, and article, section, schedule and
exhibit references are to this Agreement unless otherwise specified. The meaning
of defined terms shall be equally applicable to the singular and plural forms of
the defined terms. The terms "include" and "including" are not limiting and mean
"including without limitation."
42
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(b) References to agreements and other documents shall be deemed to include
all subsequent amendments and other modifications thereto.
(c) References to statutes shall include all regulations promulgated
thereunder and references to statutes or regulations shall be construed as
including all statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation.
(d) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement.
(e) The Parties participated jointly in the negotiation and drafting of this
Agreement and the language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent. If an ambiguity
or question of intent or interpretation arises, then this Agreement will
accordingly be construed as drafted jointly by the Parties, and no presumption
or burden of proof will arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement.
(f) The annexes, schedules and exhibits to this Agreement are a material
part hereof and shall be treated as if fully incorporated into the body of the
Agreement.
13.10 Set-Off. Buyer is hereby authorized at any time after the giving of
prior written notice to the Seller Representative, and from time to time, to
set-off and apply any and all amounts owing by Buyer to any Seller or any
Stockholder under this Agreement, any agreement entered into in connection
herewith or otherwise against any and all of the obligations of Sellers and the
Stockholders to Buyer (whether matured or unmatured) now or hereafter existing
under this Agreement, any agreement entered into in connection herewith or
otherwise. The rights of Buyer under this Section 13.10 are in addition to the
other rights and remedies (including, without limitation, other rights of
set-off) which Buyer may have.
13.11 Public Announcements. Any public announcement or similar publicity
with respect to the this Agreement or the transactions contemplated hereby will
be issued, if at all, at such time and in such manner as Buyer and the Seller
Representative mutually determine. Unless consented to by Buyer and the Seller
Representative in advance or required by Regulation applicable to Buyer
(including, without limitation, its obligations pursuant to the Exchange Act and
the rules of Nasdaq), this Agreement shall be strictly confidential and may not
be disclosed to any Person. Sellers, the Stockholders and Buyer will consult
with each other concerning the means by which the employees, customers and
suppliers of, and others having dealings with, Sellers will be informed of the
transactions contemplated by this Agreement, and Buyer shall have the right to
be present for any such communication.
13.12 Waiver of Jury Trial. EACH SIGNATORY TO THIS AGREEMENT HEREBY
IRREVOCABLY WAIVES ITS RESPECTIVE RIGHT TO A JURY TRIAL OF ANY PERMITTED CLAIM
OR CAUSE OF ACTION ARISING OUT OF THIS AGREEMENT, THE ANCILLARY AGREEMENTS ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY DEALINGS BETWEEN ANY OF THE
SIGNATORIES HERETO RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY. The scope of this waiver is intended to be
all encompassing of any and all disputes that may be filed in any court and that
relate the subject matter of this Agreement or any of the transactions
contemplated hereby, including, without limitation, contract claims, tort
claims, and all other common law and statutory claims. This waiver is
irrevocable, meaning that it may not be modified either orally or in writing,
and this waiver shall apply to any subsequent amendments, supplements or other
modifications to this Agreement, any of the transactions contemplated hereby or
to any other document or agreement relating to the transactions contemplated
hereby.
43
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13.13 Attorney Fees. If any Party to this Agreement brings an action to
enforce its rights under this Agreement in accordance with the provisions
hereof, the prevailing Party shall be entitled to recover its actual
out-of-pocket costs and expenses, including without limitation attorneys' fees
and court costs reasonably incurred in connection with such action, including
any appeal of such action.
13.14 Service of Process; Consent to Jurisdiction. EACH OF THE PARTIES
HERETO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY PROCESS, PLEADING, NOTICES OR
OTHER PAPERS BY THE MAILING OF COPIES THEREOF BY REGISTERED, CERTIFIED OR FIRST
CLASS MAIL, POSTAGE PREPAID, TO SUCH PARTY AT SUCH PARTY'S ADDRESS SET FORTH
HEREIN, OR BY ANY OTHER METHOD PROVIDED OR PERMITTED UNDER CALIFORNIA LAW.
EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (I) AGREES THAT ANY SUCH
SUIT, ACTION OR OTHER LEGAL PROCEEDING ARISING OUT OF THIS AGREEMENT MAY BE
BROUGHT IN THE UNITED STATES DISTRICT COURT IN THE CENTRAL DISTRICT OF THE STATE
OF CALIFORNIA OR, IF SUCH COURT DOES NOT HAVE JURISDICTION OR WILL NOT ACCEPT
JURISDICTION, IN ANY COURT OF GENERAL JURISDICTION IN THE COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA; (II) CONSENTS TO THE JURISDICTION OF ANY SUCH COURT IN ANY
SUCH SUIT, ACTION OR PROCEEDING; AND (III) WAIVES ANY OBJECTION WHICH SUCH PARTY
MAY HAVE OT THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY
SUCH COURT.
(Signature Pages Follow)
44
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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first written above.
BUYER:
GUITAR CENTER STORES, INC.
By:
/s/ BRUCE L. ROSS
--------------------------------------------------------------------------------
Name: Bruce Ross
Title: President
SELLERS:
AMERICAN MUSIC GROUP, LTD.
By:
/s/ ROBERT A. SCHWEILLER
--------------------------------------------------------------------------------
Name: Robert A. Schweiller
Title: President
EASTERN MUSIC SUPPLY CO., INC.
By:
/s/ ROBERT A. SCHWEILLER
--------------------------------------------------------------------------------
Name: Robert A. Schweiller
Title: President
LYONS MUSIC, INC.
By:
/s/ ROBERT A. SCHWEILLER
--------------------------------------------------------------------------------
Name: Robert A. Schweiller
Title: President
45
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AMERICAN MUSIC, INC.
By:
/s/ ROBERT A. SCHWEILLER
--------------------------------------------------------------------------------
Name: Robert A. Schweiller
Title: President
AMERICAN MUSICAL INSTRUMENTS, INC.
By:
/s/ ROBERT A. SCHWEILLER
--------------------------------------------------------------------------------
Name: Robert A. Schweiller
Title: President
GIARDINELLI BAND INSTRUMENT CO., INC.
By:
/s/ ROBERT A. SCHWEILLER
--------------------------------------------------------------------------------
Name: Robert A. Schweiller
Title: President
CENTRAL MUSIC SUPPLY, INC.
By:
/s/ ROBERT A. SCHWEILLER
--------------------------------------------------------------------------------
Name: Robert A. Schweiller
Title: President
GBI, INC.
By:
/s/ ROBERT A. SCHWEILLER
--------------------------------------------------------------------------------
Name: Robert A. Schweiller
Title: President
STOCKHOLDERS:
/s/ ROBERT A. SCHWEILLER
--------------------------------------------------------------------------------
Name: Robert A. Scheiwiller
Address: 105 Spinnaker Lane
Jupiter, Florida 33477
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/s/ DAVID FLEMING
--------------------------------------------------------------------------------
Name: David Fleming
Address: 200 Summerhaven Drive
East Syracuse, New York 13057
/s/ DAN SCHMID
--------------------------------------------------------------------------------
Name: Dan Schmid
Address: 6 Old Country Lane
Fairport, New York 14450
/s/ DANIEL FLEISCHMAN
--------------------------------------------------------------------------------
Name: Daniel Fleischman
Address: 156 South Street
Auburn, New York 13021
/s/ THOMAS RINALDI
--------------------------------------------------------------------------------
Name: Thomas Rinaldi
Address: 10 Stone Ridge Lane
Greenfield, Massachusetts 01301
/s/ GREG SCHEIWILLER
--------------------------------------------------------------------------------
Name: Greg Scheiwiller
Address: 6288 Garrett Street
Jupiter, Florida 33458
/s/ ROBERT T. SCHEIWILLER
--------------------------------------------------------------------------------
Name: Robert T. Scheiwiller
Address: 888 East Washington Street
Orlando, Florida 32801
/s/ JEFF SCHEIWILLER
--------------------------------------------------------------------------------
Name: Jeff Scheiwiller
Address: 8483 Dunham Road
Baldwinsville, New York 13027
/s/ CAROL CHARETTE
--------------------------------------------------------------------------------
Name: Carol Charette
Address: 7896 Rose Court Drive
Cicero, New York 13039
47
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ASSET PURCHASE AGREEMENT
Recitals
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Exhibit 10.2
November 5, 2001
Mr. Raymond V. Dittamore
[address]
Re: Board Compensation
Dear Ray:
Welcome to the Board of Directors of Invitrogen Corporation. The purpose of
this letter is to outline the terms and conditions of your Board Compensation
Package.
1.Annual Retainer for Board Service. You will be entitled to receive an annual
retainer of $20,000. This retainer is prorated based upon the number of days
between July 19, 2001 (the date you joined the Board of Directors) and the date
of the annual Stockholders Meeting. (Because such date for next year is not yet
determined, the date used for this calculation is the date of such meeting last
year, which was April 26). For the calendar year ending December 31, 2001, you
will be entitled to receive $15,452.05, which will become due and payable to you
on January 15, 2002.
2.Retainer for Committee Chair. You will be serving as the chairperson of the
Audit Committee. Accordingly, you will be entitled to a $4,000 annual retainer,
which will be prorated based on the number of days between July 25, 2001 (the
date you became Audit Committee Chair) and the date of the annual Stockholders
Meeting. For the calendar year ending December 31, 2001, you will be entitled to
receive $3013.69, which will become due and payable to you on January 15, 2002.
3.Stock Options. You received an initial grant of an option to purchase 10,000
shares of the Company's Common Stock and will be entitled to receive annual
grants of options to purchase 10,000 shares of the Company's Common Stock, in
accordance with Section 6.5 of the Invitrogen Corporation 1997 Stock Option
Plan.
Again, welcome to the Board of Directors. If you have any questions
regarding the compensation or the Board Compensation Package, please let me
know.
Very truly yours,
/s/ John A. Cottingham
John A. Cottingham
Vice President, General Counsel and Secretary
--------------------------------------------------------------------------------
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Exhibit 10.2
|
ALLIANCE CAPITAL MANAGEMENT L.P.
UNIT OPTION PLAN AGREEMENT
AGREEMENT, dated June 20, 2000 between Alliance Capital Management
L.P. (the "Partnership"), Alliance Capital Management Holding L.P. (“Alliance
Holding”) and Alfred Harrison (the "Participant"), an employee of the
Partnership or a subsidiary of the Partnership (an "Employee Participant").
The 1997 Option Committee (the "Administrator") of the Board of the
Board of Directors (the “Board”) of Alliance Capital Management Corporation, the
general partner of the Partnership and Alliance Holding, pursuant to the
Alliance Capital Management L.P. 1997 Long Term Incentive Plan, a copy of which
has been delivered to the Participant (the "Plan"), has granted to the
Participant an option to purchase units representing assignments of beneficial
ownership of limited partnership interests in Alliance Holding (the "Units") as
hereinafter set forth, and authorized the execution and delivery of this
Agreement.
In accordance with that grant, and as a condition thereto, the
Partnership, Alliance Holding and the Participant agree as follows:
1. Grant of Option. Subject to and under the terms and
conditions set forth in this Agreement and the Plan, the Participant is the
owner of an option (the "Option") to purchase the number of Units set forth in
Section 1 of Exhibit A attached hereto at the per Unit price set forth in
Section 2 of Exhibit A.
2. Term and Exercise Schedule. This Option shall not be
exercisable to any extent prior to June 20, 2001 or after June 20, 2010 (the
"Expiration Date"). Subject to the terms and conditions of this Agreement and
the Plan, the Participant shall be entitled to exercise the Option prior to the
Expiration Date and to purchase Units hereunder in accordance with the schedule
set forth in Section 3 of Exhibit A.
The right to exercise this Option shall be cumulative so that to the
extent this Option is not exercised when it becomes initially exercisable with
respect to any Units, it shall be exercisable with respect to such Units at any
time thereafter until the Expiration Date and any Units subject to this Option
which have not then been purchased may not, thereafter, be purchased
hereunder. A Unit shall be considered to have been purchased on or before the
Expiration Date if notice of the purchase has been given and payment therefor
has actually been received pursuant to Sections 3 and 13, on or before the
Expiration Date.
3. Notice of Exercise, Payment and Certificate. Exercise of
this Option, in whole or in part, shall be by delivery of a written notice to
the Partnership and Alliance Holding pursuant to Section 14 which specifies the
number of Units being purchased and is accompanied by payment therefor in cash.
Promptly after receipt of such notice and purchase price, the Partnership and
Alliance Holding shall deliver to the person exercising the Option a certificate
for the number of Units purchased. Units to be issued upon the exercise of this
Option may be either authorized and unissued Units or Units which have been
reacquired by the Partnership, a subsidiary of the Partnership, Alliance Holding
or a subsidiary of Alliance Holding.
4. Termination of Employment. This Option may be exercised by
an Employee Participant only while the Employee Participant is employed
full-time by the Partnership, except as follows:
(a) Disability. If the Employee Participant's
employment with the Partnership terminates because of Disability, the Employee
Participant (or his personal representative) shall have the right to exercise
this Option, to the extent that the Employee Participant was entitled to do so
on the date of termination of his employment, for a period which ends not later
than the earlier of (i) three months after such termination, and (ii) the
Expiration Date. "Disability" shall mean a determination by the Administrator
that the Employee Participant is physically or mentally incapacitated and has
been unable for a period of six consecutive months to perform the duties for
which he was responsible immediately before the onset of his incapacity. In
order to assist the Administrator in making a determination as to the
Disability of the Employee Participant for purposes of this paragraph (a), the
Employee Participant shall, as reasonably requested by the Administrator, (A)
make himself available for medical examinations by one or more physicians chosen
by the Administrator and approved by the Employee Participant, whose approval
shall not unreasonably be withheld, and (B) grant the Administrator and any
such physicians access to all relevant medical information concerning him,
arrange to furnish copies of medical records to them, and use his best efforts
to cause his own physicians to be available to discuss his health with them.
(b) Death. If the Employee Participant dies (i) while
in the employ of the Partnership, or (ii) within one month after termination of
his employment with the Partnership because of Disability (as determined in
accordance with paragraph (a) above), or (iii) within one month after the
Partnership terminates his employment for any reason other than for Cause (as
determined in accordance with paragraph (c) below), this Option may be
exercised, to the extent that the Employee Participant was entitled to do so on
the date of his death, by the person or persons to whom the Option shall have
been transferred by will or by the laws of descent and distribution, for a
period which ends not later than the earlier of (A) six months from the date of
the Employee Participant's death, and (B) the Expiration Date.
(c) Other Termination. If the Partnership terminates
the Employee Participant's employment for any reason other than death,
Disability or for Cause, the Employee Participant shall have the right to
exercise this Option, to the extent that he was entitled to do so on the date of
the termination of his employment, for a period which ends not later than the
earlier of (i) three months after such termination, and (ii) the Expiration
Date. "Cause" shall mean (A) the Employee Participant's continuing willful
failure to perform his duties as an employee (other than as a result of his
total or partial incapacity due to physical or mental illness), (B) gross
negligence or malfeasance in the performance of the Employee Participant's
duties, (c) a finding by a court or other governmental body with proper
jurisdiction that an act or acts by the Employee Participant constitutes (1) a
felony under the laws of the United States or any state thereof (or, if the
Employee Participant's place of employment is outside of the United States, a
serious crime under the laws of the foreign jurisdiction where he is employed,
which crime if committed in the United States would be a felony under the laws
of the United States or the laws of New York), or (2) a violation of federal or
state securities law (or, if the Employee Participant's place of employment is
outside of the United States, of federal, state or foreign securities law) by
reason of which finding of violation described in this clause (2) the Board
determines in good faith that the continued employment of the Employee
Participant by the Partnership would be seriously detrimental to the Partnership
and its business, (D) in the absence of such a finding by a court or other
governmental body with proper jurisdiction, such a determination in good faith
by the Board by reason of such act or acts constituting such a felony, serious
crime or violation, or (E) any breach by the Employee Participant of any
obligation of confidentiality or non-competition to the Partnership.
For purposes of this Agreement, employment by a subsidiary of the
Partnership shall be deemed to be employment by the Partnership. A "subsidiary"
of the Partnership shall be any corporation or other entity of which the
Partnership and/or its subsidiaries (a) have sufficient voting power (not
depending on the happening of a contingency) to elect at least a majority of its
board of directors, or (b) otherwise have the power to direct or cause the
direction of its management and policies.
5. No Right to Continued Employment. This Option shall not
confer upon the Participant any right to continue in the employ of the
Partnership or any subsidiary of the Partnership or to be retained as a
Director, and shall not interfere in any way with the right of the Partnership
to terminate the service of the Participant at any time for any reason.
6. Non-Transferability. This Option is not transferable other
than by will or the laws of descent and distribution and, except as otherwise
provided in Section 4, during the lifetime of the Participant this Option is
exercisable only by the Participant; except that a Participant may transfer this
Option, without consideration, subject to such rules as the Committee may adopt
to preserve the purposes of the Plan (including limiting such transfers to
transfers by Participants who are senior executives), to a trust solely for the
benefit of the Participant and the Participant's spouse, children or
grandchildren (including adopted and stepchildren and grandchildren) (each a
"Permitted Transferee").
7. Payment of Withholding Tax. (a) In the event that the
Partnership or Alliance Holding determines that any federal, state or local tax
or any other charge is required by law to be withheld with respect to the
exercise of this Option, the Participant shall promptly pay to the Partnership,
a subsidiary specified by the Partnership or Alliance Holding, on at least seven
business days' notice, an amount equal to such withholding tax or charge or (b)
if the Participant does not promptly so pay the entire amount of such
withholding tax or charge in accordance with such notice, or make arrangements
satisfactory to the Partnership and Alliance Holding regarding payment thereof,
the Partnership or any subsidiary of the Partnership may withhold the remaining
amount thereof from any amount due the Participant from the Partnership or the
subsidiary.
8. Dilution and Other Adjustments. The existence of this Option
shall not impair the right of the Partnership or Alliance Holding or their
respective partners to, among other things, conduct, make or effect any change
in the Partnership's or Alliance Holding’s business, any distribution (whether
in the form of cash, limited partnership interests, other securities or other
property), recapitalization (including, without limitation, any subdivision or
combination of limited partnership interests), reorganization, consolidation,
combination, repurchase or exchange of limited partnership interests or other
securities of the Partnership or Alliance Holding, issuance of warrants or other
rights to purchase limited partnership interests or other securities of the
Partnership or Alliance Holding, or any incorporation of the Partnership or
Alliance Holding. In the event of such a change in the partnership interests of
the Partnership or Alliance Holding, the Board shall make such adjustments to
this Option, including the purchase price specified in Section 1, as it deems
appropriate and equitable. In the event of incorporation of the Partnership
or Alliance Holding, the Board shall make such arrangements as it deems
appropriate and equitable with respect to this Option for the Participant to
purchase stock in the resulting corporation in place of the Units subject to
this Option. Any such adjustment or arrangement may provide for the
elimination of any fractional Unit or shares of stock which might otherwise
become subject to this Option. Any decision by the Board under this Section
shall be final and binding upon the Participant.
9. Rights as an Owner of a Unit. The Participant (or a
transferee of this Option pursuant to Sections 4 and 6) shall have no rights as
an owner of a Unit with respect to any Unit covered by this Option until he
becomes the holder of record of such Unit, which shall be deemed to occur at the
time that notice of purchase is given and payment in full is received under
Section 3 and 13. By such actions, the Participant (or such transferee) shall
be deemed to have consented to, and agreed to be bound by, all other terms,
conditions, rights and obligations set forth in the then current Amended and
Restated Agreement of Limited Partnership of Alliance Holding, and the
thencurrent Amended and Restated Agreement of Limited Partnership of the
Partnership. Except as provided in Section 9, no adjustment shall be made with
respect to any Unit for any distribution for which the record date is prior to
the date on which the Participant becomes the holder of record of the Unit,
regardless of whether the distribution is ordinary or extraordinary, in cash,
securities or other property, or of any other rights.
10. Administrator. If at any time there shall be no 1997 Option
Committee of the Board, the Board shall be the Administrator.
11. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
12. Interpretation. The Participant accepts this Option subject
to all the terms and provisions of the Plan, which shall control in the event of
any conflict between any provision of the Plan and this Agreement, and accepts
as binding, conclusive and final all decisions or interpretations of the Board
or the Administrator upon any questions arising under the Plan and/or this
Agreement.
13. Notices. Any notice under this Agreement shall be in writing
and shall be deemed to have been duly given when delivered personally or when
deposited in the United States mail, registered, postage prepaid, and addressed,
in the case of the Partnership, to the Secretary of Alliance Capital Management
Corporation at 1345 Avenue of the Americas, New York, New York 10105, or if the
Partnership should move its principal office, to such principal office, in the
case of Alliance Holding, to the Secretary of Alliance Capital Management
Corporation at 1345 Avenue of the Americas, New York, New York 10105, or if
Alliance Holding should move its principal office, to such principal office,
and, in the case of the Participant, to his last permanent address as shown on
the Partnership's records, subject to the right of either party to designate
some other address at any time hereafter in a notice satisfying the requirements
of this Section.
14. Sections and Headings. All section references in
this Agreement are to sections hereof for convenience of reference only and are
not to affect the meaning of any provision of this Agreement.
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management Corporation, its General Partner By: /s/
Dave H. Williams
--------------------------------------------------------------------------------
Dave H. Williams Chairman of the Board
ALLIANCE CAPITAL MANAGEMENT HOLDING L.P.
By: Alliance Capital Management Corporation, its General Partner By: /s/
Dave H. Williams
--------------------------------------------------------------------------------
Dave H. Williams Chairman of the Board /s/ Alfred Harrison
--------------------------------------------------------------------------------
Alfred Harrison
Exhibit A To Unit Option Plan Agreement Dated June 20,
between Alliance Capital Management L.P.,
Alliance Capital Management Holding L.P. and Alfred Harrison
1. The number of Units that the Participant is entitled to purchase pursuant to
the Option granted under this Agreement is 300,000. 2. The per Unit price to
purchase Units pursuant to the Option granted under this Agreement is $48.50 per
Unit. 3. Percentage of Units With Respect to Which the Option First
Becomes Exercisable on the Date Indicated
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1. June 20, 2001 20% 2. June 20, 2002 20% 3. June 20, 2003 20% 4.
June 20, 2004 20% 5. June 20, 2005 20%
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EXHIBIT 10.15
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (the "Amendment") is made and entered
into effective as of the 9th day of February, 2001, by and between
NetZero, Inc., a Delaware corporation (the "Company"), with principal corporate
offices at 2555 Townsgate Road, Westlake Village, CA 91361, and Frederic A.
Randall, Jr., whose address is 432 Isabella Terrace, Corona del Mar, California
92625 ("Employee"). All capitalized terms used but not otherwise defined herein
shall have the meanings given to them in that certain Employment Agreement by
and between the Company and Employee dated March 20, 1999 (the "Agreement" or
the "Employment Agreement").
WHEREAS, the Company and Employee desire to modify certain terms of the
Employment Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
1.The Term of the Employment Agreement is hereby extended through February 9,
2005.
2.Employee's Base Salary and Annual Bonus, as defined in the Employment
Agreement, shall be increased to include any increases to Employee's base salary
and annual bonus as approved by the Board.
3.Section 4.2 shall be replaced with the following:
4.2 Termination Without Cause. If Employee's employment is terminated
without "cause" as defined in Section 4.1(a), or if Employee is Involuntarily
Terminated (as defined below), the Company (or its successor, as the case may
be) shall pay to Employee (i) any accrued but unpaid Base Salary and vacation
through the date of termination, (ii) reimbursement for any expenses as set
forth in Section 3.5, through the date of termination and (iii) a severance
payment in an amount equal to four times Employee's Base Salary and Annual
Bonus, payable in one lump sum on the date of termination, subject to
withholding as may be required by law. In addition, if Employee's employment is
terminated without cause (other than if Employee is Involuntarily Terminated) or
if Employee's employment is terminated due to death or permanent disability,
Employee will be credited with an additional twelve (12) months of service
toward vesting in the Option shares in addition to the service he has accrued
toward vesting through the date of termination. If Employee is Involuntarily
Terminated, vesting of all options to purchase shares of the Company's Common
Stock and all restricted stock grants (subject to any vesting deferrals provided
in any restricted stock grant) will be accelerated in full and all such options
shall remain in effect for a one (1) year period following the date of
termination. As used in this Section 4.2, Employee shall be deemed
"Involuntarily Terminated" if (i) the Company or any successor to the Company
terminates Employee's employment without cause in connection with or following a
Corporate Transaction or Change of Control (as defined in the Company's 1999
Stock Incentive Plan); or (ii) in connection with or following a Corporate
Transaction or Change of Control there is (a) a decrease in Employee's title or
responsibilities (it being deemed to be a decrease in title and/or
responsibilities if Employee is not offered the position of Senior Vice
President and General Counsel of the Company or its successor as well as the
acquiring and ultimate parent entity, if any, following the Corporate
Transaction or Change of Control), (b) a decrease in pay and/or benefits from
those provided by the Company immediately prior to the Corporate Transaction or
(c) a requirement that Employee re-locate out of the greater Los Angeles
metropolitan area.
4.For the eighteen (18) month period following the termination of Employee's
employment with the Company (the "Noncompetition Period"), Employee shall not
directly engage in, or manage or direct persons engaged in, a Competitive
Business Activity (as defined below)
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anywhere in the Restricted Territory (as defined below); provided, that the
Noncompetition Period shall terminate if the Company terminates operations or if
the Company no longer engages in any Competitive Business Activity. The term
"Competitive Business Activity" shall mean the business of providing consumers
with dial-up Internet access services (free or pay). The term "Restricted
Territory" shall mean each and every county, city or other political subdivision
of the United States in which the Company is engaged in business or providing
its services. The Company agrees that providing services to a company or
entity that is involved in a Competitive Business Activity but which services
are unrelated to the Competitive Business Activity shall not be deemed a
violation of this Amendment.
5.Company and Employee agree that, for the purposes of damages to the Company
with respect to any breach of Section 4 above, the value of Employee's
obligations to the Company under Section 4 equal 37.5% of the severance payment
in paragraph 3 above. In the event that any amounts, benefits, and rights
payable to Employee upon a termination of employment under Section 4 (CIC
Benefits) would be deemed under Section 280G of the Internal Revenue Code (Code)
to constitute parachute payments, then the Employee's CIC Benefits shall be
payable either (a) in full, or (b) as to such lesser amount which would result
in no portion of such CIC Benefits being subject to excise tax under
Section 4999 of the Code, whichever of the foregoing amounts, taking into
account the applicable federal, state and local income taxes and the excise tax
imposed by Section 4999, results in the receipt by Employee on an after-tax
basis, of the greatest amount of benefits under Section 4 notwithstanding that
all or some portion of such benefits may be taxable under Section 4999 of the
Code. The determination as to whether and to what extent payments under
Section 4 are required to be reduced in accordance with the preceding sentence
shall be made at the Company's expense by PricewaterhouseCoopers LLP or by such
other nationally recognized certified public accounting firm, law firm, or
benefits consulting firm as the Compensation Committee of the Company's Board of
Directors may designate, subject to the reasonable approval of Employee.
PricewaterhouseCoopers LLP (or such other firm as may have been designated in
accordance with the preceding sentence) shall have the right to engage any
service provider of their choosing to provide any assistance or services
necessary in making such determination.
6.If any provision of this Agreement is held by an arbitrator or a court of
competent jurisdiction to conflict with any federal, state or local law, or to
be otherwise invalid or unenforceable, such provision shall be construed in a
manner so as to maximize its enforceability while giving the greatest effect as
possible to the parties' intent. To the extent any provision cannot be construed
to be enforceable, such provision shall be deemed to be eliminated from this
Agreement and of no force or effect and the remainder of this Agreement shall
otherwise remain in full force and effect and be construed as if such portion
had not been included in this Agreement.
7.This Amendment shall be deemed incorporated into the Agreement and, except as
specifically modified by this Amendment, the Agreement shall remain unchanged
and in full force and effect. The Agreement shall be binding upon successors and
assigns.
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In witness whereof, the parties have executed this Amendment to be effective
as of the first date written above.
NETZERO, INC.
By: /s/ MARK R. GOLDSTON
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Mark R. Goldston
Chief Executive Officer
EMPLOYEE
/s/ FREDERIC A. RANDALL, JR.
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Frederic A. Randall, Jr.
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AMENDMENT TO EMPLOYMENT AGREEMENT
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Exhibit 10.1
SEPARATION AGREEMENT AND GENERAL RELEASE
This Agreement is entered into between Richard L. King (“Mr. King”) and Labor
Ready, Inc. (together with its subsidiaries, the “Company”) as of this 9th day
of October, 2001, in order to sever their employment relationship. In
consideration of the mutual promises below, the Company and Mr. King agree as
follows:
1. Termination of Employment. Mr. King’s employment with the
Company, and that certain Executive Employment Agreement between the Company and
Mr. King dated May 16, 2000 (the “Employment Agreement”), were terminated
effective as of September 20, 2001.
2. Compensation. Subject to Mr. King’s compliance with all of the
terms and conditions of this Agreement and as a material inducement to Mr. King
to enter into this Agreement, the Company shall pay Mr. King the sum of One
Hundred Thousand Dollars ($100,000.00) on or before seven (7) days after mutual
execution hereof.
3. Continuation of Health Insurance. Subject to Mr. King’s
compliance with all of the terms and conditions of this Agreement and as a
material inducement to Mr. King to enter into this Agreement, the Company shall
continue to provide the health insurance coverage currently provided to Mr. King
and his wife, until the earlier of (a) the date Mr. King secures employment with
another employer, or (b) one (1) year after the date hereof.
4. Termination of Stock Options. The parties acknowledge
that the following represent all stock options granted Mr. King by the Company
to date, and that no such options have heretofore been exercised:
Option Grant
Grant Date
350,000 shares
May 16, 2000
150,000 shares
August 1, 2000
12,000 shares
February 21, 2001
All said options shall be deemed terminated and of no further force or effect as
of the date hereof.
5. Additional Terms and Conditions. Mr. King expressly agrees to
all of the following terms and conditions:
a)
Mr. King shall not issue or make any written or verbal statement to anyone which
addresses the Company or his employment with the Company in a negative or
derogatory manner.
b)
Mr. King shall comply with all of the surviving covenants and provisions set
forth in his Employment Contract.
c)
Mr. King shall reasonably cooperate with the Company on an as-requested basis in
any pending matters which in the Company’s reasonable judgment require Mr.
King’s involvement.
6. Waiver and Release by Mr. King. Mr. King expressly
acknowledges that the payment and benefits provided for hereinabove constitutes
sufficient consideration for any and all compensation and benefits due Mr. King
as well as Mr. King’s promises set forth herein and the settlement, waiver,
release and discharge of any and all claims arising under the Employment
Agreement, common law, any federal, state and local statue or regulation, or
otherwise. Mr. King represents that he has not filed any complaint, charge or
action against the Company, its officers, agents or employees with any local,
state or federal agency or court arising from his employment relationship with
the Company. Mr. King represents that he will not seek damages, monetary or
otherwise, or any other type of relief through any such complaint at any time in
the future. Mr. King, for himself and his successors and assigns, waives,
releases and forever discharges the Company, its officers, directors, agents and
employees of and from any and all claims, causes of action, rights, demands,
debts, damages and actions of whatever nature arising from or relating to Mr.
King’s employment relationship with the Company, including the termination of
such relationship and the Employment Agreement, and also including any cause of
action pertaining to employment discrimination based on age, race, creed, color,
religion, sex, national origin or disability.
7. Opportunity to Review; Revocation. Mr. King expressly
acknowledges that the Company has encouraged and given him the opportunity to
thoroughly discuss all aspects of this Agreement with his attorney or other
advisor before signing and that he has thoroughly discussed or in the
alternative has freely elected to waive any further opportunities to thoroughly
discuss this Agreement with his attorney or other advisor. Mr. King understands
that he has fourteen (14) days to review this Agreement and determine whether or
not to sign. Signature prior to the expiration of 14 days waives the remaining
consideration period. Mr. King has seven (7) days from the date this Agreement
is executed to revoke the waiver of any claim under the Age Discrimination in
Employment Act. If Mr. King does not revoke the Agreement within the seven-day
period, the Agreement shall become fully effective and the payment terms
referred to herein shall become effective. If Mr. King does revoke this
Agreement, the Company’s payment obligation under this Agreement shall be null
and void.
8. Knowing and Voluntary. Mr. King expressly acknowledges that
he understands all of the provisions of this Agreement, and that he is knowingly
and voluntarily entering into this Agreement.
9. Governing Law. This Agreement is made and entered into in
the State of Washington and shall in all respects be interpreted, enforced and
governed under the laws of this state.
10. Severability. Should any provision of this Agreement be
declared or be determined by any court of competent jurisdiction to be illegal,
invalid, void or unenforceable, the legality, validity and enforceability of the
remaining parts, terms or provisions shall not be affected thereby and any such
illegal, unenforceable or invalid part, term or provision shall be deemed to be
revised in the legal, enforceable and valid manner which most closely reflects
the intention of the parties.
11. Entire Agreement. This Agreement, along with all of the
ongoing covenants of the Employment Contract, set forth the entire agreement
between the parties and supersede any and all prior agreements or understandings
between these parties pertaining to the subject matter hereof.
LABOR READY, INC.
By:
Joseph P. Sambataro, Jr
Richard L. King
President and Chief Executive Officer
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INSTALLMENT PROMISSORY NOTE
$2,250,000.00 Hackensack, New Jersey
Date: Dec. 19, 2000
FOR VALUE RECEIVED, the undersigned (hereinafter called the "Debtor")
promises to pay, without offset, defense or counterclaim, to the order of
PINNACLE CAPITAL CORPORATION (hereinafter called "PCC"), at 411 Hackensack
Avenue, Hackensack, New Jersey 07601, or at such other place as may be
designated in writing by the holder of this Note, the principal sum of Two
Million Two Hundred Fifty Thousand Dollars and 00/100 ($2,250,000.00) with
interest thereon in eighty-four (84) successive monthly installments (which
monthly installments are inclusive of interest) as follows: one (1) installment
in the amount of $36,430.00 (the "Advance") due upon execution of this Note,
which will be applied in inverse order only against the last installment of
principal and interest provided that the undersigned has not defaulted on this
Note or Security Agreement, followed by eighty-three (83) monthly installments
each in the amount of $36,430.00 commencing on February 9, 2001, with like
monthly installments being payable on a like date each month thereafter. Each
monthly installment shall first be applied to interest and then in reduction of
the principal.
The Debtor has on this date executed and delivered to PCC a Security
Agreement of even date pursuant to which Debtor has granted to PCC a security
interest in certain equipment as collateral security for the payment of this
Note (the "Security Agreement"). If the Debtor fails to pay any installment due
under this Note more that five (5) business days after written notice of
non-payment or is in default under a material term of the Security Agreement or
under any other instrument or agreement between PCC and the Debtor or if any
representation or warranty by the Debtor to PCC, whether in any application,
financial statement, the Security Agreement, or any other agreement between
Debtor and PCC is materially untrue, then and in any such event, PCC at its
option, may declare this Note and any other obligation of the Debtor to PCC
immediately due and payable without notice or demand.
Presentment, demand for payment, notice of dishonor and protest are hereby
waived.
PCC may renew or extend this Note, release any guarantor hereof or waive
or modify any provision hereof, without affecting the obligation of the Debtor.
PCC may, at its election and subject to prior exercise in its discretion
of its right of acceleration, accept payment of arrears; and if any defaulted
payment is more than five days in arrears, the Debtor shall pay as liquidated
damages, in addition to other amounts due, a late charge equal to two percent
(2%) per month of each defaulted payment so in arrears, but only to the extent
permitted by law. After the expressed or declared maturity of this Note, the
Debtor shall pay interest on the unpaid principal balance at two percent (2%)
per month, but only to the extent permitted by law. In the event that PCC
institutes an action upon this Note or under the Security Agreement, the Debtor
shall pay, in addition to unpaid principal, interest and late charges, the
expenses of collection incurred by PCC, including reasonable attorney's fees.
The undersigned, if more than one, shall be jointly and severally liable
hereunder.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
It is understood and agreed that in no event and upon no contingency shall
the Debtor be required to pay interest in excess of the rate allowed by the laws
of the State of New York. The intention of the parties being to conform strictly
to the usury laws now in force, the provision for interest herein shall be held
subject to reduction to the amount allowed under said usury laws as now or
hereafter construed by the courts having jurisdiction.
PCC shall have the right to fill in any blanks related to non-essential
terms left in this Note or in the Security Agreement; but this Note and such
Security Agreement may not be otherwise modified or discharged, in whole or in
part, and no right or remedy of PCC hereunder or under any other agreement may
be waived, except by written agreement signed by PCC. All rights and benefits of
PCC hereunder shall inure to the benefit of the holder of this Note.
DISC GRAPHICS, INC.
By: _______________________________
Title:________________________________
No. 129
SECURITY AGREEMENT
Agreement dated January 5, 2001 between DISC GRAPHICS, INC., a CORPORATION
under the laws of the State of DELAWARE (herein called "Debtor") and PINNACLE
CAPITAL CORPORATION having its principal place of business at 411 Hackensack
Avenue, Hackensack, New Jersey 07601 as the Secured Party, (herein called
"Secured Party").
FOR VALUABLE CONSIDERATION and to secure an indebtedness of the Debtor to
Secured Party in the principal amount of $2,250,000.00 plus interest thereon
(the "Loan") as evidence by an Installment Promissory Note of even date herewith
(herein called the "Note") and any renewal, extensions or replacements thereof
and, further, to secure the obligations of the Debtor under this Agreement and
any other obligation of the Debtor to Secured Party which is now in existence or
may hereafter come into existence, the Debtor hereby grants to Secured Party a
security interest in the property listed on the annexed Equipment Schedule A,
together with all equipment parts, attachments, present and future accessions,
accessories, additions, substitutions and all replacements thereto or thereof or
hereafter attached to, placed upon, or used in connection with, the said
property and all proceeds of the foregoing, including insurance proceeds (all
herein collectively called the "Collateral").
1. DEBTOR'S WARRANTIES, REPRESENTATIONS AND COVENANTS: Debtor hereby
warrants, represents and agrees (a) that the Collateral is lawfully owned by
Debtor, free and clear of all other liens, encumbrances and security interests,
and Debtor, will warrant and defend title to the same against the claims and
demands of all persons; (b) that Debtor has not granted, and will not grant, to
anyone other than Secured Party any security interest in the Collateral and,
except for Financing Statements in favor of Secured Party, no Financing
Statements or other instrument affecting the Collateral, or rights therein is on
file in any public filling office; (c) that the Collateral is and shall be
retained in Debtor's possession at 10 Gilpin Avenue, Hauppauge, New York 11788;
(d) that the Collateral is and will be used only for business or commercial
purposes; (e) that the Collateral is and will remain personal property; (f) that
if the Collateral is attached to real estate or if the Collateral is or may
become subject to a prior interest in favor of any party having an interest in
the real estate, Debtor, on demand of Secured Party, will furnish Secured Party
with a writing by which any and all parties having such prior interest
subordinate or disclaim their rights and priorities in favor of Secured Party's
security interest provided herein; (g) that the Debtor is duly organized and
validly existing in good standing under the laws of the state of its
incorporation or organization and has full power to own its assets and to carry
on its business as now being conducted; (h) that this Agreement and the Note
have been validly authorized, duly executed and delivered and constitute the
valid and legally binding obligations of the Debtor, enforceable in accordance
with their respective terms and are not violative of, or create a default under,
its Articles or Organization, Charter, By-laws, or under any order, writ,
injunction or decree of any court or governmental instrumentality or agreement
to which Debtor is a party.
2. NO WARRANTY AND UNCONDITIONAL OBLIGATION: DEBTOR ACKNOWLEDGES THAT
THE SECURED PARTY HAS MADE NO WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ITS MERCHANTABILITY, SUITABILITY,
DESIGN, CAPACITY OR ITS FITNESS FOR ANY PARTICULAR PURPOSE. All payments due
under the Note shall be made without notice and demand and Debtor's obligation
to make any payment thereunder or hereunder shall be absolute and unconditional.
Debtor shall not be entitled to any reduction or set-off against such payment,
nor, except as otherwise expressly provided herein, shall this Security
Agreement terminate, or the obligations of Debtor be otherwise affected by
reason of any defect in, lack of fitness for use of, damage to, loss of
possession or use of the Collateral, or for any other cause, it being the
intention of the parties hereto that all amounts payable by Debtor hereunder and
under the Note shall continue to be payable in all events in the manner and at
the times provided in the Note and hereunder.
3. INSURANCE: Debtor agrees that from the date hereof it will, at its
sole cost and expense, keep the Collateral insured against all risks of physical
loss or damage including loss by fire, theft, wind and explosion with extended
coverage for not less than the greater of the indebtedness or the Collateral's
full replacement cost and that it will carry personal injury liability and
property damage liability insurance in such amounts and covering such risks as
Secured Party may reasonably require. All said insurance shall be in form and
with companies satisfactory to Secured Party. The loss under all such policies
against physical loss or damage shall be payable to Secured Party or its
assignee and the Debtor as their interests may appear and Secured Party or its
assignee shall be named as an additional insured under all liability insurance
policies. Such policies shall provide that no less than thirty (30) days notice
shall be given by the insurance company to Secured Party or its assignee prior
to any cancellation or alteration of the policies and that the coverage afforded
shall not be impaired or invalidated against Secured Party or its assignee on
account of any breach of condition or warranty contained in any policy or
application therefor by the Debtor or any reason of any action or inaction of
the Debtor. The insurance policies and all renewals thereof, or Certificates in
lieu thereof, shall be promptly delivered by the Debtor to Secured Party and
shall be held by Secured Party until the indebtedness secured hereby is paid.
Debtor hereby assigns to Secured Party all monies, not in excess of the
indebtedness secured hereby and the obligations contained herein, which may
become payable under such insurance including the return of any unearned
premiums, and directs any insurer to make payment directly to Secured Party and
authorizes Secured Party to apply such monies in payment against the
indebtedness secured hereby and the obligations contained herein and to remit
any excess to the Debtor. If the Collateral is damaged, other than being totally
destroyed, and such damage is repairable and covered by insurance, all loss
proceeds payable by the insurance company or companies shall be made available
by Secured Party to be applied to the repair and/or replacement of such damage
to the Collateral provided Debtor is not in default of its obligations under
this Agreement or in the payment of any of the indebtedness secured hereby and
provided further than Security Party receives such assurances as it may in its
sole discretion require that (i) such proceeds will be utilized for such repair
or replacement and that the Debtor has advanced such sums as may be required for
the repair or replacement to the extent that the insurance proceeds are
insufficient therefor; (ii) all replacements shall be of the same or a later
model than the item replaced and all repairs will be of first class workmanship
and (iii) the Collateral will be free of mechanics' liens and title to
replacements will vest in Debtor free of liens and encumbrances except for the
first security interest of Secured Party therein. Any excess insurance proceeds
shall be applied against the indebtedness secured hereby and the obligations
contained herein. The Debtor appoints Secured Party as its attorney-in-fact to
endorse any draft, make any claim under such insurance and execute any proof of
claim and to do all other things necessary and required to effect a settlement
under any insurance policies. In the event of a failure by Debtor to procure and
maintain such insurance, Secured Party is hereby authorized and empowered (but
not obligated) to do so and the premiums paid for same shall be a lien against
the Collateral, added to the amount of the indebtedness secured hereby and
payable on demand with interest at the lessor of 2% per month or the maximum
legal rate.
4. RISK OF LOSS AND MAINTENANCE OF COLLATERAL: All risks of loss,
theft or destruction of the Collateral shall be borne by the Debtor. Debtor
agrees to keep the Collateral in first class operating condition and appearance
at all times. Upon any failure of the Debtor to comply with the foregoing,
Secured Party, in addition to its other rights and remedies hereunder, may, but
shall not be obligated to, cause repairs to be made to the Collateral, the cost
of which shall be a lien against the Collateral, added to the amount of the
indebtedness secured hereby and payable on demand with interest at the lessor of
2% per month or the maximum legal rate.
5. USE OF COLLATERAL AND OTHER DEBTOR OBLIGATIONS: Debtor agrees that
it will not use the Collateral in violation of any statute or ordinance or
applicable insurance policy and will promptly pay all taxes, assessments,
license fees and other public or private charges levied or assessed against the
Collateral and this obligation shall survive the termination of this Agreement;
that Debtor will not permit any lien, charge, encumbrance or security interest
of any kind whatsoever (other than Secured Party's security interest) to accrue
upon or attach to the Collateral; that Debtor will not remove the Collateral
from its location as above set forth without the prior written consent of
Secured Party which shall not be unreasonably withheld; that if any part of the
Collateral is subject to a certificate of title law, Debtor will cause Secured
Party's security interest to be noted thereon and promptly deliver such
certificate of title to Secured Party, that Debtor will not secrete, sell,
transfer, dispose of, attempt to dispose of, substantially modify or abandon the
Collateral or any part thereof; that Debtor will sign and deliver to Secured
Party such Financing Statements and Continuation Statements, in form acceptable
to Secured Party, as Secured Party may, from time to time, reasonably request,
or as are reasonably necessary in the opinion of Secured Party, to establish and
maintain a valid security interest in the Collateral and Debtor will pay any
relative filing fees or costs with respect thereto and for prior lien searches;
and that Debtor hereby constitutes and appoints Secured Party its true and
lawful attorney-in-fact to execute and deliver any financing statement or other
document which may be required to establish and/or maintain Secured Party's
security interest in the Collateral and/or the additional collateral security
covered by the provisions of paragraph 7 below. Debtor shall, at its own cost
and expense, protect and defend its title to the Collateral and defend all
actions and claims which may be asserted against the Collateral and its use
thereof. In the event of a failure by Debtor to pay any taxes, assessments,
license fees and other public or private changes levied or assessed against the
Collateral, Secured Party, in addition to its other rights and remedies
hereunder, may, but shall not be obligated to, make such payments, and the
amounts so paid shall be a lien against the Collateral added to the amount of
the indebtedness secured hereby and payable on demand with interest at the
lesser of 2% per month or the maximum legal rate. Debtor will allow Secured
Party and its representatives free access to the Collateral at all times for
purposes of inspection or repair. Debtor will furnish to Secured Party unaudited
quarterly financial statements within thirty (30) days after the end of its
first three quarters in each fiscal year and its Form 10K or a certified
Financial Statement prepared by an independent certified public accountant
reasonably acceptable to Secured Party within ninety (90) days after the close
of its fiscal year, all of which shall be true and correct in all respects,
shall be prepared in accordance with generally accepted accounting principles
and shall be supplied until the indebtedness secured hereby is paid in full.
6. DEFAULT: Debtor shall be in default under the terms of this
Agreement and the Note upon the occurrence of any of the following: (a) if the
Debtor shall fail to make any payment under the Note or this Agreement when due;
(b) if the Debtor fails to maintain in force the required insurance or removes,
sells, transfers, encumbers, sublets or parts with possession of the Collateral
or any part thereof or attempts to do any of the foregoing; (c) if the Debtor
shall fail to perform or comply with any of the other terms, covenants, or
conditions of this Agreement of the Note and any such failure shall continue for
a period ten (10) days after written notice to Debtor; (d) if the Collateral or
any part hereof be seized or levied upon under legal process; (e) if the Debtor
defaults under or breaches any of the terms, covenants or condition of any other
Security Agreement, Conditional Sales Contract, Lease, Note or Agreement it may
now have or hereafter make with Secured Party; (f) if Debtor ceases doing
business as a going concern or makes or sends notice of an intended Bulk Sale or
makes an assignment for the benefit of creditors; (g) if any proceedings are
commenced by Debtor or are commenced against Debtor and are not dismissed within
sixty (60) days under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, receivership, liquidation or dissolution law or statute of
any jurisdiction, whether now or hereafter in effect; (h) if a receiver, trustee
or conservator be appointed for any of Debtor's property, or (i) if any
quarterly representation or statement made herein by Debtor or contained in any
separate statement in writing in connection herewith, including, without
limitation, any financial statements furnished to Secured Party by or on behalf
of Debtor, is untrue or incomplete in any material respect.
Upon the occurrence of any default, the indebtedness secured hereby and
all other obligations then owing by the Debtor to Secured Party shall, if
Secured Party so elects, become immediately due and payable and Secured Party
shall have the rights and remedies of a secured party under the Uniform
Commercial Code and any other applicable laws, and it shall then be lawful for,
and Secured Party is hereby authorized and empowered, with the aid and
assistance of any person or persons, to enter any premises were the Collateral
or any part thereof is, or may be placed, and to assemble and/or remove same
and/or to render if unusable and sell and dispose of such Collateral at one or
more public or private sales upon at least five business (5) days written notice
to Debtor of such sale. The proceeds of each such sale shall be applied by
Secured Party toward the payment of expenses of retaking, including
transportation, storage, refurbishing, preparing for such sale, advertising,
selling and all related charges and disbursements in connection therewith and
the indebtedness and interest secured hereby. Should the proceeds of any such
sale be insufficient to fully pay all the items above mentioned, Debtor hereby
covenants and agrees to pay any deficiency to Secured Party and if Secured Party
employs counsel for the purpose of effecting collection of any monies due
hereunder (whether or not Secured Party has retaken the Collateral or any part
thereof) or for the purpose of recovering the Collateral or for the purpose of
protecting Secured Party's interest because of any default of Debtor, Debtor
agrees to pay reasonable attorneys' fees and such attorneys; fees shall be a
lien on the Collateral herein and the proceeds thereof. Secured Party may
require Debtor to assemble the Collateral and make it available to Secured Party
at a price to be designated by Security Party which is reasonably convenient to
both parties. All rights and remedies hereunder are cumulative and not exclusive
and a waiver by Secured Part of any breach by Debtor of the terms, covenants,
and conditions hereof shall not constitute a waiver of future breaches or
defaults and no failure or delay on the part of Secured Party in exercising any
of its options, powers, rights or remedies or partial or single exercise
thereof, shall constitute a waiver thereof.
7. ADDITIONAL SECURITY: As additional collateral security for the
Debtor's obligations under the Loan and any other obligation of the Debtor to
Secured Party, Debtor hereby grants to Secured Party a security interest in all
machinery and equipment covered by any other lease, security agreement or
conditional sales contract (collectively the "agreement") between the Debtor and
Secured Party whether such agreement is now in existence or may hereafter come
into existence and Debtor hereby assigns to Secured Party all of its right,
title and interest in and to any surplus money to which Debtor may be entitled
upon the sale of any machinery and equipment covered by such agreement.
Notwithstanding anything above to the contrary, the benefit of the
foregoing additional security provision shall apply to Secured Party and its
assignee holding the Note and this Agreement only to the extent that Secured
Party or such assignee is also the holder of such other agreement(s).
8. WAIVER OF JURY TRIAL: Debtor hereby waives the right of a jury
trial in any action or proceeding by either party, or assigns, arising out of
the matter of this Agreement, the Collateral, or the Notice or other obligations
secured hereby.
9. CHANGES AND MODIFICATIONS: This Agreement may not be changed,
modified or discharged, in whole or in part, and no right or remedy of Secured
Party hereunder or under the Note or as a secured party under the Uniform
Commercial Code may be waived by Secured Party unless such change, modification,
discharge or waiver is in writing and signed on behalf of Secured Party by one
of its duly authorized officers. All prior representations and agreements are
merged in this Agreement.
10. AUTHORIZATION TO SECURED PARTY: Secured Party is hereby authorized
and empowered to date this Agreement and to fill in blank spaces in accordance
with the actual terms of the related transaction.
11. ASSIGNMENT: Secured Party may assign this Agreement and the Note
or grant a security interest therein and in the event of any such assignment,
the right of the assignee to receive all payments due hereunder and under the
Note, as well as any other rights of the assignee, shall not be subject to any
defense, set-off or counterclaim which Debtor may have against Secured Party. On
receipt of notice of such assignment, the Debtor shall promptly acknowledge its
obligations hereunder and under the Note to the assignee and shall make all
payments due thereunder as such assignee may direct. Following any such
assignment, the term "Secured Party" shall be deemed to include or refer to such
assignee and any successor assignee.1
12. MISCELLANEOUS: Notices or other communications hereunder shall be
given in writing and mailed to the other party at the address specified herein
or to such changed address as either party may give the other notice of in
writing. Forbearance or indulgence by Secured Party in any regard shall not
constitute a waiver of the applicable covenant or condition. Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. The
paragraph headings are for convenience of reference only and not a part of this
Agreement.**
13. GOVERNING LAW: This Agreement and the rights and obligations of
Secured Party and Debtor hereunder shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, Debtor has caused this Agreement to be executed and
delivered as of the day and year first above written.
DISC GRAPHICS, INC.
(Debtor)
By: ____________________ Title: President & CEO Address: 10 Gilpin Avenue
Hauppauge, NY 11788
ACCEPTED:
Secured Party: PINNACLE CAPITAL CORPORATION
By: ________________________________
Title: ________________________________
1. See Rider Attached Hereto and made a part of hereof.
** Any notices required under this Agreement must be sent by certified mail
return receipt requested or by reputable overnight courier, and are effective
upon the earlier of actual receipt or three (3) business days if mailed or the
next business day if sent via courier.
Rider to Security Agreement Dated December 19, 2000 (the "Agreement") between
Disc Graphics ("Debtor") and Pinnacle Capital Corporation ("Secured Party")
1. Debtor has the right to assign the Agreement to a person or entity which
acquires all or substantially all of the Debtor's assets, with the consent of
the Secured Party, which consent shall not be unreasonably delayed, conditioned
or withheld. It shall be reasonable for Secured Party to delay, condition or
withhold its consent to any proposed assignment by Debtor unless and until the
proposed assignee or the combined entity of Debtor and assignee meets financial
criteria or credit standards ordinarily used by Secured Party to evaluate a
borrower's credit worthiness in similar circumstances. In the event Secured
Party delays, conditions or withholds its consent to a proposed assignment for
any reason other than proposed assignee's failure to meet Secured Party's
financial criteria or credit standards consistently applied, and Debtor
nevertheless proceeds with the proposed transaction with the assignee, Secured
Party may accelerate the indebtedness secured by the Agreement which shall be
payable at the closing of the proposed transaction without the prepayment
surcharges set forth in the letter dated December 18, 2000.
PINNACLE CAPITAL CORPORATION DISC GRAPHICS, INC.
By: ____________________________ By: _____________________________ Title:
____________________________ Title: President & CEO Date: Date: January 5,
2001 |
EXHIBIT 10.1
MINERALS TECHNOLOGIES INC.
SAVINGS AND INVESTMENT PLAN
(As amended and restated effective as of
April 26, 2001)
--------------------------------------------------------------------------------
MINERALS TECHNOLOGIES INC.
SAVINGS AND INVESTMENT PLAN
(As amended and restated effective as of April 26, 2001)
TABLE OF CONTENTS
Page
I.
PURPOSES
1
II.
DEFINITIONS
1
III.
EFFECTIVE DATE
7
IV.
ELIGIBILITY
7
V.
PARTICIPATION
8
VI.
CONTRIBUTIONS
8
VII.
INVESTMENT OF FUNDS
16
VIII.
CREDITS TO MEMBERS' ACCOUNTS
20
IX.
SUSPENSION OF CONTRIBUTIONS
20
X.
WITHDRAWALS
21
XI.
SETTLEMENT UPON TERMINATION OF EMPLOYMENT
23
XII.
SAVINGS AND INVESTMENT PLAN COMMITTEE
29
XIII.
TRUST AGREEMENT
32
XIV.
ASSOCIATE COMPANIES
32
XV.
VOTING RIGHTS
33
XVI.
ADMINISTRATIVE COSTS
34
XVII.
NON-ALIENATION OF BENEFITS
34
XVIII.
NOTICE
35
XIX.
INVESTMENTS
35
XX.
TREASURY APPROVAL
35
XXI.
MISCELLANEOUS
35
XXII.
TERMINATION, AMENDMENT OR SUSPENSION OF THE PLAN
37
XXIII.
PLAN MERGERS AND CONSOLIDATIONS
37
XXIV.
CLAIMS PROCEDURE
38
XXV.
TOP-HEAVY RULE
39
XXVI.
LOAN PROVISIONS
40
SCHEDULE A
43
--------------------------------------------------------------------------------
MINERALS TECHNOLOGIES INC.
SAVINGS AND INVESTMENT PLAN
(As amended and restated effective as of April 26, 2001)
I. PURPOSES
The purposes of this Plan are to foster thrift on the part of the eligible
employees by affording them the opportunity to make regular savings and
investments through payroll deductions in order to provide the opportunity for
additional security at retirement, and also to provide them with a proprietary
interest in the continued growth and prosperity of the Company. As an incentive,
the Company will match a portion of such savings by regular contributions as
provided in the Plan.
II. DEFINITIONS
Wherever used in this Plan:
> A. "Account" means the aggregate interest of a Member in the Plan.
> B. "After-Tax Contributions" means contributions made by a Member pursuant
> to Section VI.A. hereof.
> C. "Associate Company" means any corporation of which Minerals
> Technologies Inc. owns directly or indirectly at least 80% of the issued and
> outstanding shares of stock, which, with the consent of the Company, adopts
> this Plan pursuant to the provisions of Section XIV. hereof, and when action
> is required to be taken hereunder by an Associate Company such action shall be
> authorized by its Executive Committee or its Board of Directors.
> D. "Business Day" means each day of each Plan Year on which the New York
> Stock Exchange is open for the transaction of business.
> E. "Code" means the Internal Revenue Code of 1986, as from time to time
> amended.
> F. "Committee" means the Savings and Investment Plan Committee hereinafter
> provided for in Section XII. hereof.
> G. "Company" means Minerals Technologies Inc., a Delaware corporation, and
> any successor corporation, and when action is required to be taken hereunder
> by the Company, such action shall be authorized by the Executive Committee or
> the Board of Directors of the Company.
> H. "Disability" means any medically determinable physical or mental
> impairment that renders a Member unable to engage in any substantial gainful
> activity and
>
> 1
--------------------------------------------------------------------------------
> which can be expected to result in death or to be of long-continued and
> indefinite duration, within the meaning of section 72(m)(7) of the Code.
> Generally, a Member who is approved for long-term disability by an Employer's
> long-term disability insurance carrier will be considered "Disabled".
> I. "Employee" means a person who is employed in the service of an Employer
> within the United States of America or any of its territories or possessions,
> or who is a United States citizen employed in the service of an Employer
> outside the continental limits of the United States of America, except a
> person who is included in a unit of employees covered by a collective
> bargaining agreement that does not provide for coverage of such person under
> the Plan if there is evidence that retirement benefits were the subject of
> good faith bargaining. A person who is a United States citizen or a
> Participating Resident Alien and who is employed outside the continental
> limits of the United States of America in the service of a foreign subsidiary
> (including foreign subsidiaries of such foreign subsidiary) of the Company
> shall be considered, for all purposes of this Plan, as employed in the service
> of the Company, if (1) the Company has entered into an agreement under section
> 3121(l) of the Code which applies to the foreign subsidiary of which such
> person is an employee, and (2) contributions under a funded plan of deferred
> compensation, whether or not a plan described in section 401(a), 403(a), or
> 405(a) of the Code, are not provided by any other person with respect to the
> remuneration paid to such individual by the foreign subsidiary. In addition,
> effective January 1, 1997, any person performing services for the Company as a
> Leased Employee shall, for purposes of the Plan, continue to be an employee of
> such leasing organization, and not of the Company, notwithstanding the
> provisions of the Code requiring that such person may have to be counted as an
> employee of the Company in order to perform certain plan qualification tests
> as contained therein. The term "Employee" shall also not include any person
> who is performing services for the Company pursuant to an agreement, contract,
> or arrangement under which said individual is designated, characterized, or
> classified as an independent contractor, consultant, or any category or
> classification other than an employee without regard to whether any
> determination by an agency, governmental or otherwise, or court concludes that
> such classification or characterization was in error.
> J. "Employer" means the Company or any Associate Company. For purposes of
> sections 410 and 411 of the Code, "Employer" also shall mean any corporation
> or other trade or business that is treated under the first sentence of section
> 414(b) or under section 414(c) of the Code as constituting the same "employer"
> as the Company or an Associate Company, with respect to any period of such
> affiliated status.
> K "Employer Matching Contributions" means contributions made by an
> Employer pursuant to Section VI.B. hereof.
>
> 2
--------------------------------------------------------------------------------
> L. "Hours of Service" means all hours for which an Employee is directly or
> indirectly paid, or entitled to payment (including back pay for periods for
> which such awards pertain), by an Employer (or any company which is a member
> of the same controlled group of corporations, within the meaning of section
> 1563(a) of the Code as an Employer or any trade or business whether or not
> incorporated which is under common control of an Employer as determined under
> regulations prescribed under section 414 of the Code at the time of such
> service) for the performance of duties, or for reasons other than the
> performance of duties, such as vacation, injury, accident, sickness,
> short-term Disability or authorized leave of absence. In the case of a payment
> which is made or due on account of a period during which an Employee performs.
> no duties, Hours of Service will be determined in accordance with the
> appropriate Department of Labor regulations (section 2530.200b-2(b) and (c)).
> M. "Leased Employee" means, effective as of January 1, 1997, any person
> other than an Employee, who, pursuant to an agreement between an Employer and
> any other person ("leasing organization") performs services for the Employer
> (or the Employer and any related persons or entities under common control
> determined in accordance with section 414(n)(6) of the Code) on a
> substantially full time basis for a period of at least one year, and such
> services are performed under the primary direction or control of the
> recipient. Any person performing services for an Employer as a Leased Employee
> shall, for purposes of the Plan, not be an employee of the Employer,
> notwithstanding amendments to the Code which require that such person may have
> to be counted as an employee of the Employer in order to perform certain plan
> qualification tests as contained therein.
> N. "Member" means an Employee who participates in the Plan in accordance
> with the provisions of Section V. hereof, or a former participant in the Plan
> who retains an Account therein.
> O. "Member Contributions" means the After-Tax Contributions and Qualified
> Deferred Earnings Contributions made to the Plan pursuant to Section VI.A
> hereof.
> P. "Participating Resident Alien" means a person who is not a United
> States citizen but (1) has previously been employed as a lawful resident alien
> in the service of an Employer within the United States of America, (2) was a
> Member of the Plan during such employment, (3) is currently employed at a
> location outside both the person's country of citizenship and the continental
> limits of the United States of America, and (4) continues to maintain his
> eligibility for employment as a lawful resident alien within the United States
> of America.
> Q. "Plan" means this Minerals Technologies Inc. Savings and Investment
> Plan, as it may be amended from time to time.
>
> 3
--------------------------------------------------------------------------------
> R. "Plan Year" means (1) the period beginning April 1, 1993 and ending
> December 31, 1993, and (2) each twelve (12) month period thereafter commencing
> on January I and ending on December 31 while the Plan is in effect.
> S. "Qualified Deferred Earnings Contributions" means the contributions
> made on behalf of a Member under section 401 (k) of the Code and the
> applicable Treasury Regulations thereunder pursuant to Section VI.A. hereof.
> T. "Regular Earnings" means for any Plan Year the sum of (1) the regular
> base pay and bonuses received by a Member, as established by an Employer, plus
> the Member's overtime pay, premium pay, and call-in/call-back pay, but
> excluding Christmas gifts, allowances, contest awards, remuneration received
> in the form of salary continuance or lump sum severance by a Member while no
> longer providing services to an Employer and other similar payments and (2)
> any amount which is contributed by a Member's Employer on behalf of the Member
> pursuant to a salary reduction agreement and which is not includible in gross
> income under sections 125, 402(e)(3), 402(h) or 403(b) of the Code. With
> respect to each Plan Year -commencing after December 31, 1988 and prior to
> January 1, 1994, a Member's Regular Earnings shall not include any amounts in
> excess of $200,000 (as adjusted by the Secretary of the Treasury, or his
> delegate, at the same time and in the same manner as under section 415(d) of
> the Code to reflect cost of living increases).
> In addition to other applicable limitations set forth in the Plan, and
> notwithstanding any other provision of the Plan to the contrary, for Plan
> Years beginning on or after January, 1, 1994, the Regular Earnings of each
> Employee taken into account under the Plan shall not exceed the OBRA '93
> annual compensation limit. The OBRA '93 annual compensation limit is $150,000,
> as adjusted by the Commissioner for increases in the cost-of-living in
> accordance with section 401(a)(17)(B) of the Code. The cost-of-living
> adjustment in effect for a calendar year applies to any period, not exceeding
> twelve (12) months, over which Regular Earnings is determined (determination
> period) beginning in such calendar year. If a determination period consists of
> fewer than twelve (12) months, the OBRA'93 annual compensation limit will be
> multiplied by a fraction, the numerator of which is the number of months in
> the determination period, and the denominator of which is twelve (12).
> For Plan Years beginning on or after January 1, 1994, any reference in this
> Plan to the limitation under section 401(a)(17) of the Code shall mean the
> OBRA '93 annual compensation limit set forth in this provision. If Regular
> Earnings for any prior determination period is taken into account in
> determining an Employee's contributions in the current Plan Year, the Regular
> Earnings for that prior Determination period is subject to the OBRA '93 annual
> compensation limit in effect for the prior determination period. For this
> purpose, for determination
>
> 4
--------------------------------------------------------------------------------
> periods beginning before the first day of the first Plan Year beginning on or
> after January 1, 1994, the OBRA '93 annual compensation limit is $150,000.
> If Regular Earnings for any prior determination period is taken into account
> in determining an Employee's contributions in the current Plan Year, the
> Regular Earnings for that prior determination period is subject to the OBRA
> '93 annual compensation limit in effect for that prior determination period.
> For this purpose, for determination periods beginning before the first day of
> the first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
> compensation limit is $150,000.
> Furthermore, for Plan Years beginning prior to January 1, 1997, in determining
> Regular Earnings, the rules of section 414(q)(6) of the Code shall apply,
> except that in applying such rules, the term "family" shall include only the
> spouse of the Employee and any lineal descendants of the Employee who have not
> attained age 19 before the close of the calendar year.
> U. "Rollover Contributions" means the cash rollover contributions made by
> a Member in respect of distributions from other employee plans pursuant to
> section 402(c) of the Code.
> V. "Temporary Employee" means any Employee whose employment at time of
> hire is limited in time to a period of less than six (6) months.
> W. "Trustee" means the Trustee hereinafter provided for in Section XIII.
> hereof.
> X. "Value Determination Date" means the Business Day as of which the
> Committee shall determine the value of each Fund established pursuant to
> Section VII. hereof.
> Y. "Vested" means to have acquired, in accordance with the express
> provisions of the Plan, a nonforfeitable interest in all or part of an
> Employer's contributions hereunder, which becomes payable as provided in the
> Plan.
Wherever used in this Plan, the masculine or neuter pronoun shall include the
feminine pronoun, and the singular includes the plural.
III. EFFECTIVE DATE
Subject to the provisions of Section XX. hereof, the effective date of the Plan
is April 1, 1993. The Plan as in effect prior to the effective date of any
amendment will continue to apply to those who terminated employment prior to
such date except as otherwise provided by the Plan or under applicable law.
IV. ELIGIBILITY
5
--------------------------------------------------------------------------------
Effective June, 7, 1999, all Employees are eligible to become Members of this
Plan from and after such date or the date of their commencing employment with an
Employer referred to in Schedule A (a "Schedule A Employer"), whichever is
later. Notwithstanding the foregoing, a Temporary Employee who begins employment
with a Schedule A Employer on or after June 7, 1999, shall not become eligible
to become a Member until the first day of the payroll period following his
completion of 1,000 Hours of Service. No Leased Employee will be eligible to be
a Member.
V. PARTICIPATION
Participation in the Plan shall be entirely voluntary. An Employee who is
eligible to become a Member may become a Member on the first day of any payroll
period following or coincident with the date on which he becomes eligible in
accordance with Section IV. hereof, by authorizing and directing his Employer in
accordance with rules and procedures approved by the Committee to (i) make
payroll deductions and (ii) to invest such payroll deductions as hereinafter
provided, or with the approval of the Company, as a result of a plan-to-plan
transfer to the Plan for the account of said Employee in accordance with Section
VI.C. hereof. Such authorizations and directions shall continue in effect unless
or until the Member suspends, withdraws, or modifies them, as hereinafter
provided, or until termination of employment or of the Plan.
VI. CONTRIBUTIONS
> A. Member Contributions
>
> Each employee who is a Member may elect in accordance with rules and
> procedures approved by the Committee, to contribute in each pay period, by
> payroll deduction, an amount equal to from 2% to 15%, inclusive, in whole
> percents of his after-tax Regular Earnings for said period, or a lesser amount
> in accordance with rules and procedures approved by the Committee (which rules
> and procedures may be applied uniformly, or solely to any Member who is a
> "highly compensated employee," as defined below) hereinafter referred to as
> "After-Tax Contributions." A Member may elect under section 401(k) of the Code
> and the applicable Treasury regulations thereunder, in accordance with rules
> and procedures approved by the Committee, to defer receipt of from 2% to 15%,
> inclusive, in whole percents of his Regular Earnings, or a lesser amount in
> accordance with rules and procedures established by the Committee (which rules
> and procedures may be applied uniformly, or solely to any Member who is a
> "highly compensated employee," as defined below) and to have such deferred
> earnings, hereinafter referred to as "Qualified Deferred Earnings
> Contributions," contributed to the Plan by his Employer on his behalf The
> total contribution under this Section VI. shall in no event exceed 15% of the
> Member's Regular Earnings.
>
> Notwithstanding the foregoing, under no circumstances shall an election by a
> Member be given effect (a) to the extent that the Member's Qualified Deferred
> Earnings Contributions exceed $7,000 (or such greater amount as may from time
> to time be approved for purposes of section 402(g)(1) of the Code) for a Plan
> Year, or (b) to the
>
> 6
--------------------------------------------------------------------------------
> extent that an election by a Member who is a "highly compensated employee," as
> hereinafter defined, might cause the Plan to fail to meet the discrimination
> standards set forth in section 401(k)(3) of the Code. In this regard, the
> actual deferral percentage of the Qualified Deferred Earnings Contributions on
> behalf of Members who are "highly compensated employees" for any Plan Year
> must either be (a) not more than such percentage for all other Members for
> such Plan Year multiplied by 1.25, or (b) not more than two (2) percentage
> points greater than such percentage for all other Members for such Plan Year
> and not more than such percentage for all other Members for such Plan Year
> multiplied by two (2).
>
> Effective as of January 1, 1997, "highly compensated employees" shall mean (a)
> any Employee who is a 5% owner (as defined in section 416(i)(B)(i) of the
> Code) at any time during the current year or the immediately preceding year,
> or (b) during the year immediately preceding the current year, had
> compensation (as defined in section 414(q)(4) of the Code) from an Employer in
> excess of $80,000 (as adjusted pursuant to section 415(d) of the Code, except
> that the base period for determining any such adjustment shall be the calendar
> quarter ending September 30, 1996; provided, however, that the definition of
> "highly compensated employee" as contained in section 414(q) of the Code
> immediately prior to its amendment by the Small Business Job Protection Act of
> 1996 ("SBJPA") shall be used for purposes of determining the "non-highly
> compensated employee" group with respect to the actual deferral percentage
> ("ADP") test (as defined in section 401 (k)(3) of the Code) and the actual
> contribution percentage ("ACP") test (as defined in section 401(m) of the
> Code), for the Plan Year beginning January 1, 1997. Notwithstanding the
> foregoing, the determination of "highly compensated employees" pursuant to (b)
> above, shall be limited to those Employees who are in the "top paid group" (as
> defined in section 414(q)(3) of the Code) for the preceding year.
>
> Qualified Deferred Earnings Contributions hereunder shall not exceed the
> limits set forth in section 401(k)(3) of the Code. For Plan Years beginning
> prior to January 1, 1997, current year ADP testing shall be employed.
> Effective January 1, 1998, for purposes of applying such limits:
>
> > (i) "prior year ADP testing" (within the meaning of Internal Revenue Service
> > Revenue Notice 98-1) shall be employed; and
> >
> > (ii) section 401(k)(3) of the Code, Treasury regulations promulgated
> > thereunder and such other guidance as may be issued by the Internal Revenue
> > Service under such section of the Code are incorporated herein by reference.
>
> Election of the amount of After-Tax Contributions and Qualified Deferred
> Earnings Contributions by a Member shall be made upon enrollment in the Plan
> in the manner hereinbefore provided, and a Member may change his election at
> any time in accordance with rules and procedures approved by the Committee,
> such election to be effective upon the first day of the next succeeding
> payroll period. A Member who is a "highly compensated employee" shall be
> required to revise his election either to defer an amount
>
> 7
--------------------------------------------------------------------------------
> of his Regular Earnings and/or to contribute a portion of his Regular
> Earnings, in conformity with rules and procedures approved by the Committee,
> to enable the Plan to meet the non-discrimination tests set forth in the Code
> and the applicable Treasury regulations thereunder.
>
> In the event that the limits described in section 401 (k) of the Code and the
> applicable Treasury regulations thereunder are inadvertently exceeded, the
> following provisions shall apply:
>
> (a) The amount of Qualified Deferred Earnings Contributions which may be
> made on behalf of some or all highly compensated employees shall be reduced by
> reducing to the extent necessary the highest percentage rates elected by the
> highly compensated employees.
>
> (b) Qualified Deferred Earnings Contributions subject to reduction under
> this paragraph ("excess contributions") (calculated as described in section
> 401(k)(8)(B) of the Code and Treasury regulations thereunder), plus any income
> and minus any losses allocable thereto, shall be returned to the applicable
> Employers and paid by such Employers to the affected Members before the close
> of the Plan Year following the Plan Year in which the excess contributions
> were made, and to the extent practicable within 2 1/2 months of the close of
> the Plan Year in which the excess contributions were made. The Account of any
> affected Member shall be adjusted accordingly, and the Committee shall take,
> and instruct the appropriate Employers to take, such other action as shall be
> necessary or appropriate to effectuate such distribution. If the Committee
> adopts appropriate rules in accordance with regulations issued by the
> Secretary of the Treasury, the Member may elect, in lieu of a return of the
> excess contributions, to contribute the excess contributions to the Plan as
> After-Tax Contributions for the Plan Year in which the excess contributions
> were made, subject to the limitations of Section VI.E. hereof. The Member's
> election shall be made within 2 1/2 months of the close of the Plan Year in
> which the excess contributions were made, or within such shorter period as the
> Committee may prescribe. In the absence of a timely election by the Member,
> the Committee shall return his excess contributions as provided in this
> paragraph (b).
>
> (c) The amount of income attributable to the excess contributions shall be
> determined by multiplying the total income on the Member's Qualified Deferred
> Earnings Contributions for the Plan Year in which the excess contributions
> were made by a fraction, the numerator of which is the amount of excess
> contributions for that Plan Year and the denominator of which is the total
> value of the Member's Qualified Deferred Earnings Contributions as of the
> first Business Day of the Plan Year plus the Member's Qualified Deferred
> Earnings Contributions for the Plan Year. Income for the period between the
> end of the applicable Plan Year and the date of the corrective distribution
> shall be disregarded. Member Contributions shall be remitted to the Trustee
> within thirty (30) days after the end of the calendar
>
> 8
--------------------------------------------------------------------------------
> month in which the contributions are deducted, and shall be made in cash;
> provided, however, that all or any portion of any such contribution to Fund V,
> as defined in Section VII.A. hereof, in the discretion of the Committee, may
> be retained and added to the Company's capital funds, and there may be
> delivered to the Trustee treasury stock or authorized but previously unissued
> stock of the Company, of a value equal to the amount so retained.
> Notwithstanding the foregoing, Member Contributions shall be remitted to the
> Trustee in accordance with the requirements of Department of Labor Regulations
> section 2510.3-102. The value of any such stock shall be the closing price of
> the stock on the New York Stock Exchange on the applicable Value Determination
> Date. After-Tax Contributions and Qualified Deferred Earnings Contributions
> and the earnings thereon shall be nonforfeitable.
>
> B. Employer Matching Contributions
1. Each Employer shall contribute on a bi-weekly basis and allocate to the
Account of each of its Employees who is a Member an amount equal to the percent
indicated below of the contributions made by such Employee as After-Tax
Contributions, or contributed to the Plan by the Employer on behalf of each such
Employee as Qualified Deferred Earnings Contributions, up to 6% of such
Employee's Regular Earnings, determined before any reduction for Qualified
Deferred Earnings Contributions, hereinafter referred to as "Employer Matching
Contributions":
Contributions by or on
Behalf of a Member
Employer Matching
Contributions
First 2%
100%
Next 4%
50%
Employer Matching Contributions shall be remitted to the Trustee within thirty
(30) days after the end of each calendar month, and shall be made in cash;
provided, however, that all or any portion of any such contribution to the
Company Common Stock Fund (Fund M), as defined in Section VII.B. hereof, may be
retained and added to the Company's capital funds, and there may be delivered to
the Trustee treasury stock or authorized but previously unissued stock of the
Company, of a value equal to the amount so retained. The value of any such stock
contributed by an Employer shall be the closing price of the stock on the New
York Stock Exchange on the applicable Value Determination Date. Employer
Matching Contributions and the earnings thereon shall be nonforfeitable.
2. At the discretion of the Company, Employer Matching Contributions in any
Plan Year may be increased to an amount not to exceed 100% in the aggregate of
Member Contributions or contributions made on behalf of Members as Qualified
9
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Deferred Earnings Contributions. The additional Employer Matching Contributions,
if any, provided for in this Section VI.B.2. shall be allocated to the Account
of each Member in the same manner as provided in Section VI.B.1. hereof.
3. Notwithstanding anything hereinabove to the contrary, in the case of all
Employer Matching Contributions hereunder, the amount of contributions in a Plan
Year shall in no event exceed the amount allowable under the Code and applicable
Treasury regulations thereunder to the Employer making the contributions as a
deduction for contributions paid to this Plan. Notwithstanding any provisions to
the contrary, any contribution by the Company is conditioned upon the
deductibility of the contribution by the Company under the Code and, to the
extent any such deduction is disallowed, the Company shall, within one (1) year
following the disallowance of the deduction, demand repayment of such disallowed
contribution and the Trustee shall return such contribution within one (1) year
following the disallowance. Earnings of the Plan attributable to the excess
contribution may not be returned to the Company, but any losses attributable
thereto must reduce the amount so returned.
C. Plan-to-Plan Transfers
Assets transferred to the Plan from (i) a pension or profit sharing plan
maintained by an Employer as a result of an amendment, termination, merger, or
consolidation of said plan or (ii) the Pfizer 401(k) Plan shall constitute a
plan-to-plan transfer. For the purpose of this Plan, amounts attributable to a
plan-to-plan transfer shall be treated as employee contributions or as employer
contributions for all purposes of the Plan, including Sections VI.A. and XXVI.
hereof, in accordance with the treatment afforded such assets in the transferor
plan, except that such assets may be invested, at the election of the affected
Employee in the Funds described in Section VII.A. hereof in accordance with the
provisions of Section VII.A. hereof, notwithstanding the fact that they
represented employer contributions in the prior plan. An Employee shall be
vested in assets in his Account hereunder as a result of a plan-to-plan transfer
to at least the same extent as the Employee was vested in such monies under the
terms of the transferee plan. Employees affected by this Section VI.C. shall be
deemed to be Members of the Plan with respect to such Accounts whether or not
they are otherwise eligible to be Members of the Plan pursuant to the other
provisions of the Plan.
D. Rollover Contributions
Commencing April 1, 1997, the Committee in its sole discretion, exercised in a
uniform and nondiscriminatory manner, may permit an Employee who has satisfied
the requirements of Section V. hereof to make a Rollover Contribution to the
Plan by delivering, or causing to be delivered, the cash which constitutes such
Rollover Contribution to the Trustee in accordance with rules and procedures
approved by the Committee. The Employee shall allocate the investment of his
Rollover Contribution among the Funds described in Section VII.A. hereof in
accordance with rules and procedures
10
--------------------------------------------------------------------------------
approved by the Committee. Notwithstanding any provision to the contrary, under
no circumstances shall any funds attributable to any Employee's Rollover
Contribution be used in any way as the basis for the allocation of any Employer
Matching Contributions pursuant to Section VI.B. hereof or forfeitures pursuant
to Section VI.E. hereof.
E. Maximum Additions
Notwithstanding anything contained herein to the contrary, the total annual
additions, as hereinafter defined, made to the Account of a Member shall not
exceed the lesser of $30,000 (or, if greater, 25% of the defined benefit dollar
limitation in effect under section 415(b)(1)(A) of the Code), or 25% of
compensation (as defined in section 415(c)(3) of the Code), subject to the
following:
> (1) If such annual additions exceed the foregoing limitation, any
> contributions made by the Member, which cause the excess, shall be returned to
> the Member. If, after returning such contributions to the Member, an excess
> still exists, such excess shall be reallocated to eligible Members as a
> forfeiture and credited to the Accounts of such Members on the basis of their
> respective Account balances.. If, after reallocating such excess as
> forfeitures among all eligible Members, the annual addition still exceeds the
> applicable limitation for each and every Member, such excess as still remains
> shall be held unallocated in a suspense account for the limitation year and
> allocated and reallocated in the next limitation year before any employer or
> employee contributions which would constitute annual additions under section
> 415 of the Code and the Treasury regulations thereunder may be made to the
> Plan for that limitation year.
>
> (2) Notwithstanding the foregoing, in the case of an Employee who
> participates in this Plan and in the Company's Retirement Annuity Plan or any
> other defined benefit plan or defined contribution plan maintained by an
> Employer, the sum of the defined contribution plan fraction and the defined
> benefit plan fraction for any year shall not exceed one (1). In the event the
> sum of such fractions exceeds one (1), the Committee responsible for the
> administration of the defined benefit plan shall reduce the pension provided
> under the defined benefit plan in order that none of the plans shall be
> disqualified under the Code. For purposes of applying the limitations of this
> Section VI.E., the following rules shall apply:
> (a) The term "defined contribution plan fraction" shall mean the actual
> aggregate annual additions, as hereinafter defined, to this Plan determined as
> of the close of the year, over the aggregate of the
>
> 11
--------------------------------------------------------------------------------
> maximum annual additions which could have been made for each year of the
> Member's service had such annual additions been limited each such year in
> accordance with the restrictions imposed by section 415 of the Code (or such
> greater amount prescribed under regulations issued by the Secretary of the
> Treasury pursuant to the provisions of section 415(d) of the Code to take into
> account increases in the cost of living).
>
> (b) The term "defined benefit plan fraction" shall mean the projected
> annual pension payable under the defined benefit plan, over the maximum
> projected annual pension payable under such plan increased pursuant to section
> 415(e)(2)(B) of the Code.
>
> > (c) The term "limitation year" shall mean the calendar year.
>
> (3) The term "annual addition" shall mean the sum of Employer Matching
> Contributions, After-Tax Contributions, Qualified Deferred Earnings
> Contributions and forfeitures. The term "annual addition" shall not include
> plan-to-plan transfers or, effective April 1, 1997, Rollover Contributions.
>
> (4) The limitations of this Section VI.E. with respect to any Member who
> at any time has participated in any other defined contribution plan, or in
> more than one (1) defined benefit plan, maintained by a corporation which is a
> member of the controlled group of corporations (within the meaning of section
> 1563(a), determined without regard to section 1563(a)(4) and (e)(3)(C), and
> section 415(h) of the Code) of which his Employer is a member, shall apply as
> if the total benefits payable under all defined benefit plans in which the
> Member has been a participant were payable from one (1) plan, and as if the
> total annual additions, made to all defined contribution plans in which the
> member has been a participant, were made to one (1) plan.
>
> The foregoing notwithstanding, effective January 1, 2000, except as otherwise
> required by law, subsections (2) and (5) of this Section IV.E shall no longer
> apply.
>
> F. Limitations on After-Tax Contributions and Employer Matching
> Contributions
>
> Notwithstanding the foregoing, the following rules and limitations shall apply
> to After-Tax Contributions and Employer Matching Contributions:
>
> With respect to each Plan Year, the spread between the "contribution
> percentage" (within the meaning of section 401(m)(3) of the Code and the
> Treasury regulations thereunder) for highly compensated employees (as defined
> in Section VI.A. hereof) shall not exceed the "contribution percentage" of the
> remaining Employees required to be considered under section 401(m)(2) of the
> Code and the
>
> 12
--------------------------------------------------------------------------------
> Treasury regulations thereunder, by an amount that would cause the Plan to
> fail to meet the anti-discrimination requirements set forth in section 401 (m)
> of the Code.
>
> If after the close of any Plan Year, the Committee shall determine that the
> spread between the "contribution percentage" for (A) "highly compensated
> employees," and (B) the remaining Employees required to be considered under
> section 401 (m)(2) of the Code and the Treasury regulations thereunder, for
> the Plan Year then ended is such that the Plan would fail to meet the
> anti-discrimination requirements set forth in section 401(m) of the Code, the
> following provisions shall apply:
>
> > (1) The amount of After-Tax Contributions and Employer Matching
> > Contributions which may be made on behalf of some or all highly compensated
> > employees in the Plan Year shall be reduced by reducing to the extent
> > necessary the highest percentage rates elected by the highly compensated
> > employees.
> >
> > (2) Notwithstanding any other provision of the Plan, any After-Tax
> > Contributions and Employer Matching Contributions subject to reduction under
> > this paragraph ("excess aggregate contributions," calculated as described
> > within the meaning of section 401(m)(6)(B) of the Code and Treasury
> > regulations thereunder), together with income attributable to the excess
> > aggregate contributions, determined in accordance with paragraph (4), shall
> > be reduced in the following order of priority:
> >
> > > (A) After-Tax Contributions, to the extent of the excess aggregate
> > > contributions, together with the income, and excluding any losses,
> > > attributable to those contributions, shall be returned to the Member's
> > > Employer and paid by such Employer to the affected Members, and then, if
> > > necessary,
> > >
> > > (B) Employer Matching Contributions, together with the income
> > > attributable to those contributions, shall be forfeited and applied to
> > > reduce subsequent Employer Matching Contributions.
> >
> > (3) Any repayment or forfeiture of excess aggregate contributions shall
> > be made before the close of the Plan Year following the Plan Year for which
> > those contributions were made, and to the extent practicable within 2
> > V2months of the close of the Plan Year in which the contributions were made.
> > The After-Tax Contributions and Employer Matching Contributions of any
> > affected Member shall be adjusted accordingly, and the Committee shall take,
> > and instruct the Employer to take, such other action as shall be necessary
> > or appropriate to effectuate such distribution or forfeiture.
> >
> > (4) The amount of income attributable to the excess aggregate
> > contributions shall be determined by multiplying the total income on the
> > Member's
> >
> > 13
--------------------------------------------------------------------------------
> > Account attributable to After-Tax Contributions and Employer Matching
> > Contributions for the Plan Year in which the excess aggregate contributions
> > were made by a fraction, the numerator of which is the amount of excess
> > aggregate contributions for that Plan Year and the denominator of which is,
> > the total value of the Member's Account attributable to After-Tax
> > Contributions and Employer Matching Contributions as of the first Business
> > Day of that Plan Year plus the Member's After-Tax Contributions and Employer
> > Matching Contributions for the Plan Year. Income for the period between the
> > end of the applicable Plan Year and the date of the corrective distribution
> > shall be disregarded.
> >
> > If any highly compensated employee is a member of another qualified plan of
> > an Employer under which deferred cash contributions or matching
> > contributions are made on behalf of the highly compensated employee or under
> > which the highly compensated employee makes after-tax contributions, the
> > Committee shall implement rules, which shall be uniformly applicable to all
> > employees similarly situated, to take into account all such contributions
> > under all such plans in applying the limitations of this Section VI.F.
>
> Employer Matching Contributions and After-Tax Contributions hereunder shall
> not exceed the limits set forth in section 401(m)(2) of the Code. For Plan
> Years beginning prior to January 1, 1997, current year ADP testing shall be
> employed. Effective January 1, 1997, for purposes of applying such limits:
>
> > (i) "prior year testing" (within the meaning of Internal Revenue Notice
> > 98-1) shall be employed; and
> >
> > (ii) section 401(m)(2) of the Code, Treasury regulations promulgated
> > thereunder, and such other guidance as may be issued by the Internal Revenue
> > Service under such section of the Code are incorporated herein by reference.
VII. INVESTMENT OF FUNDS
> A. Member Contributions
>
> > Each Employee who becomes a Member may elect upon enrollment, and thereafter
> > at intervals of at least three (3) months' duration and, commencing May 12,
> > 1997, at any time, by direction in accordance with rules and procedures
> > approved by the Committee, that his future After-Tax Contributions and
> > Qualified Deferred Earnings Contributions shall be invested in one (1) or
> > more of the following Funds:
> >
> > Fund I - FIXED INCOME FUND - A fund, valued at book, invested and
> > re-invested directly or through one (1) or more collective investment
> > vehicles
> >
> > 14
--------------------------------------------------------------------------------
> > primarily in obligations of a short term nature, including but not limited
> > to savings accounts, savings and loan accounts, time deposits, certificates
> > of deposit, savings certificates, short term securities issued or guaranteed
> > by the United States of America or any agency or instrumentality thereof,
> > and corporate obligations or participations therein (but excluding
> > specifically any separately managed account obligations of the Company or an
> > Associate Company), although the same may not be legal investments for
> > trustees under the laws applicable thereto, to be selected and held by the
> > Trustee in its sole discretion; or invested and re-invested in whole or in
> > part in one (1) or more investment contracts with one (1) or more insurance
> > companies or other financial institutions as directed from time to time by
> > the Committee, or in a collective investment vehicle investing in such
> > contracts selected by the Committee.
> >
> > Fund II - BALANCED GROWTH FUND - A fund invested and reinvested by the
> > fund's investment manager in commingled U.S. and international stock funds
> > and in commingled bond funds. The fund's investment manager actively manages
> > the Balanced Growth Fund and employs a systematic evaluation process to
> > determine asset allocations. Under normal market conditions the Balanced
> > Growth Fund average asset mix would be approximately 50% in U.S. equity
> > funds, 10% in international equity funds and 40% in U.S. bond funds. The
> > investment manager may adjust the total allocation to stock or bond funds by
> > plus/minus 20% based on economic or market conditions and liquidity needs.
> >
> > Fund III - S&P 500 INDEX FUND - A fund invested and reinvested in corporate
> > common stocks of 500 public companies, seeking to match the risk and return
> > of the Standard & Poor's 500 Index.
> >
> > Fund IV - GENERAL EQUITY FUND - A fund invested and re-invested by the
> > Trustee or an investment manager directly or through one or more collective
> > investment vehicles in selected common stocks identified based on
> > fundamental valuation measures and anticipated changes in earnings
> > estimates, although the same may not be legal investments for trustees under
> > the laws applicable thereto. The Trustee shall use selected criteria to
> > construct portfolios that have strong value and growth biases.
> >
> > Fund V - COMPANY STOCK FUND - A fund invested and re-invested in Minerals
> > Technologies Inc. common stock, although such may not be a legal investment
> > for trustees under the laws applicable thereto. The Trustee shall make
> > purchases of such stock in the open market or from the Company if treasury
> > stock or authorized but unissued stock is made available by the Company for
> > such purchase. If such stock is purchased from the Company, its price shall
> > be the closing price of the stock on the New York Stock Exchange on the day
> > of purchase. The Trustee may also purchase such stock from private sources
> > at a cost not in excess of that at which such stock is available on the
> > market.
> >
> > 15
--------------------------------------------------------------------------------
> > Fund VI - INTERNATIONAL FUND - A fund invested and reinvested by the
> > investment manager in non-U.S. equity investments. The fund is actively
> > managed by use of a systematic approach to analyze the suitability of
> > investments in individual countries, stocks and markets and the degree of
> > currency exposure with respect to investments in the portfolio. The active
> > management of the International Fund includes both the management of the
> > equity investments in the fund and the management of the risk associated
> > with possible fluctuations in the value of currencies.
>
> A Member shall also have the right, at intervals of at least three (3) months'
> duration and, commencing May l2, 1997, at any time, as the Committee may by
> uniform rules permit, to direct that any portion of his Account invested in
> any of the foregoing Funds be transferred to any other of the above Funds.
> Such direction to transfer shall be effective as of the first Value
> Determination Date following receipt of the Member's direction by the
> Committee's appointed agent.
>
> Commencing May 12, 1997, a Member shall also have the right, at any time, as
> the Committee may by uniform rules permit, to direct that a portion of his
> Account invested in any of the foregoing Funds be transferred to the following
> Fund VII:
>
> > Fund VII - MUTUAL FUND WINDOW (Effective May 12, 1997) - A fund administered
> > by the Trustee and its agents employed as securities brokers in which a
> > Member can invest in certain self-managed investments. The investments
> > expected to be available under the Mutual Fund Window are certain mutual
> > Rinds as specified by the Committee. The Account of each Member who invests
> > in the Mutual Fund Window shall be reduced by any brokerage fees and
> > commissions payable on their individual transactions in the Mutual Fund
> > Window and by any monthly access fee. The Committee and the Trustee are
> > authorized to sell assets held in the Member's Account for the purpose of
> > paying the commissions and fees described herein. Notwithstanding the
> > foregoing, (i) a Member's investment in Fund VII will be limited to 50% of
> > the difference between the Member's total Account value and the value of
> > such Member's Account attributable to Employer Matching Contributions and
> > earnings thereon, (ii) the minimum amount that may be transferred into Fund
> > VII at any time is $ 1,000 and (iii) no amounts invested in Fund I may be
> > directly transferred to Fund VII and no amounts invested in Fund I may be
> > indirectly transferred to Fund VII by first transferring the amounts in Fund
> > I to some other Fund (or Funds) unless such amounts remain invested in the
> > intervening Fund (or Funds) for at least three (3) months.
> >
> > Amounts transferred between Fund VII and Funds II through VI and the Pfizer
> > Common Stock Fund, as defined in Section VILE. hereof, or amounts
> > transferred between the mutual funds within Fund VII may not be transferred
> > directly; the Member must first instruct the Committee or its agent, in
> > accordance with rules and procedures approved by the Committee, to sell his
> > interest in the funds which he wishes to transfer. If such an instruction to
> > sell is properly made on or prior to
> >
> > 16
--------------------------------------------------------------------------------
> > 4:00 p.m. Eastern Standard Time, the sale will be completed at the end of
> > the next Business Day; if such an instruction is made after 4:00 p.m.
> > Eastern Standard Time, the sale will be completed at the end of the second
> > Business Day following the date of the instruction. The Trustee will place
> > the proceeds of such sale in a short-term investment fund, designed to
> > produce a money market rate of return, within Fund VIL Such proceeds will
> > remain in such fund until the Member further instructs the Committee or its
> > agent to transfer all or a portion of such proceeds into one or more of the
> > other funds. For purposes of transferring such amounts between Fund VII and
> > Funds II through VI and the Pfizer Common Stock Fund, or between the mutual
> > funds in Fund VII, the Member may not transfer amounts attributable to the
> > sale of his interest in a fund until the settlement date of such sale, which
> > is normally three (3) Business Days following the sale of an interest in
> > Fund VII, and one (1) Business Day following the sale of an interest in
> > Funds II through VI and the Pfizer Common Stock Fund. The crediting of
> > earnings within the short-term investment fund will not begin until after
> > such settlement date.
> >
> > A charge in an amount to be established by the Committee, but not to exceed
> > 1% of the value of the amount being transferred, to cover all or part of the
> > administrative cost thereof, may be deducted for such transfers.
>
> B. Employer Matching Contributions
>
> > Employer Matching Contributions shall be invested in a separate unsegregated
> > fund consisting solely, except as provided in Section VIL.D. hereof, of
> > Minerals Technologies Inc. common stock (hereinafter known as the Company
> > Common Stock Fund (Fund M)). When such contributions are in cash, the
> > Trustee shall make purchases of such stock in the open market or from the
> > Company if treasury stock or authorized but unissued stock is made available
> > by the Company for such purchases. If such stock is purchased from the
> > Company, its price shall be the closing price on the New York Stock Exchange
> > on the day of purchase or, if not so traded, the average of the closing bid
> > and asked price thereof on such Exchange on the day of purchase. The Trustee
> > may also purchase such stock from private sources at a cost not in excess of
> > that at which such stock could be purchased from the Company as provided
> > herein.
>
> C. Investment of Income Received
>
> > Subject to Section VIL.D. hereof, interest, cash dividends, stock dividends
> > and capital gains shall be held or invested and re-invested by the Trustee
> > in the same Fund from which they were derived.
>
> D. Cash Balances
>
> > Nothing provided herein shall prevent the Trustee or an investment manager
> > appointed by the Committee from maintaining any portion of the above Funds
> > of
> >
> > 17
--------------------------------------------------------------------------------
> > the Trust Fund in cash or in short-term obligations of the United States
> > Government or agencies thereof or in other types of short-term investments,
> > including commercial paper (other than obligations of the Company or its
> > affiliates), as it may from time to time deem to be in the best interests of
> > the Plan or Trust Fund; provided, however, that cash balances (including any
> > interim investment thereof) shall, not be maintained in Fund V or the Pfizer
> > Common Stock Fund except to the extent that such balances are in
> > anticipation of cash distributions from such Funds or are maintained, with
> > respect to Fund V, not to disrupt the non-discretionary purchasing program
> > of the Trustee required by the Plan.
>
> E. Pfizer Common Stock Fund
>
> > Amounts transferred to the Plan from Fund P of the Pfizer 401(k) Plan shall
> > be invested in the Pfizer Common Stock Fund and shall remain in such Fund
> > until such time as they are transferred to one or more of the Funds
> > described in Section VII.A. hereof pursuant to a Member's election in
> > accordance with rules and procedures approved by the Committee or
> > distributed pursuant to Section X., Section XI. or Section XXVI. hereof. The
> > Pfizer Common Stock Fund is an unsegregated fund invested and re-invested
> > solely, except as provided in Section VIL.D. hereof, in Pfizer Inc. common
> > stock, although such may not be a legal investment for trustees under the
> > laws applicable thereto. No amounts contributed under the Plan may be
> > invested in, or transferred from another Fund into, the Pfizer Common Stock
> > Fund.
VIII. CREDITS TO MEMBERS' ACCOUNTS
The Committee shall maintain in an equitable manner, a separate Account for each
Member, in which it shall keep a separate record of such Member's balance in
each Fund attributable to all contributions made by or for the Member. Each
Member shall receive periodically, but at least once each year, a statement
setting forth the status of his Account.
IX. SUSPENSION OF CONTRIBUTIONS
A Member may suspend his Member Contributions at any time by direction to his
Employer in accordance with rules and procedures approved by the Committee, to
be effective as of the next succeeding payroll period. During such suspension,
no contributions will be made by his Employer on behalf of such Member. Subject
to Section X.B.(e)(III), such Member shall be eligible to recommence
contributions at any time, to be effective on the first day of any payroll
period designated by him following his notice of his intent to recommence
contributions. A Member who is on military leave of absence may elect to
continue his contributions under this Plan. A Member who has been laid off or
lack of work or who is on other leave of absence will be deemed to have
suspended his contributions until such time as he is restored to the regular
18
--------------------------------------------------------------------------------
service of his Employer, at which time he may immediately recommence
contributions under the Plan.
X. WITHDRAWALS
Subject to the limitations imposed under Sections VI.C. and X.B. hereof
restricting assets transfer-red to the Plan and the withdrawal of Qualified
Deferred Earnings Contributions until the earliest of the Member's retirement,
death, Disability, separation from service, hardship or attainment of age 59
1/2, respectively, a Member may, in accordance with rules and procedures
approved by the Committee, request a withdrawal of all or any part of the value
of his Account, as of the Value Determination Date coincident with or next
following the date such withdrawal is requested in accordance with rules and
procedures approved by the Committee, upon the following conditions, provided
that, a Member who has attained age 59 1/2 who withdraws the full value of his
Account may, in accordance with rules and procedures approved by the Committee,
elect to receive a lump sum distribution (i) in Minerals Technologies Inc.
common stock equal in value to all or any part of his share in Fund V and his
share, if any, in the Company Common Stock Fund (Fund M), (ii) in Pfizer Inc.
common stock equal in value to all or any part of his share in the Pfizer Common
Stock Fund, and (iii) in cash equal in amount to his share in Funds I, II, III,
IV, VI and VII, as applicable, and his remaining share in Fund V, the Pfizer
Common Stock Fund and/or the Company Common Stock Fund (Fund M).
Notwithstanding anything in this Section X. to the contrary, effective January
1, 1997, a Member subject to Section 16 of the Securities Exchange Act of 1934,
as amended (an "Insider"), may not elect to make a withdrawal from his Account
(other than a withdrawal in connection with his termination of service) within
six (6) months of the date of an election to increase his interest in (I) Fund V
(whether by direction of future After-Tax Contributions or Qualified Deferred
Earnings Contributions or by transfer of amounts into Fund V from other Funds
pursuant to Section VII.A.) or (II) an investment in Minerals Technologies Inc.
common stock under another plan of the Company, to the extent such a withdrawal
results in a withdrawal of amounts invested by the Insider in Fund V.
> A. Withdrawal - Other Than of Qualified Deferred Earnings Contributions
>
> Except as stated above, a Member shall be entitled to withdraw in cash at any
> time up to the full value of his Account not attributable to Qualified
> Deferred Earnings Contributions, plus the cash value, if any, of the balance
> of his Account invested in the Company Common Stock Fund (Fund M); provided,
> however, that an Employee shall be entitled to withdraw in cash at any time an
> amount equal to all or any part of his Account attributable to Employer
> Matching Contributions only if (i) such contributions have been held under the
> Plan for at least two (2) years from the date of contribution, or (ii) if the
> Employee would be entitled to make a hardship withdrawal of such Employer
> Matching Contributions under the hardship withdrawal standards of Section X.B.
> hereof, or (iii) at least five (5) years have elapsed since the Employee
> enrolled in the Plan.
>
> 19
--------------------------------------------------------------------------------
> B. Withdrawal - Qualified Deferred Earnings Contributions
>
> Except as stated in the second paragraph of this Section X., a Member shall be
> entitled to make a hardship withdrawal of his Qualified Deferred Earnings
> Contributions and the amount, if any, in the Pfizer Common Stock Fund
> attributable to his elective deferrals under section 402(g) of the Code and of
> the appreciation thereon earned prior to January 1, 1989, up to the amount
> needed to satisfy the hardship, provided the Member first makes a full
> withdrawal under Section X.A. hereof and satisfies the Committee as to the
> existence of such hardship pursuant to the requirements set forth in Section
> X.B. hereof. Qualified Deferred Earnings Contributions and the appreciation,
> if any, thereon may not be withdrawn by or distributed to a Member until the
> earliest of the Member's retirement, death, Disability, separation from
> service, hardship or attainment of age 59 1/2. A withdrawal is considered a
> withdrawal due to hardship (a "hardship withdrawal") if it is on account of.
> (i) an immediate and heavy financial need of the Member, and (ii) the
> withdrawal is necessary to satisfy such financial need. The Committee may
> determine that a withdrawal shall be considered a hardship withdrawal if it is
> requested on account of:
>
> > (a) unreimbursed medical expenses described in section 213(d) of the
> > Code incurred by the Member, his spouse or dependents (as defined in section
> > 152 of the Code) or expenses necessary for such persons to obtain medical
> > care described in section 213(d) of the Code,
> >
> > (b) tuition and related educational fees for the next twelve (12) months
> > of post-secondary education for the Member, his spouse, child or dependent,
> >
> > (c) the purchase of the Member's principal residence (excluding mortgage
> > payments),
> >
> > (d) payments to prevent eviction from, or foreclosure on the mortgage
> > for, the Member's principal residence, or
> >
> > (e) such other needs as shall be officially recognized by the Internal
> > Revenue Service as giving rise to an immediate and heavy financial need for
> > purposes of section 401(k) of the Code. A hardship withdrawal shall be
> > deemed to be necessary to satisfy an immediate and heavy financial need for
> > a Member if:
> >
> > > (i) the withdrawal does not exceed the amount of the Member's
> > > immediate and heavy financial need, including any amounts necessary to pay
> > > any federal, state, or local income taxes or penalties reasonably
> > > anticipated to result from the withdrawal,
> > >
> > > (ii) the Member has received all distributions, exclusive of hardship
> > > withdrawals, and all non-taxable loans available under each qualified plan
> > > maintained by an Employer in which the Member participates,
> > >
> > > 20
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> > > (iii) the Member's Qualified Deferred Earnings Contributions and
> > > After-Tax Contributions under the Plan and any other contributions thereby
> > > under any other qualified or non-qualified plan of deferred compensation
> > > maintained by an Employer in which the Member participates are suspended
> > > for the twelve (12) month period commencing on the date immediately
> > > following receipt of the hardship withdrawal, and
> > >
> > > (iv) the Member may not have Qualified Deferred Earnings
> > > Contributions made on his behalf under the Plan and any other qualified or
> > > non-qualified plan of deferred compensation maintained by an Employer in
> > > which the Member participates for the calendar year immediately following
> > > the calendar year of the hardship withdrawal in excess of the dollar
> > > limitation on Qualified Deferred Earnings Contributions referred to in
> > > Section VI.A. hereof for such next following calendar year reduced by the
> > > amount of the Member's Qualified Deferred Earnings Contributions for the
> > > calendar year in which the hardship withdrawal was made.
In no event may the amount of a hardship withdrawal exceed the amount necessary
to satisfy the Member's financial need, taking into account the extent such need
may be satisfied through the use of other resources reasonably available to the
Member. To demonstrate such necessity, the Member must certify to the Committee
that the financial need cannot be satisfied:
> > (a) Through reimbursement or compensation by insurance or otherwise,
> >
> > (b) By reasonable liquidation of the Member's assets, to the extent such
> > liquidation would not itself cause an immediate and heavy financial need,
> >
> > (c) By cessation of Qualified Deferred Earnings Contributions under the
> > Plan, or
> >
> > (d) By distributions or nontaxable (at the time of the loan) loans from
> > plans maintained by the Company or any other employer, or by borrowing from
> > commercial sources on reasonable commercial terms.
For purposes of the above, the Member's resources shall be deemed to include the
assets of his spouse and minor children that are reasonably available to the
Member.
Except as provided in this Section X., a hardship withdrawal to a Member shall
not affect such Member's eligibility to continue to participate in the Plan, nor
shall it affect the non-withdrawn balance of such Member's Account or his rights
and privileges with respect thereto.
XI. SETTLEMENT UPON TERMINATION OF EMPLOYMENT
Upon termination of employment, a Member, or in case of death, his designated
beneficiary, which in the case of a married Member shall be the Member's spouse,
unless, with the consent of
21
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the spouse, another beneficiary has been designated, or, if there is no spouse
or other designated beneficiary, the Member's legal representative, shall be
entitled to the value of his Account, commencing as soon as practicable
thereafter, but in no event later than one year following his termination of
employment or death, as applicable, upon the following conditions:
> A. Termination of Employment
>
> 1. Forms of Benefit. A Member terminating employment, or in the case of a
> Disabled Member terminating employment, his legal representative if one has
> been appointed, shall settle his Account by selecting, in accordance with
> rules and procedures approved by the Committee, one of the following methods:
>
> > (a) in a lump sum distribution in cash equal to the full value of his
> > Account invested in the Funds described in Section VII. hereof, as
> > applicable,
> >
> > (b) in a lump sum distribution in (i) Minerals Technologies Inc. common
> > stock equal in value to all or any part of the Member's share in Fund V and
> > the Company Common Stock Fund (Fund M), if any, plus (ii) Pfizer Inc. common
> > stock equal in value to all or any part of the Member's share in the Pfizer
> > Common Stock Fund, if any, plus (iii) cash equal in amount to the Member's
> > share in Funds I, II, III, IV, VI and VII, as applicable, and his remaining
> > share in Fund V, the Company Common Stock Fund (Fund M) and the Pfizer
> > Common Stock Fund, if any,
> >
> > (c) with respect to that portion of the Member's Account, if any, equal
> > to the net value of such Member's Account as of March 31, 1997, in
> > distributions in ten (10) substantially equal annual installments in cash
> > equal to the full value of his Account invested in the Funds described in
> > Section VII. hereof, as applicable, and the remaining portion of the
> > Member's Account payable pursuant to paragraph (a) above, or
> >
> > (d) with respect to that portion of the Member's Account, if any, equal
> > to the net value of such Member's Account as of March 31, 1997, in
> > distributions in ten (10) substantially equal annual installments in (i)
> > Minerals Technologies Inc. common stock equal in value to all or any part of
> > the Member's share in Fund V and the Company Common Stock Fund (Fund M), if
> > any, plus (ii) Pfizer Inc. common stock equal in value to all or any part of
> > the Member's share in the Pfizer Common Stock Fund, if any, plus (iii) cash
> > equal in amount to the Member's share in Funds I, II, III, IV, VI and VII,
> > as applicable, and his remaining share in Fund V, the Company Common Stock
> > Fund (Fund M) and the Pfizer Common Stock Fund, if any, and the remaining
> > portion of the Member's Account payable pursuant to paragraph (b) above.
> >
> > 22
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> > Notwithstanding the above, a Member who terminates employment prior to age
> > 65, other than by Disability, may only elect to settle his Account in
> > accordance with Sections XI.A.1.(a) or (b) hereof. Regardless of the form of
> > payment, all distributions shall comply with section 401 (a)(9) of the Code
> > and the Treasury regulations thereunder, including the minimum distribution
> > incidental death benefit requirement of section 401(a)(9)(G) of the Code and
> > the Treasury regulations thereunder, and such provisions shall override any
> > Plan provisions otherwise inconsistent therewith.
>
> 2. Accounts Left in the Plan After Termination. Notwithstanding the
> foregoing, if a Member who has a balance of at least $5,000 in his Account
> terminates employment without having made a selection of the form of his
> benefit in accordance with rules and procedures approved by the Committee, his
> Account will remain in the Plan until he makes a total withdrawal of his
> Account, reaches age 65, becomes Disabled, or dies, whichever first occurs, at
> which time settlement will be made in a lump sum distribution in cash or, if
> so selected, in cash and/or stock, in accordance with Section XI.A.1.(b)
> hereof, equal to the full value of his Account, determined as of the Value
> Determination Date immediately following or coincident with the date such
> distribution is requested in accordance with rules and procedures approved by
> the Committee or the date of distribution, if earlier, less the applicable
> withholding tax. Such Account may be totally withdrawn or may be transferred
> among Funds in accordance with the terms of the Plan, prior to such
> distribution. Also, only one (1) partial withdrawal will be permitted with
> respect to such an Account following termination of employment.
>
> 3. Installment Distributions (Applicable to the Portion of the Member's
> Account, if any, equal to the March 31, 1997 Account balance). The initial
> installment distribution of a Member's Account pursuant to Sections XI.A.1(c)
> and (d) hereof shall be equal to the value of the applicable portion of such
> Account as of the Value Determination Date immediately following or coincident
> with the date such distribution is requested in accordance with rules and
> procedures approved by the Committee, divided by the total number of
> installment distributions to be made. Subsequent installment distributions
> shall be equal to the value of such Account as of the Value Determination Date
> on the date of distribution, divided by the remaining number of installment
> distributions. For the purpose of determining the value of any Company or
> Pfizer Inc. common stock distributed hereunder, such value shall be the
> closing price of the stock on the New York Stock Exchange on such Value
> Determination Date.
>
> 4. Delayed Distribution of Account. Notwithstanding anything to the
> contrary in the Plan, the benefit of each Member will be distributed or
> commence to be distributed to him in accordance with section 401(a)(9) of the
> Code, the Treasury regulations thereunder and other official guidance issued
> thereunder. Notwithstanding the foregoing, any such Member who attains age 70
> 1/2 before January 1, 2002, and who has not terminated employment with all
> Employers,
>
> 23
>
> --------------------------------------------------------------------------------
>
> shall have the right to have his distribution commence not later than April 1
> of the calendar year following the calendar year in which the member attains
> age 70 1/2. In addition, a terminating Member may, subject to Section XI.C.
> hereof, have payment of his benefit commence at a date which shall be not more
> than thirteen (13) months following termination. Notwithstanding Section
> XI.A.3. hereof, in determining the value of the Account of a Member making
> such an election, the Value Determination Date immediately following or
> coincident with the date such withdrawal is requested in accordance with rules
> and procedures approved by the Committee shall be used.
>
> B. Death
>
> In the event of a Member's death, his designated beneficiary, which in the
> case of a married Member shall be the Member's spouse unless with the consent
> of the spouse another beneficiary has been designated, or, if there is no
> spouse or other designated beneficiary, his legal representative, shall
> receive as soon as practicable thereafter, but in no event later than one (1)
> year following the Member's death, in cash the full value of the Member's
> Account, based upon both his share in the Funds described in Section VII
> hereof, as applicable, or, in lieu of such cash payment such beneficiary or
> representative may select settlement of the Member's Account in accordance
> with the alternative available under Section XI.A.1.(b) hereof to a Member
> upon terminating employment, provided that an irrevocable selection in writing
> of such settlement is received by the Committee not more than six (6) months
> following such death. Where payment has commenced to a Member prior to his
> death, payment to his spouse or his designated beneficiary shall be over a
> period that is no longer than the period under which the Member was receiving
> benefits.
>
> Where distribution has not commenced to the Member at the time of his death,
> payments to the spouse of a Member shall be made in a lump sum no later than
> the date on which the Member would have attained age 70 1/2, and distribution
> to the designated beneficiary of a Member shall be made in a lump sum no later
> than one (1) year following the date of the Member's death.
>
> In determining the net value of a Member's Account hereunder, the applicable
> Value Determination Date shall be the date of distribution. For the purpose of
> determining the value of Company or Pfizer common stock, such value shall be
> the closing price of the stock on the New York Stock Exchange on the
> applicable Value Determination Date.
>
> C. Form of Distributions
>
> Notwithstanding anything in this Plan to the contrary, in the event that the
> value of the Member's Account is less than or equal to $5,000 at the Value
> Determination Date immediately following or coincident with termination of
>
> 24
>
> --------------------------------------------------------------------------------
>
> employment, such value shall be immediately paid in a lump sum in accordance
> with Section XI.A.1.(b) hereof. Notwithstanding the foregoing, if the value of
> the Member's Account exceeds (or, for distributions made before March 22,
> 1999, at the time of any prior distribution exceeded) $5,000 and becomes
> distributable to him on an immediate lump sum basis prior to his attaining age
> 65, no such distribution shall be made to him unless he consents to such
> distribution, in accordance with rules and procedures approved by the
> Committee, no more than ninety (90) days and no less than thirty (30) days
> prior to the anticipated date of the Member's distribution, as required by
> section 1.411(a)-11(c) of the Treasury regulations. If the value of the
> Member's Account at the time of any distribution exceeds $3,500 (after
> December 31, 1997, $5,000), the value of the Member's Account at any
> subsequent time will be deemed to exceed $3,500 (after December 31, 1997,
> $5,000). If a distribution is one to which sections 401(a)(11) and 417 of the
> Code do not apply, such distribution may commence less than thirty (30) days
> after the notice required under section 1.411(a)-11(c) of the Treasury
> regulations is given, provided that:
>
> > (i) the Committee clearly informs the Member that the Member has a right
> > to a period of at least thirty (30) days after receiving the notice to
> > consider the decision of whether or not to elect a distribution (and, if
> > applicable, a particular distribution option), and
> >
> > (ii) the Member, after receiving the notice, affirmatively elects a
> > distribution.
>
> D. Rollover Distributions
>
> Notwithstanding any provision of the Plan to the contrary that would otherwise
> limit a distributee's election under this Section XI., effective January 1,
> 1993, a distributee may elect, at the time and in accordance with rules and
> procedures approved by the Committee, to have any portion of an eligible
> rollover distribution paid directly to an eligible retirement plan specified
> by the distributee in a direct rollover.
>
> An eligible rollover distribution is a distribution of all or any portion of
> the balance to the credit of the distributee, except that an eligible rollover
> distribution does not include: any distribution that is one of a series of
> substantially equal periodic payments (not less frequently than annually) made
> for the life (or life expectancy) of the distributee or the joint lives (or
> joint life expectancies) of the distributee and the distributee's designated
> beneficiary, or for a specified period of ten (10) years or more; any
> distribution to the extent such distribution is required under section 401
> (a)(9) of the Code; and the portion of any distribution that is not includible
> in gross income (determined without regard to the exclusion for net unrealized
> appreciation with respect to employer securities).
>
> 25
>
> --------------------------------------------------------------------------------
>
> An eligible retirement plan is an individual retirement account described in
> section 408(a) of the Code, an individual retirement annuity described in
> section 408(b) of the Code, an annuity plan described in section 403(a) of the
> Code, or a qualified trust described in section 401 (a) of the Code, that
> accepts the distributee's eligible rollover distribution. However, in the case
> of an eligible rollover distribution to the surviving spouse, an eligible
> retirement plan is an individual retirement account or individual retirement
> annuity.
>
> A distributee is an Employee or former Employee. In addition, the Employee's
> or former Employee's surviving spouse and the Employee's or former Employee's
> spouse or former spouse who is the alternate payee under a qualified domestic
> relations order, as defined in section 414(p) of the Code, are distributees
> with regard to the interest of the spouse or former spouse. A direct rollover
> is a payment by the Plan to the eligible retirement plan specified by the
> distributee.
>
> In the event that the provisions of this Section XI.D. or any part thereof
> cease to be required by law as a result of subsequent legislation or
> otherwise, this Section XI.D. or applicable part thereof shall be ineffective
> without necessity of further amendment of the Plan.
>
> E. Qualified Domestic Relations Order
>
> Notwithstanding anything in the Plan to the contrary, the payment of any
> benefit to which a Member may be entitled under this Section XI. shall be
> subject to a qualified domestic relations order determined by the Committee to
> be within the meaning of section 414(p) of the Code.
>
> F. Limitation on Distribution of Qualified Deferred Earnings Contributions
>
> Qualified Deferred Earnings Contributions and any income allocable to such
> amounts, shall not be distributable earlier than the Member's termination of
> employment, death or hardship distribution. Such amounts may also be
> distributed, pursuant to section 401(k)(10) of the Code and solely in the form
> of a "lump sum distribution," as defined in section 401(k)(10)(B)(ii) of the
> Code, upon:
>
> > (a) termination of the Plan without the establishment or maintenance of
> > another defined contribution plan (other than an "employee stock ownership
> > plan," as defined in section 4975(e)(7) of the Code) by the Company,
> >
> > (b) the disposition by the Company of at least 85% of the assets used
> > by the Company in a trade or business thereof, to a corporation not required
> > after such disposition to be aggregated with the Company pursuant to section
> > 414(b), (c), (m) or (o) of the Code, where the Company continues to
> >
> > 26
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> > maintain the Plan after such disposition, and solely with respect to
> > Employees who, subsequent to such disposition, continue employment with the
> > corporation acquiring such assets, or
> >
> > (c) the disposition by the Company of the Company's interest in a
> > subsidiary, to an entity not required after such disposition to be
> > aggregated with the Company pursuant to section 414(b), (c), (m) or (o) of
> > the Code, where the Company continues to maintain the Plan after such
> > disposition, and solely with respect to Employees who, subsequent to such
> > disposition, continue employment with such subsidiary.
XII. SAVINGS AND INVESTMENT PLAN COMMITTEE
> A. This Plan shall be administered by a Savings and Investment Plan
> Committee consisting of at least three (3) persons, who may be Members of the
> Plan, appointed by the Board of Directors of the Company. Members of the
> Committee shall serve at the pleasure of the Board of Directors of the
> Company, and may resign at any time upon due notice in writing. The Committee
> shall act, by a majority of its members, and the Secretary thereof shall
> certify its actions to the Trustee.
>
> B.
>
> > (1) The Committee shall be the Plan Administrator and shall have
> > fiduciary responsibility under the Employee Retirement Income Security Act
> > of 1974, as amended, for the general operation of the Plan, and the
> > exclusive authority and responsibility (i) to appoint and remove or select
> > investment managers, if any, the Trustee or any successor Trustee under the
> > Plan and the Trust Agreement and pooled investment vehicles and investment
> > advisers thereof, (ii) to direct the segregation of all or a portion of the
> > assets of the Plan Trust into an investment manager account or accounts at
> > any time and from time to time and to add or to withdraw assets from such
> > investment manager account or accounts as it deems desirable or appropriate,
> > (iii) to direct the Trustee to enter into a group annuity contract or
> > contracts, in such form and on such terms as may be approved by the
> > Committee to provide for annuity settlements under the Plan, and (iv) to
> > direct the Trustee to enter into one (1) or more investment contracts with
> > one or more insurance companies or financial institutions as provided in
> > Section VII.A. hereof and in the Trust Agreement; provided, however, that,
> > except as expressly set forth above, the Committee shall have no
> > responsibility for or control over the investment of the Plan assets held in
> > the Funds established hereunder. The Committee may appoint or employ, and
> > compensate such persons as it deems necessary to render advice with respect
> > to any responsibility of the Committee under the Plan. The Committee may
> > allocate to any one (1) or more of its members any responsibility that it
> > may have under the Plan and may designate any other
> >
> > 27
> >
> > --------------------------------------------------------------------------------
> >
> > person or persons to carry out any responsibility of the Committee under the
> > Plan. Any person may serve in more than one fiduciary capacity with respect
> > to the Plan.
> >
> > (2) The Committee shall administer the Plan in accordance with its terms
> > and shall have all powers necessary to carry out the provisions of the Plan
> > not otherwise reserved to the Company, the Board of Directors or the
> > Trustee. The Committee shall have all powers to administer the Plan, within
> > its discretion, other than the power to invest or reinvest the assets of the
> > Plan to the extent such powers have been delegated to the Trustee, an
> > insurance company and/or an asset manager. The Committee shall have total
> > and complete discretion to interpret the Plan and to determine all questions
> > arising in the administration, interpretation and application of the Plan,
> > including the power to construe and interpret the Plan; to decide questions
> > relating to an individual's eligibility to participate in the Plan and/or
> > eligibility for benefits and the amounts thereof; to have fact finder
> > discretionary authority to decide all facts relevant to the determination of
> > eligibility for benefits or participation; to make such adjustments as it
> > deems necessary or desirable to correct any arithmetical or accounting
> > errors; to determine the amount, form, and timing of any distribution to be
> > made hereunder; to approve and enforce any loan hereunder including the
> > repayment thereof, as well as to resolve any conflict. The Committee shall
> > have the discretion to make factual determinations relating to the amount
> > and manner of any allocations and distributions of benefits. In making its
> > decisions, the Committee shall be entitled to, but need not rely upon,
> > information supplied by a Member, beneficiary or representative thereof The
> > Committee shall have full and complete discretion to determine whether a
> > domestic relations order constitutes a "qualified domestic relations order"
> > under applicable law and whether the putative alternative payee under such
> > an order otherwise qualifies for benefits hereunder. The Committee may
> > correct any defect, supply any omission or reconcile any inconsistency in
> > such manner and to such extent as it shall deem necessary to carry out the
> > purposes of the Plan. The Committee's decision in such matters shall be
> > binding and conclusive as to all parties.
> >
> > (3) The Committee shall determine whether a judgment, decree, or order,
> > including approval of a property settlement agreement, made pursuant to a
> > state domestic relations law, including a community property law, that
> > relates to the provision of child support, alimony payments, or marital
> > property rights of a spouse, former spouse, child, or other dependent of the
> > Member is a qualified domestic relations order within the meaning of section
> > 414(p) of the Code, and shall give the required notices and segregate any
> > amounts that may be subject to such order if it is a qualified domestic
> > relations order, and shall administer the distributions required by any such
> > qualified domestic relations order.
> >
> > 28
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> > (4) The Committee is authorized to make such uniform rules as may be
> > necessary to carry out the provisions of the Plan and shall determine, in
> > its sole discretion, any questions arising in the administration,
> > interpretation and application of the Plan, which determination shall be
> > conclusive and binding on all parties. In exercising such powers and
> > authorities, the Committee shall at all times exercise good faith, apply
> > standards of uniform application, and refrain from arbitrary action. The
> > Committee is also authorized to adopt such uniform rules as it may consider
> > necessary or desirable for the conduct of its affairs and the transaction of
> > its business, including, but not limited to, the power on the part of the
> > Committee to act without formally convening and to provide that action of
> > the Committee may be expressed by written instruments signed by a majority
> > of its members. It shall elect a Secretary, who need not be a member of the
> > Committee, who shall record the minutes of its proceedings and shall perform
> > such other duties as may from time to time be assigned to him. The Committee
> > may retain legal counsel (who may be the General Counsel of the Company)
> > when and if it be found necessary or convenient to do so, and may also
> > employ such other assistants, clerical or otherwise, as may be needed, and
> > expend such monies as may be required for the proper performance of its
> > work. Such costs and expenses shall be borne by the Company in accordance
> > with the provisions of this Section XII.
> >
> > (5) To the extent permitted by law, the Committee, the Boards of
> > Directors of the Employers, and the Employers and their respective officers
> > shall not be liable for the directions, actions or omissions of any agent,
> > legal or other counsel, accountant or any other expert who has agreed to the
> > performance of administrative duties in connection with the Plan or Trust.
> > The Committee, the Boards of Directors of the Employers, and the Employers
> > and their respective officers shall be entitled to rely upon all
> > certificates, reports, data, statistics, analyses and opinions which may be
> > made by such experts and shall be fully protected in respect to any action
> > taken or suffered by them in good faith reliance upon any such certificates,
> > reports, data, statistics, analyses or opinions; all actions so taken or
> > suffered shall be conclusive upon each of them and upon all persons having
> > or claiming to have any interest in or under the Plan.
>
> C. Each member of the Committee shall be indemnified by the Company
> against all costs and expenses (including counsel fees but excluding any
> amount representing a settlement unless such settlement be approved by the
> Company) reasonably incurred by or imposed upon him in connection with or
> resulting from any action, suit or proceeding to which he may be made a party
> by reason of his being or having been a member of the Committee (whether or
> not he continues to be a member of the Committee at the time when such cost or
> expense is incurred or imposed), to the full extent of the law. The foregoing
> rights of indemnification
>
> 29
--------------------------------------------------------------------------------
> shall not be exclusive of other rights to which any member of the Committee
> may be entitled as a matter of law, contract or otherwise.
XIII. TRUST AGREEMENT
The Company shall enter into a written Trust Agreement with a trustee of its
choice, to become effective upon the date this Plan becomes effective, providing
for the administration of the Funds established hereunder. The Trust Agreement
shall provide that all of the Funds will be held, managed, invested and
re-invested and distributed thereunder in accordance with its provisions and the
provisions of the Plan. The Trust Agreement shall provide that it may be amended
in whole or in part by the Company at any time or from time to time and in any
manner, except that no part of the Trust Fund, either by reason of any
amendment, or otherwise, shall ever be used for or diverted to purposes other
than for the exclusive benefit of Members and their beneficiaries and the
payment of administrative expenses. The Trust Agreement shall be deemed to form
a part of the Plan, and any and all rights or benefits which may accrue to any
person under this Plan shall be subject to all the terms and provisions of the
Trust Agreement.
XIV. ASSOCIATE COMPANIES
> 1. Any corporation of which the Company owns directly or indirectly 80% of
> the issued and outstanding shares of stock, with the consent of the Company,
> by taking appropriate corporate action may become an Associate Company and
> secure the benefits of this Plan for its employees by adopting this Plan as
> its Plan, by becoming party to the Trust Agreement, and by taking such other
> actions as the Company shall consider necessary or desirable to accomplish
> that purpose. The Company may, upon thirty (30) days' written notice, request
> an Associate Company to withdraw from the Plan, and upon the expiration of
> such thirty (30) day period, unless such Associate Company has taken
> appropriate corporate action to accomplish such withdrawal, such Associate
> Company shall be deemed to have withdrawn from the Plan. Accounts of the
> Members of such Associate Company shall be vested and settled in the manner
> provided in Section XXII.C. hereof.
>
> 2. Any Associate Company may at any time segregate from further
> participation in the Trust under the Trust Agreement. Such Associate Company
> shall file with the Trustee a document evidencing its segregation from the
> Trust Fund and its continuance of a Trust in accordance with the provisions of
> the Trust Agreement as though such Associate Company were the sole creator
> thereof. In such event, the Trustee shall deliver to itself as Trustee of such
> trust such part of the Trust Fund as may be determined by the Committee to
> constitute the appropriate share of the Trust Fund then held in respect of the
> Members of such Associate Company. Such former Associate Company may
> thereafter exercise in respect of such Trust Agreement all the rights and
> powers reserved to the Company and to the Committee under the provisions of
> the Trust Agreement.
>
> 30
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> In a similar manner, the appropriate share of the Trust Fund determined by the
> Committee to be then held in respect of Members in any division, plant,
> location or other identifiable group or unit of the Company or an Associate
> Company may be segregated, and the Trustee shall hold such segregated assets
> in the same manner and for the same purpose as provided above in the event of
> segregation of an Associate Company, and the Company or any successor owner of
> the segregated unit shall have the rights and powers hereinabove provided for
> a segregated Associate Company.
XV. VOTING RIGHTS
> A. The Trustee shall have the sole and exclusive right to vote any
> securities held in Funds I, II, III, IV, VI and VII, in its discretion. With
> respect to Minerals Technologies Inc. common stock held in Fund V and the
> Company Common Stock Fund (Fund M), each Member shall be entitled to give
> voting instructions to the Trustee with respect to his interest, if any, in
> such stock. Each Member's interest in Minerals Technologies Inc. common stock
> shall be computed by multiplying the total number of shares held by the
> Trustee on the applicable shareholder record date by the ratio of the value of
> Fund V and the Company Common Stock Fund (Fund M), if any, credited to such
> Member (as of the most recent Value Determination Date prior to the
> shareholder record date for which the Committee has completed its
> determination of the value of such Funds and delivered the results of such
> determination to the Trustee, but in no event shall such Value Determination
> Date be more than sixty (60) days prior to the shareholder record date) to the
> total value of all Minerals Technologies Inc. common stock credited to all
> Members as of such Value Determination Date, excluding the value of such stock
> allocated to Members whose accounts have been distributed prior to the
> shareholder record date. Written notice of any meeting of the Company, the
> proxy statement and a request for voting instructions will be mailed by the
> Company to each Member having an interest in Fund V and/or the Company Common
> Stock Fund (Fund M), except those Members having only a fractional interest in
> a common share of the Company. The Trustee shall vote shares and fractional
> shares of such Company common stock in accordance with the written direction
> of each Member with respect to his interest, if any, provided such direction
> is received by the Trustee at least three (3) days before the date set for the
> meeting at which such Company common stock is to be voted. Shares and
> fractional shares of Company common stock with respect to which no such
> direction shall be timely given, shall be voted in the same ratio, to the
> nearest whole vote, as the shares with respect to which instructions were
> received from Members. In the event of a tender or exchange offer for Company
> common stock, each Member shall determine whether his shares shall be tendered
> or exchanged by notifying the Trustee in writing on a form to be supplied by
> the Company. In connection with any such tender or exchange offer, the Company
> shall notify each affected Member of such tender or exchange offer and
> distribute such information as is distributed to shareholders in connection
> therewith.
>
> 31
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> Such determination shall be held in confidence by the Trustee. Shares and
> fractional shares of Company common ' stock with respect to which no direction
> shall be timely given shall not be tendered or exchanged by the Trustee on the
> assumption that the Member does not wish to have his shares tendered or
> exchanged.
>
> B. With respect to Pfizer Inc. common stock held in Pfizer Inc. Common
> Stock Fund, each Member shall be entitled to give voting instructions to the
> Trustee with respect to his interest, if any, in such stock. Each Member's
> interest in Pfizer Inc. common stock shall be computed by multiplying the
> total number of shares held by the Trustee on the applicable shareholder
> record date by the ratio of the value of the Pfizer Inc. Common Stock Fund, if
> any, credited to such Member (as of the most recent Value Determination Date
> prior to the shareholder record date for which the Committee has completed its
> determination of the value of such Fund and delivered the results of such
> determination to the Trustee, but in no event shall such Value Determination
> Date be more than sixty (60) days prior to the shareholder record date) to the
> tow value of all Pfizer Inc. common, stock credited to all Members as of such
> Value Determination Date, excluding the value of such stock allocated to
> Members whose accounts have been distributed prior to the shareholder record
> date. Written notice of any meeting of Pfizer Inc., the proxy statement and a
> request for voting instructions will be mailed by the Trustee to each Member
> having an interest the Pfizer Inc. Common Stock Fund, except those Members
> having only a fractional interest in a common share of Pfizer Inc. The Trustee
> shall vote shares and fractional shares of such Pfizer Inc. common stock in
> accordance with the written direction of each Member with respect to his
> interest, if any, provided such direction is received by the Trustee at least
> three days before the date set for the meeting at which such Pfizer Inc.
> common stock is to be voted. Shares and fractional shares of Pfizer Inc.
> common stock with respect to which no such direction shall be timely given,
> shall be voted in the same ratio, to the nearest whole vote, as the shares
> with respect to which instructions were received from Members.
XVI. ADMINISTRATIVE COSTS
Subject to the provisions of Section VII.A. hereof pertaining to charges to
Member Accounts for certain investment transactions, all costs and expenses of
administering the Plan (except certain expenses with respect to the processing
of loan applications and with respect to the Mutual Fund Window which shall be
borne by such Member and except for the fees and charges of the investment
managers which shall be charged against the applicable investment fund) shall be
borne by the Company, and until so paid shall represent a lien in favor of the
Trustee, or investment manager, as applicable, against each respective Fund.
XVII. NON-ALIENATION OF BENEFITS
No benefit payable under the provisions of the Plan shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any
32
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attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or
charge the same shall be void; nor shall benefits be in any manner liable for or
subject to the debts, contracts, liabilities, engagements or torts of any Member
or beneficiary except as specifically provided (i) by a qualified domestic
relations order within the meaning of section 414(p) of the Code, or (ii) in
connection with a judgment or settlement entered into on or after August 5,
1997, involving the Plan pursuant to the requirements of section 401 (a)(l 3)(C)
of the Code.
XVIII. NOTICE
Whenever an Employer, the Committee or the Trustee is required to take action
pursuant to a request or direction from an eligible Employee or a Member
participating in the Plan, such request or direction must be given at such time
and in the form prescribed by the Employer, the Committee or the Trustee, as
applicable.
XIX. INVESTMENTS
Each Member shall assume all risk in connection with any decrease in the market
value of any investment in the respective Funds in which he participates,
including Fund V, the Company Common Stock fund (Fund M) and the Pfizer Common
Stock Fund, if any, and such Funds shall be the sole source of all payments to
be made under the Plan.
Neither the Company, any Associate Company, the Committee or the Trustee, nor
any officer or employee of any of them, is authorized to advise a Member as to
the manner in which his contributions to the Plan should be invested. The
election of the Fund or Funds in which a Member participates is his sole
responsibility, and the fact that designated Funds are available to Members for
investment or that limitations may be established with respect to maximum
investments in one or more Funds shall not be construed as a recommendation for
or against the investment of a Member's contributions hereunder in any of such
Funds.
XX. TREASURY APPROVAL
This Plan and the contributions thereto shall be conditional upon a
determination by the Internal Revenue Service that the Plan meets the applicable
requirements of section 401 (a) of the Code and that the Trust is exempt under
section 501(a) of the Code. Contributions made to the Plan are conditioned upon
their deductibility under the Code.
XXI. MISCELLANEOUS
> A. The provisions of the Plan shall be construed, regulated and
> administered according to the laws of the State of New York, except to the
> extent superseded by any controlling Federal statute.
>
> B. If any Member, former Member, or beneficiary, in the judgment of the
> Committee, is legally, physically or mentally incapable of personally
> receiving and receipting for any payment due hereunder payment may be made
>
> 33
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> to the guardian or other legal representative of such Member, former Member or
> beneficiary or to such other person or institution who, in the opinion of the
> Committee, is then maintaining or has custody of such Member, former Member or
> beneficiary. Such payments shall constitute a full discharge with respect to
> such payments.
>
> C. Nothing contained herein or in the Trust Agreement shall entitle any
> Member, former Member, beneficiary or any other person to the right or
> privilege of examining or having access to the books or records of the
> Company, any Associate Company, the Committee or the Trustee; nor shall any
> such person have any right, legal or equitable, against the Company or an
> Associate Company, or any director, officer, employee, agent or representative
> thereof, or against the Committee or the Trustee, except as expressly provided
> herein.
>
> D. The Committee shall be fully protected in respect to any action taken
> or suffered by them in good faith in reliance upon the advice or opinion of
> any actuary, accountant, legal counsel, appraiser, or physician, and all
> action so taken or suffered shall be conclusive upon all Members, former
> Members, beneficiaries, heirs, distributees, personal representatives and any
> other person claiming under the Plan.
>
> E. Participation in the Plan shall not be construed as conferring any
> legal rights upon any Member for a continuation of employment nor shall it
> interfere with the rights of the Company or any Associate Company to terminate
> any Member and to treat him without regard to the effect which such treatment
> might have upon him as a Member.
>
> F. Notwithstanding any other provision of the Plan to the contrary, an
> Insider (as defined in Section X. hereof) may not elect to (i) increase his
> interest in Fund V (whether by direction of future After-Tax or Qualified
> Deferred Earnings Contributions or by transfer of amounts into Fund V from
> other Funds pursuant to Section VII.A. hereof) within six (6) months of an
> election to decrease his interest in Fund V (or in an investment in Minerals
> Technologies Inc. common stock under another plan of the Company), or (ii)
> decrease his interest, if any, in Fund V (whether by direction of future
> After-Tax Contributions or Qualified Deferred Earnings Contributions or by
> transfer of amounts out of Fund V to other Funds pursuant to Section VII.A.
> hereof) within six (6) months of an election to increase his interest in Fund
> V (or in an investment in Mineral Technologies Inc. common stock under another
> plan of the Company), or (iii) increase his interest in Fund V (whether by
> direction of future After-Tax Contributions or Qualified Deferred Earnings
> Contributions or by transfer of amounts into Fund V from other Funds pursuant
> to Section VII.A. hereof) within six (6) months of (I) a cash withdrawal from
> his Account (other than a cash withdrawal in connection with such Insider's
> termination of employment to the extent that such withdrawal results in a
> withdrawal of an amount invested in Fund V, or (II) a withdrawal from any
> other
>
> 34
--------------------------------------------------------------------------------
> plan maintained by the Company (other than a cash withdrawal in connection
> with such Insider's termination of employment) to the extent that such
> withdrawal constitutes a withdrawal of Mineral Technologies Inc. common stock.
> To the extent any provision of the Plan or action of the Plan administrators
> involving an Insider is deemed not to comply with an applicable condition of
> Rule 16b-3, it shall be deemed null and void as to such Insider, to the extent
> permitted by law and deemed advisable by the Plan administrators.
XXII. TERMINATION, AMENDMENT OR SUSPENSION OF THE PLAN
> A. The Company expects to continue the Plan indefinitely but reserves the
> right to amend, suspend or discontinue it in whole or in part at any time and
> in its sole and absolute discretion of its Board of Directors in accordance
> with its established rules of procedure. Such amendments or modifications may
> be retroactive if necessary or appropriate to qualify or maintain the Plan or
> Trust as a Plan or Trust meeting the requirements of section 401 of the Code,
> to secure and maintain the tax exemption of the Trust under section 501 of the
> Code, and in order that the contributions to the Plan be deductible under
> section 404(a) of the Code or any other applicable provisions of the Code and
> Treasury regulations issued thereunder.
>
> B In the event of suspension of the Plan, all provisions of the Plan shall
> continue in effect during such period of suspension, except Sections V., VI.,
> and those provisions of Section X. hereof which permit resumption of
> contributions. Upon continuous suspension of the Plan for a period of three
> (3) years, the Plan shall terminate.
>
> C. In the event of termination of the Plan in whole or in part or upon the
> complete discontinuance of contributions, Accounts of affected Members shall
> be settled and distributed under the provisions of Section XI.A. hereof as
> though the termination of employment had occurred on the date of such
> termination or discontinuance; provided, however, that the amount distributed
> to affected Member's and beneficiaries shall be the net value of the Member's
> Account determined as of the Value Determination Date on the date of
> distribution.
>
> D. The Committee may make administrative changes to the Plan so as to
> conform with or take advantage of governmental requirements, statutes or
> regulations.
XXIII. PLAN MERGERS AND CONSOLIDATIONS
In the event of any merger or consolidation of the Plan with, or transfer in
whole or in part of the assets and liabilities of the Trust Fund to another
trust fund held under any other plan of deferred compensation maintained or to
be established for the benefit of all or some of the Members of this Plan, the
assets of the Trust Fund applicable to such Members shall be transferred to the
other trust fund only if:
35
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> (1) each Member would, if either this Plan or the other plan then
> terminated, receive a benefit immediately after the merger, consolidation or
> transfer which is equal to or greater than the benefit he would have been
> entitled to receive immediately before the merger, consolidation or transfer
> if this Plan had then terminated; and
>
> (2) the Employer and any new or successor employer of the affected Members
> shall authorize such transfer of assets.
XXIV. CLAIMS PROCEDURE
Any request by a Member or any other person for any benefit alleged to be due
under the Plan shall be known as a "Claim" and the Member or other person making
a Claim shall be known as a "Claimant."
A Claim shall be filed when a written statement has been made by the Claimant or
the Claimant's authorized representative and delivered to the Vice President -
Organization and Human Resources, Minerals Technologies Inc., 405 Lexington
Avenue, New York, New York 10174-1901. This statement shall include a general
description of the benefit which the Claimant believes is due and the reasons
the Claimant believes such benefit is due, to the extent this is within the
knowledge of the Claimant. It shall not be necessary for the Claimant to cite
any particular Section or Sections of the Plan, but only to set out the facts
known to him which he believes constitute a-basis for a Claim.
Within ninety (90) days of the receipt of the Claim by the Plan, the Vice
President -Organization and Human Resources shall (i) notify the Claimant that
the Claim has been approved, (ii) notify the Claimant that the Claim has been
partially approved and partially denied, or (iii) notify the Claimant that the
Claim has been denied. Notice of the decision shall be in writing and shall be
delivered to the Claimant either personally or by first-class mail. Special
circumstances may require an extension of time for processing the Claim. In no
event shall such extension exceed a period of ninety (90) days from the end of
the initial ninety (90) day period.
In the event a Claim is denied in whole or in part, the notice of denial shall
set forth (i) the specific reason or reasons for the denial, (ii) specific
reference to the pertinent Plan provisions on which the denial is based, (iii) a
description of any additional material or information necessary for the Claimant
to perfect the Claim and an explanation of why such material or information is
necessary, and (iv) an explanation of the Plan's claim review procedure.
Within sixty (60) days of the receipt of a notice of denial of a Claim in whole
or in part, a Claimant or his duly authorized representative (i) may request a
review upon written application to the Committee, (ii) may review documents
pertinent to the Claim, and (iii) may submit issues and comments in writing to
the Committee. Notice shall be deemed to be received when delivered if delivered
personally pursuant to the foregoing provisions of this Section XXIV. or three
(3) days after it has been deposited post-paid in a depository maintained by the
U.S. Post
36
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Office addressed to Claimant at the address designated by him in the Claim or if
Claimant has moved at the last address shown for Claimant on Employer's records.
It shall be the duty of the Committee to review a Claim for which a request for
review has been made and to render a decision not later than one hundred twenty
(120) days after receipt of a request for review. The decision shall be in
writing and shall include the specific reasons for the decision and specific
references to the pertinent Plan provisions on which the decision is based. The
decision shall be delivered to the Claimant either personally or by first-class
mail.
XXV. TOP-HEAVY RULE
> A. Notwithstanding any provision in the Plan to the contrary, if the Plan
> is determined by the Committee to be top-heavy, as that term is defined in
> section 416 of the Code, in any calendar year, then for that calendar year the
> minimum benefit rule, as set forth below, shall be applicable. Determination
> of whether the Plan is top-heavy shall be made in accordance with the
> definition of "top heavy group" as set forth in Section XXV.B.7. hereof.
>
> B Definitions solely applicable to this Section XXV.
>
> > 1. "Compensation" shall mean the amount reportable by the Employer for
> > federal income tax purposes as wages paid to the Member for such period.
> >
> > 2. "Determination Date" the date for determining whether the Plan is
> > top-heavy, shall be the December 31 of the preceding year.
> >
> > 3. "Key Employee" shall have the same meaning as in section 416(i)(1) of
> > the Code.
> >
> > 4. "Non-Key Employee" shall mean an employee other than a Key Employee
> > as defined in Section XXV.B.3. hereof.
> >
> > 5. "Valuation Date," for minimum funding purposes, shall be a date
> > within the twelve (12) month period ending on the Determination Date,
> > regardless of whether a valuation for minimum funding purposes is performed
> > in that year.
> >
> > 6. "Aggregation group" shall mean (I) each plan of the Employer in which
> > a Key Employee is a participant and (II) each other plan of the Employer
> > which enables any plan described in (I) above to meet the nondiscrimination
> > tests and minimum participation rules of sections 401(a)(4) and 410 of the
> > Code.
> >
> > 7. "Top heavy group" shall mean any aggregation group for which the sum
> > (as of the determination date) of (I) the present value of the cumulative
> >
> > 37
--------------------------------------------------------------------------------
> > accrued benefits for key employees under all defined benefit plans included
> > in such group, and (II) the aggregate of the accounts of key employees under
> > all defined contribution plans included in such group, exceeds 60% of a
> > similar sum determined for all employees.
>
> C. For the purpose of determining whether this Plan is top-heavy, this
> Plan and the Company's Retirement Annuity Plan shall be considered an
> aggregation group, as defined in Section XXV.B.6. hereof.
>
> D. Minimum Benefit solely applicable to this Section XXV. No Employer
> Contributions in addition to those made under Section VI. hereof shall be
> credited the Account of a Non-Key Employee who is a Member of the Plan, if
> this Plan becomes top-heavy. However, in such event, the actuarial equivalent
> of the value of all Employer Matching Contributions under this Plan whether or
> not attributable to years in which the Plan is top-heavy, shall be applied as
> an offset against the minimum annual benefit provided under Section 16 of the
> Company's Retirement Annuity Plan.
>
> E. If the Plan becomes subject to the adjustments pursuant to section
> 416(h) of the Code, the defined benefit plan fraction described in section
> 415(e)(2)(B) of the Code and the defined contribution fraction described in
> section 415(e)(3)(B) of the Code shall be applied by substituting 1.0 for 1.25
> in the denominator of each fraction.
XXVI. LOAN PROVISIONS
Upon the request of a Member in active service and in accordance with rules and
procedures approved by the Committee, the Committee shall direct the Trustee to
lend to the Member an amount not in excess of the lesser of (i) $50,000, reduced
by the excess, if any, of the highest outstanding balance of any other such
loans to such Member during the previous twelve (12) months, over the
outstanding balance of loans from the Plan on the date on which such loan is
made, or (ii) one-half (1/2) of the balance of such Member's Account, determined
as of the most recent Value Determination Date. In no event shall any loan be
made pursuant to this Section XXVI. in an amount less than $1,000. The terms of
any loan granted under this Section XXVI. shall be evidenced by a promissory
note signed by the Member. Each loan made hereunder shall be an investment of
the Member's Account over which such Member has exercised investment control and
any such loan shall be made first from the Member's Qualified Deferred Earnings
Contributions and the earnings thereon until they are exhausted, then from his
Employer Matching Contributions and the earnings thereon until they are
exhausted and finally from his After-Tax Contributions and the earnings thereon.
Except as otherwise provided in this Section XXVI., the terms of any loan
granted by the Committee shall be arrived at by mutual agreement between the
Member and the Committee; provided, however, that the term of any loan in no
event shall exceed five (5) years from the day
38
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on which the loan is granted. Notwithstanding the foregoing, loans used to
acquire any dwelling unit which is to be used (determined at the time the loan
is made) as the principal residence of the Member may be for a term in excess of
five (5) years. Repayment of loans shall be made in accordance with a definite
repayment schedule as selected by the Member in accordance with the foregoing
provisions of this Section XXVI., provided that repayment is made in
substantially level amounts, no less frequently than quarterly. Repayments,
together with the attendant interest payments, will be credited to the Member's
Account and shall be invested in the Funds, in accordance with the Member's then
effective investment election, except to the extent that the source of the loan
was Employer Matching Contributions (Fund M (the Company Common Stock Fund), or
the Pfizer Common Stock Fund as an employer matching contribution), in which
case repayments shall be credited to Fund M, to the extent the source of the
loan was Employer Matching Contributions . If a Member fails to pay an
installment of his loan such loan will be in default as of the date which is
ninety (90) days after the date such installment was first due in accordance
with the repayment schedule as originally selected by the Member. Upon default,
the outstanding loan will be deemed a distribution from the Plan.
Notwithstanding any other provision of this Section XXVI. to the contrary, any
Member who defaults on a loan from the Plan shall not again be eligible for a
loan hereunder.
Any loan granted by the Committee shall be adequately secured by collateral of
sufficient value to secure repayment of the principal balance of the loan, plus
interest. The collateral may consist of a portion of the Member's interest in
his Account, but in no event may more than one-half (1/2) of the Member's
interest in his Account be used as collateral for a loan. As additional security
for the loan repayment, the Committee shall require the Member to authorize, in
writing, the Company to withhold from payments of his salary the amount
necessary to discharge the loan. In such case, the Company shall then remit the
withheld amounts to the Trustee, and the Trustee shall apply the remittances in
reduction of the outstanding obligation of the Member under the loan. If any
amount remains outstanding as an obligation of the Member under the loan when a
distribution is to be made from his Account under the Plan, including a
distribution on account of termination of employment, then, notwithstanding any
provision of the Plan to the contrary, the balance of his Account shall be
reduced to the extent necessary to discharge the obligation and such action
shall be considered a distribution from the Plan.
All loans shall bear a rate of interest commensurate with the interest rates
charged by persons in the business of lending money for loans which would be
made under similar circumstances, as determined by the Committee, which rate
will remain in effect for the term of the loan. Each loan applicant shall
receive a statement clearly setting forth the charges involved in the loan
transaction, including the dollar amount and effective annual interest rate.
Notwithstanding anything in this Section XXVI. to the contrary, a Member may, at
any time and in his sole discretion, repay in full the outstanding amount of any
loan previously granted under this Section XXVI. Only one (1) loan may be
outstanding at any time.
Notwithstanding the foregoing, a Member who has an outstanding loan and is
absent from employment as a result of a qualified leave of absence may elect, in
accordance with rules and procedures approved by the Committee, to suspend
payments of principal and interest on his loan
39
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for a period not to exceed one (1) year. Any such suspension will neither change
the total amount of principal and interest due under the original term of the
loan nor change the term of the loan as originally selected by the Member. Upon
the expiration of the approved period of suspension of payments, installment
payments will resume under a revised repayment schedule based on the outstanding
principal and interest and the remaining term of the loan.
To the extent required by law and in accordance with rules and procedures
approved by the Committee, loans shall be made on a reasonable equivalent basis
to any beneficiary or former Member (i) who maintains an Account balance under
the Plan and (ii) who is still a party-in-interest (within the meaning of
section 3(14) of ERISA) with respect to the Plan.
The costs of administering this loan program shall be borne by the borrowing
Members.
April 2001
40
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SCHEDULE A
Groups or Classes eligible for participation in the Savings and Investment Plan
(except in each case employees covered by a collective bargaining agreement that
does not provide for coverage of such employees under the Plan if there is
evidence that retirement benefits were the subject of good faith bargaining):
1. All employees in the service of Minerals Technologies Inc.
2. All employees in the service of the following Associate Companies:
Barretts Minerals Inc.
Specialty Minerals Inc.
MINTEQ International Inc.
Specialty Minerals (Michigan) Inc.
Specialty Minerals Mississippi Inc.
Synsil Products Inc.
41
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INTELLECTUAL PROPERTY AGREEMENT
INTELLECTUAL PROPERTY AGREEMENT (this “Agreement”), dated as of November 30,
2001 (the “Effective Date”), by and between Henkel Kommanditgesellschaft auf
Aktien, organized under the laws of the Federal Republic of Germany
(collectively, along with its Affiliates, “Henkel”), and Ecolab Inc., a
corporation incorporated under the laws of the State of Delaware (collectively,
along with its Affiliates, “Ecolab”).
WHEREAS,
pursuant to the terms of that certain Master Agreement dated December 7, 2000
(the “Master Agreement”), Henkel and Ecolab developed an Intellectual Property
Plan attached as an exhibit thereto; and
WHEREAS,
Henkel and Ecolab desire to implement the terms of the Intellectual Property
Plan by entering into this Agreement.
NOW, THEREFORE,
in consideration of the mutual covenants and agreements contained herein and
other good and valuable consideration, the receipt and adequacy of which is
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. Definitions.
Unless otherwise specified herein, capitalized terms used in this Agreement
shall have the meanings ascribed to them in the Master Agreement. Additional
defined terms are as follows:
(a)
“Assigned Intellectual Property” shall mean the Assigned Patents and Assigned
Trademarks.
(b)
“Assigned Patents” shall mean the Patents identified in Exhibit 1(b), together
with the right to sue for and collect damages for any past, present or future
infringements of the Assigned Patents.
(c)
“Assigned Trademarks” shall mean the Trademarks identified in Exhibit 1(c),
together with the goodwill associated with the Assigned Trademarks and with the
right to sue for and collect damages for any past, present or future
infringements or other violations of any rights associated with the Assigned
Trademarks.
(d)
“Cleaning and Sanitizing Field” shall mean the business of the JV Entities, as
conducted from time to time from inception through the Effective Date,
including, without limitation, the manufacture, marketing and sale of textile,
kitchen, surface, food processing, agricultural, brewery, beverage, dairy,
Hospital Hygiene, quick-serve restaurant, effluent, process, waste and other
water treatment or recycling, pest elimination, on-premise laundry,
housekeeping, professional hygiene, pharmaceutical, cosmetic and critical
environment cleaning, conditioning, rinsing agent, detergent, disinfecting and
sanitizing products, systems (including, without limitation, dispensing systems
and related applications parts and equipment), services and related equipment,
all destined for the institutional and industrial markets exclusively.
(e)
“Divided Trademarks” shall mean the Trademarks identified in Exhibit 1(e).
(f)
“Documentation” shall mean any and all searches or analyses, applications,
certificates of registration, office actions, examiners reports, correspondence,
filings, submissions, drawings, petitions, pleadings, records, databases and any
other materials in any format relating to the Intellectual Property and in the
form they exist at Henkel or its agents, including, without limitation,
materials relating to: (i) administrative actions and litigation; (ii)
maintenance and filing schedules; (iii) the acquisition of the Intellectual
Property; (iv) applications for the registration of any of the Intellectual
Property; (v) registrations of any of the Intellectual Property; (vi)
maintenance, renewal or extension of the registrations of any of the
Intellectual Property; (vii) actions to protect or defend the Intellectual
Property; or (viii) the grant of licenses or sublicenses to third parties.
(g)
“Ecolab Licensed Intellectual Property” shall mean the Ecolab Licensed Patents,
Ecolab Licensed Trademarks and the Technology.
(h)
“Ecolab Licensed Patents” shall mean the Patents identified in Exhibit 1(h).
(i)
“Ecolab Licensed Trademarks” shall mean the Trademarks identified in
Exhibit 1(i).
(j)
“Exploit” shall mean, in any form or medium now existing or later developed:
(i) for Patents, the right to make and have made, use and have used, sell and
have sold, offer for sale and import the goods, materials, methods, processes
and designs that are the subject of the claims of the Patents; (ii) for
Technology, the right to make and have made, use and have used, sell and have
sold, offer for sale and import, reproduce, distribute, publicly display,
publicly perform and prepare derivative works of the Technology; (iii) for
Trademarks, the right to use, either alone or in conjunction with other
trademarks, service marks or other designations of origin or source, the
Trademarks in connection with the development, manufacture, marketing,
promotion, distribution or sale of products or services, together with the right
to use the Trademarks as all or a part of any domain name, metatag, linking
mechanism or process, or other indication of source, location, origin or address
on the internet; and (iv) with respect to all of the foregoing, the right to
grant sublicenses.
(k)
“Henkel Primary Trademarks” shall mean the Trademarks of Henkel with, embodying
or using the word “Henkel”, including, without limitation, the corporate name
“Henkel” and the red Henkel oval logo and Henkel´svariations thereof, such as
with white or other colored lettering, whether alone or in combination with
other Trademarks.
(l)
“Henkel Standards” shall mean Henkel acting in the same manner and with the same
standards and degree of care customarily required or utilized by it in
connection with Henkel’s own properties and activities.
(m)
“Intellectual Property” shall mean the Patents, Technology, Trademarks and all
other intellectual property rights whether registered or not, in each case
wherever such rights exist throughout the world, owned by Henkel and used by the
JV Entities during the existence of the JV Entities, together with
Modifications.
(n)
“Licensee” shall mean, as between Henkel and Ecolab, and as the context of any
particular provision of this Agreement requires, the party who has a right to
Exploit the Intellectual Property of the other party and/or use the Modification
of the other party.
(o)
“Licensor” shall mean, as between Henkel and Ecolab, and as the context of any
particular provision of this Agreement requires, the owner of the Intellectual
Property that is being Exploited by the other party and/or the owner of the
Modification that is being Exploited by the other party.
(p)
“Modification” shall mean any change, enhancement, modification or improvement
to the Intellectual Property.
(q)
“New Technology” shall mean all technical information and know-how, confidential
and non-confidential, including, without limitation, all computer software,
research data, trade secrets and other proprietary know-how, formulas, operating
manuals, registered designs, utility models, shop rights, registered and
unregistered copyrights, all renewals and extensions and applications for the
registration or renewal of copyrights relating to tangible and intangible items,
materials and property, and rights of ownership and authorship in documents and
other artistic works, equipment and parts lists, product packaging instructions,
product and production specifications, analytical and evaluation methods,
sources and specifications for raw materials, efficacy, toxicity and general
health and safety information and data, environmental compliance and regulatory
information and data, research and development records, and manufacturing and
product application know-how (i) which is developed by Ecolab or Henkel or
commercialized (with the right to sub-licensing) after the Effective Date, and
(ii) (a) with respect to Ecolab, which can be of use or has potential
application by Ecolab in its then current business and (b) with respect to
Henkel, which can be of use or has potential application by Henkel in its then
current business.
(r)
“Patents” shall mean patents (including, without limitation, all reissues,
divisions, continuations in part and extensions thereof), utility patents,
patent applications, patent disclosures docketed and related rights used by the
JV Entities during the existence of the JV Entities.
(s)
“Prior Agreements” shall mean the agreements between or among Henkel and Ecolab
et al relating to technology and trademarks as follows: (i) Technology Licensing
Agreement dated July 5, 1991; (ii) Trademark Licensing Agreement dated July 5,
1991; (iii) Venture Technology Licensing Agreement dated July 11, 1991; (iv)
Venture Trademark Licensing Agreement dated July 11, 1991; (v) Technology and
Trademark Royalty Fee Agreement dated July 11, 1991; and (vi) with respect to
any and all of the foregoing, any amendments or extensions thereof.
(t)
“Technology” means all technical information and know-how, confidential and
non-confidential, including, without limitation, all computer software, research
data, trade secrets and other proprietary know-how, formulas, operating manuals,
registered designs, utility models, shop rights, registered and unregistered
copyrights, all renewals and extensions and applications for the registration or
renewal of copyrights relating to tangible and intangible items, materials and
property, and rights of ownership and authorship in documents and other artistic
works, equipment and parts lists, product packaging instructions, product and
production specifications, analytical and evaluation methods, sources and
specifications for raw materials, efficacy, toxicity and general health and
safety information and data, environmental compliance and regulatory information
and data, research and development records, and manufacturing and product
application know-how owned by Henkel and used by the JV Entities during the
existence of the JV Entities.
(u)
“Trademarks” shall mean all registered and unregistered trademarks, service
marks, trade dress, corporate and trade names, and related rights, logos and
designs used by the JV Entities during the existence of the JV Entities,
together with any and all applications for registration.
(v)
The following terms shall have the meanings set forth in the sections referred
to below:
Defined Term
Section
“Limited Duration Trademark”
3(a)
“Current Relationships”
3(b)
“Databases”
8
“Technology Cooperation Committee”
9
“Modification Notice”
10
“Abandonment Notice”
11(c)
“Registered User Agreements”
11(d)
“Henkel Neighboring Trademarks”
12(c)
“Trademark Corrective Action”
13(d)
“Trademark Cure Period”
13(d)
“Default Notice”
18
“Default Cure Period”
18
“Default Corrective Action”
18
2. Assignment.
Henkel hereby transfers, sells and assigns to Ecolab all of its worldwide right,
title and interest in and to the Assigned Intellectual Property. Henkel hereby
waives any and all artistic and moral rights associated with the Assigned
Intellectual Property. Unless otherwise specified in the applicable exhibit, all
items of the Assigned Intellectual Property shall be transferred, sold and
assigned to Ecolab Inc., a Delaware corporation; provided, however, that (i)
Henkel acknowledges that Ecolab may, at any time and from time to time after the
Effective Date and subject to applicable law, change the transferee or
registrant, as applicable, of particular items of the Assigned Intellectual
Property to an Affiliate or other party and (ii) upon the reasonable request of
Ecolab, Henkel shall execute such documents and take such further actions,
including, without limitation amending such applicable exhibit(s) in accordance
with Section 17 (c), as may be necessary or advisable to effectuate the
foregoing provisions.
3. License To Ecolab.
(a)
Subject to the provisions of this Agreement, including, without limitation,
Section 3 (b) below, Henkel hereby grants Ecolab an exclusive, irrevocable,
perpetual, paid-up, royalty-free and worldwide license to Exploit and otherwise
use the Ecolab Licensed Intellectual Property in the Cleaning and Sanitizing
Field; provided, however, that Ecolab’s right to Exploit and otherwise use an
Ecolab Licensed Trademark identified as a “Limited Duration Trademark” on
Exhibit 3 (a) hereto may be terminated by Henkel providing Ecolab with at least
six (6) months prior written notice of termination as to such Limited Duration
Trademark at any time after December 31, 2006. As to Ecolab, Henkel hereby
waives any and all artistic and moral rights associated with the Ecolab Licensed
Intellectual Property.
(b)
Henkel has current contractual arrangements with third-party licensees (the
"Current Relationships") that prevent Henkel from licensing to Ecolab in
Mauritius and South Korea certain items of Intellectual Property, including
certain Technology which is therefore not currently licensed under Section 3
(a). Henkel may continue the Current Relationships, including beyond the
scheduled expiration of the existing contracts, by renewal, extension or
otherwise, but Henkel shall not enter into any contractual or other commitments
with any party not affiliated with its current licensees relating to the
Intellectual Property in Mauritius and South Korea. Henkel shall notify Ecolab
in writing of the expiration or termination of any of the Current Relationships
and, concurrently with such expiration or termination, and without the
requirement for any further action of either party or the payment of any
consideration in addition to that paid under Section 4 hereof, the affected
items of Intellectual Property including such Technology in respect of Mauritius
or South Korea, as the case may be, shall immediately and automatically become
Ecolab Licensed Intellectual Property subject to the license provisions of
Section 3 (a) hereof.
4. Purchase Price.
In reliance upon the express representations, warranties and agreements
contained herein and in consideration of the transfers, sales, assignments and
grants herein relating to the Intellectual Property, Ecolab hereby agrees to
issue to Henkel a promissory note in the principal amount of 19,258,000 Euros as
of the Effective Date, such purchase price being subject to adjustment in
accordance with the Master Agreement.
5. License of the Henkel Primary Trademarks to Ecolab.
Subject to the provisions of this Agreement, Henkel hereby grants to Ecolab an
irrevocable, paid-up and royalty-free license to Exploit and otherwise use the
Henkel Primary Trademarks (alone or in combination with other Intellectual
Property, such as the Assigned Intellectual Property or the Ecolab Licensed
Intellectual Property) in connection with the JV Entities (or their successors),
including, without limitation, for inventory, products and labels, advertising
materials and company entity names; provided, however, that, unless otherwise
authorized by Henkel, the license granted pursuant to the provisions of this
Section 5 shall terminate on December 31, 2003 and Ecolab undertakes to
discontinue the Exploit or other use of the Henkel Primary Trademarks as of
December 31, 2003, except that Ecolab may continue such Exploit and use (i) for
so long as is required for Ecolab to use or sell any then remaining inventory,
products and labels and advertising materials bearing the Henkel Primary
Trademarks and (ii) until the expiration of any registrations or filings that
include “Henkel” as part of a company entity name, such as Henkel-Ecolab GmbH &
Co OHG except for the filing or registration of the corporate names.
6. License To Henkel.
Subject to the provisions of this Agreement, Ecolab hereby grants to Henkel an
exclusive, irrevocable, perpetual, paid-up, royalty-free, worldwide license to
Exploit and otherwise use the Assigned Intellectual Property outside the
Cleaning and Sanitizing Field. As to Henkel, Ecolab hereby waives any and all
artistic and moral rights associated with the Assigned Intellectual Property
licensed to Henkel.
7. Treatment of the Divided Trademarks.
(a)
Henkel shall divide the Trademarks listed in Exhibit 1 (e) in the manner set
forth in such annex and transfer the split Trademarks so designated in such
annex to Ecolab.
(b)
In addition and promptly after the Effective Date and to the extent necessary,
Henkel and Ecolab shall continue to consult and cooperate with each other to
develop and implement a plan that will enable Henkel and Ecolab to have
separate, concurrent ownership interests in the Divided Marks. Henkel and
Ecolab acknowledge and agree that such implementation may require (i) six (6)
months or more after the Effective Date to complete, (ii) Henkel to amend and/or
partially cancel various of the registrations in effect for certain of the
Divided Marks in various countries or jurisdictions such that both parties have
certain registrations with respect to such Divided Marks, and (iii) Henkel to
enter into consent or co-existence agreements or similar arrangements whereby
Henkel and Ecolab agree to allow each other to separately but concurrently own
and/or use certain of the Divided Marks in identified commercial markets and/or
geographic territories, subject to registration and other limitations under
applicable law.
8. Originals and Copies of Documentation.
(a)
As of and from time to time after the Effective Date, Ecolab may request, and
shall obtain and receive from Henkel or its agents, (i) originals (but Henkel
may retain copies) of all of the Documentation relating to the Assigned
Intellectual Property and (ii) copies of all Documentation relating to the
Ecolab Licensed Intellectual Property to Ecolab. As may from time to time after
the Effective Date be reasonably requested by either Henkel or Ecolab, the
parties shall exchange or provide to each other (or shall promptly direct their
agents to exchange or provide to the other or its agents) originals or copies of
such additional Documentation or other information or materials or permit access
as may be necessary to (i) more effectively consummate the transactions
contemplated by this Agreement and (ii) facilitate and enhance a party’s ability
to Exploit and otherwise use the Intellectual Property pursuant to the
provisions of this Agreement. Unless otherwise necessary to accomplish purposes
of this Agreement, it is generally intended that the Licensor of any
Intellectual Property shall have the right to receive and/or retain the
originals of the Documentation associated with such Intellectual Property and
the Licensee shall have the right to receive and/or retain copies of such
Documentation.
(b)
Without limiting the generality of the foregoing Section 8(a), subject to any
restrictions imposed by third party licensors , Henkel agrees that Ecolab shall
have access to and the right to copy, transport, use and cite, as applicable
(and Henkel shall assist Ecolab in connection with such access and right to
copy, transport, use and cite, as applicable) Henkel’s computer and other
databases (collectively, the “Databases”), and any and all information and data
contained therein, relating to the Intellectual Property, including, without
limitation, (i) the PROSAFE Database pertaining to material safety data sheets
for products, (ii) the RIS Database relating to raw material and formula
information of the JV Entities, (iii) the SITOP Database pertaining to material
safety data sheets for raw materials, (iv) the HECLID Database relating to
ecological and other information for raw materials, (v) the SHE Database
pertaining to international regulations, such as environmental, toxicological
and safety properties of chemical products, (vi) any other Databases, such as
the TRANS and UBA Databases, pertaining to transportation, formula range,
environmental, toxicological and safety information, reports or data, (vii) any
CPI, PCMaster or other Databases for docketing or organizing any Intellectual
Property, and (viii) any Database for, or useful in connection with, calculation
of any inventor royalty payments. In the event of any such licensor imposed
restrictions that adversely affect Ecolab’s use or other rights hereunder,
Henkel agrees to reasonably cooperate with Ecolab to implement Ecolab’s planned
response thereto. Such response may include Ecolab obtaining its own direct
license rights or Henkel providing to Ecolab the information or data contained
in the relevant Database so as to allow Ecolab to input it into its own
databases or systems.
9. Technology Cooperation Committee.
(a)
Henkel and Ecolab hereby establish a technology cooperation committee (the
“Technology Cooperation Committee”) consisting of four (4), six (6), eight (8)
or ten (10) persons, with the exact number to be agreed (or, from time to time,
changed) by Henkel and Ecolab. Henkel and Ecolab shall each appoint one-half of
the total number of individuals to the Technology Cooperation Committee, such
that Henkel and Ecolab shall each have an equal number of appointees. Henkel’s
initial appointees and Ecolab’s initial appointees are listed on Exhibit 9(a)
hereto. Each party may withdraw existing or appoint new individuals to the
Technology Cooperation Committee by written notice to the other party. The
Technology Cooperation Committee shall be co-chaired by an appointee of each
party and each party shall elect or depose its chairman. At least twice during
each calendar year the Technology Cooperation Committee shall meet and conduct
face-to-face meetings. In addition, as may be mutually agreed upon by Henkel
and Ecolab or the members of the Technology Cooperation Committee, the
Technology Cooperation Committee may from time to time meet by telephone- or
video-conference or otherwise. The Technology Cooperation Committee shall
establish additional rules of procedure to govern its meetings and operations.
In all dealings of the Technology Cooperation Committee, the members shall
preserve confidentiality and act in good faith and with candor.
(b)
The purpose of the Technology Cooperation Committee shall be (i) to facilitate
and enhance the parties’ ability to Exploit and otherwise use the Intellectual
Property pursuant to the provisions of this Agreement, and (ii) to attempt to
resolve conflicts or issues that may arise in connection with the Exploit or
other use of the Intellectual Property. The Technology Cooperation Committee
shall consider and evaluate matters, and shall make recommendations to Henkel
and Ecolab for the mutually satisfactory resolution of conflicts, relating to
this Agreement and the Intellectual Property. Without limiting the generality
of the foregoing, topics of the Technology Cooperation Committee shall include:
(i) the development and evaluation of the Modifications; (ii) changes in the
manner by which the parties may Exploit or otherwise use the Intellectual
Property; (iii) strategies for the preparation and filing of applications to
register Intellectual Property in a manner that will protect the interests of
each party; (iv) technology developments affecting the Intellectual Property;
(v) infringements or other violations of any rights associated with the
Intellectual Property; (vi) analysis and evaluation of data, test reports and
other information for products or services relating to or embodying the
Intellectual Property; (vii) training of employees of a Licensee in the use of
the Intellectual Property; (viii) the actions contemplated by Section 17; (ix)
domain name and other internet-related conflicts; and (x) such other matters as
may arise under this Agreement or otherwise affect the Intellectual Property.
10. Ownership and Use of Modifications and New Technology.
Ecolab shall exclusively own any Modifications or New Technology which Ecolab
develops. Henkel shall exclusively own any Modifications or New Technology
which Henkel develops. Within a reasonable time after their development, Henkel
or Ecolab, as applicable, shall make a confidential written disclosure, with
enough data and specificity to permit meaningful evaluation, of a Modification
or New Technology to the Technology Cooperation Committee (the “Modification
Notice”). The Technology Cooperation Committee members representing the party
to whom the disclosure is made shall have the right to make further confidential
disclosure to management of their employer for the purpose of evaluating the
Modification or New Technology. Henkel and Ecolab shall review such
Modifications or New Technology with a view toward possibly entering into a
licensing arrangement for the use of such Modification or New Technology
developed by the other party. Any such license shall be on reasonable terms
with due regard to items such as: (i) the amount invested by the Licensor in the
development of the Modification or New Technology; (ii) the additional amount
required to be invested in order to use the Modification or New Technology;
(iii) the market for the Modification or New Technology and products or services
embodying the Modification or New Technology; and (iv) potential and existing
competition with respect to the Modification or New Technology and products or
services embodying the Modification or New Technology. In the event Henkel and
Ecolab are unable, in good faith, to agree upon the reasonable terms and
conditions of any such license within one hundred twenty (120) days after the
date the Modification Notice is received by the Technology Cooperation
Committee, the Licensor shall thereafter have the unrestricted right to grant
licenses to the subject Modification and New Technology to any third party on
such terms and conditions as the Licensor deems appropriate.
11. Maintenance of Intellectual Property.
Henkel, as the Licensor of the Ecolab Licensed Intellectual Property, and
Ecolab, as the Licensor of the Assigned Intellectual Property, shall maintain
and protect the Intellectual Property as follows:
(a)
Except as otherwise provided in subsection (c) of this Section 11, the Licensor
shall (using the same degree of care as for its other properties): (i) keep,
preserve, protect and maintain the registrations and applications for the
registration of each Patent and Trademark in full force and effect; and (ii)
appropriately protect the confidentiality of any Technology. The Licensor shall
make and prosecute all pending and/or necessary applications, filings and
payments of fees to maintain all existing registrations and applications for the
registration of the Patents and Trademarks owned by the Licensor in full force
and effect, including, without limitation, any applications for renewal of any
registrations and any affidavits, declarations or other instruments with respect
to any such registrations.
(b)
To the extent reasonably requested by the Licensee, the Licensor shall make and
prosecute all necessary applications and filings to register any Patent or
Trademark owned by the Licensor in any country or jurisdiction in which such
Patent or Trademark is not then registered. Each such application or filing
shall be made at the expense of the Licensee unless the Licensor intends to use
(or within two (2) years after such registration uses or permits a third party
to use) such Patent or Trademark in such country or jurisdiction, in which event
the expense shall be equitably shared between Licensor and Licensee as foreseen
in Section 12 (c) (iii).
(c)
The Licensor shall provide the Licensee with at least ninety (90) days prior
written notice of Licensor’s intention to abandon, through express action or
omission, any registrations or applications for the registration of any Patent
or Trademark owned by the Licensor (the “Abandonment Notice”). Within thirty
(30) days after receipt of the Abandonment Notice, the Licensee shall provide
written notice to the Licensor as to whether the Licensee desires to have the
subject Patent or Trademark assigned, for no additional consideration, by the
Licensor to the Licensee. In the event the Licensee makes such an election, the
Licensor shall execute such documents and take such other actions as may be
reasonably requested by the Licensee to effectuate the assignment, for no
additional consideration (but with cost and expenses to be borne consistent with
Section 16) of such Patent or Trademark, together with an assignment of any
registration or application for the registration of such Patent or Trademark in
an any countries or jurisdictions, as requested by the Licensee; provided,
however, (i) where the Licensor is Henkel, the subject Patent or Trademark shall
thereafter be deemed to be a part of the Assigned Intellectual Property licensed
to Henkel pursuant to Section 6 hereof and (ii) where the Licensor is Ecolab,
the subject Patent or Trademark shall thereafter be deemed to be a part of the
Ecolab Licensed Intellectual Property licensed to Ecolab pursuant Section 3
hereof. In the event the Licensee fails to notify the Licensor of its election
in a timely manner, the Licensor may abandon the subject registration or
application for the registration of a Patent or Trademark without further
obligation to the Licensee.
(d)
The Licensor and the Licensee shall execute any registered user agreements or
other similar documents (collectively, “Registered User Agreements”) promptly
after the other party’s reasonable request therefor, prepared by the requesting
party, to record any license granted to the Licensee pursuant to the provisions
of this Agreement in such countries or jurisdictions as the Licensor or the
Licensee may designate.
(e)
The expenses for the foregoing items pursuant to this Section 11 shall be borne
as between the parties in accordance with the provisions of Section 11 hereof or
the Services Agreement, as applicable.
12. Infringement of Intellectual Property.
(a)
The parties shall, with respect to any matters that come to their attention,
provide prompt written notification to each other of (i) any infringement or
other violation of any rights associated with the Intellectual Property, or (ii)
any activities that could reasonably be considered to violate any right granted
to a Licensee pursuant to this Agreement or that could reasonably be considered
to limit, otherwise restrict, or have an adverse impact on, a Licensee’s right
and ability to exercise any rights granted to a Licensee pursuant to this
Agreement; provided, however, that neither party shall, unless the parties have
otherwise expressly agreed, be affirmatively obligated to monitor for such
infringements, violations or activities. Ecolab shall have the exclusive right
to protect and defend the Assigned Intellectual Property. Henkel shall protect
and defend the Ecolab Licensed Intellectual Property, but Ecolab shall have the
right, in addition to any other rights or remedies available at (and subject to
any limitations under) law or in equity, (i) to cause Henkel to commence any
action or proceeding should Henkel fail to do so; (ii) to exercise and assert
any and all rights and remedies available to a “registrant” pursuant to the
provisions of the intellectual property laws of a particular country or
jurisdiction; (iii) to commence or join any such action or proceeding in its own
name and add Henkel as a party, in each case where permissible under applicable
law; and (v) to jointly control with Henkel any such action or proceeding;
provided, however, Ecolab shall not (without Henkel’s prior written consent,
which consent shall not be unreasonably withheld) have the right to settle or
otherwise resolve any such action or proceeding in a manner that would result in
the forfeiture, loss or material restriction of Henkel’s rights with respect to
the subject Ecolab Licensed Intellectual Property. In the event Ecolab, as the
case may be, fails or declines to promptly commence an action or proceeding in
its own name or to join an action or proceeding commenced by Henkel, Henkel
shall have the right to commence such action or proceeding and to solely control
such action or proceeding; provided, however, Henkel shall not (without Ecolab’s
prior written consent, which consent shall not be unreasonably withheld) have
the right to settle or otherwise resolve any such action or proceeding in a
manner that would result in the forfeiture, loss or material restriction of
Ecolab’s rights with respect to the subject Ecolab Licensed Intellectual
Property.
(b)
In any and all such actions or proceedings, the parties shall (i) reasonably
cooperate and assist each other in good faith to protect and defend the subject
Intellectual Property, (ii) take reasonable account of any legitimate commercial
interest, such as availability of a counterclaim, of the other party, and (iii)
notwithstanding anything in Section 16 hereof to the contrary, agree on an
equitable allocation of costs, expenses and damages for such actions and
proceedings, although it is generally intended that (a) a party solely
controlling any such action or proceeding shall reimburse the party providing
assistance for such assisting party’s reasonable outside counsel fees and
reasonable internal costs and (b) as between the parties, a party that has
solely paid all costs and expenses shall be solely entitled to any and all such
damages, absent any judgment or agreement to the contrary.
(c)
Certain Ecolab Licensed Trademarks identified on Exhibits 1 (i) or 3 (a) are
identical or substantially similar to certain Trademarks of Henkel which are
listed on Exhibit 12 (c) hereto that Henkel may continue to maintain, expand or
use outside the Cleaning and Sanitizing Field in its own interest (the “Henkel
Neighboring Trademarks”). In order to enhance the protection and defense of both
those certain Ecolab Licensed Trademarks and the Henkel Neighboring Trademarks,
Henkel shall institute actions or proceedings (i) against confusingly similar
Trademarks of third parties and (ii) in defense of those certain Ecolab
Licensed Trademarks and the Henkel Neighboring Trademarks, in each case with
the goal of protecting both those certain Ecolab Licensed Trademarks and the
Henkel Neighboring Trademarks in a coordinated manner. Section 16 hereof shall
not apply, and the costs and expenses for the foregoing actions or proceedings
shall be borne by: (i) by Henkel, if such confusingly similar Trademark or the
defense of one or more of those certain Ecolab Licensed Trademarks and Henkel
Neighboring Trademark relates to a third party that operates outside the
Cleaning and Sanitizing Field; (ii) by Ecolab, if such third party operates in
the Cleaning and Sanitizing Field; or (iii) by Henkel and Ecolab equitably, if
such third party operates both outside and in the Cleaning and Sanitizing Field
(or if the field(s) of such third party’s operations cannot reasonably be
determined or allocated). The provisions of this Section 12(c) can be
terminated by either party on notice to the other on or before June 30th of the
then current calendar year with effect as of December 31st of that year, but not
in any case with effect earlier than December 31, 2005.
13. Quality Control.
To the extent required by the laws of a particular country or jurisdiction, with
respect to Trademarks, the Licensor and the Licensee shall use reasonable
efforts to maintain the quality of products and services associated with the
Trademarks as follows:
(a)
The products and services provided by the Licensee in connection with the
Trademarks shall be at a commercially reasonable level which is substantially
comparable in the aggregate to the quality of any similar products or services
provided by the JV Entities or Henkel, as applicable, prior to the Effective
Date.
(b)
The Licensee shall, at the Licensor’s expense, provide the Licensor with samples
of Licensee’s products (with respect to trademarks) and advertising and
promotional materials (with respect to service marks), together with such
numbers and varieties of cartons, containers, packaging and other materials as
reasonably demonstrate use of the Trademarks in connection with Licensee’s
products and services, as the Licensor may reasonably request from time to time,
but not more than twice during any twelve (12) consecutive month period.
(c)
After providing the Licensee with at least thirty (30) days prior written
notice, at such time and location as may be mutually agreed upon by the Licensee
and the Licensor, not more than once during any twelve (12) consecutive month
period, the Licensor shall have the right to make reasonable inspection of the
premises where the products and services associated with the Trademarks are
manufactured or provided, as applicable. The Licensor’s exercise of its rights
under this subsection shall be subject to such reasonable scheduling,
confidentiality and other requirements as may be imposed by any third party
manufacturer engaged by the Licensee.
(d)
In the event of the Licensee’s substantial failure to perform any of its
material obligations under this Section, the Licensor shall provide the Licensee
and the Technology Cooperation Committee with written notice specifying in
reasonable detail the nature of the failure to perform. The Technology
Cooperation Committee shall promptly consider the matter and attempt to
recommend a mutually satisfactory resolution to Henkel and Ecolab. In the event
that it is determined that corrective action must be taken by the Licensee, the
Licensee shall be provided with notice of such determination. Upon receipt of
such notice, the Licensee shall diligently and in good faith commence taking
such actions as may be commercially reasonable to substantially correct or cure
its failure to perform (the “Trademark Corrective Action”). Within ninety (90)
days after its receipt of such notice (the “Trademark Cure Period”), the
Licensee shall have completed such actions as may be reasonably necessary to
have substantially corrected or cured its failure to perform. The inability or
failure of a party to have taken the Trademark Corrective Action during the
Trademark Cure Period shall not constitute a breach of this Section (i) so long
as the Licensee has in good faith commenced the Trademark Corrective Action
during the Trademark Cure Period and has made progress towards the correction or
cure of its failure to perform, or (ii) if the nature of the failure to perform,
and/or the consequences of such failure to perform, are such that the Licensee
is reasonably unable to take, commence or complete the Trademark Corrective
Action during the Trademark Cure Period, in which case the Trademark Cure Period
shall be deemed to be extended for such period of time as may be reasonably
necessary for the Licensee to take the Trademark Corrective Action.
14. Representations and Warranties of Henkel.
Henkel hereby represents, warrants and agrees, as applicable (except with
respect to certain items of Intellectual Property in Mauritius and South Korea),
as follows:
(a)
Henkel is the exclusive owner of all right, title and interest in and to the
Assigned Intellectual Property and the Ecolab Licensed Intellectual Property,
together with any and all registrations and applications to register any of the
Assigned Intellectual Property and the Ecolab Licensed Intellectual Property;
(b)
Henkel followed the Henkel Standards in filing, prosecuting, registering and
maintaining all Assigned Intellectual Property and the Ecolab Licensed
Intellectual Property;
(c)
the Assigned Intellectual Property and the Ecolab Licensed Intellectual Property
are not subject to any Encumbrances, including, without limitation, any
licenses, sublicenses or transfers to any third party, except for any
Encumbrances known to the JV Entities at the Effective Date;
(d)
to the knowledge of Henkel, the Exploit or other use by Ecolab of the Assigned
Intellectual Property and the Ecolab Licensed Intellectual Property, in a manner
and in countries consistent with the current Exploit or other use by the JV
Entities, does not infringe or otherwise violate the proprietary rights of any
third party, except for any infringements or violations known to the JV Entities
at the Effective Date;
(e)
the Assigned Intellectual Property and the Ecolab Licensed Intellectual Property
are not the subject of any pending, or to the knowledge of Henkel threatened,
disputes or claims, except for any disputes or claims known to the JV Entities
at the Effective Date;
(f)
the Documentation was prepared in accordance with the Henkel Standards; and
(g)
in connection with its representations, warranties, covenants and duties under
this Agreement, Henkel shall act, and has in the past acted, in accordance with
the Henkel Standards.
15. Indemnification.
(a)
The Licensee shall indemnify the Licensor from and against any and all claims
and/or Damages which may be asserted against or suffered by the Licensor as a
result or on account of the Exploit or other use by the Licensee of any of the
Intellectual Property.
(b)
Each party shall indemnify, defend and hold harmless the other party and its
Affiliates from and against any and all claims and/or Damages which may be
asserted against or suffered by the other party or such Affiliates as a result
of or on account of any breach of any express representation, warranty or
covenant made by a party hereunder.
(c)
The method and procedure for the assertion and resolution of indemnification
claims under this Section shall be made in accordance with the provisions of
Sections 14.5 and 14.6 of the Master Agreement, with the Licensor or party
seeking indemnification being deemed to be the Indemnified Party and the
Licensee or party from whom indemnification is being sought deemed to be the
Indemnifying Party under such sections.
16. Transfer Expenses and Costs.
With respect to transfer expenses and costs, it is agreed that:
(a)
except as set forth below and in accordance with the first sentence of Section
16.8 of the Master Agreement, each party hereto shall bear and pay its own
costs, charges and expenses incurred in the preparation, negotiation and
implementation of this Agreement, including, without limitation, the cost of its
attorneys, accountants, consultants, brokers, investment bankers or other
advisors it retained;
(b)
Ecolab shall be solely responsible for the filing and legal fees associated with
transferring, recording and/or registering the Assigned Intellectual Property in
its (or its transferees’ or registrants’) name(s);
(c)
Henkel shall not be remunerated (other than reasonably required out of pocket
expenses incurred on Ecolab’s behalf and with Ecolab’s prior approval) for
providing clerical (as opposed to professional) assistance, such as copying and
Database use, access, transport and integration, to Ecolab, including, without
limitation, in connection with Ecolab’s transfer, recording and/or registration
of the Assigned Intellectual Property;
(d)
Ecolab shall reimburse Henkel for the reasonable professional costs, including,
without limitation, for Henkel’s internal professional patent and trademark
department personnel, incurred by Henkel in Henkel’s maintenance of the Ecolab
Licensed Intellectual Property that Henkel does not use outside the Cleaning and
Sanitizing Field; and
(e)
Ecolab and Henkel shall, through the Technology Cooperation Committee, agree on
an equitable arrangement for sharing the expenses of maintaining the Ecolab
Licensed Intellectual Property that is used by Henkel outside the Cleaning and
Sanitizing Field.
Notwithstanding the foregoing, the parties acknowledge that: (i) pursuant to the
Master Agreement, they have entered into the Services Agreements (with specific
per service pricing attachments) that provide for, among other things, Henkel
rendering certain intellectual property services to Ecolab for a transition
period and the amounts by which Henkel will be compensated for such services;
and (ii) in the event of any conflict between the provisions of such Services
Agreements (with such attachments) and the foregoing provisions of this Section
16, the provisions of such Services Agreements (with such attachments) shall
control.
17. Further Assurances.
(a)
The parties expressly acknowledge that the subject matter of this Agreement and
the transactions contemplated by this Agreement involve many items of
Intellectual Property. After the Effective Date, the parties shall from time to
time at the request of each other, execute such other documents or instruments
and take such other actions as may be reasonably requested in order to more
effectively accomplish the purposes of this Agreement and the consummation of
the transactions contemplated by this Agreement. The parties shall use their
reasonable efforts to obtain any additional consents, approvals, authorizations
or waivers necessary in order to more effectively accomplish the purposes of
this Agreement or consummate the transactions contemplated by this Agreement.
(b)
The parties acknowledge and agree that, with respect to the Assigned Patents
licensed to Henkel and the Ecolab Licensed Patents, this Agreement shall
terminate on a country–by–country basis and shall expire in each such country
upon the last to expire in each such country of any registration for such
Assigned Patents and any Ecolab Licensed Patents.
(c)
The parties further acknowledge and agree that after the Effective Date it may
be necessary to re-characterize certain items of the Intellectual Property to
correct oversights or omissions and thereby (i) transfer such items from one
exhibit hereto to another, (ii) delete such items from exhibits, (iii) add such
items to exhibits, (iv) amend the intended registrant(s), if specified, such
items, or (v) otherwise take such actions as are necessary to more effectively
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby. Neither party shall have any unilateral right
to so re-characterize any such item without the other party’s prior written
consent (which consent shall not be unreasonably withheld). The foregoing
actions may also be taken for the purpose of: (i) more effectively protecting
and defending the Intellectual Property; (ii) facilitating the use of the
Intellectual Property; (iii) financial efficiency; or (iv) for other purpose
consistent with the provisions of this Agreement. All such matters pursuant to
this Section shall (i) be dealt with initially by the Technology Cooperation and
(ii) require the parties shall consult and cooperate with each other in good
faith.
18. Termination of the Agreement.
In the event that either party fails to substantially perform any of their
material obligations under this Agreement, the nondefaulting party may give
written notice of the default to the defaulting party (the “Default Notice”).
Within sixty (60) days after its receipt of the Default Notice (the “Default
Cure Period”), the defaulting party shall have completed such actions as may be
reasonably necessary to have substantially corrected or cured its default (the
“Default Corrective Action”). So long as the inability or failure of a party to
have taken the Default Corrective Action during the Default Cure Period shall
not constitute a breach of this Section (i) so long as the defaulting party has
in good faith commenced the Default Corrective Action during the Default Cure
Period and has made progress towards the correction or cure of the default, or
(ii) if the nature of the default, and/or the consequences of such failure to
perform, are such that the defaulting party is reasonably unable to take,
commence, or complete the Default Corrective Action during the Default Cure
Period, in which case the Default Cure Period shall be deemed to be extended for
such period of time as may be reasonably necessary for the defaulting party to
take the Default Corrective Action. At the expiration of the Default Cure
Period, the parties shall in good faith attempt to resolve the Dispute pursuant
to the methods and procedures for dispute resolution specified in Article XV of
the Master Agreement. In the event particular items of Intellectual Property are
the subject of a Dispute, this Agreement may be terminated only with respect to
such particular items of Intellectual Property; provided, however, the
termination of this Agreement in its entirety, or the termination of this
Agreement with respect to a particular item of Intellectual Property, shall not
in any respect whatsoever render void, or otherwise affect, the transfer, sale
and assignment to Ecolab of the Assigned Intellectual Property pursuant to the
provisions of Section 2 of this Agreement.
19. Disclaimer.
EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT OR THE MASTER
AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY
OR ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY
INTELLECTUAL PROPERTY HEREUNDER.
20. Prior Agreements.
Each of the Prior Agreements and all of the provisions thereof shall be deemed
amended by this Agreement to apply only to intellectual property used by the JV
Entities on or prior to the date hereof and shall remain in full force and
effect for a period of eighteen (18) months after the Effective Date and shall
thereupon terminate without further Liability to either party; provided that (i)
any Liability of a party under any Prior Agreement shall not terminate with
respect to any claim, whether or not fixed as to Liability or liquidated as to
amount, with respect to which such party has been given written notice by the
other party prior to such 18-month date specifying the facts on which such
alleged claim is based; (ii) Ecolab shall promptly pay any accrued and unpaid
royalties due through the Effective Date to Henkel pursuant to the Technology
and Trademark Royalty Fee Agreement dated July 11, 1991, and, immediately as of
such payment, no further royalties shall be due or payable by any party (or the
JV Entities) to the other party under any Prior Agreement; and (iii) any
provisions of a Prior Agreement that are inconsistent with any provisions of
this Agreement shall be deemed amended and superseded by the provisions of this
Agreement.
21. Assignment.
Henkel and Ecolab shall each have the right to convey, transfer, assign or
otherwise dispose of any of their rights or obligations under this Agreement to
any of their respective Affiliates and to any successors or assigns of the
relevant business or otherwise, but only to the extent that such dispositions
are consistent with the terms and conditions of the rights granted herein. The
aforementioned actions may be taken without the consent of either party, but
each party shall provide the other party with reasonable notice that such
actions have been taken.
22. Miscellaneous.
Except for the provisions of Section 16.3 and 16.8 and the last sentence of
Section 16.9 of the Master Agreement, the provisions of Article XVI of the
Master Agreement shall have application to this Agreement.
IN WITNESS WHEREOF, each of the parties has duly executed this Agreement, on its
own behalf and as the representative of each of its Affiliates, as of the date
first above written.
HENKEL KGaA
By:
/s/ W. Kotz /s/ T. Kuhn
Its:
ECOLAB INC.
By:
/s/ Lawrence T. Bell
Its:
Senior Vice President – Law and General Counsel
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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of November 21, 2001, between Zenith
National Insurance Corp., a Delaware insurance holding company (the "Company"),
and Odyssey Reinsurance Corporation, a Delaware corporation (the "Purchaser",
such term to include, subject to the proviso to Section 17, any assignee of
Odyssey Reinsurance Corporation pursuant to Section 17).
WHEREAS, the Company wishes to sell to Purchaser an aggregate of 1,000,000
shares (the "Shares") of common stock, par value U.S.$1.00 per share (the
"Common Stock"), of the Company and Purchaser wishes to purchase from the
Company the Shares, upon the terms and subject to the conditions set forth
herein;
WHEREAS, Purchaser is purchasing the Shares for investment purposes;
WHEREAS, the Company and Purchaser will be entering into a Reinsurance
Agreement (as defined below);
WHEREAS, the Company and Fairfax Financial Holdings Limited have entered
into a standstill Agreement, dated as of June 30, 1999 (the "Standstill
Agreement"); and
WHEREAS, pursuant to Section 1.1 of the Standstill Agreement, on or prior to
the Settlement Date (defined below), a majority of the Board of Directors of the
Company who are not affiliates of, and are not officers, directors or employees
of Purchaser, or any corporation or other entity controlled by or affiliated
with the Purchaser, will have approved the transactions contemplated hereby (the
"Board Approval").
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, the Company and Purchaser hereby agree as
follows:
1. Sale of Shares. Subject to the terms and conditions contained herein,
the Company will sell to Purchaser, and Purchaser will buy from the Company, the
Shares for an aggregate cash purchase price of U.S.$25,000,000 (the "Purchase
Price"), representing U.S.$25.00 per Share, payable on the Settlement Date (as
defined below). The Purchase Price shall be adjusted upon the terms and
conditions described in Section 8 below. The parties acknowledge and agree that
the Shares constitute shares of Common Stock previously issued and currently
held in the treasury of the Company.
2. Settlement.
(a)Settlement of the sale and purchase under Section 1 of this Agreement shall
take place at the offices of Shearman & Sterling, 199 Bay Street, Suite 4405,
Toronto, Ontario, Canada at 11:00 a.m., New York City time, on the third
business day after receipt by the Company and Purchaser of all necessary
approvals, non-disapprovals or comparable responses described in Section 4(f)
below (the "Settlement Date" and all such approvals, non-disapprovals and other
comparable responses being hereafter collectively referred to as the "Necessary
Approvals").
(b)On the Settlement Date, the Company shall deliver or cause to be delivered to
Purchaser (i) stock certificates evidencing the Shares registered in the name of
Purchaser, or such entity as the Purchaser may designate, and (ii) a receipt for
the Purchase Price in respect of the Shares.
(c)On the Settlement Date, Purchaser shall deliver to the Company (i) the
Purchase Price by wire transfer of immediately available funds to the Company's
account as furnished to Purchaser in writing prior to the Settlement Date and
(ii) a receipt for the Shares.
3. Representations of the Company. As an inducement to Purchaser to enter
into this Agreement, the Company represents and warrants to Purchaser that:
(a)Each of the Company and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite
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corporate power and authority to own, operate or lease the properties and assets
now owned, operated or leased by it and to carry on its business as it has been
and is currently conducted. The Company has all requisite corporate power and
authority to enter into and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The Company is duly licensed or
qualified to do business and is in good standing in the State of Delaware and is
duly qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction which requires such qualification. Each
insurance company subsidiary of the Company is duly qualified to do business as
an insurance company and is in good standing under the laws of each jurisdiction
which requires such qualification.
(b)All the outstanding shares of capital stock of each subsidiary of the Company
have been duly and validly authorized and issued and are fully paid and
nonassessable, and all outstanding shares of capital stock of the subsidiaries
are owned by the Company either directly or through wholly owned subsidiaries
free and clear of any perfected security interest or any other security
interests, claims, liens or encumbrances.
(c)The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock and 1,000,000 shares of preferred stock of the Company. As of the
date hereof, 17,532,124 shares of Common Stock are issued and outstanding, all
of which are validly issued, fully paid and nonassessable. None of the issued
and outstanding shares of Common Stock was issued in violation of any preemptive
rights. There are (i) no warrants, convertible securities or other rights,
agreements, arrangements or commitments of any character relating to the capital
stock of the Company or obligating the Company to issue or sell any shares of
capital stock of, or any other interest in, the Company and (ii) no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of Common Stock or to provide any material funds to, or make
any material investment (in the form of a loan, capital contribution or
otherwise) in, any other person (other than a direct or indirect subsidiary of
the Company), except in each case as provided in (A) any share plan of the
Company or its subsidiaries disclosed in the SEC Reports (defined below),
(B) the Standstill Agreement or (C) Article IX of the Purchase Agreement dated
February 4, 1981, among Reliance Insurance Company, the Company and certain
other parties (the "Reliance Purchase Agreement"). Upon consummation of the
transactions contemplated by this Agreement, the Shares will be fully paid and
nonassessable.
(d)Subject to receipt of the Necessary Approvals, the delivery of and payment
for the Shares pursuant to this Agreement will transfer to Purchaser good and
valid title to the Shares free and clear of any perfected security interest or
any other security interests, claims, liens or encumbrances. Except for the
Standstill Agreement, there are no voting trusts, stockholder agreements,
proxies or other agreements or understandings in effect with respect to the
voting or transfer of any of the Shares.
(e)The execution and delivery of this Agreement by the Company, the performance
by the Company of its obligations hereunder and the consummation by the Company
of the transactions contemplated hereby have been duly authorized by all
requisite corporate action on the part of the Company. This Agreement has been,
or will be on or prior to the Settlement Date, duly executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws of general application affecting
enforcement of creditors' rights generally and (ii) the availability of the
remedy of specific performance or injunctive or other forms of equitable relief
may be subject to equitable defenses and would be subject to the discretion of
the court before which any proceeding therefor may be brought.
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(f)Neither the Company nor any subsidiary is in violation or default of, (i) any
provision of its certificate of incorporation or by-laws, (ii) the terms of any
material indenture, mortgage, lease or loan agreement to which the Company or
any of its subsidiaries is a party or bound or to which its or their property is
subject, or (iii) any statute, regulation, rule, judgment, order, decree or
other restriction of any government, governmental agency or court to which the
Company or any of its subsidiaries is subject.
(g)Neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated hereby conflicts with or results in a breach of
any of the provisions of, or constitutes a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under, or
results in the creation of any encumbrance on any of the Shares under, (i) the
certificate of incorporation or by-laws of the Company or any of its
subsidiaries, (ii) any material indenture, mortgage, lease or loan agreement to
which the Company or any of its subsidiaries is a party or bound or to which its
or their property is subject, or (iii) violates any statute, regulation, rule,
judgment, order, decree or other restriction of any government, governmental
agency or court to which the Company or any of its subsidiaries is subject.
(h)Subject to the Necessary Approvals, no notice to, filing with or
authorization, consent or approval of, any court or governmental agency or body
by the Company is necessary for the consummation of the transactions
contemplated by this Agreement.
(i)The Company and its subsidiaries have conducted their business in material
compliance with all laws and governmental orders applicable to the them or any
of their assets or their business, and the Company and its subsidiaries have not
received any notice of and are not in material violation of any such laws or
governmental orders.
(j)Since December 31, 2000, except as disclosed in this Agreement or in the
Company's filings (the "SEC Reports") with the Securities and Exchange
Commission (the "Commission") or the Company's press releases, the Company and
its subsidiaries have conducted their business only in the ordinary course and
in a manner consistent with past practice, and since such date through the date
of this Agreement there has not been any change in or effect on the business of
the Company and its subsidiaries that is materially adverse to the financial
condition, prospects or results of operation of the Company and its subsidiaries
taken as a whole.
(k)All negotiations relating to this Agreement and the transactions contemplated
hereby have been carried on without the intervention of any person acting on
behalf of the Company in such manner as to give rise to any valid claim against
Purchaser for any brokerage or finder's commission, fee or similar compensation.
(l)Assuming the accuracy of the representations of Purchaser in Sections 4(a),
(b) and (c), the offer and sale of the Shares hereunder are exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act").
4. Representations of Purchaser. As an inducement to the Company to enter
into this Agreement, Purchaser represents and warrants to the Company that:
(a)Purchaser is acquiring the Shares to be purchased pursuant to this Agreement
for investment purposes, for Purchaser's own account and with no present
intention of distributing or reselling the Shares in any transactions which
would be in violation of the securities laws of the United States of America or
any state thereof or the insurance laws of any state thereof.
(b)Purchaser is an "accredited investor" as such term is defined in Rule 501(a)
of Regulation D under the Securities Act. Purchaser has conducted its own
investigation with respect to the Company, has received all information that it
believes is necessary and appropriate in
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connection with its purchase of the Shares and has knowledge and experience in
financial and business matters such that it is capable of evaluating the risks
of the investment in the Shares.
(c)Purchaser is aware that the Shares may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of without registration or
qualification under the Securities Act and any applicable state securities laws,
except pursuant to an exemption from such registration or qualification under
the Securities Act and any applicable state securities laws. Purchaser is aware
that the Company has no obligation to register the Shares for resale except
pursuant to Sections 9 through 13 of this Agreement.
(d)Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite power and authority to enter into and perform its obligations under
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Purchaser, the performance by
Purchaser of its obligations hereunder and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by all requisite
action on the part of Purchaser. This Agreement has been duly executed and
delivered by Purchaser. This Agreement constitutes a legal, valid and binding
obligation of Purchaser, enforceable against it in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws of general application
affecting enforcement of creditors' rights generally and (ii) the availability
of the remedy of specific performance or injunctive or other forms of equitable
relief may be subject to equitable defenses and would be subject to the
discretion of the court before which any proceeding therefor may be brought.
(e)Purchaser has sufficient cash available to it to consummate the purchase of
the Shares contemplated hereby without the need for any financing other than
that which is already available or committed to Purchaser without material
condition; provided that Purchaser hereby expressly acknowledges and agrees that
the ability of Purchaser to obtain the necessary funds from such financing shall
not be a condition to the consummation of the transactions contemplated hereby.
(f)Neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated hereby conflicts with or results in a breach of
any of the provisions of, or constitutes a default (or event which with the
giving of notice or lapse of time or both, would become a default) under, any
material indenture, mortgage, lease or loan agreement to which Purchaser is
bound or violates any statute, regulation, rule, judgment, order, decree or
other restriction of any government, governmental agency or court to which
Purchaser is subject. No notice to, filing with or authorization, consent or
approval of, any government or governmental agency by Purchaser is necessary for
the consummation of the transactions contemplated by the Agreement, except that
Purchaser will be required to file a Form 4 and an amendment to Schedule 13D
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
after consummation of the transactions contemplated by this Agreement.
(g)All negotiations relating to this Agreement and the transactions contemplated
hereby have been carried on without the intervention of any person acting on
behalf of Purchaser in such manner as to give rise to any valid claim against
the Company for any brokerage or finder's commission, fee or similar
compensation.
5. Covenants of the Company and Purchaser. Each of the Company and
Purchaser will:
(a)file or supply, or cause to be filed or supplied, all applications,
notifications and information required to be filed or supplied by it pursuant to
applicable law in connection with the sale
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and purchase of the Shares and the consummation of the transactions contemplated
by this Agreement;
(b)promptly respond to requests for additional information and give such
reasonable undertakings to insurance and other regulatory authorities as may be
required to consummate the sale and purchase of the Shares;
(c)use its best efforts to take, or cause to be taken, all actions necessary,
proper or advisable in order for it to fulfill its obligations under this
Agreement; and
(d)take no action that would result in its representations and warranties
becoming untrue.
6. Conditions to Closing.
(a)The obligations of Purchaser hereunder to purchase, and of the Company
hereunder to sell, the Shares are subject to the fulfillment or waiver by each
party of each of the following conditions:
(i)all permits, orders, approvals, consents, non-disapprovals or non-objections
relating to any governmental or insurance regulatory authority which are
required in connection with the consummation of the transactions contemplated by
this Agreement including, but not limited to, such regulatory authorities as
require a permit, order, approval, consent, non-disapproval or non-objection (in
the case of any non-disapprovals or non-objections as evidenced by the time
period prescribed by applicable insurance law having elapsed without Purchaser
having received any objection), shall have been obtained (and, subject to
Purchaser's obligations under Section 5(b) and (c), not contain any conditions
or other terms that are not reasonably acceptable to Purchaser) and such
permits, orders, approvals, consents, non-disapprovals and/or non-objections
shall be effective and shall not have been suspended, revoked or stayed;
(ii)no injunction or law prohibiting or making illegal the consummation of the
transactions contemplated by this Agreement shall have been enacted, issued,
promulgated or enforced by any court or governmental authority having
jurisdiction over the Company or Purchaser; and
(iii)the Company and Odyssey America Reinsurance Corporation or an affiliate of
Odyssey America Reinsurance Corporation shall have mutually agreed to the
principal terms of, and agreed to finalize after the Settlement Date, the
reinsurance agreement referred to in the Company's press release regarding the
sale and purchase of the Shares dated October 18, 2001 (the "Reinsurance
Agreement").
(b)The obligations of the Company to consummate the transactions contemplated by
this Agreement shall be further subject to the fulfillment, at or prior to the
Settlement Date, of the following conditions: (i) the representations and
warranties of Purchaser contained in this Agreement shall have been true and
correct when made and shall be true and correct in all material respects as of
the Settlement Date, with the same force and effect as if made at the Settlement
Date (except if made as of a specified earlier date), (ii) the covenants and
agreements contained in this Agreement to be complied with by Purchaser on or
before the Settlement Date shall have been complied with in all material
respects, and (iii) the Company shall have received a certificate from Purchaser
to the effect set forth in clauses (i) and (ii) signed by a duly authorized
representative thereof.
(c)The obligations of Purchaser to consummate the transactions contemplated by
this Agreement shall be further subject to the fulfillment, on or prior to the
Settlement Date, of the following conditions: (i) the representations and
warranties of the Company contained in this Agreement shall have been true and
correct when made and shall be true and correct in all
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material respects as of the Settlement Date, with the same force and effect as
if made at the Settlement Date (except if made as of a specified earlier date),
(ii) the covenants and agreements contained in this Agreement to be complied
with by the Company on or before the Settlement Date shall have been complied
with in all material respects, and (iii) Purchaser shall have received a
certificate from the Company to the effect set forth in clauses (i) and
(ii) signed by a duly authorized representative thereof.
(d)The Company shall have delivered to Purchaser a certified copy of resolutions
duly adopted by the Board of Directors of the Company which shall evidence the
Board Approval.
7. Termination.
This Agreement may be terminated as follows:
(a)by mutual written consent of the Company and Purchaser;
(b)at the election of the Company or Purchaser if the conditions set forth in
Section 6(a) of this Agreement have not been fulfilled on or prior to April 30,
2002 (so long as the party seeking to terminate this Agreement has not breached
any provision hereof);
(c)at the election of the Company, in the event that the conditions set forth in
Section 6(b) have not been fulfilled by the Settlement Date or have become
impossible of fulfillment prior to the Settlement Date; and
(d)at the election of Purchaser, in the event that the conditions set forth in
Section 6(c) or 6(d) have not been fulfilled by the Settlement Date or have
become impossible of fulfillment prior to the Settlement Date.
In the event of the termination of this Agreement pursuant to the provisions
of this Section 7, this Agreement shall become void and have no effect, without
any liability on the part of any party hereto or its directors, officers or
stockholders in respect of this Agreement, except for a breach of Section 21
hereof and except that nothing herein shall limit the right of either party to
seek damages from the other for breach of this Agreement.
8. Adjustments for Dividends and Other Distributions; Stock Splits, etc. In
the event of a change in the number of Shares prior to or on the Settlement Date
by virtue of a stock split, stock dividend, split-up, recapitalization or other
similar transactions, the Company shall deliver to Purchaser on the Settlement
Date, without change in the Purchase Price, that number of shares of Common
Stock as adjusted for such stock split, stock dividend, split-up,
recapitalization or other similar transactions, on the Settlement Date as a
result of such transactions and all such shares shall be "Shares" under this
Agreement.
9. Registration Rights.
(a)From and after the Settlement Date, Purchaser may deliver a written request
to the Company, which request shall state (i) the aggregate number of Shares
which are proposed to be sold in a public offering, (ii) whether such Shares
will be disposed of through an underwriter (an "Underwritten Offering") or
otherwise, and (iii) shall request that the Company effect a registration under
the Securities Act of all or part of the Shares then owned by Purchaser. Upon
receipt of such request, the Company will promptly use its best efforts to
effect the registration (the "Registration") under the Securities Act of the
Shares which Purchaser has so requested to register so as to permit the
disposition (in accordance with the intended methods thereof as aforesaid) by
Purchaser of the Shares so to be registered.
If Purchaser requests an Underwritten Offering, the Company shall enter into
an agreement with a managing underwriter selected by Purchaser and named in such
request and with such other underwriters as Purchaser shall from time to time
name, which agreement shall contain terms
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customary for a secondary distribution. The Company shall have the right to
approve any and all underwriters selected by Purchaser, which approvals shall
not be unreasonably withheld.
For the purposes of Sections 9 through 13 of this Agreement, Shares shall
also mean shares of Common Stock which become outstanding after the Settlement
Date, and securities issued in respect of the Shares.
(b)If the managing underwriter for an Underwritten Offering notifies Purchaser
that it is able to dispose of fewer Shares than the aggregate number which
Purchaser has requested to be registered (such difference to be referred to as
the "Undisposed Shares"), then the number of Shares to be registered on behalf
of Purchaser shall be reduced by such difference.
(c)Purchaser may make the request for the Registration only once; provided,
however, that in the event that an Underwritten Offering results in Undisposed
Shares, then, Purchaser may subsequently request a Registration pursuant to
Section 9(a) one or (to the extent that subsequent notice or notices are of
Underwritten Offerings which resulted in Undisposed Shares) more additional
times, to the extent necessary to register on behalf of Purchaser that number of
Shares equal to the Undisposed Shares which resulted from the first
Registration.
10. Registration of Shares by the Company. If the Company proposes to
register on a general form for registration under the Securities Act a sale,
disposition or transfer by the Company or any other person of any Common Stock
(otherwise than pursuant to Section 9 of this Agreement, a registration relating
solely to the sale of Common Stock to participants in a share plan of the
Company or any of its subsidiaries or a registration relating solely to a
reorganization or other transaction described under Rule 145 of the Securities
Act) it will at each such time give written notice to Purchaser of its intention
to do so and, upon the written request of Purchaser given within ten (10) days
after mailing of any such notice (which request of such entity shall specify the
number of Shares intended to be sold or disposed of by such entity and describe
the nature of any proposed sale or other disposition thereof), the Company will
use its best efforts to cause all such Shares to be registered under the
Securities Act to the extent requisite to permit the sale or other disposition,
in accordance with the method described in the notice; provided, however, that
Purchaser shall have no right to participate in any Underwritten Offering by the
Company in connection with Shares to be registered pursuant to this Section 10,
notwithstanding their rights to have Shares registered pursuant to such Section;
provided further, that the Company may require Purchaser to agree not to sell or
otherwise dispose of such shares pursuant to the registration statement for a
period not exceeding 90 days after the closing of the sale of Common Stock to an
underwriter (the "Waiting Period") to the extent that the managing underwriter
of the proposed public offering of securities for which the registration
statement was to be filed delivers to Purchaser a letter stating that such sales
or other disposition within such Waiting Period could materially and adversely
affect such public offering. In the event of a disagreement in good faith
between the parties hereto and the managing underwriter as to the length of the
Waiting Period or any other matters relating to a Registration pursuant to
Sections 9 through 13 of this Agreement, the decision of any mutually agreed
upon third party, shall control.
11. Certain Obligations Regarding Registration.
(a)If and whenever the Company is required to use its best efforts to effect the
Registration of any Shares under the Securities Act as provided above in
Sections 9 and 10 of this Agreement, the Company will promptly:
(i)in the case of Section 9, prepare and, within sixty (60) days of the date
such request was made, (provided that the Company shall use its best efforts to
file such registration statement as soon as possible), file with the Commission
a registration statement (on any form that is available to the Company and
usable by Purchaser in connection with such
7
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Registration) with respect to such Shares and use its best efforts to cause such
registration statement to become effective;
(ii)afford to the officers and authorized representatives of Purchaser
reasonable access to the Company's and its subsidiaries' plants, properties,
books and records and its and their principal officers in order that Purchaser
may have full opportunity to make a reasonable investigation of the statements
made in any such registration statement;
(iii)in the case of Section 9, prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act with
respect to the disposition of all Shares covered by such registration statement
until such time as all of such Shares have been disposed of in accordance with
the intended methods of disposition by Purchaser set forth in such registration
statement but in no event for a period of more than nine (9) months after such
registration becomes effective;
(iv)furnish to Purchaser such number of copies of such registration statement
and of each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus), in conformity
with the requirements of the Securities Act, and such other documents, as
Purchaser may reasonably request in order to facilitate the disposition of the
Shares owned by Purchaser;
(v)use its best efforts to register or qualify the Shares covered by such
registration statement under such other securities or blue sky laws of such
jurisdictions within the United States as Purchaser shall reasonably request,
except that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction wherein it
is not so qualified, to subject itself to taxation in any such jurisdiction, or
to consent to general service of process in any such jurisdiction; and
(vi)notify Purchaser at any time when a prospectus relating thereto is required
to be delivered under the Securities Act within the period mentioned in
Section 11(a)(iii) of this Agreement of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statement
therein not misleading in light of the circumstances then existing, and at the
request of Purchaser, prepare and furnish to Purchaser a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
(b)In connection with any Registration pursuant to Sections 9 and 10 of this
Agreement, the Company may require Purchaser, and Purchaser agrees:
(i)to furnish the Company such information regarding itself and the distribution
of the Shares as to which a registration is being effected as the Company may
from time to time reasonably request in writing and as shall be required by law
in connection therewith; and
(ii)in the event of a Registration pursuant to Section 10 of this Agreement, to
cooperate with the Company and enter into such agreements and take such actions
as may be reasonably requested by the Company.
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12. Registration Expenses.
(a)For purposes of Sections 9 through 13 of this Agreement, Registration
Expenses shall include all expenses incident to the Company's performance of or
compliance with Sections 9 through 13 of this Agreement including, without
limitation, all registration and filing fees, all fees and expenses of complying
with securities or blue sky laws, all registration and other incidental expenses
in connection with the registration of Shares under the Securities Act, all
printing expenses, the fees and disbursements of counsel for the Company and of
the Company's independent certified public accountants, and the expenses of any
special audits required by or incident to such performance and compliance (but
excluding selling expenses, underwriting discounts and commissions and transfer
taxes, if any).
(b)In the event of a Registration pursuant to Section 9 of this Agreement,
Purchaser shall pay all Registration Expenses other than those expenses and
costs which would have been incurred by the Company notwithstanding such request
and other than those Registration Expenses and costs attributable to the
overhead of the Company or any of its subsidiaries or the compensation of any
employee thereof.
(c)Purchaser shall not be required to pay any Registration Expenses in
connection with a registration pursuant to Section 10 of this Agreement except
for legal or selling expenses directly incurred by Purchaser.
13. Indemnification.
(a)In the event of any registration of Shares pursuant to Sections 9 through 13
of this Agreement, the Company will indemnify and hold harmless Purchaser and
each underwriter of such Shares and each other person, if any, who controls
Purchaser or such underwriter within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which Purchaser
or such underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto (including
any material incorporated by reference into such registration statement, any
such preliminary prospectus, final prospectus or any amendment or supplement
thereto, but excluding any item in a preliminary prospectus which is corrected
in the final prospectus), or (ii) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Company will, pursuant to the
provisions of Section 13(c) of this Agreement, reimburse Purchaser and each such
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage or liability or action; provided that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, any such preliminary prospectus, final prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by Purchaser or such underwriter or controlling person
specifically for use in preparation thereof.
(b)Purchaser shall indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 13(a)) the Company, each director of the
Company, each officer of the Company who shall sign such registration statement
and each underwriter of such Shares and each other person, if any, who controls
Shares or such underwriter within the meaning of the Securities Act, from any
losses, claims, damages or liabilities, joint or several, to which the
9
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Company, such directors or officers of the Company or such underwriter or
controlling person may become subject under the Securities Act or otherwise
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by Purchaser specifically for use in preparation thereof.
(c)Within sixty (60) days after receipt by an indemnified party of notice of
either a claim or the commencement of any action involving a claim referred to
in the preceding paragraphs of this Section 13 such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action; the failure of
any indemnified party to give notice as provided herein shall relieve the
indemnifying party of its obligations under the preceding paragraphs of this
Section 13, except where it can be established that the indemnifying party had
prior actual notice of such claim or action. In case any such action is brought
against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party for
any legal or other expenses subsequently incurred by the latter in connection
with the defense thereof. No indemnifying party, in the defense of any such
claim or litigation, shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation.
14. Securities Laws. The parties hereto hereby acknowledge that they are
aware that the United States securities laws prohibit any person who has
material non-public information about a company from purchasing or selling
securities of such company or communicating such information to any other person
under circumstances in which it is reasonably foreseeable that such person is
likely to purchase or sell securities of such company.
15. Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York including, without limitation,
New York General Obligations Law Section 5-1401. The headings of the Sections
hereof are inserted for convenience only and shall not be deemed to constitute a
part thereof.
16. Jury Trial. THE PARTIES HERETO HEREBY WAIVE ANY RIGHTS TO A TRIAL BY
JURY WITH RESPECT TO ANY MATTER RELATING TO THIS AGREEMENT.
17. Assignment. This Agreement may not be assigned by either party hereto
without the prior written consent of the other party hereto, except that
Purchaser may assign this Agreement to Fairfax Financial Holdings Limited and/or
any one or more of Fairfax Financial Holdings Limited's (including without
limitation Purchaser's) subsidiaries without the Company's prior written
consent; provided that Purchaser shall remain liable for the obligations of
Purchaser hereunder as if such assignment had not taken place.
18. Parties in Interest. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto.
19. Amendments. This Agreement may be amended, modified or terminated only
by an instrument in writing signed by the Company and Purchaser.
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20. Conveyance Taxes. Purchaser and the Company shall each be responsible
for any stock transfer and stamp taxes or other similar taxes which become
payable in connection with the sale of the Shares to Purchaser under this
Agreement which are such party's obligation under applicable law. Purchaser and
the Company shall execute and deliver all instruments and certificates necessary
to enable the other party to make the necessary tax and other filings, if any.
21. Press Releases. Neither party shall issue any press release relating to
the transactions contemplated hereby without having consulted in advance with
the other party and the parties shall cooperate as to the timing and contents of
any such press release, except in the event that such press release is required
by law or regulations, or by the rules of any securities exchange on which
securities of any of the parties hereto are listed or quoted and such
consultation and cooperation is not reasonably practicable within the applicable
time periods for issuing the release.
22. Notices. All notices, consents, requests, instructions, approvals and
other communications provided herein shall be validly given or made (and shall
be deemed to have been duly given or made upon receipt or delivery), if in
writing and delivered personally or sent by nationally recognized overnight
courier, by facsimile transmission (followed up by certified or registered mail,
return receipt requested) or by registered or certified mail return receipt
requested, (i) if to Purchaser c/o Fairfax Financial Holdings Limited, 95
Wellington Street West, Suite 800, Toronto, Ontario, Canada M5J 2N7, attention:
Eric Salsberg, facsimile (416) 367-2201 with a copy to Shearman & Sterling,
Commerce Court West, Suite 4405, P.O. Box 247, Toronto, Canada M5L IE8,
attention: Brice T. Voran, facsimile (416) 360-2958 and (ii) if to the Company
at Zenith National Insurance Corp. at 21255 Califa Street, Woodland Hills,
California 91367, attention: Stanley R. Zax, facsimile (818) 713-0177 with a
copy to Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand Avenue, Suite
3400, Los Angeles, California 90071, attention: Jerome L. Coben, facsimile
(213) 687-5600.
23. Miscellaneous. This Agreement may be executed concurrently in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Each counterpart may be
delivered by facsimile transmission, which transmission shall be deemed delivery
of an originally executed document.
24. Entire Agreement. This Agreement is intended by the parties as a final
expression of their understandings and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
25. Further Action. Each of the parties hereto shall use all commercially
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable laws
and regulations, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and consummate and
make effective the transactions contemplated by this Agreement. Each party will
consent to any proposal by the other party for structuring any aspect of the
sale of the Shares in a manner which is advantageous to the party making the
proposal if such proposal is neutral or advantageous to the party whose consent
is sought (as determined by the party whose consent is sought), provided that
such proposal is reasonably feasible, is not contrary to applicable laws and
regulations and will be at no cost to such party.
INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
ZENITH NATIONAL INSURANCE CORP.
By:
/s/ STANLEY R. ZAX
--------------------------------------------------------------------------------
Name: Stanley R. Zax Title: Chairman & President
ODYSSEY REINSURANCE CORPORATION
By:
/s/ DONALD L. SMITH
--------------------------------------------------------------------------------
Name: Donald L. Smith Title: Senior Vice President
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QuickLinks
STOCK PURCHASE AGREEMENT
|
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (this "Agreement") is made as of __________, 2001
by and among United Artists Theatre Company, a Delaware corporation (the
"Company"), The Anschutz Corporation, a Delaware corporation ("TAC"), and the
Lenders Group (as defined herein), and shall be binding upon and inure to the
benefit of any individual or Person (as defined herein) owning Shares (as
defined herein) that were received in connection with the exercise of any option
or any incentive stock award granted under a compensatory benefit plan of the
Company or its subsidiaries or the exercise of Convertible Securities (as
defined herein) (collectively, the "Additional Stockholders"). Each of the
parties to this Agreement (other than the Company) and any other Person who
shall become a party or agree to be bound by the terms of this Agreement after
the date hereof is referred to collectively as the "Stockholders."
RECITALS
WHEREAS, on September 5, 2000, the Company and certain affiliates and
subsidiaries (collectively, the "Debtors") filed petitions for reorganization
relief under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C.
Section 101-1330 (the "Bankruptcy Code"), in the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court"); and
WHEREAS, on or about January 22, 2001, the Bankruptcy Court entered under
Bankruptcy Code Section 1129 an order (the "Confirmation Order") confirming the
Joint Plan of Reorganization (the "Plan"), proposed by the Debtors; and
WHEREAS, the Confirmation Order has become a final order and is no longer
subject to appeal; and
WHEREAS, the Plan provides that on the Effective Date (as defined herein), TAC
and each member of the Lenders Group will receive newly-issued securities of the
Company of the type and in the amount set forth opposite their respective names
in Appendix A hereto; and
WHEREAS, the Stockholders wish to organize their mutual relationship as the
stockholders of the Company and their participation in the governance of the
Company; and
WHEREAS, the Company has undertaken to comply with all of the terms and
conditions of this Agreement insofar as they relate to the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein, the parties hereto agree as follows:
DEFINITIONS
As used herein, the terms below shall have the following meanings. Any
such term, unless the context otherwise requires, may be used in the
singular or plural, depending upon reference.
"Additional Stockholders" shall have the meaning ascribed to it in the
heading.
"Affiliate" means, as applied to any specified Person, any other Person
that, directly or indirectly, controls, is controlled by or is under
common control with such Person. For purposes of the foregoing,
"control," when used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management or policies of such Person, whether through the ownership
of voting securities, by contract or otherwise, and the terms "controlled"
and "controlling" shall have meanings correlative to the foregoing.
"Agent" means Bank of America, N.A., in its capacity as Administrative
Agent under the Restructured Bank Credit Agreement (as defined in the
Plan), and any successor Agent pursuant to the terms of Section 7.22
hereof.
"Agent-Related Person" means Bank of America, N.A., any successor Agent,
together with their respective Affiliates, and their officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.
"Bankruptcy Code" shall have the meaning ascribed to it in the Recitals.
"Bankruptcy Court" shall have the meaning ascribed to it in the Recitals.
"Beneficially Own" shall have the meaning set forth in Rule 13d-3 of the
Rules of the Securities and Exchange Commission and the Exchange Act. For
the avoidance of doubt, this meaning shall apply whether or not the
Company is subject to the reporting requirements of the Exchange Act.
"Board of Directors" or "Board" means the board of directors of the
Company.
"By-Laws" means the by-laws of the Company, as amended from time to time.
"Certificate of Incorporation" means the Company's First Amended and
Restated Certificate of Incorporation as filed with the Delaware Secretary
of State on ___________, 2001.
"Change of Control" means any transaction (whether by merger,
consolidation, sale of assets or otherwise), or series of related
transactions within a six (6) month period, pursuant to which TAC and its
Affiliates (as a group) cease to Beneficially Own at least 25% of the
issued and outstanding shares of capital stock of the Company having the
right to vote (in the aggregate). For the avoidance of doubt, voting
shares shall include, without limitation, the Common Stock and the
Series A Convertible Preferred Stock, but shall exclude any Warrants and
other non-voting Convertible Securities that have not been exercised into
shares of Common Stock.
"Common Stock" means the Company's common stock, par value $0.01 per
share.
"Confirmation Order" shall have the meaning ascribed to it in the
Recitals.
"Convertible Securities" shall mean any evidences of indebtedness, shares,
options, warrants or other securities convertible into, or exchangeable
for, capital stock of the Company.
"Debtors" shall have the meaning ascribed to it in the Recitals.
"Demand Request" shall have the meaning ascribed in Section 3.1(a).
"Effective Date" means the date on which the Plan becomes effective.
"Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as
amended.
"Expiration Date" shall have the meaning ascribed to it in Section 2.2(d).
"Expiring Nominee" shall have the meaning ascribed to it in Section
2.3(c).
"Form S-3" means such form under the Securities Act as in effect on the
date hereof or any registration form under the Securities Act subsequently
adopted by the SEC that permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the
SEC.
"GAAP" means U.S. generally accepted accounting principles.
"Holder" means any person owning or having the right to acquire
Registrable Securities or any permitted assignee thereof.
"Initial Offering" means the closing of an underwritten public offering of
Common Stock by the Company after which the Common Stock is listed on a
national securities exchange or admitted for quotation on the NASDAQ
National Market (or any successor thereto).
"Initiating Holder" shall have the meaning ascribed to it in Section
3.1(a).
"Last Transaction" shall have the meaning ascribed to it in Section
4.2(b).
"Lenders Group" means the entities identified on Schedule I attached
hereto (which schedule shall be amended from time to time only to
eliminate an entity or entities thereon in the event of a permissible
assignment pursuant to the terms of this Agreement), collectively.
"Majority in Interest of the Lenders Group" means members of the Lenders
Group holding of a majority of the shares of Common Stock then owned by
all of the members of the Lenders Group.
"Offer" shall have the meaning ascribed to it in Section 4.1(b)(iv).
"Offer Letter" shall have the meaning ascribed to it in Section 4.1(b).
"Offered Shares" shall have the meaning ascribed to it in Section
4.1(b)(iv).
"Offering Stockholder" shall have the meaning ascribed to it in Section
4.1(b).
"Option" means rights, options or warrants to subscribe for, purchase or
otherwise acquire either Common Stock or Convertible Securities.
"Permitted Transfer" means any (a) pledge of Shares made by a Stockholder
pursuant to a bona fide loan transaction which creates a mere security
interest, (b) any Transfer to the Company pursuant to a written agreement
between the Company and a Stockholder providing for the right of such
repurchase, (c) any Transfer to an Affiliate of TAC, or (d) any Transfer
by any Additional Stockholder that is an individual pursuant to the
applicable laws of descent and distribution or among such Additional
Stockholder's family, spouse, spouse's family and descendants (whether
natural or adopted) and any trust solely for the benefit of such
Additional Stockholder and/or his or her family, spouse, spouse's family
and/or descendants.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
"Plan" shall have the meaning ascribed to it in the Recitals.
"Put Shares" shall have the meaning ascribed to it in Section 4.2(b).
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement or similar
document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document.
"Registrable Securities" means (i) the Common Stock issued to TAC and the
Lenders Group pursuant to the Plan, (ii) the Common Stock issuable or
issued upon conversion of the Series A Convertible Preferred Stock or the
Warrants issued to TAC pursuant to the Plan, and (iii) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for, or in replacement of,
the Shares referenced in (i) or (ii) above, excluding in all cases,
however, (I) any Registrable Securities that have been transferred
(a) other than in compliance with the terms of this Agreement,
(b) pursuant to a registration statement under the Securities Act covering
such Registrable Securities that has been declared effective by the SEC,
(c) in a transaction under Rule 144 (or any successor rule) of the
Securities Act, or (d) in a transaction exempt from registration under
11 U.S.C. Section 1145 or (II) any securities that may be sold without
registration pursuant to 11 U.S.C. Section 1145.
"Registrable Securities then outstanding" shall be determined by the
number of shares of Common Stock outstanding that are, and the number of
shares of Common Stock issuable pursuant to then exercisable or
Convertible Securities that are, Registrable Securities.
"Registration Expenses" means all expenses other than underwriting
discounts and commissions incident to the Company's performance of its
obligations under or compliance with Sections 3.1, 3.2, and 3.3, including
(without limitation) all registration, filing and qualification and fees
(including Blue Sky fees), NASD fees and other fees and expenses
associated with listing securities on the NASDAQ National Market or an
exchange, printers' and accounting fees, word processing and duplicating
fees, messenger and delivery expenses, fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, fees
and disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Holders (which counsel shall
be selected by the Initiating Holders, if any, and otherwise by a majority
in interest of the Stockholders participating in such registration).
"Restructured Bank Credit Facility" means that certain term credit
facility in the original principal amount of approximately $252,069,405
provided to the Debtors pursuant to the Plan.
"Retroactive Tag Along Shares" shall have the meaning ascribed to it in
Section 4.2(b).
"Retroactive Tag Along Sale Notice" shall have the meaning ascribed to it
in Section 4.2(b).
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Series A Convertible Preferred Stock" means the Company's Series A
Convertible Preferred Stock, par value $0.01 per share.
"Shares" means all classes of share capital of the Company, including the
Common Stock and the Series A Convertible Preferred Stock.
"Stock Option Plan" shall have the meaning ascribed to it in Section 7.18.
"Stockholder Nominee" shall have the meaning ascribed to it in
Section 2.2(a).
"Stockholders" shall have the meaning ascribed to it in the Heading.
"Subsidiaries" means all Persons in which the Company owns, directly or
indirectly, a majority of the voting securities or interests or is a
general partner or otherwise has the power to control, by agreement or
otherwise, the management and general business affairs of such other
Person, including, but not limited to, United Artists Realty Company,
United Artists Properties I Corp., United Artists Properties II Corp. and
United Artists Theatre Circuit, Inc.
"TAC" shall have the meaning ascribed to it in the Heading.
"TAC Notification Parties" means Michael Bennet (tel.: (303) 299-1267),
Craig Slater (tel.: (303) 299-1310), Christopher Hunt (tel.: (303)
299-1508) and Cannon Harvey (tel.:(303) 299-1206), or such other Person(s)
notified in writing to the Lenders Group by TAC.
"Transfer" means any direct or indirect sale, assignment, mortgage,
transfer, pledge, hypothecation or other disposition or transfer.
"Violation" shall have the meaning ascribed to in Section 3.9(a).
"Warrants" means an aggregate of 5,600,000 warrants to acquire Common
Stock at a $10.00 per share strike price for a term of seven (7) years
issued to TAC and the holders of certain senior subordinated notes of the
Debtors pursuant to the Plan.
BOARD OF DIRECTORS
1. Board of Directors
.
Until the Expiration Date, (i) the Board of Directors will consist of
seven (7) persons and (ii) all actions to be taken by the Board of
Directors from time to time will require the affirmative vote of a
majority of the directors of the Company then in office (except as
otherwise expressly set forth herein, including, but not limited to,
Section 7.18 of this Agreement). Each Stockholder will use all its
respective best efforts to take or cause to be taken such action as may be
necessary to effectuate the provisions of this Section 2.1, including,
without limitation, amending the Company's By-Laws to provide for the
matters contemplated by this Section 2.1.
I. Board Composition.
a. Until the Expiration Date, subject to Section 2.2(d), (i) TAC will be
entitled to nominate four (4) persons to serve as directors of the
Company; (ii) a Majority in Interest of the Lenders Group will be
entitled to nominate two (2) persons to serve as directors of the
Company; and (iii) the then-current Chief Executive Officer of the
Company shall be nominated as a director of the Company. Each person
nominated for election of the Company pursuant to Section 2.2(a)(i)
and (ii), and each person nominated for election as a director of the
Company in lieu of any such person pursuant to Section 2.3(c) or to
fill a vacancy on the Board of Directors created by such person
pursuant to Section 2.4, is referred to herein as a "Stockholder
Nominee." It is agreed that, as of the date of this Agreement, the
initial members of the Board of Directors of the Company shall be the
persons set forth in Appendix B.
b. The rights to nominate directors in Section 2.2(a) shall also apply,
proportionally, to any committees of the Board of Directors, the
intent being that the Lenders Group shall be entitled to designate
two-sevenths of the members of each such committee (or such other
number as shall be as close as practicable to such proportion if the
number of members of such committee shall be less than seven but in no
case less than one member).
c. If the size of the Board of Directors is enlarged, the Stockholders
agree that the right to nominate additional directors shall be
proportionate to the number of directors previously nominated by TAC
and the Lender Group under Section 2.2(a).
d. Notwithstanding anything to the contrary in this Agreement, the rights
of the Lenders Group to nominate directors of the Company pursuant to
Section 2.2(a)(ii) shall automatically expire (the "Expiration Date")
upon the earlier to occur of the following: (i) the payment in full
of any and all principal and interest and other sums due and owing by
the Company to the Lenders Group under the Restructured Bank Credit
Facility (as amended from time to time), whether through a refinancing
or otherwise, (ii) the members of the Lenders Group on the Effective
Date (in the aggregate) cease to Beneficially Own at least 2,800,000
shares of Common Stock (as adjusted to reflect stock splits,
redemptions and similar transactions), or (iii) the termination of
this Agreement pursuant to Section 7.4(b); provided, however, that if
any such events occur prior to the second anniversary of the date of
this Agreement, then the Expiration Date shall be deemed to be the
second anniversary of the date of this Agreement. Notwithstanding
clause (i) above, the rights of the Lenders Group to nominate
directors of the Company pursuant to Section 2.2(a)(ii) shall
reinstate automatically (until a subsequent Expiration Date has
occurred) if the payment referred to in clause (i) (or any portion
thereof) is recovered from the Lenders Group for any reason under the
Bankruptcy Code or any other laws relating to the protection of
creditors generally.
e. In connection with the Initial Offering, unless otherwise unanimously
agreed by the Board of Directors, the Company and the Stockholders
shall take all actions necessary to amend the Certificate of
Incorporation to provide for cumulative voting from and after the
effective date of the registration statement relating to the Initial
Offering.
II. Election of Directors.
a. Each Stockholder agrees to take all actions necessary to cause the
Stockholder Nominees and the Chief Executive Officer to be elected as
directors of the Company in any and all elections of directors of the
Company held during the term of this Agreement and to cause the
designees of the parties hereto to the committees of the Board of
Directors of the Company as provided in Section 2.2(b) to be duly
appointed to such committees. For the avoidance of doubt, until the
Expiration Date, TAC agrees to take all actions necessary to cause the
Stockholder Nominees nominated by the Lenders Group to be elected as
directors of the Company in any and all elections of directors of the
Company held during the term of this Agreement and to cause the
designees of the Lenders Group to the committees of the Board of
Directors of the Company as provided in Section 2.2(b) to be duly
appointed to such committees.
b. Without limiting the generality or effect of Section 2.3(a), each
Stockholder will vote or cause to be voted for the election of the
Stockholder Nominees and the Chief Executive Officer to be elected as
directors of the Company in any and all elections of directors of the
Company held during the term of this Agreement all Shares entitled to
vote in such election that such Stockholder has the power to vote or
in respect of which such Stockholder has the power to direct the
vote. For the avoidance of doubt, TAC will vote or cause to be voted
for the election of the Stockholder Nominees nominated by the Lenders
Group to be elected as directors of the Company in any and all
elections of directors of the Company held during the term of this
Agreement all Shares entitled to vote in such election that TAC has
the power to vote or in respect of which TAC has the power to direct
the vote.
c. Without limiting the generality or effect of Section 2.3(a), at each
meeting of the stockholders of the Company held during the term of
this Agreement at which the term of office of any Stockholder Nominee
or the Chief Executive Officer (an " Expiring Nominee") expires, each
such Expiring Nominee will be nominated for election to another term
as a director of the Company and will be included in the slate of
nominees recommended to Stockholders for election as directors of the
Company in any proxy statement prepared by or on behalf of the Company
with respect to such meeting; provided that, if the Stockholder or
Stockholders that nominated any Expiring Nominee so specify, or any
Expiring Nominee declines or is unable to accept the nomination,
another individual designated by the Stockholder or Stockholders that
nominated such Expiring Nominee, in lieu of such Expiring Nominee,
will be nominated for election as a director of the Company and will
be included in the slate of nominees recommended to Stockholders for
election as directors of the Company in any such proxy statement.
d. Without limiting any other provision of this Agreement imposing
obligations on transferees generally, it is expressly agreed that the
voting and related covenants contained in this Article II shall bind
any transferee of any Stockholder for the term of this Agreement.
III. Vacancies.
Each director will hold his or her office as a director of the Company for
such term as is provided in the Certificate of Incorporation and By-Laws
until his or her death, resignation or removal from the Board of Directors
or until his or her successor has been duly elected and qualified in
accordance with the provisions of this Agreement, the Certificate of
Incorporation and By-Laws and applicable law. If any Stockholder Nominee
ceases to serve as a director of the Company for any reason during his or
her term, a nominee for the vacancy resulting therefrom will be notified
to the Company in writing by the Stockholder or Stockholders that
nominated such director. If the Chief Executive Officer is unwilling to
serve as a director of the Company or ceases to serve or as a director of
the Company for any reason during his or her term, then a nominee for the
vacancy arising therefrom will be designated by a majority of the
remaining members of the Board of Directors after due consultation with
one another.
IV. Removal of Stockholder Nominees.
If at any time TAC or the Agent, acting at the direction of a Majority in
Interest of the Lenders Group, as the case may be, shall notify the
Company in writing of its desire to have removed from the Board of
Directors, with or without cause, any or all of its Stockholder Nominees,
each of the Stockholders will, if necessary, subject to all applicable
requirements of law, use its respective best efforts to take or cause to
be taken all such action as may be required to remove such Stockholder
Nominee(s) from the Board of Directors. Subject to the immediately
preceding sentence, (i) TAC will not vote or cause to be voted any Shares
that it has the power to vote or in respect of which it has the power to
direct the vote for the removal of any Stockholder Nominee nominated by
the Lenders Group without the prior written consent of a Majority in
Interest of the Lenders Group and (ii) no Stockholder that is a member of
the Lenders Group will vote or cause to be voted any Shares that it has
the power to vote or in respect of which it has the power to direct the
vote for the removal of any Stockholder Nominee nominated by TAC without
the prior written consent of TAC.
V. Officers of the Company.
Throughout the term of this Agreement, the selection of any person to
serve as an officer of the Company shall be approved by a majority of the
Board of Directors. The initial Chief Executive Officer and other
officers of the Company shall be the persons set forth on Appendix B
attached hereto.
VI. Nomination of Directors by Lenders Group.
Not more than sixty (60) nor less than forty (40) days prior to any Annual
Meeting of Stockholders of the Company or any special meeting of the
Stockholders at which (i) the term of office of any Expiring Nominee of
the Lenders Group expires or (ii) a vacancy in the Board of Directors with
respect to a Stockholder Nominee of the Lenders Group is to be filled in
accordance with Section 2.4, the Agent, within five (5) days after having
received notice of such annual or special meeting from the Company, will
give written notice to the other members of the Lenders Group of the
expiration or vacancy and solicit nominations for director of the Company
from members of the Lenders Group. Within ten (10) days after receipt of
such notice, any member of the Lenders Group may propose a nominee or
nominees to the Agent. Upon expiration of the ten-day period, the Agent
will give written notice to the members of the Lenders Group with a list
of every nominee or nominees nominated by the members of the Lenders
Group. Within ten (10) days after receipt of such notice, each member of
the Lenders Group is entitled to vote the number of Shares then owned by
such member of the Lenders Group in favor of one nominee for each expired
or vacant board seat, and shall confirm in writing to the Agent the
nominee or nominees for which such member wishes to cast the number of
Shares then owned by such member. The Agent shall promptly (but not less
than ten (10) days prior to such annual or special meeting) inform the
Company in writing of the nominee or nominees who received the largest
percentage of Shares then owned and voted by the members of the Lenders
Group, which nominee(s) will be the next Stockholder Nominee or Nominees
of the Lenders Group under Section 2.2(a).
Directors' Indemnification.
a. During the term of this Agreement, the Company will maintain
directors' and officers' liability insurance covering the full Board
of Directors in a form and amount reasonably satisfactory to TAC and
the Agent, on behalf of a Majority in Interest of the Lenders Group.
b. Upon the election of each Stockholder Nominee as a director of the
Company, the Company will enter into an indemnification agreement, in
form and substance reasonably satisfactory to TAC and the Agent, on
behalf of a Majority in Interest of the Lenders Group, with such
Stockholder Nominee pursuant to which the Company will indemnify and
advance expenses to such Stockholder Nominee to the fullest extent
permitted by law.
REGISTRATION RIGHTS
1. Demand Registrations
.
Timing of Demand Registrations
. Subject to the conditions of this Section 3.1, at any time after the
effective date of the Initial Offering, any Holder or Holders (in either case,
the "
Initiating Holder
") may request in writing (a "
Demand Request
") that the Company file a Registration Statement under the Securities Act on
the appropriate form covering the Registrable Securities held by such Initiating
Holder and specified in such request; provided, that the request by the
Initiating Holder covers a minimum of thirty percent (30%) of the total number
of Registrable Securities held by all Holders.
Number of Demand Registrations
. Subject to Section 3.1(a) above, the Company shall be obligated to use its
best efforts to prepare, file and to cause to become effective pursuant to this
Section 3.1 (i) up to three (3) registration statements on behalf of Initiating
Holders comprised solely of members of the Lenders Group and (ii) up to three
(3) registration statements on behalf of Initiating Holders comprised of TAC or
TAC and members of the Lenders Group; provided, however, that a registration
statement shall not be counted as one of the demand registrations hereunder
unless it becomes effective and is maintained effective in accordance with the
requirements specified in Section 3.4(a).
Participation
. Within twenty (20) days of the receipt of any Demand Request, the Company
shall give written notice of such Demand Request to all Holders. Subject to the
provisions of this Section 3.1, the Company shall include in such demand
registration all Registrable Securities that the Holders request to be
registered in a written request from such Holders received by the Company within
twenty (20) days of the mailing of the Company's notice pursuant to this Section
3.1(c).
Underwriter's Cutbacks
. Notwithstanding any other provision of this Section 3.1, if the managing
underwriter (which shall be a major investment banking firm of recognized
national standing) with respect to the proposed offering advises the Company in
writing that, in its opinion, the number of securities requested to be included
in such registration exceeds the number of securities which can be sold in such
offering without being likely to have an adverse effect on the offering of
securities as then contemplated (including the price at which it is proposed to
sell the securities), then the Company shall so advise all Holders of
Registrable Securities that would otherwise be underwritten pursuant hereto, and
the number of shares that may be included in the underwriting shall be allocated
first to the Registrable Securities of the Initiating Holders, on a pro rata
basis based on the number of Registrable Securities held by all such Holders;
provided, however, that such allocation shall not operate to reduce the
aggregate number of Registrable Securities to be included in such registration
if any Holder does not request inclusion of the maximum number of Registrable
Securities allocated to him pursuant to the above-described procedure, in which
case, the remaining portion of his allocation shall be reallocated among those
requesting Holders whose allocations did not satisfy their requests pro rata on
the basis of the number of Registrable Securities held by such Holders, second
to securities being sold for the account of any other Holders of Registrable
Securities on a pro rata basis based on the number of securities requested to be
included in such registration, third to securities being sold for the account of
the Company, and last to any other stockholders the Company may determine to
allow to participate in the registration. Any Registrable Securities excluded
or withdrawn from such underwriting shall be withdrawn from the registration.
All Holders proposing to distribute their securities through an underwriting
shall enter into an underwriting agreement in customary form with the
underwriter.
Exceptions
. Notwithstanding the foregoing provisions, the Company shall not be required
to effect a registration pursuant to this Section 3.1:
in any particular jurisdiction in which the Company would be required to
qualify to do business, where not otherwise required, or to execute a
general consent to service of process in effecting such registration,
qualification or compliance; or
i. during the period starting with the date thirty (30) days prior to the
Company's good faith estimate of the date of the filing of, and ending on a
date one hundred eighty (180) days following the effective date of, a
Company-initiated registration which will be subject to the Holders' rights
under Section 3.2, provided that the Company is actively employing in good
faith reasonable efforts to cause such registration statement to become
effective and provided further that not less than forty percent (40%) of
the total amount of securities included in such Company-initiated
registration shall be Registrable Securities of the Holders who requested
registration pursuant to Section 3.1(a). If a registration is effected in
accordance with Section 3.1(e)(ii), the Initiating Holders' request shall
be deemed withdrawn and the Initiating Holders shall retain their rights to
registration under this Section 3.1 as though no request for such
registration had been made by them; or
ii. if the Initiating Holders propose to dispose of Registrable Securities that
may be immediately registered on Form S-3 pursuant a request made under
Section 3.3.
Managing Underwriter
. The managing underwriter or underwriters of any underwritten offering
pursuant to this Section 3.1 shall be selected by the majority of the members of
the Board of Directors.
Piggyback Registrations.
a. Piggyback Rights. If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by
the Company for stockholders other than the Holders) any of its shares or
other securities under the Securities Act in connection with the public
offering of such securities (other than a registration relating solely to
the sale of securities to participants in a Company share plan, a
registration relating to a corporate reorganization or other transaction
under Rule 145 of the Securities Act or a registration on any form that does
not include substantially the same information as would be required to be
included in a registration statement covering the sale of the Registrable
Securities), whether or not for its own account, the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon
the written request of each Holder given in writing to the Company within
twenty (20) days after receipt of such notice by the Company, the Company
shall, subject to the provisions of Section 3.2(c), use its best efforts to
prepare, file and cause to become effective a registration statement which
includes all of the Registrable Securities that each such Holder has
requested to be registered.
Right to Terminate Registration
. The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section 3.2 prior to the
effectiveness of such registration, whether or not any Holder has elected to
include securities in such registration. The expenses of such withdrawn
registration shall be borne by the Company in accordance with Section 3.6
hereof. Any such withdrawal shall be without prejudice to the rights of any
Holder to request that a registration be effected under Section 3.1.
Conversion to Demand Registration
. In the event that the Company shall determine for any reason not to
proceed with a proposed registration pursuant to Section 3.2(a) hereof, one
or more Holders shall be permitted to request that the Company continue such
registration pursuant to, and subject to all of the terms and conditions of,
Section 3.1 (including, without limitation, the limitations on the number,
frequency, amount of securities to be requested to be registered and the
ability of the Company to delay registration or suspend sales under
Section 3.1). Any such request shall be made by written notice delivered
within five Business Days of receipt by such Holders of the notice from the
Company to the Holders of the Company's determination not to proceed with
the registration and shall count as a demand under Section 3.1.
Underwriting Requirements
. In connection with any offering involving an underwriting of shares
issued by the Company, the Company shall not be required under this
Section 3.2 to include any of the Holders' Registrable Securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters) and enter into an underwriting
agreement in customary form with an underwriter or underwriters selected by
the Company (or by other persons entitled to select the underwriters). If
the total amount of securities, including Registrable Securities, requested
by stockholders to be included in such offering exceeds the amount of
securities sold other than by the Company that the underwriters determine in
their reasonable discretion is compatible with the success of the offering,
then the Company shall be required to include in the offering only that
number of such securities, including Registrable Securities, that the
underwriters determine in their reasonable discretion will not jeopardize
the success of the offering (the securities so included to be apportioned
first, to the securities to be sold by the Company for its own account, and
second, pro rata among the selling Holders according to the total amount of
securities entitled to be included therein owned by each selling Holder or
in such other proportions as shall mutually be agreed to by such selling
Holders); provided, however, in no event shall the amount of Registrable
Securities of the selling Holders included in the registration be reduced
below twenty percent (20%) of the total amount of securities included in
such registration.
Form S-3 Registration.
a. Subject to the conditions of this Section 3.3, in case the Company shall
receive from the Holders of at least five percent (5%) of the Registrable
Securities then held by all Stockholders, a written request or requests that
the Company effect a registration on Form S-3 (or comparable successor form)
and any related qualification or compliance with respect to all or a part of
the Registrable Securities owned by such Holder or Holders, the Company
shall promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders, and use best
efforts to effect, as soon as practicable, such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holders'
Registrable Securities as are specified in such request, together with all
or such portion of the Registrable Securities of any other Holders joining
in such request as are specified in a written request given to the Company
within twenty (20) days after receipt of such written notice from the
Company.
b. Notwithstanding the foregoing provisions, the Company shall not be obligated
to effect any such registration, qualification or compliance, pursuant to
this Section 3.3:
i. if Form S-3 (or comparable successor form) is not available for such
offering by such Holders;
ii. if such Holders, together with the holders of any other securities of
the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an
aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $5,000,000;
iii. if the Company has, within the three (3) month period preceding the
date of such request, already effected one registration on Form S-3
(or comparable successor form) for any Holders pursuant to this
Section 3.3;
iv. in any particular jurisdiction in which the Company would be required
to qualify to do business, where not otherwise required, or to execute
a general consent to service of process in effecting such
registration, qualification or compliance; or
v. during the period starting with the date thirty (30) days prior to the
Company's good faith estimate of the date of the filing of, and ending
on a date one hundred eighty (180) days following the effective date
of, a Company-initiated registration which will be subject to the
Holders' rights under Section 3.2, provided that the Company is
actively employing in good faith reasonable efforts to cause such
registration statement to become effective and provided further that
not less than thirty percent (30%) of the total amount of securities
included in such Company-initiated registration shall be Registrable
Securities of the Holders who requested registration pursuant to
Section 3.3. If a registration is effected in accordance with Section
3.3(b)(v), such Holders' request shall be deemed withdrawn and such
Holders shall retain their rights to registration under this
Section 3.3 as though no request for such registration had been made
by them.
c. Subject to the foregoing, the Company shall file a registration statement
covering the Registrable Securities and other securities so requested to be
registered as soon as practicable after receipt of the request or requests
of the Holders. Registrations effected pursuant to this Section 3.3 shall
not be counted as requests for registration effected pursuant to
Section 3.1.
Obligations of the Company.
Whenever required under this Section 3 to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
a. prepare and file with the SEC a registration statement with respect to such
Registrable Securities and use reasonable efforts to cause such registration
statement to become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to one hundred eighty
(180) days or, if earlier, until the distribution contemplated in the
registration statement has been completed;
b. prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all securities covered
by such registration statement for the period set forth in paragraph (a)
above;
c. furnish to each selling Holder and counsel selected by the selling Holders
(which counsel shall be selected by the Initiating Holders, if any, and
otherwise by a majority in interest of the Stockholders participating in
such registration) copies of all documents proposed to be filed with the SEC
in connection with such registration, which documents will be subject to the
review of such counsel and each selling Holder;
d. furnish to the selling Holders, without charge, such number of (i) conformed
copies of the registration statement and of each amendment or supplement
thereto (in each case including all exhibits and documents filed therewith),
and (ii) copies of the prospectus included in such registration statement,
including each preliminary prospectus and any summary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them in accordance with the
intended method or methods of such disposition;
e. in the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form,
with the managing underwriter of such offering and enter into such other
agreements and take such other actions in order to expedite or facilitate
the disposition of such Registrable Securities, including, without
limitation, preparing for, and participating in, "road shows" and all other
customary selling efforts, all as the underwriters reasonably request;
f. notify each selling Holder covered by such registration statement, at any
time when a prospectus relating thereto is required to be delivered under
the Securities Act, of (i) the issuance of any stop order by the SEC in
respect of such registration statement (and use every reasonable effort to
obtain the lifting of any such stop order at the earliest possible moment),
(ii) any period when the registration statement ceases to be effective, or
(iii) the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and, as
promptly as is practicable, prepare and furnish to such selling Holder a
reasonable number of copies of any supplement to or amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
g. cause all such Registrable Securities registered hereunder to be listed on
each securities exchange on which similar securities issued by the Company
are then listed; provided that in the case of a registration effected
pursuant to Section 3.1 above, which registration constitutes the Initial
Offering, the Registrable Securities shall be listed on a national
securities exchange or the NASDAQ National Market;
h. provide a transfer agent and registrar for all Registrable Securities
registered pursuant hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such
registration;
i. use reasonable efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of
such jurisdictions as shall be reasonably requested by the selling Holders
(or obtain an exemption from registration or qualification under such laws)
and do any and all other acts and things which may be necessary or advisable
to enable such selling Holders to consummate the disposition of the
Registrable Securities in such jurisdictions in accordance with the intended
method or methods of distribution thereof; provided, however, that the
Company shall not be required in connection therewith or as a condition
thereto to qualify to do business, where not otherwise required, or to file
a general consent to service of process in any such states or jurisdictions;
j. furnish to each selling Holder a signed counterpart, addressed to such
selling Holder, of an opinion of counsel for the Company experienced in
securities law matters, dated the effective date of the registration
statement (and, if any registration includes an underwritten public
offering, the date of the closing under the underwriting agreement) covering
such matters as are customarily covered in opinions of issuer's counsel
delivered to the underwriters in underwritten public offerings of securities
and such other matters as may be reasonably requested by the Initiating
Holders, if any;
k. request that the independent public accountants who have issued an audit
report on the Company's financial statements included in the registration
statement furnish to each selling Holder a signed counterpart of a "comfort"
letter, dated the effective date of the registration statement (and, if any
registration includes an underwritten public offering, the date of the
closing under the underwriting agreement), signed by such accountants and
covering such matters as are customarily covered in accountant's letters
delivered to the underwriters in underwritten public offerings of securities
and such other matters as may be reasonably requested by the Initiating
Holders, if any;
l. use its best efforts to cause all Registrable Securities covered by such
registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable each selling Holder thereof
to consummate the disposition of such Registrable Securities in accordance
with the intended method or methods of disposition thereof;
m. otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC, and make available to its security holders, as soon
as reasonably practicable, an earnings statement of the Company (in form
complying with the provisions of Rule 158 under the Securities Act) covering
the period of at least twelve (12) months, but not more than eighteen (18)
months, beginning with the first month after the effective date of the
registration statement; and
n. use its reasonable best efforts to take all other steps necessary to effect
the registration of such Registrable Securities contemplated hereby.
Information from Holder.
It shall be a condition precedent to the obligations of the Company to take any
action pursuant to this Section 3 with respect to the Registrable Securities of
any selling Holder that such Holder shall, within ten (10) days of a request of
by the Company, furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required by the Company to effect the
registration of such Holder's Registrable Securities. In any registration
statement with respect to any Registrable Securities or any amendment or
supplement thereto, the Company agrees not to refer to any selling Holder of any
Registrable Securities covered thereby by name, or otherwise identify such
seller as the holder of any Registrable Securities, without the consent of such
selling Holder, such consent not to be unreasonably withheld, unless such
disclosure is required by law.
Expenses of Registration.
The Company shall pay all Registration Expenses in connection with (A) all of
the demand registrations permitted under Section 3.1(b) and (B) up to three
registrations under Section 3.3(a). Notwithstanding the foregoing, the Company
shall not be required to pay for any Registration Expenses of any registration
commenced pursuant to Section 3.1 or Section 3.3 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all participating Holders
shall bear such expenses pro rata based upon the number of Registrable
Securities that were to be requested in the withdrawn registration); provided,
however, that if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition business or prospects of the Company
and its Subsidiaries, taken as a whole, from that known to the Holders at the
time of their request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse change, the Holders
shall not be required to pay any of such expense and shall retain their rights
pursuant to Section 3.1 or 3.3.
Selection of Underwriters.
If a requested registration pursuant to Section 3.1 hereof involves an
underwritten offering, the Holders of a majority of the Registrable Securities
which the Company has been requested to register in such registration shall have
the right to select in good faith the investment banker or bankers and managers
to administer the offering; provided, however, that such investment banker or
bankers and managers shall be reasonably satisfactory to the Company.
Delay of Registration.
No Holder shall have any right to obtain or seek an injunction restraining or
otherwise delaying any such registration as the result of any controversy that
might arise with respect to the interpretation or implementation of this
Section 3.
Indemnification.
In the event any Registrable Securities are included in a registration statement
under this Section 3:
a. To the extent permitted by law, the Company will indemnify and hold harmless
each Holder, the partners or officers, directors and stockholders of each
Holder, legal counsel and accountants for each Holder, any underwriter (as
defined in the Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter, within the meaning of the Securities
Act or the Exchange Act, against any losses, claims, damages, expenses or
liabilities (joint or several) (or actions, proceedings or settlements in
respect thereof), to which they may become subject under the Securities Act,
the Exchange Act or other federal, state or foreign securities laws, or
common law, insofar as such losses, claims, damages, expenses or liabilities
(or actions proceeding or settlements in respect thereof) arise out of or
are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or any other
document required in connection therewith or any qualification or compliance
associated therewith (ii) the omission or alleged omission to state therein
a material fact required to be stated therein, or necessary to make the
statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
or foreign securities laws or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state or foreign securities laws or
common law; and the Company will reimburse each such Holder, partner,
officer, director, Stockholder, counsel, accountant, underwriter or
controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending or settling any such
loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the indemnity agreement contained in this subsection
3.9(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such
loss, claim, damage, liability or action to the extent that it arises out of
or is based upon a Violation that occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person; provided
further, however, that the foregoing indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of any Holder or
underwriter, or any person controlling such Holder or underwriter, from whom
the person asserting any such losses, claims, damages or liabilities
purchased shares in the offering, if a copy of the prospectus (as then
amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) was not sent or given by or on behalf of such Holder
or underwriter to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the shares to such
person, and if the prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage or liability. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any Holder and shall survive the
transfer of such securities by any Holder.
b. To the extent permitted by law, each selling Holder, on a several and not
joint basis, will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement,
each person, if any, who controls the Company within the meaning of the
Securities Act, legal counsel and accountants for the Company, any
underwriter, any other Holder selling securities in such registration
statement and any controlling person of any such underwriter or other
Holder, against any losses, claims, damages, expenses or liabilities (joint
or several) (or actions, proceedings or settlements in respect thereof) to
which any of the foregoing persons may become subject, under the Securities
Act, the Exchange Act or any state or foreign securities laws, insofar as
such losses, claims, damages or liabilities (or actions proceedings or
settlements in respect thereto) arise out of or are based upon any Violation
(but excluding clause (iii) of the definition thereof), in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will reimburse any person intended to be indemnified pursuant to this
Section 3.9(b) for any legal or other expenses reasonably incurred by such
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this Section 3.9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld), provided further that in no event shall
any indemnity under this Section 3.9(b) exceed the net proceeds from the
offering received by such Holder.
c. Promptly after receipt by an indemnified party under this Section 3.9 of
written notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 3.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties that may be
represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if materially prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 3.9 to the extent of
such prejudice, but the omission to so deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 3.9. No
indemnifying party, in the defense of any such claim or action, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim
or action.
d. If the indemnification provided for in this Section 3.9 is held by a court
of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault
of and the relative benefits received by the indemnifying party on the one
hand and of the indemnified party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage
or expense, as well as any other relevant equitable considerations, provided
that no person guilty of fraud shall be entitled to contribution. The
relative fault of the indemnifying party and of the indemnified party shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or
by the indemnified party and the parties' relative intent, knowledge, access
to information, and opportunity to correct or prevent such statement or
omission. The relative benefits received by the indemnifying party and the
indemnified party shall be determined by reference to the net proceeds and
underwriting discounts and commissions from the offering received by each
such party. In no event shall any contribution under this Section 3.9(d)
exceed the net proceeds from the offering received by such Holder, less any
amounts paid under Section 3.9(b).
e. Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
f. The obligations of the Company and Holders under this Section 3.9 shall
survive the completion of any offering of Registrable Securities in a
registration statement under this Section 3 and the termination of this
Agreement.
g. Indemnification similar to that specified in this Section 3.9 (with
appropriate modifications) shall be given by the Company and each seller of
Registrable Securities with respect to any required registration (other than
under the Securities Act) or other qualification of such Registrable
Securities under any federal or state law or regulation of any governmental
authority.
h. Any indemnification required to be made by an indemnifying party pursuant to
this Section 3.9 shall be made by periodic payments to the indemnified party
during the course of the action or proceeding, as and when bills are
received by such indemnifying party with respect to an indemnifiable loss
claim, damage, expense or liability incurred by such indemnifying party.
i. The obligations of the parties under this Section 3.9 shall be in addition
to any liability which any party may otherwise have to any other party.
Termination of Registration Rights.
No Holder shall be entitled to any right provided for in this Section 3 after
four (4) years following the consummation of the Initial Offering.
Cooperation in Rule 144 Sales.
In the event that any Stockholder or Stockholders (or any transferee thereof)
wishes to sell Registrable Securities or securities that would be Registrable
Securities but for the fact that such securities may be sold without
registration in compliance with Rule 144(k) of the Securities Act, and such sale
will be effected without registration but otherwise in compliance with the
Securities Act, the Company shall cooperate with such Stockholder(s) and take
such actions as may be reasonably requested by such Stockholder(s) in order to
expedite and facilitate the disposition of such securities, including without
limitation, preparing for, and participating in "road shows" and such other
customary selling efforts as the Stockholder(s) may reasonably request;
provided, however, this Section 3.11 shall only apply in respect of sales of
such securities reasonably expected to result in gross proceeds to such
Stockholder(s) of at least $10,000,000.
TRANSFER OF SHARES
Rights of First Refusal
.
First Refusal Right
. Prior to an Initial Offering, subject to the restrictions contained elsewhere
in this Section 4, each of the Stockholders may sell all or any portion of such
Stockholder's Shares to any third party, provided that no Stockholder other than
TAC and its Affiliates shall sell any Shares to any third party unless such
Stockholder shall first have complied with the provisions of this Section 4.1.
Offer Notice
. If any Stockholder other than TAC or its Affiliates (for purposes of this
Section 4.1, an "
Offering Stockholder
") shall have received a bona fide offer or offers from a third party or
parties, other than a Permitted Transfer, to purchase Shares held by such
Offering Stockholder as of the date hereof (other than pursuant to an Initial
Offering), then prior to selling such Shares to such third party or parties,
such Offering Stockholder shall (i) deliver to the TAC Notification Parties a
letter (the "
Offer Letter
") signed by such Offering Stockholder and (ii) verbally inform at least one (1)
of the TAC Notification Parties, or if contact cannot be made with such Persons,
leave voicemail messages for at least two (2) of the TAC Notification Parties
(including Michael Bennet or such other TAC Notification Party notified to the
Stockholders in writing), in each case notifying the relevant TAC Notification
Parties of the proposed transaction and providing the following information:
i. the name of such third party or parties, together with a statement that
such third party or parties is not an Affiliate of the Offering
Stockholder;
ii. the prospective purchase price per share of each class of Shares;
iii. all material terms and conditions contained in the offer of such third
party or parties;
iv. in respect of the Offer Letter, such Offering Stockholder's offer
(irrevocable by its terms for four (4) business days following receipt) to
sell to TAC all (but not less than all) of the Shares covered by the offer
of the third party or parties (the " Offered Shares"), for a purchase
price per Share, and on the same terms and conditions contained in the
offer of the third party or parties (the "Offer"); and
v. closing arrangements and a closing date (not less than seven (7) nor more
than fourteen (14) business days following the date of such letter) for
any purchase and sale that may be effected by TAC or any of its assignees
pursuant to this Section 4.1.
For four (4) business days following the receipt of the Offer Letter, TAC shall
have the right to purchase all, but not less than all, of the Offered Shares for
the same price per share and on the same terms and conditions set forth in the
Offer. At TAC's election, TAC may assign such right to purchase the Offered
Shares to the Company. If the Offer is other than for all cash, TAC's right to
purchase the Offered Shares shall be exercisable only in cash at the fair market
value of the securities or other property which constitute the Offer. If the
parties cannot agree on such fair market value within ten days of the receipt of
the Offer Letter, then TAC or the Offering Stockholder may, upon notice to the
other, cause such securities or property to be valued by an appraisal to be
conducted within 20 days by two independent investment banking firms of national
standing, one appointed by each such party. If such investment banking firms
cannot agree on the fair market value within 20 days, they shall appoint a third
such firm whose valuation shall be completed within 15 days and which shall be
conclusive for the purposes set forth in this Section 4.1(b). The fees and
costs of such firms shall be shared equally by the Company and the Offering
Stockholder.
Sale of Offered Shares
. If TAC (or, if applicable, the Company) accepts in writing the Offer to
purchase all, but not less than all, of the Offered Shares, the closing of the
purchase and sale pursuant to such acceptance shall take place at the offices of
the Company on the date set forth in the Offer Letter, or at such other place or
on such other date as the applicable parties may agree or such later date as may
be necessary to obtain any required regulatory approvals. If, upon the
expiration of four (4) business days following receipt by TAC of the Offer
Letter, TAC (or, if applicable, the Company) elects to not exercise the right of
first refusal, the Offering Stockholder may sell to such third party or parties
all, but not less than all, of the Offered Shares, for the purchase price and on
the other terms and conditions contained in such Offer. Prior to consummating
any such sale, the Offering Stockholder shall, upon request from TAC or the
Company, provide TAC or the Company with reasonable supporting documentation
with respect to the terms and conditions of any such sale to a third party so as
to demonstrate such Offering Stockholder's compliance with the provisions of the
preceding sentence. If such sale has not been completed within sixty (60) days
after the expiration of such four (4) day period, the Offered Shares covered by
such Offer may not thereafter be sold by such Offering Stockholder unless the
procedures set forth in this Section 4.1 shall have again been complied with.
Bring Along and Tag Along Rights.
a. The Rights. In the event of a transaction which would result in a Change of
Control, then (following transmittal of a notice which shall be provided by
the Company to the Stockholders no less than 30 days before the consummation
of such transaction) subject to the provisions of this Section 4.2, each
Stockholder shall have the right and the obligation to participate in such
transaction and shall cooperate in, and (subject to the other provisions of
this Section 4.2) shall take all actions which the Company deems reasonably
necessary or desirable to consummate, such transaction, including, without
limitation, (i) entering into agreements with third parties on terms
substantially identical or more favorable to such Stockholder than those
agreed to by the Company (which agreements may require a Stockholder to
transfer all of his, her or its Shares (or, if TAC is transferring less than
all of its shares of Common Stock, then the same percentage of the Shares
(calculated on a fully-diluted basis) as the percentage of Shares owned by
TAC being transferred by TAC) and may require representations, indemnities,
holdbacks, and escrows), and (ii) obtaining all consents and approvals
reasonably necessary or desirable to consummate such transaction (to the
extent such consents and approvals may be obtained without any significant
expense by the Stockholder, unless such expenses have been reimbursed by the
Company).
Additional Rights
. The Stockholders shall have the right to require that any transaction
which would result in a Change of Control shall involve the following terms:
i. upon the consummation of such transaction, all of the holders of
shares of Common Stock will receive the same form and amount of
consideration per share of Common Stock and if any holders of Common
Stock are given an option as to the form and amount of consideration
to be received, all holders will be given the same option;
ii. no Stockholder shall be obligated to pay more than his, her or its pro
rata share of reasonable expenses incurred in connection with a
consummated transaction which would result in a Change of Control to
the extent such costs are incurred for the benefit of all Stockholders
and are not otherwise paid by the Company or the acquiring party
(costs incurred by or on behalf of a Stockholder for his, her or its
sole benefit will not be considered costs of the transaction
hereunder); and
iii. the terms of sale shall not include any indemnification, guaranty or
similar undertaking of any holders that (a) is not made or given on a
pro rata basis with all other Stockholders on the basis of share
ownership or (b) could result in liability that is in excess of the
consideration to be received by such Stockholder as a result of
consummation of such transaction; provided, however, that if the
transaction that would result in a Change of Control is part of a
series of related transactions which occurred within the six (6)
months prior to the date of such transaction, then each member of the
Lenders Group shall be entitled to sell in the last of the
transactions that constitute such series of related transactions (the
"Last Transaction"), or, if the Company shall then be legally
authorized to purchase such shares, at the election of the Board of
Directors, to the Company, such number of shares of Common Stock (the
"Retroactive Tag Along Shares") as is equal to the difference between
(i) the number of shares of Common Stock then owned by such member of
the Lenders Group multiplied by the percentage of the Shares owned by
TAC being transferred by TAC in such series of related transactions
during such six-month period (calculated by reference to the number of
Shares sold by TAC in the first in such series of related transactions
during such six-month period through and including the Last
Transaction) less (ii) the number of shares of Common Stock that such
member sold in such series of related transactions during such
six-month period. Notwithstanding the preceding sentence, no member
of the Lenders Group shall be entitled to sell any Retroactive Tag
Along Shares unless such member provides written notice to TAC and the
Company of such intent within ten (10) business days from the date
that such member is notified by TAC or the Company in writing of the
proposed Last Transaction (the "Retroactive Tag Along Sale Notice").
The consideration per share for the Retroactive Tag Along Shares shall
be equal to (x) the total consideration that TAC received in all of
such related transactions (including the Last Transaction) during the
six-month period divided by (y) the aggregate number of the Shares
transferred by TAC in all of such related transactions during such
six-month period less (z) the aggregate pro rata expenses in respect
of such related transactions as provided in Section 4.2(b)(ii) above.
If any portion of the consideration did not consist of cash, the
consideration per share that such member would have received for such
shares at the time such consideration was paid in the prior
transaction(s), shall be determined by an appraisal conducted by the
Company's financial advisors, which shall be an independent investment
banking firm of national standing. If any member of the Lenders Group
has timely provided a Retroactive Tag Along Sale Notice to TAC and the
Company as described above and is not permitted to sell all of the
Retroactive Tag Along Shares in the Last Transaction or to the
Company, as the case may be, such member of the Lenders Group shall be
entitled to sell to TAC, by providing written notice to TAC within the
ten (10) business day period following the date on which the Lenders
Group is given notice by TAC of the date of the consummation of the
Last Transaction, such number of shares of Common Stock (if any) as is
equal to the difference between (i) the aggregate number of the
Retroactive Tag Along Shares that such member of the Lenders Group was
entitled to sell pursuant to this proviso in the Last Transaction or
to the Company and (ii) the aggregate number of shares of Common Stock
that such member of the Lenders Group was permitted to sell in the
Last Transaction (the "Put Shares"). Within fifteen (15) business
days following the receipt of such notice, TAC shall purchase all the
Put Shares from such member of the Lenders Group. The consideration
per share for the Put Shares shall be calculated in accordance with
the methodology for calculating the consideration per share for the
Retroactive Tag Along Shares described above (as adjusted to take into
account any Shares sold by such member in the Last Transaction), less
pro rata expenses in respect of such related transactions as provided
in Section 4.2(b)(ii) above.
Voting
. In order to implement the provisions of Section 4.2, each of the
Stockholders by executing this Agreement hereby agrees to vote or to execute
and deliver written consents in respect of all Shares Beneficially Owned in
connection with the approval of such a transaction and all related matters
and not to assert any "dissenters" or similar statutory or legal right, or
otherwise assert any challenge to, such a transaction; provided, however,
that if TAC or an Affiliate of TAC Beneficially Owns 25% or more of the
voting securities of the acquiror or acquirors that seek to acquire the
Company's stock and/or assets in such transaction, the Lenders Group shall
be entitled to receive an opinion from the Company's financial advisor (as
selected by the Board of Directors of the Company), or the financial advisor
to any special committee of the Board of Directors formed to evaluate such
transaction, to the effect that, as of the date of the transaction, the
transaction is fair to the Company's Stockholders from a financial point of
view, which opinion shall be in form and substance as is customary for
opinions of such nature. If such opinion shall not be so furnished, then
the Lenders Group members shall be entitled to exercise such dissenters
rights to the extent then available under applicable law. Subject to the
preceding sentence, each of the Stockholders affirms that his, her or its
agreement to vote for the approval of such a transaction is given as a
condition of this Agreement and as such is coupled with an interest and is
irrevocable. This agreement of the Stockholders shall remain in full force
and effect and be enforceable against any donee, transferee or assignee of
any Shares that are required to become a party to this Agreement. This
voting agreement shall remain in full force and effect throughout the term
of this Agreement. It is understood that this voting agreement relates
solely to such a transaction resulting in a Change of Control and all
related matters and does not constitute the agreement to vote or consent as
to any other matters.
COVENANTS OF THE COMPANY
Delivery of Financial Statements
.
The Company shall deliver to each Stockholder:
a. within forty five (45) days after the close of each of the first three
quarterly accounting periods in each fiscal year of the Company, the
consolidated balance sheet of the Company and its Subsidiaries as at the end
of such quarterly period and the related consolidated statements of income,
cash flow and retained earnings for such quarterly period and for the
elapsed portion of the fiscal year ended with the last day of such quarterly
period, in each case setting forth comparative figures for the related
periods in the prior fiscal year; and
b. within ninety (90) days after the close of each fiscal year of the Company,
the consolidated balance sheet of the Company and its Subsidiaries as at the
end of such fiscal year and the related consolidated statements of income,
cash flow and retained earnings for such fiscal year, setting forth
comparative figures for the preceding fiscal year end and prepared in
accordance with GAAP and certified by independent public accountants of
nationally recognized standing.
Inspection.
The Company and each of its Subsidiaries shall permit each Stockholder, at such
Stockholder's expense, to visit and inspect its properties, to examine its books
of account and records and to discuss its affairs, finances and accounts with
its officers, all at such reasonable times as may be reasonably requested by the
Stockholder, subject to appropriate agreements as to confidentiality. Any
Stockholder requesting such rights shall use its best efforts to minimize any
disruption to the business or operations of the Company.
SHARES CERTIFICATE LEGENDS
A copy of this Agreement shall be filed with the Secretary of the Company and
kept with the records of the Company. Each certificate evidencing Shares owned
by the Stockholders shall bear the following legends:
(a) THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND WERE ISSUED PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE ACT PROVIDED BY 11 U.S.C. SECTION 1145,
UNDER ORDER CONFIRMING THE PLAN OF REORGANIZATION OF THE COMPANY DATED JANUARY
22, 2001. THE HOLDER OF THIS CERTIFICATE IS REFERRED TO 11 U.S.C. SECTION 1145
FOR GUIDANCE AS TO THE SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE.
(b) THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER, VOTING AGREEMENTS AND OTHER CONDITIONS AND RESTRICTIONS SPECIFIED IN
THE STOCKHOLDERS' AGREEMENT AMONG THE COMPANY, THE ANSCHUTZ CORPORATION AND THE
OTHER STOCKHOLDERS NAMED THEREIN, COPIES OF WHICH ARE ON FILE AT THE OFFICE OF
THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF SUCH SHARES
UPON WRITTEN REQUEST.
All Stockholders shall be bound by the requirements of such legends to the
extent that such legends are applicable. Upon the closing of an Initial
Offering, certificates evidencing Shares shall be replaced, at the expense of
the Company, with certificates not bearing the legends required by paragraph (b)
above or the applicable portions of paragraph (a) above relating to the
termination of this Agreement.
After such time as any of the legends described by this Article VI are no longer
required on any certificate or certificates representing the Shares and such
Shares are no longer subject to this Agreement, upon the request of the
Stockholders, the Company shall cause such certificate or certificates to be
exchanged for a certificate or certificates that do not bear such legends.
MISCELLANEOUS
Rules of Construction
.
The term "this Agreement" means this agreement together with all schedules and
exhibits hereto, as the same may from time to time be amended, modified,
supplemented or restated in accordance with the terms hereof. The use in this
Agreement of the term "including" means "including, without limitation." The
words "herein," "hereof," "hereunder" and other words of similar import refer to
this Agreement as a whole, including the schedules and exhibits, as the same may
from time to time be amended, modified, supplemented or restated, and not to any
particular section, subsection, paragraph, subparagraph or clause contained in
this Agreement. All references to sections, schedules and exhibits mean the
sections of this Agreement and the schedules and exhibits attached to this
Agreement, except where otherwise stated. The title of and the section and
paragraph headings in this Agreement are for convenience of reference only and
shall not govern or affect the interpretation of any of the terms or provisions
of this Agreement. The use herein of the masculine, feminine or neuter forms
shall also denote the other forms, as in each case the context may require or
permit. Where specific language is used to clarify by example a general
statement contained herein, such specific language shall not be deemed to
modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement has been
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party.
Independent Pursuit of Business Opportunities.
The parties hereto expressly acknowledge that each Stockholder and its
Affiliates has and will continue to have business and investment interests
independent of its investment in the Company. Nothing contained herein will
restrict the ability of any Stockholder or its Affiliates from time to time to
engage in any business or investment activity or to acquire, develop or
otherwise pursue business or investment opportunities, including without
limitation business or investment activities or opportunities that compete with
or are otherwise contrary to the interests of the Company or one or more of the
other Stockholders or that the Company or one or more of the other Stockholders
might find advantageous or desirable to engage in, acquire, develop or otherwise
pursue for its own account, independently and without notice to, or regard for
the interests of, the Company and the other Stockholders.
Successors and Assigns.
Except as otherwise set forth in this Agreement, whether or not an express
assignment has been made pursuant to the terms of this Agreement, the terms and
conditions of this Agreement shall inure to the benefit of, and be binding upon,
the respective successors, assigns, heirs, executors and administrators of the
parties and all subsequent holders of the Shares. For the avoidance of doubt,
the rights of the members of the Lenders Group set forth in Articles II and III
and Section 4.2, and Sections 7.15-7.19 are personal in nature and may not be
assigned to any Person (other than an Affiliate of such Person) without the
prior written consent of TAC.
Termination.
a. Any party to, or Person who is subject to, this Agreement who ceases to own
any Shares or any interest therein in accordance with the terms of this
Agreement shall cease to be a party to, or Person who is subject to, this
Agreement and thereafter shall have no rights or obligations hereunder,
provided that any Transfer of Shares by any Stockholder in breach of this
Agreement shall not relieve such Stockholder of liability for any such
breach.
b. All rights and obligations pursuant to this Agreement shall terminate (other
than rights and obligations under Section 4.2 if the termination is due to a
Change of Control of the Company or obligations which have arisen and are
outstanding prior to termination and the obligations of the Company pursuant
to Article 3) upon the earlier of (i) the closing of an Initial Offering,
(ii) upon written agreement of Stockholders holding an aggregate of eighty
percent (80%) of the then outstanding voting Shares, (iii) a Change of
Control of the Company or (iv) the date which is ten (10) years after the
date hereof.
Recapitalization, Exchanges, etc., Affecting the Shares.
Except as expressly provided herein, the provisions of this Agreement shall
apply to any and all Shares of the Company or any successor or assignee of the
Company (whether by merger, consolidation, sale of assets or otherwise) which
may be issued in respect of, in exchange for, or in substitution for the Shares,
by reason of any stock dividend, split, reverse split, combination,
recapitalization, reclassification, merger, consolidation, or otherwise in such
a manner as to reflect the intent and meaning of the provisions hereof.
No Third Party Beneficiaries.
Except as otherwise provided herein, this Agreement is not intended to confer
upon any Person, except for the parties hereto, any rights or remedies
hereunder.
Governing Law; Jurisdiction.
This Agreement shall be governed by and construed under the laws of the State of
Delaware as applied to agreements among Delaware residents entered into and to
be performed entirely within Delaware. The parties hereto hereby agree that any
action, demand, claim or counterclaim relating to the terms and provisions of
this Agreement, or to its breach, may be brought in Delaware in a court (State
or Federal) of competent jurisdiction and each party hereby consents to the in
personam jurisdiction of any such Court.
Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
Titles and Subtitles.
The titles and subtitles used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this Agreement.
Notices.
Unless otherwise provided, any notice required or permitted under this Agreement
shall be given in writing and shall be deemed effectively given upon personal
delivery to the party to be notified or upon delivery by confirmed facsimile
transmission, nationally recognized overnight courier service, or upon deposit
with the United States Post Office, by registered or certified mail, postage
prepaid and addressed to the party to be notified at the address indicated for
such party on the signature page hereof, or at such other address as such party
may designate by ten (10) days' advance written notice to the other parties.
Expenses.
If any action at law or in equity is necessary to enforce or interpret the terms
of this Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
Entire Agreement; Amendments and Waivers.
This Agreement constitutes the full and entire understanding and agreement among
the parties with regard to the subject matter hereof. Any term of this
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and holders of at
least eighty percent (80%) of the then outstanding voting Shares. Any amendment
or waiver effected in accordance with this Section 7.12 shall be binding upon
each holder of any Registrable Securities, each future holder of all such
Registrable Securities and the Company. Notwithstanding the foregoing, no
amendments or waivers may be made to this Agreement that change the duties or
responsibilities of the Agent under the Agreement without the prior written
consent of the Agent.
Severability.
If one or more provisions of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
Aggregation of Shares.
All Registrable Securities held or acquired by affiliated entities or persons
shall be aggregated together for the purpose of determining the availability of
any rights under this Agreement.
Amendments to Certificate of Incorporation, Bylaws, Series A Convertible
Preferred Stock and Warrants.
Prior to the Expiration Date, the parties agree that the Company may not make
any amendments to (i) the Certificate of Incorporation, (ii) the Bylaws,
(iii) the Certificate of Designations of the Series A Convertible Preferred
Stock or (iv) the terms of the Warrants without the unanimous approval of the
Board of Directors.
Issuance of Additional Equity Securities.
Prior to the Expiration Date, the parties agree that, without the prior consent
of a Majority in Interest of the Lenders Group, the Company shall not issue any
additional shares of capital stock, whether voting or non-voting, or any
options, warrants or other rights to purchase or acquire any such stock (whether
or not at the time exercisable), or any securities which are convertible into or
exchangeable for such stock (whether or not at the time so convertible or
exchangeable), or any options, warrants or other rights to purchase or acquire
such convertible or exchangeable securities (whether or not at the time
exercisable), or any voting debt securities that would result, immediately after
such issuance, in a decrease in the Conversion Price (as defined in the
Certificate of Designations) of the Series A Convertible Preferred Stock unless
all of the holders of the Series A Convertible Preferred Stock agree in writing
to waive such decrease in the Conversion Price. For the avoidance of doubt, the
foregoing shall not apply to any shares of Common Stock issued (i) upon
conversion of shares of Series A Convertible Preferred Stock or the exercise of
Warrants, (ii) to employees, consultants or directors pursuant to the terms of
the Stock Option Plan or any other stock option, stock grant, stock purchase or
similar plans or arrangements duly approved by the Board of Directors in
accordance with Section 7.18 (as applicable), (iii) as a dividend or other
distribution on the Common Stock, or (iv) in connection with a subdivision or
reclassification of shares of Common Stock into a greater number of shares.
Annual Meetings; Agenda.
Prior to the Expiration Date, the parties agree that the Agent acting at the
direction of a Majority in Interest of the Lenders Group shall be entitled to
propose items to be included in the agenda of any annual or special
stockholders' meeting by giving written notice thereof to the Secretary of the
Company at least ten (10) days prior to the date of any such meeting, and the
Company shall cause such items to be included in the agenda of any such meeting.
Employee Stock Options.
The parties agree to vote in favor of the 2000 Omnibus Stock Incentive Program
of the Company in substantially the form attached hereto as Appendix C (the
"Stock Option Plan") at any annual or special stockholders' meeting at which
stockholder approval of such program is requested by the Company. Prior to the
earlier of (i) three years from the Effective Date and (ii) the Expiration Date,
the Company shall not increase the number of shares reserved for issuance under
the Stock Option Plan, or establish or maintain any other stock option, stock
grant, stock purchase or similar plans or arrangements for the benefit of the
Company's officers, directors or employees, without the unanimous approval of
the Board of Directors; provided, however, that a majority of the Board of
Directors, in its sole discretion, may reserve up to an additional 823,966
shares of Common Stock for future grants under the Stock Option Plan.
Approval by Lenders Group.
Unless otherwise notified in writing to the Company by a Majority in Interest of
the Lenders Group, all approvals of, or notifications by, a Majority in Interest
of the Lenders Group that are required under this Agreement shall be delivered
in writing to the Company (with a copy to TAC) by the Agent. The Company shall
be entitled to conclusively rely, without further inquiry, on such written
approval or notification of the Agent (or its successor) as constituting the
approval or notification (as the case may be) of a Majority in Interest of the
Lenders Group in respect of any such matters.
Share Registry.
The Company shall maintain at its principal offices a registry of the ownership
of the Shares. Each of the Shareholders and the Agent shall be permitted to
review such records upon reasonable advance notice to the Secretary of the
Company. Each Stockholder agrees to promptly inform the Secretary of the
Company of any transfer or purported transfer of Shares and the identity of such
transferee(s) of such Shares.
Indemnification of Agent.
The Lenders Group shall indemnify upon demand the Agent-Related Persons ratably
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind whatsoever which may at any time (including at any time following the
resignation of the Agent) be imposed on, incurred by or asserted against any
such Person in any way relating to or arising out of this Agreement or any
document contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by any such Person
under or in connection with any of the foregoing; provided, however, that the
Lenders Group shall not be liable for the payment to the Agent-Related Persons
of any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from such
Person's gross negligence or willful misconduct. Without limitation of the
foregoing, the Lenders Group shall reimburse the Agent upon demand for its
ratable share of any costs or out-of-pocket expenses (including reasonable
attorney costs) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, or any
document contemplated by or referred to herein.
Successor Agent.
The Agent may resign as Agent upon thirty (30) days' notice to the Lenders
Group. If the Agent shall resign under this Agreement or the Restructured Bank
Credit Agreement, the Majority in Interest of the Lenders Group shall appoint
from among members of the Lenders Group a successor Agent for the Lenders
Group. If no successor Agent is appointed prior to the effective date of the
resignation of the Agent, the Agent may appoint, after consulting with the
Lenders Group, a successor Agent from among members of the Lenders Group. Upon
the acceptance of its appointment as successor Agent, such successor Agent shall
succeed to all the appointment, powers and duties of the retiring Agent. The
term "Agent" shall mean such successor Agent. The retiring Agent's rights,
powers and duties as Agent shall be terminated. After a retiring Agent's
resignation as Agent hereunder or under the Restructured Bank Credit Agreement,
the provisions of this Section 7.22 shall inure to its respective benefit as to
any actions taken or omitted to be taken by the Agent while the Agent was Agent
under this Agreement. If no successor Agent has accepted appointment as Agent
by the date which is thirty (30) days following a retiring Agent's notice of
resignation, the retiring Agent's resignation shall nevertheless thereupon
become effective and the Lenders Group shall perform all the duties of the Agent
hereunder until such time, if any, as the Majority in Interest of the Lenders
Group shall appoint a successor Agent, as provided for above.
[The remainder of this page has been intentionally left blank.]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
UNITED ARTISTS THEATRE COMPANY
By
Name:
Title:
Address for Notices:
UNITED ARTISTS THEATRE CIRCUIT, INC.
By
Name:
Title:
Address for Notices:
UNITED ARTISTS REALTY COMPANY
By
Name:
Title:
Address for Notices:
UNITED ARTISTS PROPERTIES I CORP.
By
Name:
Title:
Address for Notices:
UNITED ARTISTS PROPERTIES II CORP.
By
Name:
Title:
Address for Notices:
BANK OF AMERICA, N.A.
By
Name:
Title:
Bankers Trust Company
By
Name:
Title:
THE Chase Manhattan Bank
By
Name:
Title:
Continental Casualty Company
By
Name:
Title:
Cypress Tree Senior Floating Rate Fund
By
Name:
Title:
Franklin Floating Rate Trust
By
Name:
Title:
GSCP Recovery, Inc.
By
Name:
Title:
HELA Associates, LLC
By
Name:
Title:
Keyport Life Insurance Company
By
Name:
Title:
KZH Cypress Tree-1 LLC
By
Name:
Title:
Merrill Lynch Capital Corporation
By
Name:
Title:
ML CLO XIX Sterling (Cayman) Ltd.
By
Name:
Title:
Morgan Stanley Dean Witter Prime Income Trust
By
Name:
Title:
Morgens Waterfall Holdings, LLC
By
Name:
Title:
Mountain Capital CLO I, Ltd.
By
Name:
Title:
Putnam Diversified Income Trust
By
Name:
Title:
Putnam High Yield Managed Fund
By
Name:
Title:
Putnam High Yield Total Return Fund
By
Name:
Title:
Putnam High Yield Trust II
By
Name:
Title:
Salomon Brothers Holding Company Inc.
By
Name:
Title:
SRF Trading, Inc.
By
Name:
Title:
Stein Roe Floating Rate Limited Liability Company
By
Name:
Title:
Van Kampen Prime Rate Income Trust
By
Name:
Title:
Van Kampen Senior Income Trust
By
Name:
Title:
AGREED AND ACCEPTED:
BANK OF AMERICA, N.A., as Agent
By
Name:
Title:
The anschutz corporation
By
Name:
Title:
APPENDIX A
INITIAL STOCKHOLDERS
STOCKHOLDER
SECURITIES ISSUED:
The Anschutz Corporation
2,000,000 shares of Common Stock
9,120,000 shares of Series A Convertible Preferred Stock
Lenders Group
Bank of America, N.A.
1,849,842 shares of Common Stock
Bankers Trust Company
110,084 shares of Common Stock
Chase Manhattan Bank (The)
505,424 shares of Common Stock
Continental Casualty Company
160,764 shares of Common Stock
Cypress Tree Senior Floating Rate Fund
5,600 shares of Common Stock
Franklin Floating Rate Trust
393,428 shares of Common Stock
GSCP Recovery, Inc.
146,090 shares of Common Stock
Hela Associates, LLC
114,868 shares of Common Stock
Keyport Life Insurance Company
257,592 shares of Common Stock
KZH Cypress Tree-1LLC
288,492 shares of Common Stock
Merrill Lynch Capital Corporation
240,851 shares of Common Stock
ML CLO XIX Sterling (Cayman) Ltd.
190,394 shares of Common Stock
Morgan Stanley Dean Witter Prime
Income Trust
509,584 shares of Common Stock
Morgens Waterfall Holdings, LLC
1,078,103 shares of Common Stock
Mountain Capital CLO I, Ltd.
190,394 shares of Common Stock
Putnam Diversified Income Trust
134,396 shares of Common Stock
Putnam High Yield Managed Fund
22,399 shares of Common Stock
Putnam High Yield Total Return Fund
2,240 shares of Common Stock
Putnam High Yield Trust II
31,359 shares of Common Stock
Salomon Brothers Holding Company Inc.
423,576 shares of Common Stock
SRF Trading, Inc.
111,996 shares of Common Stock
Stein Roe Floating Rate Limited
Liability Company
44,799 shares of Common Stock
Van Kampen Prime Rate Income Trust
112,559 shares of Common Stock
Van Kampen Senior Income Trust
1,075,166 shares of Common Stock
Total Lenders Group shares:
8,000,000 shares of Common Stock
APPENDIX B
INITIAL
DIRECTORS AND OFFICERS
OF THE COMPANY
INITIAL DIRECTORS
TAC Directors:
Kurt C. Hall
Michael Bennet
Craig Slater
Philip Anschutz
Christopher Hunt
Lenders Group Directors:
Pursuant to the Confirmation Order, Neil Augustine and one (1) of the two (2)
individuals listed below shall be selected as the initial directors of the
Lenders Group shortly after the Effective Date by Morgens, Waterfall, Vintiadis
& Company, Inc. and Van Kampen Investment Advisory Corp.:
Robert J. Higgins
Randall G. Kominsky
INITIAL OFFICERS
Name
Title
Kurt C. Hall
President and Chief Executive Officer
Michael L. Pade
Executive Vice President
Ralph E. Hardy
Executive Vice President, General Counsel, Secretary
David J. Giesler
Executive Vice President, Chief Financial Officer
Raymond C. Nutt
Executive Vice President
Neal Pinsker
Executive Vice President
Bruce Taffet
Executive Vice President
Gerald M. Grewe
Senior Vice President
Edward Cooper
Vice President
Charles Fogel
Vice President
Vince M. Fusco
Vice President
Debbie S. Liller
Vice President
Wallace R. Helton
Vice President
Robert A. McCormick
Vice President
Rebecca A. Sanders
Vice President
Darrell C. Taylor
Vice President
Douglas A. Wolkin
Vice President
APPENDIX C
2001 OMNIBUS STOCK INCENTIVE PLAN
This Appendix C is to be supplied prior to the Effective Date, with such terms
and conditions as are consistent with the Lock-Up, Voting and Consent Agreement,
dated as of August 16, 2000, by and among the Company and the other parties
thereto, and the Term Sheet attached as an exhibit thereto.
Schedule I
Lenders Group
Avenue Special Situations Fund II, L.P.
Bank of America, N.A.
Bankers Trust Company
Bear, Stearns & Co. Inc.
Chase Securities Inc., as agent for The Chase Manhattan Bank
Continental Casualty Company
Cypress Tree Senior Floating Rate Fund
Eaton Vance Senior Income Trust
Franklin Floating Rate Trust
Fernwood Associates, L.P.
GoldenTree High Yield Partners, L.P.
GoldenTree High Yield Opportunities I, L.P.
Grayson & Co.
GSCP Recovery, Inc.
Hela Associates, LLC
Keyport Life Insurance Company
KZH Cypress Tree-1 LLC
Merrill Lynch Capital Corporation
ML CLO XIX Sterling (Cayman) Ltd.
Morgan Stanley Dean Witter Prime
Income Trust
Morgens Waterfall Holdings, LLC
Mountain Capital CLO I, Ltd.
Putnam Diversified Income Trust
Putnam High Yield Managed Fund
Putnam High Yield Total Return Fund
Putnam High Yield Trust II
Salomon Brothers Holding Company Inc.
SRF Trading, Inc.
Stein Roe Floating Rate Limited
Liability Company
Van Kampen Prime Rate Income Trust
Van Kampen Senior Income Trust
Schedule II
Additional Stockholders
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
2
ARTICLE II
BOARD OF DIRECTORS
6
2.1
Board of Directors
6
2.2
Board Composition
6
2.3
Election of Directors
7
2.4
Vacancies
8
2.5
Removal of Stockholder Nominees
8
2.6
Officers of the Company
9
2.7
Nomination of Directors by Lenders Group
9
2.8
Director's Indemnification
9
ARTICLE III
REGISTRATION RIGHTS
10
3.1
Demand Registrations
10
3.2
Piggyback Registrations
11
3.3
Form S-3 Registration
12
3.4
Obligations of the Company
13
3.5
Information from Holder
16
3.6
Expenses of Registration
16
3.7
Selection of Underwriters
16
3.8
Delay of Registration
17
3.9
Indemnification
17
3.10
Termination of Registration Rights
19
3.11
Cooperation in Rule 144 Sales
20
ARTICLE IV
TRANSFER OF SHARES
20
4.1
Rights of First Refusal
20
4.2
Bring Along and Tag Along Rights
22
ARTICLE V
COVENANTS OF THE COMPANY
24
5.1
Delivery of Financial Statements
24
5.2
Inspection
24
ARTICLE VI
SHARES CERTIFICATE LEGENDS
25
ARTICLE VII
MISCELLANEOUS
25
7.1
Rules of Construction
25
7.2
Independent Pursuit of Business Opportunities
26
7.3
Successors and Assigns
26
7.4
Termination
26
7.5
Recapitalization, Exchanges, etc., Affecting the Shares
27
7.6
No Third Party Beneficiaries
27
7.7
Governing Law; Jurisdiction
27
7.8
Counterparts
27
7.9
Titles and Subtitles
27
7.10
Notices
27
7.11
Expenses
28
7.12
Entire Agreement; Amendments and Waivers
28
7.13
Severability
28
7.14
Aggregation of Shares
28
7.15
Amendments to Certificate of Incorporation, Bylaws, Series A
Convertible Preferred Stock and Warrants
28
7.16
Issuance of Additional Equity Securities
28
7.17
Annual Meetings; Agenda
29
7.18
Employee Stock Options
29
7.19
Approval by Lenders Group
29
7.20
Share Registry
30
7.21
Indemnification
30
7.22
Successor Agent
30
UNITED ARTISTS THEATRE COMPANY
2000 OMNIBUS STOCK INCENTIVE PLAN
General Purpose of Plan; Definitions
The name of this plan is the United Artists Theatre Company 2000 Omnibus
Stock Incentive Plan (the "Plan"). The Plan was adopted by the Board
(defined below) on _____________, 2001 pursuant to that certain Joint Plan
of Reorganization dated September 5, 2000 and the order confirming same
dated ______, 2001. The purpose of the Plan is to enable the Company to
attract and retain highly qualified personnel who will contribute to the
Company's success and to provide incentives to Participants (defined below)
that are linked directly to increases in stockholder value and will
therefore inure to the benefit of all stockholders of the Company.
For purposes of the Plan, the following terms shall be defined as set forth
below:
a. "Administrator" means the Board, or if and to the extent the Board does
not administer the Plan, the Committee in accordance with Section 2
below.
b. "Award" means any award under the Plan.
c. "Award Agreement" means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
d. "Board" means the Board of Directors of the Company.
e. "Cause" means, unless otherwise provided in an Award Agreement, willful
misconduct, a willful failure to perform the Eligible Recipient's
duties, insubordination, theft, dishonesty, conviction of a felony or
any other willful conduct that is materially detrimental to the Eligible
Recipient's performance of his or her duties or is materially
detrimental to the Company or an Affiliated Entity or such other cause
as the Board in good faith reasonably determines provides cause for the
discharge of an Eligible Employee.
f. "Change in Control" means, unless it is otherwise defined in an Award
Agreement, the same as its definition in that certain Stockholders'
Agreement, dated as of __________, among the Company, The Anschutz
Corporation, the Lenders Group and Additional Stockholders of the
Company (the "Stockholders' Agreement") which is attached as Exhibit A
to the Award Agreements and is incorporated herein by this reference.
g. "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.
h. "Committee" means any committee the Board may appoint to administer the
Plan. If at any time or to any extent the Board shall not administer
the Plan, then the functions of the Board specified in the Plan shall be
exercised by the Committee.
i. "Common Stock" means the common stock, par value $0.01 per share, of the
Company.
j. "Company" means United Artists Theatre Company, a Delaware corporation
or any successor corporation.
k. "Disability" means, when used in connection with the exercise of an
Incentive Stock Option following termination of employment, disability
within the meaning of section 22(e)(3) of the Code.
l. "Eligible Recipient" means an officer, director, employee, consultant or
advisor of, or one who has accepted an offer to be so by, the Company or
of any Parent or Subsidiary, who is also the Chief Executive Officer of
the Company or is a member of the management team selected by such Chief
Executive Officer (the "Management").
m. "Exercise Price" means the per share price, if any, at which a holder of
an Award may purchase the Shares issuable upon exercise of the Award.
n. "Fair Market Value" as of a particular date shall mean the fair market
value of a share of Common Stock as determined by the Board in good
faith based on all of the relevant facts and circumstances.
o. "Incentive Stock Option" means any Option intended to be designated as
an "incentive stock option" within the meaning of Section 422 of the
Code.
p. "Nonqualified Stock Option" means any Option that is not an Incentive
Stock Option, including any Option that provides (as of the time such
Option is granted) that it will not be treated as an Incentive Stock
Option.
q. "Option" means an option to purchase Shares granted pursuant to Section
6 below.
r. "Parent" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, if each of the
corporations in the chain (other than the Company) owns stock possessing
50% or more of the combined voting power of all classes of stock in one
of the other corporations in the chain.
s. "Participant" means any Eligible Recipient selected by the
Administrator, pursuant to the Administrator's authority in Section 2
below, to receive grants of Options and/or awards of Restricted Stock.
t. "Permanent Disability" means any physical or mental condition that the
Administrator, in its discretion, finds to permanently prevent a
Participant from performing the material duties of his or her current
employment. If a Participant makes application for disability benefits
under the Company's long-term disability program, as now in effect or as
hereafter amended, and qualifies for such benefits, the Participant
shall be presumed to qualify as permanently disabled under this Plan.
u. "Person" shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any of its affiliates, (iii)
an underwriter temporarily holding securities pursuant to an offering of
such securities, or (iv) a corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company.
v. "Retirement" means termination by the Participant of employment or
service with the Company or any Parent or Subsidiary on or after
reaching the normal retirement age of sixty-five.
w. "Restricted Stock" means Shares subject to certain restrictions granted
pursuant to Section 7 below.
x. "Shares" means shares of Common Stock reserved for issuance under the
Plan, as adjusted pursuant to Sections 3 and 5, and any successor
security.
y. "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of
the corporations (other than the last corporation) in the unbroken chain
owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain.
Administration.
1. The Plan shall be administered by the Board or, at the Board's sole
discretion, by the Committee, which shall be appointed by the Board, and
which shall serve at the pleasure of the Board. Pursuant to the terms of
the Plan, the Administrator shall have the power and authority:
i. to select those Eligible Recipients who shall be Participants;
ii. to determine whether and to what extent Options or awards of
Restricted Stock or other Awards are to be granted hereunder to
Participants;
iii. to determine the number of Shares to be covered by each Award granted
hereunder;
iv. to determine the terms and conditions, not inconsistent with the terms
of the Plan, of each Award granted hereunder;
v. to determine the terms and conditions, not inconsistent with the terms
of the Plan, which shall govern all written instruments evidencing
Options or awards of Restricted Stock or other Awards granted
hereunder;
vi. to adopt, alter and repeal such administrative rules, guidelines and
practices governing the Plan as it shall from time to time deem
advisable; and
(vii) to interpret the terms and provisions of the Plan and any Award issued
under the Plan (and any Award Agreement relating thereto) in its sole
discretion and to otherwise supervise the administration of the Plan.
2. The Administrator may, in its absolute discretion, without amendment to the
Plan, (i) accelerate the date on which any Option granted under the Plan
becomes exercisable or vested, waive or amend the operation of Plan
provisions respecting exercise after termination of employment or otherwise
adjust any of the terms of such Option, and (ii) accelerate the lapse of
restrictions, or waive any condition imposed hereunder, with respect to any
share of Restricted Stock or otherwise adjust any of the terms applicable to
any such Award; provided that no action under this Section 2(b) shall
adversely affect any outstanding Award without the consent of the holder
thereof.
3. All decisions made by the Administrator pursuant to the provisions of the
Plan shall be final, conclusive and binding on all persons, including the
Company and the Participants.
Shares Subject to Plan.
The total number of shares of Common Stock reserved and available for issuance
under the Plan shall be 2,746,666, Shares, of which 1,922,700 Shares shall be
granted within ten (10) days of adoption of this Plan by the Board and 823,966
Shares of which shall be reserved for subsequent Awards. Such Shares may
consist, in whole or in part, of authorized and unissued shares or treasury
shares.
To the extent that (i) an Option expires or is otherwise terminated without
being exercised, or (ii) any Shares subject to any award of Restricted Stock are
forfeited, such Shares shall again be available for issuance in connection with
future Awards granted under the Plan. If any Shares have been pledged as
collateral for indebtedness incurred by a Participant in connection with the
exercise of an Option and such Shares are returned to the Company in
satisfaction of such indebtedness, such Shares shall again be available for
issuance in connection with future Awards granted under the Plan.
Eligibility.
Eligible Recipients may be granted Options and/or awards of Restricted Stock.
The Participants under the Plan shall be selected from time to time by the
Administrator, in its sole discretion, from among the Eligible Recipients.
The Administrator shall have the authority to grant to any Eligible Recipient
who is an employee of the Company or of any Parent or Subsidiary (including
directors who are also officers of the Company) Incentive Stock Options,
Nonqualified Stock Options, or both types of Options, and/or Restricted Stock.
Directors of the Company or of any Parent or Subsidiary, consultants or advisors
who are not also employees of the Company or of any Parent or Subsidiary may
only be granted Options that are Nonqualified Stock Options and/or Restricted
Stock.
Corporate Transactions
In the event of any merger, reorganization, consolidation, recapitalization,
stock dividend or other change in corporate structure affecting the Common
Stock, an equitable substitution or proportionate adjustment shall be made in
(i) the aggregate number of Shares reserved for issuance under the Plan, (ii)
the kind, number and Exercise Price of Shares subject to outstanding Options
granted under the Plan, and (iii) the kind, number and purchase price of Shares
subject to outstanding awards of Restricted Stock granted under the Plan, in
each case as may be determined by the Administrator, in its sole discretion.
Such other substitutions or adjustments shall be made as may be determined by
the Administrator, in its sole discretion. In connection with any event
described in this paragraph, the Administrator may provide, in its sole
discretion, for the cancellation of any outstanding awards and payment in cash
or other property therefore.
Options.
Options may be granted alone or in addition to other awards of Restricted Stock
granted under the Plan. Any Option granted under the Plan shall be in such form
as the Administrator may from time to time approve, and the provisions of each
Option need not be the same with respect to each Participant. Participants who
are granted Options shall enter into an Award Agreement with the Company, in
such form as the Administrator shall determine, which Award Agreement shall set
forth, among other things, the Exercise Price of the Option, the term of the
Option and provisions regarding exercisability of the Option granted thereunder.
The Options granted under the Plan may be of two types: (i) Incentive Stock
Options and (ii) Nonqualified Stock Options. To the extent that any Option does
not qualify as an Incentive Stock Option, it shall constitute a separate
Nonqualified Stock Option. More than one Option may be granted to the same
Participant and be outstanding concurrently hereunder.
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable:
Option Exercise Price
. The per share Exercise Price of Shares purchasable under an Option shall be
determined by the Administrator in its sole discretion at the time of grant but
shall not, (i) in the case of Incentive Stock Options, be less than 100% of the
Fair Market Value of the Common Stock on such date (110% of the Fair Market
Value per Share on such date if, on such date, the Eligible Recipient owns (or
is deemed to own under Section 424(d) of the Code) stock possessing more than
ten percent of the total combined voting power of all classes of stock of the
Company, its Parent or Subsidiary), and (ii) in the case of Nonqualified Stock
Options, to the extent required at the time of grant by California "Blue Sky"
law, be less than 85% of the Fair Market Value of the Common Stock on such date
and in no event be less than the par value of the Common Stock. Notwithstanding
the forgoing, if a Participant owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more than 10% of
the combined voting power of all classes of stock of the Company or of any
Parent or Subsidiary and an Option is granted to such Participant, the Exercise
Price of such Option, to the extent required at the time of grant by California
"Blue Sky" law with respect to any Option, shall be no less than 110% of the
Fair Market Value of the Stock on the date such Option is granted.
Option Term
. The term of each Option shall be fixed by the Administrator, but no Option
shall be exercisable more than ten years after the date such Option is granted;
provided
,
however
, that if an employee owns or is deemed to own (by reason of the attribution
rules of Section 424(d) of the Code) more than 10% of the combined voting power
of all classes of stock of the Company or of any Parent or Subsidiary and an
Incentive Stock Option is granted to such employee, the term of such Incentive
Stock Option (to the extent required by the Code at the time of grant) shall be
no more than five years from the date of grant.
Exercisability
. Options shall be exercisable at such time or times and subject to such terms
and conditions as shall be determined by the Administrator at or after the time
of grant; provided, however, that, to the extent required at the time of grant
by California "Blue Sky" law, Options granted to individuals other than
officers, directors or consultants of the Company shall be exercisable at the
rate of at least 20% per year over five years from the date of grant. The
Administrator may also provide that any Option shall be exercisable only in
installments, and the Administrator may waive such installment exercise
provisions at any time, in whole or in part, based on such factors as the
Administrator may determine, in its sole discretion.
Method of Exercise
. Subject to Section 6(c), Options may be exercised in whole or in part at any
time during the Option period, by giving written notice of exercise to the
Company specifying the number of Shares to be purchased, accompanied by (i)
payment in full of the aggregate Exercise Price of the Shares so purchased in
cash, (ii) delivery of outstanding shares of Common Stock with a Fair Market
Value on the date of exercise equal to the aggregate exercise price payable with
respect to the Options' exercise or (iii) simultaneous sale through a broker
reasonably acceptable to the Administrator of Shares acquired on exercise, as
permitted under Regulation T of the Federal Reserve Board.
In the event a grantee elects to pay the exercise price payable with respect to
an Option pursuant to clause (ii) above, (A) only a whole number of share(s) of
Common Stock (and not fractional shares of Common Stock) may be tendered in
payment, (B) such grantee must present evidence acceptable to the Company that
he or she has owned any such shares of Common Stock tendered in payment of the
exercise price (and that such tendered shares of Common Stock have not been
subject to any substantial risk of forfeiture) for at least six months prior to
the date of exercise, and (C) Common Stock must be delivered to the Company.
Delivery for this purpose may, at the election of the grantee, be made either by
(A) physical delivery of the certificate(s) for all such shares of Common Stock
tendered in payment of the price, accompanied by duly executed instruments of
transfer in a form acceptable to the Company, or (B) direction to the grantee's
broker to transfer, by book entry, of such shares of Common Stock from a
brokerage account of the grantee to a brokerage account specified by the
Company. When payment of the exercise price is made by delivery of Common
Stock, the difference, if any, between the aggregate exercise price payable with
respect to the Option being exercised and the Fair Market Value of the shares of
Common Stock tendered in payment (plus any applicable taxes) shall be paid in
cash. No grantee may tender shares of Common Stock having a Fair Market Value
exceeding the aggregate exercise price payable with respect to the Option being
exercised (plus any applicable taxes).
Non-Transferability of Options
. Except as otherwise provided by the Administrator or in the Award Agreement,
Options may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will, by the laws of descent or
distribution.
Termination of Employment or Service
. Upon the termination of a Participant's employment or service with the
Company or any Parent or Subsidiary for any reason (including without limitation
by reason of the sale of such Subsidiary) other than due to Death, Permanent
Disability or Retirement which are discussed in Section 8 below, any Shares
subject to an Option that have not vested prior to such termination, shall
immediately expire as of the date of such termination ("the Termination Date").
If a Participant's employment with, or service as a director, consultant or
advisor to the Company or to any Parent or Subsidiary terminates for any reason
other than Cause any vested Option or vested portion thereof may thereafter be
exercised to the extent that it is exercisable at the time of such termination,
or as otherwise determined by the Administrator, but in no event shall the
exercise period be less than three (3) years (or six (6) months in the event the
Company previously consummated an initial underwritten public offering of its
equity securities pursuant to an effective registration statement filed under
the Securities Act of 1933, as amended (the "Securities Act")) following
termination of employment. Incentive Stock Options not exercised by such
Participant within three(3) months after the date of termination (or within one
(1) year after a termination caused by Disability) will cease to qualify as
Incentive Stock Options and will be treated as Nonqualified Stock Options under
the Plan if required to be so treated under the Code. In the absence of a
specified time in the Award Agreement, the Option shall remain exercisable for a
period of three (3) years (or six (6) months in the event the Company previously
consummated an initial underwritten public offering of its equity securities
pursuant to an effective registration statement filed under the Securities Act)
following the Participant's termination of employment or service with the
Company or any Parent or Subsidiary for any reason other than Cause.
Notwithstanding the foregoing, no Option shall be exercisable after the
expiration of its term. Unless provided otherwise in an Award Agreement or in
the Administrator's discretion any time thereafter, in the event of the
termination of an Optionee's employment for Cause, all outstanding Options,
vested or not vested, granted to such Participant shall expire on the date of
such termination.
Annual Limit on Incentive Stock Options
. To the extent that the aggregate Fair Market Value (determined as of the date
the Incentive Stock Option is granted) of Shares with respect to which Incentive
Stock Options granted to a Participant under this Plan and all other option
plans of the Company or of any Parent or Subsidiary become exercisable for the
first time by the Participant during any calendar year exceeds $100,000 (as
determined in accordance with Section 422(d) of the Code), the
portion of such Incentive Stock Options in excess of $100,000 shall be treated
as Nonqualified Stock Options.
Rights as Stockholder
. An Optionee shall have no rights to dividends or any other rights of a
stockholder with respect to the Shares subject to the Option until the Optionee
has given written notice of exercise, has paid in full for such Shares, has
satisfied the requirements of Section 11 hereof and, if requested, has given the
representation described in paragraph (b) of Section 12 hereof, and, upon
becoming a stockholder, the Participant shall become a party to and be bound by
the conditions of the Stockholders' Agreement.
Repurchase Rights
. Unless the Administrator determines otherwise, the Award Agreement pertaining
to the Option, shall grant the Company a repurchase option with respect to
Shares obtained upon the exercise of an Option. Such repurchase option shall be
exercisable, at the discretion of the Board, upon the voluntary or involuntary
termination of the Participant's service with the Company for any reason
including, without limitation, for death, Permanent Disability or Retirement and
must be exercised within ninety (90) days following such termination or within
ninety (90) days of exercise of the Option, whichever is later. The purchase
price for the Shares repurchased pursuant to the Award Agreement pertaining to
the Option shall be no less than the Fair Market Value of the Shares on the date
of termination, and may be paid by cancellation of any indebtedness of the
Participant to the Company. Such repurchase option shall terminate upon the
consummation of an initial underwritten public offering by the Company of its
equity securities pursuant to an effective registration statement filed under
the Securities Act.
Restricted Stock.
Awards of Restricted Stock may be issued either alone or in addition to Options
granted under the Plan. The Administrator shall determine the Eligible
Recipients to whom, and the time or times at which, awards of Restricted Stock
shall be made; the number of Shares to be awarded; the purchase price to be paid
by the Participant for the acquisition of Restricted Stock; and the Restricted
Period (as defined in Section 7(b)(ii)) applicable to awards of Restricted
Stock. The Administrator may also condition the grant of the award of
Restricted Stock upon the exercise of Options, or upon such other criteria as
the Administrator may determine, in its sole discretion. The provisions of the
awards of Restricted Stock need not be the same with respect to each
Participant.
Awards and Certificates
. The prospective recipient of awards of Restricted Stock shall not have any
rights with respect to any such Award, unless and until such recipient has
executed an Award Agreement evidencing the Award (a "Restricted Stock Award
Agreement") and delivered a fully executed copy thereof to the Company, within a
period of sixty (60) days (or such other period as the Administrator may
specify) after the award date. Except as otherwise provided below in Section
7(c), each Participant who is granted an award of Restricted Stock shall be
issued a stock certificate in respect of such shares of Restricted Stock, which
certificate shall be registered in the name of the Participant and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to any such Award.
The Company may require that the stock certificates evidencing Restricted Stock
granted hereunder be held in the custody of the Company until the restrictions
thereon shall have lapsed, and that, as a condition of any award of Restricted
Stock, the Participant shall have delivered a stock power, endorsed in blank,
relating to the Shares covered by such Award.
Restrictions and Conditions
. The awards of Restricted Stock granted pursuant to this Section 7 shall be
subject to the following restrictions and conditions:
i. The price per Share, if any, that a Participant must pay for Shares
purchasable under an award of Restricted Stock shall be determined by the
Administrator in its sole discretion at the time of grant but, to the
extent required at the time of grant by California "Blue Sky" law, such
price shall not be less than 85% of the Fair Market Value of the Stock on
such date or at the time the purchase is consummated. In no event may the
purchase price be less than the par value of the Common Stock. If a
Participant owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or of any Parent or
Subsidiary and an award of Restricted Stock is granted to such Participant,
the purchase price of such Award, to the extent required at the time of
grant by California "Blue Sky" law with respect to any Option, shall be no
less than 100% of the Fair Market Value of the Common Stock on the date
such award of Restricted Stock is granted or the date the purchase is
consummated.
ii. Subject to the provisions of the Plan and the Restricted Stock Award
Agreement governing any such Award, during such period as may be set by the
Administrator commencing on the date of grant (the "Restricted Period"),
the Participant shall not be permitted to sell, transfer, pledge or assign
shares of Restricted Stock awarded under the Plan; provided, however, that
the Administrator may, in its sole discretion, provide for the lapse of
such restrictions in installments and may accelerate or waive such
restrictions in whole or in part based on such factors and such
circumstances as the Administrator may determine, in its sole discretion.
Rights as Stockholder
. Except as provided in Section 7(a) and subject to the terms and conditions of
the Stockholders' Agreement, or as otherwise provided in an Award Agreement, the
Participant shall generally have the rights of a stockholder of the Company with
respect to Restricted Stock during the Restricted Period. Certificates for
unrestricted Shares shall be delivered to the Participant promptly after, and
only after, the Restricted Period shall expire without forfeiture in respect of
such awards of Restricted Stock except as the Administrator, in its sole
discretion, shall otherwise determine.
Repurchase Rights
. Unless the Administrator determines otherwise, the Restricted Stock Award
Agreement shall grant the Company a repurchase option exercisable, at the
discretion of the Board, upon the voluntary or involuntary termination of the
Participant's service with the Company for any reason including, without
limitation, for death, Permanent Disability or Retirement which must be
exercised within ninety (90) days following such termination. The purchase
price for unrestricted Shares repurchased pursuant to the Restricted Stock Award
Agreement shall be no less than the Fair Market Value of the Shares on the date
of termination, and may be paid by cancellation of any indebtedness of the
Participant to the Company. The purchase price for all other Shares repurchased
pursuant to the Restricted Stock Award Agreement may be paid by cancellation of
any indebtedness of the Participant to the Company and shall be the lesser of
the Fair Market Value on the date of termination, or the purchase price paid by
the Participant. Such repurchase options shall lapse at a rate determined by
the Administrator;
provided that
, to the extent required at the time of grant by California "Blue Sky" law, for
awards of Restricted Stock granted to Participants other than officers,
directors or consultants of the Company, the repurchase option with respect to
Shares that are subject to forfeiture shall lapse at the rate of at least 20%
per year over five years from the date of grant and the repurchase option with
respect to unrestricted Shares shall terminate upon the consummation of an
initial underwritten public offering by the Company of its equity securities
pursuant to an effective registration statement filed under the Securities Act.
Acceleration of Vesting upon Death, Permanent Disability, Retirement, Change in
Control and Termination of the Plan.
Unless otherwise provided in an Award Agreement, a Participant shall immediately
become 100 percent Vested in all his or her outstanding Options or Restricted
Stock upon the occurrence of the Participant's death, Permanent Disability or
Retirement while the Participant is in the employ or service of the Company or
any Parent or Subsidiary and upon the occurrence of a Change in Control or
termination of the Plan.
Amendment and Termination.
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made that would impair the rights of a
Participant under any Award theretofore granted without such Participant's
consent. To the extent necessary and desirable, the Board shall obtain approval
of the stockholders (as described below), for any amendment that would:
a. except as provided in Section 5 of the Plan, increase the total number of
Shares reserved for issuance under the Plan;
b. change the class of officers, directors, employees, consultants and advisors
eligible to participate in the Plan; or
c. extend the maximum Option period under Section 6(b) of the Plan.
The Administrator may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Section 2 and to Section 5 of
the Plan, no such amendment shall impair the rights of any Participant without
his or her consent.
Notwithstanding the foregoing, the Plan shall terminate upon the sale of all or
substantially all of the assets of the Company, a distribution of all or
substantially all of the assets of the Company to its stockholders, or the
merger or reorganization of the Company if the Company is not the surviving
entity.
Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general creditor of the Company.
Withholding Taxes. Whenever cash is to be paid pursuant to an Award, the Company
shall have the right to deduct therefrom an amount sufficient to satisfy any
federal, state, local and other withholding tax requirements related thereto.
Whenever Shares are to be delivered pursuant to an Award, the Company shall have
the right to require the Participant to remit to the Company in cash an amount
sufficient to satisfy any federal, state, local and other withholding tax
requirements related thereto. Unless otherwise determined by the Administrator,
a Participant may elect to deliver shares of Common Stock (or have the Company
withhold shares deliverable upon grant or vesting of Restricted Stock to
satisfy, in whole or in part, the amount the Company is required to withhold for
taxes in connection with the exercise of an Option or the delivery of Restricted
Stock upon grant or vesting, as the case may be. Such election must be made on
or before the date the amount of tax to be withheld is determined. Once made,
the election shall be irrevocable. The fair market value of the Shares to be
withheld or delivered will be the Fair Market Value as of the date the amount of
tax to be withheld is determined. In the event a Participant elects to deliver
or have the Company withhold Shares of Common Stock pursuant to this Section
11(b), such delivery or withholding must be made subject to the conditions and
pursuant to the procedures set forth in Section 6(d) with respect to the
delivery or withholding of Common Stock in payment of the Exercise Price of
Options. General Provisions. Shares shall not be issued pursuant to the exercise
of any Award granted hereunder unless the exercise of such Award and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, and the requirements of any stock exchange
upon which the Common Stock may then be listed, and shall be further subject to
the approval of counsel for the Company with respect to such compliance. The
Administrator may require each person acquiring Shares to represent to and agree
with the Company in writing that such person is acquiring the Shares without a
view to distribution thereof. The certificates for such Shares may include any
legend which the Administrator deems appropriate to reflect any restrictions on
transfer. All certificates for Shares delivered under the Plan shall be subject
to such stock-transfer orders and other restrictions as the Administrator may
deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Common
Stock is then listed, and any applicable Federal or state securities law, and
the Administrator may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions. The Company's
Repurchase of any Shares shall be subject to the terms of any credit or loan
agreement or similar arrangement to which the Company may be a party. Nothing
contained in the Plan shall prevent the Board from adopting other or additional
compensation arrangements, subject to stockholder approval, if such approval is
required; and such arrangements may be either generally applicable or applicable
only in specific cases. The adoption of the Plan shall not confer upon any
Eligible Recipient any right to continued employment or service with the Company
or any Parent or Subsidiary, as the case may be, nor shall it interfere in any
way with the right of the Company or any Parent or Subsidiary to terminate the
employment or service of any of its Eligible Recipients at any time. Each
Participant shall, no later than the date as of which the value of an Award
first becomes includible in the gross income of the Participant for Federal
income tax purposes, pay to the Company, or make arrangements satisfactory to
the Administrator regarding payment of, any Federal, state, or local taxes of
any kind required by law to be withheld with respect to such Award. The
obligations of the Company under the Plan shall be conditional on the making of
such payments or arrangements, and the Company shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Participant. No member of the Board or the Administrator,
nor any officer or employee of the Company acting on behalf of the Board or the
Administrator, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Board or the Administrator and each and any officer or employee
of the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action,
determination or interpretation. To the extent applicable, pursuant to the
provisions of Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall provide to each Participant and to each
individual who acquires Common Stock pursuant to the Plan, not less frequently
than annually during the period such Participant or purchaser has one or more
awards granted under the Plan outstanding, and, in the case of an individual who
acquires Common Stock pursuant to the Plan, during the period such individual
owns such Common Stock, copies of the Company's annual financial statements.
The Company shall not be required to provide such statements to key employees of
the Company whose duties in connection with the Company assure their access to
equivalent information. To the extent applicable, the provisions of Sections
260.160.41, 260.140.42 and 260.140.45 of Title 10 of the California Code of
Regulations are incorporated herein by reference. Unless the Committee expressly
provides otherwise, in connection with any underwritten public offering by the
Company of its equity securities pursuant to an effective registration statement
filed under the Securities Act, for such period as the Company or its
underwriters may request and subject to such other provisions as the Committee
may deem necessary or desirable, the Participant shall not, directly or
indirectly, sell, make any short sale of, loan, hypothecate, pledge, offer,
grant or sell any Option or other contract for the purchase of, purchase any
Option or other contract for the sale of, or otherwise dispose of or transfer,
or agree to engage in any of the foregoing transactions with respect to, any
Shares acquired under this Plan without the prior written consent of the Company
or its underwriters. Stockholder Approval; Effective Date of Plan. The grant of
any Award hereunder shall be contingent upon stockholder approval of the Plan
being obtained within 12 months before or after the date the Board adopts the
Plan. Subject to the approval of the Plan by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted by the
Board, the Plan shall be effective as of [____________] (the "Effective Date").
Term of Plan.
No Award shall be granted pursuant to the Plan on or after the tenth anniversary
of the Effective Date, but Awards theretofore granted may extend beyond that
date.
Severability
Whenever possible, each provision of the Plan shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of the Plan is held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of the Plan.
Governing Law.
The Plan and all determinations made and actions taken pursuant hereto shall be
governed by the laws of the State of Delaware, without giving effect to the
conflict of laws principles thereof.
Grant No. _____
UNITED ARTISTS THEATRE COMPANY
2000 OMNIBUS STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Option Agreement") is made and entered into as
of the Date of Grant set forth below (the "Effective Date") by and between
United Artists Theatre Company, a Delaware corporation (the "Company"), and the
optionee named below (the "Optionee"). Capitalized terms not defined herein
shall have the meaning ascribed to them in the Company's 2000 Omnibus Stock
Incentive Plan (the "Plan") which, unless terminated earlier by the
Administrator, terminates on ____________________________, 2011.
Name of Optionee:
Social Security No.:
Address:
Shares Subject to Option:
Exercise Price Per Share:
Date of Grant:
Expiration Date:
Type of Stock Option
(Check one):
[ ]
Incentive Stock Option
[ ]
Non-Qualified Stock Option
Number of Shares
. The Company hereby grants to Optionee an option (this "Option") to
purchase the total number of shares of Common Stock set forth above as
Shares Subject to Option (the "Option Shares") at the Exercise Price Per
Share set forth above (the "Exercise Price"), subject to the terms and
conditions of this Option Agreement, the Plan and the Stockholders'
Agreement described in Section 2, and, in the case and to the extent that
the Option is designated as an "incentive stock option," this grant is
contingent upon stockholder approval within 12 months of the adoption of the
Plan and, in the event such Option exceeds the $100,000 rule of Section
422(d), the portion of this Option in excess of such $100,000 shall be
treated as a Non-Qualified Stock Option.
Stockholders' Agreement
. By executing this Option Agreement, the Optionee shall become a party to
and be bound by and subject to the terms and conditions of that certain
Stockholders' Agreement, dated as of __________, among the Company, The
Anschutz Corporation, the Lenders Group and Additional Stockholders of the
Company (the "Stockholders' Agreement"), which is attached as Exhibit A
hereto. The Stockholders' Agreement shall be binding on the Optionee and
the other parties thereto.
Option Term
. The term of the Option (the "Option Term") shall commence on the
Effective Date and, unless the Option is previously terminated pursuant to
the Plan, this Option Agreement, or the Stockholder's Agreement, shall
terminate upon the expiration of ten (10) years from the Effective Date.
Upon expiration of the Option Term, all rights of the Optionee hereunder
shall terminate.
Conditions of Exercise
.
a. Subject to Sections 7, 9 and 10 below, any Option granted on or within
ten (10) business days after the effective date of that certain Joint
Plan of Reorganization dated September 5, 2000 (the "Reorganization
Effective Date") to any Optionee who is in the employ or service of the
Company or any Parent or Subsidiary as of the Reorganization Effective
Date shall vest and become exercisable as to 10% of the Option Shares on
such Reorganization Effective Date, an additional 10% of the Option
Shares on the first yearly anniversary of such Reorganization Effective
Date, and an additional 20% of the Option Shares on each yearly
anniversary of such Reorganization Effective Date thereafter.
b. Subject to Sections 7, 9 and 10 below, any Option granted more than ten
(10) business days after the Reorganization Effective Date or to any
Optionee who is not in the employ or service of the Company or any
Parent or Subsidiary as of the Reorganization Effective Date shall vest
and become exercisable as to 20% of the Option Shares on each yearly
anniversary of the Effective Date.
c. Except as otherwise provided herein, the right of the Optionee to
purchase Option Shares with respect to which this Option has become
exercisable may be exercised in whole or in part at any time or from
time to time prior to expiration of the Option Term, subject to
provisions of the Plan and the Stockholders' Agreement, subject to
compliance with relevant securities law at the time of such exercise and
further subject to the approval of counsel for the Company with respect
to such compliance. This Option may not be exercised for a fraction of
a share.
Adjustments
. In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Common Stock, an equitable substitution or proportionate
adjustment shall be made in the kind, number and Exercise Price of Shares
subject to outstanding Options granted under the Plan, in each case as may
be determined by the Administrator in its sole discretion. Such other
substitutions or adjustments shall be made as may be determined by the
Administrator, in its sole discretion. In connection with any event
described in this paragraph, the Administrator may provide, in its sole
discretion, for the cancellation of any outstanding awards and payment in
cash or other property therefore.
Nontransferability of Option and Option Agreement
.
a. The Option and this Option Agreement shall not be transferable and,
during the lifetime of Optionee, the Option may be exercised only by
Optionee. Except as otherwise provided by the Administrator, Options
may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will, by the laws of descent and
distribution. Any attempted sale, pledge, assignment, hypothecation,
transfer or other disposition of the Option contrary to the provisions
hereof, and the levy of any execution, attachment or similar process
upon the Option shall be null and void and without effect.
b. Following the issuance of Option Shares upon exercise of the Option,
neither the Option Shares nor any interest therein may be transferred,
sold, assigned, exchanged, pledged, hypothecated or otherwise disposed
of, including by gift (collectively, "Transferred") by the Optionee
unless such Option Shares are Transferred pursuant to (i) an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws covering such
Option Shares, (ii) an opinion of legal counsel for the holder of such
Option Shares to be Transferred satisfactory to the Company stating that
such transaction is exempt from registration, or (iii) written notice
from the Company, signed by the principal financial and accounting
officer of the Company, to the effect that the Company has otherwise
satisfied itself that such transaction is exempt from registration.
Method of Exercise of Option
. The Option may be exercised by means of written notice of exercise to the
Company specifying the number of Option Shares to be purchased, accompanied
by payment in full of the aggregate Option Exercise Price and any applicable
withholding taxes in accordance with Section 6(d) of the Plan.
Right of First Refusal
. Before any Shares obtained upon exercise of an Option that are held by
Optionee or any transferee (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift
or operation of law), The Anschutz Corporation shall have a right of first
refusal to purchase the Option Shares subject to the terms and conditions
set forth in Section 4.1 of the Stockholders' Agreement (the "Right of First
Refusal").
Effect of Termination of Employment or Service
. Upon the termination of Optionee's employment or service with the Company
or any Parent or Subsidiary for any reason (including without limitation by
reason of the sale of such Subsidiary) other than due to Death, Permanent
Disability or Retirement which are discussed in Section 9 below, any Shares
subject to an Option that have not vested prior to such termination, shall
immediately expire as of the date of such termination (the "Termination
Date"). If Optionee's employment with, or service as a director, consultant
or advisor to the Company or to any Parent or Subsidiary terminates for any
reason other than Cause, any vested Option or vested portion thereof may
thereafter be exercised to the extent that it is exercisable at the time of
such termination, or as otherwise determined by the Administrator, but in no
event shall the exercise period be less than three (3) years (or six (6)
months in the event the Company previously consummated an initial
underwritten public offering of its equity securities pursuant to an
effective registration statement filed under the Securities Act) following
the Termination Date. In the absence of any action by the Administrator,
such exercise period shall be three (3) years (or six (6) months in the
event the Company previously consummated an initial underwritten public
offering of its equity securities pursuant to an effective registration
statement filed under the Securities Act) following the Termination Date.
Incentive Stock Options not exercised by such Optionee within three(3)
months after the date of termination (or within one (1) year after a
termination caused by Disability) will cease to qualify as Incentive Stock
Options and will be treated as Nonqualified Stock Options under the Plan if
required to be so treated under the Code. Notwithstanding the foregoing, no
Option shall be exercisable after the expiration of its term. Unless
provided otherwise in the Administrator's discretion any time hereafter, in
the event of the termination of Optionee's employment or service to the
Company or to any Parent or Subsidiary for Cause, all outstanding Options,
vested or not vested, granted to such Optionee shall expire on the date of
such termination.
Acceleration of Vesting Upon Death, Permanent Disability, Retirement, Change
in Control and Termination of the Plan
. Optionee shall immediately become 100 percent vested in all his or her
outstanding Options or Restricted Stock upon the occurrence of the
Optionee's death, Permanent Disability or Retirement, while the Optionee is
in the employ or service of the Company or any Parent or Subsidiary, or upon
the occurrence of a Change in Control or termination of the Plan.
Right of Repurchase
. The Company shall have a repurchase option (the "Repurchase Option") with
respect to Shares obtained upon the exercise of an Option. Under this
Repurchase Option the Company may purchase from Optionee, or Optionee's
personal representative, as the case may be, any or all of Optionee's Shares
obtained upon exercise of an Option. Such repurchase option shall be
exercisable, at the discretion of the Board, upon the voluntary or
involuntary termination of the Optionee's service with the Company for any
reason including, without limitation, for death, Permanent Disability or
Retirement and must be exercised within ninety (90) days following such
termination or within ninety (90) days of exercise of the Option, whichever
is later. The purchase price for the Shares repurchased pursuant to this
Option Agreement pertaining to the Option shall be no less than the Fair
Market Value of the Shares on the Termination Date, and may be paid by
cancellation of any indebtedness of the Optionee to the Company. Such
repurchase option shall terminate upon the consummation of an initial
underwritten public offering by the Company of its equity securities
pursuant to an effective registration statement filed under the Securities
Act.
a. The Repurchase Option is exercised by the Company by delivering
personally or by registered mail, to Optionee (or his transferee or
legal representative, as the case may be), within sixty (60) days of the
Termination Date or within sixty (60) days of the exercise of an Option
that is exercised after the Termination Date, whichever is later, a
notice in writing indicating the Company's intention to exercise the
Repurchase Option and setting forth a date for closing not later than
thirty (30) days from the mailing of such notice. The closing shall
take place at the Company's office. At the closing, the holder of the
certificates for the Shares being transferred shall deliver the stock
certificate or certificates evidencing the Shares, and the Company shall
deliver the purchase price therefore. At the Company's option and to
the extent permitted by applicable law, all or any portion of such
purchase price may be paid by canceling indebtedness represented by any
note or notes issued by Optionee to the Company.
b. If the Company is prevented from exercising the Repurchase Option at the
time set forth above due to General Provisions of the Plan or due to
provisions of the Stockholders' Agreement or any credit or loan
agreement or similar agreement to which the Company is a party, the
Company may exercise such Repurchase Option as of the date, if any, on
which such provisions are no longer applicable to preventing such
exercise by providing notice with sixty (60) days of such date and
following the procedures set forth in 10(a) above.
Transferability of the Shares; Escrow
.
a. Optionee hereby authorizes and directs the Secretary of the Company, or
such other person designated by the Company, to take such steps as may
be necessary to cause the transfer from Optionee to the Company (or, if
applicable, The Anschutz Corporation) of the Shares as to which the
Right of First Refusal or Repurchase Option has been exercised.
b. To insure the availability for delivery of Optionee's Shares upon
repurchase by the Company (or, if applicable, The Anschutz Corporation),
Optionee hereby appoints the Secretary of the Company, or any other
person designated by the Company as escrow agent, as its
attorney-in-fact to sell, assign and transfer unto the Company (or, if
applicable, The Anschutz Corporation) such Shares, if any, repurchased
pursuant to the Repurchase Option or purchased under the Right of First
Refusal and shall, upon exercise of an Option deliver and deposit with
the Secretary of the Company, or such other person designated by the
Company, the share certificates representing the Shares subject to such
exercise, together with the stock assignment duly endorsed in blank,
attached hereto as Exhibit A-1. The Shares and stock assignment shall
be held by the Secretary in escrow, pursuant to the Joint Escrow
Instructions of the Company and Optionee attached as Exhibit A-2 hereto,
until the Repurchase Option or Right of First Refusal is exercised,
until expiration of such rights, or until such time as this Option
Agreement no longer is in effect. As a further condition to the
Company's obligations under this Option Agreement, the spouse of the
Optionee, if any, shall execute and deliver to the Company the Consent
of Spouse attached hereto as Exhibit A-3. Upon termination of such
rights, the escrow agent shall promptly deliver to the Optionee or the
Optionee's representative, the certificate or certificates representing
such Shares in the escrow agent's possession belonging to the Optionee
in accordance with the terms of the Joint Escrow Instructions, and the
escrow agent shall be discharged of all further obligations hereunder;
provided, however, that the escrow agent shall nevertheless retain such
certificate or certificates if so required pursuant to other
restrictions imposed pursuant to this Option Agreement.
c. The Company, or its designee, shall not be liable for any act it may do
or omit to do with respect to holding the Shares in escrow and while
acting in good faith and in the exercise of its judgment.
d. Any purported transfer or sale of the Shares shall be subject to
restrictions on transfer imposed by any applicable state and Federal
securities laws and the terms and conditions of the Stockholder's
Agreement. Any transferee shall, at the discretion of the
Administrator, hold such Shares subject to all provisions hereof and
shall acknowledge the same by signing a copy of this Option Agreement.
Rights as a Stockholder
. Neither the Optionee nor any of the Optionee's successors in interest
shall have any rights as a stockholder of the Company with respect to any
shares of Common Stock subject to the Option until the date of issuance of a
stock certificate for such shares of Common Stock. This Option Agreement
shall not affect in any way the ownership, voting rights or other rights or
duties of Optionee, except as specifically provided herein and except as
specifically provided in the Stockholders' Agreement with respect to any
shares of Common Stock issued upon exercise of the Option.
Investment Representation
. The Optionee hereby represents and warrants to the Company that the
Optionee, by reason of the Optionee's business or financial experience (or
the business or financial experience of the Optionee's professional advisors
who are unaffiliated with and who are not compensated by the Company or any
affiliate or selling agent of the Company, directly or indirectly), has the
capacity to protect the Optionee's own interests in connection with the
transactions contemplated under this Option Agreement.
Tax Advisor Representations
. Optionee has reviewed with his own tax advisors the Federal, state, local
and foreign tax consequences of this investment and the transactions
contemplated by this Option Agreement. Optionee is relying solely on such
advisors and not on any statements or representations of the Company or any
of its agents. Optionee understands that he or she (and not the Company)
shall be responsible for any tax liability that may arise as a result of
this investment or the transactions contemplated by this Option Agreement.
Notices
. All notices and other communications under this Option Agreement shall be
in writing and shall be given by facsimile or first class mail, certified or
registered with return receipt requested, and shall be deemed to have been
duly given three days after mailing or 24 hours after transmission by
facsimile to the respective parties named below:
If to Company: United Artists Theatre Company
9110 E. Nichols Avenue, Suite 200
Englewood, CO 80112
Attention: Secretary
Facsimile: (303) 792-3600
with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, CA 90071-3144
Attention: Jeleen Guttenberg
Facsimile: (213) 687-5600
If to the Optionee:
Facsimile:
Either party hereto may change such party's address for notices by notice
duly given pursuant hereto.
Securities Laws Requirements
. The Option shall not be exercisable to any extent, and the Company shall
not be obligated to transfer any Option Shares to the Optionee upon exercise
of such Option, if such exercise, in the opinion of counsel for the Company,
would violate the Securities Act (or any other federal or state statutes
having similar requirements as may be in effect at that time). Further, the
Company may require as a condition of transfer of any Option Shares pursuant
to any exercise of the Option that the Optionee furnish a written
representation that he or she is purchasing or acquiring the Option Shares
for investment and not with a view to resale or distribution to the public.
The Optionee hereby represents and warrants that he or she understands that
the Option Shares are "restricted securities," as defined in Rule 144 under
the Securities Act, and that any resale of the Option Shares must be in
compliance with the registration requirements of the Securities Act, or an
exemption therefrom, and, to the extent required at the time of grant, with
California "Blue Sky" law. Each certificate representing Option Shares
shall bear the legends set forth below and with any other legends that may
be required by the Company or by any Federal or state securities laws:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE RESTRICTED SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES THEREUNDER, AND MAY
NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
REGISTRATION OR AN EXEMPTION THEREFROM.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR
ITS ASSIGNEE(S). SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE
BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER, VOTING AGREEMENTS AND OTHER CONDITIONS AND RESTRICTIONS SPECIFIED
IN THE STOCKHOLDERS' AGREEMENT AMONG THE COMPANY, THE ANSCHUTZ CORPORATION
AND THE OTHER STOCKHOLDERS NAMED THEREIN, COPIES OF WHICH ARE ON FILE AT THE
OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF
SUCH SHARES UPON WRITTEN REQUEST.
Further, if the Company decides, in its sole discretion, that the listing or
qualification of the Option Shares under any securities or other applicable
law is necessary or desirable, the Option shall not be exercisable, in whole
or in part, unless and until such listing or qualification, or a consent or
approval with respect thereto, shall have been effected or obtained free of
any conditions not acceptable to the Company.
No Obligation to Register Option Shares
. The Company shall be under no obligation to register the Option Shares
pursuant to the Securities Act or any other Federal or state securities
laws.
Protections Against Violations of Agreement
. No purported sale, assignment, mortgage, hypothecation, transfer, pledge,
encumbrance, gift, transfer in trust (voting or other) or other disposition
of, or creation of a security interest in or lien on, any of the Option
Shares by any holder thereof in violation of the provisions of this Option
Agreement, the Stockholders' Agreement or the Certificate of Incorporation
or the Bylaws of the Company, will be valid, and the Company will not
transfer any of said Option Shares on its books nor will any of said Option
Shares be entitled to vote, nor will any dividends be paid thereon, unless
and until there has been full compliance with said provisions to the
satisfaction of the Company. The foregoing restrictions are in addition to
and not in lieu of any other remedies, legal or equitable, available to
enforce said provisions.
Withholding Requirements
.
a. Whenever cash is to be paid pursuant to an Award, the Company shall have
the right to deduct therefrom an amount sufficient to satisfy any
federal, state, local and other withholding tax requirements related
thereto. Whenever Shares are to be delivered pursuant to an Award, the
Company shall have the right to require the Optionee to remit to the
Company in cash an amount sufficient to satisfy any federal, state,
local and other withholding tax requirements related thereto.
b. Unless otherwise determined by the Administrator, Optionee may elect to
deliver shares of Common Stock (or have the Company withhold shares
deliverable upon grant or vesting of Restricted Stock to satisfy, in
whole or in part, the amount the Company is required to withhold for
taxes in connection with the exercise of an Option or the delivery of
Restricted Stock upon grant or vesting, as the case may be. Such
election must be made on or before the date the amount of tax to be
withheld is determined. Once made, the election shall be irrevocable.
The fair market value of the Shares to be withheld or delivered will be
the Fair Market Value as of the date the amount of tax to be withheld is
determined. In the event Optionee elects to deliver or have the Company
withhold Shares of Common Stock pursuant to this Section 11(b) of the
Plan, such delivery or withholding must be made subject to the
conditions and pursuant to the procedures set forth in Section 6(d) of
the Plan with respect to the delivery or withholding of Common Stock in
payment of the Exercise Price of Options.
Failure to Enforce Not a Waiver
. The failure of the Company to enforce at any time any provision of this
Option Agreement shall in no way be construed to be a waiver of such
provision or of any other provision hereof.
Governing Law
. This Option Agreement shall be governed by and construed according to the
laws of the State of Delaware without regard to its principles of conflict
of laws.
Incorporation of Plan
. The Plan is hereby incorporated by reference and made a part hereof, and
the Option and this Option Agreement shall be subject to all terms and
conditions of the Plan.
Amendments
. This Option Agreement may be amended or modified at any time only by an
instrument in writing signed by each of the parties hereto.
Agreement Not a Contract of Employment
. Neither the Plan, the granting of the Option, this Option Agreement nor
any other action taken pursuant to the Plan shall constitute or be evidence
of any agreement or understanding, express or implied, that the Optionee has
a right to continue to provide services as an officer, director, employee,
consultant or advisor of the Company or any Parent, Subsidiary or affiliate
of the Company for any period of time or at any specific rate of
compensation.
Authority of the Board
. The Board shall have full authority to interpret and construe the terms
of the Plan and this Option Agreement. The determination of the Board as to
any such matter of interpretation or construction shall be final, binding
and conclusive.
Dispute Resolution
.
The parties hereto will use their reasonable best efforts to resolve any
dispute hereunder through good faith negotiations. A party hereto must
submit a written notice to any other party to whom such dispute pertains,
and any such dispute that cannot be resolved within 30 calendar days of
receipt of such notice (or such other period to which the parties may agree)
will be submitted to an arbitrator selected by mutual agreement of the
parties. In the event that, within 50 days of the written notice referred
to in the preceding sentence, a single arbitrator has not been selected by
mutual agreement of the parties, a panel of arbitrators (with each party to
the dispute being entitled to select one arbitrator and, if necessary to
prevent the possibility of deadlock, one additional arbitrator being
selected by such arbitrators selected by the parties to the dispute) shall
be selected by the parties. Except as otherwise provided herein or as the
parties to the dispute may otherwise agree, such arbitration will be
conducted in accordance with the then existing rules of the American
Arbitration Association. The decision of the arbitrator or arbitrators, or
of a majority thereof, as the case may be, made in writing will be final and
binding upon the parties hereto as to the questions submitted, and the
parties will abide by and comply with such decision;
provided
,
however
, the arbitrator or arbitrators, as the case may be, shall not be empowered
to award punitive damages. Unless the decision of the arbitrator or
arbitrators, as the case may be, provides for a different allocation of
costs and expenses determined by the arbitrators to be equitable under the
circumstances, the prevailing party or parties in any arbitration will be
entitled to recover all reasonable fees (including but not limited to
attorneys' fees) and expenses incurred by it or them in connection with such
arbitration from the nonprevailing party or parties.
Market Stand-Off
. In connection with any underwritten public offering by the Company of its
equity securities pursuant to an effective registration statement filed
under the Securities Act for such period as the Company or its underwriters
may request (such period not to exceed 180 days following the date of the
applicable offering), the Optionee shall not, directly or indirectly, sell,
make any short sale of, loan, hypothecate, pledge, offer, grant or sell any
option or other contract for the purchase of, purchase any option or other
contract for the sale of, or otherwise dispose of or transfer, or agree to
engage in any of the foregoing transactions with respect to, any Option
Shares acquired under this Option Agreement without the prior written
consent of the Company or the underwriters of such public offering.
Additional Compensation Arrangements
. Nothing contained in this Option Agreement shall prevent the Board from
adopting other or additional compensation arrangements, subject to
stockholder approval, if such approval is required; and such arrangements
may be either generally applicable or applicable only in specific cases.
Survival of Terms
. This Option Agreement shall apply to and bind Optionee and the Company
and their respective permitted assignees and transferees, heirs, legatees,
executors, administrators and legal successors.
1.
Severability
. Whenever possible, each provision of this Option Agreement shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Option Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only
to the extent of such prohibition or invalidity, without invalidating the
remainder of this Option Agreement.
IN WITNESS WHEREOF the parties hereto have executed and
delivered this Option Agreement on the day and year first above written.
United Artists Theatre Company
By
Name
Title
The undersigned hereby accepts and agrees to all the terms and provisions of the
foregoing Option Agreement and to all the terms and provisions of the Plan, and
the Stockholders' Agreement herein incorporated by reference.
The Optionee
Address:
EXHIBIT A-1
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, [_________________] (the "Purchaser") hereby sells, assigns
and transfers unto United Artists Theatre Company, a Delaware corporation (the
"Company"), (__________) shares of Company's common stock, par value $0.01 per
share (the "Common Stock"), standing in his or her name on the books of said
corporation represented by Certificate No. ____ herewith and does hereby
irrevocably constitute and appoint ______________________________ to transfer
the said stock on the books of the within named corporation with full power of
substitution in the premises.
This Assignment Separate from Certificate may be used only in accordance with
the Stock Option Agreement (the "Agreement") of the Company and the undersigned
dated __________, ____.
Dated:
Signature
INSTRUCTIONS:
Please do not fill in any blanks other than the signature line. The purpose of
this Assignment Separate from Certificate is to enable the exercise of the
"right of first refusal" and "repurchase option," as set forth in the Agreement,
without requiring additional signatures on the part of the Purchaser. This
Assignment Separate from Certificate must be delivered to the Company with the
above Certificate No. _____.
EXHIBIT A-2
JOINT ESCROW INSTRUCTIONS
__________, 20__
United Artists Theatre Company
9110 E. Nichols Avenue, Suite 200
Englewood, CO 80112
Attention: Secretary
Dear __________:
As Escrow Agent for both United Artists Theatre Company, a Delaware corporation
(the "Company"), and [___________] ("Purchaser") of the Company's common stock,
par value $0.01 per share (the "Common Stock") you are hereby authorized and
directed to hold the documents delivered to you pursuant to the terms of that
certain Stock Option Agreement between the Company and Purchaser, dated
_____________ (the "Agreement"), in accordance with the following instructions:
1. In the event the Company and/or The Anschutz Corporation (referred to
collectively for convenience herein as the "Company") exercises the
Company's right of first refusal set forth in the Stockholders'
Agreement (as defined in the Plan) or repurchase option set forth in
the Agreement (respectively, the "Right of First Refusal or Repurchase
Option"), the Company shall give to Purchaser and to you a written
notice specifying the number of shares of Common Stock (the "Shares")
to be purchased, the purchase price, and the time for a closing
hereunder at the principal office of the Company. Purchaser and the
Company hereby irrevocably authorize and direct you to close the
transaction contemplated by such notice in accordance with the terms of
said notice.
2. At the closing, you are directed (a) to date the Assignment Separate
From Certificate necessary for the transfer in question, (b) to fill in
the number of Shares being transferred, and (c) to deliver same,
together with the certificate evidencing the Shares to be transferred,
to the Company or its assignee, against the simultaneous delivery to
you of the purchase price for the number of Shares purchased pursuant
to the exercise of the Company's Right of First Refusal or Repurchase
Option.
3. Purchaser hereby irrevocably authorizes the Company to deposit with you
any certificates evidencing the Shares to be held by you hereunder and
any additions and substitutions to said Shares as set forth in the
Agreement. Purchaser does hereby irrevocably constitute and appoint
you as Purchaser's attorney-in-fact and agent for the term of this
escrow to execute with respect to such Shares all documents necessary
or appropriate to make such Shares negotiable and to complete any
transaction herein contemplated, including but not limited to, the
filing with any applicable state blue sky authority of any required
applications for consent to, or notice of transfer of, the Shares.
Subject to the provisions of this Section 3 and to that certain
Stockholders' Agreement, dated as of __________, among the Company, The
Anschutz Corporation, the Lenders Group and Additional Stockholders of
the Company (the "Stockholders' Agreement"), Purchaser shall exercise
all rights and privileges of a shareholder of the Company while the
stock is being held by you.
4. Upon written request of the Purchaser, but not more than once per
calendar year, unless the Company's Right of First Refusal or
Repurchase Option has been exercised, you will deliver to Purchaser a
certificate or certificates representing the aggregate number of Shares
that are not then subject to the Company's Right of First Refusal or
Repurchase Option. Within 120 days after Purchaser's termination of
employment or service with the Company or any Parent or Subsidiary
(each, as defined in the Company's 2000 Omnibus Stock Incentive Plan),
you will deliver to Purchaser, or Purchaser's representative, as the
case may be, a certificate or certificates representing the aggregate
number of Shares held or issued pursuant to the Agreement and not
purchased by the Company or its assignees pursuant to exercise of the
Company's Repurchase Option; provided that such Shares are not then
subject to the Company's Right of First Refusal.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of the same to Purchaser and shall be
discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked only
by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed
by you to be genuine and to have been signed or presented by the proper
party or parties. You shall not be personally liable for any act you
may do or omit to do hereunder as Escrow Agent or as attorney-in-fact
for Purchaser while acting in good faith, and any act done or omitted
by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and are
hereby expressly authorized to comply with and obey orders, judgments
or decrees of any court. In case you obey or comply with any such
order, judgment or decree, you shall not be liable to any of the
parties hereto or to any other person, firm or corporation by reason of
such compliance, notwithstanding any such order, judgment or decree
being subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or
papers deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions
or any documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts as
you may deem necessary and proper to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and
may pay such counsel reasonable compensation therefore.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall
resign by written notice to each party. In the event of any such
termination, the Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto,
the necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to
retain in your possession without liability to anyone all or any part
of said securities until such disputes shall have been settled either
by mutual written agreement of the parties concerned or by a final
order decree or judgment of a court of competent jurisdiction after the
time for appeal has expired and no appeal has been perfected, but you
shall be under no duty whatsoever to institute or defend any such
proceedings.
Notices
. All notices and other communications under this Joint Escrow
Instructions shall be in writing and shall be given by facsimile or
first class mail, certified or registered with return receipt
requested, and shall be deemed to have been duly given three days after
mailing or 24 hours after transmission by facsimile to the respective
parties named below at the following addresses or at such other
addresses as a party may designate by ten day's advance written notice
to each of the other parties hereto:
If to Company: United Artists Theatre Company
9110 E. Nichols Avenue, Suite 200
Englewood, CO 80112
Attention: Chief Executive Officer
Facsimile: (303) 792-3600
with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90071-3144
Attention: Jeleen Guttenberg
Facsimile: (213) 687-5600
If to the Optionee:
Facsimile:
If to the Escrow Agent: United Artists Theatre Company
9110 E. Nichols Avenue, Suite 200
Englewood, CO 80112
Attention: Secretary
Facsimile: (303) 792-3600
1. By signing these Joint Escrow Instructions, you become a party hereto, a
party to the Agreement and a party to the Stockholders' Agreement.
2. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
3. These Joint Escrow Instructions shall be governed by the internal
substantive laws, but not the choice of law rules, of the State of Delaware.
Purchaser:
UNITED ARTISTS THEATRE COMPANY
Signature
By
Print Name
Title
Residence Address
ESCROW AGENT
Secretary
EXHIBIT A-3
CONSENT OF SPOUSE
I, _______________, spouse of [______________], have read and hereby approve the
Stock Option Agreement by and between [______________] and United Artists
Theatre Company (the "Company"), dated ____________ (the "Agreement"). In
consideration of the granting of the right to my spouse to purchase shares of
Company common stock, par value $0.01 per share ("Common Stock"), as set forth
in the Agreement, I hereby appoint my spouse as my attorney-in-fact with respect
to the exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in said Agreement
or any shares of Common Stock issued pursuant thereto under the community
property laws or similar laws relating to marital property in effect in the
state of our residence as of the date of the signing of the foregoing Agreement.
Dated:
Signature
|
Execution Copy
2001 Amendatory Agreement
This 2001 Amendatory Agreement, dated as of September 21, 2001
between VERMONT YANKEE NUCLEAR POWER CORPORATION ("Vermont Yankee"), a Vermont
corporation, and CENTRAL VERMONT PUBLIC SERVICE CORPORATION, a Vermont
corporation (the "Purchaser"), amending both the Power Contract, dated February
1, 1968, as heretofore amended by eight amendments dated June 1, 1972, April 15,
1983, April 24, 1985, June 1, 1985, May 6, 1988, June 15, 1989 and December 1,
1989 between Vermont Yankee and the Purchaser (the "Power Contract") and the
Additional Power Contract, dated as of February 1, 1984, between Vermont Yankee
and the Purchaser (the "Additional Power Contract").
For good and valuable consideration, the receipt of which is hereby
acknowledged, it is agreed as follows:
1. Basic Understandings.
Vermont Yankee was organized in 1966 to provide for the supply of
power to its sponsoring utility companies, including the Purchaser
(collectively, the "Purchasers"). It constructed a nuclear electric generating
unit, having a net capability of approximately 510 megawatts electric (the
"Unit") at a site in Vernon, Vermont. Vermont Yankee was issued a full-term,
Facility Operating License for the Unit by the Atomic Energy Commission (now the
Nuclear Regulatory Commission, which, together with any successor agencies, is
hereafter called the "NRC"), which license is now stated to expire on March 21,
2012 (the "End of License Term"). The Unit has been in commercial operation
since December 1, 1972 and continues to operate.
The names of the Purchasers of Vermont Yankee and their respective
interests ("entitlement percentages") in Vermont Yankee and the net capacity and
output of the Unit are as follows:
Purchaser
Entitlement Percentage
Central Vermont Public Service Corporation
Green Mountain Power Corporation
New England Power Company
The Connecticut Light and Power Company
Central Maine Power Company
Public Service Company of New Hampshire
Western Massachusetts Electric Company
Cambridge Electric Light Company
35.0%
20.0%
22.5%
9.5%
4.0%
4.0%
2.5%
2.5%
The Unit was conceived to supply economic power on a cost of service
formula basis to the Purchasers. Pursuant to the Power Contract, Vermont Yankee
has agreed to supply to the Purchaser and, pursuant to separate power contracts
substantially identical to the Power Contract except for the names of the
parties (collectively, as amended through the date hereof, the "Initial Power
Contracts"), to the other Purchasers all of the capacity and the electric energy
available from the Unit for a thirty year term extending through November 30,
2002.
Pursuant to the Additional Power Contract, Vermont Yankee has agreed
to supply to the Purchaser, and pursuant to separate additional power contracts
substantially identical to the Additional Power Contract except for the names of
the parties (collectively, as amended through the date hereof, the "Additional
Power Contracts"), to the other Purchasers all the capacity and electric energy
available from the Unit during an operative term stated to commence on December
1, 2002 (when the Initial Power Contracts terminate) and extending until a date
which is 30 days after the later of the date on which the last of the financial
obligations of Vermont Yankee has been extinguished or the date on which Vermont
Yankee is finally relieved of any obligations under the last of the licenses
(operating or possessory) which it holds, or hereafter receives, from the NRC
with respect to the Unit. The Additional Power Contracts also provide, in the
event of their earlier cancellation, that the decommissioning cost obligation
and the other applicable provisions of the Additional Power Contracts shall
remain in effect to permit final billings of costs incurred prior to such
cancellation.
Pursuant to the Initial Power Contracts and the Additional Power
Contracts, the Purchasers are entitled and obligated to take their respective
entitlement percentages of the capacity and net electrical output of the Unit
during the service life of the Unit and are obligated to pay therefor monthly
their respective entitlement percentages of Vermont Yankee's cost of service,
including decommissioning costs, whether or not the Unit is operated.
On August 14, 2001, the Board of Directors of Vermont Yankee, which
includes representatives of the Purchasers (including the Purchaser), after
conducting a thorough review of the economics of continued operation of the Unit
until End of License Term in comparison to other alternatives (including the
early shut-down of the Unit) available to Vermont Yankee and evaluating the
competing bids received in a formal auction of the Unit commenced in April,
2001, voted to approve a Purchase and Sale Agreement (the "PSA"), dated as of
August 15, 2001, among Vermont Yankee and Entergy Nuclear Vermont Yankee, LLC
("ENVY") and Entergy Corporation, as guarantor, pursuant to which the Unit and
related assets of Vermont Yankee, including a pre-funded decommissioning trust,
would be sold to ENVY. The PSA also provided that Vermont Yankee would enter
into a Power Purchase Agreement (the "PPA") with ENVY to purchase 100% of the
actual net output of the Unit up to its present operating level of approximately
510 megawatts electric, together with the related ancillary products available
from the Unit, for a period from the Effective Date (as hereinafter defined) to
the End of License Term or the earlier shutdown of the Unit, all such energy and
ancillary products to be resold at wholesale by Vermont Yankee to the Purchasers
pursuant to the Initial Power Contracts and the Additional Power Contracts as
amended hereby.
As a consequence of the PSA and the PPA, Vermont Yankee and the
Purchaser propose to further amend the Power Contract and the Additional Power
Contract in various respects in order (i) to release Vermont Yankee from any
further obligations under said contracts with respect to the operation and
decommissioning of the Unit, (ii) to clarify and confirm provisions for the
recovery under said contracts of the remaining unamortized costs previously
incurred by Vermont Yankee in providing capacity and energy from the Unit prior
to the Effective Date, (iii) to provide for the recovery of any costs or
liabilities assumed by Vermont Yankee under the PSA and PPA and of Vermont
Yankee's on-going administrative expenses, and (iv) to provide for the resale at
cost by Vermont Yankee to the Purchaser of the Purchaser's entitlement
percentage of the aforesaid output and ancillary products of the Unit to be
purchased by Vermont Yankee from ENVY pursuant to the PPA.
Vermont Yankee and the Purchaser have agreed to enter into this 2001
Amendatory Agreement. Concurrently herewith each of the other Purchasers is
entering into an amendatory agreement which is identical hereto except for the
necessary changes in the names of the parties.
2. Parties' Contractual Commitments.
Vermont Yankee and the Purchaser each acknowledge that the other has
faithfully performed its obligations under the Power Contract. The Purchaser
hereby reconfirms its obligations under the Power Contract and the Additional
Power Contract to pay its entitlement percentage of Vermont Yankee's unamortized
costs of the Unit as deferred payment in connection with the capacity and net
electrical output of the Unit previously delivered by Vermont Yankee and agrees
that the decision to sell the Unit as described in Section 1 hereof did not give
rise to any cancellation right under Section 9 of the Power Contract or Section
10 of the Additional Power Contract. Vermont Yankee and the Purchaser further
agree that the Purchaser shall continue to be entitled and obligated to purchase
its entitlement percentage of the aforesaid output and ancillary products
available from the Unit during the terms of the Power Contract and Additional
Power Contract as hereinafter provided, and to pay a like percentage of Vermont
Yankee's costs therefor, and that Vermont Yankee shall continue to be obligated
to resell such output and ancillary products to the Purchaser during such terms.
Recognizing that the PSA, by transferring ownership and operating responsibility
for the Unit, changes the nature of the costs that Vermont Yankee will incur,
including those to obtain such output and ancillary products from the Unit of
which a portion is being resold hereunder to the Purchaser, Vermont Yankee and
the Purchaser further agree that this Amendatory Agreement sets forth the
necessary and appropriate provisions for the continuation of the foregoing
entitlements and obligations.
Except as expressly modified by this Amendatory Agreement, the
provisions of the Power Contract and the Additional Power Contract remain in
full force and effect.
3. Effective Date.
Subject to receipt of FERC approval, this 2001 Amendatory Agreement
shall become effective concurrently with the Closing under the PSA (the
"Effective Date").
4. Power Contract Amendments.
The Power Contract is hereby amended as follows:
(a) In recognition of the sale of the Unit being effected
pursuant to the PSA and the intention of the parties to release Vermont Yankee
from any further obligations with respect to operation of the Unit, the text of
each of Sections 3, 4, 5, 6, 8, 9 and 10 of the Power Contract is hereby deleted
and, in lieu thereof in each instance the words "Intentionally Deleted and This
Section Left Blank" shall be inserted; provided, however, that the pre-existing
text shall remain in effect for purposes of settling any accounts between the
parties for periods prior to the Effective Date.
(b) A new section 10A is hereby inserted immediately following
Section 10 to read as follows:
"10A. Definitions.
Unless the context otherwise specifies or requires, capitalized
terms not otherwise defined herein shall have the meanings provided in the PPA
and each term defined below, when used in this contract, shall have the meaning
indicated below:
"Closing" means the Closing as defined in the PSA.
"Effective Date" has the meaning provided in Section 3 hereof.
"End of License Term" means March 21, 2012.
"End of Term Date" means the earlier of the End of License Term or the date on
which the Unit is permanently removed from service.
"ENVY" means Entergy Nuclear Vermont Yankee, LLC, a Delaware limited liability
company.
"Entitlement percentage" has the meaning provided in Section 1 hereof.
"Future Power" means the aggregate energy, capacity and ancillary products
actually produced by, or available from, the Unit in accordance with the PPA.
"Net capacity" means for any period the actual level at which the Unit is
operated, less station service use, transformer losses and generator lead
losses.
"PPA" means the Power Purchase Agreement, dated as of August 15, 2001, between
Vermont Yankee, as buyer, and ENVY, as seller, a complete copy of which is
attached hereto as Exhibit B.
"PPA Entitlement Percentage" means the Sub-Entitlement or, if applicable, the
portion of the post-Uprate Company Entitlement (as those terms are defined in
the PPA) allocated to the Purchaser in accordance with the PPA.
"PPA Obligations" means the obligations of Vermont Yankee to ENVY under the PPA
other than the purchase price payable pursuant to Article 5 thereof, a schedule
of which is set forth on Exhibit A hereto.
"PSA" means the Purchase and Sale Agreement, dated as of August 15, 2001, among
Vermont Yankee, ENVY and Entergy Corporation, as guarantor, as amended from time
to time.
"PSA Obligations" means the obligations of Vermont Yankee to ENVY under the PSA,
a schedule of which is set forth on Exhibit A hereto.
"PSA Transactions" means the conduct of the auction process commenced in 2001 to
sell the Unit, the proceedings to obtain regulatory approval of the transactions
resulting from such auction, and the services of consultants, advisors and legal
counsel with respect thereto.
"Purchasers" means the sponsoring utilities named in Section 1 hereof or their
respective successors or assigns.
(c) In recognition of the Purchaser's continuing obligation to
reimburse Vermont Yankee for its entitlement percentage of certain of Vermont
Yankee's costs as deferred payment for the capacity and net electrical output of
the Unit previously delivered by Vermont Yankee and to reflect the change in the
manner in which Vermont Yankee will incur costs to supply the Purchaser with its
aliquot share of the Future Power to be purchased pursuant to the PPA by Vermont
Yankee from ENVY, the provisions of Sections 7 and 7A of the Power Contract are
hereby deleted and new Sections 7, 7A and 7B are inserted in lieu thereof as
follows:
"7. Reimbursed Costs
With respect to each month during the balance of the term of this
contract, the Purchaser will pay Vermont Yankee an amount equal to the
Purchaser's entitlement percentage of each of (A) the portion of Vermont
Yankee's Closing Net Unit Investment allocable to such month, if any, together
with one-twelfth of the composite percentage for such month of the Closing Net
Unit Investment as most recently determined in accordance with this Section 7,
(B) Vermont Yankee's Total Transaction Costs Obligation, if any, for such month,
(C) Vermont Yankee's total operating expenses for such month, (D) Vermont
Yankee's PSA Obligations, if any, for such month, (E) Vermont Yankee's PPA
Obligations, if any, for such month, (F) Vermont Yankee's Total Revolver Costs
for such month, if any, and (G) to the extent not duplicative of any payment
made under clause (A) above, an amount equal to one-twelfth of the equity
percentage for such month of the Purchaser's entitlement percentage of the
equity investment, as most recently determined in accordance with this Section
7.
"Composite percentage" shall be computed as of the Effective Date and as of the
last day of each month thereafter (the "computation date") and for any month the
composite percentage shall be that computed as of the most recent computation
date. "Composite percentage" as of a computation date shall be the sum of (i)
the equity percentage as of such date multiplied by the percentage which equity
investment as of such date is of the total capital as of such date, plus (ii)
the stated interest rate per annum of each principal amount of indebtedness
bearing a particular rate of interest outstanding on such date for money
borrowed from persons other than Purchasers multiplied by the percentage which
such principal amount is of total capital as of such date.
"Equity percentage" as of any date shall be whatever percentage per annum may be
authorized from time to time by FERC.
"Common stock equity investment" as of any date shall consist of equity
investment as of such date less the aggregate par value of all issues of
preferred stock outstanding on such date.
"Equity investment" as of any date shall consist of the sum of (i) all amounts
theretofore paid to Vermont Yankee for all capital stock theretofore issued
(taken at the total par value thereof plus the total of all amounts in an excess
of such par value paid thereon); plus all capital contributions, loans and
advances theretofore made to Vermont Yankee by the Purchasers, less the sum of
any amounts distributed by Vermont Yankee to the Purchasers or stockholders in
the form of stock repurchases or redemptions, return of capital or repayments of
loans and advances; plus (ii) any credit balance in the capital surplus account
(not included under (i)) and in earned surplus account on the books of Vermont
Yankee as of such date.
"Total capital" as of any date shall be the equity investment plus the total of
all indebtedness then outstanding for money borrowed from other than the
Purchasers.
"Uniform System" shall mean the Uniform System of Accounts prescribed by the
Federal Power Commission for Class A and Class B Public Utilities and Licensees
as in effect on the date of this contract and as said System may be hereafter
amended to take account of private ownership of special nuclear material.
Vermont Yankee's "operating expenses" shall include all expenses incurred by
Vermont Yankee after the Effective Date (i) for administrative and general
expenses which would be properly chargeable by an operating electric utility,
less any applicable credits thereto, in accordance with the Uniform System and
(ii) for expenses, if any, resulting from the settlement of claims of dissenting
shareholders.
The "net Unit investment" shall consist, in each case with respect to the Unit,
of (i) the aggregate amount properly chargeable at the time in accordance with
the Uniform System of Vermont Yankee's electric plant accounts (including
construction work in progress), less the sum of (x) the aggregate amount
included in operating expenses from the plant completion date to the date in
question on account of depreciation accruals (and amortization, if any, of
property losses) reduced by the aggregate of all amounts charged during such
period against the accumulated provision for depreciation plus (y) the amount of
net available cash; plus (ii) the aggregate amount properly chargeable at the
time in accordance with the Uniform System to accounts representing fuel
assemblies and components (including nuclear materials) and other materials and
supplies, less the balance, if any, at the time of the accumulated amortization
thereof; plus (iii) such reasonable allowances for prepaid items and cash
working capital as may from time to time be determined by Vermont Yankee; less
(z) the net proceeds received from the sale of any assets properly included in
said electric plant accounts. However, for purposes of this contract, the net
amount included at any date after the plant completion date in net Unit
investment under clause (i) of the immediately preceding sentence shall in no
event be less than the excess of:
(a) the amount properly chargeable at the plant completion date in accordance
with the Uniform System to electric plant accounts (including construction work
in progress) with respect to the Unit,
over
(b) the sum of (x) the aggregate minimum amount required by this Section 7 to
be included in operating expenses from the plant completion date to the date in
question on account of depreciation accruals (and amortization, if any, or
property losses) plus (y) the amount of net available cash.
The net Unit investment shall be determined as of the plant completion date and
thereafter as of the commencement of each calendar year, or, if Vermont Yankee
elects, at more frequent intervals.
"Closing Net Unit Investment" means the amount of net Unit investment determined
as of the Effective Date, which amount shall be amortized in equal monthly
amounts during the period beginning on the Effective Date and ending on the End
of License Term.
"Net available cash" means, at any date as of which the amount thereof is to be
determined, the excess of (a) the aggregate amount received by Vermont Yankee
after the plant completion date and prior to two years before the determination
date as insurance proceeds on account of loss or damage to the Unit or as the
proceeds of a sale or condemnation of a portion of the Unit, over (b) the
aggregate amount expended after the plant completion date and prior to the
determination date on account of rebuilding, repairs, replacements and additions
to the Unit, provided that insurance proceeds received with respect to a
particular loss shall be taken into account for purposes of the foregoing
computation only if the amount received with respect to the loss exceeds
$150,000.
"Closing Expenses" means the funds, if any, required to defray any closing
adjustments payable by Vermont Yankee in accordance with the PSA.
"Sale Costs" means the funds, if any, required to defray the costs incurred in
connection with the pre-2001 efforts to sell the Unit and the PSA Transactions,
including the refunding of such costs to the Purchasers to the extent previously
billed to, and paid by, the Purchasers.
"Transaction Costs" means the sum of (a) the Closing Expenses plus (b) the Sales
Costs.
"Total Transaction Costs Obligation" for any month shall mean the amount
attributable to such month for the payment of principal and interest, if any, on
the Transaction Costs, calculated on the basis of amortizing such liability in
equal monthly amounts over the period from the Effective Date to the End of
License Term.
"Short-term Revolver" means one or more borrowings by Vermont Yankee during the
term of this contract to obtain funds to meet short-term operating cash needs.
"Total Revolver Costs" for any month means the amount attributable to such month
for the payment of principal, interest and other fees, if any, due on the
Short-term Revolver.
7A. Purchase of Future Power, Delivery and Payments.
(a) Purchase of Future Power: With respect to each month during the
period commencing on the Effective Date and ending on the earlier of the End of
Term Date or the end of the operative term of this contract, the Purchaser will
be entitled and obligated to take its PPA Entitlement Percentage of the Future
Power. The Purchaser's PPA Entitlement Percentage of the Future Power will be
delivered to and accepted by it at the Producer's Delivery Point (as defined in
the PPA). All deliveries will be made in the form of 3-phase, 60 cycle,
alternating current at a nominal voltage of 345,000 volts. The Purchaser will
make its own arrangements for the transmission of its share of the Future Power.
In accordance with the PPA, ENVY will be responsible for maintaining metering
and telemetering with respect to the Future Power.
With respect to each month during the aforesaid period, Purchaser
will pay Vermont Yankee for the Future Power actually delivered to the Purchaser
an amount equal to its PPA Entitlement Percentage of (a) the purchase price
calculated pursuant to Article 5 of the PPA plus (b) any applicable Governmental
Charges allocable to Vermont Yankee pursuant to Section 18(b) of the PPA.
(b) Contingent Option to Terminate Purchase. Pursuant to Article
4(c) of the PPA, Vermont Yankee was granted an option to negotiate for release
from all or part of its obligations to purchase power under the PPA effective as
of February 28, 2005 and a further option to negotiate for release of any
balance of such obligations effective December 31, 2007, each such option being
exercisable by written notice to the ENVY at least 180 days prior to its
effective date (each such notice date being referred to herein as an "exercise
date"). Those options affect the Sub-Entitlements of each of the Purchasers.
Vermont Yankee hereby grants the Purchaser the right to direct Vermont Yankee to
exercise such option with respect to the Purchaser's Sub-Entitlement as follows:
If the Purchaser desires to direct Vermont Yankee to negotiate the
release of the Purchaser's Sub-Entitlement under the PPA pursuant to such
option, the Purchaser shall give written notice to that effect to Vermont Yankee
at least 90 days in advance of the relevant exercise date. Upon receipt of such
notice from the Purchaser, Vermont Yankee shall confer with all other Purchasers
giving similar notices to ascertain the scope of negotiating discretion granted
by such Purchasers and shall thereafter give timely written notice to the ENVY
indicating Vermont Yankee's desire to negotiate the release of the
Sub-Entitlements of those Purchasers that have given Vermont Yankee the required
notice. Vermont Yankee shall thereafter negotiate in good faith with the ENVY
for release of said Sub-Entitlements from the PPA and shall maintain close
coordination with the Purchaser and other affected Purchasers to assure that the
terms of such release are acceptable. Any final release agreement between
Vermont Yankee and the ENVY shall be subject to ratification by each of the
Purchasers affected thereby. If the Purchaser fails to ratify the release
agreement within the time provided by such agreement, its Sub-Entitlement shall
be excluded from the release agreement.
Vermont Yankee and the Purchaser hereby further agree that: (a)
after such a release agreement has been ratified by the Purchaser, the Purchaser
will pay to Vermont Yankee the Purchaser's proportionate share of the payments,
if any, due to the ENVY in connection with such release; and (b) from and after
the effective date of any release affecting the Purchaser's Sub-Entitlement
Percentage, the Purchaser shall no longer be obligated, pursuant to clause (a)
above, to take and pay for any Future Power delivered after such effective date.
(c) ISO Filing. Vermont Yankee agrees to submit this contract to
the market system maintained by the Independent System Operator of New England
provided for in the NEPOOL Agreement.
(d) Adequate Assurance. In the event that ENVY exercises its right
under Article 7(h) of the PPA to request adequate assurance with respect to
Purchaser's PPA Entitlement Percentage of the Future Power, then Vermont Yankee
shall be deemed to have commercially reasonably grounds for insecurity
concerning Purchaser's ability to perform its obligations under this Section 7A
and may provide Purchaser with written notice requesting adequate assurance
("Adequate Assurance") of due performance of Purchaser's obligations under this
Section 7A for the benefit of Vermont Yankee and/or ENVY. Upon receipt of such
notice by mail postage prepaid, facsimile, telecopy or hand delivery, Purchaser
shall have twelve (12) Business Days to provide such Adequate Assurance to
Vermont Yankee and ENVY.
7B. Billing.
Vermont Yankee will submit, by telecopy or other agreeable same day
delivery mechanism, to the Purchaser, as soon as practicable after the end of
each month, an invoice for the aggregate amount payable by the Purchaser
pursuant to Sections 7 and 7A hereof with respect to the particular month. Such
bills will be rendered in such detail as the Purchaser may reasonably request
and may be rendered on an estimated basis subject to corrective adjustments in
subsequent billing periods. All payments shown to be due on such invoice, except
amount in dispute, shall be due and payable by wire transfer per instructions on
the invoice on or before the later of the eighteenth (18th) day of each month,
or the eighth (8th) day after receipt of the invoice, or if either such day is
not a Business Day, then on the next Business Day.
(d) Section 14 of the Power Contract is hereby amended by adding
the following at the end thereof:
"Notwithstanding the foregoing, (a) Purchaser (or its assigns) may assign its
interest under Section 7A of this contract only (i) to a third party that has a
credit rating equal to the higher of that of the assignor or of investment grade
as determined by a nationally rated service, or (ii) to a single purpose entity
whose obligations hereunder are guaranteed by a parent that has such a credit
rating, or (iii) in connection with a merger, consolidation or sale of
substantially all its assets to another party that has a credit rating at least
equal to that of the Purchaser (or its assigns).
The Purchaser hereby consents to Vermont Yankee creating a security
interest in Vermont Yankee's interest in this contract for the benefit of ENVY
and/or the lenders under the Short-term Revolver and agrees that Purchaser's
obligations hereunder shall not be affected thereby."
(e) Section 20 of the Power Contract is hereby amended by
deleting the first sentence thereof and deleting the word "other" from the
second sentence thereof.
5. Additional Power Contract Amendments.
The Additional Power Contract is hereby amended as follows:
(a) In recognition of the sale of the Unit being effected
pursuant to the PSA and, the intention of the parties to release Vermont Yankee
from any further obligations with respect to operation of the Unit, the text of
each of Sections 3, 4, 5, 6, 8, 9, 10 and 11 of the Additional Power Contract is
hereby deleted and, in lieu thereof in each instance the words "Intentionally
Deleted and This Section Left Blank" shall be inserted.
(b) A new section 10A is hereby inserted immediately following
Section 10 to read as follows:
"10A. Definitions.
Unless the context otherwise specifies or requires, capitalized
terms not otherwise defined herein shall have the meanings provided in the PPA
and each term defined below, when used in this contract, shall have the meaning
indicated below:
"Closing" means the Closing as defined in the PSA.
"Effective Date" has the meaning provided in Section 3 hereof.
"End of License Term" means March 21, 2012.
"End of Term Date" means the earlier of the End of License Term or the date on
which the Unit is permanently removed from service.
"ENVY" means Entergy Nuclear Vermont Yankee, LLC, a Delaware limited liability
company.
"Entitlement percentage" has the meaning provided in Section 1 hereof.
"Future Power" means the aggregate energy, capacity and ancillary actually
produced by, or available from, the Unit in accordance with the PPA.
"Initial Power Contracts" means the several Power Contracts, dated as of
February 1, 1968, as amended, between Vermont Yankee and each of the Purchasers.
"Net capacity" means for any period the actual level at which the Unit is
operated, less station service use, transformer losses and generator lead
losses.
"Operative term" has the meaning provided in Section 2 hereof.
"PPA" means the Power Purchase Agreement, dated as of August 15, 2001, between
Vermont Yankee, as buyer, and ENVY, as seller, a complete copy of which is
attached hereto as Exhibit B.
"PPA Entitlement Percentage" means the Sub-Entitlement or, if applicable, the
portion of the post-Uprate Company Entitlement (as those terms are defined in
the PPA) allocated to the Purchaser in accordance with the PPA.
"PPA Obligations" means the obligations of Vermont Yankee to ENVY under the PPA
other than the purchase price payable pursuant to Article 5 thereof, a schedule
of which is set forth on Exhibit A hereto.
"PSA" means the Purchase and Sale Agreement, dated as of August 15, 2001, among
Vermont Yankee, ENVY and Entergy Corporation, as guarantor, as amended from time
to time.
"PSA Obligations" means the obligations of Vermont Yankee to ENVY, a schedule of
which is set forth on Exhibit A hereto.
"PSA Transactions" means the conduct of the auction process commenced in 2001 to
sell the Unit, the proceedings to obtain regulatory approval of the transactions
resulting from such auction, and the services of consultants, advisors and legal
counsel with respect thereto.
"Purchasers" means the sponsoring utilities named in Section 1 hereof or their
respective successors or assigns.
(c) Section 2 of the Additional Power Contract is hereby amended
in full to read as follows:
"The operative term of this contract shall commence on December 1, 2002
notwithstanding the fact that the Unit has been sold to ENVY and shall terminate
30 days after the date on which the last of the respective financial obligations
of Vermont Yankee and the Purchaser which constitute elements of the reimbursed
costs calculated pursuant to Section 7 hereof and the purchase price for Future
Power calculated pursuant to Section 7A hereof has been extinguished."
(d) In recognition of the Purchaser's continuing obligation to
reimburse Vermont Yankee for its aliquot share of certain of Vermont Yankee's
costs as deferred payment for the capacity and net electrical output of the Unit
previously delivered by Vermont Yankee and to reflect the change in the manner
in which Vermont Yankee will incur costs to supply the Purchaser with its
entitlement percentage of the Future Power to be purchased pursuant to the PPA
by Vermont Yankee from ENVY, the provisions of Section 7 of the Additional Power
Contract are hereby deleted and new Sections 7, 7A and 7B are inserted in lieu
thereof as follows:
"7. Reimbursed Costs
With respect to each month during the operative term of this
contract, the Purchaser will pay Vermont Yankee an amount equal to the
Purchaser's entitlement percentage of each of (A) the portion of Vermont
Yankee's Closing Net Unit Investment applicable to such month, if any, together
with one-twelfth of the composite percentage for such month of the Closing Net
Unit Investment as most recently determined in accordance with this Section 7,
(B) Vermont Yankee's Total Transaction Costs Obligation, if any, for such month,
(C) Vermont Yankee's total operating expenses for such month, (D) Vermont
Yankee's PSA Obligations, if any, for such month, (E) Vermont Yankee's PPA
Obligations, if any, for such month, (F) Vermont Yankee's Total Revolver Costs
for such month, if any, and (G) to the extent not duplicative of any payment
made under clause (A) above, an amount equal to one-twelfth of the equity
percentage for such month of the Purchaser's entitlement percentage of the
equity investment, as most recently determined in accordance with this Section
7.
"Composite percentage" shall be computed as of the Effective Date and as of the
last day of each month thereafter (the "computation date") and for any month the
composite percentage shall be that computed as of the most recent computation
date. "Composite percentage" as of a computation date shall be the sum of (i)
the equity percentage as of such date multiplied by the percentage which equity
investment as of such date is of the total capital as of such date, plus (ii)
the stated interest rate per annum of each principal amount of indebtedness
bearing a particular rate of interest outstanding on such date for money
borrowed from persons other than Purchasers multiplied by the percentage which
such principal amount is of total capital as of such date.
"Equity percentage" as of any date shall be whatever percentage per annum may be
authorized from time to time by FERC.
"Common stock equity investment" as of any date shall consist of equity
investment as of such date less the aggregate par value of all issues of
preferred stock outstanding on such date.
"Equity investment" as of any date shall consist of the sum of (i) all amounts
theretofore paid to Vermont Yankee for all capital stock theretofore issued
(taken at the total par value thereof plus the total of all amounts in an excess
of such par value paid thereon); plus all capital contributions, loans and
advances theretofore made to Vermont Yankee by the Purchasers, less the sum of
any amounts distributed by Vermont Yankee to the Purchasers or stockholders in
the form of stock repurchases or redemptions, return of capital or repayments of
loans and advances; plus (ii) any credit balance in the capital surplus account
(not included under (i)) and in earned surplus account on the books of Vermont
Yankee as of such date.
"Total capital" as of any date shall be the equity investment plus the total of
all indebtedness then outstanding for money borrowed from other than the
Purchasers.
"Uniform System" shall mean the Uniform System of Accounts prescribed by the
Federal Power Commission for Class A and Class B Public Utilities and Licensees
as in effect on the date of this contract and as said System may be hereafter
amended to take account of private ownership of special nuclear material.
Vermont Yankee's "operating expenses" shall include all ordinary and necessary
expenses incurred by Vermont Yankee during the term of this contract (i) for
administrative and general expenses which would be properly chargeable by an
operating electric utility, less any applicable credits thereto, in accordance
with the Uniform System and (ii) for expenses, if any, resulting from the
settlement of claims of dissenting shareholders.
The "net Unit investment" shall consist, in each case with respect to the Unit,
of (i) the aggregate amount properly chargeable at the time in accordance with
the Uniform System of Vermont Yankee's electric plant accounts (including
construction work in progress), less the sum of (x) the aggregate amount
included in operating expenses from the plant completion date to the date in
question on account of depreciation accruals (and amortization, if any, of
property losses) reduced by the aggregate of all amounts charged during such
period against the accumulated provision for depreciation plus (y) the amount of
net available cash; plus (ii) the aggregate amount properly chargeable at the
time in accordance with the Uniform System to accounts representing fuel
assemblies and components (including nuclear materials) and other materials and
supplies, less the balance, if any, at the time of the accumulated amortization
thereof; plus (iii) such reasonable allowances for prepaid items and cash
working capital as may from time to time be determined by Vermont Yankee; less
(z) the net proceeds received from the sale of any assets properly included in
said electric plant accounts. However, for purposes of this contract, the net
amount included at any date after the plant completion date in net Unit
investment under clause (i) of the immediately preceding sentence shall in no
event be less than the excess of:
(a) the amount properly chargeable at the plant completion date in accordance
with the Uniform System to electric plant accounts (including construction work
in progress) with respect to the Unit),
over
(b) the sum of (x) the aggregate minimum amount required by this Section 7 to be
included in operating expenses from the plant completion date to the date in
question on account of depreciation accruals (and amortization, if any, or
property losses) plus (y) the amount of net available cash.
The net Unit investment shall be determined as of the plant completion date and
thereafter as of the commencement of each calendar year, or, if Vermont Yankee
elects, at more frequent intervals.
"Closing Net Unit Investment" means the amount of net Unit investment determined
as of the Effective Date, which amount shall be amortized in equal monthly
amounts during the period commencing on the Effective Date and ending on the End
of License Date.
"Net available cash" means, at any date as of which the amount thereof is to be
determined, the excess of (a) the aggregate amount received by Vermont Yankee
after the plant completion date and prior to two years before the determination
date as insurance proceeds on account of loss or damage to the Unit or as the
proceeds of a sale or condemnation of a portion of the Unit, over (b) the
aggregate amount expended after the plant completion date and prior to the
determination date on account of rebuilding, repairs, replacements and additions
to the Unit, provided that insurance proceeds received with respect to a
particular loss shall be taken into account for purposes of the foregoing
computation only if the amount received with respect to the loss exceeds
$150,000.
"Closing Expenses" means the funds, if any, required to defray other closing
adjustments under the PSA.
"Sales Costs" means the funds, if any, to defray the costs incurred in
connection with pre-2001 efforts to sell the Unit and the PSA Transactions,
including the refunding of such costs to the Purchasers to the extent previously
billed to, and paid by, the Purchasers.
"Transaction Costs" means the sum of (a) the Closing Expenses plus (b) the Sale
Costs.
"Total Transaction Costs Obligation" for any month shall mean the amount
attributable to such month for the payment of principal and interest, if any, on
the Transaction Costs, calculated on the basis of amortizing such liability in
equal monthly amounts over the period from the Effective Date to the End of
License Term.
"Short-term Revolver" means one or more borrowings by Vermont Yankee during the
term of this contract to obtain funds to meet short-term operating cash needs.
"Total Revolver Costs" for any month means the amount attributable to such month
for payment of principal, interest and other fees, if any, due on the Short-term
Revolver.
7A. Purchase of Future Power, Delivery and Payments.
(a) Purchase of Future Power: With respect to each month during the
period commencing on December 1, 2002 and ending on the End of Term Date, the
Purchaser will be entitled and obligated to take its PPA Entitlement Percentage
of the Future Power. The Purchaser's PPA Entitlement Percentage of the Future
Power will be delivered to and accepted by it at the Producer's Delivery Point
(as defined in the PPA). All deliveries will be made in the form of 3-phase, 60
cycle, alternating current at a nominal voltage of 345,000 volts. The Purchaser
will make its own arrangements for the transmission of its shares of the Future
Power. In accordance with the PPA, ENVY will be responsible for maintaining
metering and telemetering with respect to the Future Power.
With respect to each month during the aforesaid period, Purchaser
will pay Vermont Yankee for the Future Power actually delivered to the Purchaser
an amount equal to its PPA Entitlement Percentage of (a) the purchase price
calculated pursuant to Article 5 of the PPA plus (b) any applicable Governmental
Charges allocable to Vermont Yankee pursuant to Section 18(b) of the PPA.
(b) Contingent Option to Terminate Purchase. Pursuant to Article
4(c) of the PPA, Vermont Yankee was granted an option to negotiate for release
from all or part of its obligations to purchase power under the PPA effective as
of February 28, 2005 and a further option to negotiate for release of any
balance of such obligations effective December 31, 2007, each such option being
exercisable by written notice to the ENVY at least 180 days prior to its
effective date (each such notice date being referred to herein as an "exercise
date"). Those options affect the Sub-Entitlements of each of the Purchasers.
Vermont Yankee hereby grants the Purchaser the right to direct Vermont Yankee to
exercise such option with respect to the Purchaser's Sub-Entitlement as follows:
If the Purchaser desires to direct Vermont Yankee to negotiate the
release of the Purchaser's Sub-Entitlement under the PPA pursuant to such
option, the Purchaser shall give written notice to that effect to Vermont Yankee
at least 90 days in advance of the relevant exercise date. Upon receipt of such
notice from the Purchaser, Vermont Yankee shall confer with all other Purchasers
giving similar notices to ascertain the scope of negotiating discretion granted
by such Purchasers and shall thereafter give timely written notice to the ENVY
indicating Vermont Yankee's desire to negotiate the release of the
Sub-Entitlements of those Purchasers that have given Vermont Yankee the required
notice. Vermont Yankee shall thereafter negotiate in good faith with the ENVY
for release of said Sub-Entitlements from the PPA and shall maintain close
coordination with the Purchaser and other affected Purchasers to assure that the
terms of such release are acceptable. Any final release agreement between
Vermont Yankee and the ENVY shall be subject to ratification by each of the
Purchasers affected thereby. If the Purchaser fails to ratify the release
agreement within the time provided by such agreement, its Sub-Entitlement shall
be excluded from the release agreement.
Vermont Yankee and the Purchaser hereby further agree that: (a)
after such a release agreement has been ratified by the Purchaser, the Purchaser
will pay to Vermont Yankee the Purchaser's proportionate share of the payments,
if any, due to the ENVY in connection with such release; and (b) from and after
the effective date of any release affecting the Purchaser's Sub-Entitlement
Percentage, the Purchaser shall no longer be obligated, pursuant to clause (a)
above, to take and pay for any Future Power delivered after such effective date.
(c) ISO Filing. Vermont Yankee agrees to submit this contract to
the market system maintained by the Independent System Operator of New England
provided for in the NEPOOL Agreement.
(d) Adequate Assurance. In the event that ENVY exercises its right
under Article 7(h) of the PPA to request adequate assurance with respect to
Purchaser's PPA Entitlement Percentage of the Future Power, then Vermont Yankee
shall be deemed to have commercially reasonably grounds for insecurity
concerning Purchaser's ability to perform its obligations under this Section 7A
and may provide Purchaser with written notice requesting adequate assurance
("Adequate Assurance") of due performance of Purchaser's obligations under this
Section 7A for the benefit of Vermont Yankee and/or ENVY. Upon receipt of such
notice by mail postage prepaid, facsimile, telecopy or hand delivery, Purchaser
shall have twelve (12) Business Days to provide such Adequate Assurance to
Vermont Yankee and ENVY.
7B. Billing.
Vermont Yankee will submit, by telecopy or other agreeable same day
delivery mechanism, to the Purchaser, as soon as practicable after the end of
each month, an invoice for the aggregate amount payable by the Purchaser
pursuant to Sections 7 and 7B hereof with respect to the particular month. Such
bills will be rendered in such detail as the Purchaser may reasonably request
and may be rendered on an estimated basis subject to corrective adjustments in
subsequent billing periods. All payments shown to be due on such invoice, except
amounts in dispute, shall be due and payable by wire transfer per instructions
on the invoice on or before the later of the eighteenth (18th) day of each
month, or the eighth (8th) day after receipt of the invoice, or if either such
day is not a Business Day, then on the next Business Day.
(e) Section 15 of the Additional Power Contract is hereby amended
by adding the following to the end thereof:
"Notwithstanding the foregoing, (a) Purchaser (or its assigns) may assign its
interest under Section 7A of this contract only (i) to a third party that has a
credit rating equal to the higher of that of the assignor or of investment grade
as determined by a nationally rated service, or (ii) to a single purpose entity
whose obligations hereunder are guaranteed by a parent that has such a credit
rating, or (iii) in connection with a merger, consolidation or sale of
substantially all its assets, to another party that has a credit rating at least
equal to that of the Purchaser (or its assigns).
The Purchaser hereby consents to Vermont Yankee creating a security
interest in Vermont Yankee's interest in this contract for the benefit of ENVY
and/or the lenders under the Short-term Revolver and agrees that Purchaser's
obligations hereunder shall not be affected by thereby."
(f) Section 17 of the Additional Power Contract is hereby amended
by deleting the first sentence thereof and deleting the word "other" from the
second sentence thereof.
6. Government Regulation. This Amendatory Agreement and all rights and
obligations of the Parties hereunder are subject to all applicable federal,
state and local laws and all duly promulgated orders and duly authorized actions
of governmental authorities having proper and valid jurisdiction over the terms
of this Amendatory Agreement. Purchaser will be obligated to make all payments
to Vermont Yankee for purchases at wholesale of capacity, energy and ancillary
products hereunder regardless of whether or not the Purchaser is permitted to
pass along or recover those payments from its customers. Each of Vermont Yankee
and Purchaser shall not propose, advance or support, and shall vigorously oppose
and defend against, any action by any legislature, agency, commission,
(including the Federal Energy Regulatory Commission), entity or court that would
adversely affect the Parties' rights and benefits hereunder and each of Vermont
Yankee and the Purchaser will vigorously pursue all actions and remedies to
overturn or cure any such action. In addition, the rates, terms, and conditions
contained in this Amendatory Agreement are not subject to change under Sections
205 or 206 of the Federal Power Act, as either section may be amended or
superseded, absent the mutual written agreement of the Parties or a finding by
the Federal Energy Regulatory Commission, that this Amendatory Agreement is not
in the public interest.
7. Confidentiality. Except as otherwise required by law or for implementation
of this Amendatory Agreement, the Parties must keep confidential the
transactions undertaken pursuant hereto; provided, however, that the Purchaser
may disclose such information on a confidential basis to third parties in
connection with good faith negotiation for the assignment of Purchaser's
interests hereunder. Nothing herein shall preclude the Purchaser from disclosing
the substance of this Amendatory Agreement to third parties on a confidential
basis in connection with the negotiation of the assignment of any of its
interests herein. Any information provided by either Party to the other Party
pursuant to this Amendatory Agreement and labeled "CONFIDENTIAL" will be used by
the receiving Party solely in connection with the purposes of this Amendatory
Agreement and will not be disclosed by the receiving Party to any third party,
except with the providing Party's consent. This Section 7 of this Amendatory
Agreement will not prevent either Party from providing any confidential
information received from the other Party to any court or in accordance with a
proper discovery request or in response to the reasonable request of any
governmental agency with jurisdiction to regulate or investigate the disclosing
Party's affairs, provided that, if feasible, the disclosing Party will give
prior notice to the other Party of such disclosure and, if so requested by such
other Party, will have used all reasonable efforts to oppose or resist the
requested disclosure, as appropriate under the circumstances, or to otherwise
make such disclosure pursuant to a protective order or other similar arrangement
for confidentiality.
8. Miscellaneous.
(a) Mitigation of Damages. In the event of any default by
Purchaser, Vermont Yankee shall have the right to sell the Purchaser's
entitlement percentage of any energy and ancillary products and apply the
proceeds thereof against the amounts owing from the Purchaser.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment by
their respective officers hereto duly authorized, as of the date first above
written.
VERMONT YANKEE NUCLEAR POWER
CORPORATION
By /s/ Ross P. Barkhurst
Ross P. Barkhurst
President and Chief Executive Officer
Address: Box 169, Ferry Road
Brattleboro, VT 05301
CENTRAL VERMONT PUBLIC SERVICE
CORPORATION
By /s/ Kent R. Brown
Kent R. Brown
Senior Vice President, Engineering & Operations
Address: 77 Grove Street
Rutland, VT 05701
Exhibit A
to
2001 Amendatory Agreement
I.
PSA Obligations:
The PSA Obligations comprise those set forth in the following sections of the
PSA:
Section 2.4
Excluded Liabilities
Section 6.11(b)
One-time fee due to DOE under the DOE Standard Contract
Section 6.12
DOE Decontamination and Decommissioning fees
Section 9.1
Indemnification obligations
II.
PPA Obligations:
The PPA Obligations comprise those set forth in the following sections of the
PPA:
Section 3(g)
Transmission charges for Station Use Energy.
Section 7(h)
Adequate assurance
Section 9
Indemnification obligations
Exhibit B
to
2001 Amendatory Agreement
[Attach copy of PPA] |
Exhibit 10.7
SENIOR EXECUTIVE RETENTION AGREEMENT
THIS AGREEMENT ("Agreement"), by and between ALADDIN GAMING, LLC a Nevada
limited liability company (the "Company"), and Patricia Becker (the
"Executive").
WITNESSETH:
WHEREAS, the Company and Executive entered into that certain employment
agreement dated July 27, 2000 ("Employment Agreement"), and has determined that
the Executive is a key executive of the Company and it is the desire of the
Company to assure itself of the availability of the services of the Executive
and to provide assurances to the Executive of employment in the event of the
commencement of a Chapter 11 case for the Company or in the event of a Change of
Control (collectively an "Event");
WHEREAS, in the event that there occurs an Event, the Company believes it
imperative that the Company be able to rely upon the Executive to continue in
her position and, if required, to assess any proposal or transaction which would
cause an Event and advise management and the Company as to whether such proposal
or transaction would be in the best interest of the Company and its members,
free from concern that her recommendations may adversely affect her continued
employment:
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Executive and the availability of her advice and counsel
notwithstanding the possibility, threat or occurrence of an Event and to induce
the Executive to remain in the employ of the Company, and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, the Company and the Executive agree as follows:
1. Services During Certain Events. The Executive agrees that she will not
voluntarily leave the employ of the Company and will continue to render services
to the Company as provided in the Employment Agreement until the later of
18 months from the date of this Agreement or an Event Completion, as hereinafter
defined ("Expiration Date"), provided, however, if no Event occurs within
18 months from the date of this Agreement, the Expiration Date shall be
18 months from the date of this Agreement. In the event the Employment Agreement
terminates prior to the Expiration Date, then the Employment Agreement shall be
extended through the Expiration Date unless otherwise terminated as provided
therein.
2. Incentive Bonus Payments. From the date of this Agreement until the
earlier of (a) the Expiration Date, (b) the date the Company terminates the
Executive with Cause or (c) the Executive quits the employ of the Company
without Good Reason, the Company shall pay Executive, in addition to the Base
Salary pursuant to the Employment Agreement, less customary payroll deductions,
the following bonus(es):
(i)If, for the calendar year 2001, the Company achieves $63 million in EBITDA
(as defined and computed in accordance with the Company's Credit Agreement,
dated February 26, 1998, (collectively, as amended, "Credit Agreement")),
Executive shall be paid a bonus equal to 15% of the Executive's then-existing
annual base salary, payable on or before March 31, 2002;
(ii)For the calendar year 2002,
a.If, for the First Quarter 2002, the Company achieves "EBITDA" equal to or
greater than the Company's "fixed charges" (both terms as defined and computed
in accordance with the Credit Agreement) for that quarter, then the Company
shall pay Executive a bonus equal to 5% of Executive's then-existing annual base
salary, payable on or before 45 days after the end of that calendar quarter;
b.If, for the Second Quarter 2002, the Company achieves "EBITDA" equal to or
greater than the Company's "fixed charges" (both terms as defined and computed
in accordance
--------------------------------------------------------------------------------
with the Credit Agreement) for that quarter, then the Company shall pay
Executive a bonus equal to 10% of Executive's then-existing annual base salary,
payable on or before 45 days after the end of that calendar quarter;
c.If, for the Third Quarter 2002, the Company achieves "EBITDA" equal to or
greater than the Company's "fixed charges" (both terms as defined and computed
in accordance with the Credit Agreement) for that quarter, then the Company
shall pay Executive a bonus equal to 15% of Executive's then-existing annual
base salary, payable on or before 45 days after the end of that calendar
quarter; and
d.If, for the entire Year 2002, the Company achieves "EBITDA" for the entire
Year 2002 equal to or greater than the Company's "fixed charges" (both terms as
defined and computed in accordance with the Credit Agreement) for the entire
Year 2002, then the Company shall pay Executive a bonus equal to 50% of
Executive's then-existing annual base salary, less the amounts, if any,
previously paid to the Executive pursuant to Sections 2(ii)(a), (b) and/or (c),
such net amount to be paid on or before 90 days after the end of that calendar
quarter.
3. Retention Bonus Payment. If there is an Event prior to the Expiration
Date, then upon the Payment Date, the Company shall pay to the Executive as
compensation for services rendered to the Company cash in an amount equal to
three (3) times her then-existing aggregate annual base salary, (excluding bonus
or options) less customary payroll deductions; provided, however, the foregoing
shall not apply if the Executive has quit without Good Reason or has been
terminated by the Company with Cause prior to the Event's occurrence.
4. Definitions.
(a)"Cause" shall mean (i) conviction of a felony, (ii) embezzlement or
misappropriation of money or property of the Company, (iii) denial, rejection,
suspension or revocation of any gaming license or permit, (iv) Executive's
material breach of Section 6 of the Employment Agreement which material breach
has an adverse impact on the Company or (v) Executive quits without Good Reason,
as defined herein.
(b)"Change of Control" means either: (i) if collectively the Trust under Article
Sixth u/w/o Sigmund Sommer and London Clubs International, plc ("London Clubs"),
through their respective subsidiaries own less than 50% of the equity of either
the Company and/or Aladdin Gaming Holdings, LLC (for purposes of this section,
collectively and/or individually hereinafter "Aladdin"); or (ii) if a third
party acquires, directly or indirectly, control of Aladdin or substantially all
of its assets.
(c)"Event Completion" means the effective date of a plan of reorganization for
the Company or 90 days after a Change of Control.
(d)"Good Reason" shall mean (i) a material reduction in Executive's duties,
authorities and responsibilities without her consent provided Executive gives
the Company written notice specifying such action and the Company has not cured
or abated such action within twenty (20) days thereafter, provided that a change
in Executive's direct report shall not in and of itself constitute evidence of a
material reduction in duties, authorities and responsibilities; or (ii) a
reduction by the Company in the Executive's base salary, in effect immediately
prior to such reduction, without her consent, provided Executive gives the
Company written notice specifying such action and the Company has not cured or
abated such action within twenty (20) days thereafter; and (iii) the failure of
the Company to cause this Agreement to be assumed as provided for in
paragraph 11 below.
2
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(e)"Payment Date" shall mean the earlier of (i) the Event Completion, (ii) the
date the Company terminates the Executive without Cause or (iii) the date the
Executive quits with Good Reason.
(f)"Person" shall have the same meaning as such term has under section 13(d) of
the Act and the regulations promulgated thereunder.
5. Indemnification. If litigation shall be brought to enforce or interpret
any provision contained herein or to recover from the Executive any moneys paid
pursuant to this Agreement, the Company, to the extent permitted by applicable
law and the Company's Articles of Organization, hereby agrees to indemnify the
Executive for her or her reasonable attorneys' fees and disbursements incurred
in such litigation, and hereby agrees to pay any money judgment obtained from
the Executive and prejudgment interest on any money judgment obtained from the
Executive.
6. Payment Obligations Absolute. The Company's obligation to pay the
Executive the payment and to make the arrangements provided for herein shall be
absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Company may have against him or anyone else. All amounts
payable by the Company hereunder shall be paid without notice or demand. Each
and every payment made hereunder by the Company shall be final, and the Company
will not seek to recover all or any part of such payment from the Executive or
from whosoever may be entitled thereto, for any reason whatsoever. The Executive
shall not be obligated to seek other employment in mitigation of the amounts
payable or arrangements made under any provision of this Agreement, and the
obtaining of any such other employment shall in no event effect any reduction of
the Company's obligations to make the payments and arrangements required to be
made under this Agreement.
7. Continuing Obligations. The Executive shall retain in confidence any
confidential information known to him concerning the Company and its respective
businesses so long as such information is not publicly disclosed and otherwise
comply with Section 6(a) of the Employment Agreement in all respects.
8. Successors. This Agreement shall be binding upon and inure to the
benefit of the Executive and her estate and the Company and any successor of the
Company, but neither this Agreement nor any rights arising hereunder may be
assigned or pledged by the Executive.
9. Severability. Any provision in this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10. Prior Agreements. This Agreement supersedes any prior severance and
retention agreement between the Executive and the Company. Notwithstanding the
prior sentence, this Agreement does not supersede or amend the Employment
Agreement except as to those provisions relating to retention and severance, and
is a separate and independent contract between the Company and the Executive.
[Balance of Page Intentionally Left Blank]
3
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11. Chapter 11 Case. In the event the Company commences a Chapter 11 case
prior to the Expiration Date, the company shall file a motion within two
(2) business days of the petition date for the Chapter 11 Case to assume this
Agreement pursuant to Section 365 of the Bankruptcy Code. In the event an order
is not entered by the Bankruptcy Court approving the assumption of this
Agreement within thirty (30) days of the petition date, which order does not
become a final, non-appealable order within fifteen (15) days thereof, Executive
has the right to terminate her employment with the Company with good reason.
12. Controlling Law. This Agreement shall in all respects be governed by and
construed in accordance with the laws of the State of Nevada.
13. Termination. This Agreement shall terminate on the Expiration Date;
however, the Company's obligations pursuant to Section 3, 5, 6 and 8 above and
the Executive's obligations pursuant to Sections 6, 7 and 9(j) of the Employment
Agreement, shall survive termination.
IN WITNESS WHEREOF, the parties have executed this Agreement on the 11th day
of June, 2001.
ALADDIN GAMING, LLC
By:
--------------------------------------------------------------------------------
Its:
EXECUTIVE
By:
--------------------------------------------------------------------------------
Patricia Becker
4
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|
Exhibit 10.4
March 1, 2001
Personal and Confidential
Directors Emeritus
First National Bank of Joliet
78 North Chicago Street
Joliet, Illinois 60431
Gentlemen:
As you know, Bank of Montreal (“BMO”), Bankmont Financial Corp.
(“Bankmont”) and First National Bancorp, Inc. (“FNB”) intend to enter into an
Agreement and Plan of Merger (the “Agreement”) whereby FNB will merge with and
into Bankmont (the “Merger”). We are writing this letter because each of you is
currently a director emeritus of First National Bank of Joliet (“FNBJ”) and, in
view of your standing in the community, your expertise, and your knowledge
concerning FNBJ and its business it is important to us that we have the benefit
of your counsel going forward and, therefore, we would like to retain each of
you as a director emeritus of FNBJ, subject to the terms and conditions set
forth herein, in the event the Merger is consummated.
1. Bankmont agrees to pay each of you, in addition to any
compensation that you are entitled to receive annually or per meeting as a
director emeritus under any compensation policy or agreement currently in
effect, a one time bonus in the amount of $120,000 (the “Bonus”) in lieu of any
“change of control” payment that you are otherwise entitled to receive pursuant
to the terms of any policy or agreement currently in effect with FNB and/or
FNBJ. The Bonus will be payable in two (2) equal installments of $60,000. The
first installment payment will be payable on the six (6) month anniversary of
the effective date of the Merger and the second installment payment will be
payable on the one (1) year anniversary of the effective date of the Merger
provided that you have not resigned as a director emeritus of FNBJ prior to the
time any such payment is due you. Notwithstanding the foregoing, if at any time
prior to the one (1) year anniversary of the effective date of the Merger you
(i) resign pursuant to the mandatory retirement policy or agreement currently in
effect, (ii) die, or (iii) become disabled such that you are unable to fulfill
your duties as a director emeritus, Bankmont will remain obligated to pay the
Bonus to you, or your estate or guardian, as the case may be, pursuant to the
aforementioned terms. If you accept the terms of this letter, any such “change
of control” provision in any policy or agreement will become null and void upon
the execution of this letter.
2. Except as otherwise provided herein, Bankmont agrees that it
will not reduce the amount of compensation that each of you is entitled to
receive as a director emeritus of FNBJ under any policy or agreement currently
in effect for the remainder of your tenure.
3. Bankmont agrees that it will, as to you, adopt or retain any
policy or agreement currently in effect regarding mandatory retirement age for
directors emeritus of FNBJ’s board of directors.
4. Bankmont agrees to retain each of you as a director emeritus of
FNBJ for as long as you care to serve (subject to FNBJ’s current retirement
policy for directors emeritus); provided that you have properly performed your
duties and Bankmont is not precluded from retaining you pursuant to any law,
rule or regulation, or requested to remove you by any regulatory agency.
If you are in agreement with the terms set forth herein, please
sign this letter below and return it to us at your earliest convenience.
Please note, this letter may be executed in two or more
counterparts, each of which shall be deemed to constitute one original, but all
of which together shall constitute one and the same instrument.
Sincerely, /s/ Paul V. Reagan
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Bankmont Financial Corp. /s/ Watson A. Healy
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/s/ Harvey J. Lewis
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Watson A. Healy Harvey J. Lewis /s/ Paul A. Lambrecht
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Paul A. Lambrecht
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EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
DATED AS OF FEBRUARY ___, 2001 AMONG
UNITED SHIPPING & TECHNOLOGY, INC.,
AND THE PURCHASERS NAMED HEREIN
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.....................................................1
Section 1.01 Definitions.........................................1
ARTICLE II PURCHASE AND SALE OF SECURITIES.................................4
Section 2.01 Commitment to Purchase..............................4
Section 2.02 The Closings........................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE ISSUER....................5
Section 3.01 Organization, Corporate Power and Licenses..........5
Section 3.02 Capital Stock and Related Matters...................5
Section 3.03 Subsidiaries; Investments...........................6
Section 3.04 Authorization; No Breach............................7
Section 3.05 Securities Law Compliance...........................7
Section 3.06 Commission Documents................................7
Section 3.07 Financial Statements................................8
Section 3.08 Absence of Undisclosed Liabilities..................8
Section 3.09 No Material Adverse Change..........................8
Section 3.10 Absence of Certain Developments.....................8
Section 3.11 Assets..............................................9
Section 3.12 Real Property.......................................9
Section 3.13 Tax Matters........................................10
Section 3.14 Contracts and Commitments..........................11
Section 3.15 Intellectual Property Rights.......................12
Section 3.16 Litigation, etc....................................14
Section 3.17 Brokerage..........................................14
Section 3.18 Governmental Consent, etc..........................14
Section 3.19 Insurance..........................................14
Section 3.20 Employees..........................................14
Section 3.21 ERISA..............................................14
Section 3.22 Compliance with Laws...............................16
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TABLE OF CONTENTS
(continued)
PAGE
Section 3.23 Environmental and Safety Matters...................16
Section 3.24 Affiliated Transactions............................18
Section 3.25 Disclosure.........................................18
Section 3.26 Customers and Suppliers............................18
Section 3.27 Reports with the Securities and Exchange
Commission.........................................18
Section 3.28 Regulatory Matters.................................18
Section 3.29 Shareholder Vote Required..........................19
Section 3.30 Knowledge..........................................19
ARTICLE IV AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...19
ARTICLE V COVENANTS OF THE ISSUER........................................20
Section 5.01 Access to Information..............................20
Section 5.02 Certificate of Designation.........................20
Section 5.03 Restrictions Pending the Closings..................20
Section 5.04 Reservation of Shares..............................21
Section 5.05 Tax Consistency....................................21
Section 5.06 Use of Proceeds....................................21
ARTICLE VI COVENANTS OF THE PURCHASERS....................................21
Section 6.01 Confidentiality....................................22
ARTICLE VII COVENANTS OF THE ISSUER AND THE PURCHASERS.....................22
Section 7.01 Certain Filings....................................22
Section 7.02 Public Announcements...............................22
ARTICLE VIII CONDITIONS PRECEDENT TO THE CLOSINGS...........................22
Section 8.01 Conditions to Each Party's Obligations.............22
Section 8.02 First Closing: Conditions to Each Purchaser's
Obligations........................................23
Section 8.03 Second Closing: Conditions to Each Purchaser's
Obligations........................................23
Section 8.04 Conditions to the Issuer's Obligations.............24
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE IX MISCELLANEOUS..................................................24
Section 9.01 Notices............................................24
Section 9.02 No Waivers; Amendments.............................25
Section 9.03 Survival...........................................25
Section 9.04 Indemnification....................................26
Section 9.05 Procedures.........................................26
Section 9.06 Termination........................................26
Section 9.07 Successors and Assigns.............................27
Section 9.08 GOVERNING LAW; WAIVER OF JURY TRIAL................27
Section 9.09 JURISDICTION.......................................27
Section 9.10 Counterparts.......................................27
Section 9.11 Entire Agreement...................................27
Section 9.12 Remedies...........................................28
Section 9.13 Severability.......................................28
Section 9.14 Descriptive Headings; Interpretation...............28
Section 9.15 No Strict Construction.............................28
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SECURITIES PURCHASE AGREEMENT
AGREEMENT dated as of February __, 2001 among United Shipping &
Technology, Inc., a Utah corporation (the "Issuer"), and the purchasers listed
in Schedule A (together, the "Purchasers" and each a "Purchaser").
WHEREAS, the Issuer desires to sell the Securities (as defined below)
to the Purchasers, and the Purchasers desire to purchase the Securities from the
Issuer, upon the terms and subject to the conditions hereinafter set forth;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person, where
"control" means the possession, directly or indirectly, of the power to direct
the management and policies of a Person whether through ownership of voting
securities, contract or otherwise; provided that none of the Purchasers shall be
considered an Affiliate of the Issuer or any of its Subsidiaries.
"Agreement" means this Agreement, as it may be amended from time to
time.
"Applicable Law" means any applicable constitution, treaty, statute,
rule, regulation, ordinance, order, directive, code, interpretation, judgment,
decree, injunction, writ, determination, award, permit, license, authorization,
directive, requirement, ruling or decision of, agreement with, or by any
Governmental Authority.
"Certificate of Designation" means the Certificate of Designation for
the Series D Shares, in the form attached as Exhibit A hereto with such changes
and modifications as may be agreed to by the Issuer and the Purchasers.
"Benefit Plan" has the meaning set forth in Section 3.21.
"Bridge Note Warrants" means the stock purchase warrants to acquire
Series D Shares originally issued by the Issuer to THLi as of January 4, 2001.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"Closings" and "Closing" shall have the meaning set forth in Section
2.03.
"Closing Date" shall have the meaning set forth in Section 2.03.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the U.S. Securities and Exchange Commission or any
governmental body or agency succeeding to the functions thereof.
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"Common Stock" means the common stock, par value $.004 per share, of
the Issuer.
"Common Warrants" means the stock purchase warrants to purchase shares
of the Issuer's Common Stock originally issued by the Issuer to TH Lee and TH
Lee Parallel as of May 31, 2000.
"Convertible Bridge Notes" means the Convertible Bridge Notes in the
aggregate amount of $5,000,000, dated January 4, 2001 and January 31, 2001,
issued by the Issuer to THLi.
"Common Stock Equivalents" has the meaning set forth in Section 3.02.
"Credit Agreement" means the credit agreement between UST Delivery
Systems, Inc., a Subsidiary of the Issuer, and General Electric Capital
Corporation, dated September 24, 1999, and all documents executed in connection
therewith.
"ERISA" has the meaning set forth in Section 3.21.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"First Closing" shall have the meaning set forth in Section 2.03.
"Governmental Authority" means any governmental body, agency or
official of any country or political subdivision of any country, including, but
not limited to, federal, state, county and local governments, administrative
agencies and courts.
"Indebtedness" means at a particular time, without duplication, (i) any
indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any note,
bond, debenture or other debt security, (iii) any indebtedness for the deferred
purchase price of property or services with respect to which a Person is liable,
contingently or otherwise, as obligor or otherwise (other than trade payables
and other current liabilities incurred in the ordinary course of business which
are not more than six months past due or being contested in good faith), (iv)
any commitment by which a Person assures a creditor against loss (including,
without limitation, contingent reimbursement obligations with respect to letters
of credit), (v) any indebtedness guaranteed in any manner by a Person
(including, without limitation, guarantees in the form of an agreement to
repurchase or reimburse), (vi) any obligations under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person assures a
creditor against loss, (vii) any indebtedness secured by a Lien on a Person's
assets and (viii) any unsatisfied obligation for "withdrawal liability" to a
"multiemployer plan" as such terms are defined under ERISA.
"Intellectual Property Rights" means all (i) patents, patent
applications and patent disclosures, (ii) trademarks, service marks, trade
dress, trade names, logos, corporate names, websites and internet domain names
and registrations and applications for registration thereof together with all of
the goodwill associated therewith, (iii) copyrights and copyrightable works and
registrations and applications for registration thereof, (iv) mask works and
registrations and applications for registration thereof, (v) computer software,
data, data bases and documentation thereof, (vi) trade secrets and other
confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques,
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research and development information, drawings, specifications, designs, plans,
proposals, technical data, financial and marketing plans and customer and
supplier lists and information), (vii) other intellectual property rights and
(viii) copies and tangible embodiments thereof (in whatever form or medium).
"Investment" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests, limited liability company interests and joint venture interests) of
any other Person and (ii) any capital contribution by such Person to any other
Person.
"Issuable Securities" has the meaning set forth in Section 3.05.
"Issuer SEC Reports" has the meaning given to it in Section 3.25.
"Latest Balance Sheet" means the audited balance sheet of the Issuer
for the most recent fiscal year ended July 1, 2000.
"Leased Property" has the meaning set forth in Section 3.12.
"Licenses" means all licenses, permits, construction permits,
certificates of public convenience and necessity and other authorizations issued
by any federal, state, county or local Governmental Authorities to the Issuer
and its Subsidiaries and used or necessary in connection with the operation and
conduct of their business, and including any applications for any such licenses,
permits, construction permits and other authorizations applied for by the Issuer
and its Subsidiaries that are currently pending.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to
Lien any asset that it has acquired or holds subject to the interest of a vendor
or lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"Market Price" of any security means the average of the closing prices
of such security's sales on all securities exchanges on which such security may
at the time be listed, or, if there has been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of the two (2) consecutive trading days
immediately prior to the day as of which "Market Price" is being determined. If
at any time such security is not listed on any securities exchange or quoted in
the NASDAQ System or the over-the-counter market, the "Market Price" shall be
the fair value thereof determined jointly by the Corporation and the Required
Holders. If such parties are unable to reach agreement within a reasonable
period of time, such fair value shall be determined by an independent appraiser
experienced in valuing securities jointly selected by the Corporation and the
Required Holders. The determination of such appraiser shall be final and binding
upon the parties, and the Corporation shall pay the fees and expenses of such
appraiser.
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"Material Adverse Effect" means any change or effect (or aggregation of
changes and effects) that is or could reasonably be expected to be materially
adverse to the business, assets, condition (financial or otherwise) or results
of operations of the Issuer and its Subsidiaries, taken as a whole.
"Owned Property" has the meaning set forth in Section 3.12.
"Person" means an individual or a corporation, partnership, limited
liability company, association, a joint stock company, trust, a joint venture,
an unincorporated organization, or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Real Property" has the meaning set forth in Section 3.12.
"Registration Rights Agreement" shall mean the Second Amended and
Restated Registration Rights Agreement to be dated as of the First Closing Date
by and among the Issuer and the Purchasers, substantially in the form attached
hereto as Exhibit D.
"SEC Documents" means all reports, schedules, registration statements
and other documents (including all Exhibits and Schedules thereto) filed by the
Issuer with the Commission.
"Second Closing" shall have the meaning set forth in Section 2.03.
"Securities" means the Series D Shares.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Series B Shares" means the shares of Series B Convertible Preferred
Stock, par value $.004 per share, of the Issuer.
"Series C Shares" means the shares of Series C Convertible Preferred
Stock, par value $.004 per share, of the Issuer.
"Series D Shares" means the shares of Series D Convertible Preferred
Stock, par value $.004 per share, of the Issuer.
"Series C Warrants" means the stock purchase warrants to purchase
Series C Shares originally issued by the Issuer to THLi as of September 1, 2000
and September 22, 2000.
"Subsidiary" means, with respect to any Person any other Person of
which a majority of the capital stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions are at the time directly or indirectly
owned by such Person.
"THLi" means, collectively, TH Lee Putnam Internet Partners, L.P., TH
Lee.Putnam Internet Parallel Partners, L.P., THLi Coinvestment Partners LLC, and
Blue Star I, LLC.
"Transaction Agreements" means this Agreement, the Registration Rights
Agreement and the Certificate of Designation.
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"Warrants" means the Series C Warrants, Common Warrants and Bridge Note
Warrants.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.1 COMMITMENT TO PURCHASE. Upon the basis of the
representations and warranties herein contained of each Purchaser, but subject
to the terms and conditions hereinafter stated, the Issuer agrees to sell to
each Purchaser, and each Purchaser, upon the basis of the representations and
warranties herein contained of the Issuer, but subject to the terms and
conditions hereinafter stated, agrees to purchase from the Issuer at the
Closings, the Series D Shares in the amount and for the aggregate purchase price
set forth opposite the name of such Purchaser on Annex I hereto. The purchase
price per Series D Share shall be (a) $____ in the case of all Purchasers other
than THLi and (b) in the case of THLi, the "conversion price" as defined in the
Convertible Bridge Notes. The Series D Shares shall have the rights, terms and
privileges set forth in the Certificate of Designation, a copy of which is
attached hereto as Exhibit A.
SECTION 2.2 THE CLOSINGS.
(a) The first closing (the "First Closing") and the second
closing (the "Second Closing") (each a "Closing" and together, the
"Closings") of the purchase and sale of the Securities hereunder shall
take place at the offices of ___________, ______________, ___________.
The First Closing shall occur immediately following fulfillment of each
of the conditions set forth in Sections 8.01, 8.02 and 8.04, or at such
other time and place as the Issuer and the Purchasers shall agree in
their sole discretion. Subject to fulfillment of the conditions set
forth in Sections 8.03 and 8.04, the Second Closing shall occur on a
date specified in writing by the Issuer following the First Closing and
following the execution of this Agreement by additional Investors who
become parties to this Agreement following the First Closing. The date
and time of each Closing are referred to herein as the "First Closing
Date" and the "Second Closing Date" (each a "Closing Date" and together
the "Closing Dates").
(b) At the Closings, each Purchaser, other than THLi, shall
deliver to the Issuer, by wire transfer to an account designated by the
Issuer not later than three Business Days prior to each Closing Date,
an amount, in immediately available funds, equal to the aggregate
purchase price of the Securities being purchased by such Purchaser. At
the First Closing, ThLi shall deliver and surrender the Convertible
Bridge Notes, which shall be converted to Series D Preferred Stock in
accordance with its terms.
(c) At each Closing, the Issuer shall deliver to each
Purchaser, against payment of the purchase price by such Purchaser to
the Issuer (or in the case of THLi, deliver the Convertible Bridge
Notes) as set forth in 2.03(b) above, certificates evidencing the
Series D Shares being purchased by such Purchaser in definitive form
and registered in such names as such Purchaser shall request not later
than two Business Days prior to the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
The Issuer represents and warrants to each Purchaser that:
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SECTION 3.1 ORGANIZATION, CORPORATE POWER AND LICENSES. The Issuer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Utah and is qualified to do business in every jurisdiction in
which its ownership of property or conduct of business requires it to qualify,
except where the failure to be so qualified would not have a Material Adverse
Effect. The Issuer possesses all requisite corporate power and authority and all
material Licenses necessary to own and operate its properties, to carry on its
businesses as now conducted and presently proposed to be conducted and to carry
out the transactions contemplated by this Agreement. The copies of the Issuer's
and each Subsidiary's charter documents and bylaws which have been furnished to
the Purchasers' counsel reflect all amendments made thereto at any time prior to
the date of this Agreement and are correct and complete.
SECTION 3.2 CAPITAL STOCK AND RELATED MATTERS.
(a) As of the First Closing (except as set forth below with
respect to the Series C Preferred as of the First Closing and the
Second Closing, and immediately thereafter, the authorized capital
stock of the Issuer shall consist of (a) 25,000,000 shares of preferred
stock, of which (i) 4,500,000 shares have been designated as Series A
Cumulative Convertible Preferred Stock (none of which shall be issued
and outstanding as of each Closing) and (ii) 10,000,000 shares shall be
designated as Series B Convertible Preferred Stock (2,806,796 of which
shall be issued and outstanding as of each Closing) and (iii) 5,000,000
shares have been designated as Series C Convertible Preferred Stock
(2,000,000 of which shall be issued and outstanding as of each Closing
and the remainder of which shall be reserved for issuance upon
exercising the Series C Warrants), (iv) 4,500,000 shall be designated
as Series D Convertible Preferred Stock (none of which shall be issued
and outstanding as of the First Closing and up to 1,533,333 of which
shall be issued and outstanding as of the Second Closing after giving
effect to the Closings (including Series D Shares reserved for
conversion of a Convertible Bridge Notes dated January 4, 2001 and
pursuant to exercise of the Bridge Warrant and (b) 75,000,000 shares of
Common Stock, of which (i) 16,646,399 shares shall be issued and
outstanding as of each Closing, (ii) 10,000,000 shares shall be
reserved for issuance upon conversion of the Series B Shares, (iii)
5,000,000 shares shall be reserved for issuance upon conversion of the
Series C Shares, (iv) 11,391,929 shares shall be reserved for issuance
upon exercise of stock options, warrants (including the Common Warrants
but excluding the securities described in clause (v) below) and
convertible securities, (v) certain of the remaining shares are
reserved for issuance upon the exercise of warrants issued to Bayview
Capital Partners L.P., the Convertible Subordinated Promissory Note
issued to CEX Holdings, Inc, and the 9% Convertible Subordinated
Promissory Note issued to J. Iver & Company, (vi) the issuance of
shares of Common Stock to Jack D. Ashabranner II (or a trust solely for
his benefit) in respect of a court-approved settlement of his claim
against Corporate Express Delivery Systems, Inc. solely to meet any
shortfall in the market value between the 600,000 shares of Common
Stock that have been issued for the benefit of Mr. Ashabranner in
respect of such settlement and the sum of $550,000, pursuant to the
terms of such settlement. As of each Closing, neither the Issuer nor
any Subsidiary shall have outstanding any stock or securities
convertible or exchangeable for any shares of its capital stock or
containing any profit participation features, nor shall it have
outstanding any rights or options to subscribe for or to purchase its
capital stock or any stock or securities convertible into or
exchangeable for its capital stock or any stock appreciation rights or
phantom stock plans ("Common Stock Equivalents"), except for the
Series B
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Shares, the Series C Shares, the Series D Shares and the Warrants and
except as set forth on Schedule 3.02 (a). Schedule 3.02 (a) accurately
sets forth the following information with respect to all outstanding
Common Stock Equivalents: the holder, the number of shares covered, the
exercise price and the expiration date. As of each Closing, neither the
Issuer nor any Subsidiary shall be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire
any shares of its capital stock or any warrants, options or other
rights to acquire its capital stock, except as set forth on Schedule
3.02 (a) and except pursuant to the Certificate of Designation. As of
each Closing, all of the outstanding shares of the Issuer's capital
stock shall be validly issued, fully paid and nonassessable.
(b) Except as set forth on Schedule 3.02 (b) hereto, there are
no statutory or contractual stockholders' preemptive rights or rights
of first refusal with respect to the issuance of the Securities
hereunder or the issuance of the Common Stock upon conversion of the
Securities. Except as set forth on Schedule 3.02 (b) hereto, the Issuer
has not violated any applicable federal or state securities laws in
connection with the offer, sale or issuance of any of its capital
stock. There are no agreements between the Issuer and any of the
Issuer's stockholders with respect to the voting or transfer of the
Issuer's capital stock.
SECTION 3.3 SUBSIDIARIES; INVESTMENTS. Schedule 3.03 correctly sets
forth the name of each Subsidiary of the Issuer, the jurisdiction of its
incorporation and the Persons owning the outstanding capital stock of such
Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, possesses all
requisite corporate or other power and authority necessary to own its properties
and to carry on its businesses as now being conducted and as presently proposed
to be conducted and is qualified to do business in every jurisdiction in which
its ownership of property or the conduct of business requires it to qualify,
except where the failure to be so qualified would not have a Material Adverse
Effect. Except as set forth on Schedule 3.03, all of the outstanding shares of
capital stock or other equity interests of each Subsidiary are validly issued,
fully paid and nonassessable or not subject to a capital call or capital
contribution requirement, as applicable, and all such shares are owned by the
Issuer or another Subsidiary free and clear of any Lien and not subject to any
option or right to purchase any such shares. Except as set forth on the Schedule
3.03, neither the Issuer nor any Subsidiary owns or holds the right to acquire
any shares of stock or any other security or interest in any other Person.
SECTION 3.4 AUTHORIZATION; NO BREACH. The execution, delivery and
performance of the Transaction Agreements and all other agreements contemplated
hereby or thereby to which the Issuer or any of its Subsidiaries is a party, the
filing of the Certificate of Designation have been duly and validly authorized
by the Issuer. The Transaction Agreements and all other agreements contemplated
hereby to which the Issuer or any of its Subsidiaries is a party each
constitutes a valid and binding obligation of the Issuer or such Subsidiary, as
applicable, enforceable in accordance with its terms. The issuance of the Common
Stock upon conversion of the Series D Shares will not require any further
corporate action (except for action related to any anti-dilution adjustments) on
the part of the Issuer except as required pursuant to Section 5.07 and, except
as set forth on Schedule 3.02 (b), will not be subject to any preemptive right,
right of first refusal or other similar right. The execution and delivery by the
Issuer of this Agreement and all other agreements contemplated hereby to which
the Issuer is a party, the offering, sale and issuance of the Securities
hereunder, the issuance of Common Stock upon conversion of the
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Series D Shares, the filing of the Certificate of Designation, and the
fulfillment of and compliance with the respective terms hereof and thereof by
the Issuer, do not and shall not (i) conflict with or result in a breach of the
terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in the creation of any Lien upon the Issuer's or any Subsidiary's capital
stock or assets pursuant to, (iv) give any third party the right to modify,
terminate or accelerate any obligation under, (v) result in a violation of, or
(vi) require any authorization, consent, approval, exemption or other action by
or notice or declaration to, or filing with, any court or administrative or
governmental body or agency pursuant to, the articles of incorporation or bylaws
of the Issuer or any Subsidiary, or any law, statute, rule or regulation, order,
judgment or decree to which the Issuer or any Subsidiary is subject, or any
material agreement or instrument to which the Issuer or any Subsidiary is
subject, except for such matters that would not have a Material Adverse Effect.
SECTION 3.5 SECURITIES LAW COMPLIANCE. Assuming the representations and
warranties of the Purchasers set forth in Article 4 hereof are true and correct
in all material respects, the offer and sale of the Series D Shares and the
shares of Common Stock issuable upon conversion of the Series C Shares (the
"Issuable Securities") pursuant to this Agreement will be exempt from the
registration requirements of the Securities Act. Neither the Issuer nor any
Person acting on its behalf has, in connection with the offering of the Issuable
Securities, engaged in (i) any form of general solicitation or general
advertising (as those terms are used within the meaning of Rule 502(c) under the
Securities Act), (ii) any action involving a public offering within the meaning
of Section 4(2) of the Securities Act, or (iii) any action that would require
the registration under the Securities Act of the offering and sale of the
Issuable Securities pursuant to this Agreement. The Issuer has not made and will
not prior to each Closing make, directly or indirectly, any offer or sale of the
Issuable Securities or of securities of the same or similar class as the
Issuable Securities if, as a result, the offer and sale contemplated hereby
could fail to be entitled to exemption from the registration requirements of the
Securities Act. As used herein, the terms "offer" and "sale" have the meanings
specified in Section 2(3) of the Securities Act.
SECTION 3.6 COMMISSION DOCUMENTS. Upon request, the Issuer will make
available to the Purchasers true and complete copies of all SEC Documents filed
with the Commission prior to the date hereof and will furnish the Purchasers a
true and correct copy of each amendment thereto and any SEC Documents filed by
the Issuer with the Commission on or before each Closing Date. As of their
respective filing dates, the SEC Documents complied (or will comply) in all
material respects with the requirements of the Securities Act, Exchange Act and
the rules and regulations of the Commission thereunder applicable to such SEC
Documents, and as of their respective dates none of the SEC Documents contained
(or will contain) any untrue statement of a material fact or omitted (or will
omit) to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
SECTION 3.7 FINANCIAL STATEMENTS. Each of the financial statements
(including, in each case, any notes and schedules thereto) contained in the
Issuer SEC Reports complied as to form in all material respects with the
applicable accounting requirements and rules and regulations of the Commission
and was prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto), and each fairly
presented the consolidated financial position, results of operations and cash
flows of the Issuer and its
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consolidated subsidiaries as at the respective dates thereof and for the
respective periods indicated therein in accordance with GAAP (subject, in the
case of unaudited statements, to normal and recurring year-end adjustments and
the absence of footnotes none of which would, individually or in the aggregate,
reflect or be reasonably expected to reflect a Material Adverse Effect).
SECTION 3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 3.08 or as disclosed in the Issuer SEC Reports, the Issuer and its
Subsidiaries do not have any material obligation or liability of a nature
required to be reflected on a balance sheet prepared in accordance with GAAP
arising out of transactions entered into at or prior to each Closing, or any
action or inaction at or prior to each Closing, or any state of facts existing
or any occurrence at or prior to each Closing other than: (i) liabilities set
forth on the Latest Balance Sheet (including any liabilities expressly disclosed
in any notes thereto), (ii) liabilities and obligations which have arisen after
the date of the Latest Balance Sheet in the ordinary course of business (none of
which is a liability resulting from breach of contract, breach of warranty,
tort, infringement, claim or lawsuit) and (iii) other liabilities and
obligations expressly disclosed in the other Schedules to this Agreement.
SECTION 3.9 NO MATERIAL ADVERSE CHANGE. Since September 30, 2000,
except as disclosed in the Issuer SEC Reports, there has been no change in the
financial condition, operating results, assets, operations, employee relations
or customer or supplier relations of the Issuer and its Subsidiaries taken as a
whole that could reasonably be expected to have a Material Adverse Effect.
SECTION 3.10 ABSENCE OF CERTAIN DEVELOPMENTS. Except as expressly
contemplated by the Transaction Agreements or as set forth on Schedule 3.10, and
except as disclosed in the Issuer SEC Reports filed prior to the date of this
Agreement, since the date of the Latest Balance Sheet, neither the Issuer nor
any Subsidiary has:
(a) issued any notes, bonds or other debt securities or any
capital stock or other equity securities or any securities convertible,
exchangeable or exercisable into any capital stock or other equity
securities;
(b) borrowed any amount in excess of $250,000 or incurred or
become subject to any material liabilities, except current liabilities
incurred in the ordinary course of business and liabilities under
contracts entered into in the ordinary course of business;
(c) discharged or satisfied any material Lien or paid any
material obligation or liability, other than current liabilities paid
in the ordinary course of business;
(d) declared or made any payment or distribution of cash or
other property to its stockholders with respect to its capital stock or
other equity securities or purchased or redeemed any shares of its
capital stock or other equity securities (including, without
limitation, any warrants, options or other rights to acquire its
capital stock or other equity securities;
(e) mortgaged or pledged any of its properties or assets or
subjected them to any material Lien, except Liens for current property
taxes not yet due and payable;
9
(f) sold, assigned or transferred any of its tangible assets
in excess of $50,000 individually or $250,000 in the aggregate or any
interest in any Subsidiary, except in the ordinary course of business,
or canceled any material debts or claims;
(g) sold, assigned, transferred or abandoned any material
patents or patent applications, trademarks, service marks, trade names,
corporate names, copyrights or copyright registrations, trade secrets
or other Intellectual Property Rights, or disclosed any material
proprietary confidential information to any Person;
(h) suffered any material extraordinary losses or waived any
rights of material value, whether or not in the ordinary course of
business or consistent with past practice;
(i) made any Investment in or taken steps to incorporate any
Subsidiary; or
(j) entered into any other material transaction, other than in
the ordinary course of business.
SECTION 3.11 ASSETS. Except as disclosed in the Issuer SEC Reports
filed prior to the date of this Agreement or as set forth on Schedule 3.11, the
Issuer and each Subsidiary have good and marketable title to, a valid leasehold
interest in, or has the right or use, the material assets (other than Real
Property, which is addressed in Section 3.10) used by them, or shown on the
Latest Balance Sheet or acquired thereafter, free and clear of all Liens, except
for (i) assets disposed of in the ordinary course of business since the date of
the Latest Balance Sheet, (ii) Liens disclosed on the Latest Balance Sheet,
(iii) Liens for Taxes not yet due and payable, and (iv) covenants, conditions
and restrictions of record and minor title defects none of which individually or
collectively could reasonably be expected to interfere with Issuer's business as
presently conducted or planned to be conducted ("Permitted Liens"). The Issuer
and each Subsidiary owns, or has a valid leasehold interest in, or has the right
to use, all material tangible assets necessary for the conduct of their
respective businesses as presently conducted and as presently proposed to be
conducted.
SECTION 3.12 REAL PROPERTY.
(a) Schedule 3.12(a) sets forth the address and description of
each parcel of real property owned by the Issuer or any of its
Subsidiaries (the "Owned Property"). The Issuer or its applicable
Subsidiary has good and marketable fee simple title in and to each
parcel of the Owned Property with a fair market value in excess of
$250,000, subject to no liens, encroachments, encumbrances, claims,
leases, rights of possession or other defects in title (collectively,
"Encumbrance" ), except (i) as disclosed on the Latest Balance Sheet,
(ii) Liens for Taxes not yet due and payable or as disclosed in the
Issuer SEC Reports, (iii) covenants, conditions and restrictions of
record and minor title defects none of which individually or
collectively could reasonably be expected to interfere with Issuer's
business as presently conducted or as planned to be conducted and (iv)
for Permitted Liens or as described on Schedule 3.12(a).
(b) Schedule 3.12(b) sets forth a list of all leases,
subleases and other occupancy agreements providing for annual payments
in excess of $50,000, including all amendments, extensions and other
modifications thereto (the "Leases") for real property (the "Leased
Property"; and collectively with the Owned Property, the "Real
Property") to which the Issuer or any of its Subsidiaries is a party.
To the best of their respective
10
knowledge, the Issuer or its applicable Subsidiary has a good and valid
leasehold interest in and to all of the Leased Property, subject to no
Encumbrances except for Permitted Liens or as described on such
Schedule. Each Lease is in full force and effect and is enforceable in
accordance with its terms in all material respects. To the knowledge of
the Issuer, there exists no default or condition which with the giving
of notice, the passage of time or both could become a default under any
Lease. Except as described on the Schedule 3.12(b), no consent, waiver,
approval or authorization is required from the landlord under any Lease
as a result of the execution of this Agreement or the consummation of
the transactions contemplated hereby.
(c) The Real Property constitutes all of the real property
owned, leased, occupied or otherwise utilized in connection with the
business of the Issuer and its Subsidiaries which is material to the
conduct of the business of the Issuer and its Subsidiaries. To the
knowledge of the Issuer, other than the Issuer, its Subsidiaries and
the landlords under the Leases, there are no parties in possession or
parties having any current or future right to occupy any of the Real
Property which are material to the conduct of the business of the
Issuer and its Subsidiaries. The Real Property and all plants,
buildings and improvements located thereon conform in all material
respects to all applicable building, zoning and other laws, ordinances,
rules and regulations. All permits, licenses and other approvals
necessary to the current occupancy and use of the Real Property which
are material to the conduct of the business of the Issuer and its
Subsidiaries have been obtained, are in full force and effect and have
not been violated in any material respect. To the knowledge of the
Issuer or any of its Subsidiaries, there exists no violation of any
covenant, condition, restriction, easement, agreement or order
affecting any portion of the Real Property which is material to the
conduct of the business of the Issuer and its Subsidiaries. There is no
pending or, to the knowledge of the Issuer, any threatened condemnation
proceeding affecting any portion of the Real Property which is material
to the conduct of the business of the Issuer and its Subsidiaries.
There are no outstanding options, rights of first offer or rights of
first refusal to purchase the Owned Property or any portion thereof or
interest therein.
SECTION 3.13 TAX MATTERS.
(a) Except as set forth on Schedule 3.13: the Issuer, each
Subsidiary and each Affiliated Group have filed all Tax Returns which
they are required to have filed under Applicable Law, except where the
failure to do so would not have a Material Adverse Effect; all such Tax
Returns are complete and correct in all material respects and have been
prepared in compliance with Applicable Law; the Issuer, each Subsidiary
and each Affiliated Group in all material respects have paid all Taxes
due and owing by them (whether or not such Taxes are required to be
shown on a Tax Return) in all material respects and have withheld and
paid over to the appropriate taxing authority all Taxes which they are
required to withhold from amounts paid or owing to any employee,
stockholder, creditor or other third party; neither the Issuer, any
Subsidiary nor any Affiliated Group have outstanding any waiver of any
statute of limitations with respect to any material Taxes or agreement
to extend the time with respect to any material Tax assessment or
deficiency; to the extent required by GAAP, the accrual for Taxes on
the Latest Balance Sheet would be adequate to pay all Tax liabilities
of the Issuer and its Subsidiaries if their current tax year were
treated as ending on the date of the Latest Balance Sheet (excluding
any amount recorded which is attributable solely to timing
11
differences between book and Tax income); since the date of the Latest
Balance Sheet, neither the Issuer nor any of its Subsidiaries have
incurred any material liability for Taxes other than in the ordinary
course of business; the federal income Tax Returns of the Issuer and
its Subsidiaries have been audited and closed for all tax years through
1998; to the knowledge of the Issuer or its Subsidiaries, no foreign,
federal, state or local tax audits or administrative or judicial
proceedings are pending or being conducted with respect to the Issuer,
any Subsidiary or any Affiliated Group; except with respect to such
audits or proceedings, to the knowledge of the Issuer or its
Subsidiaries, no information related to Tax matters has been requested
by any foreign, federal, state or local taxing authority and no written
notice indicating an intent to open an audit or other review has been
received by the Issuer from any foreign, federal, state or local taxing
authority; and there are no material unresolved questions or claims
raised by any such taxing authority concerning the Issuer's, any
Subsidiary's or any Affiliated Group Tax liability.
(b) Except as set forth on Schedule 3.13, neither the Issuer
nor any of its Subsidiaries has made an election under ss.341(f) of the
Internal Revenue Code of 1986, as amended. Neither the Issuer nor any
Subsidiary is liable for the Taxes of another Person that is not a
Subsidiary in a material amount under (a) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (b) as a
transferee or successor, (c) by contract or indemnity or (d) otherwise
by operation of Applicable Law. Neither the Issuer nor any Subsidiary
is a party to any tax sharing agreement except as a member of an
Affiliated Group. Neither the Issuer nor any Subsidiary has made any
payments, is obligated to make payments or is a party to an agreement
that could obligate it to make any payments that would not be
deductible under IRC ss.280G.
(c) "Tax" or "Taxes" means federal, state, county, local,
foreign or other income, gross receipts, ad valorem, franchise,
profits, sales or use, transfer, registration, excise, utility,
environmental, communications, real or personal property, capital
stock, license, payroll, wage or other withholding, employment, social
security, severance, stamp, occupation, alternative or add-on minimum,
estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not. "Tax Return" means any
return, information report or filing with respect to Taxes, including
any schedules attached thereto and including any amendment thereof.
"Affiliated Group" means any affiliated group as defined in IRC ss.1504
that has filed a consolidated return for federal income tax purposes
(or any similar group under state, local or foreign law) for a period
and that includes any of the Issuer or any of its Subsidiaries as a
member.
SECTION 3.14 CONTRACTS AND COMMITMENTS.
(a) Except as expressly contemplated by this Agreement or as
disclosed in the Issuer SEC Reports filed prior to the date of this
Agreement or on Schedule 3.14 under either the heading Contracts or the
heading Employee Benefits or Schedule 3.12, neither the Issuer nor any
Subsidiary is a party to or bound by any written or oral:
(i) pension, profit sharing, stock option, employee
stock purchase or other plan or arrangement providing for
deferred or other compensation to employees or any other
employee benefit plan or arrangement, or any collective
bargaining agreement or any other contract with any labor
union, or severance agreements, programs, policies or
arrangements;
12
(ii) contract for the employment of any officer,
individual employee or other Person on a full-time, part-time,
consulting or other basis providing annual compensation in
excess of $100,000 or contract relating to loans to officers,
directors or Affiliates;
(iii) contract under which the Issuer or Subsidiary
has advanced or loaned any other Person amounts in the
aggregate exceeding $250,000;
(iv) agreement or indenture relating to borrowed
money or other Indebtedness or the mortgaging, pledging or
otherwise placing a Lien on any material asset or material
group of assets of the Issuer and/or its Subsidiaries;
(v) guarantee of any obligation in excess of $100,000
(other than by the Issuer of a wholly-owned Subsidiary's debts
or a guarantee by a Subsidiary of the Issuer's debts or of
another wholly-owned Subsidiary's debts) other than in
connection with the Credit Agreement;
(vi) lease or agreement under which the Issuer or any
Subsidiary is lessee of or holds or operates any personal
property owned by any other party, except for any lease of
personal property under which the aggregate annual rental
payments do not exceed $50,000;
(vii) lease or agreement under which the Issuer or
any Subsidiary is lessor of or permits any third party to hold
or operate any property, real or personal, owned or controlled
by the Issuer or any Subsidiary, respectively;
(viii) contract or group of related contracts with
the same party or group of affiliated parties the performance
of which involves consideration in excess of $250,000;
(ix) assignment, license, indemnification or
agreement with respect to any material intangible property
(including, without limitation, any Intellectual Property
Rights);
(x) express warranty agreement with respect to its
services rendered or its products sold or leased;
(xi) agreement under which it has granted any Person
any registration rights (including, without limitation, demand
and piggyback registration rights);
(xii) sales, distribution or franchise agreement the
performance of which involves consideration in excess of
$250,000;
(xiii) agreement, the performance of which involves
consideration in excess of $250,000, with a term of more than
six months which is not terminable by the Issuer or any
Subsidiary upon less than 30 days notice without penalty;
(xiv) contract or agreement prohibiting it from
freely engaging in any business or competing anywhere in the
world;
13
(xv) any joint venture agreement or other agreement
pursuant to which the Issuer or any Subsidiary has made, or
any agreement governing the Issuer's or any Subsidiary's
investment in any other person; or
(xvi) any other agreement which is material to its
operations and business prospects or involves a consideration
in excess of $250,000 annually.
(b) All of the contracts, agreements and instruments set forth
or required to be set forth on Schedule 3.14 are valid, binding and
enforceable in accordance with their respective terms. Except as set
forth on Schedule 3.12, Schedule 3.14, Schedule 3.16, or Schedule 3.08,
the Issuer and each Subsidiary has performed all material obligations
required to be performed by it under the contracts, agreements and
instruments listed on Schedule 3.14 or required to be set forth and are
not in default under or in breach of nor in receipt of any claim of
default or breach under any material contract, agreement or instrument
to which the Issuer or any Subsidiary is subject and no event has
occurred which with the passage of time or the giving of notice or both
would result in a default, breach or event of noncompliance by the
Issuer or any Subsidiary under any material contract, agreement or
instrument to which the Issuer or any Subsidiary is subject; the Issuer
has no present intention of not fully performing all such obligations;
the Issuer has no knowledge of any breach or anticipated breach by the
other parties to any material contract, agreement, instrument or
commitment to which it is a party; and neither the Issuer nor any
Subsidiary is a party to any contract or commitment or group of
contracts or commitments the performance of which could have a Material
Adverse Effect.
(c) Upon request, the Issuer will make available to the
Purchasers a true and correct copy of each of the written instruments,
plans, contracts and agreements and an accurate description of each of
the oral arrangements, contracts and agreements which are listed on,
referred to or required to be listed on or referred to on Schedule
3.14, together with all amendments, waivers or other changes thereto.
SECTION 3.15 INTELLECTUAL PROPERTY RIGHTS.
(a) Schedule 3.15 contains a complete and accurate list of all
(a) patented or registered Intellectual Property Rights owned or used
by the Issuer or any Subsidiary and material to the business of the
Issuer and its Subsidiaries, (b) pending patent applications and
applications for registration of other Intellectual Property Rights
filed by the Issuer or any Subsidiary material to the business of the
Issuer and its Subsidiaries, (c) material unregistered trade names and
corporate names owned or used by the Issuer or any Subsidiary and (d)
material unregistered trademarks, service marks, copyrights, mask works
and computer software (other than commercially available computer
software) owned or used by the Issuer or any Subsidiary and material to
the business of the Issuer and its Subsidiaries. Schedule 3.15 also
contains a complete and accurate list of all material licenses and
other material rights granted by the Issuer or any Subsidiary to any
third party with respect to any Intellectual Property Rights and all
material licenses and other material rights granted by any third party
to the Issuer or any Subsidiary with respect to any Intellectual
Property Rights, in each case identifying the subject Intellectual
Property Rights. The Issuer or one of its Subsidiaries is the
beneficial and record owner of all right, title and interest to, or has
the right to use pursuant to a valid and enforceable license, all
Intellectual Property Rights necessary for the operation of the
businesses of the Issuer and its Subsidiaries as presently conducted
and as presently
14
proposed to be conducted, free and clear of all Liens, except where the
failure to have such right would not have a Material Adverse Effect.
The loss or expiration of any Intellectual Property Right or related
group of Intellectual Property Rights owned or used by the Issuer or
any Subsidiary would not reasonably be expected to have a Material
Adverse Effect and no such loss or expiration is, to the best of the
Issuer's knowledge, threatened, pending or reasonably foreseeable. The
Issuer and its Subsidiaries have taken all necessary actions to
maintain and protect the Intellectual Property Rights which they own,
except where the failure to have taken such actions would not have a
Material Adverse Effect. To the best of the Issuer's knowledge, the
owners of any Intellectual Property Rights licensed to the Issuer or
any Subsidiary have taken all necessary actions to maintain and protect
the Intellectual Property Rights which are subject to such licenses.
(b) Except as set forth on Schedule 3.15 or Schedule 3.16, (i)
to the best of the Issuer's knowledge, there have been no claims made
against the Issuer or any Subsidiary within the past five (5) years
asserting the invalidity, misuse or unenforceability of any of the
Issuer's or its subsidiaries' Intellectual Property Rights or alleging
infringement, misappropriation or other conflict of any third Person's
Intellectual Property Rights by the Issuer or any of its Subsidiaries
(including, without limitation, any demand or request that the Issuer
or any Subsidiary license any rights from a third party), and, to the
best of the Issuer's knowledge, there are no grounds for the same, (ii)
neither the Issuer nor any Subsidiary has received any notices of, and
is not aware of any facts which indicate a likelihood of, any
infringement or misappropriation by any third party with respect to the
Issuer's or its Subsidiaries' Intellectual Property Rights (including,
without limitation, any demand or request that the Issuer or any
Subsidiary license any rights from a third party) and (iii) to the best
of the Issuer's knowledge, the conduct of the Issuer's and each
Subsidiary's business has not infringed, misappropriated or conflicted
with and does not infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons, nor would any future
conduct as presently contemplated infringe, misappropriate or conflict
with any Intellectual Property Rights of other Persons. All
Intellectual Property Rights owned or used by the Issuer or any
Subsidiary immediately prior to each Closing will be owned or available
for use by the Issuer or any such Subsidiary on identical terms and
conditions immediately subsequent to such Closing.
SECTION 3.16 LITIGATION, ETC. Except as disclosed in the Issuer SEC
Reports filed prior to the date of this Agreement or on Schedule 3.16, there are
no actions, suits, proceedings, orders, investigations or claims pending or, to
the best of the Issuer's knowledge, threatened against or, to the Issuer's
knowledge, affecting the Issuer or any Subsidiary that individually or in the
aggregate have a Material Adverse Effect (or to the best of the Issuer's
knowledge, pending or threatened against or affecting any of the officers,
directors or employees of the Issuer and its Subsidiaries with respect to their
respective businesses or proposed business activities), or pending or threatened
by the Issuer or any Subsidiary against any third party, at law or in equity, or
before or by any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, any actions, suit, proceedings
or investigations with respect to the transactions contemplated by this
Agreement); nor has there been any such actions, suits, proceedings, orders,
investigations or claims pending against or affecting the Issuer or any
Subsidiary during the past three years that individually or in the aggregate
have a Material Adverse Effect; and, to the best of the Issuer's knowledge,
there is no reasonable basis
15
for any of the foregoing. Neither the Issuer nor any Subsidiary is subject to
any judgment, order or decree of any court or Governmental Authority which could
have a Material Adverse Effect.
SECTION 3.17 BROKERAGE. Except as set forth on Schedule 3.17, for which
Issuer shall be solely responsible, there are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement binding upon the Issuer or any Subsidiary. The Issuer shall pay, and
hold each Purchaser harmless against, any liability, loss or expense (including,
without limitation, reasonable attorneys' fees and out-of-pocket expenses)
arising in connection with any such claim.
SECTION 3.18 GOVERNMENTAL CONSENT, ETC. No permit, license, consent,
approval or authorization of, or declaration to or filing with, any governmental
authority or any other Person is required in connection with the execution,
delivery and performance by the Issuer of this Agreement or the other agreements
contemplated hereby, or the consummation by the Issuer of any other transactions
contemplated hereby or thereby, except as set forth on Schedule 3.18.
SECTION 3.19 INSURANCE. Neither the Issuer nor any Subsidiary is in
default with respect to its obligations under any insurance policy maintained by
it, and since January 1, 1996 neither the Issuer nor any Subsidiary has been
denied insurance coverage. The insurance coverage of the Issuer and its
Subsidiaries is consistent with the best insurance practices for corporations of
similar size engaged in similar lines of business, is adequate and sufficient to
cover all material liabilities encountered in the ordinary course of business of
the Issuer and all material liabilities reasonably foreseen or projected by the
Issuer, and includes, without limitation, insurance in respect of pollution and
environmental liability, and personal injury liability. All of the insurers
through which the Issuer has sought insurance coverage in the past 10 years have
been and remain solvent. Except as set forth on Schedule 3.19, and excluding
deductibles under the Issuer's current insurance policies, neither the Issuer
nor its Subsidiaries have any self-insurance or co-insurance programs.
SECTION 3.20 EMPLOYEES. The Issuer is not aware that any executive or
key employee of the Issuer or any Subsidiary or any group of employees of the
Issuer or any Subsidiary has any plans to terminate employment with the Issuer
or any Subsidiary. The Issuer and each Subsidiary have complied in all material
respects with all laws relating to the employment of labor (including, without
limitation, provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes), and
the Issuer is not aware that it or any Subsidiary has any material labor
relations problems or concerns (including, without limitation, any union
organization activities, threatened or actual strikes or work stoppages or
material grievances). Except as disclosed on Schedule 3.14, neither the Issuer,
its Subsidiaries nor, to the best of the Issuer's knowledge, any of their
employees is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreements relating to, affecting or in
conflict with the present or proposed business activities of the Issuer and its
Subsidiaries, except for agreements between the Issuer and its present and
former employees.
SECTION 3.21 ERISA.
(a) Schedule 3.21 sets forth an accurate and complete list of
each "employee benefit plan" (as such term is defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) that is material to the Issuer and each other
16
employee benefit plan, program or arrangement that is material to the
Issuer maintained, sponsored, or contributed to by the Issuer at any
time in the last three years, or with respect to which the Issuer has
any material actual or potential liability. Each such item listed on
such attached schedule is referred to herein as a "Benefit Plan" and
collectively as the "Benefit Plans".
(b) All material contributions to and payments from any
Benefit Plan that may have been required to be made in accordance with
the terms of the Benefit Plan, any applicable collective bargaining
agreement, and Section 302 of ERISA or Section 412 of the Code have
been timely made in all material respects. There has been no
application for or waiver of the minimum funding standards imposed by
Section 412 of the Code with respect to any Benefit Plan, and the
Issuer is not aware of any facts or circumstances that would materially
change the funded status of any such Benefit Plan at any time in the
last three years. To the knowledge of the Issuer, no asset of the
Issuer is or is reasonably likely to become subject to any lien under
ERISA or the Code, and the Issuer has not incurred any material
liability under Title IV of ERISA (other than for contributions not yet
due) or to the Pension Benefit Guaranty Corporation (other than for
payment of premiums not yet due).
(c) Except as set forth on Schedule 3.21, each Benefit Plan
that is intended to be qualified under Section 401(a) of the Code has
received a determination from the IRS that such Benefit Plan is so
qualified, and, to the best knowledge of the Issuer, nothing has
occurred since the date of such determination that could adversely
affect the qualified status of such Benefit Plan.
(d) Each of the Benefit Plans and all related trusts,
insurance contracts and funds have been maintained, funded and
administered in compliance in all material respects with their terms
and the terms of any applicable collective bargaining agreements and in
compliance in all material respects with the applicable provisions of
ERISA, the Code, and any other applicable laws. To the knowledge of the
Issuer, there are no pending or threatened actions, suits,
investigations or claims with respect to any Benefit Plan (other than
routine claims for benefits) that could reasonably be expected to have
a Material Adverse Effect. With respect to each Benefit Plan, all
required material payments, premiums, contributions, distributions, or
reimbursements for all periods ending prior to or as of each Closing
Date have been made or properly accrued in all material respects.
(e) To the knowledge of the Issuer, neither the Issuer nor any
other "disqualified person" (within the meaning of Section 4975 of the
Code) or any "party in interest" (within the meaning of Section 3(14)
of ERISA) has engaged in any "prohibited transaction" (within the
meaning of Section 4975 of the Code or Section 406 of ERISA) with
respect to any of the Benefit Plans which could subject any of the
Benefit Plans, the Issuer, or any officer, director or employee of any
of the foregoing to a penalty or tax under Section 502 of ERISA or
Section 4975 of the Code that could reasonably be expected to have a
Material Adverse Effect.
(f) Except as set forth otherwise on Schedule 3.14, each
Benefit Plan which is subject to the health care continuation
requirements of Part 6 of Subtitle B of Title I of ERISA or Section
4980B of the Code ("COBRA") has been administered in compliance in all
material respects with such requirements. No Benefit Plan provides
medical or life
17
or other welfare benefits to any current or future retired or
terminated employee (or any dependent thereof) of the Issuer other than
as required pursuant to COBRA or applicable State law.
(g) To the knowledge of the Issuer, no Benefit Plan subject to
Title IV of ERISA which is a "multiemployer plan" (as such term is
defined in Section 3(37) of ERISA) (a "Multiemployer Plan") has been
terminated; to the knowledge of the Issuer, no proceeding has been
initiated to terminate any such Multiemployer Plan and there has been
no "reportable event" within the meaning of Section 4043(c) of ERISA)
with respect to any such Multiemployer Plan; to the knowledge of the
Issuer, no Multiemployer Plan is in reorganization as described in
Section 4241 of ERISA and, to the knowledge of the Issuer, no
Multiemployer Plan is insolvent as described in Section 4245 of ERISA.
To the knowledge of the Issuer, the Issuer has not incurred any
liability on account of a "partial withdrawal" or a "complete
withdrawal" (within the meaning of Sections 4205 and 4203,
respectively, of ERISA) from any Multiemployer Plan, no such liability
has been asserted, and, to the knowledge of the Issuer, there are no
events or circumstances which could result in any such partial or
complete withdrawal. The Issuer is not bound by any contract or
agreement nor does it have any obligation or liability described in
Section 4204 of ERISA.
(h) With respect to each Benefit Plan, upon request, the
Issuer will provide the Purchaser with true, complete and correct
copies of (to the extent applicable): (i) all documents pursuant to
which the Benefit Plan is maintained, funded and administered
(including the plan and trust documents, any amendments thereto, the
summary plan descriptions, and any insurance contracts or service
provider agreements); (ii) the three most recent annual reports (Form
5500 series) filed with the IRS (with applicable attachments); (iii)
the most recent actuarial valuation report; and (iv) the most recent
determination letter received from the IRS.
(i) The Issuer has no liability with respect to any "employee
benefit plan" (as defined in Section 3(3) of ERISA) solely by reason of
being treated as a single employer under Section 414 of the Code with
any trade, business or entity other than the Issuer.
SECTION 3.22 COMPLIANCE WITH LAWS. Each of the Issuer and each
Subsidiary has operated its business and conducted its activities in compliance
in all material respects with all laws, regulations and governmental
requirements, which the failure to be in compliance with would reasonably be
expected to have a Material Adverse Effect and neither the Issuer nor any
Subsidiary has violated any law or any governmental regulation or requirement
which violation has had or would reasonably be expected to have a Material
Adverse Effect, and neither the Issuer nor any Subsidiary has received notice of
any such violation.
SECTION 3.23 ENVIRONMENTAL AND SAFETY MATTERS.
(a) For purposes of this Agreement, the term "Environmental
and Safety Requirements" shall mean all federal, state and local
statutes, regulations, ordinances and other provisions having the force
or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law, in each
case concerning public health and safety, worker health and safety and
pollution or protection of the environment (including, without
limitation, all those relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal,
distribution,
18
labeling, testing, processing, discharge, Release, threatened Release,
control or cleanup of any hazardous or otherwise regulated materials,
substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation);
"Release" shall have the meaning set forth in CERCLA (as defined
below); and "Environmental Lien" shall mean any Lien, whether recorded
or unrecorded, in favor of any governmental entity, relating to any
liability of the Issuer or any Subsidiary arising under any
Environmental and Safety Requirements.
(b) Except as set forth on Schedule 3.23:
(i) The Issuer and its Subsidiaries have complied in
all material respects with and are currently in compliance in
all material respects with all Environmental and Safety
Requirements, which the failure to be in compliance with would
have a Material Adverse Effect, and since January 1, 1997,
neither the Issuer nor its Subsidiaries have received any oral
or written notice, report or information regarding any
liabilities (whether accrued, absolute, unliquidated or
otherwise) or any corrective, investigatory or remedial
obligations arising under Environmental and Safety
Requirements, which liabilities or obligations would have a
Material Adverse Effect and which relate to the Issuer or its
Subsidiaries or any of their properties or facilities.
(ii) Without limiting the generality of the
foregoing, the Issuer and its Subsidiaries have obtained and
complied in all material respects with and are currently in
compliance in all material respects with, all Environmental
Permits. A list of all such permits, licenses and other
authorizations which are material to the Issuer and its
Subsidiaries is set forth on Schedule 3.23 ("Environmental
Permits").
(iii) None of the following exists at any property or
facility owned, occupied or operated by the Issuer or any of
its Subsidiaries:
(1) underground storage tanks or surface
impoundments;
(2) asbestos-containing materials in any
form or condition; or
(3) materials or equipment containing
polychlorinated biphenyls; the existence of which
could reasonably be expected to have a Material
Adverse Effect.
(iv) To the knowledge of the Issuer, neither the
Issuer nor any of its Subsidiaries has treated, stored,
disposed of, arranged for or permitted the disposal of,
transported, handled or Released any hazardous substance or
owned, occupied or operated any facility or property, so as to
give rise to liabilities of the Issuer or its Subsidiaries for
response costs, natural resource damages or attorneys fees
pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as amended,
or any other Environmental and Safety Requirements.
19
(v) Without limiting the generality of the foregoing,
to the knowledge of the Issuer, no facts, events or conditions
relating to the past or present properties, facilities or
operations of the Issuer or its Subsidiaries shall prevent,
hinder or limit continued compliance with Environmental and
Safety Requirements, give rise to any corrective,
investigatory or remedial obligations pursuant to
Environmental and Safety Requirements or give rise to any
other liabilities pursuant to Environmental and Safety
Requirements (including, without limitation, those liabilities
relating to onsite or offsite Releases or threatened Releases
of hazardous materials, substances or wastes, personal injury,
property damage or natural resources) damage that could
reasonably be expected to have a Material Adverse Effect.
(vi) Neither the Issuer nor any of its Subsidiaries
has, either expressly or by operation of law, assumed or
undertaken any material liability or corrective, investigatory
or remedial obligation of any other Person relating to any
Environmental and Safety Requirements that could reasonably be
expected to have a Material Adverse Effect.
(vii) No Environmental Lien has attached to any
property owned, leased or operated by the Issuer or any of its
Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
SECTION 3.24 AFFILIATED TRANSACTIONS. Except as set forth on Schedule
3.24 or in the Issuer's SEC Reports, no officer, director, significant
stockholder or Affiliate of the Issuer or any Subsidiary, to the knowledge of
the Issuer, or any member of such individual's immediate family or any entity in
which any such Person or individual owns any beneficial interest (other than
less than 5% of the outstanding securities of a publicly traded company), is a
party to any agreement, contract, commitment or transaction with the Issuer or
any Subsidiary or has any material interest in any material property used by the
Issuer or any Subsidiary.
SECTION 3.25 DISCLOSURE. Neither this Agreement nor any of the
exhibits, schedules, attachments, written statements, documents, certificates or
other items prepared or supplied to any Purchaser by or on behalf of the Issuer
with respect to the transactions contemplated hereby contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein not misleading; provided that with respect
to the financial projections furnished to the Purchasers by the Issuer, the
Issuer represents and warrants only that such projections were based upon
assumptions reasonably believed by the Issuer to be reasonable and fair as of
the date the projections were prepared in the context of the Issuer's history
and current and reasonably foreseeable business conditions. There is no fact
which the Issuer has not disclosed to the Purchasers in writing and of which any
of its officers, directors or executive employees is aware (other than general
economic conditions) and which has had or would reasonably be expected to have a
Material Adverse Effect.
SECTION 3.26 CUSTOMERS AND SUPPLIERS.
(a) Schedule 3.26 lists the ten (10) largest customers and
suppliers of the Issuer (on a consolidated basis) for each of the two
most recent fiscal years and sets forth opposite the name of each such
customer or supplier the amount of revenues to such customer in the
case of any such customer or the amount of expenditures to such
supplier in the case of any such supplier. Schedule 3.26 also lists any
additional current customers
20
and suppliers which the Issuer anticipates shall be among the ten (10)
largest customers or suppliers for the current fiscal year.
(b) Since the date of the Latest Balance Sheet, no Supplier
set forth on Schedule 3.26 has stopped or materially decreased the rate
of or indicated that it shall stop, or materially decrease the rate of,
supplying materials, products or services to the Issuer or any
Subsidiary, and no customer listed on Schedule 3.26 has stopped or
materially decreased or, to the Issuer's knowledge, indicated that it
shall stop, or materially decrease the rate of, buying materials,
products or services from the Issuer or any Subsidiary.
SECTION 3.27 REPORTS WITH THE SECURITIES AND EXCHANGE COMMISSION. Since
January 1, 1997, the Issuer has filed with the Commission all forms, statements,
reports and documents (including all exhibits, amendments and supplements
thereto) required to be filed by it under the Securities Act and the Exchange
Act, all of which complied when filed in all material respects with all
applicable requirements of the appropriate act and the rules and regulations
thereunder. Upon request, the Issuer will furnish the Purchasers with complete
and accurate copies of its annual report on Form 10-K for its three most recent
fiscal years, all other reports or documents required to be filed by the Issuer
pursuant to Section 13(a) or 15(d) of the Exchange Act since the filing of the
most recent annual report on Form 10-K and its most recent annual report to its
stockholders (collectively, the "Issuer SEC Reports"). Such reports and filings
did not as of the date of filing contain any material false statements or any
misstatement of any material fact and do not omit to state any fact necessary to
make the statements set forth therein not misleading. The Issuer has made all
filings with the Commission which it is required to make, and the Issuer has not
received any request from the Commission to file any amendment or supplement to
any of the reports described in this paragraph.
SECTION 3.28 REGULATORY MATTERS.
(a) Except as disclosed on Schedule 3.16, the Issuer and its
Subsidiaries have all requisite power and authority and hold or have
applied for all Licenses required under any Applicable Law to own and
operate their properties and to carry on the business of the Issuer and
its Subsidiaries as such business is conducted on the date hereof and
as proposed to be conducted. Each material License issued to the Issuer
or its Subsidiaries is validly issued and is in full force and effect.
The Issuer does not know of any reason why any Governmental Authority
might revoke any License. The Issuer does not know of any party who has
a current filing pending in specific opposition to or expressed an
interest in opposing the grant of the material Licenses held or applied
for by the Issuer or its Subsidiaries, or of any reason why any
Governmental Authority might not grant any of the material Licenses or
that have been applied for.
(b) Except as disclosed on Schedule 3.16, none of the Issuer
or its Subsidiaries is a party to nor, to the best knowledge of the
Issuer and each Subsidiary, is there threatened any investigation,
notice of apparent liability, violation, show cause order, forfeiture
or other notice, order or complaint issued by or before any
Governmental Authority, or of any other proceeding (other than
proceedings of general applicability) that could in any manner threaten
or adversely affect the validity, future grant or continued
effectiveness of the material Licenses of the Issuer and its
Subsidiaries. None of the Issuer and its Subsidiaries has any reason to
believe that each of the material Licenses will not be renewed in the
ordinary course.
21
SECTION 3.29 SHAREHOLDER VOTE REQUIRED. To the extent the number of
shares of Common Stock of the Company into which the Series D Shares are
convertible would exceed twenty percent (20%) of the Issuer's outstanding common
stock, approval of the holders of the Issuer's capital stock is required by the
rules of the NASDAQ SmallCap Market. If required to comply with Nasdaq
shareholder approval requirements, the Company will take all steps as soon as
practicable following the date of this Agreement, the Issuer will take all steps
to call and hold a special meeting of its stockholders for the purpose of
approving the issuance of common stock that would exceed such 20% requirement.
SECTION 3.30 KNOWLEDGE. As used in this Section 3, the terms
"knowledge" or "aware" shall mean and include the actual knowledge or awareness,
following due inquiry, of the executive officers of the Issuer.
ARTICLE IV
AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Issuer
as of the date hereof and as of each Closing Date that:
(a) Such Purchaser understands that the offering and sale of
the Securities is intended to be exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act and any
applicable state securities or blue sky laws.
(b) The Securities to be acquired by such Purchaser pursuant
to this Agreement are being acquired for its own account and without a
view to the resale or distribution of such Securities or any interest
therein other than in a transaction exempt from registration under the
Securities Act.
(c) Such Purchaser is an "Accredited Investor" as such term is
defined in Regulation D under the Securities Act.
(d) Such Purchaser has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the
merits and risks of its investment in the Securities and such Purchaser
is capable of bearing the economic risks of such investment, including
a complete loss of its investment in the Securities. Such Purchaser
understands that Purchaser's investment in the Securities involves a
high degree of risk.
(e) Such Purchaser has been furnished with and carefully read
a copy of the Issuer SEC Reports and this Agreement (including the
Schedules hereto) and has been given the opportunity to ask questions
of, and receive answers from, the Issuer concerning the terms and
conditions of the Securities and other related matters. To such
Purchaser's knowledge, the Issuer has made available to such Purchaser
or its agents all documents and information relating to an investment
in the Securities requested by or on behalf of such Purchaser.
(f) Such Purchaser understands that the Securities shall bear
a restrictive legend in a form agreed between the parties.
22
(g) Each Purchaser who holds Series B Shares or Series C
Shares, consents to the issuance of the Series D Shares with rights
pari passu to the Series B Shares and the Series C Shares.
ARTICLE V
COVENANTS OF THE ISSUER
The Issuer agrees that:
SECTION 5.1 ACCESS TO INFORMATION.
(a) From the date hereof until the First Closing Date, the
Issuer will (i) furnish to each Purchaser and its authorized
representatives such financial and operating data and other information
relating to the Issuer and its Subsidiaries as such Persons may
reasonably request and (ii) instruct its officers, employees, counsel,
independent accountants and financial advisors to cooperate with such
Purchaser and its authorized representatives in its investigation of
the Issuer and its Subsidiaries. Any investigation pursuant to this
Section shall be conducted in a manner that does not interfere
unreasonably with the conduct of the business of the Issuer and its
Subsidiaries.
(b) After the First Closing Date, for so long as the
Purchasers, in the aggregate, own 20% of the Series D Shares issued to
the Purchasers at the Closings, the Purchasers shall be entitled to (i)
receive, within 90 days of the issuer's financial year end, audited
annual financial statements, and receive within 45 and 30 days of the
relevant respective periods, unaudited quarterly and monthly financial
statements, (ii) receive all information made available to shareholders
of the Issuer or members of the Board of Directors, in each case, at
the same time as such materials are distributed to the shareholders or
directors, as the case may be, (iii) designate up to two persons who
shall be entitled to observation rights at all meetings of the Issuer's
Board of Directors, (iii) meet on a quarterly basis with members of
senior management, (v) receive copies of management reports, and (vi)
have reasonable access to the Issuer's outside auditors.
(c) Each Purchaser agrees that any nonpublic information
furnished to such Purchaser pursuant to this Section 5.01 shall be
deemed confidential information and shall not be used by it as the
basis for any market transactions in the securities of the Issuer
unless and until such information is made generally available to the
public.
SECTION 5.2 CERTIFICATE OF DESIGNATION. Prior to the First Closing,
subject to the terms of this Agreement, the Issuer shall cause to be filed the
Certificate of Designation as required pursuant to the laws of the State of
Utah.
SECTION 5.3 RESTRICTIONS PENDING THE CLOSINGS. After the date hereof
and prior to the Closing Dates, except as expressly provided for in this
Agreement or as consented to in writing by the Purchasers, the Issuer shall not:
(i) amend its Articles of Incorporation or bylaws;
(ii) split, combine or reclassify any shares of its
capital stock without appropriately adjusting the conversion
price and/or ratio and exercise price
23
applicable to the Series D Shares and the Warrants,
respectively, prior to their issuance at the Closings;
(iii) declare or pay any dividend or distribution
(whether in cash, stock or property) in respect of its Common
Stock;
(iv) take any action, or knowingly omit to take any
action, that could reasonably be expected to result in (A) any
of the representations and warranties of the Issuer set forth
in Article 3 becoming untrue or (B) any of the conditions to
the obligations of the Purchasers set forth in Section 8.01 or
8.02 not being satisfied; or
(v) enter into any agreement or commitment to do any
of the foregoing.
SECTION 5.4 RESERVATION OF SHARES. For so long as any of the Securities
are outstanding, the Issuer shall keep reserved for issuance a sufficient number
of shares of Common Stock to satisfy its conversion obligations under the
Certificate of Designation and its issuance obligations under the Warrants.
SECTION 5.5 TAX CONSISTENCY. The Issuer will not treat the Series D
Shares as "preferred stock" for Tax purposes, unless otherwise required pursuant
to a final determination or a change in Applicable Law.
SECTION 5.6 USE OF PROCEEDS. The Issuer shall use the proceeds received
upon the sale of the Series D Shares at the Closings solely for the purposes set
forth in Schedule 5.06 attached hereto.
ARTICLE VI
COVENANTS OF THE PURCHASERS
SECTION 6.1 CONFIDENTIALITY. Each Purchaser will hold, and will use its
reasonable best efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors, financing sources, financial
institutions, and agents (the "Representatives") to hold, in confidence, unless
required to disclose by judicial or administrative process or by other
requirements of law, regulation or national stock exchange, all confidential
documents and information concerning the Issuer or any of its Affiliates that
are furnished to such Purchaser, except to the extent that such information can
be shown to have been (i) previously known on a nonconfidential basis by such
Purchaser or such Representatives, (ii) in the public domain through no fault of
such Purchaser or its Representatives (with respect to information received in
their capacity as such) or (iii) later acquired by such Purchaser or such
Representatives from sources other than the Issuer or any of its Affiliates not
known by such Purchaser or such Representatives, as applicable, to be bound by
any confidentiality obligation; provided that such Purchaser may disclose such
information to any of its Representatives in connection with the transactions
contemplated by this Agreement and the Certificate of Designation so long as
such Persons are informed by such Purchaser of the confidential nature of such
information and are directed by such Purchaser to treat such information
confidentially. The obligation of each Purchaser to hold and to cause its
Representatives to hold any such information in confidence shall be satisfied if
such Purchaser exercises the same care with respect to such information as such
Purchaser would take to preserve the confidentiality of its own similar
information. If any
24
Purchaser or any of its Representatives is requested to disclose any
confidential information by judicial or administrative process or by other
requirements of law or a national stock exchange, such Purchaser will promptly
notify the Issuer of such request so that the Issuer may seek an appropriate
protective order. Each Purchaser agrees that it will not, and will use its
reasonable best efforts to cause its Representatives not to, use any
confidential documents or information for any purpose other than monitoring and
evaluating its investment in the Issuer and in connection with the transactions
contemplated by this Agreement and the Certificate of Designation. If this
Agreement is terminated, each Purchaser will, and will use its reasonable best
efforts to cause its Representatives to, destroy or deliver to the Issuer, upon
request, all documents and other materials, and all copies thereof, obtained by
such Purchaser or on its behalf from the Issuer, or any of the Representatives,
in connection with this Agreement that are subject to such confidence.
ARTICLE VII
COVENANTS OF THE ISSUER AND THE PURCHASERS
SECTION 7.1 CERTAIN FILINGS. The Issuer and each Purchaser will, and
will cause their Affiliates to, cooperate with one another (i) in determining
whether any action by or in respect of, or filing with, any Governmental
Authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by this Agreement and the
Certificate of Designation, the conversion by such Purchaser of such Purchaser's
Series D Shares or the exercise by such Purchaser of such Purchaser's Warrants,
and (ii) in taking such actions or making any such filings, furnishing
information required in connection therewith and seeking timely to obtain any
such actions, consents, approvals or waivers. The Issuer and each Purchaser
shall (A) give the other parties prompt notice of the commencement of any
action, suit, litigation, arbitration, preceding or investigation by or before
any governmental body with respect to the transactions contemplated by this
Agreement and the Certificate of Designation, (B) keep the other parties
informed on a current basis as to the status of any such action, suit,
litigation, arbitration, preceding or investigation, and (C) promptly inform the
other parties of any communication to or from the Department of Justice or any
other governmental body regarding the transactions contemplated by this
Agreement and the Certificate of Designation.
SECTION 7.2 PUBLIC ANNOUNCEMENTS. In connection with the execution of
this Agreement, the Issuer shall issue a press release (a "Signing Release") and
shall file with the Commission a Report on Form 8-K with respect to the
transactions contemplated hereby (the "Signing 8-K" and together with the
Signing Release, the "Agreed Disclosure"). The Signing Release shall be in form
and substance as agreed by the parties hereto. The Signing 8-K shall be provided
to the Purchasers prior to filing and the Purchasers shall be given a reasonable
opportunity to comment thereon. The Issuer shall accept all reasonable changes
suggested by the Purchasers. If the Issuer does not accept any changes suggested
in good faith by the Purchasers, the provisions of this Section 7.02 shall
immediately terminate and be of no further force or effect as to the Purchasers.
If the Issuer accepts all such changes, the Agreed Disclosure shall serve as the
basis for any public disclosure by the parties of the transactions contemplated
hereby and neither the Issuer nor any Purchaser shall make any statement or
representation regarding the transactions contemplated hereby, publicly or in a
manner which could reasonably be expected to result in its public dissemination,
which is materially inconsistent with the Agreed Disclosure. Except as otherwise
permitted pursuant to this Section 7.03, the Issuer shall not use or refer to
25
the name of any Purchaser in any public statement or disclosure without the
consent of such Purchaser.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE CLOSINGS
SECTION 8.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The obligation of
each party hereto to consummate the Closings is subject to the satisfaction, at
or prior to each Closing Date, of the following conditions:
(a) All filings with, notifications to and consents from
Governmental Authorities required for the consummation of such Closing
shall have been made or obtained, as applicable; and
(b) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation
of such Closing.
SECTION 8.2 FIRST CLOSING: CONDITIONS TO EACH PURCHASER'S OBLIGATIONS.
The obligation of each Purchaser to consummate the First Closing is further
subject to the satisfaction, at or prior to the First Closing Date, of the
following additional conditions:
(a) The representations and warranties of the Issuer contained
herein that are qualified as to materiality or Material Adverse Effect
shall be true and correct in all respects on and as of the First
Closing Date and the representations and warranties of the Issuer
contained herein that are not so qualified shall be true and correct in
all material respects on and as of the First Closing Date, in each case
as if made on and as of such date; the Issuer shall have performed and
complied in all material respects with all covenants and agreements
required by this Agreement to be performed or complied with by it at or
prior to the First Closing Date; and such Purchaser shall have received
a certificate dated the First Closing Date signed by an authorized
officer of the Issuer to the foregoing effect;
(b) The Certificate of Designation shall have been filed with
the Division of Corporations and Commercial Code of the State of Utah
in accordance with the law of the State of Utah;
(c) The Registration Rights Agreement shall have been executed
and delivered by the parties thereto and be in full force and effect;
(d) Each Purchaser shall have received opinions, dated the
First Closing Date, of counsel to the Issuer, addressing such matters
as shall be reasonably requested by the Purchasers;
(e) No action, suit, investigation, litigation or proceeding
challenging this Agreement or the transactions contemplated hereby or
seeking to prohibit, alter, prevent or materially delay the First
Closing or which could have an adverse affect on the ability of the
Issuer to perform its obligations under this Agreement shall have been
instituted by any Governmental Authority before any court, arbitrator
or governmental body, agency or official binding on any party hereto
and be pending;
26
(f) Each Purchaser shall have received all documents
reasonably requested by it relating to the existence of Issuer, the
corporate authority for Issuer entering into, and the validity of, this
Agreement, the Certificate of Designation, and the Series D Shares, all
in form and substance reasonably satisfactory to it; and
(g) The Issuer shall have received all consents and waivers by
third parties that are required for the issuance of the Securities and
the consummation of the transactions contemplated hereby on terms
reasonably satisfactory to Purchaser (including (i) waivers of all
shareholders' contractual or other preemptive and similar rights, and
(ii) any consents required in order that the transactions contemplated
hereby do not constitute a breach of, a default under, or a termination
or modification of any material agreement to which the Issuer or any
Subsidiary is a party or to which any portion of the property of the
Issuer or any Subsidiary is subject).
SECTION 8.3 SECOND CLOSING: CONDITIONS TO EACH PURCHASER'S OBLIGATIONS.
The obligation of each Purchaser to consummate the Second Closing is further
subject to the satisfaction, at or prior to the Second Closing Date, of the
following conditions:
(a) The representations and warranties of the Issuer contained
herein that are qualified as to materiality or Material Adverse Effect
shall be true and correct in all respects on and as of the Second
Closing Date and the representations and warranties of the Issuer
contained herein that are not so qualified shall be true and correct in
all material respects on and as of the Second Closing Date, in each
case as if made on and as of such date; the Issuer shall have performed
and complied in all material respects with all covenants and agreements
required by this Agreement to be performed or complied with by it at or
prior to the Second Closing Date; and such Purchaser shall have
received a certificate dated the Second Closing Date signed by an
authorized officer of the Issuer to the foregoing effect;
(b) No action, suit, investigation, litigation or proceeding
challenging this Agreement or the transactions contemplated hereby or
seeking to prohibit, alter, prevent or materially delay the Second
Closing or which could have an adverse affect on the ability of the
Issuer to perform its obligations under this Agreement shall have been
instituted by any Governmental Authority before any court, arbitrator
or governmental body, agency or official binding on any party hereto
and be pending; and
(c) There shall not have occurred since the date of the First
Closing any Material Adverse Change with respect to the Issuer.
SECTION 8.4 CONDITIONS TO THE ISSUER'S OBLIGATIONS. The obligation of
the Issuer to consummate each Closing is further subject to the satisfaction, at
or prior to each Closing Date, of the following additional conditions:
(a) The representations and warranties of each Purchaser
contained herein shall be true and correct in all respects on and as of
each Closing Date. Each Purchaser shall have performed and complied in
all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by such Purchaser at or
prior to each Closing Date; and the Issuers shall have received a
certificate dated as of each Closing Date signed by an authorized
officer of such Purchaser to the foregoing effect; and
27
(b) No proceeding challenging this Agreement or the
transactions contemplated hereby or seeking to prohibit, alter, prevent
or materially delay either Closing shall have been instituted by any
Governmental Authority before any court, arbitrator or governmental
body, agency or official binding on any party hereto and be pending;
(c) The Issuer shall have received all consents and waivers by
third parties that are required for the issuance of the Securities and
the consummation of the transactions contemplated hereby on terms
reasonably satisfactory to Purchaser (including (i) waivers of all
shareholders' contractual or other preemptive and similar rights, and
(ii) any consents required in order that the transactions contemplated
hereby do not constitute a breach of, a default under, or a termination
or modification of any material agreement to which the Issuer or any
Subsidiary is a party or to which any portion of the property of the
Issuer or any Subsidiary is subject).
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile or similar writing)
and shall be given to such party at its address or facsimile number set forth
below, or such other address or facsimile number as such party may hereinafter
specify for the purpose to the party giving such notice. Each such notice,
request or other communication shall be effective (i) if given by facsimile,
when such facsimile is transmitted to the facsimile number specified pursuant to
this Section 9.01 and the appropriate confirmation is received, (ii) if given by
mail, three days after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (iii) if given by any other
means, when delivered at the address specified below:
The Issuer:
United Shipping & Technology, Inc.
9850 51st Avenue North
Plymouth, MN 55442
Attention: Wesley C. Fredenburg, Esq.
Fax: (952) _____________
with a copy to:
Briggs and Morgan Professional Association
2400 IDS Center
Minneapolis, MN 55402
Attention: Avron L. Gordon
Fax: (612) 334-8455
28
The Purchasers:
TH Lee.Putnam Internet Partners, L.P.
TH Lee.Putnam Internet Parallel Partners, L.P.
THLi Coinvestment Partners, LLC
Blue Star I, LLC.
200 Madison Avenue
Suite 1900
New York, NY 10016
Attention: Douglas H. Hsieh
Fax: (212) 951-8655
with a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022
Attention: Eunu Chun
Fax (212) 446-4900
[OTHER PURCHASERS]
SECTION 9.2 NO WAIVERS; AMENDMENTS.
(a) No failure or delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
(b) Any provision of this Agreement may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed
by all the parties hereto.
SECTION 9.3 SURVIVAL. All representations and warranties contained
herein or made in writing by any party in connection herewith shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby for a period of 2 years following each Closing,
regardless of any investigation made by any Purchaser or on its behalf;
provided, however, that the representations and warranties contained in Sections
3.01, 3.02, and 3.04 shall survive the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby indefinitely.
SECTION 9.4 INDEMNIFICATION. Effective upon the First Closing, the
Issuer hereby indemnifies each Purchaser and its Affiliates against and agrees
to hold such Purchaser and its Affiliates harmless from any and all actions,
causes of action or suits brought by third parties ("Third Party Claims")
damages, losses, liabilities and expenses (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees and expenses
in connection with any action, suit or proceeding) ("Damages") arising from such
Third Party Claim incurred or suffered by such Purchaser or its Affiliates
arising out of (a) any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by the Issuer pursuant to this Agreement, or
(b) the breach by the Issuer of any listing or other rules of any exchange upon
which the Issuer's securities are listed, or of any other laws or rules relating
to the issue and purchase of the Series D Shares pursuant to this Agreement.
29
SECTION 9.5 PROCEDURES. The party seeking indemnification under Section
9.04 (the "Indemnified Party") agrees to give prompt notice to the party against
whom indemnity is sought (the "Indemnifying Party") and to all other Purchasers
of the assertion of any claim, or the commencement of any suit, action or
proceeding in respect of which indemnity may be sought under such Section. The
Indemnifying Party may at its election participate in and control the defense of
any such suit, action or proceeding at its own expense. The Indemnifying Party
shall not be liable under Section 9.04 for any settlement effected without its
consent of any claim, litigation or proceeding in respect of which indemnity may
be sought hereunder.
SECTION 9.6 TERMINATION.
(a) This Agreement may be terminated at any time prior to each
Closing:
(i) by mutual written agreement of the Issuer and
each Purchaser;
(ii) by the Issuer or the Purchasers if there shall
be any law or regulation that makes consummation of the
transactions contemplated hereby illegal or otherwise
prohibited or if consummation of the transactions contemplated
hereby would violate any nonappealable, final order, decree or
judgment of any court or governmental body having competent
jurisdiction.
(iii) by the Issuer if the Second Closing has not
occurred on or before the end of business on March 31, 2001,
or by the Purchasers if the First Closing has not occurred on
or before the end of business on February __, 2001. The party
desiring to terminate this Agreement pursuant to clauses
9.07(a)(ii) or (iii) shall give notice of such termination to
the other parties hereto.
(b) If this Agreement is terminated as permitted by Section
9.07(a), such termination shall be without liability of either party
(or any stockholder, director, officer, employee, agent, consultant or
representative of such party) to the other parties to this Agreement;
provided that if such termination shall result from the willful (i)
failure by any party to fulfill a condition to the performance of the
obligations of the other parties, (ii) failure by any party to perform
a covenant of this Agreement or (iii) breach by any party hereto of any
representation, warranty, covenant or agreement contained herein, such
party shall be fully liable for any and all Damages incurred or
suffered by the other parties as a result of such failure or breach.
The provisions of Sections 6.01, 9.01, 9.07, 9.09, 9.10, 9.11, 9.12,
9.13, 9.14, 9.15 and 9.16 shall survive any termination hereof pursuant
to Section 9.06(a).
(c) Expenses; Documentary Taxes. The Issuer shall reimburse
each Purchaser at the Closing for all of their respective reasonable
out-of-pocket expenses, including, without limitation, the fees and
disbursements of their counsel incurred in connection with the
negotiation, preparation, execution and delivery of this Agreement
(including the exhibits hereto) and the consummation of the
transactions contemplated by this Agreement. The Issuer shall pay any
and all stamp, transfer and other similar taxes payable or determined
to be payable in connection with the execution and delivery of this
Agreement or the Certificate of Designation or the issuance of the
Securities or any shares of Common Stock issued upon conversion or
exercise of the Securities.
30
SECTION 9.7 SUCCESSORS AND ASSIGNS. No party may assign any of its
rights and obligations hereunder without the prior written consent of the other
parties hereto. This Agreement shall be binding upon the parties hereto and
their respective successors and permitted assigns.
SECTION 9.8 GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES
OR PROVISIONS (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
OF NEW YORK. EACH OF THE PARTIES HERETO WAIVES TO THE FULLEST EXTENT PERMITTED
BY LAW ANY RIGHT TO TRIAL BY JURY IN RESPECT OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN
STATEMENT OR ACTION OF ANY PARTY HERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. THE
PARTIES TO THIS AGREEMENT EACH HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION
OR CAUSE OF A ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE
PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
AGREEMENT WITH ANY COURT AS EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
SECTION 9.9 JURISDICTION. THE PARTIES HERETO AGREE THAT ANY SUIT,
ACTION OR PROCEEDING SEEKING TO ENFORCE ANY PROVISION OF, OR BASED ON ANY MATTER
ARISING OUT OF OR IN CONNECTION WITH, THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY MAY ONLY BE BROUGHT IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK OR ANY NEW YORK STATE COURT SITTING IN New
YORK CITY, AND EACH OF THE PARTIES HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION
OF SUCH COURTS (AND OF THE APPROPRIATE APPELLATE COURTS THEREFROM) IN ANY SUCH
SUIT, ACTION OR PROCEEDING AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT
ANY SUCH SUIT, ACTION OR PROCEEDING WHICH IS BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING
MAY BE SERVED ON ANY PARTY ANYWHERE IN THE WORLD, WHETHER WITHIN OR WITHOUT THE
JURISDICTION OF ANY SUCH COURT. WITHOUT LIMITING THE FOREGOING, EACH PARTY
AGREES THAT SERVICE OF PROCESS ON SUCH PARTY AS PROVIDED IN SECTION 9.01 SHALL
BE DEEMED EFFECTIVE SERVICE OF PROCESS ON SUCH PARTY.
SECTION 9.10 COUNTERPARTS. This Agreement may be executed in any number
of counterparts each of which shall be an original with the same effect as if
the signatures thereto and hereto were upon the same instrument.
31
SECTION 9.11 ENTIRE AGREEMENT. This Agreement, the Registration Rights
Agreement, the Certificate of Designation, the Warrants and any other documents
executed concurrently herewith constitute the entire agreement and understanding
among the parties hereto and supersede any and all prior agreements and
understandings, written or oral, relating to the subject matter hereof.
SECTION 9.12 REMEDIES. Each holder of Securities and Common Stock
issuable upon conversion or exercise thereof shall have all rights and remedies
set forth in this Agreement, the Warrants, the Articles of Incorporation and the
Certificate of Designation and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any Person having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
SECTION 9.13 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
SECTION 9.14 DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a substantive part of this Agreement. The use of the word "including"
in this Agreement shall be by way of example rather than by limitation.
SECTION 9.15 NO STRICT CONSTRUCTION. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement as of the date first written above.
32
UNITED SHIPPING & TECHNOLOGY,
INC.
By: By:
-------------------------------
------------------------------- Name:
Name: Jeffrey Parell --------------------------
Title: Chief Executive Officer Its:
--------------------------
TH LEE.PUTNAM INTERNET
PARTNERS, L.P.
By: TH Lee.Putnam Internet Advisors L.P. By:
Its: General Partner -------------------------------
Name:
By: --------------------------
Its:
------------------------------- --------------------------
Name: James Brown
Title: Managing Director
By:
TH LEE.PUTNAM INTERNET -------------------------------
PARALLEL PARTNERS, L.P. Name:
By: TH Lee.Putnam Internet Advisors L.P. --------------------------
Its: General Partner Its:
--------------------------
By:
------------------------------- By:
Name: James Brown -------------------------------
Title: Managing Director Name:
--------------------------
THLI COINVESTMENT PARTNERS, Its:
LLC --------------------------
By:
By:
------------------------------- -------------------------------
Name: James Brown Name:
Its: Managing Member --------------------------
Its:
BLUE STAR I, LLC --------------------------
By:
-------------------------------
Name: Thomas H. Lee
Its: Managing Member
33
SCHEDULE A PURCHASERS
------------------ ---------------- -------------- ---------------- --------------
NUMBER OF CONSIDERATION NUMBER OF CONSIDERATION
SERIES D SHARES FOR SHARES TO SERIES D SHARES FOR SHARES TO
TO BE PURCHASED BE PURCHASED TO BE PURCHASED BE PURCHASED
AT THE FIRST AT THE FIRST AT THE SECOND AT THE SECOND
PURCHASER CLOSING CLOSING CLOSING CLOSING
------------------ ---------------- -------------- ---------------- --------------
TH Lee.Putnam
Internet Partners,
LP
------------------ ---------------- -------------- ---------------- --------------
TH Lee.Putnam
Internet Parallel
Partners, LP
------------------ ---------------- -------------- ---------------- --------------
TH Li Coinvestment
Partners LLC
------------------ ---------------- -------------- ---------------- --------------
Blue Star I, LLC
------------------ ---------------- -------------- ---------------- --------------
EXHIBIT A
CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF
SERIES D CONVERTIBLE PREFERRED STOCK AND ARTICLES OF AMENDMENT
TO THE RESTATED ARTICLES OF INCORPORATION OF UNITED SHIPPING
& TECHNOLOGY, INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF
SERIES D CONVERTIBLE PREFERRED STOCK AND ARTICLES OF AMENDMENT
TO THE RESTATED ARTICLES OF INCORPORATION OF UNITED SHIPPING &
TECHNOLOGY, INC.
Pursuant to the provisions of the Utah Revised Business Corporation
Act, the undersigned corporation adopts the following certificate of designation
and articles of amendment to its Restated Articles of Incorporation, as amended
to date:
FIRST: The name of the corporation is United Shipping & Technology, Inc.
SECOND: Pursuant to the authority vested in the Board of Directors by this
corporation's Restated Articles of Incorporation, as amended to date,
the Board of Directors of this corporation by unanimous written consent
pursuant to Section 16-10a-602 of the Utah Revised Business Corporation
Act did adopt on February __, 2001, without shareholder action, the
following resolutions, authorizing the creation and designation of a
series of preferred stock designated as Series D Convertible Preferred
Stock as set forth on Exhibit A attached hereto, which resolutions
amend this corporation's Restated Articles of Incorporation, as amended
to date, as contemplated thereby and pursuant to Exhibit A attached
hereto:
RESOLVED that, in order to comply with and fulfill its obligations
under the Transaction Documents, the Corporation will be required to
amend its Restated Articles of Incorporation in order to designate a
new class or series of its authorized preferred shares as set forth on
Exhibit "A" to these Consent Resolutions (the "Charter Amendment"); and
RESOLVED FURTHER, that the Board of Directors, acting under
authority of its Restated Articles of Incorporation and Sections
16-10a-1002(1)(e) and 16-10a-602(1) of the Act, hereby approves and
adopts the Charter Amendment; and
RESOLVED FURTHER, that, in the manner required by law and by the
Corporation's Restated Articles of Incorporation, the appropriate
officers of the Corporation be and they hereby are authorized and
directed to cause to be prepared, and to execute, and to file with the
Division of Corporations and Commercial Code of the State of Utah,
appropriate amendment documents causing the amendment of the
Corporation's Restated Articles of Incorporation in the manner
contemplated by the Charter Amendment and these Consent Resolutions.
In witness whereof, this Certificate of Designation of Series D
Convertible Preferred Stock is hereby executed on behalf of this corporation
this ___ day of February, 2001.
United Shipping & Technology, Inc.
By Wesley C. Fredenburg,
Its Secretary and General Counsel
EXHIBIT A
UNITED SHIPPING & TECHNOLOGY, INC. (THE "CORPORATION") SERIES D
CONVERTIBLE PREFERRED STOCK TERMS
SECTION 1. DESIGNATION AND AMOUNT. Subject to the provisions of Section
5B hereof, the number of authorized shares of Series D Convertible Preferred
Stock, par value $0.004 per share (the "Series D Preferred Stock"), shall be
___________. The Series D Preferred Stock shall, with respect to dividend rights
and rights on liquidation, dissolution and winding up, rank senior to the
Corporation's Common Stock, the Corporation's Series A Cumulative Convertible
Preferred Stock, par value $0.004 per share (the "Series A Preferred Stock"),
and to each other class of capital stock of the Corporation now or hereafter
established (collectively, the "Junior Securities") but shall, with respect to
dividend rights, and rights on liquidation, dissolution and winding up, rank
pari passu with the Corporation's Series B Convertible Preferred Stock, par
value $0.004 per share (the "Series B Preferred Stock") and the Corporation's
Series C Convertible Preferred Stock, Par Value $0.004 per share (the "Series C
Preferred Stock"). The definition of Junior Securities shall also include any
rights or options exercisable for or convertible into any of the Junior
Securities.
SECTION 2. DIVIDENDS. In the event that the Corporation declares or
pays any dividends upon the Common Stock (whether payable in cash, securities or
other property) other than dividends payable solely in shares of Common Stock,
the Corporation shall also declare and pay to the holders of the Series D
Preferred Stock at the same time that it declares and pays such dividends to the
holders of the Common Stock, the dividends which would have been declared and
paid with respect to the Common Stock issuable upon conversion of the Series D
Preferred Stock had all of the outstanding Series D Preferred Stock been
converted immediately prior to the record date for such dividend, or if no
record date is fixed, the date as of which the record holders of Common Stock
entitled to such dividends are to be determined.
SECTION 3. LIQUIDATION PREFERENCE. Upon any liquidation, dissolution or
winding up of the Corporation (whether voluntary or involuntary) (a "Liquidation
Event"), each holder of Series D Preferred Stock shall be entitled to be paid,
before any distribution or payment is made upon any Junior Securities but pari
passu with any payment made upon the Series B Preferred Stock and the Series C
Preferred Stock, an amount in cash equal to the aggregate Liquidation Value of
all shares of Series D Preferred Stock (each, a "Share") held by such holder
(plus all accrued and unpaid dividends thereon). If upon any such Liquidation
Event, the Corporation's assets to be distributed among the holders of the
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
are insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid under this Section 3, then the entire assets
available to be distributed to the Corporation's stockholders shall be
distributed pro rata among the holders of Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock based upon the aggregate
Liquidation Value (plus any unpaid dividends thereon) attributable to each such
holder. Not less than 60 days prior to the payment date stated therein, the
Corporation shall mail written notice of any such Liquidation Event to each
record holder of Series D Preferred Stock, setting forth in reasonable detail
the amount of proceeds to be paid with respect to each Share and each share of
Common Stock in connection with such Liquidation Event. A Change of Control
shall not be deemed a Liquidation Event for purposes of this Section 3.
SECTION 4. REDEMPTIONS.
4A MANDATORY REDEMPTION. Subject to the provisions of this
Section 4, on February __, 2007 (the "Redemption Date"), the
Corporation will be required to redeem each outstanding Share at a
price equal to the Liquidation Value per such Share.
4B REDEMPTION PAYMENTS. For each Share which is to be redeemed
hereunder, the Corporation shall be obligated on the Redemption Date to
pay to the holder thereof (upon surrender by such holder at the
Corporation's principal office of the certificate representing such
Share) an amount in cash immediately available funds equal to the
Liquidation Value of such Share (plus all accrued and unpaid dividends
thereon) (the "Redemption Price"). If the funds of the Corporation
legally available for redemption of Shares on any Redemption Date are
insufficient to pay the Redemption Price for the total number of Shares
to be redeemed on such date, those funds which are legally available
shall be used to redeem the maximum possible number of Shares pro rata
among the holders of the Shares to be redeemed based upon the aggregate
Liquidation Value of such Shares held by each such holder (plus all
accrued and unpaid dividends thereon). At any time thereafter when
additional funds of the Corporation are legally available for the
redemption of Shares, such funds shall immediately be used to pay the
balance of the cash portion of the Redemption Price for the Shares
which the Corporation has become obligated to redeem on any Redemption
Date but which it has not redeemed.
4C NOTICE OF REDEMPTION. Each holder of Series D Preferred
Stock shall give written notice of its election to exercise its
redemption rights under Section 4A above to the Corporation not more
than thirty (30) nor less than ten (10) days prior to the date on which
such redemption is to be made. In case fewer than the total number of
Shares represented by any certificate are redeemed, a new certificate
representing the number of unredeemed Shares shall be issued to the
holder thereof without cost to such holder within five business days
after surrender of the certificate representing the redeemed Shares.
4D DIVIDENDS AFTER REDEMPTION DATE. No Share shall be entitled
to any dividends declared after the date on which the Redemption Price
of such Share is paid to the holder of such Share. On such date, all
rights of the holder of such Share shall cease, and such Share shall no
longer be deemed to be issued and outstanding.
4E REACQUIRED SHARES. Any Shares which are redeemed or
otherwise acquired by the Corporation shall be canceled and retired to
authorized but unissued shares and shall not be reissued, sold or
transferred.
4F CHANGE OF CONTROL.
(i) Promptly after the occurrence of a Change of
Control (the date of such occurrence being the "Change of
Control Date"), the Corporation shall commence (or cause to be
commenced) an offer to purchase all outstanding shares of
Series D Preferred Stock pursuant to the terms described in
Section 4F(iv) (the "Change of Control Offer") at a purchase
price equal to the Liquidation Value for
2
each Share (plus any unpaid dividends thereon) (the "Change of
Control Amount") on the Change of Control Payment Date, and
shall purchase (or cause the purchase of) any Shares of Series
D Preferred Stock tendered in the Change of Control Offer
pursuant to the terms hereof.
(ii) At the option of each holder of Series D
Preferred Stock, the Change of Control Amount payable to such
holder shall be payable (A) in cash, (B) in a number of shares
of Common Stock (or the securities of the entity into which
the Common Stock became converted or was exchanged in
connection with the Change of Control) determined by dividing
the portion of the Change of Control Amount that would
otherwise be paid in cash (and which the holder has elected to
receive in shares) by the Conversion Price in effect as of the
date on which the Change of Control occurred (which will
determine the number of shares of the Corporation that the
holder would receive, which shall then be used to determine
the number of shares of the successor entity, if applicable,
that the holder is entitled to receive), or (C) in a
combination of cash and such shares.
(iii) If a holder elects to receive the Change of
Control Amount in cash, prior to the mailing of the notice
referred to in Section 4F(iv), but in any event within 20 days
following the date on which a Change of Control has occurred,
the Corporation shall (A) promptly determine if the purchase
of the Series D Preferred Stock for cash would violate or
constitute a default under any Indebtedness of the Corporation
and (B) either shall repay to the extent necessary all such
Indebtedness of the Corporation that would prohibit the
repurchase of the Series D Preferred Stock pursuant to a
Change of Control Offer or obtain any requisite consents or
approvals under instruments governing any Indebtedness of the
Corporation to permit the repurchase of the Series D Preferred
Stock for cash. The Corporation shall first comply with this
Section 4F(iii) before it shall repurchase for cash any Series
D Preferred Stock pursuant to this Section 4F.
(iv) At least within 20 days following the date on
which a Change in Control has occurred, the Corporation shall
send, by first-class mail, postage prepaid, a notice (a
"Change of Control Notice") to each holder of Series D
Preferred Stock. If applicable, such Change of Control Notice
shall contain all instructions and materials necessary to
enable such holders to tender Series D Preferred Stock
pursuant to the Change of Control Offer. Such Change of
Control Notice shall state:
(A) that a Change of Control has occurred,
that a Change of Control Offer is being made pursuant
to this Section 4F and that all Series D Preferred
Stock validly tendered and not withdrawn will be
accepted for payment;
(B) the purchase price (including the amount
of accrued dividends, if any) and the purchase date
(which must be no earlier than 30 days nor later than
60 days from the date such notice is mailed, other
than as may be required by law) (the "Change of
Control Payment Date");
3
(C) that holders electing to have any Share
purchased pursuant to a Change of Control Offer will
be required to surrender stock certificates
representing such Shares, properly endorsed for
transfer, at the address specified in the notice
prior to the close of business on the business day
prior to the Change of Control Payment Date;
(D) that holders will be entitled to
withdraw their election if the Corporation receives,
not later than five business days prior to the Change
of Control Payment Date, a telegram, facsimile
transmission or letter setting forth the name of the
holder, the number of shares of Series D Preferred
Stock the holder delivered for purchase and a
statement that such holder is withdrawing its
election to have such Shares purchased;
(E) that holders who tender only a portion
of the Shares represented by a certificate delivered
will, upon purchase of the Shares tendered, be issued
a new certificate representing the unpurchased
Shares; and
(F) the circumstances and relevant facts
regarding such Change of Control (including
information with respect to pro forma historical
income, cash flow and capitalization after giving
effect to such Change of Control).
(v) The Corporation will comply with any tender offer
rules under the Exchange Act which may then be applicable in
connection with any offer made by the Corporation to
repurchase the Shares as a result of a Change of Control. To
the extent that the provisions of any securities laws or
regulations conflict with provisions hereof, the Corporation
shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its
obligation hereunder by virtue thereof.
(vi) On the Change of Control Payment Date, the
Corporation shall (A) accept for payment the Shares validly
tendered pursuant to the Change of Control Offer, (B) pay to
the holders of Shares so accepted the purchase price therefor,
at the option of each such holder, in cash or Common Stock (or
the securities of the entity into which the Common Stock
became converted in connection with the Change of Control) as
provided in Section 4F(ii) above and (C) cancel each
surrendered certificate and retire the shares represented
thereby. Unless the Corporation defaults in the payment for
the Shares tendered pursuant to the Change of Control Offer,
all rights of holders of such tendered shares will terminate,
except for the right to receive payment therefor on the Change
of Control Payment Date.
(vii) To accept the Change of Control Offer, the
holder of a Share shall deliver, prior to the close of
business on the business day prior to the Change of Control
Payment Date, written notice to the Corporation (or an agent
designated by the Corporation for such purpose) of such
holder's acceptance, together with
4
certificates evidencing the Shares with respect to which the
Change of Control Offer is being accepted, duly endorsed for
transfer.
SECTION 5. VOTING RIGHTS AND COVENANTS.
5A VOTING RIGHTS. The holders of the Series D Preferred Stock
shall be entitled to notice of all stockholders meetings in accordance
with the Corporation's bylaws, and except as provided in Section 5A(i)
or as otherwise required by applicable law, the holders of the Series D
Preferred Stock shall be entitled to vote on all matters submitted to
the stockholders for a vote together with the holders of the Common
Stock voting together as a single class with each share of Common Stock
entitled to one vote per share and each Share of Series D Preferred
Stock entitled to one vote for each share of Common Stock issuable upon
conversion of the Series D Preferred Stock as of the record date for
such vote or, if no record date is specified, as of the date of such
vote.
(i) Notwithstanding the provisions of Section 5A with
respect to voting rights of holders of Series D Preferred
Stock, if the Corporation determines that shareholder approval
of the issuance of the Series D Preferred Stock or the
issuance of Common Stock or other securities convertible into,
exchangeable for, or equivalent to, Common Stock is required
in order to enable the Corporation to comply with continued
listing requirements for the Common Stock on the Nasdaq
SmallCap Market, such holders agree that with respect to the
voting of the Series D Preferred Stock and the conversion
thereof:
(A) the Series D Preferred Stock voting
rights of the holders shall be reduced on a pro-rata
basis among the holders to a number of votes which
will not exceed _________ (the "Reduced Voting
Amount"), until the Corporation's shareholders
approve the issuance of Series D Preferred Stock
which is convertible into more than 20% of the
Corporation's outstanding Common Stock, or such
approval is waived by Nasdaq or otherwise determined
not to be required; and
(B) the Series D Preferred Stock held by
such holders may not be converted into Common Stock
except to the extent the number of shares of Common
Stock (which vote on a one vote per share basis) and
the number of shares of Series D Preferred Stock held
by such holders, do not exceed the Reduced Voting
Amount.
5B COVENANTS. In addition, so long as 20% of the Series D
Preferred Stock originally issued pursuant to the Purchase Agreement
remains outstanding, the affirmative vote of the holders of two-thirds
of the then outstanding shares of Series D Preferred Stock, voting
together as a single class, shall be necessary to:
(i) alter or change the preferences, rights or powers
of the Series D Preferred Stock;
(ii) increase or decrease the authorized number of
shares of Series D Preferred Stock;
5
(iii) amend, alter, repeal or waive any provision of
the Corporation's Restated Articles of Incorporation
(including any articles of amendment and whether by amendment,
merger or otherwise) or the Corporation's by-laws;
(iv) issue any additional Series D Preferred Stock or
create, authorize or issue any capital stock that ranks prior
(whether with respect to dividends or upon liquidation,
dissolution, winding up or otherwise) to the Series D
Preferred Stock;
(v) directly or indirectly declare or pay any
dividends or make any distributions upon, or repurchase or
redeem, any of its capital stock or other equity securities
(or any securities directly or indirectly convertible into or
exercisable or exchangeable for equity securities), other than
(A) with respect to the Series D Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and the Bridge Note,
(B) the repurchase of Options (or Common Stock issued upon
exercise thereof) issued pursuant to the Stock Option Plans in
accordance with their respective terms, (C) any mandatory
prepayment required pursuant to the terms of the Iver Note as
in effect on February 1, 2001, and (D) the mandatory
repurchase of the Bayview Warrant (or Common Stock issued upon
exercise thereof) pursuant to Section 9 thereof as in effect
on February 1, 2001;
SECTION 6. CONVERSION.
6A CONVERSION PROCEDURE.
(i) Subject to the terms of this Section 6, at any
time and from time to time, any holder of Series D Preferred
Stock may convert all or any portion of the Series D Preferred
Stock (including any fraction of a Share) held by such holder
into a number of shares of Conversion Stock computed by
multiplying the number of Shares to be converted by $_____ and
dividing the result by the Conversion Price then in effect.
(ii) Except as otherwise provided herein, each
conversion of Series D Preferred Stock shall be deemed to have
been effected as of the close of business on the date on which
the certificate or certificates representing the Series D
Preferred Stock to be converted have been surrendered for
conversion at the principal office of the Corporation. At the
time any such conversion has been effected, the rights of the
holder of the Shares converted as a holder of Series D
Preferred Stock shall cease and the Person or Persons in whose
name or names any certificate or certificates for shares of
Conversion Stock are to be issued upon such conversion shall
be deemed to have become the holder or holders of record of
the shares of Conversion Stock represented thereby.
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(iii) The conversion rights of any Share subject to
redemption hereunder shall terminate on the Redemption Date
for such Share unless the Corporation has failed to pay to the
holder thereof the Redemption Price for such Share.
(iv) Notwithstanding any other provision hereof, if a
conversion of Series D Preferred Stock is to be made in
connection with a transaction affecting the Corporation, the
conversion of any Shares of Series D Preferred Stock may, at
the election of the holder thereof, be conditioned upon the
consummation of such transaction, in which case such
conversion shall not be deemed to be effective until such
transaction has been consummated.
(v) As soon as possible after a conversion has been
effected (but in any event within three (3) business days in
the case of subparagraph (A) below), the Corporation shall
deliver to the converting holder:
(A) a certificate or certificates
representing the number of shares of Conversion Stock
issuable by reason of such conversion in such name or
names and such denomination or denominations as the
converting holder has specified;
(B) payment of any amount payable under
subparagraph (ix) below with respect to such
conversion; and
(C) a certificate representing any Shares
which were represented by the certificate or
certificates delivered to the Corporation in
connection with such conversion but which were not
converted.
(vi) The issuance of certificates for shares of
Conversion Stock upon conversion of Series D Preferred Stock
shall be made without charge to the holders of such Series D
Preferred Stock for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection with such
conversion and the related issuance of shares of Conversion
Stock. Upon conversion of each Share of Series D Preferred
Stock, the Corporation shall take all such actions as are
necessary in order to ensure that the Conversion Stock
issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable, free and clear of all
taxes, liens, charges and encumbrances with respect to the
issuance thereof.
(vii) The Corporation shall not close its books
against the transfer of Series D Preferred Stock or of
Conversion Stock issued or issuable upon conversion of Series
D Preferred Stock in any manner which interferes with the
timely conversion of Series D Preferred Stock. The Corporation
shall assist and cooperate with any holder of Shares required
to make any governmental filings or obtain any governmental
approval prior to or in connection with any conversion of
Shares hereunder (including, without limitation, making any
filings required to be made by the Corporation).
7
(viii) The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of
Conversion Stock, solely for the purpose of issuance upon the
conversion of the Series D Preferred Stock, such number of
shares of Conversion Stock issuable upon the conversion of all
outstanding Series D Preferred Stock. All shares of Conversion
Stock which are so issuable shall, when issued, be duly and
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges. The Corporation shall take all such
actions as may be necessary to assure that all such shares of
Conversion Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements
of any domestic securities exchange upon which shares of
Conversion Stock may be listed (except for official notice of
issuance which shall be immediately delivered by the
Corporation upon each such issuance). The Corporation shall
not take any action which would cause the number of authorized
but unissued shares of Conversion Stock to be less than the
number of such shares required to be reserved hereunder for
issuance upon conversion of the Series D Preferred Stock.
(ix) If any fractional interest in a share of
Conversion Stock would, except for the provisions of this
subparagraph, be delivered upon any conversion of the Series D
Preferred Stock, the Corporation, in lieu of delivering the
fractional share therefor, shall pay an amount to the holder
thereof equal to the portion of the Market Price attributable
to such fractional interest as of the date of conversion.
(x) If the shares of Conversion Stock issuable by
reason of conversion of Series D Preferred Stock are
convertible into or exchangeable for any other stock or
securities of the Corporation, the Corporation shall, at the
converting holder's option, upon surrender of the Shares to be
converted by such holder as provided herein together with any
notice, statement or payment required to effect such
conversion or exchange of Conversion Stock, deliver to such
holder or as otherwise specified by such holder a certificate
or certificates representing the stock or securities into
which the shares of Conversion Stock issuable by reason of
such conversion are so convertible or exchangeable, registered
in such name or names and in such denomination or
denominations as such holder has specified.
6B CONVERSION PRICE.
(i) In order to prevent dilution of the conversion
rights granted under this Section 6, the Conversion Price
shall be subject to adjustment from time to time pursuant to
this Section 6B.
(ii) If and whenever after the original date of first
issuance of the Series D Preferred Stock, the Corporation
issues or sells, or in accordance with Section 6C is deemed to
have issued or sold, any shares of its Common Stock for a
consideration per share less than the Market Price of the
Common Stock determined as of the date of such issue or sale,
then immediately upon such issue or sale, the Conversion Price
shall be reduced to the Conversion Price determined by
multiplying the Conversion Price in effect immediately prior
to such issue or sale by a fraction, the numerator of which
shall be the sum of (A) the number of shares of Common Stock
Deemed Outstanding immediately prior to such issue or sale
multiplied by the Market Price of the Common Stock determined
as of the
8
date of such issuance or sale, plus (B) the consideration, if
any, received by the Corporation upon such issue or sale, and
the denominator of which shall be the product derived by
multiplying the Market Price of the Common Stock by the number
of shares of Common Stock Deemed Outstanding immediately after
such issue or sale.
(iii) Notwithstanding the foregoing, there shall be
no adjustment to the Conversion Price hereunder with respect
to the following (collectively referred to herein as the
"Permitted Issuances"):
(A) the issuance or granting of Common
Stock, Options or Convertible Securities to
employees, officers, consultants and directors of the
Corporation and its Subsidiaries or the exercise
thereof pursuant to the Stock Option Plans;
(B) the issuance or granting of Options for
up to 75,000 shares of Common Stock (as adjusted for
any stock splits, reverse stock splits, share
combinations, stock dividends or similar
reclassifications) to employees and consultants of
the Corporation outside of the Stock Option Plans;
(C) the issuance of Common Stock upon (1)
exercise of the Warrant To Purchase Shares of Common
Stock of United Shipping & Technology, Inc. or (2)
the conversion of the 9% Convertible Subordinated
Promissory Note, in each case, dated as of April 25,
2000, issued by the Corporation to J. Iver & Company
("Iver Note");
(D) the issuance of Common Stock upon
exercise of the Warrant To Purchase Common Stock of
United Shipping & Technology, Inc., dated as of
September 24, 1999, issued to Bayview Capital
Partners L.P. (the "Bayview Warrant");
(E) the issuance of Common Stock upon
conversion of the Convertible Subordinated Note,
dated as of September 24, 1999, issued by the
Corporation to CEX Holdings, Inc. (the "CEX
Convertible Note");
(F) the issuance of shares of Common Stock
to Jack D. Ashabranner II (or a trust solely for his
benefit) in respect of a court-approved settlement of
his claim against Corporate Express Delivery Systems,
Inc., solely to meet any shortfall in the market
value between the 600,000 shares of Common Stock that
have been issued for the benefit of Mr. Ashabranner
in respect of such settlement and the sum of
$550,000, pursuant to the terms of such settlement;
(G) the issuance of Common Stock upon
exercise of the Common Warrants;
9
(H) the issuance of Series D Preferred Stock
upon exercise of the Bridge Warrant or upon
conversion of the Bridge Note;
(I) the issuance of Series C Preferred Stock
upon exercise of the Series C Warrants; and
(J) the issuance of Common Stock upon
conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock.
6C EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Conversion Price under paragraph 6B, the
following shall be applicable:
(i) Issuance of Rights or Options. If the Corporation
in any manner grants or sells any Options and the price per
share for which Common Stock is issuable upon the exercise of
such Options, or upon conversion or exchange of any
Convertible Securities issuable upon exercise of such Options,
is less than the Market Price of the Common Stock determined
as of such time, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or
upon conversion or exchange of the total maximum amount of
such Convertible Securities issuable upon the exercise of such
Options shall be deemed to be outstanding and to have been
issued and sold by the Corporation at the time of the granting
or sale of such Options for such price per share. For purposes
of this paragraph, the "price per share for which Common Stock
is issuable" shall be determined by dividing (A) the total
amount, if any, received or receivable by the Corporation as
consideration for the granting or sale of such Options, plus
the minimum aggregate amount of additional consideration
payable to the Corporation upon exercise of all such Options,
plus in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the
issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such
Options. No further adjustment of the Conversion Price shall
be made when Convertible Securities are actually issued upon
the exercise of such Options or when Common Stock is actually
issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the
Corporation in any manner issues or sells any Convertible
Securities and the price per share for which Common Stock is
issuable upon conversion or exchange thereof is less than the
Market Price of the Common Stock determined as of such time,
then the maximum number of shares of Common Stock issuable
upon conversion or exchange of such Convertible Securities
shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the issuance or sale of
10
such Convertible Securities for such price per share. For the
purposes of this paragraph, the "price per share for which
Common Stock is issuable" shall be determined by dividing (A)
the total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further
adjustment of the Conversion Price shall be made when Common
Stock is actually issued upon the conversion or exchange of
such Convertible Securities, and if any such issue or sale of
such Convertible Securities is made upon exercise of any
Options for which adjustments of the Conversion Price had been
or are to be made pursuant to other provisions of this Section
6, no further adjustment of the Conversion Price shall be made
by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If
the purchase price provided for in any Options, the additional
consideration, if any, payable upon the conversion or exchange
of any Convertible Securities or the rate at which any
Convertible Securities are convertible into or exchangeable
for Common Stock changes at any time, the Conversion Price in
effect at the time of such change shall be immediately
adjusted to the Conversion Price which would have been in
effect at such time had such Options or Convertible Securities
still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may
be, at the time initially granted, issued or sold. For
purposes of Section 6C, if the terms of any Option or
Convertible Security which was outstanding as of the date of
issuance of the Series D Preferred Stock are changed in the
manner described in the immediately preceding sentence, then
such Option or Convertible Security and the Common Stock
deemed issuable upon exercise, conversion or exchange thereof
shall be deemed to have been issued as of the date of such
change; provided, that (A) no such change shall at any time
cause the Conversion Price hereunder to be increased, and (B)
no adjustment to the Conversion Price pursuant to this clause
(iii) shall be made as a result of any adjustment to the
exercise and/or conversion price with respect to the Bayview
Warrant, the Iver Note, the CEX Convertible Note, the Common
Warrants, the Series B Preferred Stock, the C Preferred Stock
and the Series C Warrants pursuant to and in accordance with
the antidilution protection provisions of such securities as
in effect on February _____, 2001.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or
the termination of any right to convert or exchange any
Convertible Security without the exercise of any such Option
or right, the Conversion Price then in effect hereunder shall
be adjusted immediately to the Conversion Price which would
have been in effect at the time of such expiration or
termination had such Option or Convertible Security, to the
extent outstanding immediately prior to such expiration or
termination, never been issued. For purposes of Section 6C,
the expiration or termination of any Option or Convertible
Security which was outstanding as of the date of issuance
11
of the Series D Preferred Stock shall not cause the Conversion
Price hereunder to be adjusted unless, and only to the extent
that, a change in the terms of such Option or Convertible
Security caused it to be deemed to have been issued after the
date of issuance of the Series D Preferred Stock.
(v) Calculation of Consideration Received. If any
Common Stock, Option or Convertible Security is issued or sold
or deemed to have been issued or sold for cash, the
consideration received therefor shall be deemed to be the
amount received by the Corporation therefor. If any Common
Stock, Option or Convertible Security is issued or sold for a
consideration other than cash, the amount of the consideration
other than cash received by the Corporation shall be the fair
value of such consideration, except where such consideration
consists of securities, in which case the amount of
consideration received by the Corporation shall be the Market
Price thereof as of the date of receipt. The fair value of any
consideration other than cash and securities shall be
determined jointly by the Corporation and the holders of at
least two-thirds of the then outstanding Series D Preferred
Stock. If such parties are unable to reach agreement within a
reasonable period of time, the fair value of such
consideration shall be determined by an independent appraiser
experienced in valuing such type of consideration jointly
selected by the Corporation and the holders of at least
two-thirds of the then outstanding Series D Preferred Stock.
The determination of such appraiser shall be final and binding
upon the parties, and the fees and expenses of such appraiser
shall be borne by the Corporation.
(vi) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other
securities of the Corporation, together comprising one
integrated transaction in which no specific consideration is
allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of
$.01.
(vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Corporation or any
Subsidiary, and the disposition of any shares so owned or held
shall be considered an issue or sale of Common Stock.
(viii) Record Date. If the Corporation takes a record
of the holders of Common Stock for the purpose of entitling
them (A) to receive a dividend or other distribution payable
in Common Stock, Options or in Convertible Securities or (B)
to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration
of such dividend or upon the making of such other distribution
or the date of the granting of such right of subscription or
purchase, as the case may be.
6D SUBDIVISION OR COMBINATION OF COMMON STOCK. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of
12
shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and if the Corporation at
any time combines (by reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number
of shares, the Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
6E REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the
Corporation's assets or other transaction, in each case which is
effected in such a manner that the holders of Common Stock are entitled
to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock
held by such holders, is referred to herein as an "Organic Change".
Subject to Section 4F, prior to the consummation of any Organic Change,
the Corporation shall make appropriate provisions to insure that each
of the holders of Series D Preferred Stock shall thereafter have the
right to acquire and receive, in lieu of the shares of Conversion Stock
immediately theretofore acquirable and receivable upon the conversion
of such holder's Series D Preferred Stock, such shares of stock,
securities or assets as such holder would have received in connection
with such Organic Change if such holder had converted its Series D
Preferred Stock immediately prior to such Organic Change. In each such
case, the Corporation shall also make appropriate provisions to insure
that the provisions of this Section 6 and Section 7 below shall
thereafter be applicable to the Series D Preferred Stock. The
Corporation shall not effect any such consolidation, merger or sale,
unless prior to the consummation thereof, the successor entity (if
other than the Corporation) resulting from consolidation or merger or
the entity purchasing such assets assumes by written instrument, the
obligation to deliver to each such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to acquire.
6F CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 6 but not expressly
provided for by such provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or other
rights with equity features), then the Corporation's Board of Directors
shall make an appropriate adjustment in the Conversion Price so as to
protect the rights of the holders of Series D Preferred Stock;
provided, that no such adjustment shall increase the Conversion Price
or decrease the number of shares of Conversion Stock issuable upon
conversion of each Share of Series D Preferred Stock as otherwise
determined pursuant to this Section 6.
6G NOTICES.
(i) Immediately upon any adjustment of the Conversion
Price, the Corporation shall give written notice thereof to
all holders of Series D Preferred Stock, setting forth in
reasonable detail and certifying the calculation of such
adjustment.
13
(ii) The Corporation shall give written notice to all
holders of Series D Preferred Stock at least 20 days prior to
the date on which the Corporation closes its books or takes a
record (A) with respect to any dividend or distribution upon
Common Stock, (B) with respect to any pro rata subscription
offer to holders of Common Stock or (C) for determining rights
to vote with respect to any Organic Change, dissolution or
liquidation.
(iii) The Corporation shall also give written notice
to the holders of Series D Preferred Stock at least 20 days
prior to the date on which any Organic Change shall take
place.
SECTION 7. PURCHASE RIGHTS. If at any time the Corporation grants,
issues or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "Purchase Rights"), then each holder of Series D
Preferred Stock shall be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Conversion Stock
acquirable upon conversion of such holder's Series D Preferred Stock immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights.
SECTION 8. REGISTRATION OF TRANSFER. The Corporation shall keep at its
principal office a register for the registration of Series D Preferred Stock.
Upon the surrender of any certificate representing Series D Preferred Stock at
such place, the Corporation shall, at the request of the record holder of such
certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the aggregate
the number of Shares represented by the surrendered certificate. Each such new
certificate shall be registered in such name and shall represent such number of
Shares as is requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Series D Preferred Stock represented by such new certificate
from the date to which dividends have been fully paid on such Series D Preferred
Stock represented by the surrendered certificate.
SECTION 9. REPLACEMENT. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing Shares, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of Shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate, and dividends
shall accrue on the Series D Preferred Stock represented by such new certificate
from the date to which dividends have been fully paid on such lost, stolen,
destroyed or mutilated certificate.
SECTION 10. DEFINITIONS.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person, where
"control" means the possession, directly or indirectly, of the power to direct
the management and policies of a Person whether through ownership of voting
securities, contract or otherwise.
"Bayview Warrant" has the meaning set forth in Section 6B(iii).
"Bridge Note" means the Convertible Bridge Notes issued to TH Li
pursuant to certain Bridge Loan Agreements by and between the Corporation and TH
Li dated January 4, 2001 and January 31, 2001.
"Bridge Warrant" means a warrant to purchase Series D Preferred Stock
issued by the Corporation to TH Li pursuant to a certain Bridge Loan Agreement
by and between the Corporation and TH Li dated January 4, 2001.
"Change of Control" means: (i) the sale, lease, transfer, conveyance or
other disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all the assets of the
Corporation and its Subsidiaries taken as a whole to any "person" (as such term
is used in Section 13(d)(3) of the Exchange Act), (ii) the consummation of any
transaction (including any merger or consolidation) the result of which is that
any "person" (as defined above but excluding the Purchasers), becomes the
beneficial owner (as determined in accordance with Rules 13d-3 and 13d-5 under
the Exchange Act except that a person will be deemed to have beneficial
ownership of all shares that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 40% of the Voting Securities of the Corporation, or
(iii) the first day on which a majority of the members of the board of directors
are not Continuing Directors, provided that a Change of Control shall not be
deemed to occur with respect to any change to the Board of Directors as a result
of the resignation or retirement of any Director in the ordinary course of
business and such Director's seat on the Board of Directors is filled by a
person appointed by the same stockholders or group of stockholders that
appointed the resigning or retiring Director.
"Change of Control Amount" has the meaning set forth in Section 4F(i).
"Change of Control Date" has the meaning set forth in Section 4F(i).
"Change of Control Notice" has the meaning set forth in Section 4F(iv).
"Change of Control Offer" has the meaning set forth in Section 4F(i).
"Change of Control Payment Date" has the meaning set forth in Section
4F(iv)(B).
"Common Stock" means, collectively, the Corporation's common stock, par
value $0.004 per share, and any capital stock of any class of the Corporation
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
15
"Common Stock Deemed Outstanding" means, at any given time, the number
of shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to subparagraphs 6C(i)
and 6C(ii) hereof whether or not the Options or Convertible Securities are
actually exercisable at such time.
"Common Warrants" means, collectively, the "Common Warrants" as defined
in, and issued pursuant to, the Series B Purchase Agreement, and any warrants
issued in exchange, substitution or replacement therefor.
"Continuing Directors" means individuals who constituted the Board of
Directors of the Corporation on February __, 2001; provided, that any individual
becoming a director during any year shall be considered to be a Continuing
Director if such individual's election, appointment or nomination was
recommended or approved by at least two-thirds of the other Continuing Directors
continuing in office following such election, appointment or nomination present,
in person or by telephone, at any meeting of the Board of Directors of the
Corporation, after the giving of a sufficient notice to each Continuing Director
so as to provide a reasonable opportunity for such Continuing Directors to be
present at such meeting.
"Conversion Price" means $_____, subject to adjustment from time to
time as set forth in Section 6.
"Conversion Stock" means shares of the Corporation's Common Stock;
provided, that if there is a change such that the securities issuable upon
conversion of the Series D Preferred Stock are issued by an entity other than
the Corporation or there is a change in the type or class of securities so
issuable, then the term "Conversion Stock" shall mean the security issuable upon
conversion of the Series D Preferred Stock if such security is issuable in
shares, or shall mean the smallest unit in which such security is issuable if
such security is not issuable in shares.
"Convertible Securities" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Liens" has the meaning set forth in Section 5B(ix).
"Indebtedness" means at a particular time, without duplication, (i) any
indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness or other liability
evidenced by any note, bond, debenture or other debt security, (iii) any
indebtedness for the deferred purchase price of property or services with
respect to which a Person is liable, contingently or otherwise, as obligor or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary course of business which are not more than ninety (90) days past
due), (iv) any commitment by which a Person assures a creditor against loss
(including, without limitation, contingent reimbursement obligations with
respect to letters of credit), (v) any indebtedness or other liability
guaranteed in any manner by a Person (including, without
16
limitation, guarantees in the form of an agreement to repurchase or reimburse),
(vi) any obligations under capitalized leases with respect to which a Person is
liable, contingently or otherwise, as obligor, guarantor or otherwise, or with
respect to which obligations a Person assures a creditor against loss, and (vii)
any indebtedness or other liability secured by a Lien on a Person's assets.
"Iver Note" has the meaning set forth in Section 6B(iii).
"Junior Securities" has the meaning set forth in Section 1.
"Lien" means any lien, mortgage, pledge, security interest,
restriction, charge or other encumbrance.
"Liquidation Event" has the meaning set forth in Section 3.
"Liquidation Value" of any share as of any particular date shall be
equal to: (i) $_______ in the case of holders of Series D Preferred Stock, or
(ii) in the case of holders of Series B Preferred Stock or Series C Preferred
Stock, the liquidation value specified in the certificate of designation
applicable to each such series of preferred stock.
"Market Price" of any security means the average of the closing prices
of such security's sales on all securities exchanges on which such security may
at the time be listed, or, if there has been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of the twenty (20) consecutive trading
days immediately prior to the day as of which "Market Price" is being
determined. If at any time such security is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" shall be the fair value thereof determined jointly by the
Corporation and the holders of at least two-thirds of the then outstanding
Series D Preferred Stock. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an independent
appraiser experienced in valuing securities jointly selected by the Corporation
and the holders of at least two-thirds of the then outstanding Series D
Preferred Stock. The determination of such appraiser shall be final and binding
upon the parties, and the Corporation shall pay the fees and expenses of such
appraiser.
"Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"Permitted Issuances" has the meaning set forth in Section 6B(iii).
"Person" means an individual, a partnership, a corporation, a limited
liability company, a limited liability, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
17
"Purchase Agreement" means the Securities Purchase Agreement, dated as
of February 1, 2001, by and among the Corporation and certain investors, as such
agreement may from time to time be amended in accordance with its terms.
"Purchaser" means the "Purchasers" as defined in the Purchase Agreement
and their respective Affiliates.
"Redemption Date" has the meaning set forth in Section 4A.
"Redemption Price" has the meaning set forth in Section 4B.
"Series A Preferred Stock" has the meaning set forth in Section 1.
"Series B Preferred Stock" has the meaning set forth in Section 1.
"Series C Preferred Stock" has the meaning set forth in Section 1.
"Series D Preferred Stock" has the meaning set forth in Section 1.
"Series B Purchase Agreement" means the Securities Purchase Agreement,
dated as of May 15, 2000, by and among the Corporation and certain investors for
the sale and purchase of Series B Preferred Stock and Warrants, as such
agreement may from time to time be amended in accordance with its terms.
"Series C Warrants" means, collectively, the "Series C Warrants" as
defined in, and issued pursuant to, Securities Purchase Agreement dated as of
September 1, 2000, by and among the Corporation and certain investors, as such
agreement may from time to time be amended in accordance with its terms, and any
warrants issued in exchange, substitution or replacement therefor.
"Share" has the meaning set forth in Section 3.
"Stock Option Plans" means, collectively, the Corporation's 1995 Stock
Option Plan, 1996 Director Stock Option Plan, and 2000 Stock Option Plan.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity
18
gains or losses or shall be or control the managing general partner of such
limited liability company, partnership, association or other business entity.
"TH Li" means collectively TH Lee.Putnam Internet Partners, LP, a
Delaware limited partnership, TH Lee.Putnam Internet Parallel Partners, LP, a
Delaware limited partnership, THLi Coinvestment Partners LLC, a Delaware limited
liability company, and Blue Star I, LLC, a Delaware limited liability company.
"Voting Securities" means securities of the Corporation ordinarily
having the power to vote for the election of directors of the Corporation;
provided, that when the term "Voting Securities" is used with respect to any
other Person it means the capital stock or other equity interests of any class
or kind ordinarily having the power to vote for the election of directors or
other members of the governing body of such Person.
SECTION 11. AMENDMENT AND WAIVER. No amendment, modification or waiver
shall be binding or effective with respect to any provision of Sections 1 to 12
hereof without the prior written consent of the holders of at least two-thirds
of the Series D Preferred Stock outstanding at the time such action is taken.
The Corporation may amend any provision hereof without the consent of any
shareholder so long as no Shares of Series D Preferred Stock are issued and
outstanding.
SECTION 12. NOTICES. Except as otherwise expressly provided hereunder,
all notices referred to herein shall be in writing and shall be delivered by
registered or certified mail, return receipt requested and postage prepaid, or
by reputable overnight courier service, charges prepaid, and shall be deemed to
have been given when so mailed or sent (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated by
any such holder).
19
EXHIBIT B
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
20
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Exhibit 10(p)
DISTRIBUTORSHIP AGREEMENT
DISTRIBUTORSHIP AGREEMENT (the "Agreement") made and entered into as of the 4th
day of June 2001 by and between LifePoint, Inc., a corporation incorporated
under the laws of the State of Delaware ("LFP"), with its executive offices at
1205 South Dupont Street, Ontario, California 91761, and CMI, Inc., a
corporation incorporated under the laws of the Commonwealth of Kentucky ("CMI"),
with its executive offices at 316 E. 9th Street, Owensboro, Kentucky 42303.
WHEREAS, LFP desires to engage CMI as its exclusive distributor of Products to
Customers in the Territory (as hereinafter defined) on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein, the parties hereto hereby agree
as follows:
Definitions
1.1 The term "Annual Marketing Plan" shall mean the annual sales and marketing
plan developed by CMI and LFP under Section 4.1 herein.
1.2 The term "Consumables" shall mean consumable products to be used with the
Instruments for saliva testing for legal or illegal drugs, including (a) the
IMPACTTM Test System Consumables which include the "NIDA-5 plus Alcohol
Cassette", the "European Drug plus Alcohol Cassette" and the " Sample Collection
Cassette" and includes the saliva sampling part of the Consumable; and (b) other
saliva drug-testing cassettes and other Consumables that may be added to the LFP
product line in the future and which are applicable in the Territory.
1.3 The term "Customers" shall mean End Users in the Law Enforcement Field.
1.4 The term "CMI's Mark" shall mean the trademark "Intoxilyzer" and any other
related or unrelated logo mark presently owned or used by CMI, each in the type
face and type style as used by CMI, and any new trademark of CMI registered at
any future date during the Term of the Distributorship.
1.5 The term "CMI Revenues" shall mean CMI's booked sales from sales to
Customers or subdistributors of CMI, less returns, of the Products, exclusive of
instruments sold to LFP for sales outside the Law Enforcement Field.
1.6 "End User" shall mean the person, entity or governmental agency that
actually uses the Products which are the subject of this Agreement.
1.7 The term "Instruments" shall mean point-of-contact devices used for testing
for legal or illegal drugs in saliva, whether sold with or without tests for
other substances, and includes the hardware and software encompassed in the
IMPACT Test System Instrument currently being commercialized.
1.8 The term "Intellectual Property" shall mean any patents or trademarks,
pending or issued, inside or outside of the United States. It shall also mean
any trade secret, information, invention, idea, sample, procedures and
formulations, process, technique algorithm, computer program (source and object
code), design, drawing, formula or test data relating to any research or
development project, work in process, future development, business or scientific
plan, engineering, manufacturing, marketing, servicing, financing and personnel
matter relating to the Company, its present or future products, sales,
suppliers, clients, customers, employees, investors or business, whether in
oral, written, graphic or electronic form. Under this Agreement, Intellectual
Property shall include, but not be limited to, derivative and residual forms of
Intellectual Property, all of which shall be treated in strict accordance with
the provisions herein.
1.9 The term "Law Enforcement Field" shall mean the markets relevant to the
enforcement and prosecution of criminal justice and law, including, but not
limited to, driving under the influence for drug testing, probation and parole,
corrections and jails, officer/guard (or similarly situated employee) testing
and drug courts.
1.10 The term "LFP's Mark" shall mean the trademarks "LifePoint", "IMPACT" and
any other related logo mark, each in the type face and type style as used by
LFP, and any new trademark of LFP for the Products at any future date during the
Term of the Distributorship.
1.11 The term "Minimum Sales Level" shall mean the mutually agreed minimum sales
level set forth in the table in Schedule "F" attached hereto.
1.12 The term "Person" means an individual, partnership, corporation, limited
liability company, trust, unincorporated association, joint venture or other
entity of whatever nature.
1.13 The term "Products" shall mean the Instruments and the Consumables
constituting the IMPACT Test System.
1.14 The term "Product Release Date" or "PR" shall mean the date of general
market introduction of the Product in the Law Enforcement Field. The Product
Release Date will be mutually and explicitly agreed to in writing by LFP and
CMI.
1.15 The term "Term" or "Term of the Distributorship" shall mean the period
during which this Agreement is effective as outlined in Schedule A attached
hereto and made a part thereof.
1.16 The term "Territory" shall mean the countries and territories listed on
Schedule B attached hereto and made a part hereof.
1.17 The term "United States" shall mean the United States and its territories.
Distribution
.
During the Term of the Distributorship, CMI shall have the exclusive right to,
and shall, sell and distribute Products to Customers in the Territory in
accordance with the terms and provisions of this Agreement and the applicable
Annual Marketing Plan.
a. In the United States CMI will sell the Products directly to Customers and
will not use subdistributors or independent sales agents to sell, install or
service the Products, other than CMI's sales representatives or such agents
that sell CMI's products exclusively. In the Territory outside of the United
States, set forth on Schedule C attached hereto, CMI may use subdistributors
or independent sales agents to sell, install or service the Products
directly to Customers, which subdistributors or sales agents shall be
jointly selected by CMI and LFP.
(b) In the event that CMI appoints a subdistributor or engages an independent
sales representative to sell, distribute, install, service or market the
Products, CMI shall be responsible to ensure that each such third party complies
with all terms of this Agreement as if said third party was a party to this
Agreement as " CMI." Accordingly, in the event that any such third party commits
an act or omits to perform an act that, if committed by CMI, would be a breach
of this Agreement, CMI shall be deemed to be in breach of this Agreement and LFP
shall have all rights and remedies hereunder as a result of such breach.
2.2 During the Term of the Distributorship, CMI shall not, directly or
indirectly, sell or distribute any Product (a) outside of the Territory or to
third parties that are not Customers (other than to authorized subdistributors),
or (b) to any Person who, to CMI's knowledge, that CMI knows, intends to sell or
distribute Products (directly or indirectly) outside of the Territory or to any
Person that is not a Customer. Notwithstanding the foregoing, LFP acknowledges
that there are legal and practical restrictions on CMI's ability to prevent the
resale of Products outside of the Territory or to third parties that are not
Customers. Accordingly, CMI shall not be in breach or default under this
Agreement, and shall not be liable to LFP for any commission, compensation or
other payment or for any damage or loss suffered by LFP whatever arising out of,
or in connection with, any sales or shipments of Products by a subdistributor or
other party outside of the Territory or to third parties that are not Customers
unless such sales or shipments are made in violation of the foregoing.
2.3 During the Term of the Distributorship, LFP shall not directly or indirectly
sell or distribute Products to Law Enforcement Customers in the Territory.
Notwithstanding the foregoing, CMI acknowledges that there are legal and
practical restrictions on LFP's ability to prevent the resale of Products into
the Territory by LFP customers and the customers of such persons outside of the
Territory. Accordingly, LFP shall not be liable to CMI for any commission,
compensation or other payment or for any damage or loss suffered by CMI whatever
arising out of, or in connection with, any sales or shipments of Products by a
distributor or other party to a Customer or other Person unless such sales or
shipments (to such Customer) were made with the consent of LFP.
3.0 Intellectual Property.
3.1 (a) CMI acknowledges that LFP's Mark has acquired a valuable secondary
meaning and goodwill in the minds of the trade and the public and that goods,
including Products, bearing LFP's Mark have acquired a reputation for high
quality. CMI acknowledges that it is not the owner of any right, title or
interest in and to LFP's Mark in any form or embodiment thereof, and it is not
the owner of the goodwill attached to LFP's Mark in connection with the business
and goods in relation to which the same has been and may in the future be used
and shall not acquire any such right, title or interest in LFP's Mark.
CMI agrees that this Agreement does not constitute a license and does not give
CMI any rights of ownership with respect to any patent rights relating to the
Products or other Intellectual Property of LFP.
CMI shall comply with all notice requirements of any law or regulation
applicable or reasonably necessary in connection with CMI's activities hereunder
for the protection of LFP's Mark and Intellectual Property in connection with
the Products, generally to the extent the same shall be reasonably necessary in
LFP's judgment for the protection of LFP's Mark or Intellectual Property in the
Territory. Sales by CMI of the Products shall be deemed for the purposes of the
acquisition of trademark rights and the purposes of trademark registration to
have been made by and for the benefit of LFP as owner of LFP's Mark. CMI will
not, at any time, do any act or thing which may, in any way, impair the rights
of LFP in and to LFP's Mark or Intellectual Property or which may affect the
validity of LFP's Mark or Intellectual Property or which may depreciate the
value of LFP's Mark or its prestige and good will.
CMI acknowledges that it may not acquire a registration, or file and prosecute a
trademark or applications to register LFP's Mark, for any items or services,
including Products, or apply for a patent, with respect to the Products and the
underlying Intellectual Property (including any improvements thereto), anywhere
in the world.
To the extent any rights in and to LFP's Mark or Intellectual Property are
deemed to accrue to CMI pursuant to this Agreement or otherwise, CMI hereby
assigns any and all such rights, at such time as they may be deemed to accrue,
to LFP. CMI shall execute any and all documents and instruments required by LFP
which LFP may deem necessary, proper or appropriate to accomplish or confirm the
foregoing. Any such assignment, transfer or conveyance shall be without
consideration other than the mutual agreements contained herein. Upon expiration
or termination of this Agreement for any reason whatsoever, CMI will forthwith
execute and file any and all documents requested by LFP terminating any and all
trademark registrations, patent applications, registered user agreements, if
any, and other documents regarding LFP's Mark or Intellectual Property.
CMI agrees not (i) to challenge the validity or ownership of LFP's Mark or
Intellectual Property or any application for registration thereof, or any
trademark registrations thereof or patent applications or patents therefor in
any jurisdiction, or (ii) to contest the fact that CMI's rights under this
Agreement are solely those provided for herein and will cease upon termination
of this Agreement.
Except as provided in Section 3.2 herein, CMI shall not use LFP's Mark as part
of a corporate or business name or as a service mark and shall not use LFP's
Mark in any form without LFP's prior written consent.
The provisions of this Section 3.1 shall survive the termination or expiration
of this Agreement.
3.2 During the Term of the Distributorship, the Instruments shall be jointly
labeled for sale in the Territory to Customers with the label of LFP's Mark and
CMI's Mark. LFP and CMI must consent to the form of label containing LFP's Mark
and CMI's Mark.
3.3 (a) LFP acknowledges that CMI's Mark has acquired a valuable secondary
meaning and goodwill in the minds of the trade and the public and that goods
bearing CMI's Mark have acquired a reputation for high quality. LFP acknowledges
that it is not the owner of any right, title or interest in and to CMI's Mark in
any form or embodiment thereof, and it is not the owner of the goodwill attached
to CMI's Mark in connection with the business and goods in relation to which the
same has been and may in the future be used and shall not acquire any such
right, title or interest in CMI's Mark.
LFP agrees that this Agreement does not constitute a license and does not give
LFP any rights of ownership with respect to any patent rights relating to any
Intellectual Property of CMI.
(c) LFP shall comply with all notice requirements of any law or regulation
applicable or reasonably necessary in connection with LFP's activities hereunder
for the protection of CMI's Mark with Instruments (or any other part of the
Product that may be jointly labeled) and, in connection with CMI's Mark and
Intellectual Property, generally to the extent the same shall be reasonably
necessary in CMI's judgment for the protection of CMI's Mark or Intellectual
Property in the Territory. Sales by CMI of Instruments (or any part of the
Product that may be jointly labeled) shall be deemed for the purposes of the
acquisition of trademark rights and the purposes of trademark registration with
respect to CMI's Mark to have been made by, and for the benefit of, CMI as owner
of CMI's Mark. LFP will not, at any time, do any act or thing which may, in any
way, impair the rights of CMI in and to CMI's Mark or Intellectual Property or
which may affect the validity of CMI's Mark or Intellectual Property or which
may depreciate the value of CMI's Mark or its prestige and good will.
(d) LFP acknowledges that it may not acquire a registration, or file and
prosecute a trademark or applications to register CMI's Mark, for any items or
services, including Instruments, anywhere in the world.
(e) To the extent any rights in and to CMI's Mark or Intellectual Property are
deemed to accrue to LFP pursuant to this Agreement or otherwise, LFP hereby
assigns any and all such rights, at such time as they may be deemed to accrue,
to CMI. LFP shall execute any and all documents and instruments required by CMI
which CMI may deem necessary, proper or appropriate to accomplish or confirm the
foregoing. Any such assignment, transfer or conveyance shall be without
consideration other than the mutual agreements contained herein. Upon expiration
or termination of this Agreement for any reason whatsoever, LFP will forthwith
execute and file any and all documents requested by CMI terminating any and all
trademark registrations, patent applications, registered user agreements, if
any, and other documents regarding CMI's Mark or Intellectual Property.
a. LFP agrees not (i) to challenge the validity or ownership of CMI's Mark or
any application for registration thereof, or any trademark registrations
thereof in any jurisdiction, or (ii) to contest the fact that LFP's rights
with respect to CMI's Mark under this Agreement are solely those provided
for herein and will cease upon termination of this Agreement.
(g) Except as set forth in Section 3.2 herein, LFP shall not use CMI's Mark as
part of a corporate or business name or as a service mark and shall not use
CMI's Mark in any form, without CMI's prior written consent.
(h) The provisions of this Section 3.3 shall survive the termination or
expiration of this Agreement.
4.0. Sales and Marketing
4.1 (a) During the Term of the Distributorship, as hereinafter provided, CMI and
LFP shall develop an annual sales and marketing plan (the "Annual Marketing
Plan") commencing with the year-ending December 31, 2002 in the format provided
by LFP for each calendar year. By March 1, 2001, CMI will present to LFP a draft
initial Annual Marketing Plan. Within ninety (90) days of the date hereof, CMI
and LFP shall create a final initial Annual Marketing Plan for each of the
countries in the Territory for the balance of the year ending December 31, 2001.
Each Annual Marketing Plan shall set forth the sales forecasts and other
marketing objectives for the calendar year covered thereby for each country and
the initial Annual Marketing Plan shall make explicit the resources (human,
financial, time, or otherwise) necessary to make the launch of the Products
successful. Each such plan shall include a detailed plan of the following for
the countries set forth in Schedule "B" and any country in which CMI has sales
of Five Hundred Thousand U.S. Dollars (US $500,000) or more in the preceding
calendar year: (i) sales forecasts by unit and sales dollars for Instruments and
Consumables for the following three (3) years; (ii) marketing communications
programs; (iii) a tradeshow schedule for the indicated time period; (iv) pilot
studies (e.g., locations, purpose and timing); (v) a full and complete schedule
of target Customers and markets, subdistributors and the proposed market of each
such subdistributor, setting forth the name and address of each such target
market and Customer and subdistributor; and (vi) a full and complete description
of proposed promotional expenditures and formats for the subject calendar year
including CMI's "Advertising and Promotional Plan" for such calendar year
showing, to the maximum extent feasible, the locations, dates and times of all
proposed promotional events and the amounts that shall be expended therefor
during such calendar year.
CMI shall provide to LFP, not later than September 30th of each calendar year
during the Term of the Distributorship, CMI's proposed Annual Marketing Plan for
the immediately succeeding calendar year. LFP shall review each proposed Annual
Marketing Plan and work with CMI to finalize the Annual Marketing Plan by
December 31 of each calendar year.
Approval of an Annual Marketing Plan by LFP shall not be deemed a commitment by
CMI to sell or distribute the quantity or Product mix set forth therein.
If there shall be any inconsistencies between any provisions contained in any
Annual Marketing Plan and the provisions of this Agreement, the provisions of
this Agreement shall control unless otherwise explicitly agreed in writing by
the parties hereto.
4.2 LFP and CMI will be responsible for the following items, which
responsibilities will also be reflected in the Annual Marketing Plan:
a. LFP will be responsible for (including costs relating to) the following:
(i) Performing all clinical trials (or Alpha testing) in order to obtain FDA
clearance for the Products, and maintaining full, accurate and complete
records of the results thereof, (all of which shall be provided to CMI);
(ii) Obtaining other regulatory approvals in the United States, including
the NHTSA Conforming Product List for Evidentiary Alcohol Products;
(iii) Performing pilot studies (or Beta testing) upon completion of such
clinical trials (or Alpha testing) in key United States markets as selected
by LFP and CMI;
(iv) Conducting lobbying efforts relating to federal and state laws and
regulations in connection with the Products (although CMI will monitor and
support LFP's efforts in identifying and managing state and local laws and
regulations);
(v) Providing thorough technical support to fully train CMI, from time to
time, on all technical aspects of the IMPACT Test System, including
Consumables and systems integration issues;
(vi) Attendance at national law enforcement tradeshows as requested by CMI,
for the first two (2) years of the Term of The Distributorship; and
(vii) Preparation and presentation of technical papers on the performance of
the Products for the first two (2) years of the Term of the Distributorship;
and
(viii) Providing to CMI such literature, brochures and other materials as
CMI and LFP jointly determine, at LFP's published and then current list
price, if any, for such materials, and providing at cost one set of camera
ready artwork and/or color separated reprints of available promotional
materials.
b. CMI will be responsible for (including costs relating to) the following:
(i) Developing and implementing marketing programs, including direct mail,
advertising, telesales and direct sales, to ensure customer awareness of the
Products;
i. Developing and implementing lead generation programs;
(iii) Non-financial assistance to LFP in initial pilot studies (or Beta
testing);
(iv) Conducting sales evaluations (e.g., locations, purpose, timing and
management) in the Law Enforcement Field;
(v) Sales collateral as appropriate to the individual market segments within the
Law Enforcement Field;
(vi) Attendance at national and local law enforcement tradeshows as appropriate
to ensure achievement of goals and acceptance of the Products as deemed
appropriate by CMI;
(vii) Training of Customers on use of the Product, and development of training
programs when necessary to meet regulatory requirements in order to sell the
Products; and
(viii) Preparing sales forecasts by unit and sales dollars for the Products.
4.3 CMI will hire and maintain sufficient staff to market, sell and service the
Products. It is anticipated that this will initially include:
a. One (1) Product Manager, dedicated exclusively to the Products;
b. One (1) Sales Manager, responsible for direct sales to, and training of, End
Users of the Product;
c. Salespeople dedicated full-time to sales of the Product; and
d. One (1) Service Manager, responsible for all installation and service of the
Products.
A timetable for hiring and training personnel, based on mutually agreed product
development and introduction milestones, appears in the initial Annual Marketing
Plan.
4.4 In furtherance of the duties and obligations of CMI under this Agreement,
during the Term of the Distributorship, CMI shall use its commercially
reasonable efforts to: (i) promote the sale and distribution of Products to
Customers and (ii) provide Customers with satisfactory services, including
prompt delivery.
Without limiting the generality of the foregoing:
CMI shall furnish LFP with the following (and with such other information or
forms as LFP may reasonably request from time to time, including, without
limitation, similar forms from any of CMI's subdistributors):
not later than thirty (30) days after the end of each quarter, detailed monthly
reports for and in such quarter (setting forth net sales in the Territory of
CMI) stating separately for each country, by Product, gross sales and returns,
and shall use its commercially reasonable efforts to provide use of Product
information for each location;
not later than thirty (30) days after the end of each quarter, quarterly reports
setting forth (by product code and unit) Products held in inventory by CMI as of
the end of such quarterly period;
on an annual basis not later than thirty (30) days after the end of each
calendar year or as soon as reasonably possible upon request by LifePoint, a
list of CMI's individual Customer accounts for and relating to the Products.
upon the request of LFP, copies or summaries of CMI's invoices to Customers.
(b) CMI will provide operator training for all Systems sold to Customers as
these units are sold; provided that LFP shall have completed its operator
training obligations to CMI. CMI may provide operator training to customers in
other fields of use via separate arrangements.
a. CMI will provide field or depot repair service for all Instruments sold to
Customers in the Law Enforcement Field. CMI may provide field or depot
repair service for Instruments in other fields of use via separate
arrangement.
b. CMI shall make reasonable efforts to assure that (i) all subdistributors are
fully informed and properly trained with respect to the sale and
merchandising of Products; and (ii) Customers are fully informed of upcoming
promotions.
c. CMI, at its sole expense, and in specific connection with the sale,
marketing and distribution of the Products, shall comply with all laws,
ordinances, rules, and regulations (including, without limitation, those
pertaining to health, sanitation, fair trade or consumer protection), obtain
all licenses and permits required by, and pay all taxes, fees, charges, and
assessments imposed or enacted by, any governmental authority and shall not
take any action which will cause LFP to be in violation of any law of any
jurisdiction in the Territory or the United States including, but not
limited to, the United States Foreign Corrupt Practices Act of 1977, the
United States Export Control laws and the United States Anti-Boycott laws.
d. Within five (5) business days after its receipt of any complaint(s), CMI
shall refer such complaint(s) relating to the Products, that cannot be
resolved as user errors, to LFP. If a complaint relates to a Product
malfunction that may result in a death, serious injury or other significant
adverse event, CMI will refer such complaint to LFP within two (2) calendar
days. CMI shall respond directly to End User complaints regarding the
performance of the Products. CMI shall maintain records of all End User
complaints, which records shall be provided to LFP. Upon its receipt of any
such complaint(s), LFP shall resolve such complaint(s) within a reasonable
period of time and in a matter satisfactory to CMI.
e. CMI shall submit all advertising and promotional materials, with an English
translation, for the Products, to LFP for approval at least thirty (30) days
prior to use or distribution of such materials. All approvals by LFP of
advertising and promotional materials must be specific and in writing. LFP
shall respond to CMI's submittal with five (5) business days of receipt.
(h) CMI shall not make any alterations to, or resell or reuse the Products
unless authorized in writing by LFP.
(i) CMI shall refer all product warranty inquiries relating to the Products to
LFP. Within five (5) business days after receipt of such inquiries, LFP shall
respond to or resolve such inquiries subject to Section 7.0 herein.
(j) In connection with its marketing and distribution of the Products or
otherwise, CMI, on behalf of LFP, will not make any representations or
warranties with respect to the Products (other than those specifically contained
herein), unless authorized in writing by LFP.
(k) CMI shall be responsible for all technical support of its Customers at a
reasonable level consistent with industry standards. Additionally, CMI and its
subdistributors shall attend at least one (1) training session per year,
conducted by LFP, at a time and location in the Territory mutually designated by
LFP and CMI.
(l) CMI shall, during the Term hereof, and may, with the concurrance of CMI and
LFP, after the end of the Term hereof, be responsible for post-warranty repair
services for the Products (at CMI's standard rates in effect from time to time).
(m) To the extent LFP satisfies CMI's inventory demands, CMI shall stock and
maintain an adequate inventory of all Products to satisfy the commercially
reasonable demand for the Products.
(n) CMI shall use its commercially reasonable efforts to obtain any and all
required non-U.S. governmental authorizations within the Territory, including,
without limitation, any import licenses and foreign exchanges permits, and, if
applicable, shall be responsible for filing or registering this Agreement with
the appropriate authorities. The Schedules of and to this Agreement shall remain
confidential, and shall not be disclosed to any third party without the written
consent of LFP, which consent shall not be unreasonably withheld. CMI shall
provide proof of compliance with required non-U.S. governmental authorization to
LFP upon request.
(o) All expenses incurred by CMI in connection with the performance of its
obligations under this Section 4.4 will be borne solely by CMI, unless mutually
agreed to by the parties in advance of the incurring of such expenses.
(p) CMI will be responsible for appointing its own employees, agents and
representatives, who will be compensated by CMI.
(q) CMI and its subdistributors will not repackage the Products, and will only
sell the Products in the same packaging as originally received from LFP, with
the addition or substitution of translated materials where needed.
4.5 CMI agrees to track the sale and repairs of all Instruments by serial
numbers and all Consumables by lot number to each End User.
4.6 CMI shall make available to LFP reasonable access to CMI's warehouses which
house the Products, upon reasonable notice from LFP to CMI.
4.7 CMI acknowledges that LFP may conduct local, national and/or international
advertising campaigns, and LFP shall provide sales leads and other pertinent
information generated from such advertising campaigns, to CMI.
4.8 CMI and LFP shall participate in quarterly management meetings.
5.0 Purchasing and Pricing
5.1. All Products to be distributed by CMI during the Term of the
Distributorship shall be purchased by CMI from LFP, and no such Products shall
be purchased from any other source whatsoever without LFP's prior written
consent, and LFP shall not sell such Products to any Person other than CMI for
sale to Customers within the Territory. CMI shall provide LFP on a monthly basis
with CMI's anticipated purchases of the Product for each of the four (4)
immediately succeeding months (the "120 Day Rolling Forecast"). CMI shall use
only purchase order forms and other forms approved by LFP (Schedule H) to order
Products and shall follow all of LFP's procedures in connection therewith as
shall be in effect from time to time, and communicated in writing to CMI. Each
Purchase Order shall be submitted at least thirty (30) days prior to the
commencement of each Purchase Order's delivery date, unless such Purchase Order
is twenty percent (20%) greater than the 120 Day Rolling Forecast, in which case
such Purchase Order shall be submitted at least sixty (60) days prior to the
commencement of such Purchase Order's delivery date. Any Purchase Orders
("Orders") by CMI shall be placed with LFP by mail (written or electronic) or
facsimile at the following address and telephone numbers:
LifePoint, Inc.
1205 South Dupont Street
Ontario, California 91761 U.S.A.
Tel: (909) 418-3000
Fax: (909) 418-3003
5.2 LFP reserves the right (reasonably exercised) to accept or reject an Order
from CMI provided that such rejection is in writing and received by CMI within
five (5) business days after LFP's receipt of such Order. LFP will use good
faith commercial efforts, consistent with its obligations to other customers, to
process and ship each Order in accordance with forecasted delivery dates. If LFP
does not have sufficient Products available to meet the Orders from CMI and
LFP's other customers, LFP will allocate the Products available on a pro-rata
basis, with a preference being given to CMI. If the terms of any such Order
conflict with the terms and conditions set forth in this Agreement, then this
Agreement shall be controlling.
5.3 Nothing herein and no subsequent course of action shall be, or deemed, a
guaranty by LFP to sell or otherwise provide a minimum quantity of Products or
allocate the Product mix requested in any of CMI's purchase orders; it being
understood and agreed that LFP may accept in whole or any part of CMI's purchase
orders and allocate Products in LFP's good faith discretion in accordance with
LFP's general business interests. However, LFP will do its best to provide CMI
with the Products ordered in CMI's purchase orders.
5.4 LFP reserves the right to reject any Order or, not later than 20 business
days prior to the delivery date, to cancel any Order previously accepted in
writing but only if LFP has evidence substantiating that such Order will not be
paid for in accordance with the terms and conditions set forth in the Agreement.
Upon a determination that LFP intends to cancel a previously accepted Order, LFP
shall give CMI written notice of such cancellation not later than 20 business
days prior to the delivery date set forth in such order, and thereafter LFP will
be under no further obligation to deliver the Products under such Order.
5.5 The price to be charged by LFP to CMI for the Products hereunder shall be as
set forth on Schedule "D" attached hereto. All prices are in U.S. dollars and do
not include freight, brokerage, handling, insurance or sales tax, use tax,
excise tax, VAT, export and import duties or impost or any similar tax or
assessments of any governmental entity, all of which shall be borne by CMI.
5.6 Except as set forth in Section 7 hereof and Schedule "E" hereto, CMI shall
not be permitted to return the Products.
In consideration of LFP granting exclusivity to CMI in accordance with the terms
hereof, CMI agrees to pay to LFP the minimum sales fee as set forth in Schedule
F attached hereto if minimum sales levels are not achieved.
5.8 LFP may ship the Products to CMI, F.O.B. Ontario, California except that any
Instruments manufactured by an OEM manufacturer for LFP shall be shipped to CMI
F.O.B. place of manufacture. LFP's responsibility for damage to Products shall
cease when the Products have left the FOB shipment site. No allowance shall be
made for breakage, loss or damage in transportation. All loss and title will
pass to CMI at the FOB shipment site. All freight insurance and transportation
expenses will be paid by CMI. If requested in the Order, LFP shall drop ship the
Products on a F.O.B. basis as set forth above to CMI's subdistributors (the
"Delivery Designee") at any location in the Territory. Any request for such drop
shipment shall be set forth in the Order. LFP's responsibility for damage to the
Products shall cease when the Products have left the F.O.B. location. No
allowance shall be made for breakage, loss or damage in transportation.
6.0 Payment
6.1 CMI shall pay LFP in full in U.S. Dollars either by wire transfer or bank
draft within thirty (30) days after the later of (a) the date of each invoice,
or (b) delivery of the Products covered by such invoice. If payment is made by
bank draft, the draft must be freely negotiable and payable on sight.
Furthermore, all bank drafts must be drawn on a bank acceptable to LFP's bank.
7.0 Warranties
7.1 LFP warrants and represents that it has all right, title and interest and/or
license rights in the Products, and LFP's Mark and Intellectual Property, and
that CMI's use and distribution of any part of the Products, or LFP''s Mark or
Intellectual Property, as contemplated in this Agreement will not (a) violate
any laws or any rights of any third parties, including, but not limited to, such
violations as infringement or misappropriation of any U.S. copyright, patent,
trademark, trade secret, or other proprietary or property right, false
advertising, unfair competition, defamation, or (b) contain any material that is
unlawful, harmful or fraudulent, or otherwise violate any applicable local,
state or national laws.
7.2 LFP represents and warrants that it will notify CMI, by rapid means of
communication followed-up by written confirmation, in the event of discovery of
any subsequent nonconformity of any Products or of any failure or difficulties
of any Products disclosed by further quality control testing carried out on the
Products, any continued stability testing, customer complaints or otherwise, the
details of such notification to be confirmed in writing; provided that LFP shall
have no such obligation after six (6) months from the later of (a) the end of
the Term, or (b) the expiration of any warranties relating to the Products last
shipped to CMI.
7.3 CMI represents and warrants that it will notify LFP, by rapid means of
communication followed-up by written confirmation, in the event of discovery of
any subsequent nonconformity of any Products disclosed by customer complaints or
otherwise, the details of such notification to be confirmed in writing; provided
that CMI shall have no such obligation after six (6) months from the later of
(a) the end of the Term, or (b) the expiration of any warranties relating to the
Products last shipped by CMI.
7.4 LFP represents and warrants that in the event it decides to recall, replace
or take other course of action with respect to any Products, it will notify CMI
by rapid means of communication followed-up by written confirmation, and CMI
shall immediately cease sales of any such Products in its possession or control
until the course of action to be taken has been determined. All costs of
recovering the Products in the field and replacement of such Products in any
action affecting such Products will be borne by LFP.
7.5 LFP represents and warrants that (a) the non-dated Products, for a period of
one (1) year after the shipment of the Products to the End User, and (b) the
dated Products, until the Product's expiration date, shall perform substantially
in accordance with its design specifications and satisfactory quality control
test studies regarding efficacy, provided that the Products are stored according
to specifications. LFP will, at its option and its expense, either (a) correct
or provide an acceptable workaround for any verifiable conditions reported to
LFP by CMI within the warranty period that cause such Products not to perform in
accordance with the above warranty, or (b) replace such nonconforming Products
with conforming Products. Irrespective of the foregoing options of LFP, LFP will
perform, or have an acceptable plan in place to perform, this warranty service
within sixty (60) days from receipt of any warranty claim. Upon any failure of a
Product to comply with the above warranty, CMI shall return Products covered by
the warranty freight prepaid after completing a failure report and obtaining a
Returned Product authorization number from LFP to be displayed on the shipping
container. If LFP is unable to correct or provide an acceptable workaround (as
provided above) within the aforementioned sixty-day (60) day period, LFP will
refund to CMI any and all purchase monies received for the Products.
7.6 LFP represents and warrants that prior to delivery of Products all of LFP's
standard tests and quality control procedures have been carried out in relation
to each Product with satisfactory results to meet the Product claims.
7.7 LFP represents and warrants that the effective life of the Consumables is or
will be one (1) year from the date of manufacture, as long as stored according
to Product Specifications, and that the expiration date will be prominently
displayed on such Consumables.
7.8 LFP MAKES NO WARRANTIES, EXPRESS OR IMPLIED AS TO THE MERCHANTABILITY OR THE
FITNESS FOR ANY PARTICULAR USE OF ANY PRODUCTS SOLD HEREUNDER AND SHALL NOT BE
LIABLE FOR ANY LOSS OR DAMAGE, DIRECTLY OR INDIRECTLY, ARISING FROM THE USE OF
SUCH PRODUCTS OR FOR any incidental or consequential damages, lost profits, or
lost data, cost of procurement of substitute goods, or any indirect damages even
if LFP has been informed of the possibility thereof.
7.9 Claims for shortages, delays, or failure in shipment or delivery, or for any
other cause
(except for defective Products which are subject to the warranties set forth in
Sections 7.1-7.8 inclusive), shall be deemed waived and released by CMI, unless
made in writing within: (i) seven (7) business days after arrival of non-dated
Products at CMI's warehouse or (if drop shipped) at the place of delivery; or
(ii) two (2) business days after arrival of dated Products at CMI's warehouse or
(if drop shipped) at the place of delivery; or (iii) five (5) business days
after arrival of drop shipped dated Products at the End User. CMI acknowledges
that, except as set forth in this Article 7, neither LFP nor any other person
has made, and CMI has not relied upon, any warranty or representation, express
or implied.
8.0 Termination
8.1 Notwithstanding any provision herein to the contrary, for a period ending on
the later to occur of six (6) months from this Agreement or thirty (30) days
after CMI's receipt (after the last clinical study) of the written results of
all clinical studies (Alpha tests) of the Product, CMI shall have the option to
terminate this Agreement if the results of the clinical studies demonstrate that
the Products are ineffective as compared to currently accepted and approved
products of a similar nature.
8.2 Notwithstanding Section 1.14 herein, if any of the sovereign entities or
political subdivisions in the Territory enacts legislation relating to the
relationship created by this Agreement which grants rights to either party which
are not granted by this Agreement, or which renders any part of this Agreement
void or ineffective, then either party shall have the right to terminate this
Agreement.
8.3 This Agreement may be terminated immediately upon written notice from LFP to
CMI if: (a) CMI fails to pay its debts to LFP as and when the same becomes due,
(b) a petition in bankruptcy is filed by or against CMI and, in the case of an
involuntary petition, is not dismissed within sixty (60) days, (c) CMI makes an
assignment for the benefit of CMI's creditors, (d) CMI is insolvent and a
receiver is appointed for CMI which is not cured in thirty (30) days, (e) CMI
materially breaches this Agreement and fails to cure said breach after ten (10)
days' prior written notice to cure, or (f) any of the reports or forms which CMI
submits to LFP are found to be materially false or fraudulent. In the event that
CMI's sales for any portion of the Territory delineated on Schedule F are below
the Minimum Sales Level, and no significant market changes (as described in
Schedule F attached hereto) have occurred and are continuing, LFP may terminate
this Agreement in its entirety or terminate CMI as a distributor in that portion
of the Territory in which the sales are below the Minimum Sales Level, with this
Agreement remaining in effect with respect to the balance of the Territory.
8.4 This Agreement may be terminated immediately upon notice from CMI to LFP if
(a) LFP fails to pay its debts to CMI, if any, as and when the same becomes due,
(b) a petition in bankruptcy is filed by or against LFP and in the case of an
involuntary petition, is not dismissed within sixty (60) days, (c) LFP makes an
assignment for the benefit of LFP's creditors, (d) LFP is insolvent and a
receiver is appointed for LFP which is not cured in thirty (30) days, (e) LFP
materially breaches this Agreement and fails to cure said breach after ten (10)
days' prior written notice to cure, (f) any information which LFP submits to CMI
is found to be materially false or fraudulent, or (g) LFP fails to supply at
least fifty percent (50%) of CMI's orders for the Products continuously over any
three-consecutive month period immediately preceding such notice.
8.5 From and after the date of termination of the distributorship created hereby
(the "Termination Date"), CMI (a) shall have the right for a period of ninety
(90) days to sell in accordance with all of the terms hereof, CMI's remaining
inventory of the Products to Customers in the Territory on a non-exclusive
basis, and shall not, without LFP's permission, otherwise use LFP's Mark; (b)
shall take any and all reasonable actions requested by LFP to insure the
transfer to LFP (and/or its designee) of any rights to market and distribute the
Products in the Territory (including, without limitation, the transfer of any
and all transferable permits, regulatory filings and licenses); (c) at the
expiration of the ninety (90)-day period (under subsection (a) herein), shall
notify LFP as to the inventory of Products in CMI's possession or control which
are not subject to orders, shall supply such other information as LFP may
request with respect to its inventory of Products on hand and in transit and (d)
shall return to LFP all LFP produced marketing materials within forty-five (45)
days of termination (including Customer lists, serial number placements of
instruments, and LFP produced marketing materials). LFP shall have the right to
(a) repurchase (at the landed cost price and not at the retail price) all
salable Products set forth in (iii) above and (b) require the destruction by CMI
of all non-salable Products. CMI will have the option to return and be paid and
reimbursed for, any inventory with over one-hundred fifty (150) days' dating. In
the event that LFP terminates this Agreement as a result of a failure of CMI to
achieve Minimum Sales Level, the Minimum Fee (subject to any available
adjustments per Schedule F hereto) will be immediately due and payable in a lump
sum for the balance of the Term of the Distributorship calculated as if the
Agreement had not been terminated and assuming that there were no sales for the
balance of the two (2)-year period after the Product Release Date; provided,
however, that any Minimum Fees previously paid by CMI to LFP for any period will
be subtracted from such lump sum.
8.6 Names of CMI's Customers, addresses, telephone numbers and purchase history
including serial numbers and lot numbers, in English if possible, and
specifically relating to the Product, will be provided to LFP upon termination
of this Agreement.
8.7 This Agreement shall remain in full force and effect to and until all of the
rights and obligations hereunder of the parties hereto arising on or before the
termination hereof shall have been satisfied and performed in full.
9.0 Representations and Warranties
9.1 CMI represents and warrants to LFP as follows:
CMI is a corporation duly organized and validly existing under the laws of
Kentucky.
CMI has the full right, power and authority to execute and deliver this
Agreement, and perform fully and in accordance with all of the terms hereof, and
the performance by CMI of all of its obligations and covenants hereunder shall
not violate any agreement or other instrument to which CMI is a party or by
which CMI or any of its property may be bound.
9.2 LFP represents and warrants to CMI as follows:
LFP is a corporation duly organized and validly existing under the laws of
Delaware.
LFP has the full right, power and authority to execute and deliver this
Agreement, and perform fully and in accordance with all of the terms hereof, and
the performance by LFP of all of its obligations and covenants hereunder shall
not violate any agreement or other instrument to which LFP is a party or by
which LFP or any of its property may be bound.
10.0 Other Agreements and Covenants
10.1 CMI will not market, sell, service, distribute or train for any product
that is competitive with the Products except for CMI's own breath alcohol
testing products.
10.2 LFP will not appoint or contract with any breath alcohol instrument
competitor of CMI as listed and described on Schedule G attached hereto, as a
partner, agent or distributor or in any other capacity for and relating to the
marketing, sales or distribution of the Products in the Territory.
10.3 LFP will take all commercially reasonable actions necessary to enforce the
terms and provisions of CMI's exclusive distributorship hereunder.
10.4 LFP agrees to refer promptly any inquiries regarding the sale of the
Products from Customers in the Territory received by it to CMI. CMI shall refer
promptly to LFP any inquiries which CMI may receive from outside of the
Territory or from a non-Customer inside the Territory for the purchase of the
Products.
10.5 LFP shall maintain product liability insurance covering the Instruments
designed or manufactured by LFP and Consumables designed or manufactured by LFP
in amounts not less than One Million Dollars ($1,000,000.00). LFP shall promptly
procure and maintain in full force and effect at all times during the Term of
the Distributorship, with a responsible insurance carrier or carriers acceptable
to CMI, at least One Million Dollars ($1,000,000.00) of product liability
insurance coverage for bodily injury to one (1) person with respect to the
Consumables and the Instruments designed or manufactured by LFP. All of said
insurance shall provide for coverage resulting from claims reported during and
after the policy period and shall name CMI as an additional insured. LFP shall
promptly furnish or cause to be furnished to CMI evidence of the maintenance and
renewal of the insurance required herein, including, but not limited to, copies
of policies with applicable riders and endorsements, certificates of insurance,
and continuing certificates of insurance.
10.6 Subject to Sections 7.2, 7.3 and 7.4 herein, alterations to any Product
which LFP deems necessary or desirable, and that does not materially change the
performance or user interface of the Products, may be made at any time by LFP,
without prior notice to, or consent of, CMI, and such altered Product, upon
satisfactorily meeting all Product specifications, shall be deemed fully
conforming. In the event of such change in specifications or designs, LFP shall
be under no obligation to make such change on any of the Products previously
shipped to CMI. CMI shall not make any alterations or modifications whatsoever
to Products, without the express prior written consent of LFP. In the event that
LFP plans on a material change in the Product performance, then LFP will notify
CMI in writing at least ninety (90) days (where appropriate) in advance.
10.7 LFP shall have the sole right to bring or threaten action or collect
damages or settlements for infringement of proprietary rights (including,
without limitation, distribution rights) with respect to the Products by third
parties. CMI will promptly notify LFP of any potential infringement of which it
becomes aware.
10.8 The parties anticipate that the Products and their results will be used by
law enforcement agencies to prosecute defendants for drug or alcohol use. It is
also anticipated that one or more defendants will seek to discredit or overturn
the results of the Products. CMI will, in consultation with LFP, create a Law
Enforcement Legal Challenge Strategy (LELCS). The LELCS will be drafted by CMI
within sixty (60) days of the date of this Agreement and finalized as soon as
reasonably possible thereafter. The purpose of the LELCS is to prepare the
parties for the expected challenges and will include plans for:
i. Jurisdictions best suited for a challenge;
ii. Strategy for success in a Court of Record;
iii. Data necessary to support system results;
iv. Experts available to provide expert testimony;
v. Timeframe to expect challenges;
vi. Estimates of costs (financial, time, and other) necessary to win a
challenge; and
vii. Any other aspects necessary for winning the challenge
LFP will have primary responsibility for supporting and defending the Products
when the performance or efficacy or results of the Products are challenged in
criminal or civil suits which seek to invalidate the test results derived from
the Product for the initial three year term of this Agreement. CMI will provide
assistance to LFP in these matters.
11.0 Indemnity
11.1 CMI shall indemnify and hold harmless LFP from and against any and all
losses, costs, charges and expenses, including, without limitation, reasonable
attorneys' fees and disbursements, incurred or sustained by LFP as a result of
any material breach or inaccuracy of any representation, warranty or covenant by
CMI.
11.2 LFP shall indemnify and hold harmless CMI from and against any and all
losses, costs, charges and expenses, including, without limitation, reasonable
attorneys' fees and disbursements, incurred or sustained by CMI as a result of
any material breach or inaccuracy of any representation, warranty or covenant by
LFP.
11.3 If CMI receives a claim of a third party that any Product infringes a
patent validly issued in the Territory or any validly issued U.S. copyright or
trademark, any trade secret, or other proprietary or property right in the
Territory, then CMI will notify LFP promptly in writing within five (5) business
days of receipt of such claim and will give LFP all reasonable information and
assistance and the exclusive authority to evaluate, defend and settle such
claim. LFP, at its own expense and option, may (i) assume control of the
settlement and/or defense of such claim, or (ii) contract with CMI to do so at
CMI's option and LFP's expense [provided, however, that if CMI does not so
elect, LFP shall assume control of the settlement and/or defense of such claim].
LFP will pay any damages or settlement finally awarded on account of such claim;
provided LFP, in the case of settlement by CMI, approves such settlement.
11.4 The foregoing indemnity will not apply to any claim arising out of (i)
non-compliance with LFP's specifications, or (ii) a modification of or damage to
the Products after shipment by LFP, or (iii) any use of the Products in a manner
different from that specified in LFP's product literature. LFP's obligation
hereunder shall not apply to any infringement unless LFP has given CMI express
written permission for such continuing distribution notwithstanding the
allegation of infringement.
11.5 Notwithstanding any other provisions hereof, LFP shall not be liable for
any claim based on CMI's use of the Products as shipped after LFP has provided
written notice to CMI of modifications or changes in the Products or their use
required to avoid such claims and offered to implement those modifications or
changes, if such claim would have been avoided by implementation of LFP's
suggestion.
11.6 LFP shall be responsible for all of the acts and omissions, whether or not
willful, reckless or negligent, of its branches, agents, distributors, dealers
and employees. LFP shall indemnify and defend CMI against and save it harmless
from any and all claims, demands, damages, losses, costs, attorneys' fee
incurred by CMI, by reason of any warranty or representation contained or made
herein, or any act or omission by LFP, its branches, agents, distributors,
dealers or employees.
11.7 CMI shall be responsible for all of the acts and omissions, whether or not
willful, reckless or negligent, of its branches, agents, distributors, dealers
and employees. CMI shall indemnify and defend LFP against and save it harmless
from, any and all claims, demands, damage, loss, cost, attorneys' fees incurred
by LFP by reason of any warranty or representation not authorized by LFP in
writing to any party, or any act or omission not authorized by LFP in writing,
by CMI, its branches, agents, distributors, dealers or employees.
12.0 Export Regulations
12.1 CMI shall be responsible for and shall bear all costs of obtaining import
and export licenses and all governmental consents or authorizations with respect
to shipment of the Products from the United States and shall demonstrate to
LFP's satisfaction compliance with applicable laws and regulations prior to the
scheduled date for the initial shipment outside the United States. CMI and shall
be responsible for and shall bear all costs of clearing the Product through
customs in the Territory and shall pay all customer duties with respect thereto.
12.2 CMI shall not export from the country in which it first takes possession of
any Products or technical information with respect thereto, or re-export from
anywhere, any Products or technical information with respect thereto (or a
direct product thereof, including, without limitation, processes and services)
unless it had first complied with all applicable export regulations, including,
without limitation, those of the United States.
13.0. Miscellaneous
13.1 CMI is an independent contractor, and shall not hold itself out as, or be
deemed to be, an employee, agent, partner or joint venturer of LFP. CMI's
authority shall be limited to the matters expressly set forth in this Agreement.
CMI shall have no right or power to enter into any agreement or commitment in
the name or on behalf of, or otherwise to obligate or bind, LFP, and CMI shall
not hold itself out as having the authority to do so. Neither party to this
Agreement shall have any authority to employ any person on behalf of the other
and CMI shall, with respect to all persons employed by it, perform all
obligations and discharge all liabilities imposed upon employers under law. This
Section 13.1 shall survive termination of this Agreement.
13.2 Each party shall not, and shall cause its employees and Affiliates and
third party subdistributors and sales agents not to, directly or indirectly,
disclose or use at any time (either during or after the Term of the
Distributorship), other than provided hereunder, any confidential information or
knowledge related directly or indirectly to the business of the other party (or
any of its affiliates). A party shall not be bound by the provisions of Section
13.2 with respect to:
a. Information which at the time of disclosure is published or otherwise
generally available to the public through no fault of the party seeking not
to be bound by this Section 13.2 or its employees, agents, distributors or
dealers;
b. Information which was in the possession of such party at the time of
disclosure and which was not acquired directly or indirectly from the other
party;
c. Information rightfully acquired without restriction by such party from a
third party who did not obtain it under pledge of secrecy to another person
or entity.
This Section 13.2 shall survive termination of this Agreement.
13.3 Each party recognizes that the injured party's remedy at law for any breach
of the provisions of Sections 13.1 and 13.2 of this Agreement will be inadequate
and, accordingly, each party agrees that, in addition to such other rights and
remedies that may be available to the injured party, in law or in equity, any
court of competent jurisdiction may enjoin, without the necessity of requiring
proof of actual damages or the posting of any bond or other security, any actual
or threatened breach of the provisions of any of such Sections (whether during
or after the Term of the Distributorship). This Section 13.3 shall survive
termination of this Agreement.
The best efforts obligations imposed on LFP and CMI by the Uniform Commercial
Code are hereby expressly waived and/or disclaimed.
13.5 Any notice required or intended to be given by either party hereto to the
other, pursuant to this Agreement or any provision of law, shall be in writing
and sent by registered or certified mail, postage paid, or delivered by hand or
overnight courier and acknowledged, or by fax and confirmed by registered or
certified mail as follows:
CMI, Inc.
316 E. 9th Street
Owensboro, Kentucky 42303
Attn: Robert L. Hill, President
Fax: 270-685-6678
with a copy to:
Sullivan, Mountjoy, Stainback & Miller, P.S.C.
100 St. Ann Building
Owensboro, KY 42302
Attn: Jesse T. Mountjoy, Esq.
and Anne H. Shelburne, Esq.
Fax: 270-683-6694
LifePoint, Inc.
1205 South Dupont Street
Ontario, CA 91761
Attn: President
Fax: (909) 418-3003
with a copy to:
Wachtel & Masyr, LLP
110 East 59th Street
New York, NY 10022
Attn: Robert W. Berend, Esq.
Fax: (212) 909-9455
or to such other address as may be designated by the respective party by notice
given to the other in accordance with this Section 13.5.
13.6 No waiver by LFP or CMI of any of the terms, conditions, covenants or
agreements of this Agreement, or non-compliance therewith, shall be binding
unless in writing and signed by the party to be charged, and no such wavier
shall be deemed or taken as a waiver at any time thereafter of the same of any
other term, condition, covenant or agreement herein contained, nor of the strict
and prompt performance thereof.
13.7 This Agreement shall be binding upon, and inure to the benefit of, the
parties hereto and their respective successors and assigns. This Agreement may
not be assigned by any party hereto without the prior written consent of the
other parties hereto.
13.8 Section headings are for the convenience of the parties and shall not be
deemed to govern, limit, modify or in any manner affect the scope, meaning or
intent of the provisions of this Agreement.
13.9 This Agreement constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof. No covenants, representations or
warranties other than those contained, incorporated or referred to herein have
been made, given or received. No course of dealing shall be deemed a waiver of
any term or condition hereof. This Agreement may not be changed, modified or
amended except in writing and signed by the parties.
13.10 Notwithstanding any provision herein to the contrary, in the event that
either party is prevented from performing or is unable to perform any of its
obligations under this Agreement (other than a payment obligation) due to any
act of God, fire, casualty, flood, earthquake, war, strike, lockout, epidemic,
destruction of production facilities, riot, insurrection, unavailability of
materials or any other cause beyond the reasonable control of the party invoking
this section, and if such party shall have used its commercially reasonable
efforts to mitigate its effects, such party shall give prompt written notice to
the other party, such party's performance shall be excused, and the time for the
performance shall be extended for the period of delay or inability to perform
due to such occurrences. Irrespective of the excuse of Force Majeure, if such
party is not able to perform within 180 days after such event, the other party
may terminate this Agreement in accordance with the provisions under Section 8
herein. Termination of this Agreement shall not affect the obligations of either
party which exist as of the date of termination.
13.11 If any term or provision, or any portion thereof, of this Agreement, to
any extent, be invalid or unenforceable, the remainder of this Agreement shall
not be affected thereby, and each term and provision of this Agreement shall be
valid and enforceable to the fullest extent permitted by law.
13.12 Governing Law; Arbitration
13.12.1 This Agreement is entered into in the State of California, United
States, and shall only be interpreted according to the laws of the State of
California without giving effect to the principles of conflicts of laws.
13.12.2 Except as provided in Section 13.3 hereof, all disputes arising in
connection with this Agreement, including the interpretation, performance, or
non-performance of the Agreement, shall be settled in Ontario, California, by
arbitration by three (3) Arbitrators who shall be selected from a panel of
arbitrators provided by the American Arbitration Association, in accordance with
the Commercial Arbitration Rules then in effect of the American Arbitration
Association. Selection of the Arbitrators shall be as follows: each party shall
appoint one (1) Arbitrator within twenty (20) days, after written demand for
arbitration, and the two (2) Arbitrators so appointed shall appoint the third
Arbitrator, who shall act as Chairman, within a further twenty (20) days. If the
third Arbitrator is not so appointed within that further twenty (20)-day period,
either party may apply to the American Arbitration Association for appointment
of the third Arbitrator in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. Any such arbitration shall be conducted in
the English language and shall be governed by the laws of the State of
California, United States. Judgment upon the award may be entered in the
Superior Court of the State of California, County of San Bernardino, United
States, or the Circuit Court of Daviess County, Kentucky, or any other court
having jurisdiction thereof. Except for each party's own attorneys' fees and any
expenses incurred in producing its own witnesses (which shall be paid by the
party incurring such expenses), all other administrative expenses shall be
divided equally among the parties.
13.12.3 Except as specifically permitted under subsection 13.12.4, if either
party should attempt either to resolve any dispute arising in connection with
this Agreement in a court of law or equity or to forestall, preempt, or prevent
arbitration of any such dispute by resort to the process of a court of law or
equity, and such dispute is ultimately determined to be arbitrable by such court
of law or equity, the Arbitrators shall include in their award an amount for the
other party equal to all of that other party's costs, including reasonable
attorney's fees, incurred in connection with such determination.
13.12.4 Notwithstanding the foregoing, either party shall be entitled to pursue
its remedies or resolve a dispute under this Agreement in a court of law or
equity in any appropriate foreign (outside the United States) jurisdiction. In
the event that such party elects to enforce its rights under this Agreement in
such a foreign court, the provisions of Sections 13.12.2 and 13.12.3 shall not
be applicable with respect to such action, and each party shall pay its own
attorneys' fees and costs with respect to such action.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
LIFEPOINT, INC.
By: /s/ Linda H. Masterson
Linda H. Masterson
Chairman, President and
Chief Executive Officer
CMI, INC.
By: /s/ Robert L. Hill
Robert L. Hill
President |
SECURITIES PURCHASE AGREEMENT
by and between
HOFMANN & CO
Buyer
and
NETWORK COMPUTING DEVICES, INC.
As Issuer and Seller
Dated August 29, 2001
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”) is entered into as of
August 29, 2001, by and between Network Computing Devices, Inc., a Delaware
corporation (“Seller”), and Hofmann & Co, a Swiss Partnership incorporated in
Unteraegeri (“Buyer”) (each a “Party” and together “Parties”).
RECITALS
Buyer desires to purchase from Seller, on the following terms and conditions,
certain newly issued Shares (as defined below) and Warrants (as defined below)
of the Seller, from the Seller; a publicly-traded corporation; and
Seller desires to issue and deliver the Shares and Warrants to Buyer, each on
the following terms and conditions, set forth herein.
NOW, THEREFORE, in consideration of the recitals and the mutual covenants,
representations, warranties, conditions, and agreement hereinafter expressed,
the Parties agree as follows:
ARTICLE I - PURCHASE AND SALE
1.1. The Shares. Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing (as defined below), the Seller shall
issue and deliver to Buyer, free and clear of all security interests, claims,
and restrictions, and Buyer shall purchase and accept from Seller, an aggregate
of Five Hundred Thirty Thousand (530,000) shares of Convertible Preferred Stock
of the Seller having the rights, privileges, and designations set forth on
Exhibit A hereto (the “Preferred Shares”). The Preferred Shares shall be
convertible into Common Stock (the “Conversion Shares”) on the terms and
conditions set forth in Exhibit A. The Buyer understands that the Shares and
the Conversion Shares, when issued, have not been registered under the
Securities Act of 1933, as amended (the “Act”) and will bear a legend
restricting retransfer in accordance with the Act.
1.2 Warrants. Upon the terms and subject to the conditions set forth
in this Agreement, at the Closing (as defined below), the Seller shall issue and
deliver to Buyer, free and clear of all security interests, claims, and
restrictions, and Buyer shall purchase and accept from Seller, an aggregate of
One Million Two Hundred Thousand (1,200,000) Warrants to purchase additional
Shares of Common Stock (the “Warrant Shares”) of the Seller on the terms, and
subject to the conditions, of the form of Warrants (the “Warrants”) annexed
hereto as Exhibit B hereof. The Buyer understands that neither the Warrants nor
the Warrant Shares have been registered under the Act, and that the Warrants,
and Warrant Shares when issued, will bear a legend restricting retransfer in
accordance with the Act.
1.3 Consideration. The consideration that Buyer shall pay, and the
Seller shall accept, for the Preferred Shares and Warrants is Two Million
Dollars (U.S. $2,000,000).
1.4 Closing; Cooperation. The Closing shall take place at the office
of the Seller at 10:00 A.M. local time on August 29, 2001, or, if the conditions
to the Closing are not by then satisfied, upon satisfaction of such conditions,
the date on which the Closing actually occurs being referred to herein as the
“Closing Date.” Each Party shall reasonably cooperate, as to matters under such
Party's control, in the satisfaction of conditions to the obligations of the
Parties at the Closing; provided, that the foregoing shall not require either
Party to waive any condition herein to its obligations at the Closing or to
incur any substantial cost not otherwise required hereunder.
1.5 Deliveries of Seller at Closing. Subject to the conditions to
Seller’s obligations in Article V, at each Closing, Seller shall deliver to
Buyer a certificate or certificates evidencing the Preferred Shares and the
Warrants duly endorsed or accompanied by a duly executed stock power, together
with such other documents identified in Article IV, duly executed by Seller.
1.6 Deliveries of Buyer at Closing. Subject to the conditions to
Buyer’s obligations in Article IV, at each Closing, Buyer shall deliver to
Seller the Purchase Price by wire transfer of immediately available funds, and
the documents identified in Article V, duly executed by Buyer.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Schedule of Exceptions attached hereto as Exhibit C,
Seller hereby makes the following representations and warranties to Buyer, each
of which is true and correct on the date hereof and each of which shall survive
the Closing:
2.1 Power and Authority. The Seller has the power and capacity to
execute and deliver this Agreement, to perform its obligations hereunder, and to
consummate the transactions contemplated hereby.
2.2 Shares and Warrants. The Preferred Shares, Conversion Shares,
Warrants, and Warrant Shares (collectively the “Securities”) will be, when
issued, fully paid, non-assessable securities of the Seller, free and clear of
all security interests, claims, restrictions and voting agreements of any kind.
The Seller will transfer good and marketable title to the Shares and Warrants at
the Closing, free and clear of all liens, security interests, claims, liens and
voting agreements subject to (i) laws of general application relating to
specific performance, injunctive relief and other equitable remedies; (ii)
applicable laws of general application relating to or affecting creditor rights
generally; and (iii) to the extent that the indemnification provisions in
Section 7.2 hereof may be limited by State or Federal Law.
2.3 Enforceability. This Agreement has been duly executed and
delivered by the Seller and constitutes a legal, valid and binding obligation of
the Seller, enforceable against the Seller in accordance with its terms, subject
to (i) laws of general application relating to specific performance, injunctive
relief and other equitable remedies; (ii) applicable laws of general application
relating to or effecting creditor rights generally; and (iii) to the extent that
the indemnification provisions in Section 7.2 hereof may be limited by State or
Federal Law.
2.4 No Violation; Consents. The execution and delivery of this
Agreement by Seller, the performance by Seller of its obligations hereunder and
the consummation by Seller of the transactions contemplated by this Agreement
will not (i) contravene any provision of the certificate of incorporation or
bylaws of the Seller, (ii) violate or conflict with any law, statute, ordinance,
rule, regulation, decree, writ, injunction, judgment or order of any
governmental authority or of any arbitration award which is either applicable
to, binding upon or enforceable against the Seller, (iii) conflict with, result
in any breach of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default) under, or
give rise to a right to terminate, amend, modify, abandon or accelerate, any
contract which is applicable to, binding upon or enforceable against the Seller,
or (v) require the consent, approval, authorization or permit of, or filing with
or notification to, any governmental authority, except any filings with the
Securities and Exchange Commission (the “SEC”) and other securities filings
required to be made by Seller subsequent to the consummation of the transactions
contemplated hereunder.
2.5 Corporate Existence and Qualification. The Seller is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the State of Delaware; it is duly qualified and in good standing in each
foreign jurisdiction where its failure to so qualify would materially adversely
effect the Seller. The Seller has the corporate power and authority to own and
use its properties and to transact the business in which it is engaged.
2.6 Capitalization. The authorized capital stock of the Seller
consists of 30,000,000 shares of common stock, par value $0.001 per share, and
3,000,000 shares of preferred stock. As of the date hereof, there are issued
and outstanding 17,613,237 Common Shares and 220,000 shares of Series B
Convertible Preferred Stock, all of which have been duly authorized and validly
issued and are fully paid and non-assessable, and warrants to purchase an
additional 1,600,000 shares of Common Stock.
2.7 Property and Permits. Except as set forth in the Seller’s filings
in accordance with the Securities Exchange Act of 1934 (the “Exchange Act”)
including the Seller’s 10-K for the fiscal year ended December 31, 2000 and 10-Q
for the fiscal quarter ending June 30, 2001, (collectively the “Filings”) the
Seller is the sole owner of all right, title, and interest in and to all assets
reflected on its most recent balance sheet, free and clear of all mortgages,
security interests, claims, restrictions and other encumbrances, except as set
forth in the Filings, and there exists no restriction on the use or transfer of
such assets or property. No such assets or property are in the possession of
others and the Seller holds no property on consignment. The Seller holds all
permits, licenses and other approvals necessary to conduct the business in which
it is engaged.
2.8 Financial Information. The audited and unaudited financial
information set forth in the Filings (the “Financial Information”), and has been
prepared in accordance with generally accepted accounting principles
consistently applied during the periods involved (“GAAP”), and fairly presents
the financial condition and results of operations of the Seller as of the dates
and for the periods presented therein. The books and records of the Seller have
been, and are being, maintained in all material respects in accordance with the
GAAP.
2.9 Changes Since June 30, 2001. Except as set forth in the Filings,
since June 30, 2001, the Seller has not (i) issued any capital stock or other
securities; (ii) made any distribution of or with respect to its capital stock
or other securities or purchased or redeemed any of its securities; (iii) sold,
leased or transferred any of its properties or assets other than in the ordinary
course of business consistent with past practice; (iv) made or obligated itself
to make capital expenditures out of ordinary course of business consistent with
past practice; (v) made any payment in respect of its liabilities other than in
the ordinary course of business consistent with past practice; or (vi) agreed to
do or authorized any of the foregoing.
2.10 No Breach of Law or Governing Document. The Seller is not and has
not been in default under or in breach or violation of any applicable statute,
law, treaty, convention, ordinance, decree, order, injunction, rule, directive,
or regulation of any Government (“Law”) or the provisions of any Government
permit, franchise, or license, or any provision of its certificate of
incorporation or its bylaws. The Seller has not received any notice alleging
such default, breach or violation. Neither the execution of this Agreement nor
the consummation of the transactions contemplated hereby constitute or will
constitute or result in any such default, breach or violation.
2.11 Litigation. Except as reflected in the Filings, there is no
action, suit, or other legal or administrative proceeding or governmental
investigation pending or threatened against or by Seller, or any of its
properties or assets, which alone or in the aggregate would have a material
adverse effect upon the Seller, or which questions the validity or
enforceability of this Agreement or the transactions contemplated hereby. There
are no outstanding orders, injunctions, decrees or stipulations issued by any
governmental authority in any proceeding to which the Seller is a party which
have not been complied with in full or which continue to impose any material
obligations on the Seller.
2.12 Intellectual Property.
(a) Except as disclosed in the Filings, to its knowledge, the Seller
is the sole and exclusive owner of each patent, trademark, trade name, service
mark, and copyrighted work, and registrations thereof and applications therefor,
trade secret, software program, invention, proprietary process, and item of
proprietary know-how and other intellectual property necessary for the conduct
of its business as currently conducted (the “Intellectual Property”);
(b) To its knowledge, the Seller is the exclusive owner of all
internally developed prospect lists, customer lists, projections, analyses, and
market studies, free and clear of all restrictions whatsoever, and has the
unrestricted right to use any other such materials used by the Seller but not
internally developed;
(c) To its knowledge, the ownership, use, licensing, purchase, or sale
by or to the Seller of any of the Intellectual Property or of the other
technology used in the business of the Seller does not conflict with,
contravene, infringe upon, interfere with, or violate any patent, trademark,
copyright or other intellectual property right of any third person or require
the acquiescence, agreement or consent of any third person; and
(d) To its knowledge, the Intellectual Property and the other
technology used in the business of the Seller are not subject to a challenge or
claim of infringement, interference or unfair competition or other claim and, to
the knowledge of Seller or the Seller, the Intellectual Property is not being
infringed upon or violated by any third person.
2.15 Disclosure. No representation or warranty by Seller in this
Agreement or in any other document or agreement to be delivered hereunder, and
no information furnished to Buyer by or on behalf of Seller pursuant to or in
connection with this Agreement, contains or will contain as of the Closing Date
any untrue statement of a material fact or any omission of a material fact
necessary to make the respective statements contained herein or therein, in
light of the circumstances under which the statements were made, not misleading.
2.16 Brokers; Finders. Seller has not incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby.
2.17 Restrictive Documents. Seller is not subject to any charter,
by-law, mortgage, lien, lease, agreement, instrument, order, law, rule,
regulation, judgment or decree or any other restriction which would prevent
consummation of the transactions contemplated by this Agreement.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties to Seller, each
of which is true and correct on the date hereof and each of which shall survive
the Closing:
3.1 Status. Buyer is a partnership with the power and authority to
enter into this transaction, and execute and deliver this Agreement, perform its
obligations hereunder, and to consummate the transactions contemplated hereby.
Buyer has the power and capacity to execute and deliver this Agreement, to
perform its obligations hereunder, and to consummate the transactions
contemplated hereby. Buyer has taken all action necessary to authorize its
execution and delivery of this Agreement, the performance of its respective
obligations hereunder and the consummation of the transactions contemplated
hereunder.
3.2 Enforceability. This Agreement has been duly executed and
delivered by Buyer and constitutes a legal, valid and binding obligations of
Buyer, enforceable against Buyer in accordance with its terms.
3.3 No Violation. The execution and delivery of this Agreement by
Buyer, the performance by Buyer of the obligations hereunder and the
consummation by Buyer of the transactions contemplated by this Agreement will
not (i) violate or conflict with any law, statute, ordinance, rule, regulation,
decree, writ, injunction, judgment or order of any governmental authority or of
any arbitration award which is either applicable to, binding upon or enforceable
against Buyer, (ii) conflict with, result in any breach of, or constitute a
default (or an event which would, with the passage of time or the giving of
notice or both, constitute a default) under, or give rise to a right to
terminate, amend, modify, abandon or accelerate, any contract which is
applicable to, binding upon or enforceable against Buyer, (iii) result in or
require the creation or imposition of any lien upon or with respect to the
Securities being acquired by Buyer, or (iv) require the consent, approval,
authorization or permit of, or filing with or notification to, any governmental
authority, except any filings with the SEC and other filings required to be made
by Buyer subsequent to the consummation of the transaction.
3.4 Financial Condition. Buyer has sufficient assets to enter into
this Agreement and to consummate the transactions contemplated hereby.
3.5 Investment Experience. The Buyer is an accredited investor, as
such term is defined under Regulation D promulgated under the Act, which may
require that the Buyer have more than US$ 5,000,000 in assets or that each
constituent partner of the Buyer have either (i) a net worth in excess of
US$1,000,000 or (ii) income of more than US$200,000 in each of the last two
years or US$300,000 jointly with his or her spouse during those years and a
reasonable expectation of reaching the same income level in the current year.The
Buyer acknowledges that it can bear the economic risk and complete loss of its
investment in the Shares and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the
investment contemplated hereby.
3.6 Investment Representation. Buyer is acquiring the Shares for its
own account, for investment and without any view to resale or distribution of
the Shares or any portion thereof. Buyer acknowledges that the sale of the
Securities hereunder has not been registered or qualified under the Act, or
under any state securities laws, and that any retransfer of the Shares by the
Buyer will accordingly be restricted. The certificates representing the Shares
will bear a legend to the effect that the Shares may not be transferred except
in a transaction registered or qualified under applicable securities laws or in
a transaction exempt from such registration or qualification, as evidenced by an
opinion of counsel or other evidence satisfactory to the Seller and its counsel.
3.6.1 Restrictions on Transfer. Buyer acknowledges that the Securities
must be held indefinitely unless subsequently registered under the Securities
Act or the Company receives an opinion of counsel satisfactory to the Company
that such registration is not required. Buyer is aware of the provisions of
Rule 144 promulgated under the Securities Act which permit limited resale of
stock purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the stock. In the absence of a prior registration of the Common Shares
underlying the securities being sold, the Buyer agrees to be bound by any
applicable restrictions, and acknowledges that the Buyer may be required to hold
the Shares for an indefinite period of time, subject to prior registration of
the Common Stock into which the Shares are convertible.
3.6.2 Exemption from Registration. Buyer further acknowledges that, in
the event all of the requirements of Rule 144 are not met, compliance with
another registration exemption will be required; and that, although Rule 144 is
not exclusive, the staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and other than pursuant to Rule 144, will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, that such persons and the brokers who participate in the
transactions do so at their own risk. There is no assurance that any exemption
from registration under the Securities Act will be available or, if available,
will allow such person to dispose of, or otherwise transfer, all or any portion
of the Securities.
3.7 Disclosure of Information. The Buyer has had access to such
financial and other information concerning the Seller and the Shares as the
Buyer deems necessary in order to make a decision to acquire the Shares,
including an opportunity to ask questions of and receive information from the
Seller. Neither such inquiries nor any other due diligence investigation
conducted by the Buyer shall modify, amend or affect the Buyer’s right to rely
on the Seller’s representations and warranties contained in this Agreement.
3.8 Brokers, Finders. Buyer has not incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby.
3.9 Restrictive Documents. Buyer is not subject to any agreement,
instrument, order, law, rule, regulation, judgment or decree or any other
restriction which would prevent consummation of the transactions contemplated by
this Agreement.
ARTICLE IV - CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer at the Closing shall be subject to the satisfaction at
or prior to the Closing of each of the following conditions (unless waived in
writing by Buyer):
4.1 Accuracy of Representations and Warranties. Seller’s
representations and warranties set forth in Article II shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects on the Closing Date as though such representations and
warranties were made at and as of such date and time.
4.2 Performance of Agreement. Seller shall have fully performed and
complied with all covenants, conditions, and other obligations under this
Agreement to be performed or complied with by them at or prior to the Closing.
4.3 No Adverse Change. There shall have been no material adverse
change in the Seller’s business, prospects or financial condition between the
date hereof and Closing.
4.4 Certificate. Seller shall have delivered to Buyer at the Closing
a certificate of Seller, dated the Closing Date, to the effect that the
conditions set forth in Sections 4.1, 4.2 and 4.3 have been satisfied. Such
certificate shall be deemed an additional representation and warranty of Seller
hereunder.
4.5 Registration Rights Agreement. Seller shall have entered into,
executed and delivered a Registration Rights Agreement, in form and substance
satisfactory to Buyer, providing for at least one demand registration of the
Conversion Shares and the Warrant Shares, and an unlimited number of piggyback
registrations of such Conversion Shares and Warrant Shares.
ARTICLE V - CONDITIONS TO SELLER’S OBLIGATIONS
The obligations of Seller at the Closing shall be subject to the satisfaction at
the Closing of the following conditions (unless waived in writing by Seller):
5.1 Accuracy of Representations and Warranties. Buyer's
representations and warranties set forth in Article III shall have been true and
correct in all material respects when made, and shall be true and correct in all
material respects on the Closing Date as though such representations and
warranties were made at and as of such date and time.
5.2 Performance of Agreement. Buyer shall have fully performed and
complied with all covenants, conditions, and other obligations under this
Agreement to be performed or complied with by it at or prior to the Closing.
5.3 Certificate. Buyer shall have delivered to Seller at the Closing
a certificate of Buyer, dated the Closing Date, to the effect that the
conditions set forth in Sections 5.1 and 5.2 have been satisfied. Such
certificate shall be deemed an additional representation and warranty of Buyer
hereunder.
5.4 Registration Rights Agreements. Buyer shall have entered into,
executed and delivered a Registration Rights Agreement, as provided in Section
4.5 hereof.
ARTICLE VI - ADDITIONAL COVENANTS OF THE PARTIES
6.1 Conduct of Business Before Closing. From the date hereof, until
Closing, Seller shall (a) cause the business of the Seller to be operating in
the ordinary course of business and (b) not take any action which would require
a change or addition to or deletion from the disclosures of Seller pursuant to
Article II hereof, without the prior written consent of Buyer.
6.2 Public Disclosure. No Party to this Agreement shall make any
public disclosure of the terms hereof or the transactions contemplated hereby
without the prior written consent of the other Party, except as required by
law. In the event circumstances shall change requiring, in the opinion of
either Party, a public release, the Party proposing to make the announcement
will advise the other in advance and will give the other Party the opportunity
to comment on the form of the proposed announcement. Buyer shall not disclose
to any third person any confidential information relating to the Seller, without
the prior written consent of the Seller. Notwithstanding the foregoing, Buyer
may disclose such information, as may be reasonably required, to its attorneys,
accountants, and advisors, financial and otherwise, in order to evaluate the
investment opportunity presented herein.
6.3 Further Assurances. From and after each Closing, the Parties
shall do such acts and execute such documents and instruments as may be
reasonably required to make effective the transactions contemplated hereby.
ARTICLE VII - INDEMNIFICATION
7.1 Survival. The respective representations and warranties made by
the Parties in Articles II and III and certificates under Sections 4.4 and 5.3
shall survive the Closing Date but the right to bring a claim for
indemnification under this Article VII shall expire on the first anniversary of
the Closing Date unless a claim with respect thereto shall have been made
against the Party responsible for indemnification hereunder (the “Indemnifying
Party”).
7.2 Indemnification of Buyer. Seller shall hold Buyer harmless and
indemnify it from and against, and waives any claim for contribution or
indemnity with respect to, any and all claims, losses, damages, liabilities,
expenses or costs (“Buyer Losses”) plus reasonable attorneys' fees and expenses
incurred in connection with Buyer Losses and/or enforcement of this Agreement
(“Buyer Indemnified Losses”) incurred or to be incurred by it to the extent
resulting from or arising out of any breach or violation of Seller’s
representations, warranties, covenants, or agreements contained in this
Agreement, including provisions of this Article VII.
7.3 Indemnification of Seller. Buyer shall hold
Seller, its officers, directors, and affiliates (“Seller Indemnified Persons”),
harmless and indemnify each of them from and against, and waives any claim for
contribution or indemnity with respect to, any and all claims, losses, damages,
liabilities, expenses or costs (“Seller Losses”) plus reasonable attorneys' fees
and expenses incurred in connection with Seller Losses and/or enforcement of
this Agreement. (“Seller Indemnified Losses”) incurred or to be incurred by any
of them to the extent resulting from or arising out of any breach or violation
of Buyer’s representations, warranties, covenants, or agreements contained in
this Agreement, including provisions of this Article VII.
7.4 Notice of Claim. In the event that Buyer seeks indemnification,
or Seller seeks indemnification on behalf of a Seller Indemnified Person, such
Party seeking indemnification (the “Indemnified Party”) shall give written
notice to the other party (the “Indemnifying Party”) specifying the facts
constituting the basis for such claim and the amount, to the extent known, of
the claim asserted. The Indemnifying Party shall pay the amount of any valid
claim not more than thirty days (30) after the Indemnified Party provides notice
to the Indemnifying Party of such amount, or otherwise take the entire burden,
including all reasonable legal fees and expenses, of defending and holding
harmless the Indemnified Party against such claim or liability.
ARTICLE VIII - MISCELLANEOUS PROVISIONS
8.1 Notice. All notices, requests, demands, and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given and made upon being delivered either by courier
or telecopier delivery to the Party for whom it is intended, provided that if
delivered by telecopier, a copy thereof is deposited, postage prepaid, certified
or registered mail, return receipt requested, bearing the address shown in this
Agreement for, or such other address as may be designated in writing hereafter
by, such Party:
8.2 Entire Agreement. This Agreement embodies the entire
understanding of the parties hereto with respect to the subject matter hereof,
and supersede all prior and contemporaneous agreements and understandings
relative to such subject matter.
8.3 Assignment; Binding Agreement. This Agreement and various rights
and obligations arising hereunder shall inure to the benefit of and be binding
upon Buyer, its successors, and permitted assigns and Seller, its successors and
permitted assigns. Neither this Agreement nor any of the rights, interests, or
obligations hereunder may be transferred, delegated, or assigned (by operation
of law or otherwise) by either of the Parties hereto without the prior written
consent of the other Party.
8.4 Counterparts. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
8.5 Headings; Interpretation. The article and section headings
contained in this Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of the Agreement.
8.6 Expenses. Seller and Buyer shall each pay all costs and expenses
incurred by either of them in connection with the negotiation, preparation and
execution of this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, fees and expenses of
attorneys, investment bankers and accountants.
8.7 Governing Law. This Agreement shall in all respects be construed
in accordance with and governed by the substantive laws of the State of
California, without reference to its conflict of law rules.
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be
executed as of the date first above written.
BUYER:
SELLER:
HOFMANN & CO.
NETWORK COMPUTING DEVICES, INC
By:
By:
Name: Gottfried Hofmann
Name:
Title: Partner
Title
EXHIBIT A
NETWORK COMPUTING DEVICES, INC.
AMENDED
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF THE TERMS OF THE SERIES B AND SERIES C PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation Law of the State of
Delaware)
The undersigned President and Chief Executive Officer of Network Computing
Devices, Inc., organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 103 thereof,
DOES HEREBY CERTIFY:
That, on August 29, 2001, the Board of Directors of the Corporation adopted the
following resolution changing the designations, preferences and rights of the
terms of the Series B Preferred Stock and creating a series of 530,000 shares of
Preferred Stock designated as Series C Preferred Stock:
RESOLVED, that the designations, preferences and rights of the Series B
Preferred Stock of the Corporation are hereby amended, and a new series of
Preferred stock of the Corporation, designated Series C Preferred Stock, is
hereby created, and that the designation and amount thereof and the powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
SECTION 1: DESIGNATION AND AMOUNT.
The shares of such series shall be designated as “Series B Preferred Stock” (the
“Series B Preferred Stock”), par value $.001 per share, and “Series C Preferred
Stock” (the “Series C Preferred Stock”), par value $.001 per share. The number
of shares initially constituting the Series B Preferred Stock and the Series C
Preferred Stock shall be 290,000 shares and 530,000 shares, respectively. The
Series B Preferred Stock and Series C Preferred Stock are sometimes referred to
together as the “Series Preferred Stock.”
SECTION 2: DIVIDENDS AND DISTRIBUTIONS.
(A) DIVIDENDS. THE HOLDERS OF THE SERIES B PREFERRED STOCK (THE
“SERIES B HOLDERS”) AND THE HOLDERS OF THE SERIES C PREFERRED STOCK (THE “SERIES
C HOLDERS” OR, COLLECTIVELY WITH THE SERIES B HOLDERS, THE “SERIES HOLDERS”)
SHALL BE ENTITLED TO RECEIVE WHEN, AS AND IF DECLARED BY THE BOARD OF DIRECTORS,
OUT OF ANY ASSETS LEGALLY AVAILABLE THEREFOR, DIVIDENDS NOT LESS THAN, AND IN
PREFERENCE AND PRIORITY TO ANY PAYMENT OF, ANY DIVIDEND OR DISTRIBUTION ON THE
COMMON STOCK OR ANY OTHER CLASS OR SERIES OF STOCK OF THE CORPORATION RANKING
JUNIOR TO THE SERIES PREFERRED STOCK AND PRO RATA WITH PAYMENT OF ANY DIVIDEND
ON ANY CLASS OR SERIES OF STOCK OF THE CORPORATION RANKING ON A PARITY WITH THE
SERIES PREFERRED STOCK AS TO DIVIDENDS. SUCH DIVIDENDS ON THE SERIES B
PREFERRED STOCK AND THE SERIES C PREFERRED STOCK SHALL ACCRUE AT THE RATE OF
$.41 PER SHARE AND $.23 PER SHARE, RESPECTIVELY, PER ANNUM FROM THE DATE OF
ISSUANCE TO THE DATE OF PAYMENT, BASED ON THE ACTUAL NUMBER OF DAYS ELAPSED, AND
SHALL BE PAYABLE ON THE PAYMENT DATE FIXED BY THE DECLARATION OR, IF NO PAYMENT
DATE IS FIXED, SHALL ACCRUE SEMI-ANNUALLY ON MAY 31ST, AND NOVEMBER 30TH OF EACH
YEAR, AND UPON ANY LIQUIDATION (AS HEREINAFTER DEFINED). IN THE EVENT DIVIDENDS
IN LESS THAN THE FULL PREFERENTIAL AMOUNT SHALL BE PAID TO THE HOLDERS OF THE
SERIES PREFERRED STOCK, SUCH DIVIDENDS SHALL BE DISTRIBUTED RATABLY AMONG SUCH
HOLDERS IN PROPORTION TO THE FULL PREFERENTIAL AMONT THAT EACH SUCH HOLDER IS
OTHERWISE ENTITLED TO RECEIVE UNDER THIS SECTION 2(A).
(B) DISTRIBUTIONS. AS USED IN THIS SECTION 2, THE TERM “DISTRIBUTION”
SHALL MEAN A TRANSFER OF CASH, PROPERTY OR SECURITIES WITHOUT CONSIDERATION,
WHETHER BY WAY OF DIVIDEND OR OTHERWISE, OR THE PURCHASE OR REDEMPTION OF SHARES
OF THE CORPORATION.
(C) NECESSARY ACTIONS. THE CORPORATION SHALL TAKE ANY AND ALL
CORPORATE ACTION NECESSARY TO DECLARE AND PAY THE DIVIDENDS REQUIRED.
SECTION 3: LIQUIDATION.
(A) LIQUIDATION DEFINED. “LIQUIDATION” MEANS ANY VOLUNTARY OR
INVOLUNTARY LIQUIDATION, DISSOLUTION OR WINDING UP OF THE AFFAIRS OF THE
CORPORATION, OTHER THAN ANY DISSOLUTION, LIQUIDATION OR WINDING UP IN CONNECTION
WITH ANY REINCORPORATION OF THE CORPORATION IN ANOTHER JURISDICTION. A
CORPORATE TRANSACTION (AS HEREINAFTER DEFINED) SHALL BE DEEMED TO BE A
LIQUIDATION. AS USED HEREIN, “CORPORATE TRANSACTION” SHALL MEAN (I) ANY
CONSOLIDATION OR MERGER OF THE CORPORATION WITH OR INTO ANY OTHER CORPORATION OR
OTHER ENTITY OR PERSON, OR ANY OTHER CORPORATE REORGANIZATION, IN WHICH THE
STOCKHOLDERS OF THE CORPORATION IMMEDIATELY PRIOR TO SUCH CONSOLIDATION, MERGER
OR REORGANIZATION OWN LESS THAN FIFTY PERCENT (50%) OF THE CORPORATION’S VOTING
POWER IMMEDIATELY AFTER SUCH CONSOLIDATION, MERGER OR REORGANIZATION, OR (II) A
SALE, LEASE, TRANSFER OR OTHER DISPOSITION OF ALL OR SUBSTANTIALLY ALL OF THE
ASSETS OF THE CORPORATION.
(B) RIGHTS. UPON A LIQUIDATION, AS HEREINABOVE DEFINED, AFTER PAYMENT
OR PROVISION FOR PAYMENT OF THE DEBTS AND OTHER LIABILITIES OF THE CORPORATION,
AND PRIOR TO ANY DISTRIBUTION TO THE HOLDERS OF SERIES A PARTICIPATING PREFERRED
STOCK OR COMMON STOCK OF THE CORPORATION, THE SERIES HOLDERS SHALL BE ENTITLED
TO RECEIVE, OUT OF THE REMAINING ASSETS OF THE CORPORATION AVAILABLE FOR
DISTRIBUTION TO ITS STOCKHOLDERS, AN AMOUNT EQUAL TO $7.00 PER SHARE PLUS
ACCRUED AND UNPAID DIVIDENDS, IF ANY, WITH RESPECT TO EACH SHARE OF SERIES B
PREFERRED STOCK (THE “SERIES B LIQUIDATION PREFERENCE”) AND AN AMOUNT EQUAL TO
$3.80 PER SHARE PLUS ACCRUED AND UNPAID DIVIDENDS, IF ANY, WITH RESPECT TO EACH
SHARE OF SERIES C PREFERRED STOCK (THE “SERIES C LIQUIDATION PREFERENCE”).
FOLLOWING THE PAYMENT OF THE FULL AMOUNT OF THE SERIES B LIQUIDATION PREFERENCE
AND THE SERIES C LIQUIDATION PREFERENCE AND ANY PREFERENCE THAT IS PAYABLE TO
THE HOLDERS OF ANY OTHER SERIES OF PREFERRED STOCK, THE HOLDERS OF
SERIES PREFERRED STOCK AND COMMON STOCK AND, TO THE EXTENT PROVIDED FOR IN THE
CERTIFICATE OF INCORPORATION, SUCH OTHER SERIES OF PREFERRED STOCK, SHALL
RECEIVE THEIR RATABLE AND PROPORTIONATE SHARE, ON A PER SHARE AND AS-CONVERTED
TO COMMON STOCK BASIS, OF THE REMAINING ASSETS TO BE DISTRIBUTED WITH RESPECT TO
SUCH SERIES PREFERRED STOCK, SUCH OTHER SERIES OF PREFERRED STOCK AND COMMON
STOCK, RESPECTIVELY. IF UPON ANY LIQUIDATION THE ASSETS OF THE CORPORATION
AVAILABLE FOR DISTRIBUTION TO ITS STOCKHOLDERS SHALL BE INSUFFICIENT TO PAY TO
THE SERIES HOLDERS AND THE HOLDERS OF ANY OTHER CLASS OF CAPITAL STOCK RANKING
ON A PARITY WITH THE SERIES PREFERRED STOCK (“PARITY HOLDERS”) THE FULL SERIES B
LIQUIDATION PREFERENCE, SERIES C LIQUIDATION PREFERENCE AND LIQUIDATION
PREFERENCE PAYABLE TO SUCH PARITY HOLDERS (“PARITY PREFERENCE”), RESPECTIVELY,
THE SERIES B HOLDERS, SERIES C HOLDERS AND PARITY HOLDERS SHALL SHARE PRO RATA
IN ANY DISTRIBUTION OF ASSETS IN ACCORDANCE WITH SUCH FULL SERIES B LIQUIDATION
PREFERENCE, SERIES C LIQUIDATION PREFERENCE AND PARITY PREFERENCE AMOUNTS,
RESPECTIVELY.
SECTION 4: VOTING RIGHTS.
In addition to other rights provided herein or by law, the Series Holders shall
be entitled to vote on all matters submitted to the stockholders of the
Corporation for vote or consent and, except when a single class vote is
required, will vote with the holders of Common Stock as one class. Each Series
Holder shall be entitled to one vote per share of Common Stock issuable upon
conversion of the shares of Series Preferred Stock then held by such holder.
SECTION 5: CONVERSION.
(A) RATE. THE SERIES B PREFERRED STOCK AND THE SERIES C PREFERRED
STOCK SHALL BE CONVERTIBLE, AT THE OPTION OF THE HOLDER THEREOF AT A RATE OF TEN
(10) SHARES OF COMMON STOCK FOR EACH SHARE OF SERIES B PREFERRED STOCK OR SERIES
C PREFERRED STOCK, SUBJECT TO APPROPRIATE ADJUSTMENT IN THE EVENT OF ANY STOCK
SPLIT, STOCK DIVIDEND OR REVERSE STOCK SPLIT AFFECTING THE COMMON STOCK WHERE
THE SERIES B PREFERRED STOCK OR SERIES C PREFERRED STOCK IS NOT TREATED IN AN
EQUIVALENT MANNER. NOTWITHSTANDING THE FOREGOING, THE SERIES C PREFERRED STOCK
SHALL NOT BE CONVERTIBLE UNLESS AND UNTIL THE CERTIFICATE OF INCORPORATION OF
THE CORPORATION IS AMENDED TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK BY NOT LESS THAN 5,300,000, PROVIDED THAT, WHILE THIS RESTRICTION REMAINS
IN EFFECT, THE SERIES C HOLDERS SHALL HAVE THE SAME RIGHTS UPON A LIQUIDATION
UNDER SECTION 3 AND THE SAME VOTING RIGHTS UNDER SECTION 4 AS THEY WOULD HAVE
ABSENT THIS RESTRICTION.
(B) MECHANICS OF CONVERSION. UPON DELIVERY TO THE COMPANY OF THE
CERTIFICATE OR CERTIFICATES FOR THE SHARES OF SERIES PREFERRED STOCK TO BE
CONVERTED, DULY ENDORSED OR ASSIGNED IN BLANK TO THE COMPANY (IF REQUIRED BY
IT), THE COMPANY SHALL ISSUE AND DELIVER TO OR UPON THE WRITTEN ORDER OF A
SERIES HOLDER, TO THE PLACE DESIGNATED BY SUCH HOLDER, A CERTIFICATE OR
CERTIFICATES FOR THE NUMBER OF FULL SHARES OF COMMON STOCK TO WHICH SUCH HOLDER
IS ENTITLED.
SECTION 6: REDEMPTION.
The Series B Preferred Stock and the Series C Preferred Stock may not be
redeemed by the Corporation without the consent of the holders of all of the
Series B Preferred Stock or Series C Preferred Stock, respectively, then
outstanding.
SECTION 7: NO REISSUANCE.
No shares of Series Preferred Stock acquired by the Company by reason of
exchange, conversion or otherwise shall be reissued and all such shares shall be
canceled, retired and eliminated from the shares of Series Preferred Stock which
the Company shall be authorized to issue.
SECTION 8: PROTECTIVE PROVISIONS.
(A) REQUIRED CONSENTS. IN ADDITION TO ANY OTHER VOTE OR CONSENT
REQUIRED HEREIN OR BY LAW, THE AFFIRMATIVE VOTE OR WRITTEN CONSENT OF THE SERIES
B HOLDERS OWNING A MAJORITY OF THE OUTSTANDING SERIES B PREFERRED STOCK, AND THE
SERIES C HOLDERS OWNING A MAJORITY OF THE OUTSTANDING SERIES C PREFERRED STOCK,
EACH VOTING AS A SEPARATE CLASS, SHALL BE NECESSARY FOR EFFECTING OR VALIDATING
THE FOLLOWING ACTIONS:
(I) ANY AMENDMENT, ALTERATION, REPEAL, OR WAIVER OF ANY PROVISION OF
THE CERTIFICATE OF INCORPORATION OF THE COMPANY (INCLUDING THE FILING OF ANY
CERTIFICATE OF DESIGNATIONS), AS IN EFFECT FROM TIME TO TIME (THE “CERTIFICATE
OF INCORPORATION”), OR THE BYLAWS OF THE COMPANY, THAT AFFECTS ADVERSELY THE
VOTING POWERS, PREFERENCES, PRIORITIES OR OTHER SPECIAL RIGHTS OR PRIVILEGES,
QUALIFICATIONS, LIMITATIONS, OR RESTRICTIONS OF SUCH SERIES OF PREFERRED STOCK;
(II) ANY REDEMPTION OR REPURCHASE OF CAPITAL STOCK OF THE COMPANY
(EXCEPT FOR ACQUISITIONS OF COMMON STOCK BY THE COMPANY UNDER STOCK OPTION OR
RESTRICTED STOCK AGREEMENTS WITH EMPLOYEES APPROVED BY THE BOARD OF DIRECTORS);
(III) ANY MATERIAL DISBURSEMENT OF FUNDS OUTSIDE OF THE ORDINARY COURSE
OF THE COMPANY’S BUSINESS;
(IV) ANY CONSOLIDATION OR MERGER OF THE COMPANY WITH OR INTO ANY OTHER
COMPANY OR OTHER ENTITY OR PERSON, OR THE ENTERING INTO ANY OTHER CORPORATE
REORGANIZATION;
(V) ANY TERMINATION OF THE COMPANY’S LINE OF BUSINESS AS OF THE DATE
OF THE FIRST ISSUANCE OF SERIES B PREFERRED STOCK OR SUBSTITUTION OF AN
UNRELATED LINE OF BUSINESS AS ITS PRINCIPAL FOCUS OF THE COMPANY’S ACTIVITIES;
(VI) ANY VOLUNTARY DISSOLUTION, LIQUIDATION WINDING-UP OR PARTIAL
LIQUIDATION OF THE COMPANY, OR ANY DISTRIBUTION OR TRANSACTION IN THE NATURE OF
A PARTIAL LIQUIDATION OR DISTRIBUTION, OR ANY SALE OR OTHER TRANSFER OF ALL OR
SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY (INCLUDING SHARES, OR ALL OR
SUBSTANTIALLY ALL OF THE ASSETS, OF ANY SUBSIDIARY OF THE COMPANY); OR
(VII) ANY INCREASE OR DECREASE IN THE AUTHORIZED NUMBER OF SHARES OF ANY
SERIES OR CLASS OF THE COMPANY’S CAPITAL STOCK.
(B) FINANCIAL REPORTS. THE COMPANY WILL FURNISH TO THE SERIES HOLDERS,
AS SOON AS PRACTICABLE, AND IN ANY CASE WITHIN 75 DAYS AFTER THE END OF EACH
FISCAL QUARTER, UNAUDITED QUARTERLY FINANCIAL STATEMENTS, AND WITHIN 90 DAYS
AFTER THE END OF EACH FISCAL YEAR, ANNUAL AUDITED FINANCIAL STATEMENTS (ALL
PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
CONSISTENTLY APPLIED).
SECTION 9: NO IMPAIRMENT
The Company will not, by amendment of its Certificate of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of the Series
Preferred Stock set forth herein, and will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Series Holders
against impairment. Without limiting the generality of the foregoing, the
Company will take all such action as may be necessary or appropriate in order
that the Company may reserve for issuance, and validly and legally issue fully
paid and non-assessable Company shares on the conversion of all Series Preferred
Stock from time to time outstanding.
SECTION 10: NOTICES.
All notices, requests and other communications shall be in writing addressed to
the Company at its principal office or to the Series Holders at their addresses
appearing on the stock ownership records of the Company and delivered by a
nationally recognized overnight mail carrier, certified mail return receipt
requested or facsimile. Any notice sent by nationally-recognized overnight mail
carrier shall be deemed to be delivered on the expected date of delivery. Any
notice sent by certified mail, return receipt requested, shall be deemed to be
delivered 3 days after mailing. Any notice sent by facsimile shall be deemed
delivered upon the receipt by sender of written confirmation of transmission.
3. That the foregoing amendment has been duly adopted in accordance
with Section 242 of the General Corporation Law of the State of Delaware.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, I have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this 29th day of
August, 2001.
Rudolph G. Morin, President and Chief
Executive Officer
|
OPTION AGREEMENT
This agreement is entered into this seventh day of December, 2000, by and
between VICORP Restaurants, Inc. (the Corporation), and Robert E. Kaltenbach
("Optionee").
WHEREAS, the Corporation has adopted the Amended and Restated 1982 Stock Option
Plan ("Plan"), which Plan is in full force and effect; and
WHEREAS, pursuant to Article VIII of the Plan, the Committee of Non-Employee
Directors is to notify the recipient of the grant of any option in a writing
delivered in duplicate either in person or by mail.
NOW, THEREFORE, the parties hereto acknowledge and agree as follows:
I. GRANT:
Optionee is hereby granted a non-qualified option to purchase under the terms of
the plan 25,000 shares of the Corporation's common stock (par value $0.05 per
share) for an exercise price of $17.8125 per share. The options shall be vested
according to the following schedule:
8,333 shares will vest on December 7, 2000
8,333 shares will vest on December 7, 2001
8,334 shares will vest on December 7, 2002
II. TERM:
Each option granted shall expire ten years from the date of grant, unless
canceled or terminated earlier in accordance with the terms of the Plan.
III. EXERCISE OF OPTIONS:
Only options which are vested may be exercised.
IV. MANNER OF EXERCISE:
(a) Notice to the Corporation: Each exercise of an option shall be made by the
delivery by the Optionee of written notice of such election to the Corporation,
either in person or by mail, stating the number of shares with respect to which
the option is being exercised and specifying a date on which the shares will be
taken and payment made therefor. The date shall be at least fifteen (15) days
after the giving of such notice, unless an earlier date shall have been mutually
agreed upon .
(b) Issuance of Stock: Subject to any law or regulation of the Securities and
Exchange Commission or other body having jurisdiction requiring an action to be
taken in connection with the shares specified in a notice of election before the
shares can be delivered to the Optionee, on the date specified in the notice of
election, the Corporation shall deliver, or cause to be delivered to the
Optionee stock certificates for the number of shares with respect to which the
option is being exercised, against payment therefor (including payment of any
tax required to be withheld). In the event of any failure to take and pay, on
the date stated, for the full number of shares specified in the notice of
election, the option shall become inoperative only as to those shares which are
not taken or paid for, but shall continue with respect to any remaining shares
subject to the option as to which exercise has not yet been made.
V. ASSIGNMENT:
Any option granted under the Plan shall not be assigned, pledged, or
hypothecated in any way, shall not be subject to execution, and shall not be
transferable other than by will or the laws of descent and distribution. Any
attempted assignment or other prohibited disposition shall be null and void.
VI. TERMINATION:
(a) Termination Other Than At Death Or Disability: If the Optionee terminates
his position as an Employee of the Corporation for any reason other than death
or disability, any unexpired and unexercised granted options shall be canceled
three months after the effective date of the Optionee's termination.
(b) Termination At Death Or Disability: In the event of the death of the
Optionee, any option held by him at the time of his death shall be transferred
as provided in his will or by the laws of descent and distribution, and may be
exercised by such transferee at any time within twelve months after the date of
death, to the extent the option is exercisable on the date of death, and
provided it is exercised within the time prescribed in the Plan. In the event of
the disability of the Optionee, any option held by him may be exercised in whole
or in part, by the Optionee or his personal representative at any time within
twelve months after the date of disability, to the extent the option is
exercisable on the date of disability, and provided that it is exercised within
the time prescribed in the Plan. Disability and time of disability shall be
determined by the Committee.
VII. CHANGES IN CAPITAL STRUCTURE:
The number of shares granted to Optionee will be subject to adjustment in the
case of stock splits, combinations, stock dividends, reorganization and similar
events.
VIII. SUBSTITUTION OR CANCELLATION UPON ACQUISITION:
As used in this article, "Acquisition Event" means (1) any sale or other
disposition of all or substantially all of the assets of the Corporation or of
any participating subsidiary pursuant to a plan which provides for the
liquidation of the Corporation or the participating subsidiary, (2) any exchange
by the holders of all of the outstanding shares of Common Stock for securities
issued by another entity, or in whole or in part for cash or other property,
pursuant to a plan of exchange approved by the holders of a majority of such
outstanding shares, or (3) any transaction to which 425(a) of the Internal
Revenue Code of 1954, as amended, applies and to which the Corporation or any
participating subsidiary is a party in connection with any Acquisition Event and
upon such terms and conditions as the Board may establish:
(a) The Committee may waive any limitation applicable to any option or right
granted to the Optionee by this Agreement under the Plan so that such option and
right, from and after a date prior to the Acquisition Event that is specified by
the Committee, shall be exercisable in full.
(b) If the Committee so determines, the Optionee may be given the opportunity to
make a final settlement for the entire unexercised portion of any option and any
right granted by this Agreement under the Plan, including any portion not then
currently exercisable, in any one or more of the following matters:
(i) Surrender such unexercised portion for cancellation in exchange for the
payment in cash of an amount not less than the difference between the value per
share of Common Stock as measured by the value to be received by the holders of
the outstanding shares of Common Stock pursuant to the terms of the Acquisition
Event, as determined by the Committee in its discretion, and the price at which
such option and right is or would become exercisable, multiplied by the number
of shares represented by such unexercised portion.
(ii) Exercise such option and right, including any portion not then otherwise
currently exercisable, prior to the Acquisition Event so that the Optionee would
be entitled, with respect to shares thereby acquired, to participate in the
Acquisition Event as a holder of Common Stock.
(iii) Surrender such option and right for cancellation in exchange for a
substitute option, with or without a related stock appreciation right, providing
substantially equal benefits and granted or to be granted by an employer
corporation, or a parent or subsidiary of such an employer corporation, that
after the Acquisition Event is expected to continue to conduct substantially the
same business as that acquired from the Corporation or a participating
subsidiary pursuant to the Acquisition Event.
If the Optionee is given one or more of such opportunities with respect to the
entire unexercised portion of any option and right granted by this Agreement,
the option and right may be canceled by the Corporation upon the occurrence of
the Acquisition Event and thereafter the Optionee will be entitled only to
receive the appropriate benefit pursuant to clause (i), (ii), or (iii) above,
whichever may be applicable.
The provisions of this article are not intended to be exclusive of any other
arrangements that the Board might approve for settlement of any or all
outstanding options and rights in connection with an Acquisition Event or
otherwise.
IX. ADMINISTRATION:
The Plan is administered by a committee of non-employee directors appointed by
the Board of Directors of the Corporation ("Committee") to whom all
correspondence shall be directed.
X. MISCELLANEOUS:
(a) Interpretation: Any inconsistencies between the provisions of this Option
Agreement and the Plan shall be governed by the terms and provisions of the
Plan. Optionee is referred to the Plan to determine all of his rights and
obligations, only a portion of which have been set forth in this Agreement.
(b) Acknowledgment: By execution of this Agreement, Optionee acknowledges
receipt of a duplicate copy of the same as notification of his grant of options
and that Optionee agrees in consideration of such option he will abide by all
the terms and conditions of the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement as of
the day and year first above-written.
VICORP Restaurants, Inc.
By/s/Charles R. _ Frederickson
Chairman
/s/Robert E. Kaltenbach
Optionee
This is Page 4 of a 4-page Option Agreement between VICORP Restaurants, Inc.,
and Robert E. Kaltenbach dated December 7, 2000. |
1 Exhibit 10.9 PARALLEL PETROLEUM CORPORATION EMPLOYEE STOCK OPTION PLAN I.
Purpose of the Plan The Parallel Petroleum Corporation Employee Stock Option
Plan (the "Plan") is intended to provide a means whereby certain employees who
are not officers or directors of Parallel Petroleum Corporation, a Delaware
corporation (the "Company"), and its subsidiaries may develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company, and to encourage them to remain with and devote their best
efforts to the business of the Company, thereby advancing the interests of the
Company and its shareholders. Accordingly, the Plan provides for granting
employees (in each case, "Optionee") the option ("Option") to purchase shares of
common stock of the Company ("Stock"), as hereinafter set forth. Options granted
under the Plan to employees will not be incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). II. Administration The Plan shall be administered by the Board of
Directors of the Company (the "Board") or by a committee (the "Committee") of
two or more directors of the Company appointed by the Board. If a Committee is
not appointed by the Board, the Board shall act as and be deemed to be the
Committee for all purposes of the Plan. The Committee shall have sole authority
(within the limitations described herein) to select the employees who are to be
granted Options from among those eligible hereunder and to establish the number
of shares which may be issued to employees under each Option and to prescribe
the form of the agreement embodying awards of Options. The Committee is
authorized to interpret the Plan and may from time to time adopt such rules and
regulations, consistent with the provisions of the Plan, as it may deem
advisable to carry out the Plan. All decisions made by the Committee in
selecting the employees to whom Options shall be granted, in establishing the
number of shares which may 2 be issued to employees under each Option and in
construing the provisions of the Plan shall be final. No member of the Board
shall be liable for anything done or omitted to be done by such member or by any
other member of the Board in connection with the Plan, except for such member's
own willful misconduct. III. Option Agreements; Terms and Conditions Each Option
granted under the Plan shall be evidenced by a written stock option agreement
and shall contain such terms and conditions, and may be exercisable for such
periods, as the Committee shall prescribe from time to time in accordance with
this Plan, and shall comply with the following terms and conditions: (a) The
Option exercise price shall be the fair market value of the Stock subject to the
Option on the date the Option is granted. For all purposes under the Plan, the
fair market of a share of Stock on a particular date shall be equal to the
average of the high and low sales prices of the Stock on the date of grant as
reported on the Nasdaq National Market tier of The Nasdaq Stock Market ("NMS"),
or on the stock exchange composite tape if the Stock is traded on a national
stock exchange on that date, or if no prices are reported on that date, on the
last preceding date on which such prices of the Stock are so reported. If the
Stock is not traded on the NMS or other stock exchange on that date, but is
otherwise traded over the counter at the time a determination of its fair market
value is required to be made hereunder, its fair market value shall be deemed to
be equal to the average between the reported high and low or closing bid and
asked prices of the Stock on the most recent date on which the Stock was
publicly traded. If the Stock is not publicly traded at the time a determination
of its value is required to be made hereunder, the determination of its fair
market value shall be made by the Committee in such manner as it deems
appropriate. (b) Each Option and all rights granted thereunder shall not be
transferable otherwise than by will or the laws of descent and distribution, and
may be exercised only by the Optionee during the Optionee's lifetime and while
the Optionee remains employed by the Company, except that: (i) if the Optionee
ceases to be an employee of the Company because of disability, the Option may be
exercised in full by the Optionee (or the 3 Optionee's estate or the person who
acquires the Option by will or the laws of descent and distribution or otherwise
by reason of the death of the Optionee) at any time during the period of one
year following such termination; (ii) if the Optionee dies while Optionee is an
employee of the Company, the Optionee's estate, or the person who acquires the
Option by will or the laws of descent and distribution or otherwise by reason of
the death of the Optionee, may exercise the Option in full at any time during
the period of one year following the date of the Optionee's death; and (iii) if
the Optionee ceases to be an employee of the Company for any reason other than
as described in clause (i) or (ii) above, unless the Optionee is removed for
cause, the Option may be exercised by the Optionee at any time during the period
of three months following the date the Optionee ceases to be an employee of the
Company, or by the Optionee's estate (or the person who acquires the Option by
will or the laws of descent and distribution or otherwise by reason of the death
of the Optionee) during a period of one year following the Optionee's death if
the Optionee dies during such three-month period, but in each case only as to
the number of shares the Optionee was entitled to purchase hereunder upon
exercise of the Option as of the date the Optionee ceases to be an employee of
the Company. (c) The Option shall not be exercisable in any event after the
expiration of ten years from the date of grant. (d) The purchase price of shares
as to which the Option is exercised shall be paid in full at the time of
exercise (a) in cash, (b) by delivering to the Company shares of Stock having a
fair market value on the date of delivery equal to the purchase price, or (c)
any combination of cash or Stock, as shall be established by the Committee.
Unless and until a certificate or certificates representing such shares shall
have been issued by the Company to the Optionee, the Optionee (or the person
permitted to exercise the Option in the event of the Optionee's death) shall not
be or have any of the rights or privileges of a shareholder of the Company with
respect to shares acquirable upon an exercise of the Option. (e) The terms and
conditions of the respective stock option agreements need not be identical. 4
IV. Eligibility of Optionee Options may be granted only to employees (who are
not officers or directors) of the Company or any parent or subsidiary
corporation (as defined in Section 424 of the Code) of the Company at the time
the Option is granted. Options may be granted to the same Optionee on more than
one occasion. V. Shares Subject to the Plan The aggregate number of shares which
may be issued under Options granted under the Plan shall not exceed 200,000
shares of Stock. Such shares may consist of authorized but unissued shares of
Stock or previously issued shares of Stock reacquired by the Company. Any of
such shares which remain unissued and which are not subject to outstanding
Options at the termination of the Plan shall cease to be subject to the Plan,
but, until termination of the Plan, the Company shall at all times make
available a sufficient number of shares to meet the requirements of the Plan.
Should any Option hereunder expire or terminate prior to its exercise in full,
the shares theretofore subject to such Option may again be subject to an Option
granted under the Plan. The aggregate number of shares which may be issued under
the Plan shall be subject to adjustment in the same manner as provided in
Article VII hereof with respect to shares of Stock subject to Options then
outstanding. Exercise of an Option in any manner shall result in a decrease in
the number of shares of Stock which may thereafter be available, both for
purposes of the Plan and for sale to any one individual, by the number of shares
as to which the Option is exercised. VI. Term of Plan (a) The Plan shall be
effective upon the date of its approval and adoption by the Board. The Committee
may grant Options under the Plan at any time on or after the effective date and
before the date fixed herein for termination of the Plan. 5 (b) Except with
respect to Options then outstanding, if not sooner terminated under the
provisions of Subparagraph (a) above or Article VIII, the Plan shall terminate
upon and no further Options shall be granted after the expiration of ten years
from the date of its adoption by the Board. VII. Recapitalization or
Reorganization (a) The existence of the Plan and the Options granted hereunder
shall not affect in any way the right or power of the Board or the shareholders
of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of debt or
equity securities ahead of or affecting the Stock or the rights thereof, the
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding. (b) The shares with respect to which Options may be granted
are shares of Stock as presently constituted, but if, and whenever, prior to the
expiration of an Option theretofore granted, the Company shall effect a
subdivision or consolidation of shares of Stock or the payment of a stock
dividend on Stock without receipt of consideration by the Company, the number of
shares of Stock with respect to which such Option may thereafter be exercised
(i) in the event of an increase in the number of outstanding shares shall be
proportionately increased, and the purchase price per share shall be
proportionately reduced, and (ii) in the event of a reduction in the number of
outstanding shares shall be proportionately reduced, and the purchase price per
share shall be proportionately increased. (c) If the Company recapitalizes or
otherwise changes its capital structure, thereafter upon any exercise of an
Option theretofore granted the Optionee shall be entitled to purchase under such
Option, in lieu of the number of shares of Stock as to which such Option shall
then be exercisable, the number and class of shares of stock and securities to
which the Optionee would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to such recapitalization, the Optionee
had been the holder of record of the number of shares of Stock as to which such
Option is then exercisable. If (i) the Company shall not be the 6 surviving
entity in any merger or consolidation (or survives only as a subsidiary of an
entity other than a previously wholly-owned subsidiary of the Company), (ii) the
Company sells, leases or exchanges or agrees to sell, lease or exchange all or
substantially all of its assets to any other person or entity (other than a
wholly-owned subsidiary of the Company), (iii) the Company is to be dissolved
and liquidated, (iv) any person or entity, including a "group" as contemplated
by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires
or gains ownership or control (including, without limitation, power to vote) of
more than 50% of the outstanding shares of Stock, or (v) as a result of or in
connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the Board (each such event, a "Corporate Change"), then effective as
of a date selected by the Committee, the Committee acting in its sole discretion
without the consent or approval of any Optionee, shall effect one or more of the
following alternatives with respect to the then outstanding Options held by
Optionees, which may vary among individual Optionees: (1) accelerate the time at
which such Options may be exercised so that such Options may be exercised in
full on or before a specified date (before or after such Corporate Change) fixed
by the Committee, after which specified date all unexercised Options and all
rights of Optionees thereunder shall terminate, (2) require the mandatory
surrender to the Company by selected Optionees of some or all of such Options
(irrespective of whether such Options are then exercisable under the provisions
of the Plan) as of a date, before or after such Corporate Change, specified by
the Committee, in which event the Committee shall thereupon cancel such Options
and pay to each Optionee an amount of cash per share equal to the excess of the
amount calculated in Subparagraph (d) below (the "Change of Control Value") of
the shares subject to such Option over the exercise price(s) under such Options
for such shares, (3) make such adjustments to such Options as the Committee
deems appropriate to reflect such Corporate Change, (4) make no adjustments to
such Options as the Committee may determine in its sole discretion or (5)
provide that thereafter upon any exercise of an Option theretofore granted the
Optionee shall be entitled to purchase under such Option, in lieu of the number
of shares of Stock as to which such Option shall then be exercisable, the number
and class of shares of stock or other securities or property to which the
Optionee would have been entitled pursuant to the terms of the agreement of
merger, 7 consolidation or sale of assets and dissolution if, immediately prior
to such merger, consolidation or sale of assets and dissolution, the Optionee
had been the holder of record of the number of shares of Stock as to which such
Option is then exercisable. (d) For purposes of clause (2) in paragraph (c)
above, the "Change of Control Value" shall equal the amount determined in clause
(i), (ii) or (iii), whichever is applicable, as follows: (i) the per share price
offered to shareholders of the Company in any such merger, consolidation, sale
of assets or dissolution transaction, (ii) the price per share offered to
shareholders of the Company in any tender offer or exchange offer whereby a
Corporate Change takes place, or (iii) if such Corporate Change occurs other
than pursuant to a tender or exchange offer, the fair market value per share of
the shares into which such Options being surrendered are exercisable, as
determined by the Committee as of the date determined by the Committee to be the
date of cancellation and surrender of such Options. In the event that the
consideration offered to shareholders of the Company in any transaction
described in this Subparagraph (d) or Subparagraph (c) above consists of
anything other than cash, the Committee shall determine the fair cash equivalent
of the portion of the consideration offered which is other than cash. (e) Any
adjustment provided for in Subparagraphs (b) or (c) above shall be subject to
any required shareholder action. (f) Except as hereinbefore expressly provided,
the issuance by the Company of shares of stock of any class or securities
convertible into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, and in any case whether or not for fair
value, shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Stock subject to Options theretofore granted
or the purchase price per share. VIII. Amendment or Termination of the Plan The
Board in its discretion may terminate the Plan at any time with respect to any
shares for which Options have not theretofore been granted. 8 The Board shall
have the right to alter or amend the Plan or any part thereof from time to time,
provided, that no change in any Option theretofore granted may be made which
would impair the rights of the Optionee without the consent of such Optionee.
IX. Miscellaneous Provisions (a) Neither the Plan nor any action taken hereunder
shall be construed as giving any employee any right to be retained in the
service of the Company or the right to have an Option granted to such person.
(b) An Optionee's rights and interest under the Plan may not be assigned or
transferred in whole or in part either directly or by operation of law or
otherwise (except in the event of an Optionee's death or disability, by will or
the laws of descent and distribution, all as provided in Article III),
including, but not by way of limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy, or in any other manner, and no such right or
interest of any participant in the Plan shall be subject to any obligation or
liability of such participant. (c) No shares of Stock shall be issued hereunder
unless counsel for the Company shall be satisfied that such issuance will be in
compliance with applicable Federal, state, and other securities laws and
regulations and the rules and regulations of the Nasdaq Stock Market. (d) It
shall be a condition to the obligation of the Company to issue shares of Stock
upon exercise of an Option, that the Optionee (or any beneficiary or person
entitled to act under or through Optionee as provided herein) pay to the
Company, upon its demand, such amount as may be requested by the Company for the
purpose of satisfying any liability to withhold Federal, state, local, or
foreign income or other taxes. If the amount requested is not paid, the Company
may refuse to issue shares of Stock. (e) By accepting any Option under the Plan,
each Optionee and each person claiming under or through such person shall be
conclusively deemed to have indicated his or her acceptance and ratification of,
and consent to, any action taken under the Plan by the Company, the Board or the
Committee. |
THIRTIETH AMENDMENT TO FORBEARANCE AGREEMENT
AND TWENTY-EIGHTH AMENDMENT TO POST-CONFIRMATION
LOAN AND SECURITY AGREEMENT
THIS THIRTIETH AMENDMENT TO FORBEARANCE AGREEMENT AND TWENTY-EIGHTH
AMENDMENT TO POST-CONFIRMATION LOAN AND SECURITY AGREEMENT
(the "Agreement") is effective as of this 26th day of October, 2001, among THE
CIT GROUP/BUSINESS CREDIT, INC., a New York corporation in its capacity as Agent
and Lender ("Agent"), each of the financial institutions party to the Loan
Agreement (each is referred to herein as a "Lender" and collectively as the
"Lenders"), TRISM, INC., a Delaware corporation ("Trism"), TRISM SECURED
TRANSPORTATION, INC., a Delaware corporation ("Trism Secured"), TRI-STATE MOTOR
TRANSIT CO., a Delaware corporation ("TSMT"), DIABLO SYSTEMS INCORPORATED D/B/A
DIABLO TRANSPORTATION, INC., a California corporation ("Diablo"), TRISM EASTERN,
INC. D/B/A C.I. WHITTEN TRANSFER, a Delaware corporation ("CI Whitten"), TRISM
HEAVY HAUL, INC., a Delaware corporation ("Heavy Haul"), TRISM SPECIALIZED
CARRIERS, INC., a Georgia corporation ("Specialized"), TRISM SPECIAL SERVICES,
INC., a Georgia corporation ("Special Services"), TRISM LOGISTICS, INC., a
Delaware corporation ("Logistics"), TRISM EQUIPMENT, INC., a Delaware
corporation ("TEI") (each of Trism, Trism Secured, TSMT, Diablo, CI Whitten,
Heavy Haul, Specialized, Special Services, Logistics and TEI is herein referred
to individually as a "Borrower" and collectively as the "Borrowers"), AERO BODY
AND TRUCK EQUIPMENT, INC., a Delaware corporation ("Aero Body"), E.L. POWELL &
SONS TRUCKING CO., INC., an Oklahoma corporation ("EL Powell"), TRISM TRANSPORT,
INC., a Delaware corporation ("Transport"), and TRISM TRANSPORT SERVICES, INC.
("Transport Services") (each of Aero Body, EL Powell, Transport and Transport
Services is individually referred to herein as a "Guarantor" and collectively as
the "Guarantors").
W
I T N E S S E T H:
WHEREAS
, Borrowers, Agent and Lenders are party to that certain Post-Confirmation Loan
and Security Agreement, dated February 9, 2000 (as the same has been amended
from time to time, the "Loan Agreement");
WHEREAS
, Borrowers, Agent and Lenders desire to amend the Loan Agreement as set forth
herein; and
WHEREAS
, Borrowers, Guarantors, Agent and Lenders are party to that certain Forbearance
Agreement, dated as of November 8, 2000 (as the same has been amended from time
to time, the "Forbearance Agreement;" all capitalized terms used herein and not
otherwise expressly defined herein shall have the respective meanings given to
such terms in the Forbearance Agreement); and
WHEREAS
, Agent, Lenders, Borrowers and Guarantors desire to amend the Forbearance
Agreement as set forth herein; and
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WHEREAS
, Borrowers have requested certain additional amounts be made available to
Borrowers pursuant to the Loan Agreement and the Forbearance Agreement, and
WHEREAS
, notwithstanding the fact that Agent and Lenders are under no obligation to
make available to Borrowers any such additional amounts, Agent and Lenders are,
subject to the terms and conditions herein set forth, willing to adjust the
Forbearance Reserve as herein provided.
NOW, THEREFORE
, in consideration of the foregoing premises, and other good and valuable
consideration, the receipt and legal sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Amendments to Loan Agreement and Forbearance Agreement.
A. Amendments to Loan Agreement.
> > (a) Section 1.1 of Article 1 of the Loan Agreement is hereby
> > amended by deleting subsection (g) in its entirety from the definition of
> > "Collateral" and inserting the following new subsection (g) in lieu thereof:
> >
> > > > (g) the Trailers and the Tractors,
> > (b) Section 1.1 of Article 1 of the Loan Agreement is hereby
> > further amended by deleting the definition of "Initial Anniversary Date" in
> > its entirety therefrom and inserting the following in lieu thereof:
> >
> > > "Initial Anniversary Date" shall mean November 30, 2001.
> >
> > (c) Section 1.1 of Article 1 of the Loan Agreement is hereby
> > further amended by deleting the word "Trailers" from subsection (g) of the
> > definition of "Security Documents" and inserting the phrase "Tractors and
> > Trailers" in lieu thereof.
> >
> > (d) Section 1.1 of Article 1 of the Loan Agreement is hereby
> > further amended by adding the following new definition, "Tractors," in the
> > correct alphabetical order thereto:
> >
> > > "Tractors" means those tractors and other vehicles owned by one or more
> > > Borrowers or Guarantors and pledged to Agent, for the benefit of Lenders,
> > > in accordance with this Agreement, free and clear of any Lien, as set
> > > forth in Schedule 6.1(g)(ii) thereto.
> >
> > (e) Section 2.3(d) of Article 2 of the Loan Agreement is
> > hereby amended by deleting from the third line thereof the word "Trailers"
> > and inserting the phrase "Tractors and Trailers" in lieu thereof.
--------------------------------------------------------------------------------
> > (f) Section 6.1(g) of Article 6 of the Loan Agreement is
> > hereby amended by deleting the word "Trailers" from the fifth line thereof
> > and inserting the phrase "Tractors and Trailers" in lieu thereof.
> >
> > (g) Section 6.1(g) of Article 6 of the Loan Agreement is
> > hereby further amended by adding the following new sentence to the end
> > thereof:
> >
> > > Schedule 6.1(g)(ii) sets forth all Tractors owned by the Borrowers and
> > > Guarantors and pledged as Collateral hereunder.
> >
> > (h) Section 8.8(c) of Article 8 of the Loan Agreement is
> > hereby amended by deleting from the second line thereof the word "Trailers"
> > and inserting the phrase "Trailers and Tractors" in lieu thereof.
> >
> > (i) Section 8.8(c) of Article 8 of the Loan Agreement is
> > hereby further amended by deleting from the fourth line thereof the word
> > "Trailers" and inserting the phrase "Trailers and Tractors" in lieu thereof.
> >
> > (j) Section 8.11(e) of Article 8 of the Loan Agreement is
> > hereby amended by deleting the word "Trailer" from the third line thereof
> > and inserting the phrase "Tractor and every Trailer" in lieu thereof.
> >
> > (k) Section 8.14(a) of Article 8 of the Loan Agreement is
> > hereby amended by deleting the word "Trailers" from the first line thereof
> > and inserting in lieu thereof the phrase "Tractors and Trailers."
> >
> > (l) Section 8.14(a) of Article 8 of the Loan Agreement is
> > hereby further amended by deleting the word "Trailers" from the second line
> > thereof and inserting the phrase "Tractors and Trailers" in lieu thereof.
> >
> > (m) Section 8.14(a) of Article 8 of the Loan Agreement is
> > hereby further amended by deleting the phrase "any Trailer or Trailers" from
> > the fourth line thereof and inserting the phrase "(a) any Tractor or
> > Tractors or (b) any Trailer or Trailers" in lieu thereof.
> >
> > (n) Section 8.15 of Article 8 of the Loan Agreement is hereby
> > amended by deleting the word "Trailers" from the third line thereof and
> > inserting the phrase "Tractors and Trailers" in lieu thereof.
> >
> > (o) The Loan Agreement is hereby further amended by inserting
> > the Schedule 6.1(g)(ii) attached hereto immediately following the end of
> > Schedule 6.1(g)(i) thereof.
>
> B. Amendments to Forbearance Agreement.
> > (a) Paragraph 2 of the Forbearance Agreement is hereby
> > amended by deleting therefrom the reference to the date "October 26, 2001"
> > and inserting in lieu thereof the date "November 30, 2001."
> >
> >
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> > (b) Paragraph 4(d) of the Forbearance Agreement is hereby
> > deleted in its entirety and the following is inserted in lieu thereof:
> >
> > (d) Section 1.1 of Article 1 of the Loan Agreement is hereby
> > further amended by adding the following new definition of "Forbearance
> > Reserve" in the correct alphabetical order thereto:
> >
> > > "Forbearance Reserve" shall mean a reserve against Borrowing Base
> > > Availability in an amount equal to $2,000,000.00.
2. Representations, Warranties, Covenants and Acknowledgments. To induce
Agent and Lenders to enter into this Agreement:
Each Borrower and Guarantor does hereby represent and warrant that (i) as of the
date hereof, all of the representations and warranties made or deemed to be made
under the Forbearance Agreement and the other Loan Documents are true and
correct, including without limitation each of those representation and
warranties as they relate to the Tractors and the grant of the security interest
herein, (ii) as of the date hereof, after giving effect to the terms hereof,
there exists no (A) default or breach of the Forbearance Agreement or (B)
Default or Event of Default under the Loan Agreement or any of the Loan
Documents, other than any Default or Event of Default which may arise from the
failure of Borrowers to pay, during the Forbearance Period, certain interest
payments with respect to the Senior Notes (as defined below), (iii) such
Borrower and Guarantor has the power and is duly authorized to enter into,
deliver and perform this Agreement, and (iv) this Agreement and each of the
Forbearance Agreement and the other Loan Documents is the legal, valid and
binding obligation of the such Borrower and Guarantor enforceable against it in
accordance with its terms; and
Each Borrower and Guarantor does hereby reaffirm each of the agreements,
covenants, and undertakings set forth in the Forbearance Agreement and each and
every other Loan Document executed in connection therewith or pursuant thereto
as if such Borrower or Guarantor were making said agreements, covenants and
undertakings on the date hereof; and
Each Borrower and Guarantor does hereby acknowledge and agree that no right of
offset, defense, counterclaim, claim, causes of action or objection in favor of
any Borrower or Guarantor against Agent or any Lender exists arising out of or
with respect to (i) the Secured Obligations, this Agreement, the Forbearance
Agreement, the Loan Agreement or any of the other Loan Documents, (ii) any other
documents now or heretofore evidencing, securing or in any way relating to the
foregoing or (iii) the administration or funding of the Revolving Credit Loans;
and
--------------------------------------------------------------------------------
Each Borrower and Guarantor does hereby acknowledge and agree that any and all
references to the Loan Agreement herein or in the Forbearance Agreement shall
mean and refer to the Loan Agreement, as amended by (i) that certain First
Amendment to Post-Confirmation Loan and Security Agreement, dated August 31,
2000, (ii) that certain Second Amendment to Post-Confirmation Loan and Security
Agreement, dated January 26, 2001, (iii) that certain Third Amendment to
Post-Confirmation Loan and Security Agreement, dated February 28, 2001, (iv)
that certain Fourth Amendment to Post-Confirmation Loan and Security Agreement,
dated March 30, 2001, (v) that certain Fifth Amendment to Post-Confirmation Loan
and Security Agreement, dated April 13, 2001, (vi) that certain Sixth Amendment
to Post-Confirmation Loan and Security Agreement, dated April 27, 2001, (vii)
that certain Seventh Amendment to Post-Confirmation Loan and Security Agreement,
dated May 18, 2001, (viii) that certain Eighth Amendment to Post-Confirmation
Loan and Security Agreement, dated June 4, 2001, (ix) that certain Ninth
Amendment to Post-Confirmation Loan and Security Agreement, dated June 8, 2001,
(x) that certain Tenth Amendment to Post-Confirmation Loan and Security
Agreement, dated June 15, 2001, (xi) that certain Eleventh Amendment to
Post-Confirmation Loan and Security Agreement, dated June 27, 2001, (xii) that
certain Twelfth Amendment to Post-Confirmation Loan and Security Agreement,
dated July 6, 2001, (xiii) that certain Thirteenth Amendment to
Post-Confirmation Loan and Security Agreement, dated July 13, 2001, (xiv) that
certain Fourteenth Amendment to Post-Confirmation Loan and Security Agreement,
dated July 20, 2001, (xv) that certain Fifteenth Amendment to Post-Confirmation
Loan and Security Agreement, dated July 27, 2001, (xvi) that certain Sixteenth
Amendment to Post-Confirmation Loan and Security Agreement, dated August 3,
2001, (xvii) that certain Seventeenth Amendment to Post-Confirmation Loan and
Security Agreement, dated August 10, 2001, (xviii) that certain Eighteenth
Amendment to Post-Confirmation Loan and Security Agreement, dated August 17,
2001, (xix) that certain Nineteenth Amendment to Post-Confirmation Loan and
Security Agreement, dated August 24, 2001, (xx) that certain Twentieth Amendment
to Post-Confirmation Loan and Security Agreement, dated August 31, 2001, (xxi)
that certain Twenty-First Amendment to Post-Confirmation Loan and Security
Agreement, dated September 7, 2001, (xxii) that certain Twenty-Second Amendment
to Post-Confirmation Loan and Security Agreement, dated September 14, 2001,
(xxiii) that certain Twenty-Third Amendment to Post-Confirmation Loan and
Security Agreement, dated September 21, 2001, (xxiv) that certain Twenty-Fourth
Amendment to Post-Confirmation Loan and Security Agreement, dated September 28,
2001, (xxv) that certain Twenty-Fifth Amendment to Post-Confirmation Loan and
Security Agreement, dated October 5, 2001, (xxvi) that certain Twenty-Sixth
Amendment to Post-Confirmation Loan and Security Agreement, dated October 12,
2001, (xxvii) that certain Twenty-Seventh Amendment to Post-Confirmation Loan
and Security Agreement, dated October 19, 2001, and (xxviii) that certain
Twenty-Eighth Amendment to Post-Confirmation Loan and Security Agreement, as
contained herein.
3. Releases; Indemnities.
In further consideration of Agent's and each Lender's execution of this
Agreement, each Borrower and each Guarantor, individually and on behalf of its
successors (including, without limitation, any trustees acting on behalf of such
Borrower or Guarantor and any debtor-in-possession with respect to such Borrower
or Guarantor), assigns, subsidiaries and Affiliates, hereby forever releases
Agent and each Lender and their respective successors, assigns, parents,
subsidiaries, Affiliates, officers, employees, directors, agents and attorneys
(collectively, the "Releasees") from any and all debts, claims, demands,
liabilities, responsibilities, disputes, causes, damages, actions and causes of
actions (whether at law or in equity) and obligations of every nature
whatsoever, whether liquidated or unliquidated, whether known or unknown,
matured or unmatured, fixed or contingent (collectively, "Claims") that such
Borrower or Guarantor may have against the Releasees which arise from or relate
to any actions which the Releasees may have taken or omitted to take in
connection with the Forbearance Agreement or other Loan Documents prior to the
date this Agreement was executed including without limitation with respect to
the Secured Obligations, any Collateral, the Loan Agreement, the Forbearance
Agreement, any other Loan Document and any third parties liable in whole or in
part for the Secured Obligations. This provision shall survive and continue in
full force and effect whether or not such Borrower or Guarantor shall satisfy
all other provisions of this Agreement, the Forbearance Agreement, the Loan
Documents or the Loan Agreement including payment in full of all Secured
Obligations.
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Each Borrower hereby agrees that its obligation to indemnify and hold the
Releasees harmless as set forth in Section 3.A. above shall include an
obligation to indemnify and hold the Releasees harmless with respect to any and
all liabilities, obligations, losses, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever incurred by
the Releasees, or any of them, whether direct, indirect or consequential, as a
result of or arising from or relating to any proceeding by, or on behalf of any
Person, including, without limitation, officers, directors, agents, trustees,
creditors, partners or shareholders of such Borrower or Guarantor any subsidiary
or Affiliate of such Borrower, such Guarantor whether threatened or initiated,
asserting any claim for legal or equitable remedy under any statutes, regulation
or common law principle arising from or in connection with the negotiation,
preparation, execution, delivery, performance, administration and enforcement of
this Agreement or any other document executed in connection herewith. The
foregoing indemnity shall survive the payment in full of the Secured Obligations
and the termination of this Agreement, the Forbearance Agreement, the Loan
Agreement and the other Loan Documents
4. Conditions Precedent. The effectiveness of this Agreement is subject
to the following conditions precedent:
A. Delivery of Documents. Borrowers and Guarantors shall have delivered to
Agent, on behalf of Lenders, all in form and substance acceptable to Agent
in its sole discretion, (i) executed counterpart originals of this
Agreement, and (ii) such other documentation as Agent may reasonably require
in connection herewith; and
B. Accuracy of Representations and Warranties. All of the representations and
warranties made or deemed to be made in this Agreement and under the
Forbearance Agreement and the other Loan Documents shall be true and correct
as of the date of this Agreement, except such representations and warranties
which, by their terms, are applicable to a prior specific date or period;
and
C. Expenses. Borrowers and Guarantors shall have agreed to jointly and
severally pay to Agent the costs and expenses referred to in Section 6
hereof; and
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D. Fees. Borrowers and Guarantors shall have paid to Agent, for the ratable
benefit of Lenders, an amendment and forbearance fee in an amount equal to
$75,000, which fee shall be deemed fully earned as of the date hereof.
5. Effect of this Agreement; Relationship of Parties. As expressly
amended hereby, the Forbearance Agreement and the other Loan Documents shall be
and remain in full force and effect as originally written, and shall constitute
the legal, valid, binding and enforceable obligations of Borrowers and
Guarantors to Agent and Lenders. The relationship of Agent and Lenders, on the
one hand, and Borrowers and Guarantors, on the other hand, has been and shall
continue to be, at all times, that of creditor and debtor and not as joint
venturers or partners. Nothing contained in this Agreement, any instrument,
document or agreement delivered in connection herewith or in the Forbearance
Agreement, the Loan Agreement or any of the other Loan Documents shall be deemed
or construed to create a fiduciary relationship between or among the parties.
6. Expenses. Borrowers and Guarantors agree to jointly and severally
pay on demand all reasonable costs and expenses of Agent and Lenders in
connection with the preparation, execution, delivery and enforcement of this
Agreement and all other documents and any other transactions contemplated
hereby, including, without limitation, the reasonable fees and out-of-pocket
expenses of legal counsel to Agent and Lenders. Borrowers authorize Agent to
charge the foregoing expenses to the Borrowers' loan account by increasing the
principal amount of the Revolving Credit Loans by the amount of such expenses
owed by Borrowers in connection herewith.
7. Miscellaneous. Borrowers and Guarantors agree to take such further
action as Agent or any Lender shall reasonably request in connection herewith to
evidence the amendments herein contained to the Forbearance Agreement. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which, when so executed and delivered,
shall be deemed to be an original and all of which counterparts, taken together,
shall constitute but one and the same instrument. This Agreement shall be
binding upon and inure to the benefit of the successors and permitted assigns of
the parties hereto. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Georgia. This Agreement embodies the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior oral or written negotiations,
agreements and understandings of the parties with respect to the subject matter
hereof, except the agreements embodied in the Forbearance Agreement, the Loan
Agreement and the other Loan documents (as modified herein). Time is of the
essence of this Agreement and of the Forbearance Agreement and the Loan
Agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, Borrowers, Guarantors, Lenders and Agent have caused
this Agreement to be duly executed as of the date first above written.
BORROWERS:
TRISM, INC.
By:
Name:
Ralph Nelson
Title:
Senior Vice President and General Counsel
TRISM SECURED TRANSPORTATION, INC.
By:
Name: Ralph Nelson Title: Senior Vice President and General Counsel
TRI-STATE MOTOR TRANSIT CO.
By:
Name: Ralph Nelson Title: Senior Vice President and General Counsel
--------------------------------------------------------------------------------
DIABLO SYSTEMS INCORPORATED,
D/B/A DIABLO TRANSPORTATION, INC.
By:
Name:
Ralph Nelson
Title:
Senior Vice President and General Counsel
TRISM EASTERN, INC., D/B/A C. I.
WHITTEN TRANSFER
By:
Name:
Ralph Nelson
Title:
Senior Vice President and General Counsel
TRISM HEAVY HAUL, INC.
By:
Name: Ralph Nelson Title: Senior Vice President and General Counsel
TRISM SPECIALIZED CARRIERS, INC.
By:
Name: Ralph Nelson Title: Senior Vice President and General Counsel TRISM
SPECIAL SERVICES, INC.
By:
Name: Ralph Nelson Title: Senior Vice President and General Counsel TRISM
LOGISTICS, INC.
By:
Name: Ralph Nelson Title: Senior Vice President and General Counsel
--------------------------------------------------------------------------------
TRISM EQUIPMENT, INC.
By:
Name: Ralph Nelson Title: Senior Vice President and General Counsel GUARANTORS:
AERO BODY AND TRUCK EQUIPMENT,
INC.
By:
Name: Ralph Nelson Title: Senior Vice President and General Counsel E.L.
POWELL & SONS TRUCKING, INC.
By:
Name:
Ralph Nelson
Title: Senior Vice President and General Counsel TRISM TRANSPORT, INC.
By:
Name: Ralph Nelson Title: Senior Vice President and General Counsel
TRISM TRANSPORT SERVICES, INC.
By:
Name:
Ralph Nelson
Title: Senior Vice President and General Counsel
--------------------------------------------------------------------------------
LENDERS:
FLEET CAPITAL CORPORATION
By:
Name:
Title:
THE CIT GROUP/BUSINESS CREDIT,
INC.
By:
Name:
Title:
AGENT:
THE CIT GROUP/BUSINESS CREDIT,
INC.
By:
Name:
Title:
--------------------------------------------------------------------------------
Schedule 6.1(g)(ii)
List of Tractors
See Attached. |
EXHIBIT 10.40
LEASE EXTENSION AND MODIFICATION AGREEMENT
THIS LEASE EXTENSION AND MODIFICATION AGREEMENT (the “Agreement”) is made as of
September 1, 2001, by and between Marco Warehouse d.b.a. Salinas Valley Public
Warehouse (“Landlord”), and Monterey Pasta Company, (“Tenant”),
WITNESSETH
WHEREAS, by written Lease Agreement dated September 1, 1999 (the
“Lease”), Landlord leased to Tenant and Tenant leased from Landlord that part of
the premises commonly known as Space 36, 340 El Camino Real South, situated in
the County of Monterey and the State of California, as more fully described in
the Lease, for the term, at the rent and upon terms as set forth in the Lease;
and
WHEREAS, the Lease shall terminate as of August 31, 2001, and
WHEREAS, the parties now wish to modify and extend the Lease,
all as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
herein contained and for other valuable consideration the receipt and
sufficiency of which is hereby acknowledged, it is hereby mutually agreed as
follows:
1. The Lease and the term thereof are hereby extended for a period of one
(1) year from September 1, 2001, up to and including August 31, 2002, upon the
same terms and conditions contained in the Lease, except as herein provided.
2. The rent to be paid by Tenant to Landlord for the term, as extended,
shall be ($8,489.70) per month, (24,969.7 S.F. at .34/sf) any partial month to
be prorated, or $.34/sq. foot occupied.
3. Landlord represents and warrants that it has full power and authority to
enter into this Agreement and to modify and extend the Lease and the Landlord
does not need the consent of any lender holding a mortgage or a deed of trust on
the Premises or any other party.
4. The Lease, except as herein modified and extended, as in all other
respects fully ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
Landlord:
MARCO WAREHOUSE d.b.a. SALINAS
VALLEY PUBLIC WAREHOUSE
_______________________________________
Brenda Kibbee
General Manager
Tenant:
MONTEREY PASTA COMPANY
_______________________________________
Stephen L. Brinkman
Chief Financial Officer
|
Exhibit 10.30
SECURITY AGREEMENT
THIS AGREEMENT, entered into as of December 28, 2000, between
Conductus, Inc., a Delaware corporation (the "Company"), and Charles E. Shalvoy
(the "Purchaser"),
W I T N E S S E T H:
WHEREAS, the Purchaser has purchased from the Company 134,664 shares of the
Company's Common Stock (the "Shares"); and
WHEREAS, the Company has loaned to the Purchaser the sum of $459,448 which
the Purchaser has used to pay the purchase price of the Shares; and
WHEREAS, the Purchaser has executed and delivered to the Company a
full-recourse promissory note evidencing such loan (the "Note") and has agreed
to pledge all of the Shares to the Company as security for the payment of the
Note:
NOW, THEREFORE, it is agreed as follows:
1. The Purchaser hereby delivers to the Company one or more certificates
representing the Shares, together with two Assignments Separate From Certificate
signed by the Purchaser. The Purchaser hereby pledges and grants a security
interest in the Shares, including any shares into which the Shares may be
converted and all proceeds of the Shares, as security for the timely payment of
all of the Purchaser's obligations under the Note and for the Purchaser's
performance of all of its obligations under this Agreement. In the event of a
default in payment of the Note, the Purchaser hereby appoints the Company as his
true and lawful attorney to take such action as may be necessary or appropriate
to cause the Shares to be transferred into the name of the Company or any
assignee of the Company and to take any other action on behalf of the Purchaser
permitted hereunder or under applicable law.
2. The Company agrees to hold the Shares as security for the timely payment
of all of the Purchaser's obligations under the Note and for the Purchaser's
performance of all of its obligations under this Agreement, as provided herein.
At no time shall the Company dispose of or encumber the Shares, except as
otherwise provided in this Agreement.
3. At all times while the Company is holding the Shares as security under
this Agreement, the Company shall:
(a) Collect any dividends that may be declared on the Shares and credit such
dividends against any accrued interest or unpaid principal under the Note, as
part payment;
(b) Collect and hold any shares that may be issued upon conversion of the
Shares; and
(c) Collect and hold any other securities or other property that may be
distributed with respect to the Shares.
Such shares and other securities or property shall be subject to the security
interest granted in Section 1 of this Agreement and shall be held by the Company
under this Agreement.
4. While the Company holds the Shares as security under this Agreement, the
Purchaser shall have the right to vote the Shares at all meetings of the
Company's share-holders; provided that the Purchaser is not in default in the
performance of any term of this Agreement or in any payment due under the Note.
In the event of such a default, the Company shall have the right to the extent
permitted by law to vote and to give consents, ratifications and waivers and
take any other action with respect to the Shares with the same force and effect
as if the Company were the absolute and sole owner of the Shares.
5. Upon payment in full of the outstanding principal balance of the Note
and all interest and other charges due under the Note, the Company shall release
from pledge and redeliver to the
--------------------------------------------------------------------------------
Purchaser the certificate(s) representing the Shares and the Assignment Separate
From Certificate forms, provided all rights of repurchase under the terms of the
stock option grant shall have elapsed.
6. In the event that the Purchaser fails to perform any term of this
Agreement or fails to make any payment when due under the Note, the Company
shall have all of the rights and remedies of a creditor and secured party at law
and in equity, including (without limitation) the rights and remedies provided
under the Uniform Commercial Code.
Without limiting the foregoing, the Company may, after giving ten
(10) days' prior written notice to the Purchaser by certified mail at his
residence or business address, sell any or all of the Shares in such manner and
for such price as the Company may determine, including (without limitation)
through a public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery. The Company is
authorized at any such sale, if it deems it advisable to do so, to restrict the
prospective bidders or purchasers of any of the Shares to persons who will
represent and agree that they are purchasing for their own account for
investment, and not with a view to the distribution or sale of any of the
Shares, to restrict the prospective bidders or purchasers and the use any
purchaser may make of the Shares and impose any other restriction or condition
that the Company deems necessary or advisable under the federal and state
securities laws.
Upon any such sale the Company shall have the right to deliver, assign
and transfer to the purchaser thereof the Shares so sold. Each purchaser at any
such sale shall hold the Shares so sold absolute, free from any claim or right
of any kind. In case of any sale of any or all of the Shares on credit or for
future delivery, the Shares so sold may be retained by the Company until the
selling price is paid by the purchaser thereof, but the Company shall not incur
any liability in case of the failure of such purchaser to take up and pay for
the Shares so sold and, in case of any such failure, such Shares may again be
sold under the terms of this section.
The Purchaser hereby agrees that any disposition of any or all of the
Shares by way of a private placement or other method which in the opinion of the
Company is required or advisable under Federal and state securities laws is
commercially reasonable. At any public sale, the Company may (if it is the
highest bidder) purchase all or any part of the Shares at such price as the
Company deems proper. Out of the proceeds of any sale, the Company may retain an
amount sufficient to pay all amounts then due under the Note, together with the
expenses of the sale and reasonable attorneys' fees. The Company shall pay the
balance of such proceeds, if any, to the Purchaser. The Purchaser shall be
liable for any deficiency that remains after the Company has exercised its
rights under this Agreement.
7. This Agreement shall be governed by and construed in accordance with the
laws of the State of California without regard to choice of law provisions.
This Agreement shall inure to the benefit of, and be binding upon, the
Company and its successors and assigns and be binding upon the Purchaser and the
Purchaser's legal representative, heirs, legatees, distributees, assigns and
transferees by operation of law.
This Agreement contains the entire security agreement between the
Company and the Purchaser.
The Purchaser will execute any additional agreements, assignments or
documents or take any other actions reasonably required by the Company to
preserve and perfect the security interest in the Shares granted to the Company
herein and otherwise to effectuate this Agreement.
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by its duly authorized officer, and the Purchaser has personally
executed this Agreement.
Conductus, Inc.
By
/s/ CHARLES E. SHALVOY
--------------------------------------------------------------------------------
Title Chief Executive Officer
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Purchaser
--------------------------------------------------------------------------------
|
MEDIA ARTS GROUP, INC.
Exhibit 10.47
AMENDMENT NO. 5 TO BUSINESS LOAN AGREEMENT
This Amendment No. 5 to Business Loan Agreement, dated as of September 30, 2001
(the "Amendment"), is between Media Arts Group, Inc., a Delaware corporation
(“MAGI”), Lightpost Publishing, Inc., a California corporation (“Lightpost,” and
together with MAGI, each a “Borrower” and collectively the “Borrowers”) and Bank
of America, N.A. (the “Bank”).
A. The Borrowers and the Bank have entered into a certain Business
Loan Agreement dated as of October 27, 1999 as amended to date (the "Loan
Agreement").
B. The Borrowers have requested that the Bank amend the Loan
Agreement on the terms and conditions herein contained.
NOW, THEREFORE, in consideration of the premises herein contained and for other
good and valuable consideration, the Borrowers and the Bank do hereby mutually
agree as follows:
AGREEMENT
1. Definitions. Capitalized terms used but not defined in this
Amendment shall have the meaning given to them in the Loan Agreement.
2. Amendment. Section 1.2 of the Loan Agreement is amended by
deleting this Section in its entirety, and by substituting the following
therefor:
"1.2 Availability Period. The line of credit is available between the
date of this Agreement and November 30, 2001 (the “Expiration Date”) unless any
Borrower is in default."
3. Representations and Warranties. When the Borrowers sign this
Amendment, each Borrower represents and warrants to the Bank that: (a) giving
effect to this Amendment, there is no event which is, or with notice of, or
lapse of time, or both would be, a default under the Loan Agreement, (b) giving
effect to this Amendment, the representations and warranties of the Borrowers in
the Loan Agreement are true on and as of the date hereof as if made on and as of
said date, (c) this Amendment is within such Borrower's powers, has been duly
authorized and does not conflict with any of such Borrower's organizational
papers, and (d) this Amendment does not conflict with any law, agreement or
obligations by which such Borrower is bound.
4. Conditions. This Amendment will be effective upon the occurrence
of the following, in each case in a manner satisfactory to the Bank:
4.1 Receipt by the Bank of this Amendment executed by each party
hereto; and
4.2 Payment by the Borrowers to the Bank of a fee in the amount of
Eight Thousand Three Hundred Thirty Three and 33/100 Dollars ($8,333.33).
5. Effect of Amendment. Except as specifically amended above, the
Loan Agreement shall remain in full force and effect and is hereby ratified and
confirmed. Nothing in this Amendment shall be deemed to (a) constitute a waiver
of compliance by any Borrower with respect to any other term, provision or
condition of the Loan Agreement or any other instrument or agreement referred to
therein or (b) prejudice any right or remedy that the Bank may now have or may
have in the future under applicable law or instrument or agreement referred to
therein.
6. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed an original, and
all of said counterparts taken together shall be deemed to constitute but one
and the same instrument.
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as of
the date first above written.
BANK OF AMERICA, N.A.
MEDIA ARTS GROUP, INC.
By
/s/ Kenneth E. Jones
By
/s/ Michael J. Catelani
Kenneth E. Jones, Senior Vice President
Name:
Michael J. Catelani
Title:
VP - Finance
By
/s/ John C. Plecque
LIGHTPOST PUBLISHING, INC.
John C. Plecque, Senior Vice President
By
/s/ Michael J. Catelani
Name:
Michael J. Catelani
Title:
VP - Finance
|
CONTRACT NO. PP/81/01/LCD
on SECURITY ASSIGNMENT OF A RECEIVABLE
1.
Commercial firm:
Č
eská spořitelna, a.s.
Registered seat:
Na Příkopě 29, Prague 1, Postal Code: 113 98
Identification No.:
45244782
Registered in the Commercial Register maintained by the Municipal Court in
Prague, Section B, Inlet 1171
as the assignee (hereafter "the Bank")
And
2.
Commercial firm:
CME Czech Republic B.V.
Registered seat:
Hoogoorddreef 9
1101BA Amsterdam Zuidoost
The Netherlands
Registration No.:
33289324
as the assignor (hereafter "the Assignor")
conclude on the below day this
CONTRACT ON SECURITY ASSIGNMENT OF A RECEIVABLE
Article I
Introductory Provisions
1. For the purposes of this Contract, the terms set forth in this article have
the following meaning:
"Debtor" means the company Česká nezávislá televizní společnost, spol. s r.o.,
with its registered seat at Prague 1, Vladislavova 20, Identification No.
49616668, registered in the Commercial Register maintained by the Municipal
Court in Prague, Section C, Inlet 21333.
"Client" means the company CME Media Enterprises B.V., with its registered seat
at Hoogoorddreef 9, 1101BA Amsterdam Zuidoost, The Netherlands.
"Debtor's Real Estate" means the following real estate in the ownership of the
Debtor: land parcel No. 696 - built up area/other building object, area of 1 262
square meters; land parcel No. 709 - built up area/other building object, area
of 695 square meters; land parcel No. 697 - built up area/courtyard, area of 155
square meters; and building No. 1477 on the land parcel No. 696 built up
area/other building object and building No. 28 on land parcel No. 709 - built up
area/other building object, all registered in the List of Ownership No. 1326 for
the cadastral area Nové Město, Prague Municipality, in the Cadastral Register
for the city of Prague.
"Business Day" means any day when banks are open in the Czech Republic and
inter-bank transactions are settled. For payments in a currency other than Czech
Crowns it is any day when banks are open and foreign-currency transactions are
settled in the Czech Republic and in the main financial center for currency in
which the payments are denominated. The financial center is a place where mainly
interest rates for the given currency are quoted and where payments in such
currency are settled.
"Assigned Receivable" means the Assignor's monetary receivable against the
Debtor, the amount of which as of the day of signature of this Contract is 283
087 301 CZK (two hundred and eighty three million eighty seven thousand and
three hundred and one Czech Crowns). This Assigned Receivable of the Assignor
against the Debtor originated on the basis of a Resolution of the General
Meeting of the Debtor. The original amount of the Assigned Receivable of the
Assignor against the Debtor was 475 227 596 CZK, whereas until the signature of
this Contract the Debtor has paid to the Assignor the amount of 192 140 295 CZK
on the Assigned Receivable. Based on an agreement concluded between the Assignor
and the Debtor on 28 November 2000 and an agreement concluded between the
Assignor and the Debtor on 7 August 2001, the Assigned Receivable is due on 30
November 2005. In the case of the invalidity of the Resolution of the General
Meeting of the Debtor, based on which the Assigned Receivable stipulated above
in this definition would have otherwise originated, the Assigned Receivable
shall be the receivable arising from a potential claim for compensation for
damages against the Debtor or other liable persons originated from the invalid
Resolution of the General Meeting of the Debtor.
"Resolution of the General Meeting of the Debtor" means the resolution of the
regular General Meeting of the Debtor of 17 April 2000, at which was produced
the notarial deed NZ 239/2000, N 253/2000 by the notary JUDr. Marie Malá, with
its registered seat at Prague 2, Karlovo náměstí 17. This regular General
Meeting of the Debtor decided on the distribution of profit and the payment of
dividends for the year 1999. The total distributed profit was in the amount of
480 027 875 CZK; whereas the part of dividends accounting for the ownership
interest of the Assignor in the Debtor was 475 227 596 CZK.
"Contract" means this contract on security assignment of a receivable including
its enclosures and in the wording of appropriate amendments.
"Contracting Parties" means jointly the Bank and the Assignor.
"Account" means Account No. 004327-0310271439/0800 maintained by the Bank, which
was established by the Bank on the basis of the Secured Contract in CZK and to
which shall be transferred the payments from the Assigned Receivable under the
conditions stipulated in this Contract.
"Secured Contract" means Credit Contract No. 81/01/LCD, which the Bank and the
Client concluded on October 5, 2001 and on the basis of which the Bank undertook
to grant the Client a credit in the amount of 249 764 513.28 CZK (two hundred
and forty nine million seven hundred and sixty four thousand five hundred and
thirteen Czech Crowns and twenty eight Hallers) under the conditions stipulated
there.
"Secured Receivables" mean all monetary claims of the Bank against the Client
which originated or will originate on the basis, of a breach, from the
invalidity of the Secured Contract or by its notice by any of the Parties. The
Secured Receivables also mean all claims of the Bank against the Assignor on the
basis and in connection with this Contract, in particular the claims of the Bank
for payment of a contractual penalty according to Article X of this Contract.
The security applies to all accessories of the Secured Receivables, in
particular to interest, default interest, and costs associated with enforcement
of all Secured Receivables. In order to avoid doubt, the Contracting Parties
stipulate that the Secured Receivables are also all claims of the Bank for
payment of a contractual penalty or for compensation for damages in connection
with the Secured Contract. In the case of the invalidity of the Secured
Contract, the Secured Receivables would mean the receivable that would arise for
the Bank due to unjust enrichment of the Client, originating by fulfillment of
the Bank based on the invalid Secured Contract, and any appropriate claim of the
Bank for compensation for damages that would be thus suffered. The Secured
Receivables further mean all claims of the Bank originating from withdrawal from
the Secured Contract.
"Security of the Assigned Receivable" means mortgage rights in favor of the
Assignor, established to secure the Assigned Receivable, pertaining to the
Debtor's Real Estate, entered on List in Ownership No. 1326 by the Cadastral
Office for the city of Prague under No. V2 11624/00, with legal effects of the
entry as of 21 April 2000.
"Law on Public Auctions" means Act No. 26/2000 Coll., on Public Auctions, as
amended.
2. Unless the context of the text indicates otherwise, for terms defined in this
Contract, singular corresponds to plural and vice versa.
Article II
Subject of the Contract
1. The Assignor hereby declares that it is the sole creditor of the Assigned
Receivable in the amount of 283 087 301 CZK (in words two hundred and eighty
three million eighty seven thousand and three hundred and one Czech Crowns),
which it documents by an engrossment of the relevant Resolution of the General
Meeting of the Debtor, by a confirmation on payment of part of the dividends,
stipulated for payment to the Assignor by the Resolution of the General Meeting
of the Debtor, in the amount of 192 140 295 CZK. The Assignor documents the due
date of the Assigned Receivable by an agreement concluded between the Assignor
and the Debtor on 28 November 2000 and by an agreement concluded between the
Assignor and the Debtor on 7 August 2001.
2. The Assignor further declares that duly and timely payment of the Assigned
Receivable is secured by Security of the Assigned Receivable which the Assignor
documents by an extract from the Cadastral Register, List of Ownership No. 1326
maintained by the Cadastral Register for the city of Prague, showing the
Debtor's Real Estate and confirming the Security of the Assigned Receivable
3. For the purpose of securing duly and timely payment of the Secured
Receivables, the Assignor hereby assigns the Assigned Receivable to the Bank.
Based on assignment of the Assigned Receivable by the Assignor to the Bank, all
rights associated with the Assigned Receivable pass to the Bank together with
the Assigned Receivable, including Security of the Assigned Receivable.
4. Based on the Assignor's assignment of the Assigned Receivable to the Bank,
all accessories of the Assigned Receivable pass to the Bank along with the
Assigned Receivable, in particular interest, default interest and claim for
compensation of costs associated with executing the Assigned Receivable.
5. The Bank hereby accepts the Assigned Receivable thus assigned by the
Assignor, including the rights associated with it.
Article III
Effectiveness of Assignment of the Assigned Receivable
1. The Assigned Receivable and the rights associated with it are assigned as of
the date of effectiveness of this Contract. The registration of the change of
the mortgage creditor in the sense of Security of the Assigned Receivable in the
appropriate Cadastral Register will be made on the basis of a joint declaration
signed by the Contracting Parties and delivered to the Cadastral Registry for
the city of Prague together with necessary enclosures in the appropriate number
of copies. Specimen of the joint declaration constitutes Enclosure No. 1 of this
Contract.
2. The Contracting Parties are obliged to provide each other with all necessary
co-operation without undue delay for the purpose of registration of the change
in the person of the mortgage creditor in the sense of the Security of the
Assigned Receivable passing to the Bank in the appropriate Cadastral Register,
including signature of all necessary documents for this purpose and delivery of
all necessary documents to the Cadastral Register for the city of Prague
together with necessary enclosures in the appropriate number of copies.
Article IV
Rights and Obligations of the Bank and the Assignor
1. Within five (5) Business Days after the signature of this Contract, the
Assignor must prove in a way acceptable for the Bank that the notification on
assignment of the Assigned Receivable that meets requirements specified in
Enclosure No. 2 of this Contract was delivered to the Debtor. This does not
affect the right of the Bank to prove to the Debtor the assignment of the
Assigned Receivable independently.
2. The Assignor is obliged to assure that the Debtor pays its debt corresponding
to the Assigned Receivable to the Account. Should the Debtor pay its debt
corresponding to the Assigned Receivable in any other way, the Assignor is
obliged to reject such payment of the debt by the Debtor and inform the Debtor
that this debt will be paid off only by its payment to the Account. Should the
Debtor pay to the Bank from the Assigned Receivable otherwise than to the
Account, the Bank will transfer the payments of the Debtor to the Account
without undue delay and such payments will be handled as if though they had been
transferred to the Account directly by the Debtor.
3. The Bank and the Assignor explicitly agreed that payments received by the
Bank from the Assigned Receivable are considered as payment of the Assigned
Receivables or its parts, even in the case that the Assigned Receivables are not
yet due.
4. The Bank is entitled to set off any of its due receivables against the
Assignor against any receivables of the Assignor against the Bank regardless of
the due date of the receivables of the Assignor and regardless of the currency
of their denomination and the legal relationship which they result from. This
does not affect the provision of Section 360 of Act No. 513/1991 Coll., the
Commercial Code, as amended.
5. At any time, the Bank is entitled to use the monetary funds deposited on any
account of the Assignor maintained by the Bank to compensate any of its due
receivables against the Assignor, regardless of the due date of the Assignor's
receivable for payment of the monetary funds from the respective account and
regardless of the Assignor's instructions regarding the use of funds on the
account. The Bank will use the financial funds on the account by subtracting
them from the account at any time from the moment when its receivable becomes
due even without informing the Assignor in advance.
6. Application of Section 361 of Act No. 513/1991 Coll., the Commercial Code, as
amended, is excluded in all obligation relationships between the Contracting
Parties based on this Contract.
7. The Bank is obliged to send to the Assignor information about payments of the
Debtor to the Account always at the latest on the fifteenth (15th) Business Day
from the day when the Debtor's payment was credited to the Account.
Article V
Other Obligations of the Assignor
1. Based on the written request of the Bank, the Assignor is obliged to submit
to the Bank within fifteen (15) Business Days of the delivery of such request an
overview of the Debtor's payments of the Assigned Receivable of which the
Assignor is aware. The overview shall be prepared in a form requested by the
Bank and it shall reflect the status of the Debtor's payments of the Assigned
Receivable as of the day stipulated in the request of the Bank.
Article VI
Realization of the rights of the Bank on the basis of the security assignment
of the Assigned Receivable
1.
If any Secured Receivable is not duly and timely paid, the Bank will request the
Debtor in writing (with a copy to the Assignor) to pay the Assigned Receivable
or its appropriate parts (even if the Assigned Receivable or its respective part
are not yet due at that time) and provide the Debtor with an appropriate period
of time for such payment, not shorter than ten (10) Business Days from the date
of delivery of such a written request. The amount requested from the Debtor by
the Bank in such a written request may not exceed the amount corresponding to
the due unpaid part of the Secured Receivable. If the Debtor does not pay the
stipulated amount in accordance with Article VI, point 1 of this Contract, the
Bank has the right to proceed in accordance with Article VI, point 2 of this
Contract.
2. If any Secured Receivable is not duly and timely paid and not even in the
manner stipulated in Article VI, point 1 of this Contract, and the Assigned
Receivable and even its part are not yet due at that time, the Bank has the
right for satisfaction of the Secured Receivable from the proceeds of the
disposal for cash of the Assigned Receivable and the Assignor is obliged to
enable and suffer the Assigned Receivable`s disposal for cash and the
satisfaction of the Secured Receivable from proceeds of the disposal of the
Assigned Receivable for cash, even if the Secured Receivable is out of its
statute of limitations. The Bank is obliged to inform the Assignor in writing of
the intended sale of the Assigned Receivable at least ten (10) Business Days
before the day when the Bank makes an offer or realizes the sale of the Assigned
Receivable or its part to a third party. The Bank is not entitled to make an
offer or to realize the sale of the Assigned Receivable or its part to a third
party earlier than on the day following the 10. Business Day after the delivery
of such written information to the Assignor.
3. The Contracting Parties agree that for the purpose of respecting the
legitimate interest of the Assignor in achieving the highest proceeds from the
disposal of the Assigned Receivable for cash, the Assigned Receivable or its
part will be disposed for cash by sale by public auction in accordance with the
Act on Public Auctions. The Bank is entitled to conclude a contract on
performing the auction with any auction organizer of its choice, whereas the
remuneration of the auction organizer does not exceed the maximum admissible
remuneration specified in Section 18, paragraph 2 of the Act on Public Auctions.
The Bank is entitled to inform the public about holding the public auction via
the media, or in another suitable way.
4. In accordance with Section 13 of the Act on Public Auctions, the estimated
value of the Assigned Receivable will be the minimum bid. Should not even the
minimum bid be offered in the auction, the auctioneer is entitled to reduce the
minimum bid to 50% percent of the estimated value. Should the Assigned
Receivable or its part not be sold in the auction or should the auction fail, a
repeated auction will be held where the minimum bid will be at least 70% of the
minimum bid of the previous auction. If the Assigned Receivable or its part
cannot be realized by the described way, it can be sold by the Bank to anyone
for the highest offered price.
5. If any Secured Receivable is not duly and timely paid, and not even in the
manners specified in Section VI, points 1-4 of the Contract, and the Assigned
Receivable or even its part only is already due at that time and the Debtor is
in delay with its payment, the Bank is entitled to the satisfaction of the
Secured Receivable from the proceeds from the realization of the Security of the
Assigned Receivable, i.e. from the disposal of Debtor's Real Estate for cash.
The Bank is obliged to inform the Debtor and the Assignor in writing of its
intent to dispose the Debtor's Real Estate for cash at least twenty (20)
Business Days before the day when the Bank makes an offer or realizes the
disposal of the Debtor's Real Estate for cash. The Bank is not entitled to make
an offer or realize the disposal of the Debtor's Real Estate for cash earlier
than on the day following 20th. Business Day after delivery of such written
information to the Assignor and the Debtor.
6. Satisfaction of the Bank from the Security of the Assigned Receivable is
governed by the valid legal regulations and by this Contract. The Bank is
entitled to inform the public about realization of the Security of the Assigned
Receivable in an appropriate manner.
7. The manner of disposal of the Debtor's Real Estate for cash depends entirely
on the decision of the Bank; whereas the manner of disposal for cash is one of
the requirements of the Bank's notification to the Assignor and the Debtor
according to Article VI, point 5 of this Contract. In the case of failure of any
of the methods of disposal of the Debtor's Real Estate for cash chosen by the
Bank according to relevant legal regulations, the Bank is entitled to continue
by any other admissible methods of disposal of the Debtor's Real Estate for
cash.
8. The Bank is entitled to use the proceeds from the disposal of the Assigned
Receivable for cash or from the disposal of the Debtor's Real Estate for cash
for the satisfaction of the due Secured Receivables or any of their due parts if
they are not duly and timely paid by the Client or the Debtor, and for payment
of all costs related to this disposal for cash. In the case of a surplus from
the disposal of the Assigned Receivable for cash after the satisfaction of the
Secured Receivables, the surplus from the disposal of the Assigned Receivable
for cash will be transferred by the Bank without undue delay to the Assignor's
account that was announced to the Bank. In the case of a surplus from the
disposal of the Debtor's Real Estate for cash after the satisfaction of the
Assigned Receivable, the Bank will transfer the balance from the disposal for
cash and/or the surplus without undue delay to the Debtor's account that was
announced to the Bank.
9. Upon request, the Bank is obliged to inform the Assignor about the total
proceeds from the disposal of the Assigned Receivable for cash, the total
proceeds of the disposal of the Debtor's Real Estate for cash, and what part of
the payment of the Assigned Receivable, disposal of the Assigned Receivable for
cash and/or disposal of the Debtor's Real Estate for cash was used to pay the
Secured Receivables, and what is the current balance of the Secured Receivables.
Article VII
Expiry of the Security Assignment of the Assigned Receivable
1. The security assignment of the Assigned Receivable according to this Contract
expires by expiry of the Secured Receivables or by other ways stipulated by
legal regulations, with the exception stipulated in provision of Article VII,
point 3 of this Contract.
2. In the event of expiry of all Secured Receivables, the Assigned Receivable,
including the rights associated with it, will be transferred back to the
Assignor to the extent that it has not been paid by the Debtor yet or otherwise
expired. Within ten (10) Business Days after the expiry of all Secured
Receivables, the Bank is obliged to confirm in writing to the Assignor and the
Debtor the transfer of the Assigned Receivable back to the Assignor, including
its amount as of the day of this transfer, and explanation and enumeration of
this resulting amount.
3. Without undue delay after the expiry of the Secured Receivables, the Bank is
obliged to provide the Assignor and the Debtor with all co-operation necessary
for the purpose of registration of the change in the person of the mortgage
creditor in the sense of the transfer of Security of the Assigned Receivable
back to the Assignor in the appropriate Cadastral Register, including signature
of all documents necessary for this purpose and delivery of all necessary
documents to the Cadastral Register for the city of Prague together with
necessary enclosures in the appropriate number of copies.
4. If the Security of the Assigned Receivable expires as a result of expiry of
the Assigned Receivable, Article VII, point 3 shall be applied appropriately.
Article VIII
Declarations and Obligations of the Assignor
1. As of the date of the execution of this Contract and as of each date
thereafter until the expiry of the Secured Receivables, the Assignor declares
and confirms that:
a) it is a legal entity duly established and existing according to the
appropriate legal system that has an unrestricted capacity to the rights,
obligations and legal acts and in particular, to conclude this Contract and to
fulfil all obligations based on this Contract and that the execution and
signature of this Contract and fulfillment of the Assignor's obligations on its
basis were duly approved by the appropriate bodies of the Assignor;
b) this Contract is duly and validly signed by the Assignor or by its
representatives, who are not exceeding their authorizations. All obligations of
the Assignor resulting from this Contract are valid and enforceable obligations
of the Assignor. The Assignor has duly fulfilled or is prepared to duly fulfil
any obligations on the basis of this Contract and there are no objections or
claims against the Assigned Receivable that the Debtor or other parties might
assert against the Bank;
c) the Assigned Receivable has no legal or factual defects; in particular there
are no further rights of third parties to the Assigned Receivable and the
Assignor is not aware of any circumstances attesting to their origin;
d) neither the Assigned Receivable nor any of its parts were previously
satisfied by the Debtor nor it has expired by setting off the claim of the
Debtor against the Assignor (with the exception of the extent of fulfillment or
setting off that was announced to the Bank in writing by the Assignor before
executing this Contract or in this Contract) and it is not even aware of a risk
of set off;
e) the assignment of the Assigned Receivable based on this Contract is not
contrary to any agreement between the Assignor and the Debtor.
2. As of the day of execution of this Contract, the Assignor declares and
confirms that:
a) the execution of this Contract and the fulfillment of the Assignor's
obligations on its basis does not violate any constitutive or other
organizational documents of the Assignor, it is not contrary to any contract,
document, court judgement, arbitration award or administrative resolution,
regardless of whether currently effective or in legal force, which are binding
for the Assignor or affect the Assignor's rights and obligations or have a
substantial influence on the status of its assets, and it does not violate any
legal regulation;
b) the Assignor is not aware of any petition having been filed for issuing a
decision or of any such decision having been issued which might restrict the
Assignor's rights to dispose of the Assigned Receivable (for example a petition
for declaration of bankruptcy, a petition for settlement, a petition for issuing
a preliminary injunction, or a petition for realization of a resolution, etc.)
and that the Assignor is not bankrupt in the sense of relevant legal
regulations;
c) the Debtor is a legal entity duly established and existing in accordance with
the relevant legal system that has unrestricted capacity for rights,
obligations, and legal actions;
d) the Assignor is not aware of any petition having been filed to issue a
resolution or of any such resolution having been issued which might restrict the
Security of the Assigned Receivable (for example a petition for declaration of
bankruptcy, a petition for settlement, a petition for issue of a preliminary
injunction, or a petition for realization of a resolution), or that the Debtor
is bankrupt in the sense of relevant legal regulations;
e) The Debtor's Real Estate is insured against common risks by Insurance
Contract No. 80-595014267 of 23 November 1993, as amended, concluded between the
Debtor and the insurer, Kooperativa Pojist'ovna, a.s., for a total insurance
coverage of 230 781 000 CZK. The Assignor documents this declaration with an
officially verified copy of the insurance contract.
3. The Assignor is obliged:
a) not to assign the Assigned Receivable to a third party and not to set it off
against any other receivable;
b) to refrain from taking any action that might cause any of the declarations
set forth in this Contract untrue or in an important respect misleading and to
take any necessary and appropriate action to ensure that the declarations set
forth in this Contract are at all times true. The Assignor is further obliged to
notify the Bank in writing if any declaration set forth in this Contract is
untrue or in an important respect misleading. The notification must be made
within the period of seven (7) Business Days from the day when the Assignor
learns this or could have learned that the appropriate declaration is untrue or
in an important respect misleading;
c) to deliver to the Bank all announcements it received in connection with the
assertion of rights of third parties to the Assigned Receivable. The delivery
shall be made within the period of seven (7) Business Days from the day it
received such an announcement. Further it is obliged to notify the Bank in
writing if any right of third parties to the Assigned Receivable arises based on
law or on a court or administrative office resolution or for another reason.
Such notification must be made within the period of seven (7) Business Days
after the day on which the Assignor learned or could have learned of this fact;
d) not to take any action that would lead to a deterioration of the status of
the Assigned Receivable to the detriment of the Bank, not to establish any right
of third parties to the Assigned Receivable and not to take any action to
establish such a right and not to exercise rights associated with the Assigned
Receivable to the detriment of the Bank as assignee of the Assigned Receivable;
e) to provide the Bank without undue delay with all information the Assignor
learns about and which affects the Assigned Receivable in a substantial way or
that is substantial in another way for the relationship between the Assignor and
the Bank based on this Contract, including information of similar nature related
to the Debtor;
f) to inform the Bank in writing about all prepared or implemented
organizationally-legal changes in respect of the Assignor, changes in the
Commercial Register or any similar register maintained for the purposes of
registering commercial companies, and other changes that could substantially
threaten the Bank's position as assignee of the Assigned Receivable ;
g) to ensure that the Debtor's Real Estate is insured in the common extent until
the expiry of the Secured Receivables, whereby the total amount of insurance
coverage during this period will not drop below the amount given in Article
VIII, paragraph 2, letter e) of this Contract, and that the Debtor pays the
insurance premiums duly and timely;
h) to demonstrate to the Bank in an appropriate way within twenty (20) Business
Days after the delivery of a written request of the Bank that the Debtor's Real
Estate is insured in the common extent and for the amount stipulated in Article
VIII, paragraph 2, letter e) of this Contract, and that the Debtor pays
insurance premiums duly.
Article IX
Declarations and Obligations of the Bank
1. As of the date of execution of this Contract and as of each date thereafter
until the expiry of the Secured Receivables, the Bank declares and confirms
that:
a) the Bank is a legal entity duly established and existing according to the
applicable legal system that has an unrestricted capacity to rights,
obligations, and legal actions and in particular to conclude this Contract, and
to fulfil all obligations resulting from the Contract, and that the execution
and signature of this Contract and fulfillment of the Bank's obligations on its
basis was duly approved by the appropriate bodies of the Bank;
b) this Contract is duly and validly signed by the Bank or its representatives,
who are not exceeding their authorizations. All obligations of the Bank as a
result of this Contract are valid and enforceable obligations of the Bank. The
Bank duly fulfilled or is prepared to fulfil all its obligations based on this
Contract;
2. As of the day of execution of this Contract, the Bank declares and confirms
that execution of this Contract and fulfillment of the Bank's obligations based
on it does not violate any constitutive or other organizational documents of the
Bank; it is not contrary to any contract, document, court resolution,
arbitration award or administrative resolution, regardless of whether currently
effective and in legal force, which are binding for the Bank or that affect the
Bank's rights and obligations or have a substantial influence on the status of
the Bank's assets, and it does not violate any legal regulation.
3. The Bank is obliged:
a) not to assign the Assigned Receivable to a third party and not to set it off
against any other receivable, except in cases explicitly permitted by this
Contract or by a legal regulation governing the security of receivables and its
realization;
b) to transfer to the Assignor all payments received from the Debtor exceeding
the Secured Receivables not paid in another way;
c) not to take any steps leading to the disposal of the Debtor's Real Estate for
cash in the event of the Debtor's delay with fulfillment of the Assigned
Receivable, unless the Client becomes delayed with the fulfillment of the
Secured Receivables;
d) to deliver to the Assignor all notifications received in connection with the
assertion of rights of third parties to the Assigned Receivable, whereas it must
be delivered within the period of seven (7) Business Days from receiving such
notification. The Bank is further obliged to notify the Assignor in writing if
any right of third parties to the Assigned Receivable arise based on law or on a
court or administrative office resolution or for another reason, whereas the
notification must be made within the period of seven (7) Business Days from the
day when the Bank learned or could have learned about this fact;
e) not to take any action that could lead to a deterioration of the status of
the Assigned Receivable to the detriment of the Assignor, not to establish any
right of third parties to the Assigned Receivable and not to take any action
that could lead to the establishment of such a right, and not to exercise rights
associated with the Assigned Receivable to the detriment of the Assignor, except
in cases explicitly permitted by this Contract or by a legal regulations
governing the security of receivables and its realization;
f) to provide the Assignor without undue delay with all information it learns
that affects the Assigned Receivable in a substantial way or is important in
another way for the relationship between the Bank and the Assignor based on this
Contract, including information of similar nature related to the Debtor. This
provision shall not be applied if the provision of such information would breach
the duty of the Bank to keep banking secrets according to the relevant legal
regulations;
g) to inform the Assignor in writing of all planned or implemented
organizationally legal changes in respect of the Bank and other changes that
could substantially threaten the Assignor's position as assignor of the Assigned
Receivable.
Article X
Contractual Penalties
1. If any of the declarations made by the Assignor in this Contract is untrue or
in a substantial respect misleading, and/or if the Assignor breaches any
obligation according to this Contract with the exception of provisions of
Articles IV, V and VIII, paragraph 3, letters a), b), c), d), f) and g) of this
Contract, the Bank is entitled to demand a contractual penalty of CZK 100 000 in
each individual case of breach of the Contract.
2. If the Assignor breaches the obligations stipulated in Articles IV, V and
VIII, paragraph 3, letter a), b), c), d), f), and g) of this Contract, the Bank
is entitled to demand a contractual penalty of 500 000 CZK in each individual
case of breach of the Contract.
3. Neither circumstances excluding liability nor insufficient fault on the part
of the Assignor affect the Bank's right to demand the contractual penalty. The
Bank's right to demand the contractual penalty does not affect to any extent the
right of the Bank for compensation for damages caused by a breach of the
contractual obligation. The Assignor is obliged to fulfil the obligation, the
fulfillment of which was secured by the contractual penalty, regardless of
payment of the contractual penalty.
Article XI
Closing Provisions
1. Unless provided otherwise by this Contract or by relevant Czech or foreign
legal regulations, all information contained in this Contract or provided
between the Contracting Parties in connection with this Contract that is not
publicly available is confidential and the Contracting Parties are obliged to
keep it confidential (hereafter "the Confidential Information"). The Bank is
also entitled to use the Confidential Information for purposes related to the
business operations of the Bank, in particular for providing services to the
Assignor and processing the Confidential Information for these purposes. The
Bank is entitled to provide the Confidential Information to a person controlling
the Bank, to persons controlled by the Bank, to persons controlled by the same
person as the Bank (a controlling relationship in the sense of Section 66a of
Act No. 513/1991 Coll., the Commercial Code, as amended), and further to persons
that the Bank has entrusted by fulfilling any of its legal or contractual
obligations, provided that the Bank ensures that these persons are bound by
confidentiality duty in relation to the Confidential Information to the same
extent as to which the Bank is bound by confidentiality duty according to this
Contract and the relevant legal regulations.
2. The Bank will execute setting-off or payment of any receivables denominated
in various currencies using the exchange rate stipulated by the Bank two (2)
Business Days prior to the date on which setting-off or payment will be made and
in accordance with the Bank's rules for stipulating exchange rates. If the use
of the exchange rate set as of the above-mentioned date is not possible for any
reason, the Bank will use the exchange rate stipulated as of the closest
preceding Business Day.
3. This Contract is signed in six engrossments in the Czech language and three
engrossments in the English language; the Assignor will receive one engrossment
of each language version and the Bank will receive the remaining engrossments of
both language versions. The Czech language version of the Contract is binding
and decisive.
4. If any provision of this Contract is or becomes or shall be found to be
invalid or unenforceable, this will not affect the validity or enforceability of
the remaining provisions of the Contract (to the fullest extent permitted by
legal regulations). In such cases the Contracting Parties undertake to replace
the invalid or unenforceable provision by a valid and enforceable one which
shall have to the highest possible extent permitted by the legal regulations the
same meaning and effect as the original intention which is being replaced.
5. This Contract can be changed or amended only by written agreement of the
Contracting Parties stating clear will of the Contracting Parties to change or
amend this Contract.
6. This Contract is governed by valid Czech law. Any disputes arising from this
Contract will be definitively resolved, excluding the legal power of common
courts, in arbitration proceedings conducted before the Arbitration Court of the
Chamber of Economy of the Czech Republic and the Chamber of Agriculture of the
Czech Republic according to its Rules, by three (3) arbitrators appointed in
accordance with these Rules. The Contracting Parties undertake to fulfil all
obligations imposed on them in the arbitration award within the time limits
specified therein.
7. The Contracting Parties agreed on the following method of delivery of written
documents. The written documents will be sent to the Bank at the address: Česká
spořitelna, a.s., Olbrachtova 62, Prague 4, Postal Code 140 00, Department of
Restructuring and Execution (1263), fax 00420 2 61073229 to the Assignor at the
address: C/o CME Development Corporation, 8th Floor, Aldwych House, 71-91
Aldwych, London WC2B 4HN, attention Vice President - Finance Mark Wyllie, tel.
44 20 7430 5337, fax 44 20 7430 5402 ;
and to the Debtor at the address: CNTS, Vladislavova 20, 110 00 Praha 1,
Ceska republika, attention Mr. Milan Cimirot, tel. +42 02 211 00 169, fax +42 02
211 00 182;
or to such an address that will be announced in writing by the appropriate
Contracting Party to the other Contracting Party (in the case of the Debtor, the
appropriate Contracting Party means the Assignor). In the case the written
document is returned as undeliverable, it is considered to have been delivered
on the day following the day when it was returned.
8. This Contract becomes valid and effective by signature of both Contracting
Parties.
9. After having read this Contract, the Contracting Parties declare that they
agree with its content, that it has been drawn up on the basis of truthful
information and their true and free will, and that it has not been negotiated
under duress or under conditions otherwise disadvantageous to one Contracting
Party.
IN WITNESS WHEREOF both Contracting Parties have affixed their signatures on the
day set forth below.
CME Czech Republic B.V. :
By: /s/ Frederic Thomas Klinkhammer
Name : Frederic Thomas Klinkhammer
Title : Director A
Date : October 2, 2001
Česká spořitelna, a.s.:
By : /s/ Ing. Josef Suryn
Name : Ing. Josef Suryn
Title : Head of Section of Restructuring and Execution, Head of Section of Big
Corporations
Date : October 5, 2001
By : /s/Ing. Jaroslav Jirát
Name : Ing. Jaroslav Jirát
Title : Section of Restructuring and Execution, Section of Big Corporations
Date : October 5, 2001
Enclosure No. 1 of the Contract on Security Assignment of a Receivable No.
PP/81/01/LCD
Cadastral Registry
for the city of Prague
CME Czech Republic B.V.
Hoogoorddreef 9
1101BA Amsterdam Zuidoost
The Netherlands
Registration No.: 33289324
and
Česká spořitelna, a.s.
Na Příkopě 29, Prague 1, Postal Code: 113 98
Identification No. 45 24 47 82
registered in the Commercial Register maintained by the Municipal Court in
Prague,
Section B, Inlet 1171
jointly declare and announce
to the Cadastral Register for the city of Prague in accordance with Section 36,
paragraph 5, letter a) of Decree No. 190/96 Coll., as amended
the fact that there has been a change of the mortgage creditor
for the receivable of the company CME Czech Republic B.V. against the debtor,
the company Česká nezávislá televizní společnost, spol. s r.o. with its
registered seat at Vladislavova 20, Prague 1, Identification No. 49 61 66 68,
registered in the Commercial Register maintained by the Municipal Court in
Prague, Section C, Inlet 21333, which is secured by a mortgage on real estate
properties listed in the cadastral area Nové město, in capacity of the local
Cadastral Register on List of Ownership No. 1326. Entry of the mortgage right
was permitted by decision of local Cadastral Register No. V2 11624/00 with legal
effects of entry starting from 21.4. 2000.
Based on Contract No. PP/81/01/LCD on Security Assignment of a Receivable
concluded on _____ between Česká spořitelna, a.s. and the company CME Czech
Republic B.V., Česká spořitelna, a.s. has become the mortgage creditor of the
above-mentioned receivable according to Section 524 and subseq. of the Civil
Code in association with Section 554 of the Civil Code.
Regarding the fact that the rights to the stated real estate properties are not
disputed or doubted by the declaring parties, we request the registration of
change in the person of the mortgage creditor from the company CME Czech
Republic B.V. to the company Česká spořitelna, a.s. for the following buildings
and land parcels: Land Parcel No. 696 built up area/other building object, area
of 1 262 square meters; Land Parcel No.709 built up area/other building object,
area of 695 square meters; Land Parcel No. 697 built up area/courtyard, area of
155 square meters, building No. 1477 on Land Parcel No. 696 built up area/other
building object and; building No. 28 on Land Parcel No. 709 built up area/other
building object, all registered on the List of Ownership No. 1326 for cadastral
area Nové město, Prague Municipality, in the Cadastral Register for the city of
Prague.
In Prague, date:
CME Czech Republic B.V.:
________________
Name:
Position:
Date:
Česká spořitelna, a.s.:
__________________
Name:
Position:
Date:
___________________
Name:
Position:
Date:
Enclosure No. 2 of the Contract on Security Assignment of a Receivable No.
PP/81/01/LCD
NOTICE OF ASSIGNMENT OF RECEIVABLES
Česká nezávislá televizní společnost, spol. s r.o.
Vladislavova 20, Prague 1
Identification No.: 49 61 66 68
registered in the Commercial Register maintained by the Municipal Court in
Prague,
Section C, Inlet 21333
Dear all:
We hereby inform you that on ________ [date] we, the company CME Czech Republic
B.V. with its registered seat at Hoogoorddreef 9, 1101BA Amsterdam Zuidoost,
The Netherlands, Registration No. 33289324 as the assignor, concluded Contract
No. PP/81/01/LCD on Security Assignment of a Receivable with Ceska sporitelna,
a.s., with its registered seat at Na Prikope; 29, Prague 1, Postal Code 113 98,
Identification No. 45244782, registered in the Commercial Register maintained by
the Municipal Court in Prague under Ref. No. B.1171 on 30 December 1991, as the
assignee, and that based on this contract our monetary receivable against you,
the company Ce
ska nezavisla televizni spolecnost, spol. s r.o., resulting from the resolution
of your regular General Meeting on the distribution of profit and payment of
dividends for the year 1999 held on 17 April 2000, was assigned to Ceska;
sporitelna, a.s. The original amount of the assigned receivable was 475 227 596
CZK; whereas as of the day of signature of the above mentioned Contract on the
Security Assignment of Receivable the amount of the assigned receivable was 283
087 301 CZK. Along with the assigned receivable, all rights associated therewith
passed to Ceska sporitelna, a.s., in particular, the mortgage right established
in favor of the assignor to secure duly and timely payment of the assigned
receivable registered under No. V2 1162400 for your real estate properties
registered in List of Ownership No. 1326 for the Cadastral area Nové mesto,
Prague Municipality by the Cadastral Register for the city of Prague.
Regarding the above fact, we ask you to make all payments under the
above-specified receivable to Account No. 004327-0310271439/0800 maintained by
Česká spořitelna, a.s.
We would also like to inform you that as of the delivery of this notice your
obligations resulting from the above specified assigned receivable will be duly
and timely fulfilled only by their duly and timely payment to Česká spořitelna,
a.s. to the stated account.
_________________________
CME Czech Republic B.V. :
By: _________________
Name:
Title:
Date:
I hereby confirm acceptance of this notice:
In , on _________ [date] .
_________________________
Česká nezávislá televizní společnost, spol. s r.o. |
Exhibit 10.9
WGL HOLDINGS, INC.
LONG-TERM
INCENTIVE COMPENSATION PLAN
Adopted June 28, 1989
As Amended December 18, 1996
As Amended as of November 1, 2000
--------------------------------------------------------------------------------
WGL HOLDINGS, INC.
LONG-TERM INCENTIVE COMPENSATION PLAN
ARTICLE I
PURPOSE
The purpose of the WGL Holdings, Inc. Long-Term Incentive Compensation Plan
is to promote the long-term viability and financial success of the Company and
its Affiliates by assisting in the recruiting and retention of key employees.
The Plan is designed to enable key employees to acquire or increase a
proprietary interest in the Company.
ARTICLE II DEFINITIONS
2.01 Affiliate means any entity that is (i) a member of a controlled group
of corporations as defined in Code Section 1563 (a), determined without regard
to Code Sections 1563 (a) (4) and 1563 (e) (3) (c), of which the Company is a
member according to Code Section 414(b); (ii) an unincorporated trade or
business that is under common control with the Company, as determined according
to Code Section 414(c); (iii) a member of an affiliated service group of which
the Company is a member according to Code Section 414(m); or (iv) any other
subsidiary corporation or business in which the Company has a substantial
interest or business relation.
2.02 Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the terms
and conditions of an Award.
2.03 Award means Options, Restricted Stock, Stock Appreciation Rights,
Performance Shares, and Dividend Units.
2.04 Board means the Board of Directors of the Company.
2.05 Code means the Internal Revenue Code of 1986, as amended.
- 1 -
--------------------------------------------------------------------------------
2.06 Committee means the Compensation Committee of the Board or any other
Committee of the Board appointed to administer the Plan, provided that the
composition of such Committee shall at all times meet the requirements of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended.
2.07 Common Stock means the Common Stock of the Company, no par value per
share.
2.08 Company means WGL Holdings, Inc. and its predecessor in interest under
the Plan, Washington Gas Light Company.
2.09 Dividend Unit means an Award granted under Article X of the Plan.
2.10 Fair Market Value means, on any given date, the closing price of a
share Common Stock as reported on the New York Stock Exchange composite tape on
such day or, if the Common Stock was not traded on such day, then on the next
preceding day that the Common Stock was traded, all as reported by such source
as the Committee may select.
2.11 Option means an Award granted under Article VI of the Plan.
2.12 Participant means a key employee of the Company or of an Affiliate,
including a key employee who is a member of the Board, who satisfies the
requirements of Article IV of the Plan.
2.13 Performance Shares means an Award granted under Article IX of the
Plan.
2.14 Plan means the WGL Holdings, Inc. Long-Term Incentive Compensation
Plan herein set forth, as the same may from time to time be amended.
2.15 Restricted Stock means shares of Common Stock awarded to a Participant
under Article VII of the Plan.
2.16 Stock Appreciation Rights means an Award granted under Article VIII of
the Plan.
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ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Committee. Except for the initial
Awards as provided for in Section 7.01 (I), the Committee shall have authority
to grant Awards upon such terms (not inconsistent with the provisions of the
Plan) as the Committee may consider appropriate. Such terms may include
conditions (in addition to those contained in the Plan) on the exercisability of
all or any part of an Option or of Stock Appreciation Rights or on the
transferability or forfeitability of Restricted Stock. In addition, the
Committee shall have complete authority to interpret all provisions of the Plan;
to prescribe the form of Agreements; to adopt, amend, and rescind rules and
regulations pertaining to the administration of the Plan; and to make all other
determinations necessary or advisable for the administration of the Plan. The
express grant in the Plan of any specific power to the Committee shall not be
construed as limiting any power or authority of the Committee. Any decision
made, or action taken, by the Committee shall not be construed as limiting any
power or authority of the Committee. Any decision made, or action taken, by the
Committee in connection with the administration of the Plan shall be final,
conclusive, and binding with respect to all persons including all Participants.
No member of the Committee shall be liable for any act done, or for any failure
to act, if such act or failure to act was done or omitted in good faith with
respect to the Plan or any Agreement or Award.
ARTICLE IV
ELIGIBILITY
Key employees of the Company or of any Affiliate are eligible to receive
Awards under the Plan. An individual may receive more than one Award. The
Committee shall, in its discretion, select the eligible key employees and shall
base its selection on the employees’ job responsibilities and present and
potential contributions to the success of the Company and its Affiliates.
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ARTICLE V
GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN
The Committee may, from time to time, grant Awards to one or more eligible
employees, provided that (i) subject to any adjustment pursuant to Article XI,
the aggregate number of shares of Common Stock subject to Awards under the Plan
may not exceed four hundred thousand (400,000) shares; (ii) to the extent that
an Award lapses or the rights of the Participant to whom it was granted
terminate, any shares of Common Stock subject to such Award shall again be
available for the grant of an Award under the Plan; and (iii) shares delivered
by the Company under the Plan may be authorized and unissued Common Stock,
Common Stock held in the treasury of the Company, or Common Stock purchased on
the open market (including private purchases) in accordance with applicable
securities laws. In determining the size of Awards, the Committee shall take
into account a Participant’s responsibility level, performance, potential, and
cash compensation level, and the Fair Market Value at the time of the Award, as
well as such other considerations as it deems appropriate.
ARTICLE VI
STOCK OPTIONS
6.01 Grant of Options. One or more Options may be granted to any eligible
employee. Options shall be embodied in an Agreement in a form approved by the
Committee.
6.02 Incentive Stock Options/Nonqualified Stock Options. The Agreement may
provide for “incentive stock options” that are intended to satisfy the
requirements of Section 422A of the Code, or such other options that are not
intended to satisfy the requirements of Section 422A of the Code (hereinafter
described as “nonqualified stock options”), that entitle the holder to purchase
from the Company a stated number of shares of Common Stock at the price set
forth in the Agreement. Each Option shall be an incentive stock option or a
nonqualified stock option as specified in the Agreement. All Options that are
not identified as incentive stock options in the Agreement are intended to be
nonqualified stock options.
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6.03 Option Price. Except as provided in Section 6.04, the exercise price
per share of an Option shall be an amount not less than 100% of the Fair Market
Value per share of the Common Stock on the date of grant of such Option (or, in
the case of a grant of an incentive stock option to a prospective employee, the
date the grant becomes effective).
6.04 Additional Provisions Applicable to Incentive Stock Options. The
aggregate Fair Market Value (determined at the time any incentive stock option
is granted) of the Common Stock with respect to any Participant’s incentive
stock options, together with incentive stock options granted under any other
plan of the Company or any subsidiary (as defined in Code Section 425 (f)), that
are exercisable for the first time by such Participant during any calendar year
shall not exceed $100,000. In the event that a Participant holds incentive stock
options that become first exercisable (as a result of acceleration of
exercisability under the Plan or an Agreement, or otherwise) in any one calendar
year for shares having a Fair Market Value at the date of grant in excess of
$100,000, then the most recently granted of such incentive stock options, to the
extent that they are exercisable for shares having an aggregate Fair Market
Value in excess of $100,000, shall be deemed to be nonqualified stock options.
No incentive stock option may be granted under the Plan to any person who
owns, directly or indirectly, within the meaning of Sections 422A(b) (6) and
425(d) of the Code, at the time the incentive stock option is granted, stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any subsidiary (as defined in Code Section 425(f))
unless the exercise price is at least 110% of the Fair Market Value of the
shares subject to the incentive stock option, determined on the date of the
grant, and the incentive stock option by its terms is not exercisable after the
expiration of five years from the date such incentive stock option is granted.
6.05 Option Exercise Period. No Option shall be exercisable less than one
year nor more than ten years from the date the Option was granted.
6.06 Employee Status. In the event that the terms of any Option provide
that it may be exercised only during employment or within a specified period of
time after termination of employment, the Committee may decide in each case to
what extent leaves of absence for governmental or military service, illness,
temporary disability, or other reasons shall not be deemed terminations of
employment.
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6.07 Nontransferability. Any Option granted under the Plan shall not be
transferable by the Participant except by will or the laws of descent and
distribution and shall be exercisable during the Participant’s lifetime only by
the Participant or, in the event of the Participant’s mental or physical
incapacity, by his legal representative.
6.08 Exercisability.
(i) Generally. Subject to the other provisions of the Plan, an Option may
be exercised in whole at any time or in part, from time to time, at such times
and in compliance with such requirements as set forth in the Agreement. An
Option granted under the Plan may be exercised with respect to any number of
whole shares less than the full number for which the Option could be exercised.
Such partial exercise of an Option shall not affect the right to exercise the
Option from time to time in accordance with the Plan with respect to remaining
shares subject to the Option. Upon the exercise of an Option granted in
connection with Stock Appreciation Rights, the Participant shall surrender
unexercised the Stock Appreciation Rights or, if the Option is not exercised in
full, any portion of the Stock Appreciation Rights to which the exercised
portion of the Option is related.
(ii) Death, Disability, or Retirement. In the event of a Participant’s
death or disability, Options shall become exercisable either according to the
terms of the Agreement or on a pro-rata basis based upon the vesting period
specified in the Agreement, whichever permits the Participant or beneficiary to
exercise Options for a greater number of shares of Common Stock. For purposes of
this provision, “disability” means a physical or mental condition which prevents
the Participant from engaging in any substantially gainful activity. In the
event of normal retirement or early retirement as provided under the employees’
pension plan of the Company or the Affiliate employing the Participant, the
Committee may accelerate the exercisability of Options.
6.09 Exercise; Payment.
(i) Exercise. Unless provided otherwise in an Agreement, an Option shall
be exercised, in whole or in part, by a written notice delivered to the
Committee, which notice shall contain the provision or authorization with
respect to tax withholding required by Section 14.06(I). The Option shall be
deemed to have been exercised when such notice is received by the Committee.
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(ii) Payment. Payment of the Option exercise price shall be made in cash
or a cash equivalent acceptable to the Committee. If the Agreement so provides,
payment of all or part of the Option exercise price may be made in shares of
Common Stock, or through such other arrangements as specified in the Agreement.
If Common Stock is used to pay all or part of the Option exercise price, the
shares surrendered must have a Fair Market Value (determined as of the day of
exercise) that is not less than such price or part thereof.
6.10 Shareholder Rights. No Participant shall, as a result of having been
granted any Option, have any rights as a shareholder until the date the
Participant becomes a shareholder of record of shares of Common Stock upon
exercise of such Option.
ARTICLE VII
RESTRICTED STOCK
7.01 Awards.
(i) Initial Awards. The initial Awards of Restricted Stock shall be by
action of the Board taken on June 28, 1989, effective July 3, 1989.
(ii) Subsequent Awards. In accordance with the provisions of Article IV of
the Plan, the Committee may designate individuals to whom any subsequent Awards
of Restricted Stock are to be made and shall specify the number of shares of
Common Stock covered by the Awards.
7.02 Grant; Forfeiture of Restricted Stock.
(i) Grant. An Award of Restricted Stock shall be granted for no
consideration other than services.
(ii) Forfeiture of Restricted Stock. In the event that a Participant
granted an Award of Restricted Stock shall cease to be an employee of the
Company and all Affiliates for any reason, including but not limited to an
employing Affiliate’s ceasing to be such, other than death, disability, or
retirement prior to the lapse of all restrictions applicable to such Restricted
Stock, the shares of Restricted Stock awarded to the Participant shall be
forfeited to the Company, effective with the effective date of the Participant’s
termination of employ-
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ment. The Committee may decide in each case to what extent leaves of absence for
governmental or military service, illness, temporary disability, or other
reasons shall not be deemed a termination of employment.
7.03 Restriction Period.
(i) Initial Awards. For those initial Awards of Restricted Stock granted
by the Board on June 28, 1989, there shall be a five-year restriction period
during which restrictions shall lapse as follows: 50% after the third
anniversary of the granting of the Award; 25% after the fourth anniversary of
the granting of the Award; and the final 25% after the fifth anniversary of the
granting of the Award.
(ii) Subsequent Awards. The Committee shall establish restriction periods
applicable to any Award made subsequent to the initial Awards described in
Section 7.01 (I).
7.04 Death or Disability; Retirement.
(i) Death or Disability. Restrictions on Restricted Stock shall lapse on a
pro-rata basis in the event of a Participant’s death or disability. On the basis
of a five-year restriction period, the restrictions will lapse at the rate of
20% for each anniversary of the granting of the Award that has passed before the
occurrence of the Participant’s death or disability. For purposes of this
provision, “disability” means a physical or mental condition which prevents the
Participant from engaging in any substantially gainful activity.
(ii) Retirement. In the event of normal retirement or early retirement as
provided under the Company’s Employees’ Pension Plan, the Committee may
terminate any remaining restrictions on Restricted Stock.
7.05 Shareholder Rights. While the shares are Restricted Stock, a
Participant shall have all rights of a shareholder with respect to such shares,
including the right to receive dividends and to vote the shares; provided,
however, that (i) a Participant may not sell, transfer, pledge, exchange,
hypothecate, or otherwise dispose of shares of Restricted Stock and (ii) the
Company shall retain custody of the certificates evidencing shares of Restricted
Stock.
7.06 Withholding Notice. Unless provided otherwise in an Agreement, at the
time at which shares become freely transferable upon the lapse of restrictions,
the Participant shall
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provide written notice to the Committee setting forth the provision or
authorization with respect to tax withholding required by Section 14.06(I).
ARTICLE VIII
STOCK APPRECIATION RIGHTS
8.01 Grant of Stock Appreciation Rights. Stock Appreciation Rights may be
granted under the Plan in connection with an Option either at the time of grant
or by amendment, or may be separately awarded. Stock Appreciation Rights shall
be subject to such terms and conditions not inconsistent with the Plan as the
Committee shall impose.
8.02 Exercisability. Stock Appreciation Rights granted in connection with
an Option shall be exercisable to the extent the Option is exercisable. Stock
Appreciation Rights not granted in connection with an Option shall be
exercisable pursuant to such terms and conditions established by the Committee
in the Award.
8.03 Failure to Exercise. If a Participant who has been granted Stock
Appreciation Rights has not exercised such rights as of the day the Stock
Appreciation Rights expire due to passage of time, then such rights shall be
deemed to have been exercised by the Participant on such day. The foregoing
sentence applies only if the Fair Market Value of one share of Common Stock on
such day exceeds the Fair Market Value of one share of Common Stock on the day
the Stock Appreciation Rights were granted.
8.04 Exercise; Form of Payment.
(i) Exercise. Unless otherwise provided otherwise in an Agreement, Stock
Appreciation Rights shall be exercised, in whole or in part, by a written notice
delivered to the Committee, which notice shall contain the provision or
authorization with respect to tax withholding required by Section 14.06(I). The
Stock Appreciation Rights shall be deemed to have been exercised when such
notice is received by the Committee.
(ii) Form of Payment. Upon the exercise of Stock Appreciation Rights
granted in connection with an Option, the Participant shall surrender
unexercised the Option or, if the Stock Appreciation Rights are not exercised in
full, any portion of the Option to which the Stock Appreciation Rights are
related, and shall be entitled to receive payment (in cash
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or shares of Common Stock or a combination thereof as set forth in the Agreement
at the time of grant) equal to the product of the excess of the Fair Market
Value of one share of Common Stock at the date of exercise over the Option
price, multiplied by the number of shares called for by the Stock Appreciation
Rights (or portion thereof) which are so exercised. Upon exercise of Stock
Appreciation Rights not granted in connection with an Option, the Participant
shall be entitled to payment (in cash or shares of Common Stock or a combination
thereof as set forth in the Agreement at the time of grant) equal to the product
of the excess of the Fair Market Value of one share of Common Stock at the date
of exercise over the Fair Market Value of one share of Common Stock at the date
of grant of the Stock Appreciation Rights, multiplied by the number of shares
called for by the Stock Appreciation Rights (or portion thereof) which are so
exercised. The value of any Common Stock payable upon exercise of Stock
Appreciation Rights shall be the Fair Market Value of the Common Stock on the
day on which the Stock Appreciation Rights are exercised. Solely for purposes of
Article V of the Plan, to the extent that Stock Appreciation Rights granted in
connection with an Option are exercised, such Option shall be deemed to have
been exercised, and shall not be deemed to have lapsed.
8.05 Nontransferability. Stock Appreciation Rights granted under the Plan
shall not be transferable by the Participant except by will or the laws of
descent and distribution and shall be exercisable during the Participant’s
lifetime only by the Participant or, in the event of the Participant’s mental or
physical incapacity, by his legal representative.
8.06 Lapse of Stock Appreciation Rights. Stock Appreciation Rights granted
in connection with an Option shall lapse in accordance with the same terms and
conditions specified in the underlying Option. Stock Appreciation Rights not
granted in connection with an Option shall lapse in accordance with the terms
and conditions specified by the Committee in the Award.
8.07 Shareholder Rights. No Participant shall, as a result of having been
granted Stock Appreciation Rights, have any rights as a shareholder until the
date the Participant becomes a shareholder of record of shares of Common Stock
upon exercise of the Stock Appreciation Rights if shares of Common Stock are
issued to such Participant as a result of such exercise.
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ARTICLE IX
PERFORMANCE SHARES
9.01 Grant of Performance Shares. Awards made pursuant to this Article IX
shall be granted in the form of bookkeeping entries called Performance Shares,
subject to such terms and conditions not inconsistent with the Plan as the
Committee shall impose. Each Performance Share Award shall define performance
related objectives which shall be specified by the Committee in the Agreement
for the Award. The Agreement shall specify the extent to which satisfaction of
such specified objectives will entitle the Participant to receive shares of
Common Stock of the Company or cash at the end of the performance period.
9.02 Performance Period. The measuring period to establish the performance
objectives set forth in a Performance Share Agreement shall be no less than
three years.
9.03 Form of Payment. Upon the completion of the applicable performance
period, a determination shall be made as to the number of shares of Common Stock
or cash equal to the share value to be paid to the Participant for no
consideration other than services. Unless provided otherwise in an Agreement, at
the time of payment under the Performance Share Award the Participant shall
provide written notice to the Committee setting forth the provision or
authorization with respect to tax withholding required by Section 14.06(I).
9.04 Shareholder Rights. No Participant shall, as a result of having been
awarded Performance Shares, have any rights as a shareholder until the date the
Participant becomes a shareholder of record of shares of Common Stock upon
payment of the Performance Shares if shares of Common Stock are issued to such
Participant as a result of such payment.
ARTICLE X
DIVIDEND UNITS
The Committee may grant Dividend Units equal to a specified number of
shares of Common Stock on which Participants will receive cash payments equal to
the dividends paid on the underlying number of shares when, as, and if paid. An
Award of Dividend Units shall entitle the Participant to payment of an amount of
cash equal to such cash dividends only and
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not to any right to the actual dividends on the underlying shares or to the
underlying shares themselves. Such Awards of Dividend Units may be combined with
other Awards. Payments in respect of Dividend Units will be made at dividend
payment dates and not accumulated.
ARTICLE XI
ADJUSTMENT UPON CHANGE IN CAPITALIZATION
Should the Company effect one or more Common Stock dividends, stock
split-ups, subdivisions, or consolidations of shares or other changes in
capitalization, then the maximum number of shares that may be subject to Awards
under the Plan shall be proportionately adjusted, and the terms of outstanding
Awards shall be adjusted, as the Committee in its discretion shall determine to
be equitably required.
The issuance by the Company of shares of Common Stock of any class, or
securities convertible into shares of Common Stock of any class, for cash or
property or for labor or services, either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the maximum number of shares that may be subject to Awards under the Plan or
to the terms of outstanding Awards.
ARTICLE XII
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES; LEGENDS
No Option or Stock Appreciation Rights shall be exercisable, no Common
Stock shall be issued, no certificates for shares of Common Stock shall be
delivered, and no payment shall be made under the Plan except in compliance with
all applicable federal and state laws and regulations (including, without
limitation, tax withholding requirements) and the rules of all stock exchanges
on which the Common Stock may be listed. The Company shall have the right to
rely on an opinion of its counsel as to such compliance. No Option or Stock
Appreciation Rights shall be exercisable, no Common Stock shall be issued, no
certificate for shares shall be delivered, and no payment shall be made under
the Plan until the Company
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has obtained such consent or approval as the Company may deem advisable from
regulatory bodies having jurisdiction over such matters. Any share certificate
issued to evidence Common Stock or Restricted Stock may bear such legends and
statements as the Company may deem advisable to assure compliance with the Plan
and all federal and state laws and regulations.
ARTICLE XIII
ACCELERATION OF AWARDS; CHANGE OF CONTROL
13.01 Acceleration of Awards. Any other provision to the contrary in the
Plan or any Award or Agreement notwithstanding, in the event that an Award
pursuant to the terms of its grant is not immediately exercisable, is subject to
restrictions, or is subject to the meeting of specified performance objectives,
the Award may initially provide, or the Committee may at any time amend it to
provide, for accelerated exercisability, termination of restrictions, or waiver
or modification of performance objectives, subject to such terms and conditions
and upon the occurrence of such events determined by the Committee in its sole
discretion to justify such acceleration.
13.02 Change of Control — Acceleration; Automatic Vesting of Awards.
(i) Acceleration. Subject to the limitations in Section 13.03, any other
provision to the contrary in the Plan or any Award or Agreement notwithstanding,
all Options and Stock Appreciation Rights shall automatically become fully
exercisable, all restrictions applicable to Restricted Stock shall automatically
terminate and all performance objectives in Performance Share Awards shall be
waived upon the occurrence of any one or more of the triggering events specified
below:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) (a “Person”), of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of
either (i) the then-outstanding shares of common stock of the Company or
(ii) the combined voting power of the then-outstanding voting securities of the
Company entitled to vote generally in the election of directors; provided,
however, that for purposes of this subsection (a), the following acquisitions
shall not constitute a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, or any corporation controlled by
or
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otherwise affiliated with the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by or otherwise affiliated with the Company; or (iv) any
transaction described in clauses (i), (ii), and (iii) of subsection (d) of this
Section 13.02; or
(b) Individuals who, as of the close of business on November 1, 2000,
constituted the Board of Directors of the Company (the “Incumbent Company
Board”) cease for any reason to constitute at least a majority of the Board of
Directors of the Company; provided, however, that any individual becoming a
director subsequent to November 1, 2000 whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Company Board shall be
considered as though such individual were a member of the Incumbent Company
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Incumbent Company Board; or
(c) The acquisition by any Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of
either (i) the then-outstanding shares of common stock of Washington Gas Light
Company (the “Utility”) or (ii) the combined voting power of the
then-outstanding voting securities of the Utility entitled to vote generally in
the election of directors, provided, however, that for purposes of this
subsection (c), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Utility, (ii) any acquisition by
the Utility or any corporation controlled by or otherwise affiliated with the
Utility, (iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Utility or any corporation controlled by or
otherwise affiliated with the Utility; or (iv) any transaction described in
clauses (i) and (ii) of subsection (e) of this Section 13.02; or
(d) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
“Business Combination”), in each case unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the outstanding Company common
stock and outstanding Company voting securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then-outstanding shares of
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common stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination in
substantially the same proportions as their ownership, immediately prior to such
Business Combination, of the outstanding Company common stock and outstanding
Company voting securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 30% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination, or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination and (iii) at least
a majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent WGL Holdings, Inc.
Board at the time of the execution of the initial agreement, or of such
Incumbent WGL Holdings, Inc. Board, providing for such Business Combination; or
(e) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Utility (a
“Utility Business Combination”), in each case unless, following such Utility
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, directly or indirectly, respectively,
of the outstanding Utility common stock and the outstanding Utility voting
securities immediately prior to such Utility Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively, the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Utility
Business Combination in substantially the same proportions as their ownership,
immediately prior to such Utility Business Combination, of the outstanding
Utility common stock and outstanding Utility voting securities, as the case may
be, and (ii) no Person (excluding any corporation resulting from such Utility
Business Combination or any employee benefit plan (or related trust) of the
Utility or such corporation resulting from such Utility Business Combination)
beneficially owns, directly or indirectly, 30% or more of, respectively, the
then-outstanding shares of common stock of the corporation resulting from such
Utility Business Combination, or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Utility Business Combination; or
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(f) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
(ii) Vesting of Awards. Except as provided below, upon the occurrence of
any of the triggering events described in Section 13.02 (i) above, all
outstanding Awards shall automatically vest and be surrendered, and the
Participants shall receive in full satisfaction therefor, distribution in the
form of shares of Common Stock.
13.03 Certain Reduction of Payments. Anything in this Plan to the contrary
notwithstanding, in the event the Company determines that any payment by it to a
Participant (whether paid pursuant to the terms of this Plan or otherwise) would
be nondeductible by the Company for federal income tax purposes because of
Section 28OG of the Code, then any amounts payable to a Participant pursuant to
this Plan shall be reduced automatically to an amount that maximizes the
payments under the Plan without causing any payments to be nondeductible by the
Company because of Section 28OG of the Code.
ARTICLE XIV
GENERAL PROVISIONS
14.01 Effect on Employment. Neither the adoption of the Plan, nor the
receipt of any Award under the Plan, nor any documents under the Plan (or any
part thereof), including but not limited to any Agreement, shall confer upon any
employee any right to continue in the employ of the Company or any Affiliate, or
in any way affect any right and power of the Company or any Affiliate to
terminate the employment of any employee at any time with or without assigning a
reason therefor.
14.02 Unfunded Plan. The Plan shall be unfunded, and neither the Company
nor any Affiliate shall be required to segregate any assets that may at any time
be represented by Awards under the Plan. Any liability of the Company or any
Affiliate to any person with respect to any Award under the Plan shall be based
solely upon contractual obligations created pursuant to the Plan. No such
obligation of the Company or any Affiliate shall be deemed to be secured by any
pledge of, or other encumbrance on, any property of the Company or any
Affiliate.
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14.03 Rules of Construction. Headings are given to the articles and
sections of the Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
14.04 Fractional Shares. Any fractional shares concerning Awards shall be
eliminated by rounding down for fractions less than one-half and rounding up for
fractions equal to or more than one-half. No cash settlements shall be made with
respect to fractional shares eliminated by rounding.
14.05 Nonalienation. No benefit provided under the Plan shall be subject to
alienation or assignment by a Participant (or by any person entitled to such
benefit pursuant to the terms of the Plan), nor shall it be subject to
attachment or other legal process of whatever nature. Any attempted alienation,
assignment, or attachment shall be void and of no effect whatsoever. Payment
shall be made only to the Participant entitled to receive the same or the
Participant’s authorized legal representative. Deposit of any sum in any
financial institution to the credit of any Participant (or a person entitled to
such sum pursuant to the terms of the Plan) shall constitute payment to that
Participant (or such person).
14.06 Tax Withholding.
(i) Generally. Either the Company or an Affiliate, as appropriate, shall
have the right to deduct from all Awards paid in cash any federal, state, or
local taxes as it deems to be required by law to be withheld with respect to
such cash payments. In the case of Awards paid in shares of Common Stock, the
Participant receiving such Common Stock may be required to pay to the Company or
an Affiliate, as appropriate, the amount of any such taxes which the Company or
Affiliate is required to withhold with respect to such Common Stock. At the
request of a Participant, or as required by law, such sums as may be required
for the payment of any estimated or accrued income tax liability may be withheld
or paid to the Company or an Affiliate, as appropriate, and paid over to the
governmental entity entitled to receive the same.
(ii) Cashless Withholding. Participants may elect (an “Election”) to have
withheld shares of Common Stock (A) to be issued pursuant to the exercise of an
Option or Stock Appreciation Rights, (B) which have become freely transferable
pursuant to the termination of restrictions on Restricted Stock, or (C) which
are issued pursuant to a Performance Share Award, or the Participant may make an
Election to surrender to the Company shares already
- 17 -
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owned by the Participant (which may be shares of Common Stock previously
received pursuant to an Award), which shall be sufficient in value to satisfy
applicable tax withholding obligations, or such other withholding arrangements
requested by the Participant or otherwise required as specified above, in
connection with shares received pursuant to an Award. For purposes of such
withholding or surrender, the shares withheld or surrendered shall be valued at
their Fair Market Value on the date as of which the Participant first becomes
subject to taxation for federal income tax purposes in respect of shares of
Common Stock received upon exercise of the Option or Stock Appreciation Rights,
which have become freely transferable upon the termination of restrictions on
Restricted Stock, or which are issued under a Performance Share Award, whichever
is applicable (the “Tax Date”). If the Fair Market Value on the Tax Date of the
number of whole shares of Common Stock withheld or surrendered pursuant to an
Election exceeds the withholding or other applicable tax obligations, a
fractional share shall not be issued or returned for the excess, but an amount
equal to the excess shall be paid to the Participant by the Company in cash as
soon as reasonably practicable after the amount of such excess is determined by
the Company. An Election may be made by a Participant with respect to all or
part of a particular Option or Stock Appreciation Rights exercise, termination
of restrictions on Restricted Stock, or issuance of shares under a Performance
Share Award, to all or a specified class of previously granted Options, Stock
Appreciation Rights, Restricted Stock, or Performance Share Awards, and/or to
all or a specified class of Options, Stock Appreciation Rights, Restricted
Stock, or Performance Share Awards which may be granted in the future. The
Election shall specify whether the Participant elects to have withheld shares
issued pursuant to the Award to which the Election relates, or to surrender
already-owned shares of Common Stock. If the Participant elects to surrender
already-owned shares of Common Stock, the Election shall be accompanied by
certificates, with accompanying stock powers signed in blank, for a sufficient
number of such shares of Common Stock.
An Election by a Participant shall be made prior to the applicable Tax Date
and also shall meet each of the following additional requirements:
(1) The Election, once made, shall be irrevocable;
(2) The Election must be made either (a) during one of the ten
business-day periods beginning on the third business day following the date of
release of the Company’s quarterly or annual summary statements of sales and
earnings and ending on the twelfth business day following such date; or (b) at
least six months prior to the Tax Date for the Award to which the Election
applies;
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(3) No Election may be made with respect to any Award during the first
six months after the grant of the Award, with respect to any Option or Stock
Appreciation Rights which have been exercised during the first six months after
their date of grant, or with respect to any Restricted Stock for which
restrictions have terminated, or any Performance Share Awards for which shares
have been issued, during the first six months after the date of grant, and, if
any Option or Stock Appreciation Rights with respect to which an Election is
already in effect shall be exercised during the first six months after the date
of grant, or if any Common Stock is received upon the termination of
restrictions on Restricted Stock or issued pursuant to a Performance Share Award
with respect to which an Election is already in effect during the first six
months after the date of grant of such Award, such Election shall to the extent
of such exercise, termination, or issuance be deemed void, except that such
limitations shall not apply if such Participant dies or is disabled prior to the
expiration of such six-month period;
(4) No Election shall be made with respect to shares of Common Stock
issued pursuant to an Award if the Participant has previously filed an election
under Section 83 (b) of the Code in connection with such Award or in connection
with the receipt of shares under such Award; and
(5) The Committee shall have sole discretion to consent or disapprove any
Election made by a Participant, and if the Committee disapproves such an
Election, shares shall not be issued to the Participant upon the exercise of an
Option or Stock Appreciation Rights, become freely transferable pursuant to the
termination of restrictions on Restricted Stock, or be issued pursuant to a
Performance Share Award to which the disapproved Election applies until the
Participant shall have complied with Section 14.06(i) for satisfying tax
withholding obligations. The Committee by resolution may approve in advance
specified classes of Elections whether by a given Participant or category of
Awards, or by type of Election; provided, however, that any such resolution must
expressly reserve to the Committee the right both to disapprove any such
Election and to revoke or modify its advance approval of any such class of
Elections.
14.07 Government and Other Regulations. The obligation of the Company to
make payment of Awards in Common Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any government
agencies as may be required.
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The Company shall be under no obligation to register under the Securities Act of
1933, as amended, or under any state securities or Blue Sky laws any of the
shares of Common Stock issued, delivered, or paid in settlement under the Plan.
If Common Stock awarded under the Plan may in certain circumstances be exempt
from such registration, the Company may restrict its transfer in such manner as
it deems advisable to ensure such exempt status.
14.08 Reliance on Reports. Each member of the Committee shall be fully
justified in relying or acting in good faith upon any report made by the
independent public accountants of the Company and upon any other information
furnished in connection with the Plan. In no event shall any person who is or
shall have been a member of the Committee be liable for any determination made,
any other action taken, or any omission to act in reliance upon any such report
or information.
14.09 Company Successors. In the event the Company becomes a party to a
merger, consolidation, sale of substantially all of its assets, or any other
corporate reorganization in which the Company will not be the surviving
corporation or in which the holders of the Common Stock will receive securities
of another corporation (in any such case, the “New Company”), then the New
Company shall assume the rights and obligations of the Company under the Plan.
14.10 Governing Law. All matters relating to the Plan, any Awards, or any
Agreements, shall be governed by the laws of the District of Columbia, without
regard to the principles of conflict of laws.
14.11 Relationship to Other Benefits. No payment under the Plan shall be
taken into account in determining any benefits under any other pension,
retirement, profit-sharing, or other employee benefit plan of the Company or any
Affiliate.
14.12 Expenses. The expenses of administering the Plan shall be borne by
the Company.
14.13 Proceeds. Any cash proceeds received by the Company under the Plan
shall be used for general corporate purposes, and any shares of Common Stock
withheld by or paid to the Company under the Plan shall be held by the Company
as treasury stock or shall be canceled, as the Company in its discretion shall
determine.
- 20 -
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ARTICLE XV
AMENDMENT
The Board may amend the Plan from time to time. No amendment may become
effective until shareholder approval is obtained if such approval is required by
any federal or state law or regulation or the rates of any stock exchange on
which the Common Stock may be listed, or if the Board in its discretion
determines that the obtaining of such shareholder approval is for any reason
advisable. No amendment shall, without a Participant’s consent, adversely affect
any rights of such Participant under any Award outstanding at the time such
amendment is made.
ARTICLE XVI
EFFECTIVE DATE; DURATION OF THE PLAN
The effective date of the Plan is June 28, 1989, subject to shareholder
approval. Unless sooner terminated by the Board, the Plan shall terminate on
June 27, 1999; provided, however, that any Award outstanding at the time of such
termination shall continue in full force and effect and shall continue to be
governed by the Plan and its applicable Agreement until the Award expires or is
discharged by its terms.
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FIRST AMENDMENT
THIS FIRST AMENDMENT (this “Amendment”) is made as of this 14th day of December,
2000, by and among PMA CAPITAL CORPORATION, a Pennsylvania corporation (the
“Applicant”), each subsidiary of the Applicant which is a party hereto (each a
“Co-Applicant”), the banks or other lending institutions party hereto ( the
“Banks”, and each a “Bank”) and PNC BANK, NATIONAL ASSOCIATION, as agent for
itself and the other Banks (in such capacity, the “Agent”), and as issuing bank
(in such capacity, the “Issuing Bank”).
RECITALS
A. The Applicant, the Co-Applicants, the Banks and the Agent are
parties to a Second Amended and Restated Letter of Credit Agreement dated as of
November 22, 2000 (the “Credit Agreement”), pursuant to which the Agent agreed
to issue Letters of Credit to the Applicant and Co-Applicants in an aggregate
outstanding face amount of up to $55,000,000 (the “Commitment”). (All terms used
in this Amendment shall have the meanings set forth in the Credit Agreement,
unless otherwise defined herein.)
B. The Applicant and the Co-Applicants have requested and the Banks
and the Agent have agreed to increase the Commitment by an additional
$12,500,000 (the “Additional Commitment”) thereby increasing the total
Commitment available under the Credit Agreement to $67,500,000.
C. Allfirst Bank (“Allfirst”) has agreed to join in the Credit
Agreement and accept the Additional Commitments as its Commitment Amount and
Allfirst, the Applicant, the Co-Applicants, the Banks and the Agent have agreed
to enter into this Amendment to effect the foregoing increase and joinder and to
make certain other modifications to the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Amendments to the Credit Agreement. Effective as of December 18,
2000, the Credit Agreement is hereby amended as follows:
(a) The definition of Commitment in Section 1.1 is hereby
amended and restated to read in full as follows:
“Commitment means the commitment of PNC, as Issuing Bank, to issue Letters of
Credit having an aggregate outstanding Dollar Equivalent face amount up to
$67,500,000 (as reduced from time to time pursuant to Section 2.4), and with
respect to the Banks shall mean their commitment to participate in the Letter of
Credit Exposure in an amount equal to their respective Commitment Percentages as
set forth in Section 2.2 in an aggregate amount up to their respective
Commitment Amounts.”
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(b) Section 2 of the Credit Agreement is hereby amended by
adding the following new subsection 2.19 thereto:
"2.19. Release of Co-Applicant
Each Co-Applicant under the Credit Documents may request the
Agent to release such Co-Applicant as a party to the Credit Documents, provided
that at the time any such Co-Applicant makes the request for such release there
are (i) no outstanding Letters of Credit issued for the account of such
Co-Applicant, and (ii) no Default or Event of Default has occurred and is
continuing. If the conditions of this Section 2.19 are met by such Co-Applicant,
the Agent shall execute all documents necessary to confirm and effect the
release of such Co-Applicant as a party to the Credit Documents.”
(c) Exhibit A and Schedule 10.2 attached hereto shall be
substituted for Exhibit A and Schedule 10.2 attached to the Credit Agreement.
2. Representations and Warranties. Applicant and each Co-Applicant
hereby represent and warrant to the Agent and the Banks that:
(a) The representations and warranties contained in Section 4
of the Credit Agreement are true and correct in all material respects on and as
of the date of this Amendment (except to the extent any such representation or
warranty is expressly stated to have been made on a specific date, in which case
such representation or warranty shall be true and correct in all material
respects as of such date).
(b) No Default or Event of Default exists under the Credit
Agreement as of the date of this Amendment.
(c) This Amendment has been duly authorized by all requisite
action on behalf of the Applicant and each Co-Applicant and, assuming the due
execution of the other parties hereto, constitutes the legal, valid and binding
obligation of the Applicant and each Co-Applicant enforceable in accordance with
its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors’rights generally and general principles of equity.
(d) The execution, delivery and performance of this Amendment
will not violate any applicable Requirement of Law nor conflict with or
constitute a breach of or a default under any material instrument to which any
of the Applicant and each Co-Applicant is a party or by which the Applicant and
each Co-Applicant or any of their respective properties is bound.
(e) No approval, consent or authorization of, or registration,
declaration or filing with, any Governmental Authority or other Person is
required in connection with the valid execution, delivery and performance by the
Applicant and each Co-Applicant of this Amendment, except such as have been
obtained.
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3. Conditions Precedent. The effectiveness of the amendments set forth
herein is subject to the fulfillment, to the satisfaction of the Agent and its
counsel, of the following conditions precedent:
(a) The Applicant shall have delivered to the Agent the
following, all of which shall be in form and substance satisfactory to the Agent
and shall be duly completed and executed:
(i) This Amendment; and
(ii) Such additional documents, certificates and
information as the Agent may require pursuant to the terms hereof or otherwise
reasonably request.
(b) The representations and warranties set forth in the Credit
Agreement shall be true and correct in all material respects on and as of the
date hereof (except to the extent any such representation or warranty is
expressly stated to have been made on a specific date, in which case such
representation or warranty shall be true and correct in all material respects as
of such date).
4. Joinder. By signing this Amendment, Allfirst acknowledges that it
has received a copy of the Credit Agreement and the parties hereto acknowledge
and agree that from and after the date hereof, Allfirst shall be a party to the
Credit Agreement and the other Credit Documents as a Bank with all the rights
and obligations of a Bank under the Credit Agreement and the Credit Documents,
including, but not limited to, the Commitment Percentage and the Commitment
Amount as set forth opposite Allfirst’s name in Exhibit A, and that each and
every reference in the Credit Agreement and in any other Credit Document to
“Bank”or “Banks”shall mean and/or be a reference to include Allfirst. Allfirst
represents and warrants that the execution of this Amendment by Allfirst
constitutes a legal, valid and binding obligation of Allfirst enforceable in
accordance with the terms of the Credit Agreement, as amended hereby, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors’rights generally or by
general equitable principles.
5. Ratification; References; No Waiver. Except as expressly amended
by this Amendment, the Credit Agreement shall continue to be, and shall remain,
unaltered and in full force and effect in accordance with its terms. All
references in the Credit Agreement to “this Agreement,” “hereof,” “hereto” and
“hereunder” shall be deemed to be references to the Credit Agreement as amended
hereby, and all references in any of the Credit Documents to the Credit
Agreement shall be deemed to be to the Credit Agreement as amended hereby. This
Amendment does not and shall not be deemed to constitute a waiver by the Agent
or the Banks of any Default or Event of Default or of any of the Agent’s or the
Banks’ other rights or remedies.
6. Release. In consideration of the execution of this Amendment by
the Agent and the Banks, the Applicant and each Co-Applicant hereby release the
Agent and the Banks and their respective officers, attorneys, agents and
employees from any liability, suit, damage, claim,
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loss or expense of any kind or nature whatsoever and howsoever arising that the
Applicant had since the date of the Credit Agreement or now has as of the date
of this Amendment against the Agent or the Banks or any of them arising out of
or relating solely to the Credit Agreement and the other Credit Documents or the
Agent’s or the Banks’acts or omissions with respect thereto. The Applicant and
each Co-Applicant further state that they have carefully read the foregoing
release, know the contents thereof and grant the same as their own free act and
deed.
7. Miscellaneous.
(a) Counterparts. This Amendment may be executed by one or
more of the parties to this Amendment in any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
(b) Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or of the Credit Agreement, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(c) GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE COMMONWEALTH OF
PENNSYLVANIA.
(d) Successors; Assigns. Each and every one of the terms and
provisions of this Amendment shall be binding upon and shall inure to the
benefit of the Applicant, the Co-Applicants, the Agent and the Banks and their
respective successors and assigns. No rights are intended to be created
hereunder for the benefit of any third party donee, creditor or incidental
beneficiary.
(e) Headings. The paragraph headings of this Amendment are for
convenience only and shall not be used to interpret any provision hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
PMA CAPITAL CORPORATION By: /s/ Francis W. McDonnell
--------------------------------------------------------------------------------
Name: Francis W. McDonnell
--------------------------------------------------------------------------------
Title: Senior Vice President, Chief Financial Officer
and Treasurer
--------------------------------------------------------------------------------
PMA CAPITAL INSURANCE COMPANY By: /s/ Albert D. Ciavardelli
--------------------------------------------------------------------------------
Name: Albert D. Ciavardelli
--------------------------------------------------------------------------------
Title: Treasurer
--------------------------------------------------------------------------------
PENNSYLVANIA MANUFACTURERS'
ASSOCIATION INSURANCE COMPANY By: /s/ Francis W. McDonnell
--------------------------------------------------------------------------------
Name: Francis W. McDonnell
--------------------------------------------------------------------------------
Title: Vice President
--------------------------------------------------------------------------------
HIGH MOUNTAIN REINSURANCE LTD. By: /s/ Francis W. McDonnell
--------------------------------------------------------------------------------
Name: Francis W. McDonnell
--------------------------------------------------------------------------------
Title: Vice President & CFO
--------------------------------------------------------------------------------
WALPROP, INC. By: /s/ Francis W. McDonnell
--------------------------------------------------------------------------------
Name: Francis W. McDonnell
--------------------------------------------------------------------------------
Title: Vice President, Treasurer & Assistant Secretary
--------------------------------------------------------------------------------
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PNC BANK, NATIONAL ASSOCIATION,
Individually and as Agent and Issuing Bank By: /s/ Kirk Seagers
--------------------------------------------------------------------------------
Name: Kirk Seagers
--------------------------------------------------------------------------------
Title: Vice President
--------------------------------------------------------------------------------
FLEET NATIONAL BANK By: /s/ Lawrence Davis
--------------------------------------------------------------------------------
Name: Lawrence Davis
--------------------------------------------------------------------------------
Title: Associate Portfolio Manager
--------------------------------------------------------------------------------
CREDIT LYONNAIS NEW YORK BRANCH By: /s/ Peter Rasmussen
--------------------------------------------------------------------------------
Name: Peter Rasmussen
--------------------------------------------------------------------------------
Title: First Vice President
--------------------------------------------------------------------------------
SOVEREIGN BANK By: /s/ Michael J. Hassett
--------------------------------------------------------------------------------
Name: Michael J. Hassett
--------------------------------------------------------------------------------
Title: Vice President
--------------------------------------------------------------------------------
ALLFIRST BANK By: /s/ Coney Burgess
--------------------------------------------------------------------------------
Name: Coney Burgess
--------------------------------------------------------------------------------
Title: Vice President
--------------------------------------------------------------------------------
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PMA CAPITAL CORPORATION EXHIBIT A
COMMITMENT PERCENTAGES
Bank Commitment
Percentage Commitment
Amount PNC Bank, National Association 22.22222% $15,000,000 Fleet
National Bank 18.51852% 12,500,000 Credit Lyonnais New York Branch
22.22222% 15,000,000 Sovereign Bank 18.51852% 12,500,000 Allfirst Bank
18.51852% 12,500,000
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Total 100.00000% $67,500,000
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SCHEDULE 10.2
TO SECOND AMENDED AND RESTATED LETTER OF CREDIT AGREEMENT
DATED AS OF NOVEMBER 22, 2000
LIST OF BANKS
1. Mr. Kirk Seagers
PNC Bank, N.A.
1600 Market St., 22nd Floor
Philadelphia, PA 19103
Phone: (215) 585-5393 Fax: (215) 585-7615
e-mail: [email protected] 4. Mr. Michael J. Hassett
Sovereign Bank
20-6431-CM2
Three Radnor Corporate Center, Ste.210
100 Matsonford Road Radnor, PA 19087
Phone: (610) 526-6302
Fax: (610) 526-6214
e-mail:[email protected] 2. Mr. Anson T. Harris
Vice President, Financial Institutions
Fleet National Bank
777 Main Street, CT MO 0250
Hartford, CT 06115-2001
Phone: (860) 986-7518
Fax: (860) 986-1264
e-mail:[email protected] 5. Mr. C. Coney Burgess
Allfirst Bank
Mail Code 101-745
25 South Charles Street
Baltimore, MD 21201
Phone: (410) 244-4203
Fax: (410) 545-2047
e-mail: [email protected] 3. Mr. Peter Rasmussen
Credit Lyonnais
1301 Avenue of the Americas, 17th Floor
New York, NY 10019-6022
Phone: (212) 261-7718
Fax: (212) 261-3401
e-mail:[email protected]
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Exhibit 10.16
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COLLATERAL PLEDGE
AND SECURITY AGREEMENT
Dated as of October 15, 2001
among
FINISAR CORPORATION
as Pledgor,
U.S. BANK TRUST NATIONAL ASSOCIATION
as Trustee, and
U.S. BANK NATIONAL ASSOCIATION
as Collateral Agent
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This Collateral Pledge and Security Agreement (as supplemented from time to
time, this "Pledge Agreement") is made and entered into as of October 15, 2001
among FINISAR CORPORATION, a Delaware corporation (the "Pledgor"), having its
principal offices at 1308 Moffett Park Drive, Sunnyvale, California 94089, U.S.
Bank Trust National Association, a national banking association, having its
principal corporate trust office at 100 Wall Street, 16th Floor, New York, New
York, 10005, as trustee (in such capacity, the "Trustee") for the holders (the
"Holders") of the Notes (as defined herein) issued by the Pledgor under the
Indenture referred to below, and U.S. Bank National Association, a national
banking association, having a corporate trust office at 100 Wall Street, 16th
Floor, New York, New York, 10005, as collateral agent for the Trustee and the
holders from time to time of the Notes referred to below (in such capacity, the
"Collateral Agent") and securities intermediary.
W I T N E S S E T H:
WHEREAS, the Pledgor and Merrill Lynch, Pierce, Fenner & Smith Incorporated,
J.P. Morgan Securities Inc. and CIBC World Markets Corp. (collectively, the
"Initial Purchasers") are parties to a Purchase Agreement dated October 9, 2001
(the "Purchase Agreement"), pursuant to which the Pledgor will issue and sell to
the Initial Purchasers $125 million aggregate principal amount of 51/4%
Convertible Subordinated Notes due 2008 (the "Notes"), which amount includes
$25,000,000 aggregate principal amount of Notes as to which the Initial
Purchasers have exercised their over-allotment option set forth in Section 2(b)
of the Purchase Agreement;
WHEREAS, the Pledgor and U.S. Bank Trust National Association, as Trustee,
have entered into that certain indenture dated as of the date hereof (as
amended, restated, supplemented or otherwise modified from time to time, the
"Indenture"), pursuant to which the Pledgor is issuing the Notes on the date
hereof;
WHEREAS, pursuant to the Indenture, the Pledgor is required to purchase, or
cause the purchase of, and pledge to the Collateral Agent for the benefit of the
Trustee and the Holders, at the Closing Time (as defined in the Purchase
Agreement) or the relevant Date of Delivery (as defined in the Purchase
Agreement), U.S. Government Obligations (as defined in the Indenture) in an
amount that will be sufficient upon receipt of scheduled interest and principal
payments of such securities, in the written opinion of Ernst & Young LLP or
another nationally recognized firm of independent public accountants selected by
the Pledgor and delivered to the Trustee, to provide for payment in full of the
first six scheduled interest payments due on the Notes (such obligation,
together with the obligation to repay the principal, premium, if any, interest
(including Liquidated Damages, if any), fees, expenses or otherwise on the Notes
and under the Indenture, this Agreement and any other transaction document
related thereto in the event that the Notes become due and payable prior to such
time as the first six scheduled interest payments thereon shall have been paid
in full, being collectively referred to herein as the "Obligations");
WHEREAS, the Pledgor has established an account (the "Collateral Account")
with U.S. Bank National Association, at its office at 100 Wall Street, 16th
Floor, New York, New York, 10005, Account No. 77093271, in the name of U.S. Bank
National Association, as Collateral Agent for the benefit of the trustee and
holders of the 51/4% Convertible Subordinated Notes Due 2008 of Finisar
Corporation and designated as "USBANK COLL AGENT FOR FINISAR"; and
WHEREAS, it is a condition precedent to the purchase of the Notes by the
Initial Purchasers pursuant to the Purchase Agreement that the Pledgor apply
certain of the proceeds of the offering of the Notes to purchase the Pledged
Securities (as defined below) and deposit such Pledged Securities into the
Collateral Account to be held therein subject to the terms of this Pledge
Agreement and shall have granted the assignment and security interest and made
the pledge and assignment contemplated by this Pledge Agreement.
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NOW, THEREFORE, in consideration of the premises herein contained, and in
order to induce the Initial Purchasers to purchase the Notes, the Pledgor, the
Trustee and the Collateral Agent hereby agree, for the benefit of the Initial
Purchasers and for the ratable benefit of the Holders, as follows:
SECTION 1. Definitions; Appointment; Deposit and Investment.
1.1 Definitions.
(a) Unless otherwise defined in this Pledge Agreement, terms defined or
referenced in the Indenture are used in this Pledge Agreement as such terms are
defined or referenced therein.
(b) Unless otherwise defined in the Indenture or in this Pledge Agreement,
terms defined in Article 8 or 9 of the Uniform Commercial Code in effect in the
State of New York ("N.Y. Uniform Commercial Code") from time to time and/or in
Section 357.2 of the Treasury Regulations (as defined in Section 1.1(c)) are
used in this Pledge Agreement as such terms are defined in such Article 8 or 9
and/or such Section 357.2.
(c) In this Pledge Agreement, the following terms have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined:
"Additional Pledged Securities" has the meaning specified in Section 1.3
hereof.
"Cash Equivalents" means, to the extent owned by the Pledgor free and clear
of all Liens other than Liens created hereunder, U.S. Government Obligations.
"C.F.R." means U.S. Code of Federal Regulations.
"Closing Time" has the meaning specified in the Purchase Agreement.
"Collateral" has the meaning specified in Section 1.3 hereof.
"Collateral Account" has the meaning specified in the recitals of the
parties hereof.
"Collateral Agent" has the meaning specified in the recitals of the parties
hereto.
"Collateral Investments" has the meaning specified in Section 5 hereof.
"Date of Delivery" has the meaning specified in the Purchase Agreement.
"Entitlement holder" has the meaning specified in N.Y. Uniform Commercial
Code Section 8-102(a)(7) or in respect of any Book-entry Security, the meaning
specified for "Entitlement Holder" in 31 C.F.R. Section 357.2 or as applicable
to such Book-entry Security, the corresponding federal book-entry regulations.
"FRBMN" means Federal Reserve Bank of Minneapolis.
"FRBMN Account" means the FRBMN Member Securities Account maintained in the
name of the Collateral Agent by the FRBMN.
"FRBMN Member" means any Person that is eligible to maintain (and that
maintains) with the FRBMN one or more FRBMN Member Securities Accounts in such
Person's name.
"FRBMN Member Securities Account" means, in respect of any Person, the
Participant's Securities Account maintained in the name of such Person at the
FRBMN, to which account U.S. Government Obligations held for such Person are or
may be credited.
"Holders" has the meaning specified in the recitals of the parties hereto.
"Initial Pledged Securities" has the meaning specified in Section 1.3
hereof.
"Notes" has the meaning specified in the recitals of the parties hereof.
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"N.Y. Uniform Commercial Code" has the meaning specified in Section 1.1(b).
"Obligations" has the meaning specified in the recitals of the parties
hereof.
"Initial Purchasers" has the meaning specified in the recitals of the
parties hereof.
"Purchase Agreement" has the meaning specified in the recitals of the
parties hereof.
"Pledged Securities" has the meaning specified in Section 1.3 hereof.
"Pledgor" has the meaning specified in the recitals of the parties hereto.
"Securities intermediary" means a Person that is a "securities intermediary"
(as defined in N.Y. Uniform Commercial Code Section 8-102(a)(14)) and, in
respect of any Book-entry Security, a "Securities Intermediary" (as defined in
31 C.F.R. Section 357.2 or, as applicable to such Book-entry Security, as
defined in the corresponding federal book-entry regulations).
"Security" has the meaning specified in Section 8-102(a)(15) of the N.Y.
Uniform Commercial Code or, in respect of any Book-entry Security, has the
meaning specified for "Security" in 31 C.F.R. Section 357.2 (or as applicable to
such Book-entry Security, the corresponding federal book-entry regulations).
"Security entitlement" has the meaning specified in N.Y. Uniform Commercial Code
Section 8-102(a)(17) or, in respect of any Book-entry Security, has the meaning
specified for "Security Entitlement" in 31 C.F.R. Section 357.2 (or, as
applicable to such Book-entry Security, the corresponding federal book-entry
regulations).
"Settlement Date" means, as to any U.S. Government Obligations, the date on
which the purchase of such U.S. Government Obligations shall have been settled.
"Supplement" has the meaning specified in Section 1.3 hereof, and shall
substantially in the form of Exhibit B hereto.
"Termination Date" means the earlier of (a) the date of the payment in full
in cash of each of the first six scheduled interest payments due on the Notes
under the terms of the Indenture and (b) the date of the payment in full in cash
of all obligations due and owing under this Pledge Agreement, the Indenture and
the Notes, in the event such obligations become due and payable prior to the
payment of the first six scheduled interest payments on the Notes.
"Treasury Regulations" means (a) the federal regulations contained in 31
C.F.R. Part 357 (including, without limitation, Section 357.2, Section 357.10
through Section 357.14 and Section 357.41 through Section 357.44 of 31 C.F.R.)
and (b) to the extent substantially identical to the federal regulations
referred to in clause (a) above (as in effect from time to time) the federal
regulations governing other U.S. Government Obligations.
"Trustee" has the meaning specified in the recitals of parties hereto.
"Uncertificated Security" has the meaning specified in Section 8-102(a)(18)
of the N.Y. Uniform Commercial Code.
1.2 Appointment of the Collateral Agent. The Trustee hereby appoints the
Collateral Agent as Collateral Agent in accordance with the terms and conditions
set forth herein and the Collateral Agent hereby accepts such appointment.
1.3 Pledge and Grant of Security Interest. As security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations, the Pledgor hereby assigns and
pledges to the Collateral Agent for the benefit of the Trustee and the ratable
benefit of the Holders and hereby grants to the Collateral Agent for the benefit
of the Trustee and for the ratable benefit of the Holders, a lien on and first
priority perfected security interest in all of the Pledgor's right, title and
interest in, to and under the following property: (a) (i)
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the U.S. Government Obligations identified by CUSIP No. in Part I of Schedule I
to this Pledge Agreement (the "Initial Pledged Securities") and (ii) the U.S.
Government Obligations, if any, identified by CUSIP No. in a supplement or
supplements (each, a "Supplement," the form of which is attached hereto as
Exhibit B) to the Pledge Agreement (the "Additional Pledged Securities" and,
together with the Initial Pledged Securities, the "Pledged Securities") and the
certificates representing the Pledged Securities (if any), the scheduled
payments of principal and interest thereon which will be sufficient to provide
for payment in full of the first six scheduled interest payments due on the
Notes, (b) the security entitlements described in Part II of said Schedule I and
in each Supplement to the Pledge Agreement, if any, with respect to the
financial assets described, the securities intermediary named, and the
securities account referred to therein, (c) the Collateral Account, all security
entitlements from time to time carried in the Collateral Account, all funds held
therein and all certificates and instruments, if any, from time to time
representing or evidencing the Collateral Account, (d) all Collateral
Investments (as hereinafter defined) from time to time and all certificates and
instruments, if any, representing or evidencing the Collateral Investments, and
any and all security entitlements to the Collateral Investments, and any and all
related securities accounts in which any security entitlements to the Collateral
Investments is carried, (e) all notes, certificates of deposit, deposit
accounts, checks and other instruments, if any, from time to time hereafter
delivered to or otherwise possessed by the Collateral Agent for or on behalf of
the Pledgor and specifically designated by the Pledgor to be in substitution for
any or all of the then existing Collateral, (f) all interest, dividends, cash,
instruments and other property, if any, from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of the then
existing Collateral and (g) all proceeds of any and all of the foregoing
Collateral (including, without limitation, proceeds that constitute property of
the types described in clauses (a)-(f) of this Section 1.3) and, to the extent
not otherwise included, all (i) payments under insurance (whether or not the
Trustee is the loss payee thereof) or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral and (ii) cash proceeds of any and all of the foregoing
Collateral (such property described in clauses (a) through (g) of this
Section 1.3 being collectively referred to herein as the "Collateral"). Without
limiting the generality of the foregoing, this Pledge Agreement secures the
payment of all amounts that constitute part of the Obligations and would be owed
by the Pledgor to the Trustee under the Notes, the Indenture, this Pledge
Agreement and any other transaction documents related thereto but for the fact
that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Pledgor.
SECTION 2. Establishment and Maintenance of Collateral Account.
(a) Prior to or concurrently with the execution and delivery hereof, the
Collateral Agent shall establish the Collateral Account on its books as a
separate account segregated from all other custodial or collateral accounts at
its office at 100 Wall Street, 16th Floor, New York, New York, 10005. The
Pledgor and the Collateral Agent will maintain the Collateral Account as a
securities account with the Collateral Agent in the State of New York. The
following provisions shall apply to the establishment and maintenance of the
Collateral Account:
(i)The Collateral Agent shall cause the Collateral Account to be, and the
Collateral Account shall be, separate from all other accounts maintained by the
Collateral Agent.
(ii)The Collateral Agent shall, in accordance with all applicable laws, have
sole dominion and control over the Collateral Account.
(iii)It shall be a term and condition of the Collateral Account and the Pledgor
irrevocably instructs the Collateral Agent, notwithstanding any other term or
condition to the contrary in any other agreement, that no amount (including
interest on Collateral Investments) shall be released to or for the account of,
or withdrawn by or for the
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account of, the Pledgor or any other Person except as expressly provided in this
Pledge Agreement.
(b) On (i) the Closing Time and (ii) the relevant Date of Delivery, if any,
the Pledgor shall transfer, or cause to be transferred, to the Collateral Agent,
in the case of (i), an amount equal to $18,855,193.59 or, in the case of (ii),
an additional amount in cash to be set forth in the relevant Supplement to the
Pledge Agreement, which amount shall be sufficient for the Collateral Agent to
purchase the Additional Pledged Securities, in each case by depositing all such
funds into the Collateral Account. The Collateral Account shall be subject to
such applicable laws, and such applicable regulations of the Board of Governors
of the Federal Reserve System and of any other appropriate banking or
governmental authority, as may now or hereafter be in effect.
(c) As soon as practicably possible after receipt of the amount referred to
in Section 2(b) (and not later than the Business Day following (A) the Closing
Time or (B) the relevant Date of Delivery, as the case may be), (i) the
Collateral Agent shall apply such amount to purchase (1) in the case of
(A) above, the U.S. Government Obligations (in the name of the Collateral Agent)
listed on Schedule I hereto, or (2) in the case of (B) above, the U.S.
Government Obligations (in the name of the Collateral Agent) listed on the
relevant Supplement to the Pledge Agreement hereto, and, in each case, credit
such U.S. Government Obligations to the Collateral Account as Collateral
hereunder; and (ii) the Collateral Agent shall ensure that, on the Settlement
Date of such U.S. Government Obligations, the FRBMN indicates by book-entry that
those U.S. Government Obligations being settled on such date are credited to the
FRBMN Account.
(d) The Collateral Agent will, from time to time, reinvest the proceeds of
Collateral that may mature or be sold in such Collateral Investments (in the
name of the Collateral Agent) as it will be directed in writing by the Pledgor,
and cause such Collateral Investments to be credited to the Collateral Account
as Collateral hereunder. Any such proceeds that the Pledgor directs the
Collateral Agent in writing not to reinvest in Collateral Investments shall be
held in the Collateral Account.
SECTION 3. Delivery and Control of Collateral.
(a) All certificates or instruments representing or evidencing Collateral
shall be delivered to and held by or on behalf of the Collateral Agent pursuant
hereto and shall be in suitable form for transfer or delivery, or, at the
request of the Collateral Agent, shall be accompanied by duly executed
instruments of transfer or assignment in blank. In addition, the Collateral
Agent shall have the right at any time to exchange certificates or instruments
representing or evidencing Collateral for certificates or instruments of smaller
or larger denominations.
(b) With respect to any Collateral that constitutes a security and is not
represented or evidenced by a certificate or instrument, the Pledgor shall cause
the issuer thereof either (i) to register the Collateral Agent as the registered
owner of such security or (ii) to agree in writing with the Collateral Agent and
the Pledgor that such issuer will comply with instructions with respect to such
security originated by the Collateral Agent without further consent of the
Pledgor, the terms of such agreement to be consistent with the terms of this
Agreement (if applicable).
(c) With respect to any Collateral that constitutes a security entitlement,
the Pledgor shall cause the securities intermediary with respect to such
security entitlement either (i) to identify in its records the Collateral Agent
as the entitlement holder of such security entitlement against such securities
intermediary or (ii) to agree in writing with the Pledgor and the Collateral
Agent that such securities intermediary will comply with entitlement orders
(that is, notifications communicated to such securities intermediary directing
transfer or redemption of the financial asset to which Pledgor has a security
entitlement) originated by the Collateral Agent without further consent of the
Pledgor, the terms of such agreement to be consistent with the terms of this
Agreement (if applicable).
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(d) With respect to any Collateral that constitutes a securities account,
the Pledgor will comply with subsection (c) of this Section 3 with respect to
all security entitlements carried in such securities account.
(e) Concurrently with the execution and delivery of this Pledge Agreement,
the Collateral Agent is delivering, and concurrently with the execution and
delivery of any Supplement to the Pledge Agreement, the Collateral Agent will
deliver, to the Pledgor and the Initial Purchasers a duly executed certificate,
in the form of Exhibit A hereto, of an officer of the Collateral Agent.
(f) [RESERVED]
(g) Pledgor hereby irrevocably authorizes the Collateral Agent at any time
and from time to time to file in the Office of the Secretary of State of
Delaware and any other filing office in the United States any initial financing
statements and amendments thereto that (a) contain a description of collateral
of an equal or lesser scope as the Collateral described in this Pledge Agreement
or any Supplement to the Pledge Agreement, but such description may contain
greater detail than is contained in this Pledge Agreement or any such
Supplement, and (b) contain any other information required by part 5 of
Article 9 of the Uniform Commercial Code as in effect in any applicable
jurisdiction for the sufficiency or filing office acceptance of any financing
statement or amendment therein, including whether the Pledgor is an
organization, the type of organization and any organization identification
number issued to the Pledgor. The Pledgor agrees to furnish any such information
to the Collateral Agent promptly upon request. The Pledgor also ratifies its
authorization for the Collateral Agent to have filed in any Uniform Commercial
Code jurisdiction any initial financing statements or amendments thereto if
filed prior to the date hereof. A photocopy or other reproduction of this
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law.
SECTION 4. Delivery of Collateral Other than U.S. Government Obligations.
(a) Collateral consisting of cash will be deemed to be delivered to the
Collateral Agent (such that the Collateral Agent will have an enforceable lien
and security interest thereon and therein) when it has been (and for so long as
it shall remain) deposited in or credited to the Collateral Account.
(b) [RESERVED].
(c) Collateral consisting of uncertificated securities (other than U.S.
Government Obligations) will be deemed delivered to the Collateral Agent when
the Collateral Agent (A) shall indicate by book entry that such securities have
been credited to the Collateral Account or (B) shall receive such security (or a
financial asset based on such security) for the Collateral Account from or at
the direction of the Pledgor, and shall accept such security (or such financial
asset) for credit to the Collateral Account.
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(d) Collateral consisting of securities, and represented or evidenced by
certificates or instruments (other than U.S. Government Obligations), will be
deemed delivered to the Collateral Agent when all such certificates or
instruments representing or evidencing the Collateral, including, without
limitation, amounts invested as provided in Section 5, shall be delivered to the
Collateral Agent and held by or on behalf of the Collateral Agent pursuant
hereto and shall be in registered form and specially indorsed to the Collateral
Agent by an effective indorsement, all in form and substance sufficient to
convey a valid security interest in such Collateral to the Collateral Agent or
shall be credited to the Collateral Account.
SECTION 5. Investing of Amounts in the Collateral Account. The Collateral
Agent shall advise the Pledgor if, at any time, any amounts shall exist in the
Collateral Account uninvested, and if directed in writing by the Pledgor, the
Collateral Agent will, subject to the provisions of Section 6 and Section 13,
(a) invest such amounts on deposit in the Collateral Account in such Cash
Equivalents in the name of the Collateral Agent as the Pledgor may select, and
(b) invest interest paid on the Cash Equivalents referred to in clause (a)
above, and reinvest other proceeds of any such Cash Equivalents that may mature
or be sold, in each case in such Cash Equivalents in the name of the Collateral
Agent, as the Pledgor may select (the Cash Equivalents referred to in clauses
(a) and (b) above, together with the Pledged Securities, being collectively
referred to herein as "Collateral Investments"); provided, however, that the
amount in cash and Pledged Securities on deposit in the Collateral Account,
collectively, at any time during the term of this Pledge Agreement, is
sufficient to provide for the payment in full of the remaining interest payments
at such time on the Notes up to and including the sixth scheduled interest
payment. Interest and proceeds that are not invested or reinvested in Collateral
Investments as provided above shall be deposited and held in the Collateral
Account. Except as otherwise provided in Sections 11 and 12, the Collateral
Agent shall not be liable for any loss in the investment or reinvestment of
amounts held in the Collateral Account. The Collateral Agent is not at any time
under any duty to advise or make any recommendation for the purchase, sale,
retention or disposition of the Collateral Investments.
SECTION 6. Disbursements. The Collateral Agent shall hold the Collateral in
the Collateral Account and release the same, or a portion thereof, only as
follows:
(a) Prior to each of the first six scheduled interest payments on the Notes,
the Collateral Agent shall release from the Collateral Account and pay to the
Trustee for the benefit of, and payment to, the Holders of the Notes in
accordance with the provisions of the Indenture an amount sufficient to pay the
interest due on the Notes on such interest payment date and will take any action
necessary to provide for the payment of the interest on the Notes to the Holders
in accordance with the payment provisions of the Indenture from (and to the
extent of) proceeds of the Collateral in the Collateral Account. Nothing in this
Section 6 shall affect the Collateral Agent's rights to apply the Collateral to
the payments of amounts due on the Notes upon acceleration thereof.
(b) If, prior to the date on which the sixth scheduled interest payment on
the Notes is due:
(i)an Event of Default under the Notes occurs and is continuing and
(ii)the Trustee or the Holders of 25% in aggregate principal amount of the Notes
accelerate the Notes by declaring the principal amount of the Notes to be
immediately due and payable in accordance with the provisions of the Indenture,
except for the occurrence and continuance of an Event of Default under
Section 6.01(6) and (7) of the Indenture, upon which the Notes will be
accelerated automatically pursuant to the Indenture,
then the Collateral Agent shall promptly, subject to applicable bankruptcy laws,
release the proceeds from the Collateral Account and pay to the Trustee for the
benefit of, and payment to, the Holders of
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the Notes in accordance with the provisions of the Indenture. Distributions from
the Collateral Account shall be applied, for the ratable benefit of the Holders,
as follows:
(x)first, to any accrued and unpaid interest on the Notes and
(y)second, to the extent available, to the repayment of the remaining
Obligations, including the principal amount of the Notes.
Any surplus of such proceeds held by the Collateral Agent and remaining
after payment in full of all of the Obligations shall be paid over to the
Pledgor.
(c) [RESERVED]
(d) In the event that the Collateral held in the Collateral Account is less
than 100% of the amount sufficient, in the written opinion of Ernst & Young LLP
or another nationally recognized firm of independent public accountants selected
by the Pledgor, to provide for payment in full of the first six scheduled
interest payments due on the Notes (or, in the event an interest payment or
payments have been made, an amount sufficient to provide for payment in full of
all interest payments remaining, up to and including the sixth scheduled
interest payment), the Pledgor shall deposit cash in to the Collateral Account
in the amount of such deficiency.
(e) In the event that the Collateral held in the Collateral Account exceeds
100% of the amount sufficient, in the opinion of Ernst & Young LLP or another
nationally recognized firm of independent public accountants selected by the
Pledgor, to provide for payment in full of the first six scheduled interest
payments due on the Notes (or, in the event an interest payment or payments have
been made, an amount sufficient to provide for payment in full of all interest
payments remaining, up to and including the sixth scheduled interest payment),
the Collateral Agent shall release to the Pledgor, at the Pledgor's written
request, accompanied by a written opinion prepared by Ernst & Young LLP or such
other nationally recognized firm of independent public accountants, any such
excess Collateral.
(f) Upon the release of any Collateral from the Collateral Account, in
accordance with the terms of this Pledge Agreement, the security interest and
lien evidenced by this Pledge Agreement in such released Collateral will
automatically terminate and be of no further force and effect; provided that the
foregoing shall not affect the security interest and lien on any Collateral not
so released.
(g) Except as expressly provided in this Section 6, nothing contained in
this Pledge Agreement shall (i) afford the Pledgor any right to issue
entitlement orders with respect to any security entitlement to the Pledged
Securities or Collateral Investments or any securities account in which any such
security entitlement may be carried, or otherwise afford the Pledgor control of
any such security entitlement or (ii) otherwise give rise to any rights of the
Pledgor with respect to the Collateral Investments, any security entitlement
thereto or any securities account in which any such security entitlement may be
carried, other than the Pledgor's rights under this Pledge Agreement as the
beneficial owner of Collateral pledged to and subject to the exclusive dominion
and control (including, without limitation, securities control) of the
Collateral Agent in its capacity as such (and not as a securities intermediary).
The Pledgor acknowledges, confirms and agrees that the Collateral Agent holds a
first priority perfected security interest, lien and security entitlement to the
Collateral Investments solely as collateral agent for the Trustee and the
Holders and not as a securities intermediary for the Pledgor.
SECTION 7. Representations and Warranties. The Pledgor hereby represents
and warrants, as of the date hereof, that:
(a) The execution and delivery by the Pledgor of, and the performance by the
Pledgor of its obligations under, this Pledge Agreement will not contravene any
provision of applicable law or the certificate of incorporation, bylaws or
equivalent organizational instruments of the Pledgor or any material agreement
or other material instrument binding upon the Pledgor or any of its subsidiaries
or any judgment, order or decree of any governmental body, agency or court
having jurisdiction over the
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Pledgor or any of its subsidiaries, or result in the creation or imposition of
any Lien on any assets of the Pledgor, except for the lien and security
interests granted under this Pledge Agreement; no consent, approval,
authorization or order of, or qualification with, and no notice to or filing
with, any governmental body or agency or other third party is required (i) for
the performance by the Pledgor of its obligations under this Pledge Agreement,
(ii) for the pledge by the Pledgor of the Collateral pursuant to this Pledge
Agreement or for the execution, delivery or performance of this Agreement by the
Pledgor or (iii) for the perfection or maintenance of the pledge, assignment and
security interest created hereby (including the first priority nature of such
pledge, assignment or security interest), except for the filing of financing and
continuation statements under the Uniform Commercial Code of applicable
jurisdictions which financing statements have been delivered pursuant to
Section 3(g) hereof, or (iv) except for any such consents, approvals,
authorizations or orders required to be obtained by the Collateral Agent (or the
Holders) for reasons other than the consummation of this transaction, for the
exercise by the Collateral Agent of the rights provided for in this Pledge
Agreement or the remedies in respect of the Collateral pursuant to this Pledge
Agreement.
(b) The Pledgor is the legal and beneficial owner of the Collateral, free
and clear of any Lien or claims of any Person (except for the lien and security
interests granted under this Pledge Agreement). No effective financing statement
or other instrument similar in effect covering all or any part of the Collateral
is on file in any public office other than the financing statements, if any, to
be filed pursuant to this Pledge Agreement.
(c) This Pledge Agreement has been duly authorized, validly executed and
delivered by the Pledgor and (assuming the due authorization and valid execution
and delivery of this Pledge Agreement by each of the Trustee and the Collateral
Agent and enforceability of the Pledge Agreement against each of the Trustee and
the Collateral Agent in accordance with its terms) constitutes a valid and
binding agreement of the Pledgor, enforceable against the Pledgor in accordance
with its terms, except as (i) the enforceability hereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, preference, reorganization,
moratorium or similar laws now or hereafter in effect relating to or affecting
the rights or remedies of creditors generally, (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability and the discretion of the court before which any proceeding
therefor may be brought, (iii) the exculpation provisions and rights to
indemnification hereunder may be limited by U.S. federal and state securities
laws and public policy considerations and (iv) the waiver of rights and defenses
contained in Section 13(b), Section 17.11 and Section 17.15 hereof may be
limited by applicable law.
(d) Upon the delivery to the Collateral Agent of the Collateral in
accordance with the terms hereof and the filing of the financing statements
referred to in Section 3(g) hereof, the pledge of and grant of a security
interest in the Collateral securing the payment of the Obligations for the
benefit of the Trustee and the Holders will constitute a valid, first priority,
perfected security interest in such Collateral (except, with respect to
proceeds, only to the extent permitted by Section 9-315 of the N.Y. Uniform
Commercial Code), enforceable as such against all creditors of the Pledgor and
any persons purporting to purchase any of the Collateral from the Pledgor other
than as permitted by the Indenture. Upon filing of the financing statements
described in Section 3(g) hereof, all filings and other actions necessary or
desirable to perfect and protect such security interest will have been duly
taken.
(e) There are no legal or governmental proceedings pending or, to the best
of the Pledgor's knowledge, threatened to which the Pledgor or any of its
subsidiaries is a party or to which any of the properties of the Pledgor or any
of its subsidiaries is subject that would materially adversely affect the power
or ability of the Pledgor to perform its obligations under this Pledge Agreement
or to consummate the transactions contemplated hereby.
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(f) The pledge of the Collateral pursuant to this Pledge Agreement is not
prohibited by law or governmental regulation (including, without limitation,
Regulations T, U and X of the Board of Governors of the Federal Reserve System)
applicable to the Pledgor.
(g) No Event of Default exists.
(h) The Pledgor is a corporation duly organized and validly existing under
the laws of the State of Delaware. The Pledgor's name as it appears in official
filings in the State of Delaware is FINISAR CORPORATION. The Pledgor's
organizational identification number issued by the State of Delaware is 3090879.
SECTION 8. Further Assurances. The Pledgor will, promptly upon the request
by the Collateral Agent (which request the Collateral Agent may submit at the
direction of the Holders of a majority in aggregate principal amount of the
Notes then outstanding), execute and deliver or cause to be executed and
delivered, or use its reasonable best efforts to procure, all assignments,
instruments and other documents, deliver any instruments to the Collateral Agent
and take any other actions that are necessary or desirable to perfect, continue
the perfection of, or protect the first priority of the Trustee's security
interest in and to the Collateral, to protect the Collateral against the rights,
claims or interests of third persons (other than any such rights, claims or
interests created by or arising through the Collateral Agent) or to effect the
purposes of this Pledge Agreement. Without limiting the generality of the
foregoing, the Pledgor will, if any Collateral shall be evidenced by a
promissory note or other instrument, deliver to the Collateral Agent in pledge
hereunder such note or instrument duly indorsed and accompanied by duly executed
instruments of transfer or assignment; and execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary, or as the Collateral Agent may reasonably request,
in order to perfect and preserve the pledge, assignment and first priority
perfected security interest granted or purported to be granted hereby. The
Pledgor will promptly pay all costs incurred in connection with any of the
foregoing within 45 days of receipt of an invoice therefor. The Pledgor also
agrees, whether or not requested by the Collateral Agent, to use its reasonable
best efforts to perfect or continue the perfection of, or to protect the first
priority of, the Trustee's security interest in and to the Collateral, and to
protect the Collateral against the rights, claims or interests of third persons
(other than any such rights, claims or interests created by or arising through
the Collateral Agent).
SECTION 9. Covenants. The Pledgor covenants and agrees with the Collateral
Agent, Trustee and the Holders that from and after the date of this Pledge
Agreement until the Termination Date:
(a) it will not (i) (and will not purport to) sell or otherwise dispose of,
or grant any option or warrant with respect to, any of the Collateral nor
(ii) create or permit to exist any Lien upon or with respect to any of the
Collateral (except for the liens and security interests granted under this
Pledge Agreement and any Lien created by or arising through the Collateral
Agent) and at all times will be the sole beneficial owner of the Collateral;
(b) it will not (i) enter into any agreement or understanding that restricts
or inhibits or purports to restrict or inhibit the Trustee's or the Collateral
Agent's rights or remedies hereunder, including, without limitation, the
Collateral Agent's right to sell or otherwise dispose of the Collateral or
(ii) fail to pay or discharge any tax, assessment or levy of any nature with
respect to its beneficial interest in the Collateral not later than three
Business Days prior to the date of any proposed sale under any judgment, writ or
warrant of attachment with respect to the Collateral;
(c) it will maintain its jurisdiction of organization in the State of
Delaware, or upon 30 days' prior written notice to the Collateral Agent, in
another jurisdiction where all actions required by Sections 3(g) and 8 have been
taken with respect to the Collateral;
(d) it will, and will cause the Trustee and the Collateral Agent to, execute
and deliver on or prior to any Date of Delivery, a Supplement to this Pledge
Agreement substantially in the form of Exhibit B
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hereto, and take such other actions as shall be necessary to grant to the
Collateral Agent, for the benefit of the Trustee and the ratable benefit of the
Holders, a valid assignment of and security interest in the Additional Pledged
Securities and the related security entitlements; and
(e) it will not, and acknowledges that it is not authorized to, file any
financing statement or amendment or termination statement with respect to any
financing statement in favor of the Collateral Agent without the prior written
consent of Collateral Agent and agrees that it will not do so without the prior
written consent of Collateral Agent, subject to the Pledgor's rights under
Section 9-509(d)(2) of the N.Y. Uniform Commercial Code.
SECTION 10. Power of Attorney; Agent May Perform.
(a) Subject to the terms of this Pledge Agreement, the Pledgor hereby
appoints and constitutes the Collateral Agent as the Pledgor's attorney-in-fact
(with full power of substitution) to exercise to the fullest extent permitted by
law all of the following powers upon and at any time after the occurrence and
during the continuance of an Event of Default:
(i)collection of proceeds of any Collateral;
(ii)conveyance of any item of Collateral to any purchaser thereof;
(iii)giving of any notices or recording of any Liens hereof; and
(iv)paying or discharging taxes or Liens levied or placed upon the Collateral,
the legality or validity thereof and the amounts necessary to discharge the same
to be determined by the Collateral Agent in its sole reasonable discretion, and
such payments made by the Collateral Agent to become part of the Obligations
secured hereby, due and payable immediately upon demand. The Collateral Agent's
authority under this Section 10 shall include, without limitation, the authority
to endorse and negotiate any checks or instruments representing proceeds of
Collateral in the name of the Pledgor, execute and give receipt for any
certificate of ownership or any document constituting Collateral, transfer title
to any item of Collateral, sign the Pledgor's name on all financing statements
(to the extent permitted by applicable law) or any other documents necessary or
appropriate to preserve, protect or perfect the security interest in the
Collateral and to file the same, prepare, file and sign the Pledgor's name on
any notice of Lien (to the extent permitted by applicable law), and to take any
other actions arising from or necessarily incident to the powers granted to the
Trustee or the Collateral Agent in this Pledge Agreement. This power of attorney
is coupled with an interest and is irrevocable by the Pledgor.
(b) If the Pledgor fails to perform any agreement contained herein, the
Collateral Agent may, but is not obligated to, after providing to the Pledgor
notice of such failure and five Business Days to effect such performance, itself
perform, or cause performance of, such agreement, and the expenses of the
Collateral Agent incurred in connection therewith shall be payable by the
Pledgor under Section 14.
SECTION 11. No Assumption of Duties; Reasonable Care. The rights and powers
granted to the Collateral Agent hereunder are being granted in order to preserve
and protect the security interest of the Collateral Agent for the benefit of the
Trustee and the Holders in and to the Collateral granted hereby and shall not be
interpreted to, and shall not impose any duties on, the Collateral Agent in
connection therewith other than those expressly provided herein or imposed under
applicable law. Except as provided by applicable law or by the Indenture, the
Collateral Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which the Collateral Agent
accords similar property held by the Collateral Agent for similar accounts, it
being understood that the Collateral Agent in its capacity as such
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(a) may consult with counsel of its selection and the advice of such counsel
or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon and
(b) shall not have any responsibility for
(i)ascertaining or taking action with respect to calls, conversions, exchanges,
maturities or other matters relative to any Collateral, whether or not the
Collateral Agent has or is deemed to have knowledge of such matters,
(ii)taking any necessary steps for the existence, enforceability or perfection
of any security interest of the Collateral Agent or to preserve rights against
any parties with respect to any Collateral or
(iii)except as otherwise set forth in Section 5, investing or reinvesting any of
the Collateral, provided, however, that in the case of clause (a) and clause (b)
of this sentence, nothing contained in this Pledge Agreement shall relieve the
Collateral Agent of any responsibilities as a securities intermediary under
applicable law.
In no event shall the Collateral Agent be liable for the existence,
validity, enforceability or perfection of any security interest of the
Collateral Agent, or for special indirect or consequential damages or lost
profits or loss of business, arising in connection with this Agreement.
SECTION 12. Indemnity. The Pledgor shall fully indemnify, hold harmless and
defend the Collateral Agent and its directors and officers from and against any
and all claims, losses, actions, obligations, liabilities and expenses,
including reasonable defense costs, reasonable investigative fees and costs, and
reasonable legal fees, expenses, and damages arising from the Collateral Agent's
appointment and performance as Collateral Agent under this Pledge Agreement,
except to the extent that such claim, action, obligation, liability or expense
is directly caused by the bad faith, gross negligence or willful misconduct of
such indemnified person. The provisions of this Section 12 shall survive
termination of this Pledge Agreement and the resignation and removal of the
Collateral Agent.
SECTION 13. Remedies upon Event of Default. Subject to Section 6(b), if any
Event of Default under the Indenture shall have occurred and be continuing and
the Notes shall have been accelerated in accordance with the provisions of the
Indenture:
(a) The Trustee, the Collateral Agent and the Holders shall have, in
addition to all other rights given by law or by this Pledge Agreement or the
Indenture, all of the rights and remedies with respect to the Collateral of a
secured party upon default under the N.Y. Uniform Commercial Code (whether or
not the N.Y. Uniform Commercial Code applies to the affected Collateral) at that
time. In addition, with respect to any Collateral that shall then be in or shall
thereafter come into the possession or custody of the Collateral Agent, the
Collateral Agent may and, at the written direction of the Trustee or the Holders
of a majority in aggregate principal amount of the Notes then outstanding, shall
appoint a broker or other expert to sell or cause the same to be sold at any
broker's board or at public or private sale, in one or more sales or lots, at
such price or prices such broker or other expert may deem commercially
reasonable, for cash or on credit or for future delivery, without assumption of
any credit risk. The purchaser of any or all Collateral so sold shall thereafter
hold the same absolutely, free from any claim, encumbrance or right of any kind
whatsoever created by or through the Pledgor. Unless any of the Collateral
threatens, in the reasonable judgment of the Collateral Agent, to decline
speedily in value, the Collateral Agent will give the Pledgor reasonable notice
of the time and place of any public sale thereof, or of the time after which any
private sale or other intended disposition is to be made. Any sale of the
Collateral conducted in conformity with reasonable commercial practices of
banks, insurance companies, commercial finance companies, or other financial
institutions disposing of property similar to the Collateral shall be deemed to
be commercially reasonable. Any requirements of reasonable notice shall be met
if notice of the time and place of any public sale or the time after which
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any private sale is to be made is given to the Pledgor as provided in
Section 17.1 hereof at least ten (10) days before the time of the sale or
disposition. The Collateral Agent or any Holder may, in its own name or in the
name of a designee or nominee, buy any of the Collateral at any public sale and,
if permitted by applicable law, at any private sale. The Collateral Agent shall
not be obligated to make any sale of Collateral regardless of notice of sale
having been given. The Collateral Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned. All expenses (including court costs and reasonable attorneys'
fees, expenses and disbursements) of, or incident to, the enforcement of any of
the provisions hereof shall be recoverable from the proceeds of the sale or
other disposition of the Collateral.
(b) The Pledgor further agrees to use its reasonable best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Collateral pursuant to this Section 13 valid
and binding and in compliance with any and all other applicable requirements of
law. The Pledgor further agrees that a breach of any of the covenants contained
in this Section 13 will cause irreparable injury to the Trustee and the Holders,
that the Trustee and the Holders have no adequate remedy at law in respect of
such breach and, as a consequence, that each and every covenant contained in
this Section 13 shall be specifically enforceable against the Pledgor, and the
Pledgor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no Event of
Default has occurred.
(c) All cash proceeds received by the Collateral Agent in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Collateral Agent, be held by the
Collateral Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to the Collateral Agent or the
Trustee pursuant to Section 14) by the Collateral Agent for the ratable benefit
of the Holders first against any accrued and unpaid interest on the Notes and
thereafter against the remaining Obligations. Any surplus of such cash or cash
proceeds held by the Collateral Agent and remaining after payment in full of all
of the Obligations shall be paid over to the Pledgor.
(d) The Collateral Agent may, but is not obligated to, exercise any and all
rights and remedies of the Pledgor in respect of the Collateral.
(e) Subject to and in accordance with the terms of this Pledge Agreement,
all payments received by the Pledgor in respect of the Collateral shall be
received in trust for the benefit of the Collateral Agent, shall be segregated
from other funds of the Pledgor and shall be forthwith paid over to the
Collateral Agent in the same form as so received (with any necessary
indorsement).
(f) The Collateral Agent may, without notice to the Pledgor except as
required by law and at any time or from time to time, charge, set-off and
otherwise apply all or any part of the Obligations against the Collateral
Account or any part thereof.
(g) The Pledgor shall cease to be entitled to direct the investment of
amounts held in the Collateral Account under Section 5 hereof and the Collateral
Agent shall not accept any direction from the Pledgor to invest amounts held in
the Collateral Account.
SECTION 14. Fees and Expenses. Pledgor agrees to pay to Collateral Agent
the fees as may be agreed upon from time to time in writing. The Pledgor will
upon demand pay to the Trustee and the Collateral Agent the amount of any and
all expenses, including, without limitation, the reasonable fees, expenses and
disbursements of counsel, experts and agents retained by the Trustee and the
Collateral Agent, that the Trustee and the Collateral Agent may incur in
connection with
(a) the review, negotiation and administration of this Pledge Agreement,
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(b) the custody or preservation of, or the sale of, collection from, or
other realization upon, any of the Collateral,
(c) the exercise or enforcement of any of the rights of the Collateral
Agent, the Trustee and the Holders hereunder or
(d) the failure by the Pledgor to perform or observe any of the provisions
hereof.
SECTION 15. Security Interest Absolute. All rights of the Collateral Agent,
the Trustee and the Holders and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or any other
agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Obligations, or any other amendment or waiver of or
any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any Liens on any
other collateral for all or any of the Obligations;
(d) any change, restructuring or termination of the corporate structure or
the existence of the Pledgor or any of its subsidiaries;
(e) to the extent permitted by applicable law, any other circumstance which
might otherwise constitute a defense available to, or a discharge of, the
Pledgor in respect of the Obligations or of this Pledge Agreement; or
(f) any manner of application of other collateral, or proceeds thereof, to
all or any item of the Obligations, or any manner of sale or other disposition
of any item of Collateral for all or any of the Obligations.
SECTION 16. Collateral Agent's Representations, Warranties and Covenants.
The Collateral Agent (in its capacity as securities intermediary) represents and
warrants that it is as of the date hereof, and it agrees that for so long as it
maintains the Collateral Account and acts as the securities intermediary
pursuant to this Pledge Agreement it shall be a securities intermediary and a
FRBMN Member. In furtherance of the foregoing, the Collateral Agent (in its
capacity as securities intermediary) hereby:
(a) represents and warrants that it is a commercial bank that in the
ordinary course of its business maintains securities accounts for others and is
acting in that capacity hereunder and with respect to the Collateral Account;
(b) represents and warrants that it maintains the FRBMN Account with the
FRBMN;
(c) agrees that the Collateral Account shall be an account to which
financial assets may be credited, and undertakes to treat the Collateral Agent
(in its capacity as such) as entitled to exercise rights that comprise (and
entitled to the benefits of) such financial assets, and entitled to exercise the
rights of an entitlement holder in the manner contemplated by the N.Y. Uniform
Commercial Code;
(d) hereby represents that, subject to applicable law, it has not granted,
and covenants that so long as it acts as a securities intermediary hereunder it
shall not grant, control (including without limitation, securities control) over
or with respect to any Collateral credited to any Collateral Account from time
to time to any other Person other than the Collateral Agent (in its capacity as
such);
(e) covenants that it shall not, subject to applicable law, knowingly take
any action inconsistent with, and represents and covenants that it is not and so
long as this Pledge Agreement remains in
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effect will not knowingly become, party to any agreement the terms of which are
inconsistent with, the provisions of this Pledge Agreement;
(f) agrees that any item of property credited to the Collateral Account
shall be treated as a financial asset;
(g) agrees that any item of Collateral credited to the Collateral Account
shall not be subject to any security interest, Lien or right of set-off in favor
of it as securities intermediary, except as may be expressly permitted under the
Indenture and this Pledge Agreement;
(h) agrees to maintain the Collateral Account and maintain appropriate books
and records in respect thereof in accordance with its usual procedures and
subject to the terms of this Pledge Agreement;
(i) agrees that, with respect to any Collateral that constitutes a security
entitlement, it shall comply with the provisions of Section 3(c)(i) or (ii) of
this Pledge Agreement and, with respect to any Collateral that constitutes a
securities account, it shall comply with the provisions of Section 3(c)(i) or
(ii) of this Pledge Agreement with respect to all security entitlements carried
in such securities account; and
(j) agrees that if its jurisdiction as securities intermediary shall change
from that jurisdiction specified in Section 16(i), it will promptly notify the
Collateral Agent and the Trustee of such change and of such new jurisdiction.
SECTION 17. Collateral Agent's Jurisdiction as Securities Intermediary. The
parties hereby agree that the Collateral Agent's jurisdiction as securities
intermediary for purposes of Section 8-110(e) of the N.Y. Uniform Commercial
Code and Section 357.11 of the Treasury Regulations or the corresponding U.S.
federal regulations as they pertain to this Pledge Agreement, the Collateral
Account and the security entitlements relating thereto, shall be the State of
New York.
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SECTION 18. Miscellaneous Provisions.
18.1 Notices. Any notice, approval, direction, consent or other
communication shall be sufficiently given if in writing and delivered in person
or mailed by first class mail, commercial courier service or telecopier
communication, addressed as follows:
if to the Pledgor:
Finisar Corporation
1308 Moffett Park Drive
Sunnyvale, California 94089
Attention: Chief Financial Officer
Telecopier No.: (408) 541-9579
if to the Collateral Agent:
U.S. Bank National Association
100 Wall Street, 16th Floor
New York, New York 10005
Attention: Adam Berman
Telecopier No.: (212) 809-5459
if to the Trustee:
U.S. Bank Trust National Association
100 Wall Street, 16th Floor
New York, New York 10005
Attention: Adam Berman
Telecopier No.: (212) 809-5459
or, as to any such party, at such other address as shall be designated by such
party in a written notice to each other party complying as to delivery with the
terms of this Section. All such notices and other communications shall be deemed
to have been duly given: at the time delivered by hand, if personally delivered;
three Business Days after being deposited in the mail, postage prepaid, if
mailed; when receipt is confirmed, if telecopied; and on the next Business Day
if timely delivered to an air courier guaranteeing overnight delivery.
18.2 No Adverse Interpretation of Other Agreements. This Pledge Agreement
may not be used to interpret another pledge, security or debt agreement of the
Pledgor or any subsidiary thereof. No such pledge, security or debt agreement
(other than the Indenture) may be used to interpret this Pledge Agreement.
18.3 Severability. The provisions of this Pledge Agreement are severable,
and if any clause or provision shall be held invalid, illegal or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Pledge Agreement in any jurisdiction.
18.4 Headings. The headings in this Pledge Agreement have been inserted
for convenience of reference only, are not to be considered a part hereof and
shall in no way modify or restrict any of the terms or provisions hereof.
18.5 Counterpart Originals. This Pledge Agreement may be signed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall together constitute one and the same agreement.
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18.6 Benefits of Pledge Agreement. Nothing in this Pledge Agreement,
express or implied, shall give to any Person, other than the parties hereto and
their successors hereunder, and the Holders, any benefit or any legal or
equitable right, remedy or claim under this Pledge Agreement.
18.7 Amendments, Waivers and Consents. Any amendment or waiver of any
provision of this Pledge Agreement and any consent to any departure by the
Pledgor, the Trustee or the Collateral Agent or from any provision of this
Pledge Agreement shall be effective only if made or duly given in compliance
with all of the terms and provisions of the Indenture, and none of the Trustee,
the Collateral Agent, the Pledgor, or any Holder shall be deemed, by any act,
delay, indulgence, omission or otherwise, to have waived any right or remedy
hereunder or to have acquiesced in any default or Event of Default or in any
breach of any of the terms and conditions hereof. Failure of the Trustee, the
Pledgor, the Collateral Agent or any Holder to exercise, or delay in exercising,
any right, power or privilege hereunder shall not preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Trustee, the Pledgor, the Collateral Agent or any Holder of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy that the Trustee, the Pledgor, the Collateral Agent or such
Holder would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any rights or remedies provided by law.
18.8 [RESERVED]
18.9 Continuing Security Interest; Termination.
(a) This Pledge Agreement shall create a continuing first priority perfected
security interest in and to the Collateral and shall, unless otherwise provided
in the Indenture or in this Pledge Agreement, remain in full force and effect
until the Termination Date. This Pledge Agreement shall be binding upon the
parties hereto and their respective transferees, successors and assigns, and
shall inure, together with the rights and remedies of the Trustee and the
Collateral Agent hereunder, to the benefit of the Trustee, the Collateral Agent,
the Pledgor, the Holders and their respective successors, transferees and
assigns.
(b) Upon the Termination Date, the pledge, assignment and security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the Pledgor. At such time, the Collateral Agent shall, in accordance with the
Pledgor's instructions, promptly reassign and redeliver to the Pledgor all of
the Collateral hereunder that has not been sold, disposed of, retained or
applied by the Collateral Agent in accordance with the terms of this Pledge
Agreement and the Indenture and execute and deliver to the Pledgor such
documents as the Pledgor shall reasonably request to evidence such termination.
Such reassignment and redelivery shall be without warranty by or recourse to the
Collateral Agent or the Trustee in its capacity as such, except as to the
absence of any Liens on the Collateral created by or arising through the
Collateral Agent or the Trustee, and shall be at the reasonable expense of the
Pledgor.
18.10 Survival Provisions. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this Pledge
Agreement, and shall terminate only upon the termination of this Pledge
Agreement. The obligations of the Pledgor under Sections 12 and 14 hereof and
the obligations of the Collateral Agent under Section 17.9(b) hereof shall
survive the termination of this Pledge Agreement.
18.11 Waivers. The Pledgor waives presentment and demand for payment of
any of the Obligations, protest and notice of dishonor or default with respect
to any of the Obligations, and all other notices to which the Pledgor might
otherwise be entitled, except as otherwise expressly provided herein or in the
Indenture.
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18.12 Authority of the Collateral Agent.
(a) The Collateral Agent shall have and be entitled to exercise all powers
hereunder that are specifically granted to the Collateral Agent by the terms
hereof, together with such powers as are reasonably incident thereto. The
Collateral Agent may perform any of its duties hereunder or in connection with
the Collateral by or through agents or attorneys, shall not be responsible for
any misconduct or negligence on the part of any agent or attorney appointed with
due care by it hereunder and shall be entitled to retain counsel and to act in
reliance upon the advice of counsel concerning all such matters. Except as
otherwise expressly provided in this Pledge Agreement or the Indenture, neither
the Collateral Agent nor any director, officer, employee, attorney or agent of
the Collateral Agent shall be liable to the Pledgor for any action taken or
omitted to be taken by the Collateral Agent, in its capacity as Collateral
Agent, hereunder, except for its own bad faith, gross negligence or willful
misconduct, and the Collateral Agent shall not be responsible for the validity,
effectiveness or sufficiency hereof or of any document or security furnished
pursuant hereto. The Collateral Agent and its directors, officers, employees,
attorneys and agents shall be entitled to rely conclusively on any
communication, instrument or document believed by it or them to be genuine and
correct and to have been signed or sent by the proper Person or Persons. The
Collateral Agent shall have no duty to cause any financing statement or
continuation statement to be filed in respect of the Collateral.
(b) The Pledgor acknowledges that the rights and responsibilities of the
Collateral Agent under this Pledge Agreement with respect to any action taken by
the Collateral Agent or the exercise or non-exercise by the Collateral Agent of
any option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Pledge Agreement shall, as between
the Collateral Agent and the Holders, be governed by the Indenture and by such
other agreements with respect thereto as may exist from time to time among them,
but, as between the Collateral Agent and the Pledgor, the Collateral Agent shall
be conclusively presumed to be acting as agent for the Trustee and the Holders
with full and valid authority so to act or refrain from acting, and the Pledgor
shall not be obligated or entitled to make any inquiry respecting such
authority.
18.13 Final Expression. This Pledge Agreement, together with the Indenture
and any other agreement executed in connection herewith, is intended by the
parties as a final expression of this Pledge Agreement and is intended as a
complete and exclusive statement of the terms and conditions thereof.
18.14 Rights of Holders. No Holder shall have any independent rights
hereunder other than those rights granted to individual Holders pursuant to
Sections 6.05, 6.06 and 6.07 of the Indenture; provided that nothing in this
subsection shall limit any rights granted to the Trustee under the Notes or the
Indenture.
18.15 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL;
WAIVER OF DAMAGES.
(a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK, AND, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK, ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR, THE
TRUSTEE, THE COLLATERAL AGENT AND THE HOLDERS IN CONNECTION WITH THIS PLEDGE
AGREEMENT, AND WHETHER
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ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK. NOTWITHSTANDING THE FOREGOING, THE
MATTERS IDENTIFIED IN 31 C.F.R. SECTIONS 357.10 AND 357.11 (AS IN EFFECT ON THE
DATE OF THIS PLEDGE AGREEMENT) SHALL BE GOVERNED SOLELY BY THE LAWS SPECIFIED
THEREIN AND THE MATTERS IDENTIFIED IN SECTION 9305(a)(3) OF THE N.Y. UNIFORM
COMMERCIAL CODE WILL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
(b) THE PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF PROCESS IN ANY SUIT,
ACTION OR PROCEEDING WITH RESPECT TO THIS PLEDGE AGREEMENT AND FOR ACTIONS
BROUGHT UNDER THE U.S. FEDERAL OR STATE SECURITIES LAWS BROUGHT IN ANY FEDERAL
OR STATE COURT LOCATED IN THE CITY OF NEW YORK (EACH A "NEW YORK COURT") AND
CONSENTS THAT ALL SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING
SHALL BE MADE BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE
PLEDGOR AT THE ADDRESS INDICATED IN SECTION 17.1. EACH OF THE PARTIES HERETO
SUBMITS TO THE JURISDICTION OF ANY NEW YORK COURT AND TO THE COURTS OF ITS
CORPORATE DOMICILE WITH RESPECT TO ANY ACTIONS BROUGHT AGAINST IT AS DEFENDANT
IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THE PLEDGOR, THE TRUSTEE, THE
COLLATERAL AGENT AND THE HOLDERS IN CONNECTION WITH THIS PLEDGE AGREEMENT, AND
EACH OF THE PARTIES HERETO WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LAYING
OF VENUE, INCLUDING ANY PLEADING OF FORUM NON CONVENIENS, WITH RESPECT TO ANY
SUCH ACTION AND WAIVES ANY RIGHT TO WHICH IT MAY BE ENTITLED ON ACCOUNT OF PLACE
OF RESIDENCE OR DOMICILE.
(c) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY AS TRUSTEE OR
IN THE NAME AND ON BEHALF OF ANY HOLDER, HAVE THE RIGHT, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, TO PROCEED AGAINST THE PLEDGOR OR THE COLLATERAL IN A COURT
IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH (AND HAVING PERSONAL OR IN REM
JURISDICTION OVER THE PLEDGOR OR THE COLLATERAL, AS THE CASE MAY BE) TO ENABLE
THE TRUSTEE TO REALIZE ON SUCH COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER ENTERED IN FAVOR OF THE TRUSTEE. THE PLEDGOR AGREES THAT IT WILL NOT
ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY
THE TRUSTEE TO REALIZE ON SUCH PROPERTY OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE TRUSTEE, EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR
CROSSCLAIMS WHICH, IF NOT ASSERTED IN ANY SUCH PROCEEDING, COULD NOT OTHERWISE
BE BROUGHT OR ASSERTED.
(d) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER NOR (EXCEPT AS OTHERWISE
PROVIDED IN THIS PLEDGE AGREEMENT OR THE INDENTURE) THE COLLATERAL AGENT IN ITS
CAPACITY AS COLLATERAL AGENT SHALL HAVE ANY LIABILITY TO THE PLEDGOR (WHETHER
ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE PLEDGOR IN
CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS
CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS PLEDGE AGREEMENT, OR ANY
ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS
DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT IS BINDING ON
THE TRUSTEE OR SUCH HOLDER, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT
OF ACTS OR OMISSIONS ON THE PART OF THE
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COLLATERAL AGENT OR SUCH HOLDERS, AS THE CASE MAY BE, CONSTITUTING BAD FAITH,
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR WAIVES THE
POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE, THE COLLATERAL AGENT OR
ANY HOLDER IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY
JUDGMENT OR OTHER COURT ORDER PERTAINING TO THIS PLEDGE AGREEMENT OR ANY RELATED
AGREEMENT OR DOCUMENT ENTERED IN FAVOR OF THE TRUSTEE, THE COLLATERAL AGENT OR
ANY HOLDER, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER
OR PRELIMINARY OR PERMANENT INJUNCTION, THIS PLEDGE AGREEMENT OR ANY RELATED
AGREEMENT OR DOCUMENT BETWEEN THE PLEDGOR, ON THE ONE HAND, AND THE TRUSTEE, THE
COLLATERAL AGENT AND/OR THE HOLDERS, ON THE OTHER HAND.
18.16 Effectiveness. This Pledge Agreement shall become effective upon the
effectiveness of the Indenture.
IN WITNESS WHEREOF, the Pledgor, the Trustee and the Collateral Agent have
each caused this Pledge Agreement to be duly executed and delivered as of the
date first above written.
Pledgor:
FINISAR CORPORATION
By:
Jerry S. Rawls
--------------------------------------------------------------------------------
Name:
Title:
Trustee:
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
By:
Adam Berman
--------------------------------------------------------------------------------
Name:
Title:
Collateral Agent:
U.S. BANK NATIONAL ASSOCIATION,
as Collateral Agent
By:
Adam Berman
--------------------------------------------------------------------------------
Name:
Title:
20
--------------------------------------------------------------------------------
SCHEDULE I
PART I
PLEDGED SECURITIES
Description of
Debt
--------------------------------------------------------------------------------
CUSIP No(s).
--------------------------------------------------------------------------------
Final Maturity
--------------------------------------------------------------------------------
Original Principal Amount
--------------------------------------------------------------------------------
Cost at Closing Time
--------------------------------------------------------------------------------
Treasury Type B 912795JP7 4/11/02 $ 3,282,000.00 $ 3,246,867.10 Treasury
Type SP 912820BE6 8/15/02 $ 3,281,000.00 $ 3,221,909.19 Treasury Type SP
912820BF3 2/15/03 $ 3,281,000.00 $ 3,175,286.18 Treasury Type SP
912820BG1 8/15/03 $ 3,281,000.00 $ 3,126,891.43 Treasury Type SP
912820BH9 2/15/04 $ 3,282,000.00 $ 3,077,170.38 Treasury Type SP
912820BK2 8/15/04 $ 3,281,000.00 $ 3,007,069.31
PART II
SECURITIES ENTITLEMENTS
Issuer of Financial Asset
--------------------------------------------------------------------------------
Description of Financial Asset
--------------------------------------------------------------------------------
Securities Intermediary
(Name and Address)
--------------------------------------------------------------------------------
Securities Account
(Number and Location)
--------------------------------------------------------------------------------
U.S. Government Account No. U.S. Government Account No. U.S.
Government Account No. U.S. Government Account No. U.S.
Government Account No. U.S. Government Account No.
I–1
--------------------------------------------------------------------------------
EXHIBIT A
U.S. Bank National Association
Officer's Certificate
Pursuant to Section 3(e) of the Collateral Pledge and Security Agreement (as
supplemented from time to time, the "Pledge Agreement") dated as of October 15,
2001, among Finisar Corporation, a Delaware corporation (the "Pledgor"), U.S.
Bank Trust National Association, a national banking association, as trustee (the
"Trustee") for the holders of the $100 million aggregate principal amount (or up
to $125 million aggregate principal amount if the Initial Purchaser's
overallotment option is exercised) of 51/4% Convertible Subordinated Notes Due
2008 of the Pledgor and U.S. Bank National Association, a national banking
association, as collateral agent and securities intermediary (the "Collateral
Agent"), the undersigned officer of the Collateral Agent, on behalf of the
Collateral Agent, makes the following certifications to the Pledgor and the
Initial Purchasers. Capitalized terms used and not defined in this Officer's
Certificate have the meanings set forth or referred to in the Pledge Agreement.
1. Substantially contemporaneously with the execution and delivery of this
Officer's Certificate, the Collateral Agent has acquired its security
entitlement to the [Initial Pledged Securities] [the Additional Pledged
Securities identified on Supplement No. to the Pledge Agreement] or through a
"securities account" (as defined in Section 8-501(a) of the N.Y. Uniform
Commercial Code) maintained by the Collateral Agent, for value and without
notice of any adverse claim thereto. Without limiting the generality of the
foregoing, the Collateral Account, the Pledged Securities and the other
Collateral are not, and the Collateral Agent's security entitlement to the
Collateral is not, to the actual knowledge of the corporate trust officer having
responsibility for the administration of the Pledge Agreement on behalf of the
Collateral Agent, subject to any Lien granted by or to or arising through or in
favor of any securities intermediary (including, without limitation, U.S. Bank
National Association or the Federal Reserve Bank of Minneapolis) through which
the Collateral Agent derives its security entitlement to the Collateral.
2. The Collateral Agent has not knowingly caused or permitted the
Collateral Account or its security entitlement thereto to become subject to any
Lien created by or arising through the Collateral Agent.
A–1
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the undersigned officer has executed this Officer's
Certificate on behalf of U.S. Bank National Association, as Collateral Agent
this day of , 2001.
U.S. BANK NATIONAL ASSOCIATION,
as Collateral Agent
By:
--------------------------------------------------------------------------------
Name:
Title:
A–2
--------------------------------------------------------------------------------
EXHIBIT B
[Form of Supplement to the Pledge Agreement]
SUPPLEMENT NO. dated as of , 2001, to the COLLATERAL PLEDGE AND
SECURITY AGREEMENT dated as of October 15, 2001 (as supplemented from time to
time, the "Pledge Agreement") among Finisar Corporation, a Delaware corporation
(the "Pledgor"), U.S. Bank Trust National Association, a national banking
association, as trustee (in such capacity, the "Trustee") for the holders (the
"Holders") of the Notes issued by the Pledgor under the Indenture referred to
below, and U.S. Bank National Association, a national banking association, as
collateral agent and securities intermediary (in such capacity, the "Collateral
Agent"). Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Pledge Agreement.
WHEREAS, the Pledgor and Merrill Lynch, Pierce, Fenner & Smith Incorporated,
J.P. Morgan Securities Inc. and CIBC World Markets Corp. (collectively, the
"Initial Purchasers") are parties to a Purchase Agreement dated October 9, 2001
(the "Purchase Agreement"), pursuant to which the Pledgor have granted the
Initial Purchasers an overallotment option to purchase up to $25 million
aggregate principal amount of the Pledgor's 51/4% Convertible Subordinated Notes
due 2008 (the "Notes");
WHEREAS, the Pledgor and the Trustee have entered into that certain
indenture dated as of October 15, 2001 (as amended, restated, supplemented or
otherwise modified from time to time, the "Indenture"), pursuant to which the
Issuers are issuing the Notes on the date hereof;
WHEREAS, pursuant to the Indenture, the Pledgor is required to purchase, or
cause the purchase of, and pledge to the Collateral Agent for the benefit of the
Trustee and the Holders, on the relevant Date of Delivery (as defined in the
Purchase Agreement), Pledged Securities in an amount that will be sufficient
upon receipt of scheduled interest and principal payments of such securities, in
the written opinion of Ernst & Young LLP or another nationally recognized firm
of independent public accountants selected by the Pledgor and delivered to the
Trustee, to provide for payment in full of the first six scheduled interest
payments due on the Notes;
WHEREAS, the Pledgor, the Trustee and the Collateral Agent have entered into
the Pledge Agreement, pursuant to which the Pledgor has previously pledged
certain Pledged Securities to the Collateral Agent for the benefit of the
Holders in connection with the purchase by the Initial Purchasers of $ million
aggregate principal amount of Notes;
WHEREAS, the Initial Purchasers have exercised their overallotment option
under the Purchase Agreement to purchase $ million aggregate principal amount
of Notes;
WHEREAS, it is a condition precedent to the purchase of the Notes by the
Initial Purchasers pursuant to the overallotment option granted in the Purchase
Agreement that the Pledgor apply certain of the proceeds of the offering of the
Notes to purchase the Additional Pledged Securities and deposit such Additional
Pledged Securities into the Collateral Account to be held therein subject to the
terms of the Pledge Agreement and shall have granted the assignment and security
interest and made the pledge and assignment contemplated by the Pledge
Agreement;
NOW, THEREFORE, in consideration of the premises herein contained, and in
order to induce the Initial Purchasers to purchase the Notes, the Pledgor, the
Trustee and the Collateral Agent hereby agree, for the benefit of the Initial
Purchasers and for the ratable benefit of the Holders, as follows:
SECTION 1. Pledge and Grant of Security Interest. Pursuant to Section 1.3
of the Pledge Agreement, as security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations, the Pledgor hereby assigns and pledges to the
Collateral Agent for the benefit of the Trustee and the ratable benefit of the
Holders
B–1
--------------------------------------------------------------------------------
and hereby grants to the Collateral Agent for the benefit of the Trustee and for
the ratable benefit of the Holders, a lien on and security interest in all of
the Pledgor's right, title and interest in, to and under the following property:
(a) the U.S. Government Obligations identified by CUSIP No. in Part I of
Schedule I hereto (the "Additional Pledged Securities") and the certificates
representing the Additional Pledged Securities, the scheduled payments of
principal and interest thereon which will be sufficient to provide for payment
in full of the first six scheduled interest payments due on the Notes issued in
connection herewith and (b) the security entitlements described in Part II of
Schedule I hereto, with respect to the financial assets described, the
securities intermediary named, and the securities account referred to therein.
The Pledge Agreement is hereby incorporated herein by reference.
SECTION 2. Supplement to Schedule I. The parties hereto agree that
Schedule I to the Pledge Agreement shall be supplemented by Schedule I hereto.
SECTION 3. Deposit of Proceeds from the Offering. Pursuant to
Section 2(b)(ii) of the Pledge Agreement, on the date hereof, the Pledgor agrees
to transfer, or caused to be transferred, an amount equal to $ ,
which amount shall be sufficient for the Collateral Agent to purchase the
Additional Pledged Securities, by depositing such funds into the Collateral
Account. The Collateral Agent agrees to apply such amount to purchase the
Additional Pledged Securities as contemplated under Section 2(c) of the Pledge
Agreement.
SECTION 4. Representations and Warranties of the Pledgor. The Pledgor
hereby represents and warrants to the Trustee and the Collateral Agent that:
(a)Each of this Supplement and the Pledge Agreement as supplemented hereby has
been duly authorized, validly executed and delivered by the Pledgor and
(assuming the due authorization and valid execution and delivery of this
Supplement by each of the Trustee and the Collateral Agent) constitutes a valid
and binding agreement of the Pledgor, enforceable against the Pledgor in
accordance with its terms, except as (i) the enforceability hereof and thereof
may be limited by bankruptcy, insolvency, fraudulent conveyance, preference,
reorganization, moratorium or similar laws now or hereafter in effect relating
to or affecting the rights or remedies of creditors generally, (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability and the discretion of the court before which any
proceeding therefor may be brought, (iii) the exculpation provisions and rights
to indemnification under the Pledge Agreement may be limited by U.S. federal and
state securities laws and public policy considerations and (iv) the waiver of
rights and defenses contained in Section 13(b), Section 17.11 and Section 17.15
of the Pledge Agreement may be limited by applicable law and
(b)the representations and warranties of the Pledgor set forth in Section 7 of
the Pledge Agreement are true and correct in all material respects with the same
effect as if made on and as of the date hereof.
SECTION 5. Execution in Counterparts. This Supplement may be signed in two
or more counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same agreement. This Supplement
shall become effective when the Collateral Agent shall have received
counterparts of this Supplement that, when taken together, bear the signatures
of the Pledgor, the Trustee and the Collateral Agent.
SECTION 6. Effect of Supplement. Except as expressly supplemented hereby,
the Pledge Agreement shall remain in full force and effect.
SECTION 7. Governing Law. This Supplement shall governed by and construed
in accordance with the laws of the State of New York.
B–2
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Pledgor, the Trustee and the Collateral Agent have
each caused this Supplement to be duly executed and delivered as of the date
first above written.
Pledgor:
FINISAR CORPORATION
By:
--------------------------------------------------------------------------------
Name:
Title:
Trustee:
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
By:
--------------------------------------------------------------------------------
Name:
Title:
Collateral Agent:
U.S. BANK NATIONAL ASSOCIATION,
as Collateral Agent
By:
--------------------------------------------------------------------------------
Name:
Title:
B–3
--------------------------------------------------------------------------------
SCHEDULE I TO
SUPPLEMENT NO. TO
PLEDGE AGREEMENT
PART I
PLEDGED SECURITIES
Description of Debt
--------------------------------------------------------------------------------
CUSIP No(s).
--------------------------------------------------------------------------------
Final Maturity
--------------------------------------------------------------------------------
Original Principal Amount
--------------------------------------------------------------------------------
Cost at Date of Delivery
--------------------------------------------------------------------------------
PART II
SECURITIES ENTITLEMENTS
Issuer of Financial Asset
--------------------------------------------------------------------------------
Description of Financial Asset
--------------------------------------------------------------------------------
Securities Intermediary
(Name and Address)
--------------------------------------------------------------------------------
Securities Account
(Number and Location)
--------------------------------------------------------------------------------
B–I–1
--------------------------------------------------------------------------------
QuickLinks
Exhibit 10.16
SCHEDULE I
U.S. Bank National Association Officer's Certificate
[Form of Supplement to the Pledge Agreement]
SCHEDULE I TO SUPPLEMENT NO. TO PLEDGE AGREEMENT
|
EX-10 3 ex1016.htm LabOne, Inc. Exhibit 10.16
EXHIBIT 10.16
Amendment to Paragraph 2 of Stock Plan for Non-Employee Directors,
Effective February 11, 2001
The plan shall be administered, construed and interpreted by a committee (the
"Committee") which shall consist of not less than two members of the board of
Directors of LabOne who are not eligible to receive grants under Section 4 of
the Plan; provided, however, that if only one member of the Board of Directors
is eligible to receive grants under Section 3 of the Plan, the committee shall
consist of one member. |
--------------------------------------------------------------------------------
Exhibit 10(s)
Execution Version
AMENDMENT TO FORBEARANCE AND
MODIFICATION AGREEMENT AND WAIVER
This AMENDMENT TO FORBEARANCE AND MODIFICATION AGREEMENT AND WAIVER
(this "Agreement") is entered into as of the 26th day of December, 2001, among
Arguss Communications Inc., formerly known as Arguss Holdings, Inc. (the
"Borrower"), certain guarantors of the Borrower identified on the signature
pages hereto (the "Guarantors"), the Lenders (as defined below) and Bank of
America, N.A., formerly NationsBank, N.A., as administrative agent for the
Lenders (in such capacity, the "Agent"). Capitalized terms used herein but not
otherwise defined shall have the meanings set forth, or incorporated, in the
Forbearance Agreement (as defined below).
RECITALS
A. The Borrower, the Agent and certain financial institutions (the
"Lenders") are parties to that certain Credit Agreement dated as of March 19,
1999 (as amended and otherwise modified from time to time, the
"Credit Agreement"), pursuant to which the Lenders have made and may hereafter
make loans and advances and other extensions of credit to the Borrower.
B. The Borrower, the Guarantors, the Agent and the Lenders are
parties to that certain Forbearance and Modification Agreement dated as of
November 13, 2001 (as amended and otherwise modified from time to time, the
"Forbearance Agreement") pursuant to which the Agent and the Lenders agreed to
temporarily forbear from exercising their rights and remedies arising from the
Acknowledged Events of Default pursuant to the terms and conditions set forth
therein.
C. The Borrower has requested that the Agent and the Lenders (i)
confirm the Borrower's compliance with Section 12 of the Forbearance Agreement
and (ii) amend the Forbearance Agreement to extend the Forbearance Period to
January 31, 2002.
D. The Agent and the Lenders have agreed to do so, but only
pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Estoppel, Acknowledgement and Reaffirmation. As of December
26, 2001, the total outstanding principal amount of Revolving Loans was not less
than $53,000,000, the undrawn portion of the Stated Amount of all outstanding
Letters of Credit was $3,000,000 and the total outstanding principal amount
under the Term Loan was not less than $10,750,000, which amounts constitute
valid and subsisting obligations of the Borrower to the Lenders that are not
subject to any credits, offsets, defenses, claims, counterclaims or adjustments
of any kind. The Borrower and the Guarantors hereby acknowledge their
obligations under the Loan Documents and reaffirm that each of the liens and
security interests created and granted in or pursuant to the Loan Documents are
valid and subsisting and that this Agreement shall in no manner impair or
otherwise adversely effect such liens and security interests.
2. Vehicle Titles. The Agent and the Lenders confirm that the
Borrower has complied with Section 12 of the Forbearance Agreement by delivering
to the Agent original title documents for substantially all of the titled
vehicles owned by the Borrower or any Subsidiary. The Borrower remains obligated
to deliver, as and when received, additional original title documents for any
titled vehicles that it subsequently receives.
3. Amendment to Forbearance Agreement. The definition of
"Forbearance Termination Event" set forth in Section 3 of the Forbearance
Agreement is hereby amended by deleting the reference to "December 31, 2001"
contained in clause (d) thereof and replacing it with "January 31, 2002".
4. Expenses. Upon demand therefor, the Borrower shall pay all
reasonable out-of-pocket expenses incurred by the Agent and Lenders (including
without limitation the reasonable fees and out-of-pocket expenses of counsel) in
connection with or related to the negotiation, drafting, and execution of this
Agreement and the transactions contemplated hereby.
5. Conditions Precedent. As conditions precedent to the
effectiveness of this Agreement:
> (a) the Agent shall have received counterparts of this Agreement
> duly executed by the Borrower and the Lenders; and
>
> (b) the Borrower shall have reimbursed the Agent for the fees
> and expenses of its counsel through the date hereof in the amount of
> $34,663.53, which amount includes (i) $6,291.50 of fees and expenses incurred
> by local counsel in connection with the preparation and review of mortgages
> and/or deeds of trust with respect to the Mortgaged Properties, and (ii)
> $16,731.53 for premium fees, endorsement fees, title fees, and recording fees
> for title insurance policies with respect to the Mortgaged Properties.
6. Representations and Warranties. The Borrower hereby represents
and warrants to the Agent and Lenders that:
> (a) after giving effect to this Agreement, other than the
> Acknowledged Events of Default, no Default or Event of Default exists under
> the Loan Documents;
>
> (b) after giving effect to this Agreement, the representations
> and warranties of the Borrower contained in Article IV of the Credit Agreement
> are true, accurate and complete in all material respects on and as of the date
> hereof to the same extent as though made on and as of such date except to the
> extent such representations and warranties specifically relate to an earlier
> date; and
>
> (c) (i) the execution, delivery and performance by the Borrower
> of this Agreement are within the Borrower's corporate powers and have been
> duly authorized by all necessary corporate action on the part of the Borrower,
> (ii) this Agreement constitutes a legal, valid and binding obligation of the
> Borrower enforceable against the Borrower in accordance with its terms and
> (iii) neither this Agreement, nor the execution, delivery or performance by
> the Borrower hereof (A) violates any law or regulation, or any order or decree
> of any court or Governmental Authority, (B) conflicts with or results in the
> breach or termination of, constitutes a default under or accelerates any
> performance required by, any material indenture, mortgage, deed of trust,
> lease, agreement or other instrument to which the Borrower is a party or by
> which the Borrower or any of its property is bound, or (C) results in the
> creation or imposition of any lien upon any of the Collateral.
7. Release. In consideration of the willingness of the Agent and
the Lenders to enter into this Agreement, the Borrower and each of the
Guarantors hereby releases the Agent and the Lenders, and the officers,
employees, representatives, counsel, subsidiaries, affiliates, trustees and
directors of each, from any and all actions, causes of action, claims, demands,
damages and liabilities of whatever kind or nature, in law or in equity, now
known or unknown, suspected or unsuspected to the extent that any of the
foregoing arises from any action or failure to act on or prior to the date
hereof.
8. Reference to and Effect on Credit Agreement. Except as
specifically modified herein, the Forbearance Agreement and the other Loan
Documents shall remain in full force and effect. The execution, delivery and
effectiveness of this Agreement shall not operate as a waiver of any right,
power or remedy of the Lenders or the Agent under any of the Loan Documents, or
constitute a waiver or amendment of any provision of any of the Loan Documents,
except as expressly set forth herein.
9. Further Assurances. The Agent, the Lenders, the Guarantors and
the Borrower each agrees to execute and deliver, or to cause to be executed and
delivered, all such instruments as they may reasonably request to effectuate the
intent and purposes, and to carry out the terms, of this Agreement.
10. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAW OF THE STATE OF MARYLAND (WITHOUT REGARD TO CONFLICTS OF LAW
PROVISIONS THEREOF); PROVIDED THAT THE BORROWER, THE AGENT AND THE LENDERS SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
11. Miscellaneous.
> (a) This Agreement shall be binding on and shall inure to the
> benefit of the Borrower, the Guarantors, the Agent, the Lenders and their
> respective successors and permitted assigns. The terms and provisions of this
> Agreement are for the purpose of defining the relative rights and obligations
> of the Borrower, the Guarantors, the Agent and the Lenders with respect to the
> transactions contemplated hereby and there shall be no third party
> beneficiaries of any of the terms and provisions of this Agreement.
>
> (b) Section headings in this Agreement are included herein for
> convenience of reference only and shall not constitute a part of this
> Agreement for any other purpose.
>
> (c) Wherever possible, each provision of this Agreement shall be
> interpreted in such a manner as to be effective and valid under applicable
> law, but if any provision of this Agreement shall be prohibited by or invalid
> under applicable law, such provision shall be ineffective to the extent of
> such prohibition or invalidity, without invalidating the remainder of such
> provision or the remaining provisions of this Agreement.
>
> (d) Except as otherwise provided in this Agreement, if any
> provision contained in this Agreement is in conflict with, or inconsistent
> with, any provision in the Loan Documents, the provision contained in this
> Agreement shall govern and control.
>
> (e) This Agreement may be executed in any number of separate
> counterparts, each of which shall collectively and separately constitute one
> agreement. Delivery of an executed counterpart of this Agreement by telecopy
> shall be effective as an original and shall constitute a representation that
> an original shall be delivered to the Agent.
12. Entirety. This Agreement and the other Loan Documents embody
the entire agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof. This Agreement
and the other Loan Documents represent the final agreement between the parties
and may not be contradicted by evidence of prior, contemporaneous or subsequent
oral agreements of the parties.
[Remainder of Page Left Blank Intentionally.]
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
BORROWER
:
ARGUSS COMMUNICATIONS, INC.
By:
Name:
Title:
GUARANTORS
:
ARGUSS COMMUNICATIONS GROUP
By:
Name:
Title:
ARGUSS SERVICES CORP.
By:
Name:
Title:
CONCEPTRONIC, INC.
By:
Name:
Title:
SCHENCK COMMUNICATIONS LIMITED PARTNERSHIP
By:
Name:
Title:
LENDERS
:
BANK OF AMERICA, N.A.,
as Agent and as a Lender
By:
Name:
Title:
SUNTRUST BANK
By:
Name:
Title:
FLEET NATIONAL BANK
By:
Name:
Title:
KEYBANK NATIONAL ASSOCIATION
By:
Name:
Title:
UNION BANK OF CALIFORNIA
By:
Name:
Title:
NATIONAL CITY BANK
By:
Name:
Title:
U.S. BANK, NATIONAL ASSOCIATION
By:
Name:
Title:
-------------------------------------------------------------------------------- |
Exhibit 10.13
AGREEMENT OF SALE
THIS AGREEMENT OF SALE, made this 10th day of July, 2001 by and
between ORLEANS HOMEBUILDERS, INC., a Delaware corporation authorized to do
business in the State of New Jersey ("Buyer") and ROTTLUND HOMES OF NEW JERSEY,
INC. T/A KEVIN SCARBOROUGH HOMES a Minnesota corporation authorized to do
business in the State of New Jersey (“Seller").
BACKGROUND
A. Seller is the owner or equitable owner of approximately
256 acres of land located on Evesboro-Medford and North Elmwood Roads in the
Township of Evesham (“Township”), Burlington County, being more particularly
described in Exhibit A attached hereto and made a part hereof (the "Entire
Tract"). Seller is the equitable owner of certain portions of the Entire Tract
pursuant to an Option to Sell Vacant Land by and between Seller and South Jersey
Assets, Inc. (“South Jersey”) dated January 16, 1997 as amended by First
Amendment dated July 17, 1997 (collectively “Option Agreement”).
B. Seller has sold and conveyed certain lands as more
particularly described in Exhibit B attached hereto and made a part hereof to
third party purchasers (“Settled Lots”).
C. The Entire Tract excepting thereout and therefrom the
Settled Lots shall be hereinafter referred to as the “Real Property.” The Real
Property consists, in part, of Vacant Lots (as hereinafter defined) and WIP Lots
(as hereinafter defined). That portion of the Real Property owned in fee by
Seller (whether WIP Lots or Vacant Lots) shall be known as the “Owned Lots” and
any Lots (whether WIP Lots or Vacant Lots) under and subject to the Option
Agreement shall be known as “Option Lots.” The Vacant Lots, Affordable Lots (as
hereinafter defined and as currently designated subject to the terms of
Paragraph 28 hereof) and WIP Lots are listed on Exhibit C attached hereto and
made a part hereof and shall be collectively known as the “Lots.”
D. Seller, at its sole cost and expense, has obtained all
Governmental Approvals (as hereinafter defined) to permit the construction,
development and sale of a single family detached age-restricted dwelling on
each of the Lots in accordance with the plans (“Plans”) as more particularly
listed on Exhibit D attached hereto and made a part hereof ("Intended Use").
For the purposes of this Agreement, a “Vacant Lot” is defined as (i)
a fee simple subdivided parcel sufficient to construct thereon a single family
detached dwelling in width and size as depicted on the Plans (as hereinafter
defined) and which has received all unappealable approvals, permits and licenses
(except for building permits and the payment of water and sewer connection fees)
necessary to construct, develop and market the dwelling, (ii) no construction of
the home has commenced, and (iii) for which no restriction or limitation on the
sales price or occupants (other than an age restriction requiring one occupant
to be at least 55 years of age or older) are placed or imposed by any
governmental body, agency or court or pursuant to any court order or
governmental implementation of any court order or settlement in furtherance of
the Township of Evesham’s, Burlington County's or New Jersey's obligations under
the Mt. Laurel II decision of the New Jersey Supreme Court, or "Fair Housing
Act" of the State of New Jersey or the New Jersey Council of Affordable Housing
regulations nor shall Buyer, except as otherwise stated herein, be obligated to
make any contribution in furtherance of the above.
For the purposes of this Agreement, a “WIP Lot” is defined as (i)
a fee simple subdivided parcel sufficient to construct thereon a single family
detached dwelling in width and size as depicted on the Plans (as hereinafter
defined) with water and sewer connection fees already paid by Seller and which
has received all unappealable approvals, permits and licenses (except for
certificates of occupancy) necessary to construct, develop and market the
dwelling with a partially completed single family detached home thereon, and
for which no restriction or limitation on the sales price or occupants (other
than an age restriction requiring one occupant to be eat least 55 years of age
or older) are placed or imposed by any governmental body, agency or court or
pursuant to any court order or governmental implementation of any court order or
settlement in furtherance of the Township of Evesham’s, Burlington County's or
New Jersey's obligations under the Mt. Laurel II decision of the New Jersey
Supreme Court, or "Fair Housing Act" of the State of New Jersey or the New
Jersey Council of Affordable Housing regulations nor shall Buyer, except as
otherwise stated herein, be obligated to make any contribution in furtherance of
the above.
For the purposes of this Agreement, an “Affordable Lot” is defined
as (i) a fee simple subdivided parcel sufficient to construct thereon a single
family attached dwelling (townhouse) in width and size as depicted on the Plans
(as hereinafter defined) and which has received all unappealable approvals,
permits and licenses (except for building permits) necessary to construct,
develop and market the townhouse, for which a restriction or limitation on the
sales price or occupants are placed or imposed by any governmental body, agency
or court or pursuant to any court order or governmental implementation of any
court order or settlement in furtherance of the Township of Evesham’s,
Burlington County's or New Jersey's obligations under the Mt. Laurel II decision
of the New Jersey Supreme Court, or "Fair Housing Act" of the State of New
Jersey or the New Jersey Council of Affordable Housing regulations.
E. Seller desires to sell and Buyer desires to purchase the Real
Property subject to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the covenants and provisions
contained herein, and intending to be legally bound hereby, the parties hereto
agrees as follows:
1. Agreement to Sell and Purchase.
Seller agrees to sell to Buyer, and Buyer agrees to purchase from
Seller, subject to the terms and conditions of this Agreement, the Real Property
(either by Deed (as hereinafter defined) or by Assignment of Option Agreement
(as hereinafter defined)), consisting of the following:
(a) The lands more fully described on Exhibit E attached
hereto, together with the buildings and other improvements situate thereon, and
trees and shrubbery and appurtenances thereto including, without limitation, all
easements, rights–of–way, privileges, licenses and other rights and benefits
belonging to, running with or in any way relating to the Real Property; together
with all right, title and interest of Seller in and to any land lying in the bed
of any street, road or highway opened or proposed, in front of or abutting or
adjoining the Real Property, and all right, title and interest of Seller in and
to any unpaid award for the taking by eminent domain of any part of the Real
Property or for damage to the Real Property by reason of future change of grade
of any street, road or highway.
2. Purchase Price.
Subject to adjustment described in Paragraph 28 below, the purchase
price ("Purchase Price") for the Real Property shall be calculated in the
following manner:
(a) Fifty-Seven Thousand Dollars ($57,000) for each Owned Lot; and
(b) Fifty-Seven Thousand Dollars ($57,000) for each Option Lot less
$22,483.44 per Option Lot (being the option price of $18, 895.68 in effect as of
the date of this Agreement plus $587.76 being Seller’s portion of the rollback
taxes payable under the Option Agreement and the $3000 being the Per Lot
Off-Site Improvement Cost (as described in Exhibit B of the Option Agreement).
At Closing, Buyer shall pay in cash by wire transfer such portion
of the Purchase Price equal to (i) the amount of all Owned Lots, (ii) the amount
of all Conveyed Lots and (iii) such numberof Option Lots which when added to all
Owned Lots and Conveyed Lots equal fifty percent of all Lots. If any Owned Lot
is conveyed to a third party purchaser between August 1, 2001 and the date of
Closing ( “Conveyed Lots”), then in that event, the Purchase Price shall be
reduced by the Net Proceeds (as hereinafter defined) which shall be applied
against the cash portion of the Purchase Price. For the purposes of this
paragraph, “Net Proceeds” shall be calculated in the following manner:
1. Gross sales price (including lot premiums, options and upgrades)
paid by third party purchaser for the Conveyed Lot less the sum of :
(A). $57,000;
(B). The value of the Construction Costs of
that Conveyed Lot; and
(C). Normal and ordinary settlement expenses
incurred by Seller in the conveyance of the Conveyed Lot to a third party
purchaser (such costs and expenses include transfer tax, broker commissions, and
title company attendance charges).
The balance of the Purchase Price shall be payable in the following
manner:
(c) Buyer’s execution of a Purchase Money Note in the form
attached hereto and made a part hereof as Exhibit F (“Note”). The Note shall be
secured by a Collateral Assignment of Option Agreement, in the form attached
hereto and made a part hereof as Exhibit G. The Note shall be due and payable
twelve (12) months from the date of Closing, with interest payable monthly
calculated on a floating daily basis at the Prime Rate less one percent (1%) as
published in the Wall Street Journal, calculated on the basis of a 360 day year.
3. Deposit.
Buyer shall pay to Settlers Title Agency, Inc. (the "Title
Company") a deposit either in the form of cash or letter of credit substantially
in the form attached hereto and made a part hereof as Exhibit H in the sum of
One Hundred Twenty-Seven Thousand Six Hundred Fifty Dollars ($127,650.00) ((the
"Deposit") within three (3) business days of the complete execution of this
Agreement. The Deposit, if in cash, shall be held in escrow in an interest
bearing money market account in a federally–insured banking institution in the
State of New Jersey and any interest accruing thereon shall be part of the
Deposit. If the performance and maintenance bonds (“Bonds”) listed on Exhibit I
attached hereto and made a part hereof have been returned to Seller or are being
returned to Seller at Closing, the Deposit shall be credited against the cash
portion of the Purchase Price due at Closing (as defined below). Otherwise, the
Deposit shall remain in escrow until all of the Bonds have been returned to
Seller, at which time the Deposit shall be released to Buyer. If Buyer
terminates this Agreement pursuant to Paragraphs 5, 6, 10, 11, 26 or 27, the
Deposit plus the accrued interest thereon, shall be immediately returned to
Buyer. Seller and Buyer acknowledge that the Title Company is acting solely as
an escrow holder at their request and for their convenience and that the Title
Company shall not be liable to either of the parties for any act or omission on
its part unless taken or suffered in willful disregard of this Agreement or
involving its gross negligence. Seller and Buyer shall jointly and severally
indemnify and hold Title Company harmless from and against any loss or liability
arising from the performance of its duties as Title Company hereunder, unless
Title Company has wilfully disregarded the terms of this Agreement or committed
gross negligence. The Title Company shall not be entitled to any fees for the
performance of its services as escrow holder hereunder.
In the event there is any dispute between Seller and Buyer with
respect to the performance of obligations hereunder or the disposition of the
Deposit or in the event the Title Company shall otherwise believe in good faith
at any time that a disagreement or dispute has arisen between the parties with
respect to release of the Deposit (whether or not litigation has been
instituted), Title Company shall have the right, at any time upon written notice
to both Seller and Buyer (“Title Company Elections”), to (a) retain the Deposit
in escrow pending resolution of the dispute or (b) place the Deposit with the
Clerk of the Court in which any litigation is pending. Prior to
releasing the Deposit from escrow, Title Company shall give notice to the
parties hereto of its disbursement intentions. The parties shall be given ten
(10) days from receipt of said notice to advise Title Company of a dispute with
respect to the disposition of the Deposit. In the event Title Company receives
notice of any dispute from Seller or Buyer within said ten (10) days with
respect to the performance of the parties’ obligations hereunder or the
disposition of the Deposit and/or interest, Title Company shall select an
alternative within the Title Company Elections. If no notice of a dispute is
received within said ten (10) days, Title Company shall be entitled and hereby
directed to release the Deposit (to the extent the parties are entitled to same)
in accordance with its disbursement notice and this Agreement of Sale.
4. Closing.
Subject to the provisions of Paragraph 26 hereof and satisfaction
of the Conditions Precedent set forth in Paragraph 5, the closing (“Closing”)
shall occur on or before August 24, 2001.
Closing hereunder shall take place at such location and at such
time as Buyer shall designate by at least five (5) days notice to Seller.
5. Conditions Precedent.
Buyer's obligations under this Agreement and to complete Closing
hereunder is expressly contingent and conditioned upon the following:
(a) Intentionally Deleted.
(b) Intentionally Deleted.
(c) Buyer shall have the right for a period of thirty (30)
days after the date of this Agreement (the “Due Diligence Period”) to (i)
investigate the Entire Tract and surrounding area and perform whatever tests on
the Real Property Buyer desires, in its sole discretion (such tests include, but
are not limited to, environmental testing, preparation of environmental reports
and investigation, soil samples, wetland studies, surveys, percolation tests and
test bores), (ii) review the plans, documents, reports, correspondence and any
other information relevant to the Real Property, (iii) review the estimated
costs of construction and development of any on–site or off–site improvements,
and (iv) review any other information deemed relevant to Buyer, in its sole
discretion, to ascertain whether the Real Property is suitable for the Intended
Use. In the event Buyer determines, in its sole discretion, that the Real
Property is not suitable for the Intended Use, Buyer shall have the right
within such thirty (30) days to terminate the Agreement by notice to Seller in
which case the Deposit shall be immediately returned to Buyer whereupon this
Agreement shall be null and void (except for the indemnity provisions set forth
in Paragraph 9(a) which shall survive such termination), and neither party shall
have any further rights or obligations hereunder.
(d) Intentionally Deleted.
(e) All easements, licenses or grants necessary to
construct, develop and use the Real Property in accordance with the Intended Use
shall have been granted to Seller at or prior to Closing. If granted to Seller,
at Buyer's request, such easements, licenses or grants shall be assigned to
Buyer at Closing.
(f) All representations and warranties by Seller set forth
in this Agreement shall be true and correct at and as of date of Closing
hereunder in all material respects as though such representations and warranties
were made at and as of Closing hereunder ("Seller's Representations").
(g) Seller obtaining, at its sole cost and expense, within
thirty (30) days of the date after the date of this Agreement, confirmation from
the New Jersey Department of Environmental Protection ("NJDEP") that the
provisions of the Industrial Site Recovery Act are not applicable to the present
transaction (or, if required, Seller, at its option, obtaining such
authorization from NJDEP as required in order to permit the transaction to
proceed). Seller shall promptly furnish Buyer with a copy of said ISRA
application, as well as copies of any correspondence received from NJDEP.
(h) Seller, obtaining, at its sole cost and expense, an
Assignment of the Option Agreement duly executed by South Jersey, Seller and
Buyer in form satisfactory to the parties.
(i) Each party shall diligently and, in good faith proceed
to fulfill the Conditions Precedent for which it is responsible, and each party
agrees, at no cost and expense to it to cooperate fully with the other party in
fulfilling the Conditions Precedent and to execute any reasonably required
applications and /or documents. If either party, after good faith efforts,
determines that it is unable to fulfill or comply with the Conditions Precedent
for which it is responsible, that party shall give notice to the other in which
case, Buyer shall either (i) terminate this Agreement by notice to Seller,
whereupon the Deposit shall be promptly released to Buyer and this Agreement
shall be null and void (except for the indemnity provisions set forth in
Paragraph 9(a) which shall survive such termination) and neither party shall
have any further rights or obligations hereunder, or (ii) waive the Condition
Precedent by written notice to Seller.
6. Title.
(a) At Closing, Seller shall convey fee simple title to the
Owned Lots to Buyer or its designee by delivery of the Deed (as hereinafter
defined). Title to the Owned Lots, shall be good and marketable, and shall be
insurable as such at regular rates by the Title Company, free of all liens,
encumbrances, leases or other rights or occupancies and title company
exceptions, except those liens and other encumbrances (the "Permitted
Exceptions") to which Buyer has not objected in writing within thirty (30) days
of the date of this Agreement. Any monetary liens or encumbrances other than
the Permitted Exceptions shall be removed by the Seller, at Seller’s expense,
prior to Closing. Subsequent to the execution of this Agreement, Seller shall
not further encumber the Real Property in any fashion whatsoever without the
written approval of Buyer. Seller shall deliver to Buyer copies of any title
reports, data or surveys in its possession related to the Real Property
simultaneous with its execution of this Agreement. At Closing, Seller shall
deliver exclusive possession and occupancy of the Owned Lots.
Buyer shall deliver to Seller within thirty (30) days from the date
of this Agreement a copy of its title report together with a written list of all
objections thereto. Seller shall have a period of five (5) days from receipt of
such objections to advise Buyer in writing whether Seller shall have the
objections removed or cured prior to Closing. Seller’s failure to notify Buyer
within the stated time period shall be deemed Seller’s election not to cure. If
Seller is unwilling to remove or cure the objections prior to Closing, Buyer
shall have five (5) days thereafter to either: (a) terminate its obligation
hereunder and receive the Deposit whereupon this Agreement shall be null and
void (except for the indemnity provisions set forth in Paragraph 9(a) which
shall survive such termination) and neither party shall have any further
liability hereunder; or (b) agree to accept such title as Seller agrees to
deliver at Closing.
At Closing, Seller shall deliver a Bargain and Sale Deed with
Covenants Against Grantor's Acts, in proper recordable form, duly–executed and
acknowledged by Seller for the Owned Lots (the "Deed"), an Affidavit of Title
and such other documents (including, but not limited to, Assignment of Option
Agreement in a form mutually acceptable to the parties and duly executed by
South Jersey, Assignment of Special Declarants Rights, Bill of Sale, Assignment
of Plans (which shall include consents of the engineers and architects),
Governmental Approvals and Outstanding Agreements (as hereinafter defined), and
an Closing Agreement confirming and ratifying the representations and warranties
set forth herein)) which shall be reasonably required by Buyer, its counsel,
and/or the Title Company.
(b) If Seller is unable to convey title to the Owned Lots in
accordance with the requirements of Paragraph 6(a) above, Buyer shall have the
option (i) of taking such title to the Owned Lots as Seller can convey, with
abatement of the Purchase Price to the extent of any liens and encumbrances of a
fixed or ascertainable amount as set forth in the title report or (ii) of
terminating Buyer’s obligations under this Agreement and being repaid the
Deposit, together with the amount of all charges incurred by Buyer for
searching title, and upon payment of these amounts, this Agreement shall be null
and void and neither party shall have any obligations hereunder (except for the
indemnity provisions set forth in Paragraph 9(a) which shall survive such
termination).
7. Seller's Covenants, Representations, and Warranties.
Seller, to induce Buyer to enter into this Agreement and to
complete Closing hereunder, makes the following covenants, representations and
warranties to Buyer:
(a) Seller warrants and represents that (i) to its actual
knowledge (actual knowledge meaning the knowledge of John Sheridan and the
officers and directors of Seller and the individuals responsible for
construction of the improvements at the Entire Tract) and except as otherwise
disclosed in the Phase I Environmental Site Assessment dated August, 1994,
prepared by Environmental Resolutions, Inc., Phase II Environmental Assessment
dated November 1994 prepared by Environmental Resolutions, Inc, Phase I
Environmental Assessment dated March, 1997 prepared by Environmental
Resolutions, Inc., Phase II Addendum dated May, 1995 prepared by Environmental
Resolutions, Inc., Letter report dated March 14, 1997 prepared by Environmental
Resolutions, Inc. and No Further Action Letter dated September 18, 1997 from
NJDEP ( collectively, the “Environmental Reports”), no hazardous or toxic
materials or substances or hazardous waste, residual waste or solid waste (as
defined in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Resource Conservation and Recovery Act, and any
other state or local environmental laws applicable thereto) are present on the
Entire Tract (including, but not limited to, surface and ground water); (ii)
Seller has not been identified in any litigation, administrative proceedings or
investigation as a potentially responsible party for any liability under any
applicable environmental, hazardous or solid waste laws with respect to the
Entire Tract; (iii) except as otherwise disclosed in the Environmental Reports,
Seller does not have any knowledge of the use, discharge, storage, transfer,
handling, disposal or processing over, in, on or under the Entire Tract of any
substances in violation of such laws; (iv) with respect to the Entire Tract,
Seller has no actual knowledge of and has not received any notice from any
governmental or quasi–governmental agency regarding any actual or potential
violation of any applicable environmental, hazardous waste or solid waste laws.
Simultaneous with its execution of this Agreement, Seller shall deliver
complete and accurate copies of the Environmental Reports together with reliance
letters from the consultant who prepared such reports authorizing Buyer, its
successors and assigns and Buyer’s lenders the right to use and rely upon such
reports. Seller has no actual knowledge of any other environmental reports,
tests or audits regarding any portion of the Entire Tract existing elsewhere.
To its actual knowledge, no landfill has occurred on any portion of the Entire
Tract and no debris has been buried or placed on any portion of the Entire
Tract.
(b) To its actual knowledge, there were and are no
underground storage tanks on the Entire Tract.
(c) Except for the Model Leases (as hereinafter defined),
there are no other leases, tenancies, licenses or other rights of occupancy or
use for all or any portion of the Real Property and possession of the Real
Property shall be given to Buyer unoccupied and free and clear of any leases
(excepting the Model Leases) and claims to or rights of possession, occupancy or
use.
(d) Seller is under no restriction which would prohibit or
prevent the conveyance of title as herein required and Seller will do nothing or
suffer anything which would impair or hinder the Seller's so ability to convey.
(e) Except for agreements of sale to third party
purchasers, true and correct copies of which are listed in Exhibit J attached
hereto and made a part hereof (“Outstanding Agreements”), there are no other
agreements of sale, rights of first refusal, options to purchase, rights of
reverter or rights of first offer relating to the Real Property or any portion
thereof.
(f) There is no claim, action, suit or proceeding, pending
or threatened, against Seller or any portion of the Real Property, or relating
to or arising out of the ownership, management or operation of the Entire Tract
or sale of Settled Lots or Lots in any court or before or by any governmental or
public department, commission, board, bureau or agency. There is no claim,
action, suit or proceeding, pending or threatened, against Seller relating to or
arising out of Seller’s actions or inaction as Developer (as such term is
defined in the Amended and Limited Public Offering Statement for Village Greenes
registered November 7, 1997 as amended by amendment dated November 12, 1998
(“POS”) or as Declarant (as such term is defined in the Declaration of
Covenants, Easements, and Restrictions for Village Greenes dated July 13, 1998
and recorded in Burlington County in Deed Book 5616, Page 157 (“Declaration”) in
any court or before or by any governmental or public department, commission,
board, bureau or agency.
(g) No assessments for public improvements have been made
against the Real Property which will remain unpaid as of Closing on the Real
Property and all assessments for work ordered, commenced or completed prior to
the date of Closing shall have been paid by Seller in full at or prior to
Closing. Buyer shall pay all assessments for work ordered or commenced after
the date of Closing. Seller has not received written notice from any
governmental agency of any special or other assessments for public improvements
affecting the Real Property or any portion thereof.
(h) Seller has no notice nor actual knowledge of (i) pending
annexation or condemnation proceedings affecting or which may affect, all or any
portion of the Real Property or (ii) could result in the termination or
reduction of the current access of the Real Property to existing public streets
or of any reduction in/or to the sewer, water or other utility services
presently serving or intended to serve the Real Property.
(i) Seller is not a foreign person as defined by the
Foreign Investment in Real Property Tax Act. At Closing, Seller shall execute
and deliver to Buyer a Non-Foreign Affidavit in form satisfactory to Buyer and
Title Company.
(j) There are no adverse parties in possession of the Real
Property.
(k) To Seller’s actual knowledge, no portion of the Real
Property is (or there is no condition existing with respect to the Real
Property) in violation of any applicable law, ordinance, code, rule, order
regulation or requirement of any governmental or quasi-governmental authority
and there are no outstanding and uncured notices of such violations.
(l) The Outstanding Agreements are full force and effect
and are assignable to Buyer without the consent of any third party.
(m) To Seller’s actual knowledge, there is no pending or
anticipated reassessment or reclassification of any or all of the Real Property
for state or local real property taxation purposes.
(n) Seller has and shall continue to have at Closing the
full power and authority to execute and deliver this Agreement and all other
documents now of hereafter to be executed and delivered by Seller pursuant to
this Agreement and to consummate the transactions contemplated thereby.
(o) The authorization, execution and delivery of this
Agreement by Seller and the consummation of the transactions described herein do
not and will not, at Closing, with or without the giving of notice or passage of
time or both, violate, conflict with or result in the breach of any terms or
provisions of, or require any notice, filing, registration or further consent,
approval, authorization under any instrument or agreement to which Seller may be
bound and/or relating to or affecting the Real Property or portions thereof.
(p) Seller is a corporation duly organized and validly
existing under the laws of the State of Minnesota, authorized to do business in
the State of New Jersey and has the legal right, power and authority to enter
into this Agreement and perform all of its obligations hereunder, and the
execution of this Agreement by Buyer has been fully authorized by all requisite
action.
(q) Seller has duly registered the Entire Tract in
accordance with the requirements of the New Jersey Planned Real Estate
Development Full Disclosure Act (N.J.S.A. 45:22A-21 et seq.) and the regulations
promulgated thereunder, and has complied with the terms and provisions of the
same in its sale of any of the Lots or Settled Lots to third party purchasers.
(r) To Seller’s actual knowledge, Seller, its employees and
subcontractors, to the extent it has constructed, installed, replaced or
repaired improvements on the Entire Tract or off-site (as required by the
Governmental Approvals), has constructed , installed, replaced or repaired such
improvements in accordance with the requirements of the Governmental Approvals
and Warranties (as hereinafter defined) and in accordance with the governmental
agencies or utility companies having jurisdiction over such improvements.
(s) Other than those items listed on the Payables Schedule
attached hereto as Exhibit K attached hereto and made a part hereof, which shall
be updated as of the date of Closing, Seller has paid all professionals
(including but not limited to attorneys, architects, engineers), subcontractors,
suppliers, vendors for all work, equipment, materials, or supplies relating to
the Entire Tract or improvements thereon. No subcontractor, supplier or vendor
has filed or threatened to, file a claim under the New Jersey Construction Lien
Law of any similar statute or took any other action seeking to be reimbursed for
services, materials or supplies.
(t) Seller represents and warrants that true, correct and
complete copies of the Model Lease dated December 15, 1998 (with Assignment with
Notification dated December 15, 1998 addressed to Union Planters Bank) (“ESA”),
dated December 15, 1998 as amended by letter dated October 30, 2000, Exclusive
Sales Agreement, Motivation Agreement dated December 15, 1998 are attached
hereto as part of Exhibit L and are collectively known as the “Lease Documents”.
The Lease Documents are in full force and effect, and Seller has no knowledge
of or notice of any default under the any of the Lease Documents. Any defaults
by Seller under any of the Lease Documents shall be cured by Seller, at its sole
cost and expense, prior to Closing.
Seller shall provide Buyer with a copy of any notice regarding the
Lease Documents within two (2) days after Seller’s receipt of same. At Closing,
Seller shall assign its rights under the Lease Documents to Buyer. Seller shall
pay all costs and expenses due under the Lease Documents up to the date of
Closing. Buyer shall pay all costs and expenses under the Lease Documents from
the date of Closing. At Closing, Seller shall deliver an Assignment of Lease
Documents substantially in the form attached hereto and made a part hereof as
Exhibit M and a Non-Disturbance Agreement reasonably acceptable to the
parties. The calculation of the Purchase Price does not include the Model
Homes since the Model Homes are owned by Strategic Capital Resources, Inc.
(“Strategic”).
Furthermore, Seller shall assign at Closing with Strategic’s consent, its
rights and obligations under the Exclusive Sales Agreement dated December 15,
1998 and Motivation Agreement dated December 15, 1998, true and correct copies
of which are also attached as part of Exhibit L.
(u) As of the date of Closing, Seller has obtained and
continued in effect, at its sole cost and expense, any and all governmental and
quasi–governmental approvals, permits and licenses (except for the payment of
sewer and water connection fees for the Vacant Lots), including, but not limited
to those approvals, permits and licenses listed in Exhibit N attached hereto
and made a part hereof as are necessary or required to permit the construction,
development and sale of the Real Property in accordance with the Intended Use
("Governmental Approvals"). All Governmental Approvals are valid and
unappealable with all appeal periods having expired with no appeals pending.
Simultaneously with Seller’s execution of this Agreement, Seller shall provide
Buyer with full and complete copies of the Governmental Approvals.
(v) A true and correct copy of the Option Agreement is
attached hereto and made a part hereof as Exhibit O. The Option Agreement is
in full force and effect, and Seller and South Jersey have not defaulted under
the terms of the Option Agreement nor has Seller received any notice of default
under the Option Agreement. Prior to Closing, Seller shall comply with its
obligations under the Option Agreement. Seller shall immediately provide copies
of any notices received pursuant to the Option Agreement to Buyer. Seller has
paid to South Jersey all monies due under the Option Agreement with respect to
each Owned Lot, including, but not limited to, Three Thousand Dollars ($3000.00)
Per Lot Off-Site Improvement Cost (as described in Exhibit B of the Option
Agreement).
(w) All rollback taxes assessed under the "Farmland
Assessment Action of 1964" (N.J.S.A 54:4 23.1) or other similar acts against the
Entire Tract have been paid by South Jersey pursuant to the terms of the Option
Agreement. Seller’s only obligation with respect to rollback taxes is to pay
South Jersey $587.76 per Option Lot.
8. Buyer's Covenants, Representations and Warranties.
Buyer, to induce Seller to enter into this Agreement and to
complete Closing hereunder, makes the following covenants, representations and
warranties to Seller:
(a) Buyer is a corporation duly organized and validly
existing under the laws of the State of Delaware authorized to do business in
the State of New Jersey and has the legal right, power and authority to enter
into this Agreement and perform all of its obligations hereunder, and the
execution of this Agreement by Buyer has been fully authorized by all requisite
action.
(b) Buyer hereby agrees to and shall accept the Real
Property in its “as is” and “where is” condition and except as otherwise
provided in this Agreement, Seller makes no representation regarding the state
of or condition of the Real Property.
9. Operations Prior to Closing.
Between the date of this Agreement of Sale and Closing hereunder;
(a) Buyer shall have the right to enter upon the Real
Property to inspect, appraise and perform any tests necessary or desirable to
determine the suitability and the adaptability of the Real Property for the
Intended Use. After the date of this Agreement of Sale, Seller shall afford
Buyer full and complete access to all of Seller's records and files relating to
the Real Property which shall remain Seller's property until Closing. Buyer
shall give at least verbal notice to Seller before entering the Real Property so
Seller can accompany Buyer if it so desires. If Buyer’s inspection activities
reveal potential violations of law, Buyer shall promptly notify Seller. The
parties agree and acknowledge that Buyer shall not be responsible for any damage
caused to any fields or crops as a result of the Buyer’s exercise of its rights
hereunder but Buyer shall be responsible for, and shall indemnify Seller from
and against all other injuries to any person or damage to any personal property
associated with Buyer’s testing activities at the Real Property. At Seller’s
request, Buyer shall provide Seller with copies of all reports, investigations
and testing activities performed by Buyer.
Buyer shall carry liability insurance in an amount of Two Million
($2,000,000) Dollars with respect to such inspection and testing activities,
naming Seller as an additional insured and shall deliver a certificate of
insurance to Seller prior to undertaking any inspection or testing activities on
any part of the Real Property.
(b) Seller shall continue to improve the Real Property in
accordance with the requirements of the Governmental Approvals.
(c) Promptly after the receipt thereof by Seller, Seller
shall deliver to Buyer a copy of any tax bill, notice or statement of value,
notice of change in the tax rate affecting or relating to the Real Property,
notice or claim of any violation from any governmental authority or notice of
any taking, affecting or relating to the Real Property.
(d) Seller shall continue to market the Lots upon the prices
and terms existing as of the date of this Agreement, with any changes to such
prices or terms to be approved by Buyer.
(e) Seller shall not enter into a Agreement of Sale for any
of the Model Lots without Buyer’s consent.
10. Default.
(a) Seller's Default. If Seller violates any terms of
this Agreement or if Closing under this Agreement is not consummated on account
of Seller's default hereunder, the Deposit and all monies paid to Seller or on
its behalf by Buyer shall be returned immediately to Buyer and in addition
thereto, Buyer may pursue the remedy of specific performance. If specific
performance is unavailable due to Seller’s intentional acts (such as conveyance
of the Real Property to a party other than Buyer), then Buyer may pursue any and
all other remedies available to it in law or in equity. Any default hereunder
shall be also be default under the terms and provisions of the Agreement of Sale
between Buyer and Seller dated as of June 29, 2001 for lands in Hainesport
Township, Burlington County, New Jersey (“Hainesport Agreement”).
Notwithstanding anything to the contrary contained in this Agreement, Seller
shall have ten (10) days after notice to cure any default hereunder before Buyer
shall have the right to exercise any remedies hereunder.
(b) Buyer's Default. If Buyer violates any terms of this
Agreement or if Closing under this Agreement is not consummated on account of
Buyer's default hereunder, Seller shall be entitled to the Deposit and any
interest accruing thereon. In such event, the payment of the Deposit shall be
deemed to be and shall be fully liquidated damages for such default of Buyer,
the parties hereto acknowledging that it is impossible to estimate more
precisely the damages which might be suffered by Seller upon the Buyer's
default. Seller's receipt of the Deposit is not intended as a penalty, but as
full liquidated damages and upon such retention, this Agreement shall terminate
and become null and void, and neither party shall have any further rights or
obligations hereunder. The right to retain the Deposit as full liquidated
damages is Seller's sole and exclusive remedy in the event of such default
hereunder by Buyer and Seller hereby waives and releases any right to (and
hereby covenants that it shall not) sue Buyer: (i) for specific performance of
this Agreement; or (ii) to prove that Seller's actual damages exceed the total
of the Deposit. Any default hereunder shall be also be default under the terms
and provisions of the Hainesport Agreement. Notwithstanding anything to the
contrary contained in this Agreement, Buyer shall have ten (10) days after
notice to cure any default hereunder before Seller shall have the right to
exercise any remedies hereunder.
11. Condemnation.
If, after the date hereof and prior to Closing, all or any material
portion of the Real Property (for the purposes of this Paragraph material is
defined as loss of more than ten (10) Lots, loss of clubhouse or a material
adverse change in access to the Real Property or portions thereof) is condemned
or taken by eminent domain (or is the subject of pending or contemplated
proceeding or taking by eminent domain), Seller shall promptly give Buyer a copy
of the notice of such condemnation, taking or change, and Buyer shall have the
option to terminate this Agreement by giving notice to Seller within ten (10)
days after the receipt of such Seller's notice. Upon the giving of such notice
by Buyer, Buyer shall be entitled to the immediate return of the Deposit and
upon such return to Buyer, this Agreement shall terminate and become null and
void, and neither party shall have any further rights or obligations hereunder
(except for the indemnity provisions set forth in Paragraph 9(a) which shall
survive such termination). If Buyer shall not exercise its option to terminate
this Agreement as hereinabove set forth, then this Agreement shall remain in
full force and effect without a reduction in the Purchase Price and Buyer shall
be entitled to, and at Closing, Seller shall assign to Buyer any and all claims
that Seller may have to condemnation awards and/or any and all causes of action
with respect to such condemnation or taking relating to the Real Property.
Furthermore, at Closing, Seller shall pay to Buyer, by the plain check of the
Title Company, an amount equal to all payments theretofore made with respect to
such condemnation, taking or change. Any negotiations, agreements or contests,
or offers or awards relating to such condemnation or taking of or change
relating to the Real Property shall be subject to the participation and consent
of Buyer provided Buyer has waived its termination right hereunder. Buyer
agrees to act with promptness and reasonableness in its participation in any
such negotiations, agreements or contests or offers or awards.
12. Assignability.
Buyer shall have the right to assign this Agreement and its rights
hereunder to any person or entity provided such assignee is fifty–one percent
(51%) or more owned by, Buyer, or Jeffrey P. Orleans, and, upon notice from
Buyer, Seller shall convey the Real Property to any such assignee of Buyer. Any
permitted assignee of Buyer shall be entitled to all the rights and powers of
Buyer hereunder provided however that Orleans Homebuilders, Inc. shall execute a
guaranty guaranteeing the obligations under the Note..
13. Notices.
(a) Any notice required or permitted to be given by the
terms and provisions of this Agreement shall be in writing and shall be deemed
to have been served and given:
(i) three (3) business days following the
date when deposited by postage prepaid, registered or certified mail, return
receipt requested, in the United States' mail;
(ii) on the first business day following
delivery thereof to a recognized overnight courier such as Federal Express;
(iii) on the date transmitted by a legible
telecopier transmission; or
(iv) when personally delivered.
Business days shall mean Monday through Friday and excludes
Saturday, Sunday and national holidays. Notice given in any other manner shall
be deemed to have been served and given when actually received by the party to
which such notice was directed. Either party may designate a different address
for the purposes of notice hereunder by notice given herein prescribed. Notice
shall be given as follows:
If intended for Seller:
Rottlund Homes of New Jersey, Inc.
3065 Centre Point Drive
Roseville, MN 55113
Fax Number:651-638-0505
Attention: Steven A. Kahn, Chief Financial Officer
with a copy to:
Gary L. Green, Esquire
Archer & Greiner
One Centennial Square
PO Box 3000
Haddonfield, NJ 08033-0968
Fax Number: 1-856-795-0574
If intended for Buyer:
Orleans Homebuilders, Inc.
One Greenwood Square
3333 Street Road, Suite 101
Bensalem, PA 19020
Attention: Benjamin D. Goldman, Vice-Chairman
Fax Number (215) 633-2351
with a copy to:
Orleans Homebuilders, Inc.
One Greenwood Square
3333 Street Road, Suite 101
Bensalem, PA 19020
Attention: Lawrence J. Dugan, Esquire
Fax Number (215) 633-2352
14. Brokerage.
Each party represents and warrants to the other that it or they
have not made any agreement or taken any action which may cause anyone to become
entitled to a commission, fee or other compensation as a result of the
transactions contemplated by this Agreement except for Seller’s agreement to pay
Cohen Schatz Associates, Inc., a licensed New Jersey real estate broker,
pursuant to a separate agreement. Seller represents and warrants that it shall
pay the commission due Cohen Schatz, Inc. at Closing. Each party agrees to
indemnify, defend and hold harmless the other from and against any and all
claims, actual or threatened, losses or expenses (including attorneys' fees and
disbursements and court costs) resulting by reason of such party's breach (or
alleged breach) of the foregoing representations, warranties and covenants.
15. Survival.
Notwithstanding any presumption to the contrary, all covenants,
conditions, representations, warranties and agreements of Buyer and Seller
contained herein shall not be discharged upon, and except as otherwise stated
herein, shall survive for a period of one (1) year from the date of Closing.
16. Captions.
The captions in this Agreement are inserted for convenience of
reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
17. Successors and Assigns.
This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
18. No Recording.
Neither Seller nor Buyer shall cause or permit this Agreement to be
filed of record in any office or place of public record and, if Buyer or Seller
shall fail to comply with the terms hereof by recording or attempting to record
to the same, such acts shall not operate to bind or cloud title to the Real
Property. Filing of this Agreement in a recorder’s office by Buyer shall
constitute a default hereunder. However, the filing of this Agreement or any
suit or any proceeding in which this document is relevant or material shall not
be deemed to be a violation of this Paragraph.
19. Entire Agreement.
This Agreement constitutes and expresses the whole agreement of the
parties hereto with reference to the subject matter hereof and to any of the
matters or things herein provided for, or hereinbefore discussed or mentioned in
reference to the subject matter hereof, all prior promises, undertakings,
representations, agreements, understandings and arrangements relative thereto
being merged herein.
20. Construction.
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New Jersey without giving any effect to any New
Jersey law or other laws regarding conflicts of law or to any presumption, canon
or rule of law requiring or permitting construction against the party who
drafted this Agreement.
21. Modification.
This Agreement may be amended or modified only in a writing signed
by the parties hereto.
22. No Waiver.
(a) No consent or waiver, express or implied, by Buyer to
or of a breach of any representation, covenant, condition, agreement or warranty
of Seller shall be construed as a consent to or waiver of any other breach of
the same or any other representation, covenant, condition, agreement or warranty
of Seller.
(b) No consent or waiver, express or implied, by Seller to
or of a breach of any representation, covenant, condition, agreement or warranty
of Buyer shall be construed as a consent to or waiver of any other breach of the
same or any other representation, covenant, condition, agreement or warranty of
Buyer.
23. Severability.
If any term or provision of this Agreement or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or the application of such term
or provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Agreement shall be valid and be enforced to the fullest extent
permitted by law.
24. Background and Exhibits.
The Background and Exhibits attached hereto are hereby incorporated
herein and made a part hereof.
25. Adjustments or Incidental Costs.
(a) Real estate taxes, water and sewer charges (on the
basis of actual fiscal years for which such taxes and charges are assessed)
shall be apportioned pro–rata between Buyer and Seller on a per diem basis as of
Closing. As of Closing, Seller will make any payment necessary to cause the
Association’s year to date net income to be zero, provided, however, that Seller
shall not be responsible for any payment to the extent resulting from delinquent
homeowners’ payments for dues or special assessments. Any charges, fees or
assessments imposed by the Association against Seller shall be paid by Seller.
Prior to Closing, Seller, at Buyer’s request, shall obtain a certificate from
the Association showing any unpaid dues, charges or assessments owed by the
Seller to the Association through the date of Closing.
(b) Any realty transfer taxes imposed in connection with
this transaction shall be paid by Seller at Closing hereunder.
26. Moratorium.
If prior to Closing, a water, sewer or building moratorium prevents
Buyer from obtaining water, sewer or building permits or connections sufficient
for its Intended Use, then the time within which Buyer shall be required to
complete such Closing shall be extended to the extent of the moratorium plus
thirty (30) days. In the event a moratorium extends one year beyond the date
originally set for Closing, either party shall have the right to terminate by
notice to the other, whereupon this Agreement, subject to provisions of the last
sentence in this Paragraph, shall terminate and become null and void, and
neither party shall have any further rights or obligations hereunder (except for
the indemnity provisions set forth in Paragraph 9(a) which shall survive such
termination). In the event Seller is the party giving such notice, Buyer shall
have the right to nullify the effect thereof by closing within thirty (30) days
after receipt of Seller’s notice.
27. Fire or Other Casualty.
If, at any time prior to Closing, all or any material portion of
the Real Property (for the purposes of this Paragraph, material is defined as
loss of more than ten (10) Lots, loss of clubhouse or a material adverse change
in access to the Real Property or portions thereof) is destroyed or damaged as a
result of fire or other casualty, Seller shall promptly give written notice
thereof to Buyer, and Buyer shall have the option to terminate this Agreement by
giving notice to Seller within ten (10) days after the receipt of such Seller's
notice. Upon the giving of such notice by Buyer, Buyer shall be entitled to the
immediate return of the Deposit and upon such return to Buyer, this Agreement
shall terminate and become null and void, and neither party shall have any
further rights or obligations hereunder (except for the indemnity provisions set
forth in Paragraph 9(a) which shall survive such termination). If Buyer shall
not exercise its option to terminate this Agreement as hereinabove set forth,
then this Agreement shall remain in full force and effect without a reduction in
the Purchase Price and Buyer shall be entitled to, and at Closing, Seller shall
assign to Buyer any and all claims that Seller may have to insurance and/or any
and all causes of action with respect to such casualty or loss relating to the
Real Property. Furthermore, at Closing, Seller shall pay to Buyer, by the plain
check of the Title Company, an amount equal to all payments theretofore made
with respect to such casualty or loss. Any negotiations, agreements or contests,
or offers or awards relating to such casualty or loss shall be subject to the
participation and consent of Buyer. Buyer agrees to act with promptness and
reasonableness in its participation in any such negotiations, agreements or
contests or offers or awards.
28. Affordable Lots.
As part of the Governmental Approvals, Seller is obligated to construct
seventeen (17) Affordable Lots either on-site or off-site. Seller has entered
into an Agreement dated November 29, 2000 (“B’Nai B’Rith Agreement”) with B’Nai
B’Rith Elmwood House, Inc. (“B’Nai B’Rith”) to facilitate the construction of 15
low income homes on property owned by B’Nai B’Rith. Seller shall provide
evidence satisfactory to Buyer that the construction of 15 Affordable Lots on
property owned by B’Nai B’rith completely satisfies the Governmental Approvals.
If B’Nai B’rith fails to complete construction of the homes or if Seller
otherwise fails to satisfy its obligations with respect to the Affordable Lots
(such as by entering into a Regional Contribution Agreement) by the earlier of
(i) Buyer’s prepayment of the entire amount due under the Note or (ii) the
maturity date of the Note, then Buyer shall have the automatic right to set off
against the amounts due under the Note, such set-off be equal to the amount of
$57,000 x the number of Affordable Lots required to be constructed on the Real
Property. In the event Buyer exercises its set-off rights hereunder and Seller
subsequently satisfies its obligations with respect to the Affordable Lots, then
in that event, Buyer shall reimburse Seller the sum of $57,000 x the number of
Affordable Lots not required to be constructed on the Real Property(but in no
event more than amount set-off) less any expenses incurred by Buyer as result of
Seller’s delay in satisfying this obligation.
29. Models and Sales Center.
Seller has constructed six (6) models on the Entire Tract, being
more specifically described in Exhibit L attached hereto and made a part hereof
(“Models”). Seller has conveyed the Models to Strategic Capital Resources, Inc.
(“Strategic”) as part of a financing transaction.
The Model Furnishings being more specifically described in Exhibit
P attached hereto and made a part hereof are owned by Seller. At Closing,
Seller shall convey fee simple title to the Model Furnishings to Buyer or its
designee by delivery of a Bill of Sale upon payment of Seventy-Three Thousand
Five Hundred Dollars ($73,500) in cash, which amount is in addition to the
Purchase Price.. Title to the Model Furnishings shall be good and marketable
free of all liens, encumbrances, leases or other rights.
In addition to the Models, Seller has constructed a sales center on
one of the Lots (being Block 15.06, Lot 15) (“Sales Center”). Seller is the fee
owner of the Sales Center and shall convey the same to Buyer at Closing in
accordance with the terms and provisions of this Agreement upon payment of Two
Hundred Thousand Dollars ($200,000) in cash, which amount is in addition to the
Purchase Price.
30. Warranty.
Seller has issued a ten year builder’s warranty (issued by
Residential Warranty Corporation) for each of the Settled Lots and Model Lots in
accordance with the terms and provision of the New Home Warranty and Builder’s
Registration Act (N.J.S.A. 46:3B-1 et seq.)(“Home Warranty”) and has further
warranted the construction of certain improvements in accordance with the terms
and provisions of the Planned Real Estate Development Full Disclosure Act
(N.J.S.A. 45:22A-21 et seq.) (“PRED Warranties”). If required by the New Jersey
Department of Community Affairs, Seller will reissue such warranty, as its cost
and expense, for each of Model Lots when each Model Lot is conveyed to a third
party purchaser. The Home Warranty and PRED Warranties are collectively known
as “ Warranties.” Seller desires to engage Buyer to supervise any repair work
required under the Warranties. Buyer’s agreement to supervise and coordinate
the repair work under the Warranties shall not be construed as or obligate Buyer
to assume the obligations under the Warranties. Buyer shall engage, on
Seller’s behalf, all subcontractors needed to perform the repair (endeavoring to
use the Seller’s subcontractors if such subcontractors provided a warranty for
the item to be repaired) work under the Warranties, and Seller shall pay all
such subcontractors within thirty (30) days after receipt. If Seller does not
pay such subcontractors, Buyer shall have the right to pay such amounts and set
off those amounts against the amounts due under the Note. With respect to any
claim for repairs that would cost less than $500 as to any individual repair or
less than $1,000 in the aggregate as to all repairs requested to a single home,
Buyer shall have the right to determine whether to honor a warranty work request
by a homeowner. As to any warranty work request which would exceed the
foregoing limits, Buyer shall not undertake such warranty work without Seller’s
prior written consent (which consent shall be deemed to have been given unless
Seller objects to such warranty work by written notice to Buyer within ten (10)
days following Seller’s receipt of written notice from Buyer of such request).
31. Seller’s Employees.
At Closing and in consideration for Seller keeping the sales
offices open until the date of Closing and continuing to offer Lots for sale in
the normal course of business, Buyer shall reimburse to Seller one-half of the
wages (excluding any employee benefits, such as medical premiums) of the sales
staff (being the salesperson, hostess, and selection employee) incurred from the
date of this Agreement until Closing. The amount to be reimbursed to Seller for
such wages shall in no event exceed One Thousand Five Hundred Dollars ($1500.00)
per week. In addition, at Closing, Buyer shall reimburse Seller one-half of
advertising costs incurred by Seller for advertisements for the Real Property
run from the date of this Agreement until Closing, such amount will not exceed
the amounts set forth in Exhibit Q attached hereto and made a part hereof.
32. Performance Bonds.
Attached hereto and made a part hereof as Exhibit I is a true and
correct list of all performance and maintenance bonds posted by Seller, at its
sole cost and expense (“ Bonds”) and inspection escrows (“Inspection Escrows”).
The parties agree and acknowledge that the amount of the Inspection Escrows will
change since Seller will continue to construct homes and improvements at the
Real Property. The parties shall make good faith efforts and work with each
other and the governmental entities holding the Inspection Escrows to obtain a
correct accounting of the Inspection Escrows as of the date of Closing. Buyer,
at its cost and expense, shall diligently and in good faith, replace such Bonds
and Inspection Escrows as soon as reasonably possible but in no event earlier
than the date of Closing. Buyer shall tender the replacement Bonds by the date
of Closing.
33. Village Greenes Community Association.
Seller has formed Village Greenes Community Association, Inc.
(“Association”) and has recorded the Declaration in accordance with the terms
and provisions of the POS. Seller has complied with the terms and provisions of
the POS and Declaration. Buyer acknowledges that it will need to amend the POS
to reflect Buyer’s interest in the Lots. Such amendment shall be subject to
review and approval by the New Jersey Department of Community Affairs pursuant
to the terms and provisions of Planned Real Estate Development Full Disclosure
Act (N.J.S.A. 45:22A-21 et seq.) (“DCA Approval”). Buyer’s receipt of the DCA
Approval is not a condition precedent to Closing hereunder. Nevertheless,
Seller shall cooperate with Buyer and promptly shall provide Buyer with such
documentation requested by Buyer in order to facilitate the DCA Approval. At
Closing, Seller shall cause its representatives to resign as directors of the
Association to be replaced by Buyer’s representatives. Immediately upon
execution of this Agreement, Seller shall provide Buyer with the latest
financial statements of the Association together with a copy of the latest audit
of Association’s funds.
34. Sales Commissions.
After Closing, Buyer shall pay all real estate commissions due and
payable on Outstanding Agreements which settle after Closing. In the event
Seller has prepaid such commission or any portion thereof, Buyer shall reimburse
Seller the amount of such prepayment at Closing.
35. Construction Costs.
At Closing, in addition to the Purchase Price, Buyer shall
reimburse Seller the Construction Costs (as hereinafter defined) pursuant to
the Combined Job Cost Activity Report (as agreed to by the parties during the
Due Diligence Period) as of the date of Closing for the WIP Lots. Seller shall
prepare a Combined Job Cost Activity Report for each WIP Lot under construction,
which shall be agreed to by the parties. A sample of the Combined Job Cost
Activity Report is attached hereto as Exhibit R attached hereto and made part
hereof.
Buyer acknowledges that during the term of this Agreement, Seller
will continue to construct homes on the WIP Lots. Accordingly, the parties
agree that the Construction Costs of each WIP Lot will need to be determined by
the parties immediately prior to Closing and any work performed on the WIP Lots
but not detailed on the Combined Job Cost Activity Report shall be paid by Buyer
to the subcontractor (subject to Buyer’s verification of such work). The term
“Construction Costs” shall include the sums expended for wages of Seller’s
construction personnel supervising the WIP Lots and such other amounts agreeable
to parties as detailed in the Combined Job Cost Activity Report.
36. Site Improvements.
The parties acknowledge that Seller has partially completed the
site improvements for the Entire Tract. After Closing, Buyer shall be
responsible for completion of the remaining site improvements. Accordingly,
Seller shall provide Buyer with a Site Credit (as hereinafter defined) equal to
the amounts described in Exhibit S. The Site Credit shall equal the costs to
complete the uncompleted site improvements, including , but not limited to,
direct construction costs, bonding fees, inspection fees, dedication costs,
installation and replacement of street trees and other landscaping required
pursuant to the Governmental Approvals. The Site Credit shall be allocated in
the following manner: (i) if the site work is estimated by the parties (using
reasonable discretion) to be completed within twelve (12) months of the date of
Closing, that portion of the Site Credit attributable to such work shall be
reimbursed by Seller upon Buyer’s presentation of the invoice for such work, and
(ii) if the site work is estimated by the parties (using reasonable discretion)
to be completed more than twelve (12) months after the date of Closing, that
portion of the Site Credit attributable to such work shall be credited against
the principal amount of the Note. In addition, any amounts needed to repair the
existing site improvements (as noted on the Pre-Closing Inspection described in
Paragraph 37 below) shall be added to the Site Credit, and allocated in the same
manner as the Site Credit.
37. Pre- Closing Inspection.
Prior to Closing, representatives of the parties shall inspect the
Entire Tract excepting the Settled Lots to determine (i) the condition of the
Site Improvements installed by Seller and note any repairs to be made thereto,
(ii) stage of completion of the WIP Lots under construction so that the proper
amount of Construction Costs can be allocated to such Unit and reimbursed to
Seller at Closing, (iii) the stage of completion of the Site Improvements, and
(iv) the general state of improvements constructed by Seller. At such
inspection, Buyer and Seller shall detail these items on a written inspection
report, to be signed by Buyer and Seller.
38. Indemnity.
Seller hereby agrees to indemnify, defend and hold Buyer, its
officers, directors, shareholders, employees, representatives, agents,
successors and assigns harmless from and against and to reimburse Buyer with
respect to all losses, claims, demands, liabilities, obligations, causes of
action, damages, costs, expenses, fines, or penalties (including, without
limitation, reasonable attorneys’ fees and costs) (collectively, “Losses”)
suffered by or asserted against Buyer arising from or relating to (i) Seller’s
installation, construction, repair or replacement of any of the improvements
(including, but not limited to, the improvements on Settled Lots) existing as of
the date of Closing, (ii) its actions or inaction as Declarant with respect to
the Association, (iii) the sale, construction and settlement of any Settled
Lots. This indemnity shall survive for a period of two (2) years after the date
of Closing. Notwithstanding any other provisions of Paragraph 38, no claim for
indemnification shall be asserted unless the aggregate of all Losses exceed
$50,000, in which case the indemnity shall cover all Losses in excess of
$25,000. Further, any claim for indemnification by Buyer under this Paragraph
38 arising from the turnover to the Association of common areas and improvements
therein (including, without limitation, costs of repairs or replacements to such
improvements) shall be limited such that Seller’s indemnification obligation
(which shall likewise be limited to the extent provided in the immediately
preceding sentence) shall be pro rated based on the ratio of Settled Lots to the
total number of homes to be built within the Entire Tract as permitted under all
applicable governmental approvals.
Buyer hereby agrees to indemnify, defend and hold Seller, its
officers, directors, shareholders, employees, representatives, agents,
successors and assigns harmless from and against and to reimburse Seller with
respect to all losses, claims, demands, liabilities, obligations, causes of
action, damages, costs, expenses, fines, or penalties (including, without
limitation, reasonable attorneys’ fees and costs) suffered by or asserted
against Seller arising from or relating to (i) Buyer’s installation,
construction, repair or replacement of any of the improvements, (ii) its
actions or inaction as Declarant with respect to the Association, and (iii) the
sale, construction and settlement by it of any Vacant Lots, WIP Lots or
Affordable Lots. This indemnity shall survive for a period of two (2) years
after the date of Closing. Notwithstanding any other provisions of Paragraph
38, no claim for indemnification shall be asserted unless the aggregate of all
Losses exceed $50,000, in which case the indemnity shall cover all Losses in
excess of $25,000. Further, any claim for indemnification by Seller under this
Paragraph 38 arising from the turnover to the Association of common areas and
improvements therein (including, without limitation, costs of repairs or
replacements to such improvements) shall be limited such that Buyer’s
indemnification obligation (which shall likewise be limited to the extent
provided in the immediately preceding sentence) shall be pro rated based on the
ratio of number of Lots conveyed by Buyer to the total number of homes to be
built within the Entire Tract as permitted under all applicable governmental
approvals.
39. Counterparts.
This Agreement may be executed in any number of counterparts, each
of which when executed and delivered shall be an original, but all such
counterparts shall constitute one and the same instrument.
40. Mutual Cooperation.
Buyer and Seller agree to mutually cooperate, as required or
appropriate to carry out the intent and purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and
year first above written.
SELLER: ROTTLUND HOMES OF NEW JERSEY, INC
--------------------------------------------------------------------------------
Attest By:/s/ Steven A. Kahn BUYER: ORLEANS
HOMEBUILDERS, INC. By: /s/ Benjamin D. Goldman Vice-Chairman
ATTEST: [SEAL]
--------------------------------------------------------------------------------
Lawrence J. Dugan, Assistant Secretary
|
THERAPEUTIC SPECIALTY BEDS, THERAPEUTIC
SURFACES & RELATED PRODUCTS
SUPPLIER AGREEMENT
between
NOVATION, LLC
and
KCI USA, Inc.
(Supplier)
MS10730
(Contract Number)
TABLE OF CONTENTS
PAGE
1.
INTRODUCTION
4
a.
Purchasing Opportunities for Members
4
b.
Supplier
4
c.
Bid
4
2.
CONTRACT AWARD
4
a.
Letter of Award
4
b.
Optional Purchasing Arrangement
4
c.
Market Competitive Terms
5
d.
Changes in Award Prices
5
e.
Notification of Changes in Pricing Terms
5
f.
Underutilized Businesses
5
g.
E-Commerce Business
5
3.
TERM AND TERMINATION
5
a.
Term
6
b.
Termination by Novation
6
c.
Termination by Supplier
6
4.
PRODUCT SUPPLY
6
a.
Delivery and Invoicing
6
b.
Product Fill Rates; Confirmation and Delivery Times
6
c.
Bundled Terms
6
d.
Discontinuation of Products; Changes in Packaging
7
e.
Replacement or New Products
7
f.
Member Services
7
g.
Product Deletion
7
h.
Return of Products
7
i.
Failure to Supply
7
5.
PRODUCT QUALITY
8
a.
Free from Defects
8
b.
Product Compliance
8
c.
Patent Infringement
8
d.
Product Condition
8
e.
Recall of Products
9
f.
Shelf Life
9
6.
CENTURY COMPLIANCE
9
a.
Definitions
9
b.
Representations
9
c.
Remedies
10
d.
Noncompliance Notice
10
e.
Survival
10
7.
REPORTS AND OTHER INFORMATION REQUIREMENTS
10
a.
Report Content
10
b.
Report Format and Delivery
11
c.
Other Information Requirements
11
8.
OBLIGATIONS OF NOVATION
11
a.
Information to Members
11
b.
Marketing Services
11
9.
MARKETING FEES
11
a.
Calculation
11
b.
Payment
12
10.
ADMINISTRATIVE DAMAGES
12
11.
NONPAYMENT OR INSOLVENCY OF A MEMBER
13
12.
INSURANCE
13
a.
Policy Requirements
13
b.
Self-Insurance
13
c.
Amendments, Notices and Endorsements
13
13.
COMPLIANCE WITH LAW AND GOVERNMENT PROGRAM PARTICIPATION
13
a.
Compliance with Law
13
b.
Government Program Participation
14
14.
RELEASE AND INDEMNITY
14
15.
BOOKS AND RECORDS; FACILITIES INSPECTIONS
14
16.
USE OF NAMES, ETC.
14
17.
CONFIDENTIAL INFORMATION
15
a.
Nondisclosure
15
b.
Definition
15
18.
MISCELLANEOUS
15
a.
Choice of Law
15
b.
Not Responsible
15
c.
Third Party Beneficiaries
15
d.
Notices
16
e.
No Assignment
16
f.
Severability
16
g.
Entire Agreement
16
NOVATION, LLC
SUPPLIER AGREEMENT
1. INTRODUCTION
a. Purchasing Opportunities for Members. Novation, LLC
("Novation") is engaged in providing purchasing opportunities with respect to
high quality products and services to participating health care providers
("Members"). Members are entitled to participate in Novation's programs through
their membership or other participatory status in any of the following client
organizations: VHA Inc., University HealthSystem Consortium, and HealthCare
Purchasing Partners International, LLC (collectively, "Clients"). Novation is
acting as the exclusive agent for each of the Clients and certain of each
Client's subsidiaries and affiliates, respectively (and not collectively), with
respect to this Agreement. A current listing of Members is maintained by
Novation in the electronic database described in the Guidebook referred to in
Subsection 7.c below ("Novation Database"). A provider will become a "Member"
for purposes of this Agreement at the time Novation adds the provider to the
Novation Database and will cease to be a "Member" for such purposes at the time
Novation deletes the provider from the Novation Database.
b. Supplier. Supplier is the manufacturer of products listed on
Exhibit A, the provider of installation, training and maintenance services for
such products, and the provider of any other services listed on Exhibit A (such
products and/or services are collectively referred to herein as "Products").
c. Bid. Supplier has responded to Novation's Invitation to Bid by
submitting its written offer ("Bid") to Novation consisting of this Agreement,
the listing of Products and pricing therefor ("Award Prices") attached hereto as
Exhibit A, the other specifications attached hereto as Exhibit B ("Non-Price
Specification"), the Special Conditions attached hereto as Exhibit C ("Special
Conditions"), and any other materials required to be submitted in accordance
with the Bid Instructions.
2. CONTRACT AWARD
a. Letter of Award. By executing and delivering the Letter of
Award attached hereto as Exhibit D ("Award Letter") to Supplier, Novation will
have accepted the Bid, and Novation and Supplier therefore agree that Supplier
will make the Products available for purchase by the Members at the Award Prices
in accordance with the terms of this Agreement; provided, however, that
Novation's award of this Agreement to Supplier will not constitute a commitment
by any person to purchase any of the Products. No obligations of Novation set
forth in this Agreement will be valid or enforceable against Novation unless and
until the Award Letter has been duly executed by Novation and attached as an
exhibit hereto. Supplier acknowledges that, in making its award to Supplier,
Novation has materially relied on all representations, warranties and agreements
made by Supplier as part of the Bid and that all such representations,
warranties and agreements will survive acceptance of the Bid.
b. Optional Purchasing Arrangement. Novation and Supplier agree
that each Member will have the option of purchasing the Products under the terms
of this Agreement or under the terms of any other purchasing or pricing
arrangement that may exist between such Member and Supplier at any time during
the Term; provided, however, that, regardless of the arrangement, Supplier will
comply with Sections 7 and 9 below. If any Member uses any other purchasing or
pricing arrangement with Supplier when ordering products covered by any contract
between Supplier and Novation, Supplier will notify such Member of the pricing
and other significant terms of the applicable Novation contract.
c. Market Competitive Terms. Supplier agrees that the prices,
quality, value and technology of all Products purchased under this Agreement
will remain market competitive at all times during the Term. Supplier agrees to
provide prompt written notice to Novation of all offers for the sale of the
Products made by Supplier during the Term on terms that are more favorable to
the offeree than the terms of this Agreement. Supplier will lower the Award
Prices or increase any discount applicable to the purchase of the Products as
necessary to assure market competitiveness. If at any time during the Term
Novation receives information from any source suggesting that Supplier's prices,
quality, value or technology are not market competitive, Novation may provide
written notice of such information to Supplier, and Supplier will, within five
(5) business days for Novation's private label Products and with ten (10)
business days for all other Products, advise Novation in writing of and fully
implement all adjustments necessary to assure market competitiveness.
d. Changes in Award Prices. Unless otherwise expressly agreed in
any exhibit to this Agreement, the Award Prices will not be increased and any
discount will not be eliminated or reduced during the Term. In addition to any
changes made to assure market competitiveness, Supplier may lower the Award
Prices or increase any discount applicable to the purchase of the Products at
any time.
e. Notification of Changes in Pricing Terms. Supplier will provide
not less than sixty (60) days prior written notice to Novation and not less than
forty-five (45) days prior written notice to all Members of any change in
pricing terms permitted or required by this Agreement. For purposes of the
foregoing notification requirements, a change in pricing terms will mean any
change that affects the delivered price to the Member, including, without
limitation, changes in list prices, discounts or pricing tiers or schedules.
Such prior written notice will be provided in such format and in such detail as
may be required by Novation from time to time, and will include, at a minimum,
sufficient information to determine line item pricing of the Products for all
affected Members.
f. Underutilized Businesses. Certain Members may be required by
law, regulation and/or internal policy to do business with underutilized
businesses such as Minority Business Enterprises (MBE), Disadvantaged Business
Enterprises (DBE), Small Business Enterprises (SBE), Historically Underutilized
Businesses (HUB) and/or Women-owned Business Enterprises (WBE). To assist
Novation in helping Members meet these requirements, Supplier will comply with
all Novation policies and programs with respect to such businesses and will
provide, on request, Novation or any Member with statistical or other
information with respect to Supplier's utilization of such businesses as a
vendor, distributor, contractor or subcontractor.
g. E-Commerce Business. Certain Members have chosen to utilize the
services of the Marketplace@Novation™ through Novation's relationship with
Neoforma.com, Inc. ("Neoforma"), to transact business associated with this
Agreement with Supplier. To assist Novation in helping Members meet those needs,
Supplier agrees to sign and comply with the Neoforma Master Supplier Agreement
attached hereto as Exhibit F and support Novation's programs with respect to
e-commerce.
3. TERM AND TERMINATION
a. Term. This Agreement will be effective as of the effective date
set forth in the Award Letter ("Effective Date"), and, unless sooner terminated,
will continue in full force and effect for the initial term set forth in the
Non-Price Specifications and for any renewal terms set forth in the Non-Price
Specifications by Novation's delivery of written notice of renewal to Supplier
not less than ten (10) days prior to the end of the initial term or any renewal
term, as applicable. The initial term, together with the renewal terms, if any,
are collectively referred to herein as the "Term".
b. Termination by Novation. Novation may terminate this Agreement
at any time for any reason whatsoever by delivering not less than ninety (90)
days prior written notice thereof to Supplier. In addition, Novation may
terminate this Agreement immediately by delivering written notice thereof to
Supplier upon the occurrence of either of the following events:
(1) Supplier breaches this Agreement; or
(2) Supplier becomes bankrupt or insolvent or makes an
unauthorized
assignment or goes into liquidation or proceedings are
initiated for the
purpose of having a receiving order or winding up order
made against
Supplier or Supplier applies to the courts for
protection from its creditors.
Novation's right to terminate this Agreement due to supplier's breach in
accordance with this Subsection is in addition to any other rights and remedies
Novation, the Clients or the Members may have resulting from such breach,
including, but not limited to, Novation's and the Clients' right to recover all
loss of Marketing Fees resulting from such breach through the date of
termination and for one hundred eighty (180) days thereafter.
c. Termination by Supplier. Supplier may terminate this Agreement
at any time for any reason whatsoever by delivering not less than one hundred
eight (180) days prior written notice thereof to Novation.
4. PRODUCT SUPPLY
a. Delivery and Invoicing. On and after the Effective Date,
Supplier agrees to deliver Products ordered by the Members to the Members, FOB
destination, and will direct its invoices to the Members in accordance with this
Agreement. Supplier agrees to prepay and absorb charges, if any, for
transporting Products to the Members. Payment terms are 2%-30, Net 31 days.
Supplier will make whatever arrangements are reasonably necessary with the
Members to implement the terms of this Agreement; provided, however, Supplier
will not impose any purchasing commitment on any Member as a condition to the
Member's purchase of any Products pursuant to this Agreement.
b. Product Fill Rates; Confirmation and Delivery Times. Supplier
agrees to provide product fill rates to the Members of greater than ninety-five
percent (95%), calculated as line item orders. Supplier will provide
confirmation of orders from Members via electronic data interchange within two
(2) business days after placement of the order and will deliver the Products to
the Members within ten (10) business days after placement of the order.
c. Bundled Terms. Supplier agrees to give Novation prior written
notice of any offer Supplier makes to any Member to sell products that are not
covered by this Agreement in conjunction with Products covered by this Agreement
under circumstances where the Member has no real economic choice other than to
accept such bundled terms.
d. Discontinuation of Products; Changes in Packaging. Supplier
will have no unilateral right to discontinue any of the Products or to make any
changes in packaging which render any of the Products substantially different in
use, function or distribution. Supplier may request Novation in writing to agree
to a proposed discontinuation of any Products or a proposed change in packaging
for any Products at least ninety (90) days prior to the proposed implementation
of the discontinuation or change. Under no circumstances will any Product
discontinuation or packaging changes be permitted under this Agreement without
Novation's agreement to the discontinuation or change. In the event Supplier
implements such proposed discontinuation or change without Novation's agreement
thereto in writing, in addition to any other rights and remedies Novation or the
Members may have by reason of such discontinuation or change, (i) Novation will
have the right to terminate any or all of the Product(s) subject to such
discontinuation or change or to terminate this Agreement in its entirety
immediately upon becoming aware of the discontinuation or change or any time
thereafter by delivering written notice thereof to Supplier; (ii) the Members
may purchase products equivalent to the discontinued or changed Products from
other sources and Supplier will be liable to the Members for all reasonable
costs in excess of the Award Prices plus any other damages which they may incur;
and (iii) Supplier will be liable to Novation and the Clients for any loss of
Marketing Fees resulting from such unacceptable discontinuation or change plus
any other damages which they may incur.
e. Replacement or New Products. Supplier will have no unilateral
right to replace any of the Products listed in Exhibit A with other products or
to add new products to this Agreement. Supplier may request Novation in writing
to agree to a replacement of any of the Products or the addition of a new
product that is closely related by function or use to an existing Product at
least sixty (60) days prior to the proposed implementation of the replacement or
to the new product introduction. Under no circumstances will any Product
replacement or new product addition to this Agreement be permitted without
Novation's agreement to the replacement or new product.
f. Member Services. Supplier will consult with each Member to
identify the Member's policies relating to access to facilities and personnel.
Supplier will comply with such policies and will establish a specific timetable
for sales calls by sales representatives to satisfy the needs of the Member.
Supplier will promptly respond to Members' reasonable requests for verification
of purchase history. If requested by Novation or any Members, Supplier will
provide, at Supplier's cost, on-site inservice training to Members' personnel
for pertinent Products.
g. Product Deletion. Notwithstanding anything to the contrary
contained in this Agreement, Novation may delete any one or more of the Products
from this Agreement at any time, at will and without cause, upon not less than
sixty (60) days prior written notice to Supplier.
h. Return of Products. Any Member, in addition to and not in
limitation of any other rights and remedies, will have the right to return
Products to Supplier under any of the following circumstances: (1) the Product
is ordered or shipped in error; (2) the Product is no longer needed by the
Member due to deletion from its standard supply list or changes in usage
patterns, provided the Product is returned at least six (6) months prior to its
expiration date and is in a re-salable condition; (3) the Product is received
outdated or is otherwise unusable; (4) the Product is received damaged, or is
defective or nonconforming; (5) the Product is one which a product manufacturer
or supplier specifically authorizes for return; and (6) the Product is recalled.
Supplier agrees to accept the return of Products under these circumstances
without charge and for full credit.
i. Failure to Supply. In the event of Supplier's failure to
perform its supply obligations in accordance with the terms of this Section 4,
the Member may purchase products equivalent to the Products from other sources
and Supplier will be liable to the Member for all reasonable costs in excess of
the Award Prices plus any other damages which they may incur. In such event,
Supplier will also be liable to Novation and the Clients for any loss of
Marketing Fees resulting from such failure plus any other damages which they may
incur. The remedies set forth in this Subsection are in addition to any other
rights and remedies Novation, the Clients or the Members may have resulting from
such failure.
5. PRODUCT QUALITY
a. Free From Defects. Supplier warrants the Products against
defects in material, workmanship, design and manufacturing. Supplier will make
all necessary arrangements to assign such warranty to the Members. Supplier
further represents and warrants that the Products will conform to the
specifications, drawings, and samples furnished by Supplier or contained in the
Non-Price Specifications and will be safe for their intended use. If any
Products are defective and a claim is made by a Member on account of such
defect, Supplier will, at the option of the Member, either replace the defective
Products or credit the Member. Supplier will bear all costs of returning and
replacing the defective Products, as well as all risk of loss or damage to the
defective Products from and after the time they leave the physical possession of
the Member. The warranties contained in this Subsection will survive any
inspection, delivery, acceptance or payment by a Member. In addition, if there
is at any time widespread failure of the Products, the Member may return all
said Products for credit or replacement, at its option. This Subsection and the
obligations contained herein will survive the expiration or earlier termination
of this Agreement. The remedies set forth in this Subsection are in addition to
and not a limitation on any other rights or remedies that may be available
against Supplier.
b. Product Compliance. Supplier represents and warrants to
Novation, the Clients and the Members that the Products are, if required,
registered, and will not be distributed, sold or priced by Supplier in violation
of any federal, state or local law. Supplier represents and warrants that as of
the date of delivery to the Members all Products will not be adulterated or
misbranded within the meaning of the Federal Food, Drug and Cosmetic Act and
will not violate or cause a violation of any applicable law, ordinance, rule,
regulation or order. Supplier agrees it will comply with all applicable Good
Manufacturing Practices and Standards contained in 21 C.F.R. Parts 210, 211,
225, 226, 600, 606, 610, 640, 660, 680 and 820. Supplier represents and warrants
that it will provide adequate warnings and instructions to inform users of the
Products of the risks, if any, associated with the use of the Products.
Supplier's representations; warranties and agreements in this Subsection will
survive the expiration or earlier termination of this Agreement.
c. Patent Infringement. Supplier represents and warrants that sale
or use of the Products will not infringe any United States patent. Supplier
will, at its own expense, defend every suit which will be brought against
Novation or a Member for any alleged infringement of any patent by reason of the
sale or use of the Products and will pay all costs, damages and profits
recoverable in any such suit. This Subsection and the obligations contained
herein will survive the expiration or earlier termination of this Agreement. The
remedies set forth in this Subsection are in addition to and not a limitation on
any other rights or remedies that may be available against Supplier.
d. Product Condition. Unless otherwise stated in the Non-Price
Specifications or unless agreed upon by a Member in connection with Products it
may order, all Products will be new. Products which are demonstrators, used,
obsolete, seconds, or which have been discontinued are unacceptable unless
otherwise specified in the Non-Price Specifications or the Member accepts
delivery after receiving notice of the condition of the Products.
e. Recall of Products. Supplier will reimburse Members for any
cost associated with any Product corrective action, withdrawal or recall
requested by Supplier or required by any governmental entity. In the event a
product recall or a court action impacting supply occurs, Supplier will notify
Novation in writing within twenty-four (24) hours of any such recall or action.
Supplier's obligations in this Subsection will survive the expiration or earlier
termination of this Agreement.
f. Shelf Life. Sterile Products and other Products with a limited
shelf life sold under this Agreement will have the longest possible shelf life
and the latest possible expiration dates. Unless required by stability
considerations, there will not be less than an eighteen (18) month interval
between a Product's date of delivery by Supplier to the Member and its
expiration date.
6. CENTURY COMPLIANCE
a. Definitions. For purposes of this Section, the following terms
have the respective meanings given below:
(1) "Systems" means any of the Products, systems of
distribution for Products
and Product manufacturing systems that consist of or include
any computer
software, computer firmware, computer hardware (whether general
or special
purpose), documentation, data, and other similar or related
items of the
automated, computerized, and/or software systems that are
provided by or
through Supplier or utilized to manufacture or distribute the
Products provided
by or through Supplier pursuant to this Agreement, or any
component part
thereof, and any services provided by or through Supplier in
connection
therewith.
(2) "Calendar-Related" refers to date values based on the
"Gregorian calendar"
(as defined in the Encyclopedia Britannica, 15th edition, 1982,
page 602) and to
all uses in any manner of those date values, including without
limitation
manipulations, calculations, conversions, comparisons, and
presentations.
(3) "Century Noncompliance" means any aspects of the Systems
that fail to
satisfy the requirements set forth in Subsection 6.b below.
b. Representations. Supplier warrants, represents and agrees that
the Systems satisfy the following requirements:
(1) In connection with the use and processing of
Calendar-Related data, the
Systems will not malfunction, will not cease to function, will
not generate
incorrect data, and will not produce incorrect results.
(2) In connection with providing Calendar-Related data to and
accepting
Calendar-Related data from other automated, computerized,
and/or software
systems and users via user interfaces, electronic interfaces,
and data storage,
the Systems represent dates without ambiguity as to century.
(3) The year component of Calendar-Related data that is
provided by the
Systems to or that is accepted by the Systems from other
automated,
computerized, and/or software systems and user interfaces,
electronic
interfaces, and data storage is represented in a four-digit
CCYY format, where
CC represents the two digits expressing the century and YY
represents the two
digits expressing the year within that century (e.g., 1996 or
2003).
(4) Supplier has verified through testing that the Systems
satisfy the
requirements of this Subsection including, without limitation,
testing of each of
the following specific dates and the transition to and from
each such date:
December 31, 2000; January 1, 2001; December 31, 2004; and
January 1,
2005.
c. Remedies. In the event of any Century Noncompliance in the
Systems in any respect, in addition to any other remedies that may be available
to Novation or the Members, Supplier will, at no cost to the Members, promptly
under the circumstances (but, in all cases, within thirty (30) days after
receipt of a written request from any Member, unless otherwise agreed by the
Member in writing) eliminate the Century Noncompliance from the Systems.
d. Noncompliance Notice. In the event Supplier becomes aware of
(i) any possible or actual Century Noncompliance in the Systems or (ii) any
international, governmental, industrial, or other standard (proposed or adopted)
regarding Calendar-Related data and/or processing, or Supplier begins any
significant effort to conform the Systems to any such standard, Supplier will
promptly provide the Members with all relevant information in writing and will
timely provide the Members with updates to such information. Supplier will
respond promptly and fully to inquiries by the Members, and timely provide
updates to any responses provided to the Members, with respect to (i) any
possible or actual Century Noncompliance in the Systems or (ii) any
international, governmental, industrial, or other standards. In the foregoing,
the use of "timely" means promptly after the relevant information becomes known
to or is developed by or for Supplier.
e. Survival. Supplier's representations, warranties and agreements
in this Section will continue in effect throughout the Term and will survive the
expiration or earlier termination of this Agreement.
7. REPORTS AND OTHER INFORMATION REQUIREMENTS
a. Report Content. Within twenty (20) days after the end of each
full and partial month during the Term ("Reporting Month"), Supplier will submit
to Novation a report in the form of a diskette containing the following
information in form and content reasonably satisfactory to Novation:
(1) the name of Supplier, the Reporting Month and Year and the
Agreement
Number (as provided to Supplier by Novation);
(2) with respect to each Member (described by LIC number (as
provided to
Supplier by Novation), health industry number (if applicable),
full name, street
address, city, state, zip code and, if applicable, tier and
committed status), the
number of units sold and the amount of net sales for each
Product on a line item
basis, and the sum of net sales and the associated Marketing
Fees for all
Products purchased by such Member directly or indirectly from
Supplier during
the Reporting Month, whether under the pricing and other terms
of this
Agreement or under the terms of any other purchasing or pricing
arrangements
that may exist between the Member and Supplier;
(3) the sum of the net sales and the associated Marketing Fees
for all Products
sold to all Members during the Reporting Month; and
(4) such additional information as Novation may reasonably
request from time
to time.
b. Report Format and Delivery. The reports required by this
Section will be submitted electronically in Excel Version 7 or Access Version 7
and in accordance with other specifications established by Novation from time to
time and will be delivered to:
Novation
Attn: SRIS Operations
220 East Las Colinas Boulevard
Irving, TX 75039
c. Other Information Requirements. In addition to the reporting
requirements set forth in Subsections 7.a and 7.b above, the parties agree to
facilitate the administration of this Agreement by transmitting and receiving
information electronically and by complying with the information requirements
set forth in Exhibit E attached hereto. Supplier further agrees that, except to
the extent of any inconsistency with the provisions of this Agreement, it will
comply with all information requirements set forth in the Novation Information
Requirements Guidebook ("Guidebook"). On or about the Effective Date, Novation
will provide Supplier with a current copy of the Guidebook and will thereafter
provide Supplier with updates and/or revisions to the Guidebook from time to
time.
8. OBLIGATIONS OF NOVATION
a. Information to Members. After issuing the Award Letter,
Novation, in conjunction with the Clients, will deliver a summary of the
purchasing arrangements covered by this Agreement to each Member and will, from
time to time, at the request of Supplier, deliver to each Member reasonable and
appropriate amounts and types of materials supplied by Supplier to Novation
which relate to the purchase of the Products.
b. Marketing Services. Novation, in conjunction with the Clients,
will market the purchasing arrangements covered by this Agreement to the
Members. Such promotional services may include, as appropriate, the use of
direct mail, contact by Novation's field service delivery team, member support
services, and regional and national meetings and conferences. As appropriate,
Novation, in conjunction with the Clients, will involve Supplier in these
promotional activities by inviting Supplier to participate in meetings and other
reasonable networking activities with Members.
9. MARKETING FEES
a. Calculation. Supplier will pay to Novation, as the authorized
collection agent for each of the Clients and certain of each Client's
subsidiaries and affiliates, respectively (and not collectively), marketing fees
("Marketing Fees") belonging to any of the Clients or certain of their
subsidiaries or affiliates equal to the Agreed Percentage of the aggregate gross
charges of all net sales of the Products to the Members directly or indirectly
from Supplier, whether under the pricing and other terms of this Agreement or
under the terms of any other purchasing or pricing arrangements that may exist
between the Members and Supplier. Such gross charges will be determined without
any deduction for uncollected accounts or for costs incurred in the manufacture,
provision, sale or distribution of the Products, and will include, but not be
limited to, charges for the sale of products, the provision of installation,
training and maintenance services, and the provision of any other services
listed on Exhibit A. The "Agreed Percentage" will be defined in the Award
Letter.
b. Payment. On or about the Effective Date, Novation will advise
Supplier in writing of the amount determined by Novation to be Supplier's
monthly estimated Marketing Fees. Thereafter, Supplier's monthly estimated
Marketing Fees may be adjusted from time to time upon written notice from
Novation based on actual purchase data. No later than the tenth (10th) day of
each month, Supplier will remit the monthly estimated Marketing Fees for such
month to Novation. Such payment will be adjusted to reflect the reconciliation
between the actual Marketing Fees payable for the second month prior to such
month with the estimated Marketing Fees actually paid during such prior month.
Supplier will pay all estimated and adjusted Marketing Fees by check made
payable to "Novation, LLC". All checks should reference the Agreement number.
Supplier will include with its check the reconciliation calculation used by
Supplier to determine the payment adjustment, with separate amounts shown for
each Client's component thereof. Checks sent by first class mail will be mailed
to the following address:
Novation
75 Remittance Dr., Suite 1420
Chicago, IL 60675-1420
Checks sent by courier (Federal Express, United Parcel Service or messenger)
will be addressed as follows:
The Northern Trust Company
350 North Orleans Street
Receipt & Dispatch 8th Floor
Chicago, IL 60654
Attn: Novation, LLC, Lockbox Number 1420
Telephone: (312) 444-3576
10. ADMINISTRATIVE DAMAGES. Novation and Supplier agree that Novation
would incur additional administrative costs if Supplier fails to provide notice
of change in pricing terms as required in Subsection 2.e above, fails to provide
reports as required in Section 7 above, or fails to pay Marketing Fees as
required in Section 9 above, in each case within the time and manner required by
this Agreement. Novation and Supplier further agree that the additional
administrative costs incurred by Novation by reason of any such failure to
Supplier is uncertain, and they therefore agree that the following schedule of
administrative damages constitutes a reasonable estimation of such costs and
were determined according to the principles of just compensation:
1st failure:
written warning
2nd failure:
$ 500.00
3rd failure:
$ 1,000.00
4th failure:
$ 2,500.00
5th failure:
$ 5,000.00
6th & each subsequent failure:
$10,000.00
Novation's right to recover administrative damages in accordance with this
Section is in addition to any other rights and remedies Novation or the Clients
may have by reason of Supplier's failure to pay the Marketing Fees or provide
the reports or notices within the time and manner required by this Agreement.
11. NONPAYMENT OR INSOLVENCY OF A MEMBER. If a Member fails to pay
Supplier for Products, or if a Member becomes bankrupt or insolvent or makes an
assignment for the benefit of creditors or goes into liquidation, or if
proceedings are initiated for the purpose of having a receiving order or winding
up order made against a Member, or if a Member applies to the court for
protection from its creditors, then, in any such case, this Agreement will not
terminate, but Supplier will have the right, upon prior written notice to
Novation and the Member, to discontinue selling Products to that Member.
12. INSURANCE
a. Policy Requirements. Supplier will maintain and keep in force
during the Term product liability, general public liability, and property damage
insurance against any insurable claim or claims, which might or could arise
regarding Products purchased from Supplier. Such insurance will contain a
minimum combined single limit of liability for bodily injury and property damage
in the amounts of not less than $2,000,000 per occurrence and $10,000,000 in the
aggregate; will name Novation, the Clients and the Members, as their interests
may appear, as additional insureds, and will contain an endorsement providing
that the carrier will provide directly to all named insured copies of all
notices and endorsements. Supplier will provide to Novation in its Bid and
thereafter within fifteen (15) days after Novation's request, an insurance
certificate indicating the foregoing coverage, issued by an insurance company
licensed to do business in the relevant states and signed by an authorized
agent.
b. Self-Insurance. Notwithstanding anything to the contrary in
Subsection 12.a above, Supplier may maintain a self-insurance program for all or
any part of the foregoing liability risks, provided such self-insurance policy
in all material respects complies with the requirements applicable to the
product liability, general public liability and property damage insurance set
forth in Subsection 12.a. Supplier will provide Novation in its Bid, and
thereafter within fifteen (15) days after Novation's request: (1) the
self-insurance policy; (2) the name of the company managing the self-insurance
program and providing reinsurance, if any; (3) the most recent annual reports on
claims and reserves for the program; and (4) the most recent annual actuarial
report on such program.
c. Amendments, Notices and Endorsements. Supplier will not amend,
in any material respect that affects the interests of Novation, the Clients or
the Members, or terminate said liability insurance or self-insurance program
except after thirty (30) days prior written notice to Novation and will provide
to Novation copies of all notices and endorsements as soon as practicable after
it receives or gives them.
13. COMPLIANCE WITH LAW AND GOVERNMENT PROGRAM PARTICIPATION
a. Compliance with Law. Supplier represents and warrants that to
the best of its knowledge, after due inquiry, it is in compliance with all
federal, state and local statutes, laws, ordinances and regulations applicable
to it ("Legal Requirements") which are material to the operation of its business
and the conduct of its affairs, including Legal Requirements pertaining to the
safety of the Products, occupational health and safety, environmental
protection, nondiscrimination, antitrust, and equal employment opportunity.
During the Term, Supplier will: (1) promptly notify Novation of any lawsuits,
claims, administrative actions or other proceedings asserted or commenced
against it which assert in whole or in part that Supplier is in noncompliance
with any Legal Requirement which is material to the operation of its business
and the conduct of its affairs and (2) promptly provide Novation with true and
correct copies of all written notices of adverse findings from the U.S. Food and
Drug Administration ("FDA") and all written results of FDA inspections which
pertain to the Products.
b. Government Program Participation. Supplier represents and
warrants that it is not excluded from participation, and is not otherwise
ineligible to participate, in a "Federal health care program" as defined in 42
U.S.C. Subsection 1320a-7b(f) or in any other government payment program. In the
event Supplier is excluded from participation, or becomes otherwise ineligible
to participate in any such program during the Term, Supplier will notify
Novation in writing within three (3) days after such event, and upon the
occurrence of such event, whether or not such notice is given to Novation,
Novation may immediately terminate this Agreement upon written notice to
Supplier.
14. RELEASE AND INDEMNITY. SUPPLIER WILL RELEASE, INDEMNIFY, HOLD
HARMLESS, AND, IF REQUESTED, DEFEND NOVATION, THE CLIENTS AND THE MEMBERS, AND
THEIR RESPECTIVE OFFICERS, DIRECTORS, REGENTS, AGENTS, SUBSIDIARIES, AFFILIATES
AND EMPLOYEES (COLLECTIVELY, THE "INDEMNITEES"), FROM AND AGAINST ANY CLAIMS,
LIABILITIES, DAMAGES, ACTIONS, COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, REASONABLE ATTORNEYS' FEES, EXPERT FEES AND COURT COSTS) OF ANY KIND
OR NATURE, WHETHER AT LAW OR IN EQUITY, INCLUDING CLAIMS ASSERTING STRICT
LIABILITY, ARISING FROM OR CAUSED IN ANY PART BY (1) THE BREACH OF ANY
REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT OF SUPPLIER CONTAINED IN THIS
AGREEMENT OR IN THE BID; (2) THE CONDITION OF ANY PRODUCT, INCLUDING A DEFECT IN
MATERIAL, WORKMANSHIP, DESIGN OR MANUFACTURING; OR (3) THE WARNINGS AND
INSTRUCTIONS ASSOCIATED WITH ANY PRODUCT. SUCH OBLIGATION TO RELEASE, INDEMNIFY,
HOLD HARMLESS AND DEFEND WILL APPLY EVEN IF THE CLAIMS, LIABILITIES, DAMAGES,
ACTIONS, COSTS AND EXPENSES ARE CAUSED BY THE NEGLIGENCE, GROSS NEGLIGENCE OR
OTHER CULPABLE CONDUCT OF INDEMNITEES; PROVIDED, HOWEVER, THAT SUCH
INDEMNIFICATION, HOLD HARMLESS AND RIGHT TO DEFENSE WILL NOT BE APPLICABLE WHERE
THE CLAIM, LIABILITY, DAMAGE, ACTION, COST OR EXPENSE ARISES SOLELY AS A RESULT
OF AN ACT OR FAILURE TO ACT OF INDEMNITIES. THIS SECTION AND THE OBLIGATIONS
CONTAINED HEREIN WILL SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS
AGREEMENT. THE REMEDIES SET FORTH IN THIS SECTION ARE IN ADDITION TO AND NOT A
LIMITATION ON ANY OTHER RIGHTS OR REMEDIES THAT MAY BE AVAILABLE AGAINST
SUPPLIER.
15. BOOKS AND RECORDS; FACILITIES INSPECTIONS. Supplier agrees to keep,
maintain and preserve complete, current and accurate books, records and accounts
of the transactions contemplated by this Agreement and such additional books,
records and accounts as are necessary to establish and verify Supplier's
compliance with this Agreement. All such books, records and accounts will be
available for inspection and audit by Novation representatives at any time
during the Term and for two (2) years thereafter, but only during reasonable
business hours and upon reasonable notice. Novation agrees that its routine
audits will not be conducted more frequently than twice in any consecutive
twelve (12) month period, subject to Novation's right to conduct special audits
whenever it deems it to be necessary. In addition, Supplier will make its
manufacturing and packaging facilities available for inspection from time to
time during the Term by Novation representatives, but only during reasonable
business hours and upon reasonable notice. The exercise by Novation of the right
to inspect and audit is without prejudice to any other or additional rights or
remedies of either party.
16. USE OF NAMES, ETC. Supplier agrees that it will not use in any way in
its promotional, informational or marketing activities or materials (i) the
names, trademarks, logos, symbols or a description of the business or activities
of Novation or any Client or Member without in each instance obtaining the prior
written consent of the person owning the rights thereto; or (ii) the award or
the content of this Agreement without in each instance obtaining the prior
written consent of Novation.
17. CONFIDENTIAL INFORMATION
a. Nondisclosure. Supplier agrees that it will:
(1) keep strictly confidential and hold in trust all
Confidential Information, as
defined in subsection 17.b below, of Novation, the Clients and
the Members;
(2) not use the Confidential Information for any purpose other
than the
performance of its obligations under this Agreement, without
the prior written
consent of Novation;
(3) not disclose the Confidential Information to any third
party (unless required
by law) without the prior written consent of Novation; and
(4) not later than thirty (30) days after the expiration or
earlier termination of
this Agreement, return to Novation, the Client or the Member,
as the case may
be, the Confidential Information.
b. Definition. "Confidential Information", as used in Subsection
17.a above, will consist of all information relating to the prices and usage of
the Products (including all information contained in the reports produced by
Supplier pursuant to Section 7 above) and all documents and other materials of
Novation, the Clients and the Members containing information relating to the
programs of Novation, the Clients or the Members of a proprietary or sensitive
nature not readily available through sources in the public domain. In no event
will Supplier provide to any person any information relating to the prices it
charges the Members for Products ordered pursuant to this Agreement without the
prior written consent of Novation.
18. MISCELLANEOUS
a. Choice of Law. This Agreement will be governed by and construed
in accordance with the internal substantive laws of the State of Texas and the
Texas courts will have jurisdiction over all matters relating to this Agreement;
provided, however, the terms of any agreement between Supplier and a Member will
be governed by and construed in accordance with the choice of law and venue
provisions set forth in such agreement.
b. Not Responsible. Novation and the Clients and their
subsidiaries and affiliates will not be responsible or liable for any Member's
breach of any purchasing commitment or for any other actions of any Member. In
addition, none of the Clients will be responsible or liable for the obligations
of another Client or its subsidiaries or affiliates or the obligations of
Novation or Supplier under this Agreement.
c. Third Party Beneficiaries. All Clients and Members are intended
third party beneficiaries of this Agreement. All terms and conditions of this
Agreement which are applicable to the Clients will inure to the benefit of and
be enforceable by the Clients and their respective successors and assigns. All
terms and conditions of this Agreement which are applicable to the Members will
inure to the benefit of and be enforceable by the Members and their respective
successors and assigns.
d. Notices. Except as otherwise expressly provided herein, all
notices or other communications required or permitted under this Agreement will
be in writing and will be deemed sufficient when mailed by United States mail,
or delivered in person to the party to which it is to be given, at the address
of such party set forth below:
If to Supplier:
To the address set forth by Supplier in the Bid
If to Novation:
Novation
Attn: General Counsel
125 East John Carpenter Freeway
Irving, TX 75062-2324
or such other address as the party will have furnished in writing in accordance
with the provisions of this Subsection.
e. No Assignment. No assignment of all or any part of this
Agreement may be made without the prior written consent of the other party;
except that Novation may assign its rights and obligations to any affiliate of
Novation. Any assignment of all or any part of this Agreement by either party
will not relieve that party of the responsibility of performing its obligations
hereunder to the extent that such obligations are not satisfied in full by the
assignee. This Agreement will be binding upon and inure to the benefit of the
parties' respective successors and assigns.
f. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement will be prohibited
by or invalid under applicable law, such provision will be ineffective to the
extent of such prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Agreement. Each party will,
at its own expense, take such action as is reasonably necessary to defend the
validity and enforceability of this Agreement and will cooperate with the other
party as is reasonably necessary in such defense.
g. Entire Agreement. This Agreement, together with the exhibits
listed below, will constitute the entire agreement between Novation and
Supplier. This Agreement, together with the exhibits listed below and each
Member's purchase order will constitute the entire agreement between each Member
and Supplier. In the event of any inconsistency between this Agreement and a
Member's purchase order, the terms of this Agreement will control, except that
the Member's purchase order will supersede Sections 4 and 5 of this Agreement in
the event of any inconsistency with such Sections. No other terms and conditions
in any document, acceptance, or acknowledgment will be effective or binding
unless expressly agreed to in writing. The following exhibits are incorporated
by reference in this Agreement:
Exhibit A Product and Service Description and Pricing
Exhibit B Non-Price Specifications
Exhibit C Special Conditions
Exhibit D Award Letter
Exhibit E Other Information Requirements
Exhibit F Neoforma Master Supplier Agreement
Exhibit G Product Purchase Terms and Conditions
Exhibit H Exceptions to the Supplier Agreement
[Other Exhibits Listed, if any]
SUPPLIER: KCI USA
ADDRESS: 8023 Vantage Drive
San Antonio, TX 78230
SIGNATURE: /s/ Scott S. Brooks
Please Print Name: Scott S. Brooks
TITLE: V.P. National Accounts
DATE: November 5, 2000 |
Exhibit 10.125
November 16, 2000
Mr. Bogdan Dziurzynski
c/o MedImmune, Inc.
35 W. Watkins Mill Road
Gaithersburg, MD 20878
Dear Bob:
Reference is made to your Employment Agreement, dated as of November 1, 1998 (the "Employment Agreement"), with
MedImmune, Inc. (the "Company").
The Employment Agreement is hereby amended so that the Employment Period referred to in Section 2 thereof is
extended to November 1, 2002. All other provisions of the Employment Agreement remain unchanged.
Very truly yours,
MEDIMMUNE, INC.
By: /s/ David M. Mott
David M. Mott
Chief Executive Officer
Accepted and agreed to by:
/s/ Bogdan Dziurzynski
Bogdan Dziurzynski
Date: 12/5/00
|
EXECUTIVE SEVERANCE AGREEMENT
Cobalt Corporation
TABLE OF CONTENTS
ARTICLE 1 ESTABLISHMENT, TERM, AND PURPOSE ARTICLE 2 DEFINITIONS
ARTICLE 3 LOSS OF ELIGIBILITY UNDER THIS AGREEMENT ARTICLE 4 SEVERANCE
BENEFITS ARTICLE 5 FORM AND TIMING OF SEVERANCE BENEFITS ARTICLE
6 EXCISE TAX EQUALIZATION PAYMENT ARTICLE 7 THE COMPANY’S PAYMENT
OBLIGATION ARTICLE 8 LEGAL REMEDIES ARTICLE 9 OUTPLACEMENT
ASSISTANCE ARTICLE 10 SUCCESSORS AND ASSIGNMENT ARTICLE 11
MISCELLANEOUS
Cobalt Corporation
Executive Severance Agreement
THIS AGREEMENT is made and entered into as of the ___ day of
________, 2001, by and between Cobalt Corporation (hereinafter referred to as
the “Company”) and «FirstName» (hereinafter referred to as the “Executive”).
WHEREAS, the Executive is a key executive of the Company;
WHEREAS, should the possibility of a Change in Control of the
Company (as defined in Section 2.6 hereof) arise, the Board believes it is
imperative that the Company and the Board should be able to rely upon the
Executive to continue in his or her position, and that the Company should be
able to receive and rely upon the Executive’s advice, if requested, as to the
best interests of the Company without concern that the Executive might be
distracted by the personal uncertainties and risks created by the possibility of
a Change in Control;
WHEREAS, should the possibility of a Change in Control arise, in
addition to his or her regular duties, the Executive may be called upon to
assist in the assessment of such possible Change in Control, advise management
and the Board as to whether such Change in Control would be in the best
interests of the Company, and to take such other actions as the Board might
determine to be appropriate;
WHEREAS, the Executive previously entered into an executive
severance agreement (the “Prior Agreement”) with Blue Cross & Blue Shield United
of Wisconsin (“BCBSUW”) which is substantially similar to this Agreement;
WHEREAS, through a reorganization, BCBSUW has become a subsidiary
of the Company;
WHEREAS, the Prior Agreement would have covered a Change in Control
of the Company and imposed the financial obligations of the Prior Agreement on
BCBSUW which is now a subsidiary of the Company;
WHEREAS, the Board of Directors of the Company believes that the
Executive Severance Agreement and the obligations thereunder should be between
the Company and the Executive now that the Company has become BCBSUW’s parent;
and
WHEREAS, the Board of Directors of the Company desires to
substitute this Agreement for the Prior Agreement.
NOW, THEREFORE, to assure the Company that it will have the
continued dedication of the Executive and the availability of his or her advice
and counsel notwithstanding the possibility, threat, or occurrence of a Change
in Control of the Company, and to induce the Executive to remain in the employ
of the Company, and for other good and valuable consideration, the Company and
the Executive agree as follows:
Article 1 ESTABLISHMENT, TERM, AND PURPOSE
This Agreement will commence on the Effective Date and, subject to
Article 3, shall continue in effect for three (3) full years. However, at the
end of such three (3) year period and, if extended, at the end of each
additional year thereafter, the term of this Agreement shall be extended
automatically for one (1) additional year, unless the Committee delivers written
notice six (6) months prior to the end of such term, or extended term, to the
Executive, that the Agreement will not be extended. In the latter case, the
Agreement will terminate at the end of the term, or extended term, then in
progress, or as provided in Article 3.
However, in the event a Change in Control occurs during the
original or any extended term, this Agreement will remain in effect for the
longer of: (i) twenty-four (24) months beyond the month in which such Change in
Control occurred; or (ii) until all obligations of the Company hereunder have
been fulfilled, and until all benefits required hereunder have been paid to the
Executive.
Article 2 DEFINITIONS
Whenever used in this Agreement, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial letter
of the word is capitalized.
2.1 “Base Salary” means the salary of record paid to an Executive
by the Company, or by Blue Cross & Blue Shield United of Wisconsin or any other
subsidiary of the Company as annual salary, excluding amounts received under
incentive or other bonus plans, whether or not deferred.
2.2 “Beneficial Owner” shall have the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act,
but excluding those whose status arises from the holding of proxies and
including option holders on a fully diluted basis.
2.3 “Beneficiary” means the persons or entities designated or
deemed designated by the Executive pursuant to Section 11.2 herein.
2.4 “Board” means the Board of Directors of the Company.
2.5 “Cause” means: (a) the Executive’s willful and continued
failure to substantially perform his or her duties with the Company (other than
any such failure resulting from Disability or occurring after issuance by the
Executive of a Notice of Termination for Good Reason), after a written demand
for substantial performance is delivered to the Executive that specifically
identifies the manner in which the Company believes that the Executive has
willfully failed to substantially perform his or her duties, and after the
Executive has failed to resume substantial performance of his or her duties on a
continuous basis within thirty (30) calendar days of receiving such demand; (b)
the Executive willfully engaging in conduct (other than conduct covered under
(a) above) which is demonstrably and materially injurious to the Company,
monetarily or otherwise; or (c) the Executive having been convicted of a felony
(as evidenced by binding and final judgment, order or decree of a court of
competent jurisdiction, in effect after exhaustion of all rights of appeal)
which substantially impairs the Executive’s ability to perform his or her duties
or responsibilities. For purposes of this Section 2.5, the Executive’s actions
or failures to act will be deemed “willful” only if done or omitted in bad faith
and without reasonable belief that the action or omission was in the best
interests of the Company.
2.6 “Change in Control” shall mean:
(i) Any individual, entity or group (within the meaning of
Section 13(d)(3) of the Exchange Act) (a “Person”), other than the Wisconsin
United for Health Foundation, Inc. (the “Foundation”) becoming the beneficial
owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of the either (x) the then outstanding shares of common stock of the
Company (the “Outstanding Company Common Stock”) or (y) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in an election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this Section 2.6, the
following acquisitions shall not constitute a Change in Control: (A) any
acquisition directly from the Company, (B) any acquisition by the Company, (C)
any acquisition by any employee benefit plan (or related trust) sponsored by or
maintained by the Company or any corporation controlled by the Company, (D) any
acquisition by any corporation controlled by the Company, or (E) any acquisition
by any corporation pursuant to a transaction that complies with clauses (A), (B)
and (C) of Section 2.6 (iii); or (F) any acquisition where the Person owns,
after the acquisition, less of the Outstanding Company Voting Securities or
Outstanding Company Common Stock than the Foundation then owns after such
acquisition.
(ii) Individuals who, as of the date of this Agreement,
constitute the Board (the “Incumbent Board”) cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company’s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a “Business Combination”), in each case, unless,
following such Business Combination: (A) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then Outstanding shares of
common stock and the combined voting power of the then Outstanding voting
Company Securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation that as a result of such
transaction owns the Company or all or substantially all of the Company’s assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (C) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board
providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
2.7 “Code” means the United States Internal Revenue Code of 1986,
as amended, and any successors thereto.
2.8 “Committee” means the Management Review Committee of the Board
or any other committee appointed by the Board to perform the functions of the
Management Review Committee or any successor committee which performs the
functions of the Management Review Committee or, in the absence of one, by the
Board.
2.9 “Company” means Cobalt Corporation, a Wisconsin corporation,
or any successor thereto as provided in Article 10 herein.
2.10 “Disability” means a complete and permanent disability as
determined by the Committee in accordance with the Company Long-Term Disability
Plan, as in effect on the Effective Date.
2.11 “Effective Date” means the date of this Agreement set forth
above.
2.12 “Effective Date of Termination” means the date on which a
Qualifying Termination occurs.
2.13 “Exchange Act” means the United States Securities Exchange
Act of 1934, as amended.
2.14 “Good Reason” shall mean, without the Executive’s express
written consent, the occurrence of any one or more of the following:
(a) The assignment of the Executive to duties materially inconsistent
with the Executive’s authorities, duties, responsibilities, and status
(including offices and reporting requirements) as an employee of the Company, or
a reduction or alteration in the nature or status of the Executive’s
authorities, duties, or responsibilities from the greater of those in effect (i)
on the Effective Date; (ii) during the fiscal year immediately preceding the
year of the Change in Control; or (iii) immediately preceding the Change in
Control;
(b) Any breach of this Agreement by the Company, other than an isolated,
insubstantial or inadvertent failure which is not taken in bad faith and which
the Company or any successor remedies promptly after notice from the Executive;
(c) The Executive’s principal office is moved to a location that is more
than fifty (50) miles farther from the Executive’s home than the principal
office location immediately prior to the Change in Control;
(d) A reduction by the Company in the Executive’s Base Salary as in
effect on the Effective Date or as the same shall be increased from time to
time;
(e) A material reduction in the Executive’s level of participation in
any of the Company’s short- and/or long-term incentive compensation plans, or
employee benefit or retirement plans, policies, practices, or arrangements in
which the Executive participates from the greater of the levels in place on:
(i) the Effective Date; (ii) the fiscal year immediately preceding the Change in
Control; or (iii) immediately preceding the Change in Control;
(f) The failure of the Company to obtain a satisfactory agreement from
any successor to the Company to assume and agree to perform this Agreement, as
contemplated in Article 10 herein; or
(g) Any termination of Executive’s employment by the Company that is not
effected pursuant to a Notice of Termination.
The existence of Good Reason shall not be affected by the
Executive’s temporary incapacity due to physical or mental illness not
constituting a Disability. The Executive’s continued employment shall not
constitute a waiver of the Executive’s rights with respect to any circumstance
constituting Good Reason.
2.15 “Notice of Termination” means a written notice which shall
indicate the specific provision in this Agreement governing the Executive’s
termination of employment and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated.
2.16 “Person” shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a “group” as provided in Section 13(d).
2.17 “Profit Sharing Plan” means the Company Profit Sharing Plan.
2.18 “Qualifying Termination” means termination of the Executive’s
employment under one of the circumstances described in Section 4.2 below.
2.19 “Retirement” shall mean termination of employment after the
Executive has attained Age 55 and completed 10 “Years of Service” (as such term
is defined in the Company’s tax-qualified defined benefit pension plan.)
“Retirement” shall be deemed to occur only if it is pursuant to a mandatory
retirement provision in such plan or if the Executive and the Company agree in
writing that “Retirement” has occurred for purposes of this Agreement.
(Retirement pursuant to a mandatory retirement provision added on or after a
date six months prior to a Change in Control will not be treated as mandatory
retirement for purposes of this Agreement.)
2.20 “Severance Benefits” means the payment of severance
compensation as provided in Section 4.3 herein.
Article 3 LOSS OF ELIGIBILITY UNDER THIS AGREEMENT
In the event Executive’s job classification is reduced, the
Committee, in its sole discretion, may cancel this Agreement by written notice
delivered to the Executive. A cancellation occurring later than six (6) months
prior to a Change in Control shall be null and void.
Article 4 SEVERANCE BENEFITS
4.1 Right to Severance Benefits. The Executive shall be
entitled to receive from the Company Severance Benefits, as described in Section
4.3 herein, if the Executive incurs a Qualifying Termination during the six (6)
month period immediately prior to a Change in Control or within twenty-four (24)
calendar months following a Change in Control.
The Executive shall not be entitled to receive Severance Benefits
if he or she is terminated for Cause, or if his or her employment with the
Company ends due to death, Disability, or Retirement or due to termination of
employment by the Executive without Good Reason.
4.2 Qualifying Termination of Employment. Upon the occurrence of
any one or more of the following events the Company shall pay Severance Benefits
to the Executive under this Agreement:
(a) Termination of the Executive’s employment by the
Company for reasons other than Cause.
(b) Termination by the Executive for Good Reason
pursuant to a Notice of Termination delivered to the Company by the Executive.
4.3 Description of Severance Benefits. In the event the Executive
becomes entitled to receive Severance Benefits as provided in Sections 4.1 and
4.2 herein, the Company shall pay to the Executive and provide him or her with
the following:
(a) An amount equal to one and one half (1 ½) times the highest rate of
the Executive’s annualized Base Salary in effect at any time up to and including
the Effective Date of Termination.
(b) An amount equal to one and one half (1 ½) times the Executive’s
target award under the annual bonus plan and the Profit Sharing Plan established
for the plan year in which the Executive’s Effective Date of Termination occurs,
or the prior plan year if a target award has not been established for the plan
year in which the Executive’s Effective Date of Termination occurs.
(c) A continuation of the welfare benefits of health care, life and
accidental death and dismemberment, and disability insurance coverage
(collectively, “Supplemental Benefits”) for one and one half (1 ½) full years
after the Effective Date of Termination. These benefits shall be provided at
the same cost to the Executive (if any), and at the same coverage level, as in
effect as of the Executive’s Effective Date of Termination. However, in the
event the premium cost and/or level of coverage shall change for all management
employees with respect to Supplemental Benefits, the cost and/or coverage level,
likewise, shall change for the Executive in a corresponding manner.
COBRA-related benefits will begin as of the end of the three year period (or
upon earlier discontinuance described below).
The continuation of any or all of the Supplemental Benefits shall be
discontinued prior to the end of the one and one half (1 ½) year period in the
event the Executive has available substantially similar benefits at a comparable
cost from a subsequent employer.
The Executive must supply all information reasonably requested by the Company
pursuant to this subsection.
(d) An amount equal to the Executive’s unpaid targeted annual bonus,
established for the plan year in which the Executive’s Effective Date of
Termination occurs, multiplied by a fraction, the numerator of which is the
number of days completed in the then-existing fiscal year through the Effective
Date of Termination, and the denominator of which is three hundred sixty-five
(365).
(e) An amount equal to the Executive’s unpaid allocation from the Profit
Sharing Plan, established for the plan year in which the Executive’s Effective
Date of Termination occurs, multiplied by a fraction, the numerator of which is
the number of days completed in the then-existing fiscal year through the
Effective Date of Termination, and the denominator of which is three hundred
sixty-five (365).
Incentive awards granted under the Company Equity Incentive Plan
and other incentive arrangements adopted by the Company shall be governed by the
terms of the applicable plan.
The aggregate benefits accrued by the Executive as of the Effective
Date of Termination under the Company Pension Plan, the UGS Pension Plan, the
Company 401(k) Plan, and other qualified savings and retirement plans sponsored
by the Company shall be governed by the terms of the applicable plan. For
purposes of the Company Supplemental Executive Retirement Plan, such benefits
shall be calculated under the assumption that the minimum service requirement
under Section 4.1 of the Company Supplemental Executive Retirement Plan (vesting
requirement) shall be deemed to have been satisfied as of the date of a
Qualifying Termination and the Executive’s employment continued following the
Effective Date of Termination for one and one half (1 ½) full years (i.e., one
and one half (1 ½) additional years of service credits shall be added);
provided, however, that for purposes of determining “final average pay” under
such program, the Executive’s actual pay history as of the Effective Date of
Termination shall be used.
For purposes of the Company Retiree Medical Plan, such benefits
shall be calculated under the assumption that the Executive’s employment
continued following the Effective Date of Termination of one and one-half (1 ½)
years (i.e., one and one-half additional years of service credits shall be added
and the Executive’s age advance to correspond).
Compensation which has been deferred under the Company Deferred
Compensation Plan or other plans sponsored by the Company, as applicable,
together with all interest that has been credited with respect to any such
deferred compensation balances, shall be governed by the terms of the applicable
plan.
4.4 Termination for Disability. In the event the
Executive’s employment is terminated due to Disability, the Executive shall not
be entitled to the Severance Benefits described in Section 4.3. The terms and
conditions of the Executive’s employment rights under that circumstance shall be
determined without regard to this Agreement.
4.5 Termination for Retirement or Death. If the Executive’s
employment is terminated by reason of his or her Retirement or death, the
Executive shall not be entitled to the Severance Benefits described in Section
4.3. The terms and conditions of the Executive’s employment rights under those
circumstances are to be determined without regard to this Agreement.
4.6 Termination for Cause or by the Executive Other Than for Good
Reason. If the Executive’s employment is terminated either: (a) by the Company
for Cause; or (b) by the Executive other than for Good Reason, the Company shall
pay the Executive the amounts specified in Section 4.8 and the Company shall
have no further obligations to the Executive under this Agreement.
4.7 Notice of Termination. Any termination of employment by the
Company or by the Executive for Good Reason shall be communicated by a Notice of
Termination. If the Executive is providing the notice, it should be delivered
to a member of the Committee. If the Company is providing notice, it should be
delivered to the Executive.
4.8 Payment of Accrued Compensation and Benefits. In all
events, Executive shall, upon termination of employment with the Company, be
paid an amount equal to Executive’s unpaid Base Salary, accrued vacation pay and
any other accrued but unpaid compensation in cash or cash equivalents within ten
(10) days of the termination except where the terms of the compensation
arrangement or plan govern instead of this Agreement and specifically provide
for later payment.
4.9 Coordination with Other Agreements. The Severance
Benefits described in Section 4.3 shall be reduced by any severance benefits
paid pursuant to either: (i) other agreements between the Company and the
Executive or (ii) any plan adopted by the Company, unless such plan or agreement
expressly provides that the benefits under such plan or agreement are in
addition to the benefits payable under this Agreement.
Article 5 FORM AND TIMING OF SEVERANCE BENEFITS
5.1 Form and Timing of Severance Benefits. The Severance
Benefits described in Sections 4.3(a), 4.3(b), 4.3(d), and 4.3(e) herein shall
be paid in cash or cash equivalents to the Executive in a single lump sum as
soon as practicable following the Effective Date of Termination, (or, if later,
the date of the Change in Control) but in no event beyond ten (10) days from
such date. The Supplemental Benefits described in Section 4.3(c) shall be paid
at the times due under each applicable plan.
5.2 Withholding of Taxes. The Company shall be entitled to
withhold from any amounts payable under this Agreement the minimum taxes legally
required to be withheld (including, without limitation, any United States
Federal taxes and any other state, city, or local taxes).
Article 6 EXCISE TAX EQUALIZATION PAYMENT
6.1 Benefit Adjustment/Excise Tax Equalization Payment. If the
Committee reasonably determines that any benefit under this Plan, alone or when
aggregated with other compensation payable to the Executive, would constitute an
excess parachute payment within the meaning of Section 280G of the Code, the
amount payable under this Plan will be limited to the extent necessary to avoid
creation of an excess parachute payment, unless the excess parachute payment
results from the inability to include compensation paid by Blue Cross & Blue
Shield United of Wisconsin, Inc. for purposes of determining the “base amount”
under Section 280G of the Code.
In the event that the Executive becomes entitled to Severance
Benefits or any other payment or benefit under this Agreement, or under any
other agreement with or plan of the Company (in the aggregate, the “Total
Payments”), if all or any part of the Total Payments will be subject to the tax
(the “Excise Tax”) imposed by Section 4999 of the Code (or any similar tax that
may hereafter be imposed) due to the inability to include compensation paid by
Blue Cross & Blue Shield United of Wisconsin, Inc. for purposes of determining
the “base amount” under Section 280G of the Code, the Company shall pay to the
Executive in cash an additional amount (the “Gross-Up Payment”) such that the
net amount retained by the Executive after deduction of any Excise Tax upon the
Total Payments and any federal, state, and local income tax, penalties,
interest, and Excise Tax upon the Gross-Up Payment provided for by this Section
6.1 (including FICA and FUTA), shall be equal to the Total Payments or, if less,
the amount Executive would have received had the compensation paid by Blue Cross
& Blue Shield United of Wisconsin, Inc. been included in compensation for
purposes of Section 280G of the Code. Such payment shall be made by the Company
to the Executive as soon as practical following the Effective Date of
Termination, but in no event beyond thirty (30) days from such date.
6.2 Tax Computation. For purposes of determining whether
any of the Total Payments will be subject to the Excise Tax and the amounts of
such Excise Tax:
(a) The Severance Benefits and any other payments or benefits received
or to be received by the Executive in connection with a Change in Control of the
Company or the Executive’s termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement, or agreement with the
Company and subsidiaries or affiliates, or with any Person whose actions result
in a Change in Control of the Company or any Person affiliated with the Company
or such Persons) shall be treated as “parachute payments” within the meaning of
Section 280G(b)(2) of the Code, and all “excess parachute payments” within the
meaning of Section 280G(b)(l) shall be treated as subject to the Excise Tax,
unless in the opinion of a nationally recognized tax counsel selected by the
Company’s independent auditors and reasonably acceptable to the Executive: (i)
the Severance Benefits and such other payments or benefits (in whole or in part)
do not constitute parachute payments; (ii) such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in excess of the
base amount within the meaning of Section 280G(b)(3) of the Code; or (iii) are
otherwise not subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated as subject to
the Excise Tax shall be equal to the lesser of: (i) the total amount of the
Total Payments; or (ii) the amount of excess parachute payments within the
meaning of Section 280G(b)( 1) (after applying clause (a) above); and
(c) The value of any noncash benefits or any deferred payment or benefit
shall be determined by the Company’s independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made, and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive’s residence on the
Effective Date of Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes.
6.3 Subsequent Recalculation. In the event the Internal
Revenue Service adjusts the computation of the Company under Section 6.2 herein
so that the Executive did not receive the greatest net benefit, the Company
shall reimburse the Executive for the full amount necessary to make the
Executive whole, plus a market rate of interest, as determined by the national
tax counsel referred to above.
6.4 Costs of Calculations. The Company agrees to bear all
costs associated with, and to indemnify and hold harmless, the national tax
counsel of and from any and all claims, damages, and expenses resulting from or
relating to its determination pursuant to this Article 6, except for claims,
damages, or expenses resulting from the gross negligence or willful misconduct
of such firm.
Article 7 THE COMPANY’S PAYMENT OBLIGATION
7.1 Payment Obligations Absolute. The Company’s obligation
to make the payments and the arrangements provided for herein shall be absolute
and unconditional, and shall not be affected by any circumstances, including,
without limitation, any offset, counterclaim, recoupment, defense, or other
right which the Company may have against the Executive or anyone else. All
amounts payable by the Company hereunder shall be paid without notice or
demand. Subject to the provision set forth in Section 8.1 and 8.2, each and
every payment made hereunder by the Company shall be final, and the Company
shall not seek to recover all or any part of such payment from the Executive or
from whomsoever may be entitled thereto, for any reasons whatsoever.
The Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any provision of
this Agreement, and the obtaining of any such other employment shall in no event
effect any reduction of the Company’s obligations to make the payments and
arrangements required to be made under this Agreement, except to the extent
provided in Section 4.3(c) herein.
7.2 Contractual Rights to Benefits. This Agreement
establishes and vests in each Executive a contractual right to the benefits to
which he or she is entitled hereunder. However, nothing herein contained shall
require or be deemed to require, or prohibit or be deemed to prohibit, the
Company to segregate, earmark, or otherwise set aside any funds or other assets,
in trust or otherwise, to provide for any payments to be made or required
hereunder.
Article 8 LEGAL REMEDIES
8.1 Payment of Legal Fees. To the extent permitted by law, the
Company shall pay all legal fees, costs of litigation, prejudgment interest, and
other expenses incurred in good faith by the Executive as a result of the
Company’s refusal to provide the Severance Benefits, the Gross-Up Payment and/or
any other benefits under this Agreement to which the Executive becomes entitled
under this Agreement, or as a result of the Company’s contesting the validity,
enforceability, or interpretation of this Agreement, or as a result of any
conflict (including conflicts related to the calculation of parachute payments)
between the parties pertaining to this Agreement; provided, however, that the
Company shall be reimbursed by the Executive for all such fees and expenses in
the event the Executive fails to prevail with respect to any one (1) material
issue of dispute in connection with such legal action. The Executive shall not
be liable for the Company’s fees or costs related to any such litigation.
8.2 Arbitration. Executive shall have the right and option to
elect (in lieu of litigation) to have any dispute or controversy arising under
or in connection with this Agreement settled by arbitration, conducted before a
panel of three (3) arbitrators sitting in a location selected by the Executive
within fifty (50) miles from the location of his or her employment with the
Company, in accordance with the rules of the American Arbitration Association
then in effect.
Judgment may be entered on the award of the arbitrator in any court
having proper jurisdiction. All expenses of such arbitration, including the
fees and expenses of the counsel for the Executive, shall be borne by the
Company; provided, however, that the Company shall be reimbursed by the
Executive for all such fees and expenses in the event the Executive fails to
prevail with respect to any one (1) material issue of dispute in connection with
such legal action. The Executive shall not be liable for the Company’s fees or
costs related to any such arbitration.
Article 9 OUTPLACEMENT ASSISTANCE
Following a Qualifying Termination (as described in Section 4.2
herein), the Executive shall be reimbursed by the Company for the costs of all
outplacement services obtained by the Executive within the two (2) year period
after the Effective Date of Termination; provided, however, that the total
reimbursement shall be limited to an amount equal to fifteen percent (15%) of
the Executive’s Base Salary as of the Effective Date of Termination.
Article 10 SUCCESSORS AND ASSIGNMENT
10.1 Successors to the Company. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) of all or substantially all of the business and/or assets of the
Company or of any division or subsidiary thereof to expressly assume and agree
to perform the Company’s obligations under this Agreement in the same manner and
to the same extent that the Company would be required to perform them if no such
succession had taken place. Failure of the Company to obtain such assumption
and agreement prior to the effective date of any such succession shall be a
breach of this Agreement and shall entitle Executives to compensation from the
Company in the same amount and on the same terms as they would be entitled to
hereunder if they had terminated their employment with the Company voluntarily
for Good Reason. Except for the purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the
Effective Date of Termination.
10.2 Assignment by the Executive. This Agreement shall inure
to the benefit of and be enforceable by the Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees. If the Executive dies (prior to receipt of all amounts
due under Sections 4.3(a), (b), (d) or (e) and 4.8, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Executive’s Beneficiary. If the Executive has not named a
Beneficiary, then such amounts shall be paid to the Executive’s devisee,
legatee, or other designee, or if there is no such designee, to the Executive’s
estate.
Article 11 MISCELLANEOUS
11.1 Employment Status. Except as may be provided under any
other agreement between the Executive and the Company, the employment of the
Executive by the Company is “at will,” and may be terminated by either the
Executive or the Company at any time, subject to applicable law.
11.2 Beneficiaries. The Executive may designate one or more
persons or entities as the primary and/or contingent Beneficiaries of any
Severance Benefits owing to the Executive under this Agreement. Such
designation must be in the form of a signed writing acceptable to the
Committee. The Executive may make or change such designations at any time.
11.3 Severability. In the event any provision of this
Agreement shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of the Agreement, and the
Agreement shall be construed and enforced as if the illegal or invalid provision
had not been included. Further, the captions of this Agreement are not part of
the provisions hereof and shall have no force and effect.
11.4 Modification. No provision of this Agreement may be
modified, waived, or discharged unless such modification, waiver, or discharge
is agreed to in writing and signed by the Executive and by the Company, or by
the respective parties’ legal representatives and successors.
11.5 Effect On Prior Agreement. This Agreement shall
completely supercede the Prior Agreement between the Company and the Executive
and the Prior Agreement shall have no further force or effect. BCBSUW shall be
a third party beneficiary of this Section 11.5.
11.6 Applicable Law. To the extent not preempted by the laws
of the United States, the laws of the state of Wisconsin shall be the
controlling law in all matters relating to this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on
this _____ day of ___________________, 2001.
Cobalt Corporation Executive:
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«FirstName» By:
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Its:
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Attest:
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|
EXHIBIT 10.45
PARTICIPATION AGREEMENT
This Participation Agreement is made as of the 5th day of December, 2001 by and
between Affinity Group Thrift Holding Corp. (“Thrift Holding”) and the Stephen
Adams Living Trust (“Adams”).
WITNESSETH:
WHEREAS, Thrift Holding is the holder of a capital note issued
by Affinity Bank Holdings Inc. (the “Maker”) on October 1, 1999 in the original
principal amount of $18,636,615 (the “Capital Note”);
WHEREAS, Adams purchased a $1.5 million participation in the
Capital Note by the terms of a participation agreement dated as of October 31,
2000 made between Thrift Holding and Adams (the “Prior Participation
Agreement”);
WHEREAS, the Capital Note does not require any payments to be
made on a current basis, no payments of principal or interest have been made on
the Capital Note since the issuance of the Capital Note and interest has accrued
thereon at the rate set forth therein since the date thereof;
WHEREAS, Thrift Holding is desirous of selling an additional
participation in the Capital Note on substantially the same terms and conditions
as in the Prior Participation Agreement;
WHEREAS, Adams is willing to purchase a participation in the
Capital Note at par provided that (i) payments received in respect of the
Capital Note are applied on a “LIFO” basis and paid first to Adams to the extent
of Adams’ interest therein and (ii) Thrift Holding reimburse Adams for the
origination fees (aggregating $450,000) and the allocable share of the lender’s
legal fees ($72,581) incurred by an affiliate of Adams in obtaining funds for
the purchase of such participation;
WHEREAS, Thrift Holding is willing to sell such participation to
Adams.
NOW, THEREFORE, in consideration of the payment of $15 million
by Adams to Thrift Holding, the receipt of which is acknowledged by Thrift
Holding, Thrift Holding and Adams agree as follows:
1. Participation. Thrift Holding hereby grants to
Adams a participation in the Capital Note to the extent of $15 million of
principal thereof, together with (i) interest on such $15 million at the rate
set forth in the Capital Note from the date hereof and (ii) any pro rata
premium, penalty or other amounts payable in respect of the Capital Note by the
terms thereof. All payments made in respect of the Capital Note shall be first
applied to accrued interest on Adams’ interest therein and then to the principal
amount of Adams’ interest therein, Thrift Holding agreeing that it shall retain
no payment in respect of the Capital Note until the participation of Adams
therein has been paid in full to Adams. If Adams’ interest shall not have been
paid directly to Adams by the Maker, Thrift Holding agrees to remit,
contemporaneously with its receipt thereof, Adams’ interest in any such
payment. As between Adams’ participation in the Capital Note pursuant to this
Participation Agreement and Adams’ participation in the Capital Note pursuant to
the Prior Participation Agreement, amounts shall be allocated by Adams in such
manner as is determined by Adams, in Adams’ sole discretion.
2. Fees. Thrift Holding agrees (i) to pay, directly
to CIBC Capital Markets (“CIBC”), a fee in the amount of $450,000 committed to
be paid by AOA Holding LLC, an affiliate of Adams, in connection with the
funding of the purchase of the participation pursuant to this Participation
Agreement, and (ii) to reimburse AOA for the allocable portion of CIBC’s legal
fees, $72,581, such payments to be made by Thrift Holding contemporaneously with
the receipt of funds by Thrift from Adams hereunder.
3. Acceptance. Adams accepts the participation in
the Capital Note granted pursuant to Section 1 above subject to the terms of the
Capital Note and acknowledges that its interest therein is subject to the terms
thereof and the instruments governing the issuance thereof, including the
instruments referenced in a letter dated October 1, 1999 from the Maker to
Thrift Holding by virtue of which the Capital Note was issued.
4. Representations and Warranties of Thrift
Holding. Thrift Holding represents and warrants to Adams that:
a. Title. Thrift Holding is the
owner of the Capital Note, free and clear of any liens, mortgages, charges,
security interests, encumbrances or other restrictions or limitations and has
the legal right and authority to grant to Adams a participation in the Capital
Note as provided herein.
b. No Breach. The execution,
delivery, validity and enforceability of this Participation Agreement by Thrift
Holding, the consummation of the transactions provided for hereby by Thrift
Holding, and the performance by Thrift Holding of its obligations contemplated
hereunder will not (i) violate, conflict with or result in a breach or
termination of, or otherwise give any other person a right to terminate, or
constitute a default, event of default or event which with notice, lapse of time
or both, would constitute a default of event of default under, the terms of any
material contract, indenture or other instrument by which Thrift Holding is
bound, (ii) result in the creation of any lien on the Capital Note, (iii)
constitute a violation by Thrift Holding of any statute, rule or regulation or
(iv) give rise to any preferential right to purchase in favor of any third
party.
5. Representations and Warranties of Adams. Adams
hereby represents and warrants to Thrift Holding that:
a. Investment Intent. Adams is
acquiring the participation in the Capital Note for its own account for
investment and with no present intention of distributing such interest or any
part thereof.
b. Purchase Investigation. Adams
has received and is familiar with such information with respect to the Maker and
the Maker’s historical and projected performance as Adams deems necessary for
the purpose of purchasing the participation in the Capital Note and desires no
further information which respect thereto. Adams acknowledges that Adams is not
relying on any information provided by Thrift Holding in respect thereof.
c. No Breach. The execution,
delivery, validity and enforceability of this Participation Agreement by Adams,
the consummation of the transactions provided for hereby by Adams, and the
performance by Adams of its obligations contemplated hereunder will not violate,
conflict with or result in a breach or termination of, or otherwise give any
other person a right to terminate or constitute a default, event of default or
an event which, with notice, lapse of time or both, would constitute a default
or event of default under, the terms of any material contract by which Adams is
bound.
6. Miscellaneous. This Participation Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. This Participation Agreement shall be
construed and enforced in accordance with the laws of the state of California.
This Participation Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which shall constitute one and
the same instrument. This Participation Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and may
not be varied, modified or amended except by a writing signed by the parties to
be charged. The making, execution and delivery of this Participation Agreement
by the parties hereto have been induced by no representations, statements,
warranties or agreement of the other except those herein expressed.
IN WITNESS WHEREOF, the parties hereto have caused these
presents to be executed as of the day and year first above written.
AFFINITY GROUP THRIFT HOLDING CORP.
By:
/s/
Name:
Mark J. Boggess
Title:
Senior Vice President
STEPHEN ADAMS LIVING TRUST
By:
/s/
Name:
Stephen Adams
Title:
Trustee
|
Exhibit 10.1
AMENDMENTS TO EXISTING
EQUITY INCENTIVE PLAN
ADDING NEW CHANGE OF CONTROL SECTION
1.Section 4(c)(xiii) is amended to read as follows:
(xiii) to impose such additional conditions, restrictions, and limitations upon
the grant, exercise or retention of Awards as the Committee may, before or
concurrently with the grant thereof, deem appropriate, including, without
limitation, requiring simultaneous exercise of related identified Awards, and
subject to Article 28, limiting the percentage of Awards which may from time to
time be exercised by a Grantee.
2.The first sentence of section 8(a) is amended to read as follows:
Subject to Articles 4(c)(vii), 14, 17 and 28, and such terms and conditions as
the Committee may impose, each option shall be exercisable in one or more
installments commencing not earlier than the first anniversary of the Grant Date
of such option.
3.A new Article 28 is added, to read as follows:
28. Effect of Change of Control
(a) Certain Definitions. As used in this Article 28, the terms set forth
below shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
(i) "Allstate Incumbent Directors" means, determined as of any date by
reference to any baseline date:
(A) the members of the Board on the date of such determination who have been
members of the Board since such baseline date, and
(B) the members of the Board on the date of such determination who were
appointed or elected after such baseline date and whose election, or nomination
for election by stockholders of the Company or the Surviving Corporation, as
applicable, was approved by a vote or written consent of two-thirds (100% for
purposes of paragraph (A) of the definition of "Merger of Equals") of the
directors comprising the Allstate Incumbent Directors on the date of such vote
or written consent, but excluding each such member whose initial assumption of
office was in connection with (1) an actual or threatened election contest,
including a consent solicitation, relating to the election or removal of one or
more members of the Board,
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(2) a "tender offer" (as such terms is used in Section 14(d) of the Exchange
Act), (3) a proposed Reorganization Transaction, or (4) a request, nomination or
suggestion of any Beneficial Owner of Voting Securities representing 15% or more
of the aggregate voting power of the Voting Securities of the Company or the
Surviving Corporation, as applicable.
(ii) "Approved Passive Holder" means, as of any date, any Person that
satisfies all of the following conditions:
(A) as of such date, such Person is a 20% Owner, but is the Beneficial Owner
of less than 30% of the then-outstanding Common Stock and of Voting Securities
representing less than 30% of the combined voting power of all then-outstanding
Voting Securities of the Company;
(B) prior to becoming a 20% Owner, such Person has filed, and as of such
date has not withdrawn, or made any subsequent filing or public statement
inconsistent with, a statement with the SEC pursuant to Section 13(g) of the
Exchange Act that includes a certification by such person to the effect that
such beneficial ownership does not have the purpose or effect of changing or
influencing the control of the Company;
(C) prior to such Person's becoming a 20% Owner, at least two-thirds of the
Allstate Incumbent Directors (such Allstate Incumbent Directors to be determined
as of March 3, 1999 as the baseline date) shall have voted in favor of a
resolution adopted by the Board to the effect that:
(1) the terms and conditions of such Person's investment in the Company will
not have the effect of changing or influencing the control of the Company, and
(2) notwithstanding clause (A) of the definition of "Change of Control,"
such Person's becoming a 20% Owner shall be treated as though it were a Merger
of Equals for purposes of the Plan.
(iii) "Beneficial Owner" means such term as defined in Rule 13d-3 of the SEC
under the Exchange Act.
(iv) "Cause" means any of the events or conditions which constitute cause
for immediate termination of employment of the Grantee as provided from time to
time in the applicable Human Resources Policy of the Company or one of its
Subsidiaries.
(v) "Change of Control" means, except as provided at the end of this
Section, the occurrence of any one or more of the following:
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(A) any person (as such term is used in Rule 13d-5 of the SEC under the
Securities Exchange Act of 1934, as amended ("Exchange Act")) or group (as such
term is defined in Sections 3(a)(9) and 13(d)(3) of the Exchange Act), other
than a Controlled Affiliate of the Company or any employee benefit plan (or any
related trust) of the Company or any of its Controlled Affiliates, becomes the
Beneficial Owner of 20% or more of the common stock of the Company or of Voting
Securities representing 20% or more of the combined voting power of all Voting
Securities of the Company (such a person or group that is not a Similarly Owned
Company (as defined below), a "20% Owner"), except that no Change of Control
shall be deemed to have occurred solely by reason of such beneficial ownership
by a corporation (a "Similarly Owned Company") with respect to which both more
than 70% of the common stock of such corporation and Voting Securities
representing more than 70% of the combined voting power of the Voting Securities
of such corporation are then owned, directly or indirectly, by the persons who
were the direct or indirect owners of the common stock and Voting Securities of
the Company immediately before such acquisition, in substantially the same
proportions as their ownership, immediately before such acquisition, of the
common stock and Voting Securities of the Company, as the case may be; or
(B) Allstate Incumbent Directors (as determined using March 3, 1999 as the
baseline date) cease for any reason to constitute at least two-thirds of the
directors of the Company then serving (provided, however, that this clause (B)
shall be inapplicable during a Post-Merger of Equals Period); or
(C) Approval by the stockholders of the Company of a merger, reorganization,
consolidation, or similar transaction, or a plan or agreement for the sale or
other disposition of all or substantially all of the consolidated assets of the
Company or a plan of liquidation of the Company (any of the foregoing, a
"Reorganization Transaction") that, based on information included in the proxy
and other written materials distributed to the Company's stockholders in
connection with the solicitation by the Company of such stockholder approval, is
not expected to qualify as an Exempt Reorganization Transaction; provided,
however, that if (1) the merger or other agreement between the parties to a
Reorganization Transaction expires or is terminated after the date of such
stockholder approval but prior to the consummation of such Reorganization
Transaction (a "Reorganization Transaction Termination") or (2) immediately
after the consummation of the Reorganization Transaction, such Reorganization
Transaction does qualify as an Exempt Reorganization Transaction notwithstanding
the fact that it was not expected to so qualify as of the date of such
stockholder approval, then such stockholder approval shall not be
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deemed a Change of Control for purposes of any Termination of Employment as to
which the Termination Date occurs on or after the date of the Reorganization
Transaction Termination or the date of the consummation of the Exempt
Reorganization Transaction, as applicable; or
(D) The consummation by the Company of a Reorganization Transaction that for
any reason fails to qualify as an Exempt Reorganization Transaction as of the
date of such consummation, notwithstanding the fact that such Reorganization
Transaction was expected to so qualify as of the date of such stockholder
approval; or
(E) A 20% Owner who had qualified as an Approved Passive Holder ceases to
qualify as such for any reason other than ceasing to be a 20% Owner (such
cessation of Approved Passive Holder status to be considered for all purposes of
this Equity Incentive Plan (including the definition of "Change of Control
Effective Date") a Change of Control distinct from and in addition to the Change
of Control specified in clause (A) above).
Notwithstanding the occurrence of any of the foregoing events, a Change of
Control shall not occur with respect to a Grantee if, in advance of such event,
such Grantee agrees in writing that such event shall not constitute a Change of
Control.
(vi) "Change of Control Effective Date" means the date on which a Change of
Control first occurs while an Award is outstanding.
(vii) "Consummation Date" means the date on which a Reorganization
Transaction is consummated.
(viii) "Controlled Affiliate" of a Person means any corporation, business
trust, or limited liability company or partnership with respect to which such
Person owns, directly or indirectly, Voting Securities representing more than
50% of the aggregate voting power of the then-outstanding Voting Securities.
(ix) "Exempt Reorganization Transaction" means a Reorganization Transaction
that results in the Persons who were the direct or indirect owners of the
outstanding common stock and Voting Securities of the Company immediately before
such Reorganization Transaction becoming, immediately after the consummation of
such Reorganization Transaction, the direct or indirect owners, of both more
than 70% of the then-outstanding common stock of the Surviving Corporation and
Voting Securities representing more than 70% of the combined voting power of the
then-outstanding Voting Securities of the Surviving Corporation, in
substantially the same respective proportions as such Persons' ownership of the
common stock and Voting Securities of the Company immediately before such
Reorganization Transaction.
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(x) "Merger of Equals" means, as of any date, a transaction that,
notwithstanding the fact that such transaction may also qualify as a Change of
Control, satisfies all of the conditions set forth in paragraphs (A) or
(B) below:
(A) if such date is on or after the Consummation Date, a Reorganization
Transaction in respect of which all of the following conditions are satisfied as
of such date, or if such date is prior to the Consummation Date, a proposed
Reorganization Transaction in respect of which the merger agreement or other
documents (including the exhibits and annexes thereto) setting forth the terms
and conditions of such Reorganization Transaction, as in effect on such date
after giving effect to all amendments thereof or waivers thereunder, require
that the following conditions be satisfied on and, where applicable, after the
Consummation Date:
(1) at least 50%, but not more than 70%, of the common stock of the
surviving Corporation outstanding immediately after the consummation of the
Reorganization Transaction, together with Voting Securities representing at
least 50%, but not more than 70%, of the combined voting power of all Voting
Securities of the Surviving Corporation outstanding immediately after such
consummation shall be owned, directly or indirectly, by the persons who were the
owners directly or indirectly of the common stock and Voting Securities of the
Company immediately before such consummation in substantially the same
proportions as their respective direct or indirect ownership, immediately before
such consummation, of the common stock and Voting Securities of the Company,
respective; and
(2) Allstate Incumbent Directors (determined as of such date using the date
immediately preceding the Change of Control Effective Date as the baseline date)
shall, throughout the period beginning on the Change of Control Effective Date
and ending on the third anniversary of the Change of Control Effective Date,
continue to constitute not less than 50% of the members of the Board; and
(3) The person who was the CEO of the Company immediately prior to the
Change of Control Effective Date shall serve as (x) the CEO of the Company
throughout the period beginning on the Change of Control Effective Date and
ending on the Consummation Date and (y) the CEO of the Surviving Corporation at
all times during the period commencing on the
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Consummation Date and ending on the first anniversary of the Consummation Date;
provided, however, that a Reorganization Transaction that qualifies as a Merger
of Equals shall cease to qualify as a Merger of Equals (a "Merger of Equals
Cessation") and shall instead qualify as a Change of Control that is not a
Merger of Equals from and after the first date during the Post-Change period
(such date, the "Merger of Equals Cessation Date") as of which any one or more
of the following shall occur for any reason:
(i) if any condition of clause (1) of paragraph (A) of this Section shall
for any reason not be satisfied immediately after the consummation of the
Reorganization Transaction; or
(ii) if as of the close of business on any date on or after the Change of
Control Effective Date, any condition of clauses (2) or (3) of paragraph (A) of
this Section shall not be satisfied; or
(iii) if on any date prior to the first anniversary of the Consummation
Date, the Company shall make a filing with the SEC, issue a press release, or
make a public announcement to the effect that the Company is seeking or intends
to seek a replacement for the then-CEO of the Company, whether such replacement
is to become effective before or after such first anniversary.
(B) As of such date, each Person who is a 20% Owner qualifies as an Approved
Passive Holder.
The Committee shall give all Grantees written notice of any Merger of Equals
Cessation and the applicable Merger of Equals Cessation Date as soon as
practicable after the Merger of Equals Cessation Date.
(xi) "Merger of Equals Cessation Date"—see the definition of "Merger of
Equals".
(xii) "Person" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, entity or
government instrumentality, division, agency, body or department.
(xiii) "Post-Change Period" means the period commencing on the Change of
Control Effective Date and ending on the third anniversary of the Change of
Control Effective Date.
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(xiv) "Post-Merger of Equals Period" means the period commencing on a Change
of Control Effective Date of a Change of Control that qualifies as a Merger of
Equals and ending on the third anniversary of such Change of Control Effective
Date or, if sooner, the Merger of Equals Cessation Date.
(xv) "Reorganization Transaction"—see clause (C) of the definition of "Change
of Control."
(xvi) "Reorganization Transaction Termination"—see clause (C) of the
definition of "Change of Control."
(xvii) "Surviving Corporation" means the corporation resulting from a
Reorganization Transaction or, if securities representing at least 50% of the
aggregate Voting Power of such resulting corporation are directly or indirectly
owned by another corporation, such other corporation.
(xviii) "20% Owner"—see clause (A) of the definition of "Change of Control."
(xviv) "Voting Securities" of a corporation means securities of such
corporation that are entitled to vote generally in the election of directors of
such corporation.
(b) Vesting on Change of Control. Except as otherwise specifically
provided in The Allstate Corporation Change of Control Severance Plan (to the
extent such plan is applicable to the Grantee), an Award Agreement relating to
an Award or another written agreement with the Company to which the Grantee is a
party,
(i) on a Change of Control Effective Date of a Change of Control that is
not a Merger of Equals or, if applicable, on a Merger of Equals Cessation Date,
each Award outstanding on such date shall become fully vested and nonforfeitable
and, subject to Article 13, shall be exercisable in full; provided, however,
that for purposes of a Change of Control as defined in Section 28(a)(v)(C) only,
each Award granted on or after March 13, 2001 shall become fully vested and
nonforfeitable to the extent such Award is outstanding, on the Consummation Date
with respect to such a Change of Control that is not a Merger of Equals or if
applicable, on a later Merger of Equals Cessation Date; and
(ii) if a Grantee has a Termination of Employment during the Post-Merger of
Equals Period, which Termination of Employment is initiated by the Grantee's
employer for a reason other than Cause or Disability, then each outstanding
Award held by such Grantee (or his or her permitted transferee) on the date of
such Termination of Employment shall become fully vested and nonforfeitable
immediately prior to such Termination of Employment and, subject to Article 13,
shall be exercisable in full.
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SHARE PURCHASE AGREEMENT
by and among
COMMERCE ONE, INC.,
NEW COMMERCE ONE HOLDING, INC.
and
SAP AG
June 28, 2001
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TABLE OF CONTENTS
Article
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Page
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1. Agreement To Sell And Purchase Shares 1 1.1 Sale and Purchase of
Shares 1 1.2 Closing 1 1.3 Legends; Stop Transfer Orders 2
2.
Representations and Warranties of Commerce One
2 2.1 Organization, Standing and Power 2 2.2 Authority; Binding
Nature of Agreements 3 2.3 Non-Contravention; Consents 3 2.4
Capital Structure 3 2.5 Litigation 4 2.6 Brokers 4 2.7
SEC Filings; Financial Statements 4 2.8 No Undisclosed Liabilities,
Absence of Certain Events and Changes 5 2.9 Intellectual Property 5
2.10 Material Contracts 5 2.11 Sufficiency of Assets 6 2.12
Compliance with Applicable Law 6
3.
Representations and Warranties of SAP AG
6 3.1 Organization and Good Standing 6 3.2 Authority; Binding
Nature of Agreements 7 3.3 Non-Contravention; Consents 7 3.4
Litigation 7 3.5 Brokers 7 3.6 Investment Representations 7
3.7 Disclosure 8 3.8 Current Common Stock Ownership 8
4.
Conditions to Closing
9 4.1 Conditions to SAP AG's Obligations 9 4.2 Conditions to
Commerce One's Obligations 10
5.
Additional Agreements
10 5.1 Filings and Consents 10 5.2 Covenant to Satisfy Conditions
11 5.3 Further Assurances 11 5.4 Adjustment to Number and Type
of Securities and Purchase Price 11 5.5 No Impairment of Rights 12
5.6 Notification of Certain Matters 12 5.7 Public Announcements 12
5.8 Execution of Other Agreements 12
6.
Termination
13 6.1 Termination Events 13 6.2 Effect of Termination 13
7.
Miscellaneous
13 7.1 Interpretation 13 7.2 Fees and Expenses 13
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7.3 Governing Law; Jurisdiction and Venue 14 7.4 Specific
Enforcement 14 7.5 No Third Party Beneficiaries 14 7.6 Entire
Agreement 15 7.7 Severability 15 7.8 Amendment and Waiver 15
7.9 Assignment and Successors 15 7.10 Relationship of the Parties
15 7.11 Notices 15 7.12 Facsimile; Counterparts 16 7.13
Survival of Representations and Warranties 16
EXHIBIT A — CERTAIN DEFINITIONS
EXHIBIT B — FORM OF OPINION OF WSGR
EXHIBIT C — [RESERVED]
EXHIBIT D — FORM OF SAP AG INVESTOR RIGHTS AGREEMENT
EXHIBIT E — FORM OF STANDSTILL AGREEMENT
ii
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EXECUTION COPY
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (this "Agreement") is entered into as of
June 28, 2001, by and between Commerce One, Inc., a Delaware corporation
("Commerce One"), New Commerce One Holding, Inc., a Delaware corporation, ("New
Commerce One Holding") and SAP Aktiengesellschaft, a stock corporation
incorporated under the laws of the Federal Republic of Germany ("SAP AG").
WHEREAS, SAP AG wishes to purchase from Commerce One, and Commerce One
wishes to issue and sell to SAP AG, certain shares of the Common Stock, par
value $0.0001 per share, of Commerce One;
WHEREAS, SAP AG and Commerce One wish to provide for additional rights with
respect to the shares of Common Stock to be purchased pursuant to this Agreement
and to make certain representations, warranties and covenants in connection with
the purchase and sale of such shares of Common Stock;
WHEREAS, New Commerce One Holding will assume all of the rights and
obligations of Commerce One hereunder upon the consummation of the
reorganization of Commerce One into a holding company structure with New
Commerce One Holding as the publicly-traded holding company (the
"Reorganization"); and
WHEREAS, certain defined terms used herein are defined in Exhibit A to this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
1. Agreement To Sell And Purchase Shares
1.1 Sale and Purchase of Shares. Subject to the terms and conditions
hereof, Commerce One agrees to issue and sell to SAP AG 47,484,767 shares of
Common Stock in exchange for $225,552,643 (the "Aggregate Purchase Price"), and
SAP AG, subject to the terms and conditions hereof, agrees to purchase shares of
Common Stock in exchange for the Aggregate Purchase Price.
1.2 Closing
(a) The closing of the purchase and sale of Common Stock
hereunder (the "Closing") shall take place at 10 a.m. on the second business day
following the satisfaction or waiver of the closing conditions described in
Section 4 ("Closing Date") at the offices of Wilson Sonsini Goodrich & Rosati,
650 Page Mill Road, Palo Alto, California 94304, or at such other time and place
as Commerce One and SAP AG shall mutually agree. Subject to the terms and
conditions of this Agreement, at the Closing, SAP AG shall deliver to Commerce
One a check or a wire transfer of immediately available funds in the amount of
$225,552,643; and Commerce One shall deliver to SAP AG one or more stock
certificates (as requested by SAP AG) representing the 47,484,767 shares of
Common Stock (as adjusted by the following proviso, the "Shares"); provided,
however, that if the issuance of such number of Shares to SAP AG hereunder would
require Commerce One to obtain stockholder approval of the issuance pursuant to
Rule 4350(i)(1)(B) or (D) of the Nasdaq National Market Issuer Designation
Requirements or under the DGCL, the number of shares to be issued shall be
reduced to the maximum number of shares that may be issued without stockholder
approval (but in no event shall SAP AG be required to purchase less than
40,000,000 shares of Common Stock hereunder) and the purchase price shall be
appropriately adjusted on pro rata basis based on a price per share of $4.75.
1
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(b) When issued pursuant to the terms and conditions of this
Agreement, the shares shall be free and clear of any and all Liens (other than
any Liens created by the Related Equity Agreements and any restrictions imposed
by applicable securities laws).
1.3 Legends; Stop Transfer Orders
(a) All certificates representing the Shares shall bear the
following legends:
(i) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM. COMMERCE ONE MAY REQUIRE AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT THAT A PROPOSED TRANSFER OR SALE
IS IN COMPLIANCE WITH THE ACT."
(ii) "THE SALE OR TRANSFER OF THE SHARES REPRESENTED BY
THIS CERTIFICATE IS RESTRICTED BY THE TERMS OF AN AMENDED AND RESTATED
STANDSTILL AND STOCK RESTRICTION AGREEMENT, DATED AS OF JUNE 28, 2001, BY AND
BETWEEN COMMERCE ONE, INC., NEW COMMERCE ONE HOLDING, INC. AND SAP AG. COPIES OF
THE AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDERS
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE ISSUER OF THESE SHARES AT
THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER."
(iii) Any legend required by the blue sky or securities
laws of any state or jurisdiction to the extent such laws are applicable to the
shares represented by the certificate so legended.
(iv) A legend stating such certificate also represents
certain rights issued under Commerce One's Stockholder Rights Plan.
(b) The certificates representing the Shares will be subject to
a stop transfer order with Commerce One's transfer agent that restricts the
transfer of the Shares except in compliance with this Agreement and the
Standstill Agreement.
(c) Upon request of SAP AG at any time when any of the Shares
are no longer subject to the restrictions set forth in any of the legends
described in Section 1.3(a), Commerce One shall, and shall cause its transfer
agent to, remove such restrictive legends from the certificates representing
such Shares and to cancel the stop order referred to in Section 1.3(b) with
respect to such Shares.
2. Representations and Warranties of Commerce One
Commerce One hereby represents and warrants to SAP AG as follows (except as
described in the Commerce One disclosure schedule attached hereto):
2.1 Organization, Standing and Power. Commerce One is, and on the
Closing Date will be, a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Commerce One has, and on the
Closing Date will have, the corporate power and authority to own its properties
and to carry on its business as now being conducted (or as being conducted on
the Closing Date) and is, and on the Closing Date will be, duly qualified as a
foreign corporation to do business and is, and on the Closing Date will be, in
good standing in each jurisdiction in which the failure to be so qualified would
have, or would be reasonably expected to have, a Material Adverse Effect on
Commerce One.
2
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2.2 Authority; Binding Nature of Agreements. Commerce One has all
requisite corporate power and authority to enter into this Agreement and any
Related Equity Agreements to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and any Related Equity Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Commerce One. No
vote or approval of the stockholders of Commerce One is necessary in connection
with the execution, delivery and performance by Commerce One of this Agreement
or any Related Equity Agreement to which it is a party. This Agreement and any
Related Equity Agreement to which Commerce One is a party have been duly
executed and delivered by Commerce One and constitute the valid and binding
obligations of Commerce One, enforceable in accordance with their terms.
2.3 Non-Contravention; Consents
(a) Neither the execution and delivery by Commerce One, nor the
consummation or performance by Commerce One of any of the transactions to be
consummated or performed by it under this Agreement or any Related Equity
Agreement, will directly or indirectly (with or without notice or lapse of
time): (i) violate any provision of Commerce One's Certificate of Incorporation
or Bylaws, (ii) constitute or result in a breach or default by Commerce One or
any of its subsidiaries, or give rise to a right of termination, amendment,
cancellation or acceleration on the part of any other party, or result in the
creation or imposition of any Lien on Commerce One's assets, under any agreement
or instrument to which Commerce One or any of its subsidiaries is a party or by
which Commerce One or any of its subsidiaries is bound, which breach, default,
termination or Lien would have, or would be reasonably expected to have, a
Material Adverse Effect on Commerce One, or (iii) constitute a violation by
Commerce One or any of its subsidiaries of any Requirement of Law.
(b) Except for the filings under the Hard-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, no consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any Governmental Authority or other Person on the part of Commerce
One or any of its subsidiaries is required in connection with the execution,
delivery and performance by Commerce One of this Agreement and the Related
Equity Agreements or the consummation of the transactions contemplated hereby
and thereby.
(c) Commerce One is not in violation of any provision of its
Certificate of Incorporation or Bylaws or any other agreement, contract,
obligation or commitment, which violation would materially affect its ability to
perform its obligations under this Agreement or any of the Related Equity
Agreements or has, or could reasonably be expected to have, a Material Adverse
Effect on Commerce One.
2.4 Capital Structure
(a) As of May 31, 2001, the authorized capital stock of Commerce
One consists of 950,000,000 shares of Common Stock, $.0001 par value, of which
208,742,610 shares (together with the associated rights to purchase Series A
Participating Preferred Stock) are issued and outstanding on such date,
50,000,000 shares of Preferred Stock, $0.0001 par value, of which 300,000 shares
are designated Series A Participating Preferred Stock, $.0001 par value, none of
which are issued and outstanding of such date, and 49,700,000 shares of which
are undesignated Preferred Stock, $.0001 par value, none of which are issued or
outstanding on such date. All such shares of Commerce One have been duly
authorized, and all such issued and outstanding shares have been validly issued,
are fully paid and nonassessable and are free of any Liens or encumbrances other
than any Liens or encumbrances created by or imposed upon the holders thereof.
Commerce One has also reserved 75,743,739 shares of Common Stock for issuance
pursuant to its employee and director stock and option and stock purchase plans
(the "Plans"), 23,219,156 of which were issuable upon exercise of such
outstanding stock options as of May 31, 2001 and 24,641,051 of which may be
issued in connection with Commerce One's
3
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employee stock option exchange program. In addition, 200,000 other shares of
Common Stock are issuable pursuant to outstanding stock options (other than
those described above), warrants, rights, convertible or exchangeable securities
or other agreements as of May 31, 2001. Upon the Reorganization, New Commerce
One Holding's certificate of incorporation and bylaws as in effect immediately
following the reorganization will be identical to Commerce One's certificate of
incorporation and bylaws, respectively, as in effect immediately prior to the
consummation of the Reorganization, and New Commerce One Holding's
capitalization will become identical to the capitalization of Commerce One
immediately prior to the consummation of the Reorganization, except that an
additional 28,800,000 shares of Common Stock will be issued and outstanding
following the consummation of the Reorganization. Except as contemplated by this
Agreement, there are no other options, warrants, rights, convertible or
exchangeable securities, commitments, or agreements of any character to which
Commerce One is a party or by which it is bound obligating Commerce One to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of the capital stock of Commerce One
or any securities convertible into or exchangeable for capital stock of Commerce
One or obligating Commerce One to grant, extend or enter into any such option,
warrant, right, commitment or agreement. There are no outstanding bonds,
debentures, notes or other obligations issued by Commerce One which permit the
holders thereof to vote with the stockholders of Commerce One on any matter.
Except as contemplated by this Agreement, no change in the capitalization of
Commerce One or New Commerce One Holding has occurred since May 31, 2001 and
through the date of this Agreement, except for (i) issuance of stock options and
other rights under Commerce One's and its affiliates' stock and option and stock
purchase plans, (ii) exercise of outstanding options and other rights under
Commerce One's and its affiliates' stock and option and stock purchase plans.
(b) The shares of Common Stock to be issued pursuant to this
Agreement have been duly authorized, and when issued to SAP AG in accordance
with the terms hereof, will be validly issued, fully paid and non-assessable,
free of any Liens except as provided in this Agreement or any of the Related
Equity Agreements or federal and state applicable securities laws. Assuming that
the representations and warranties of SAP AG in Section 3.6 hereof are truthful
and accurate, the issuance and sale of the Shares pursuant to this Agreement
will be exempt from the registration requirements of Section 5 of the Securities
Act.
2.5 Litigation. As of the date hereof, there are no claims, actions,
suits, proceedings or investigations pending or, to the knowledge of Commerce
One, threatened against Commerce One or any of its subsidiaries or any of their
properties or assets before any Governmental Authority which (i) in any manner
challenge or seek to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement or (ii) could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Commerce One.
None of Commerce One or any of its subsidiaries or any of their assets or
properties (whether leased or owned) are subject to any orders, judgments,
injunctions or decrees which could reasonably be expected to have a Material
Adverse Effect on Commerce One.
2.6 Brokers. Except for the investment bank(s) previously disclosed
to SAP AG, whose fees and expenses will be paid by Commerce One, Commerce One
has not granted or become obligated to pay, or taken any action that likely
would result in any Person claiming to be entitled to receive from Commerce One,
any brokerage commission, finder's fee or similar commission or fee in
connection with any of the transactions contemplated by this Agreement.
2.7 SEC Filings; Financial Statements
(a) Commerce One has timely and properly filed all forms,
schedules, reports, prospectuses, proxy statements and documents required to be
filed by Commerce One with the SEC (the "Commerce One SEC Reports") and has made
available true and correct copies thereof to SAP
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AG. The Commerce One SEC Reports (i) at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on the date
of such filing) complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Commerce One makes no representation or warranty
whatsoever concerning the Commerce One SEC Reports as of any time other than the
time they were filed, amended or superseded. None of Commerce One's subsidiaries
are required to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) (the "Commerce One Financial Statements")
contained in the Commerce One SEC Reports has been prepared in accordance with
GAAP applied on a consistent basis throughout the period involved (except as may
be indicated in the notes thereto) and complied in all material respects with
the rules and regulations of the SEC. Each of the Commerce One Financial
Statements fairly presents in all material respects the consolidated financial
position of Commerce One and its subsidiaries as at the respective dates thereof
and the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be, individually or in the aggregate, materially adverse to Commerce
One and its subsidiaries taken as a whole.
2.8 No Undisclosed Liabilities, Absence of Certain Events and
Changes. Except as otherwise disclosed in the Commerce One SEC Reports, since
March 31, 2001 neither Commerce One nor any of its subsidiaries has incurred any
liabilities or obligations (whether absolute or contingent) other than those
arising from operations in the ordinary course of business consistent with past
practice. Since December 31, 2000, except as disclosed in the Commerce One SEC
Reports filed with the SEC and publicly available prior to the date hereof,
there has not been any event, occurrence, development or circumstances and there
has been no change in or development with respect to the business, condition
(financial or otherwise), assets, liabilities, properties, operations or results
of operations of Commerce One and its subsidiaries except events, occurrences,
developments, circumstances, changes and developments which have not had or
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Commerce One.
2.9 Intellectual Property. Commerce One and its subsidiaries own,
free and clear of all Liens, and have good and marketable title to, or hold
adequate licenses or otherwise possess all such rights as are necessary to use
all patents (and applications therefor), patent disclosures, trademarks, service
marks, trade names, copyrights (and applications therefor), inventions,
discoveries, processes, know-how, scientific, technical, engineering and
marketing data, formulae and techniques (collectively, "Intellectual Property")
necessary for the conduct of their business as now conducted. To Commerce One's
knowledge, the business of Commerce One as presently conducted does not infringe
upon or violate any Intellectual Property rights of others except where such
infringement or violation, individually or in the aggregate, would not have a
Material Adverse Effect on Commerce One.
2.10 Material Contracts. Except as disclosed in the Commerce One SEC
Reports, neither Commerce One nor any of its subsidiaries is, nor to the
knowledge of Commerce One is any other party, in material default under, or in
material breach or material violation of any "material contracts" within the
meaning of Item 601 of Regulation S-K of the SEC to which Commerce One or any of
its subsidiaries is a party or any material contracts concerning Commerce One's
Intellectual Property (collectively, "Commerce One Material Contracts"). All of
the Commerce One Material Contracts are valid, binding and in full force and
effect in all material respects and enforceable by Commerce One in
5
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accordance with their respective terms. No event has occurred which, with the
giving of notice or passage of time or both, would constitute a material default
by Commerce One or any of its subsidiaries or, to the knowledge of Commerce One,
any other party under any Commerce One Material Contract.
2.11 Sufficiency of Assets. Commerce One has good and marketable
title to its property and assets, free and clear of all Liens, except such Liens
which arise in accordance with the ordinary course of business and do not
materially impair Commerce One's ownership or use of such property or assets.
With respect to the property and assets it leases, Commerce One is in compliance
with such leases and, to its knowledge, holds a valid leasehold interest free of
any Liens. The assets and properties of Commerce One and its subsidiaries
(including Commerce One's Intellectual Property), whether owned, leased,
licensed or otherwise held, constitute (i) all of the material assets and rights
that are used by Commerce One and its subsidiaries in the operation of their
business as it is being conducted as of the date hereof and (ii) all the
property, real and personal, tangible and intangible, necessary for Commerce One
and its subsidiaries to conduct such business as it is being conducted as of the
date hereof.
2.12 Compliance with Applicable Law. Commerce One and its
subsidiaries are in compliance in all material respects with all Requirements of
Law of any Governmental Authority, including those relating to environmental,
occupational health and safety, fair employment and equal opportunity, and no
claims or complaints from any Governmental Authorities or other parties have
been received by Commerce One or any of its subsidiaries, and, to the knowledge
of Commerce One, no claims or complaints are threatened alleging that Commerce
One or any of its subsidiaries is in violation of any such Requirement of Law
except for such claims or complaints which could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Commerce
One.
2.13 Section 203 Approval. The Board of Directors of each of
Commerce One and New Commerce One Holding have "approved," for purposes of
Section 203(a)(1) of the DGCL, (a) the acquisition pursuant hereto by SAP or any
Purchaser Controlled Entity (as defined in the Standstill Agreement) of the
Shares and (b) the acquisition by SAP or any Purchaser Controlled Entity of any
additional shares of Commerce One Common Stock up to the Standstill Limit (as
defined in the Standstill Agreement, which Standstill Limit shall be applicable
with respect to the approval described in this Section 2.13 irrespective of
whether the Standstill Agreement is in effect at such time or at any time in the
future), and all other transactions contemplated hereby or by the Standstill
Agreement pursuant to which SAP or any Purchaser Controlled Entity becomes an
"interested stockholder" under Section 203 of the DGCL.
2.14 Amendment of Rights Agreement. Commerce One's Board of
Directors has amended that certain Preferred Stock Rights Agreement, dated as of
April 18, 2001, by and between Commerce One and Fleet National Bank as Rights
Agent (the "Rights Agreement"), in order to permit the transactions contemplated
herein, such that SAP AG shall be excepted from the operation of the Rights
Agreement only to the extent of the Standstill Limit specified in the Standstill
Agreement (irrespective of whether the Standstill Agreement is in effect at such
time or at any time in the future).
3. Representations and Warranties of SAP AG
SAP AG hereby represents and warrants to Commerce One as follows:
3.1 Organization and Good Standing. SAP AG is a corporation duly
organized, validly existing and in good standing under the laws of the Federal
Republic of Germany. SAP AG has the corporate power and authority to own its
properties and to carry on its business as now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified would have a Material Adverse Effect on SAP AG.
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3.2 Authority; Binding Nature of Agreements. SAP AG has all
requisite corporate power and authority to enter into this Agreement and any
Related Equity Agreements to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and any Related Equity Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of SAP AG. This
Agreement and any Related Equity Agreements to which SAP AG is party have been
duly executed and delivered by SAP AG and constitute the valid and binding
obligations of SAP AG, enforceable in accordance with their terms.
3.3 Non-Contravention; Consents
(a) Neither the execution and delivery by SAP AG, nor the
consummation or performance by SAP AG of any of the transactions to be
consummated or performed by it under this Agreement or the Related Equity
Agreements, will directly or indirectly (with or without notice or lapse of
time): (i) violate any provision of SAP AG's charter documents, (ii) after
giving effect to the amendment and restatement of the Standstill Agreement
effective as of the Closing, constitute or result in a breach or default by SAP
AG, or give rise to a right of termination, amendment, cancellation or
acceleration on the part of any other party, or result in the creation or
imposition of any Lien on SAP AG's assets, under any agreement or instrument to
which SAP AG is a party or by which SAP AG is bound which breach, default,
termination or Lien would have a Material Adverse Effect on SAP AG, or
(iii) constitute a violation by SAP AG of any Requirement of Law.
(b) No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
Governmental Authority on the part of SAP AG is required in connection with the
consummation of the transactions contemplated by this Agreement and the Related
Equity Agreements except for any filings to be made after the Closing as
required by the German Competition Act, European Community Treaty Act and
Council Regulation 4064/89.
3.4 Litigation. As of the date hereof, there are no actions, suits,
proceedings or investigations pending or, to the knowledge of SAP AG, threatened
against SAP AG or any of its property or assets before any Governmental
Authority which (i) in any manner challenge or seek to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement or (ii) could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on SAP AG (other than as disclosed in public filings made by SAP
AG with the SEC or as disclosed in writing by SAP AG to Commerce One on or
before the date hereof).
3.5 Brokers. Except for the investment bank previously disclosed to
Commerce One, whose fees and expenses will be paid by SAP AG, SAP AG has not
granted or become obligated to pay, or taken any action that likely would result
in any Person claiming to be entitled to receive from SAP AG, any brokerage
commission, finder's fee or similar commission or fee in connection with any of
the transactions contemplated by this Agreement.
3.6 Investment Representations
(a) SAP AG understands that none of the Shares has been
registered under the Securities Act. SAP AG also understands that the Shares are
being offered and sold pursuant to an exemption from registration contained in
the Securities Act based in part upon SAP AG's representations contained in this
Agreement, and that Commerce One is relying upon the truth and accuracy of SAP
AG's representations, warranties, acknowledgements and understandings with
respect to the material facts set forth herein.
(b) SAP AG is acquiring the Shares for SAP AG's own account for
investment purposes only, and not with the current intention of making a public
distribution thereof.
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(c) SAP AG has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to Commerce One so that it is capable of evaluating the merits and risks of its
investment in Commerce One and has the capacity to protect its own interests.
SAP AG, by reason of its business or financial experience, has the capacity to
protect its own interests in connection with the transactions contemplated by
this Agreement and the Related Equity Agreements. SAP AG is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D under the
Securities Act.
(d) SAP AG acknowledges that the Shares may be required to be
held indefinitely and that SAP AG must bear the economic risk of this investment
indefinitely unless the Shares are subsequently registered under the Securities
Act or an exemption from such registration is available. SAP AG understands that
Commerce One's obligations to register the Shares are set forth in the SAP
Investor Rights Agreement. SAP AG also understands that there is no assurance
that any exemption from registration under the Securities Act will be available
and that, even if available, such exemption may not allow SAP AG to transfer all
or any portion of the Shares under the circumstances, in the amounts or at the
times SAP AG might propose.
(e) SAP AG has been advised or is aware of the provisions of
Rule 144 under the Securities Act ("Rule 144"), which permit limited resale of
shares purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things: (i) the availability of certain
current public information about Commerce One, (ii) the resale occurring not
less than one year after a party has purchased and paid for the security to be
sold, (iii) the sale being through an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Exchange Act) and (iv) the number of shares being sold during any three-month
period not exceeding specified limitations. SAP has been advised or is aware
that it may be deemed to be an "affiliate" of Commerce One with the meaning of
the Securities Act following the execution of this Agreement.
(f) SAP AG did not receive any information regarding such
purchase and sale through any general solicitation or general advertising within
the meaning of Rule 502(c) under the Securities Act.
3.7 Disclosure. SAP AG has received copies of all Commerce One
filings with the SEC that SAP AG has requested. Without limiting Commerce One's
obligations with respect to any representations or warranties made by Commerce
One in this Agreement, SAP AG has been afforded the opportunity to obtain any
additional information deemed necessary by SAP AG to verify the accuracy of any
representations made or information conveyed to SAP AG. SAP AG confirms that all
documents records and books pertaining to its investment in Common Stock and
requested by SAP AG have been made available or delivered to SAP AG. SAP AG has
had an opportunity to ask questions of and receive answers from Commerce One, or
from a person or persons acting on Commerce One's behalf, concerning the terms
and conditions of this investment.
3.8 Current Common Stock Ownership. As of the date of this
Agreement, SAP AG beneficially owns 9,817,046 shares of Common Stock. Except for
such shares, SAP AG does not own any other equity securities of Commerce One,
any options, warrants or other rights to acquire equity securities of Commerce
One or any other securities convertible into equity securities of Commerce One.
SAP is not currently in breach of any of the terms and conditions of
Section 2.1(a), (d), (e), (f), and (g) of the Standstill and the Stock
Restriction Agreement, dated June 14, 2000, by and between Commerce One and SAP
AG.
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4. Conditions to Closing
4.1 Conditions to SAP AG's Obligations. SAP AG's obligation to
purchase the Shares is subject to the satisfaction, at or prior to the purchase
of the Shares, of the following respective conditions (any of which may be
waived by SAP AG, in whole or in part):
(a) The representations and warranties of Commerce One contained
in Sections 2.1, 2.2 and 2.4 shall be true and correct in all material respects,
in each case as of the date of this Agreement and on the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of the date of this Agreement and the Closing Date, except for
the representations and warranties in Section 2.4 which address matters only as
a particular date, which shall be true and correct in all material respects as
of such date. The other representations and warranties of Commerce One contained
in this Agreement shall be true and correct in all respects, in each case as of
the date of this Agreement and on and as of the Closing Date with the same force
and effect as though such representations and warranties had been made on and as
of the date of this Agreement and the Closing Date (other than representations
and warranties made specifically with reference to a particular date, which,
subject to the following proviso shall have been true and correct as of such
date), except in each case, or in the aggregate, as does not constitute a
Material Adverse Effect on Commerce One (it being understood that, for purposes
of determining the accuracy of such representations and warranties, all
"Material Adverse Effect" qualifications and other qualifications based on the
word "material" or similar phrases contained in such representations and
warranties shall be disregarded); and SAP AG shall have received a certificate
signed by a duly authorized executive officer of Commerce One confirming the
foregoing as of the Closing Date with respect to the representations and
warranties made by Commerce One.
(b) Commerce One shall have performed and complied with all of
its covenants and agreements contained in this Agreement in all material
respects through the Closing; and SAP AG shall have received a certificate
signed by a duly authorized executive officer of Commerce One confirming the
foregoing as of the Closing Date.
(c) There shall not exist, and there shall not have been any
event, occurrence, change, development or circumstance (other than as previously
disclosed in writing by Commerce One to SAP or disclosed by Commerce One
publicly in a filing with the SEC prior to the date of this Agreement), which
has had or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Commerce One.
(d) There shall be no injunction, writ, preliminary restraining
order or other order in effect of any nature issued by a court or governmental
agency of competent jurisdiction directing that the transactions contemplated by
this Agreement or any Related Equity Agreement not be consummated in the manner
provided for in this Agreement or a Related Equity Agreement, nor shall there be
pending any proceeding brought by a governmental authority or agency seeking any
of foregoing.
(e) The applicable waiting period under the HSR Act and any
applicable foreign antitrust or competition laws shall have expired or been
terminated.
(f) Commerce One shall have duly executed and delivered to SAP
AG the SAP Investor Rights Agreement.
(g) SAP AG shall have received the opinion of independent
counsel to Commerce One, dated the date of the Closing Date of the purchase and
sale of the Shares, in the form of Exhibit B hereto.
(h) Commerce One shall have amended the Rights Agreement in the
manner contemplated by Section 2.14.
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(i) The Strategic Alliance Agreement, dated as of September 18,
2000 by and between Commerce One, SAP AG and SAP Markets, Inc., as amended to
date and as may be amended hereafter, and any successor or replacement
agreement, (the "Strategic Alliance Agreement") shall not have expired or been
terminated, and there shall not be any uncured material breach by Commerce One
which, if not cured, would result in SAP AG or SAP Markets, Inc. having the
right to terminate of the Strategic Alliance Agreement.
4.2 Conditions to Commerce One's Obligations. Commerce One's
obligation to sell the Shares, is subject to the satisfaction, at or prior to
the delivery of the Shares, of the following respective conditions (any of which
may be waived by Commerce One, in whole or in part):
(a) The representations and warranties of SAP AG contained in
this Agreement shall be true and correct in all respects, in each case as of the
date of this Agreement and on and as of the Closing Date with the same force and
effect as though such representations and warranties had been made on and as of
the date of this Agreement and the Closing Date, (other than representations and
warranties made specifically with reference to a particular date, which, subject
to the following provisions, shall have been true and correct as of such date)
except in each case, or in the aggregate, as does not constitute a Material
Adverse Effect on SAP AG (it being understood that, for purposes of determining
the accuracy of such representations and warranties, all "Material Adverse
Effect" qualifications and other qualifications based on the word "material" or
similar phrases contained in such representations and warranties shall be
disregarded); and Commerce One shall have received a certificate signed by a
duly authorized executive officer of SAP AG confirming the foregoing as of the
Closing Date.
(b) SAP AG shall have performed and complied with all of its
covenants and agreements contained in this Agreement in all material respects
through the Closing; and Commerce One shall have received a certificate signed
by a duly authorized executive officer of SAP AG confirming the foregoing as of
the Closing Date.
(c) There shall be no injunction, writ, preliminary restraining
order or other order in effect of any nature issued by a court or governmental
agency of competent jurisdiction directing that the transactions contemplated in
this Agreement or any Related Equity Agreement not be consummated in the manner
provided for in this Agreement or a Related Equity Agreement.
(d) SAP AG shall have duly executed and delivered the Standstill
Agreement to Commerce One.
(e) The applicable waiting period under the HSR Act and any
applicable foreign antitrust or competition laws shall have expired or been
terminated.
(f) Commerce One shall have received the opinion of in-house
counsel to SAP AG, dated the Closing Date, substantially identical to the
opinion given to Commerce One on behalf of SAP AG by Schilling, Zutt & Anschutz,
dated June 16, 2000.
(g) SAP AG is not at such time, or would not be after giving
effect to the sale of the Shares, in breach of the provisions of Section 2.1 of
the Standstill Agreement.
(h) The Strategic Alliance Agreement shall not have expired or
been terminated, and there shall not be any uncured material breach by SAP
Markets, Inc. or SAP AG which, if not cured, would result in Commerce One having
the right to terminate of the Strategic Alliance Agreement.
5. Additional Agreements.
5.1 Filings and Consents. Each party hereto will cooperate with each
other with respect to obtaining, as promptly as practicable, and in any event
prior to the Closing, all necessary consents, approvals, authorizations and
agreements of, and the giving of all notices and making of all other
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filings with (including, without limitation, filings under the HSR Act or under
applicable foreign antitrust or competition laws), any third parties, including
Governmental Authorities, necessary to authorize, approve or permit the
transactions contemplated by this Agreement and the Related Equity Agreements.
5.2 Covenant to Satisfy Conditions. Subject to the terms and
conditions of this Agreement and applicable law, each party agrees to use all
commercially reasonable efforts to ensure that the conditions to the other
party's obligations hereunder set forth in Section 4, insofar as such matters
are within the control of such party, are satisfied as promptly as practicable.
5.3 Further Assurances. Each party shall execute and deliver such
additional instruments, documents or other writings as may be reasonably
requested by any other party in order to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
5.4 Adjustment to Number and Type of Securities and Purchase
Price. The type and number of securities of Commerce One issuable hereunder and
the Purchase Price per share of such securities are subject to adjustment as set
forth below:
(a) Upon any reclassification, exchange, substitution or other
event that results in a change of the number and/or class of the securities
issuable hereunder or upon the payment of a dividend in securities or property
other than Common Stock, SAP AG shall be entitled to receive the number and kind
of securities and property that SAP AG would have received if SAP AG had made a
purchase hereunder immediately before the record date for such reclassification,
exchange, substitution or other event or dividend, subject to further
adjustments as provided in this Section 5.4. The provisions of this
Section 5.4(a) shall similarly apply to successive reclassifications, exchanges,
substitutions or other events or dividends.
(b) If Commerce One is a party to any transaction (including any
consolidation or merger of Commerce One with or into any other corporation,
entity or person in which Commerce One shall not be the continuing or surviving
entity, statutory share exchange, sale of all or substantially all of the assets
of Commerce One or a recapitalization or reorganization or other transaction) in
each case as a result of which shares of Common Stock are converted into the
right, or the holders of Common Stock are otherwise entitled, to receive stock,
securities or other property (including cash or any combination thereof) (any
such transaction being hereinafter referred to as a "Recapitalization"), then,
in each such case, SAP AG, at any time after the consummation or effective date
of such Recapitalization, shall receive, in lieu of or in addition to (as the
case may be) the Common Stock otherwise issuable hereunder prior to the date of
such Recapitalization and the stock and other securities and property (including
cash or any combination thereof) to which SAP AG would have been entitled upon
the date of such Recapitalization if SAP AG had purchased shares of Common Stock
hereunder immediately prior thereto. Commerce One shall not be a party to any
Recapitalization unless the terms thereof are consistent with the provisions of
this Section 5.4 and any successor or acquiring entity has expressly assumed by
written instrument the obligations of Commerce One hereunder. The provisions of
this Section 5.4(b) shall similarly apply to successive Recapitalization.
(c) In case of any adjustment in the type of securities issuable
hereunder, Commerce One will promptly give written notice thereof to SAP AG in
the form of a certificate, certified and confirmed by an officer of Commerce
One, setting forth such adjustment and showing in reasonable detail the facts
upon which such adjustment is based.
(d) Commerce One shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock, solely for the
purpose of meeting its obligations under this Agreement, a sufficient number of
shares of Common Stock to meet its obligations under this Agreement. If at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to meet the obligations of Commerce One under this Agreement, in
addition to such other
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remedies as shall be available to SAP AG, Commerce One shall use its reasonable
efforts to take such corporate action as may, in the opinion of its legal
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
(e) If at any time, as a result of an adjustment made pursuant
to this Section 5.4, SAP AG shall become entitled hereunder to receive any
shares of capital stock of other than Common Stock, the number of such other
shares so receivable shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the shares of Common Stock contained in this Section 5.4 and the
provisions of this Agreement shall apply on like terms to any other such shares.
5.5 No Impairment of Rights. Commerce One hereby agrees that it will
not, through the amendment of its Certificate of Incorporation, or through a
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or otherwise, avoid or seek to avoid the observance or
performance of any of the terms of this Agreement, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
holder of the Shares against impairment. Without limiting the generality of the
foregoing, Commerce One will (i) take all such action as may be necessary or
appropriate in order that Commerce One may validly and legally issue hereunder
fully paid and nonassessable shares of Common Stock, free and clear of any
liens, encumbrances and restrictions, and (ii) use its best efforts to obtain
all such authorizations, exemptions or consents from any public regulatory body
having jurisdiction as may be necessary to enable Commerce One to perform its
obligations hereunder.
5.6 Notification of Certain Matters. Between the date hereof and the
Closing Date, each party hereto will give prompt notice in writing to the other
party of: (i) the occurrence or non-occurrence of any event which will result,
or has a reasonable prospect of resulting, in the failure of any condition,
covenant or agreement contained in this Agreement to be complied with or
satisfied, (ii) any failure of such party to comply with or satisfy any
condition, covenant or agreement to be complied with or satisfied by it
hereunder, and (iii) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement or any Related
Equity Agreement or that such transactions otherwise may violate the rights of
or confer remedies upon such third party.
5.7 Public Announcements. Except to the extent otherwise required by
applicable law or any listing agreement concerning Commerce One's or SAP AG's
publicly traded securities, none of the parties hereto will disclose to any
Person, issue any press release or make any public announcements concerning the
transactions contemplated by this Agreement or any Related Equity Agreement or
the contents of any thereof without the prior written consent of Commerce One
and SAP AG; it being understood and agreed, however, that Commerce One currently
expects to file with the SEC complete unredacted copies of this Agreement and
the Related Equity Agreements as exhibits to a Form 8-K. Commerce One hereby
agrees to provide a copy of such Form 8-K (including exhibits) to SAP AG prior
to its filing.
5.8 Execution of Other Agreements. Concurrently with the execution
of this Agreement, each of Commerce One, New Commerce One Holding and SAP AG, as
applicable, shall execute and deliver the Related Equity Agreements and the
amendment to the Strategic Alliance Agreement.
5.9 Updated Capital Structure Information. At the Closing, Commerce
One shall deliver to SAP AG information regarding its capital structure, to the
extent and in a similar form as provided in Section 2.4 hereof, as of a date
within 10 business days prior to the Closing
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6. Termination
6.1 Termination Events. Without prejudice to other remedies which
may be available to the parties by law or this Agreement, this Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any time
prior to the Closing:
(a) by mutual written consent of Commerce One and SAP AG;
(b) by either Commerce One or SAP AG by giving written notice to
the other party if the Closing shall not have occurred prior to September 30,
2001, unless extended by written agreement of the parties; provided that the
party seeking termination pursuant to this subsection (b) is not in default or
breach hereunder and provided, further, that the right to terminate this
Agreement under this clause (b) shall not be available (i) to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before such date or
(ii) in the event that the Closing shall not have occurred as a result of a
failure of any representation to be true and correct and the party seeking
termination knew of such breach prior to the date of this Agreement; or
(c) by either Commerce One or SAP AG by giving written notice to
the other party if any Governmental Authority shall have issued an injunction or
other ruling prohibiting the consummation of any of the transactions
contemplated by this Agreement or any Related Equity Agreement and such
injunction or other ruling shall not be subject to appeal or shall have become
final and unappealable.
6.2 Effect of Termination. In the event of any termination of this
Agreement pursuant to Section 6.1, all rights and obligations of the parties
hereunder shall terminate without any liability on the part of either party or
its respective subsidiaries and affiliates in respect thereof, except that
(a) the obligations of the parties under Section 5.7 and Section 7 (other than
Section 7.4) of this Agreement shall remain in full force and effect and
(b) such termination shall not relieve Commerce One or SAP AG of any liability
for any breach of this Agreement.
7. Miscellaneous
7.1 Interpretation
(a) The various section headings are inserted for purposes of
reference only and shall not affect the meaning or interpretation of this
Agreement or any provision hereof. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such terms.
(b) Each party hereto acknowledges that it has been represented
by competent counsel and participated in the drafting of this Agreement, and
agrees that any applicable rule of construction to the effect that ambiguities
are to be resolved against the drafting party shall not be applied in connection
with the construction or interpretation of this Agreement.
(c) When a reference is made in this Agreement to a Section,
Exhibit or Schedule, such reference shall be to a Section of, Exhibit to or
Schedule to this Agreement unless otherwise indicated.
7.2 Fees and Expenses. Each party shall be solely responsible for
the payment of the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement, except to the extent expressly set forth in this Agreement. Without
limiting the generality of the foregoing, each of SAP AG and Commerce One shall
pay (i) 50% of all fees payable in connection with the HSR Act filing and
(ii) 50% of all stamp and other transfer taxes, if any, which
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may be payable in respect of the issuance, sale and delivery to SAP AG of Common
Stock pursuant to the terms of this Agreement.
7.3 Governing Law; Jurisdiction and Venue
(a) This Agreement is to be construed in accordance with and
governed by the internal laws of the State of Delaware without giving effect to
any choice of law rule that would cause the application of the laws of any
jurisdiction other than the internal laws of the State of Delaware to the rights
and duties of the parties.
(b) Any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement may be brought
or otherwise commenced in any state or federal court located in the States of
California or Delaware. Each party to this Agreement:
(i) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in the States of California
or Delaware (and each appellate court located in the States of California or
Delaware in connection with any such legal proceeding, including to enforce any
settlement, order or award;
(ii) agrees that each state and federal court located in
the States of California or Delaware shall be deemed to be a convenient forum;
and
(iii) waives and agrees not to assert (by way of motion,
as a defense or otherwise), in any such legal proceeding commenced in any state
or federal court located in the States of California or Delaware any claim that
such party is not subject personally to the jurisdiction of such court, that
such legal proceeding has been brought in an inconvenient forum, that the venue
of such proceeding is improper or that this Agreement or the subject matter
hereof or thereof may not be enforced in or by such court.
(c) Each party hereto agrees to the entry of an order to enforce
any resolution, settlement, order or award made pursuant to this Section by the
state and federal courts located in the States of California or Delaware and in
connection therewith hereby waives, and agrees not to assert by way of motion,
as a defense, or otherwise, any claim that such resolution, settlement, order or
award is inconsistent with or violative of the laws or public policy of the laws
of the States of California or Delaware or any other jurisdiction.
(d) In the event of any legal action or other legal proceeding
relating to this Agreement or the enforcement of any provision of this
Agreement, the prevailing party shall be entitled to payment by the
non-prevailing party of all costs and expenses (including reasonable attorneys'
fees) incurred by the prevailing party.
7.4 Specific Enforcement. The parties hereto acknowledge and agree
that irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached and that such damage would not be compensable in money
damages and that it would be extremely difficult or impracticable to measure the
resultant damages. It is accordingly agreed that any party hereto shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of the Agreement and to enforce specifically the terms and provisions hereof, in
addition to any other remedy to which it may be entitled at law or equity, and
such party that is sued for breach of this Agreement expressly waives any
defense that a remedy in damages would be adequate and expressly waives any
requirement in an action for specific performance for the posting of a bond by
the party bringing such action.
7.5 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and are not for the benefit of, nor may any provision hereof or thereof
be enforced by, any other Person.
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7.6 Entire Agreement. This Agreement and the Related Equity
Agreements and the other documents delivered pursuant hereto and thereto,
constitute the full and entire understanding and agreement between the parties
with regard to the subject matter hereof and no party shall be liable or bound
to any other in any manner by any representations, warranties, covenants and
agreements except as specifically set forth herein and therein.
7.7 Severability. The provisions of this Agreement shall be
severable, and any invalidity, unenforceability or illegality of any provision
or provisions of this Agreement shall not affect any other provision or
provisions of this Agreement, and each term and provision of this Agreement
shall be construed to be valid and enforceable to the full extent permitted by
law.
7.8 Amendment and Waiver
(a) This Agreement may be modified only pursuant to a writing
executed by authorized representatives of SAP AG and Commerce One.
(b) No failure to exercise and no delay in exercising any right,
power or privilege granted under this Agreement shall operate as a waiver of
such right, power or privilege. No single or partial exercise of any right,
power or privilege granted under this Agreement shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies provided in this Agreement are cumulative and are not
exclusive of any rights or remedies provided by law.
7.9 Assignment and Successors. SAP AG may transfer or assign its
rights and obligations hereunder to any wholly-owned subsidiary of SAP AG;
provided, however, that such rights are transferred in accordance with the terms
of the Standstill Agreement, and such transferee executes and delivers a
counterpart copy of this Agreement thereby agreeing to be bound by the terms and
provisions set forth herein. Further, the parties agree that, in the event that
the reorganization of Commerce One into a holding company structure is
consummated prior to the Closing Date, that New Commerce One Holding (as the
publicly-traded holding company of Commerce One) shall without any further
action of the parties automatically assume all of Commerce One's rights and
obligations hereunder, and except as the context requires otherwise all
references herein to Commerce One shall be deemed to be referenced to New
Commerce One Holding. Except as permitted herein, any assignment of rights or
delegation of duties under this Agreement by a party without the prior written
consent of the other parties shall be void ab initio. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
7.10 Relationship of the Parties. For all purposes of this Agreement
and the Related Equity Agreements, each of the parties hereto and their
respective Affiliates shall be deemed to be independent entities and, anything
in this Agreement to the contrary notwithstanding, nothing herein shall be
deemed to constitute the parties hereto or any of their respective Affiliates as
partners, joint venturers, co-owners, an association or any entity separate and
apart from each party itself, nor shall this Agreement make any party hereto an
employee or agent, legal or otherwise, of the other parties for any purposes
whatsoever. This Agreement does not create or constitute, and shall not be
construed as creating or constituting, a voting trust agreement under the
Delaware General Corporation Law or any other applicable corporation law. None
of the parties to this Agreement is authorized to make any statements or
representations on behalf of any other party or in any way to obligate any other
party, except as expressly authorized in writing by the other parties. Anything
in this Agreement to the contrary notwithstanding, no party hereto or thereto
shall assume nor shall be liable for any liabilities or obligations of the other
parties, whether past, present or future.
7.11 Notices. All notices required or permitted hereunder shall be
in writing and shall be given, and deemed effectively given, if given in
accordance with the applicable section of the Strategic Alliance Agreement.
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7.12 Facsimile; Counterparts. This Agreement may be executed by
facsimile and in any number of counterparts, each of which shall be an original,
but all of which together shall constitute one instrument.
7.13 Survival of Representations and Warranties. The representations
and warranties of the parties contained in this Agreement shall survive until
the date which is one (1) year following the Closing Date; provided, however,
that the representations and warranties set forth in Sections 2.2, 2.4(b), 2.13
and 2.14 shall continue in perpetuity.
[The remainder of this page is intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph hereof.
COMMERCE ONE, INC.
By:
/s/ PETER F. PERVERE
--------------------------------------------------------------------------------
Name: Peter F. Pervere
Title: Senior Vice President and Chief Financial Officer
NEW COMMERCE ONE HOLDING, INC.
By:
/s/ PETER F. PERVERE
--------------------------------------------------------------------------------
Name: Peter F. Pervere
Title: Senior Vice President and Chief Financial Officer
SAP AG
By:
/s/ WERNER BRANDT
--------------------------------------------------------------------------------
Name: Werner Brandt
Title:
By:
/s/ MICHAEL JUNGE
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Name: Michael Junge
Title: General Counsel
[Signature page to Share Purchase Agreement]
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EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
"Business Day" shall mean any day other than a Saturday or Sunday or other
day on which commercial banks in California are authorized or required by law to
close.
"Common Stock" shall mean the common stock, par value $0.0001 per share, of
Commerce One, Inc., a Delaware corporation and the associated stock purchase
rights.
"DGCL" shall mean the Delaware General Corporation Law.
"Dollars" or "$" shall mean United States dollars.
"Entity" shall mean any corporation (including any non profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, cooperative, foundation, society, political party,
union, company (including any limited liability company or joint stock company),
firm or other enterprise, association, organization or entity.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof or court, arbitral or other tribunal and any
Entity properly exercising executive, legislative, judicial, regulatory or
administrative functions of government.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Lien" shall mean any charge, equitable interest, lien, encumbrance, claim,
option, proxy by way of security, pledge, security interest, mortgage, right of
first refusal, right of preemption, transfer or retention of title agreement, or
restriction by way of security of any kind or nature, including any restriction
on use, voting, transfer, receipt of income or exercise of any other attribute
of ownership.
"Material Adverse Effect" shall mean, with respect to Commerce One or SAP
AG, any change event or effect that is materially adverse to (a) the business,
assets, financial condition, operations or results of operations of such company
and its subsidiaries taken as a whole; or (b) the ability of such company to
consummate the transactions contemplated by this Agreement or the Related Equity
Agreements or perform its obligations with respect thereto; provided, however,
that in no event shall a decline in the market price of an entity's publicly
traded securities, in and of itself, constitute a Material Adverse Effect.
"Person" shall mean any individual, Entity or Governmental Authority.
"Preferred Stock" shall mean the preferred stock, par value $0.0001 per
share, of Commerce One, Inc., a Delaware corporation.
"Purchase Price" shall have the meaning specified in Section 1 of the
Agreement.
"Related Equity Agreements" shall mean the Standstill Agreement and the SAP
Investor Rights Agreement.
"Requirements of Law" shall mean, as to any Person, the certificate of
incorporation and bylaws or other organizational or governing documents of such
Person, and all federal, state, local and foreign laws, rules and regulations,
including, without limitation, securities, antitrust, communications, licensing,
health, safety, labor and trade laws, rules and regulations, and all orders,
judgments, decrees and other determinations of any Governmental Authority or
arbitrator, applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject.
A–1
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"SAP Investor Rights Agreement" shall mean the SAP Investor Rights Agreement
to be entered into concurrently herewith in the form attached hereto as
Exhibit D.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Standstill Agreement" shall mean the Amended and Standstill and Stock
Restriction Agreement to be entered into concurrently herewith by and between
Commerce One and SAP AG, in the form attached hereto as Exhibit E.
A–2
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TABLE OF CONTENTS
SHARE PURCHASE AGREEMENT
EXHIBIT A CERTAIN DEFINITIONS
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Use these links to rapidly review the document
TABLE OF CONTENTS FOR EXHIBIT 10–a
ADC TELECOMMUNICATIONS, INC.
EXECUTIVE CHANGE IN CONTROL
SEVERANCE PAY PLAN
Effective July 1, 2001
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ADC TELECOMMUNICATIONS, INC.
EXECUTIVE CHANGE IN CONTROL
SEVERANCE PAY PLAN
TABLE OF CONTENTS
SECTION 1. INTRODUCTION 1.1. Establishment 1.2. Definitions 1.2.1.
Base Pay 1.2.2. Change in Control 1.2.3. Cause 1.2.4. Code
1.2.5. Continuing Director 1.2.6. Disability 1.2.7. Effective Date
1.2.8. Eligible Employee 1.2.9. Employer 1.2.10. ERISA
1.2.11. Exchange Act 1.2.12. Good Reason 1.2.13. Incentive Bonus
Plan 1.2.14. Participant 1.2.15. Plan 1.2.16. Plan Statement
1.2.17. Plan Year 1.2.18. Principal Sponsor 1.2.19. Termination
of Employment
SECTION 2. PARTICIPATION 2.1. Eligibility to Participate 2.2. Termination of
Participation
SECTION 3. SEVERANCE PAYMENT 3.1. Eligibility for Payment 3.2. Amount of
Benefits 3.3. Benefit Offset 3.4. Time and Form of Payment 3.5.
Withholding Tax
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SECTION 4. BONUS PAYMENT 4.1. General 4.2. Bonus Payments 4.3. Adjusted
Bonus Payments
SECTION 5. 280G LIMITATION 5.1. Gross-Up Payment 5.2. Payment Date 5.3.
Controversies with Tax Authorities
SECTION 6. FUNDING
SECTION 7. AMENDMENT AND TERMINATION
SECTION 8. CLAIMS PROCEDURE
SECTION 9. MISCELLANEOUS 9.1. Type of Plan 9.2. No Assignment 9.3. Named
Fiduciaries 9.4. Administrator 9.5. Service of Legal Process 9.6. Validity
9.7. Governing Law 9.8. No Employment Rights 9.9. No Guarantee 9.10. No
Co-Fiduciary Responsibility
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SECTION 1
INTRODUCTION
1.1. Establishment. ADC Telecommunications, Inc., a Minnesota corporation,
has previously established and maintained a welfare benefit plan to provide
severance benefits to certain Eligible Employees following a Change in Control.
In its most recent form this severance plan is embodied in a document which was
first adopted effective September 26, 1989 and amended effective September 23,
1997 and entitled "ADC Telecommunications, Inc. Change in Control Severance Pay
Plan." Effective July 1, 2001, ADC Telecommunications has amended and restated
its existing plan to, among other things, exclude certain employees from
participation. This "ADC Telecommunications, Inc. Executive Change in Control
Severance Pay Plan" has been adopted, effective July 1, 2001, to provide change
in control severance benefits for certain executives no longer eligible to
participate in the "ADC Telecommunications, Inc. Change in Control Severance Pay
Plan."
1.2. Definitions. When the following terms are used in this document with
initial capital letters, they shall have the following meanings.
1.2.1. Base Pay—the regular basic cash remuneration before deductions for
taxes and other items withheld, payable to a Participant for services rendered
to the Employer, but not including items such as Incentive Bonus payments,
perquisites, allowances, per diem payments, bonuses, incentive compensation,
stock options, equity compensation, fringe benefits, special pay, awards or
commissions. Base pay shall include regular basic cash remuneration that is
contributed by an employee to a qualified retirement plan, nonqualified deferred
compensation plan or similar plan sponsored by the Employer but it shall not
include earnings on those amounts.
1.2.2. Change in Control—the occurrence of any of the following events:
(a)a change in control of the Principal Sponsor of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Exchange Act, whether or not the Principal Sponsor is
then subject to such reporting requirement;
(b)the public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to Section 13(d) of the
Exchange Act) by the Principal Sponsor or any "person" (as such term is used in
Section 13(d) of the Exchange Act) that such person has become the "beneficial
owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), of
securities of the Principal Sponsor representing 20% or more of the combined
voting power of the Principal Sponsor's then outstanding securities, determined
in accordance with Rule 13d-3;
(c)the Continuing Directors cease to constitute a majority of the Principal
Sponsor's Board of Directors;
(d)consummation of a reorganization, merger or consolidation of, or a sale or
other disposition of all or substantially all of the assets of, the Principal
Sponsor (a "Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the persons who were the
beneficial owners of the Principal Sponsor's outstanding voting securities
immediately prior to such Business Combination beneficially own voting
securities of the corporation resulting from such Business Combination having
more than 50% of the combined voting power of the outstanding voting securities
of such resulting Corporation and (B) at least a majority of the members of the
Board of Directors of the corporation resulting from such Business Combination
were Continuing Directors at the time of the action of the Board of Directors of
the Principal Sponsor approving such Business Combination;
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(e)approval by the shareholders of the Principal Sponsor of a complete
liquidation or dissolution of the Principal Sponsor; or
(f)the majority of the Continuing Directors determine in their sole and absolute
discretion that there has been a change in control of the Principal Sponsor.
1.2.3. Cause—the willful and continued failure by a Participant to perform
his or her duties or gross and willful misconduct including, but not limited to,
wrongful appropriation of funds.
1.2.4. Code—the U.S. Internal Revenue Code of 1986, as amended.
1.2.5. Continuing Director—any person who is a member of the Board of
Directors of the Principal Sponsor, while such person is a member of the Board
of Directors, who is not an Acquiring Person (as defined below) or an Affiliate
or Associate (as defined below) of an Acquiring Person, or a representative of
an Acquiring Person or of any such Affiliate or Associate, and who (i) was a
member of the Board of Directors on the Effective Date of the Plan as first
written above, or (ii) subsequently becomes a member of the Board of Directors,
if such person's initial nomination for election or initial election to the
Board of Directors is recommended or approved by a majority of the Continuing
Directors. For purposes of definition, "Acquiring Person" shall mean any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
who or which, together with all Affiliates and Associates of such person, is the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Principal Sponsor
representing 20% or more of the combined voting power of the Principal Sponsor's
then outstanding securities, but shall not include the Principal Sponsor, any
subsidiary of the Principal Sponsor or any employee benefit plan of the
Principal Sponsor or of any subsidiary of the Principal Sponsor or any entity
holding shares of common stock of the Principal Sponsor organized, appointed or
established for, or pursuant to the terms of, any such plan; and "Affiliate" and
"Associate" shall have the respective meanings ascribed to such terms in Rule
12b-2 promulgated under the Exchange Act.
1.2.6. Disability—the Participant's inability, due to an impairment, to
perform the essential functions of the Participant's position, with or without
reasonable accommodation, provided the Participant has exhausted the
Participant's entitlement to any applicable disability-related leave of absence,
if the Participant desires to take and satisfies all eligibility requirements
for such leave.
1.2.7. Effective Date—July 1, 2001.
1.2.8. Eligible Employee—an individual who, immediately prior to a Change
in Control is the Chief Executive Officer of the Principal Sponsor, or is
classified by the Employer as a regular employee in ADC global job grades 22 or
higher.
Eligible Employee does not include an employee who is employed outside the
United States (other than a U.S. regular employee whose assignment outside the
United States has been classified by the Employer as temporary, provided that
any assignment outside the United States that is expected to exceed 60 months
will not be considered temporary) or who is a non-immigrant worker residing in
the United States covered by any non-immigrant visa status other than an H-1B
visa status.
The Employer's classification of a person as a regular employee shall be
conclusive. No reclassification of a person's status with the Employer, for any
reason, without regard to whether it is initiated by a court, governmental
agency or otherwise and without regard to whether or not the Employer agrees to
such reclassification, shall result in the person being an Eligible Employee,
either retroactively or prospectively. Notwithstanding anything to the contrary
in this provision, however, the Employer may declare that a reclassified person
will be classified as an Eligible Employee, either retroactively or
prospectively.
2
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1.2.9. Employer—ADC Telecommunications, Inc., a Minnesota corporation, its
wholly owned subsidiaries with employees who meet the definition of Eligible
Employee, and any successor of the Principal Sponsor. Employer shall also refer
to any affiliates designated by ADC Telecommunications, Inc.
1.2.10. ERISA—the United States Employee Retirement Income Security Act of
1974.
1.2.11. Exchange Act—the United States Securities Exchange Act of 1934, as
amended.
1.2.12. Good Reason—the occurrence of any of the following events: (i) a
job reassignment that is not of comparable responsibility or status as the
assignment in effect immediately prior to the Change in Control; (ii) a
reduction in the Participant's Base Pay as in effect immediately prior to a
Change in Control; (iii) a material modification of the Employer's incentive
compensation program (that is adverse to the Participant) as in effect
immediately prior to a Change in Control; (iv) a requirement by the Employer
that the Participant be based anywhere other than within fifty miles of the
Participant's work location immediately prior to a Change in Control (with
exceptions for temporary business travel); or (v) except as otherwise required
by applicable law, the failure by the Employer to provide employee benefit
programs and plans (including any stock ownership and stock purchase plans) that
provide substantially similar benefits, in terms of aggregate monetary value, at
substantially similar costs to the Participant as the benefits provided in
effect immediately prior to a Change in Control. Termination or reassignment of
the Participant's employment for Cause, or by reason of Disability or death, are
excluded from this definition.
1.2.13. Incentive Bonus Plan—Employer's Management Incentive Plan ("MIP")
or Sales Management Incentive Plan ("SMIP") or any other equivalent incentive
bonus plan covering management employees that the Compensation Committee of the
Board has determined to be an Incentive Bonus Plan for purposes of this Plan.
1.2.14. Participant—an Eligible Employee of the Employer who becomes a
Participant under the terms of Section 2 of the Plan.
1.2.15. Plan—the severance pay plan of the Employer established for the
benefit of certain Eligible Employees in the event of a Change in Control and
described in this Plan Statement. (As used herein, "Plan" refers to the program
established by the Employer and not the document pursuant to which the Plan is
maintained. That document is referred to herein as the "Plan Statement.")
1.2.16. Plan Statement—effective July 1, 2001, this written document
entitled "ADC Telecommunications, Inc. Executive Change in Control Severance Pay
Plan," as the same may be amended from time to time thereafter.
1.2.17. Plan Year—the twelve consecutive month period ending on any
December 31.
1.2.18. Principal Sponsor—ADC Telecommunications, Inc.
1.2.19. Termination of Employment—actual cessation of active employment by
a Participant as a result of (a) an involuntary termination by the Employer,
with or without reasonable notice, and for any reason other than Cause, or (b) a
voluntary termination by the Participant for Good Reason. Termination of
Employment shall not include termination by reason of the Participant's death or
Disability.
3
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SECTION 2
PARTICIPATION
2.1. Eligibility to Participate. An individual shall become a Participant
on the day such individual becomes an Eligible Employee. Notwithstanding
anything to the contrary in the Plan, an individual who is an employee of a
successor to the Principal Sponsor immediately prior to a Change in Control
shall not be eligible for benefits under the Plan.
2.2. Termination of Participation. An individual ceases to be a
Participant on the earliest of:
(a)the date the Participant ceases to be an Eligible Employee or otherwise
ceases to satisfy the Plan's eligibility requirements, except where such
cessation results in eligibility for a severance payment as provided in Section
3;
(b)the date the Participant ceases to be an employee due to termination of the
Participant's employment (with or without reasonable notice and whether
voluntary or involuntary and including retirement) with the Employer, except
where such termination results in eligibility for a severance payment as
provided in Section 3;
(c)the date the Participant ceases to be an employee due to Participant's death
or Disability;
(d)the date following a Change in Control that the Participant receives all of
the severance and bonus payments due, if any, under the Plan;
(e)the date the Plan is amended pursuant to the rules of Section 7 to exclude
the Participant from participation; or
(f)the date the Plan is terminated pursuant to the rules of Section 7.
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SECTION 3
SEVERANCE PAYMENT
3.1. Eligibility for Payment. To qualify for a severance payment under
this Plan, a Change in Control must occur and a Participant must: (a) be a
Participant immediately prior to the time of such Change in Control and
immediately prior to the Participant's Termination of Employment; and (b) have a
Termination of Employment that occurs within 12 months following a Change in
Control.
3.2. Amount of Benefits. The severance payment to a Participant under the
Plan shall be based on the Participant's position or global job grade in effect
immediately prior to a Change in Control. For purposes of this Section 3.2, a
Participant's "annual pay" shall be equal to the sum of: (a) the Participant's
annual Base Pay in effect immediately prior to the Change in Control or, if
greater, the Termination of Employment; and (b) the Participant's annual target
bonus under the Participant's Incentive Bonus Plans in effect immediately prior
to the Change in Control or, if greater, the Termination of Employment. The
Participant's total severance benefit shall be payable in a single lump sum and
shall be determined according to the following schedule:
Position/Grade
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Severance Benefit
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CEO 3 x annual pay 22 or higher 2 x annual pay
3.3. Benefit Offset. The amount of any severance payment that a
Participant is entitled to under Section 3.2 shall be reduced by any cash
compensation paid or payable by the Employer to the Participant associated with
the Participant's termination of employment (including any pay in lieu of notice
and severance pay). A Participant who receives a severance benefit under the
Plan will not be eligible to receive any severance benefit under the severance
Plan entitled "ADC Telecommunications, Inc. Change in Control Severance Pay
Plan."
3.4. Time and Form of Payment. Payments will be made to eligible
Participants in a single lump sum cash payment as soon as administratively
feasible following the Participant's Termination of Employment. If the
Participant should die before actually receiving the severance payment, such
payment will be made to the personal representative of the Participant's estate.
3.5. Withholding Tax. The Employer shall deduct from the amount of any
severance payment under the Plan any amount required to be withheld by reason of
any law or regulation for the payment of federal, state or local taxes.
5
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SECTION 4
BONUS PAYMENT
4.1. General. A Participant is eligible to receive a bonus payment
provided for in this Section 4 only if the Participant is eligible to receive a
severance payment as provided in Section 3. This Section 4 is intended to
provide for a final payment under any applicable Incentive Bonus Plans for the
bonus period in which Participant's Termination of Employment occurs. Any
amounts determined pursuant to this Section 4 shall be offset by amounts
otherwise paid or payable to the Participant under the relevant Incentive Bonus
Plans for the bonus period in which the Participant's Termination of Employment
occurs.
4.2. Bonus Payments. Bonus payment(s), if any, shall be equal to the
target bonus amount in effect for the bonus period in which the Termination of
Employment occurs multiplied by a fraction, the numerator of which is the number
of days worked by the Participant in the bonus period prior to the Termination
of Employment, and the denominator of which is the number of days in the bonus
period. The bonus payment will be made to the Participant in a single lump sum
cash payment as soon as administratively feasible following the Participant's
Termination of Employment. If the Participant should die before actually
receiving the payment, such payment will be made to the personal representative
of the Participant's estate.
4.3. Adjusted Bonus Payments. At the end of the bonus period, the Employer
shall calculate the amount a Participant would receive for a bonus period in
which a Termination of Employment occurs based on actual performance over the
entire bonus period multiplied by a fraction, the numerator of which is the
number of days worked by the Participant in the bonus period prior to the
Termination of Employment and the denominator of which is the number of days in
the bonus period (the "Actual Bonus Amount"). If the Actual Bonus Amount is
greater than the amount calculated under Section 4.2 above, the Employer shall
pay the difference to the Participant in a single lump sum cash payment as soon
as administratively feasible following the end of the bonus period. If the
Participant should die before actually receiving the payment, such payment will
be made to the personal representative of the Participant's estate.
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SECTION 5
280G LIMITATION
5.1. Gross-Up Payment. In the event a Participant becomes entitled to
payments under the Plan, the Employer shall cause its independent auditors (the
"Auditors") promptly to review, at the Employer's sole expense, the
applicability of Section 4999 of the Code to those payments.
If the Auditors shall determine that any payment or distribution of any type
by the Employer to a Participant or for a Participant's benefit, whether paid or
payable or distributed or distributable pursuant to the terms of the Plan or
otherwise (the "Total Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code, or any interest or penalties with respect to such
excise tax (the excise tax, together with any interest and penalties, are
collectively referred to as the "Excise Tax"), then the Participant shall be
entitled to receive an additional cash payment (a "Gross-Up Payment") equal to
an amount such that after payment by the Participant of all taxes (including any
interest or penalties imposed with respect to such taxes), including any Excise
Tax, imposed upon the Gross-Up Payment, the Participant would retain an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments.
For purposes of determining the amount of any tax pursuant to this Section,
the Participant's tax rate shall be deemed to be the highest statutory marginal
state and Federal tax rate (on a combined basis and including the Participant's
share of F.I.C.A. and Medicare taxes) then in effect.
A Participant shall in good faith cooperate with the Auditors in making the
determination of whether a Gross-Up Payment is required, including but not
limited to providing the Auditors with information or documentation as
reasonably requested by the Auditors. A determination by the Auditors regarding
whether a Gross-Up Payment is required and the amount of such Gross-Up Payment
shall be conclusive and binding upon the Participant and the Employer for all
purposes.
5.2. Payment Date. A Gross-Up Payment required to be made by Section 5.1
of this Plan shall be paid to Participant within 30 days of a final
determination by the Auditors that the Gross-Up Payment is required.
If the Auditors have not yet made the determination required by Section 5.1
prior to the time the Participant is required to file a tax return reflecting
the Total Payments, the Participant will be entitled to receive a Gross-Up
Payment calculated on the basis of the Total Payments reported by the
Participant in such tax return, within 30 days of the filing of such tax return.
5.3. Controversies with Tax Authorities. The Employer and the Participant
shall promptly deliver to each other copies of any written communications, and
summaries of any oral communications, with any taxing authority regarding the
applicability of Section 280G or 4999 of the Code to any portion of the Total
Payments. In the event of any controversy with the Internal Revenue Service or
other tax authority with regard to the applicability of Section 280G or 4999 of
the Code to any portion of the Total Payments, Employer shall have the right,
exercisable in its sole discretion, to control the resolution of such
controversy at its own expense. Participant and the Employer shall in good faith
cooperate in the resolution of such controversy.
If the Internal Revenue Service or any tax authority makes a final
determination that a greater Excise Tax should be imposed upon the Total
Payments than is determined by the Auditors or reflected in the Participant's
tax return pursuant to this Section, the Participant shall be entitled to
receive from the Employer the full Gross-Up Payment calculated on the basis of
the amount of Excise Tax determined to be payable by such tax authority. That
amount shall be paid to the Participant within 30 days of the date of such final
determination by the relevant tax authority.
7
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SECTION 6
FUNDING
The Employer may establish a trust to fund the Plan but the Employer is not
under any obligation to establish a trust. A Participant will be entitled to
claim benefits from the trust to the extent the Plan is funded under a trust and
a Participant shall have only such rights as set forth in the trust. To the
extent benefits are not funded under a trust, payments made pursuant to the Plan
will be paid out of the general funds of the Employer. To the extent benefits
are not funded under a trust, a Participant will not have any secured or
preferred interest by way of trust, escrow, lien or otherwise in any specific
assets and the Participant's rights shall be solely those of an unsecured
general creditor of the Employer.
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SECTION 7
AMENDMENT AND TERMINATION
The right has been reserved to the Board of Directors of the Principal
Sponsor to amend the provisions of the Plan Statement and to amend or terminate
the Plan at any time prior to a Change in Control. If any of these actions are
taken, affected Participants will be notified. During one year following the
date of a Change in Control, the provisions of the Plan Statement may not be
amended if any amendment would adversely affect the rights, expectancies or
benefits provided by the Plan (as in effect immediately prior to the Change in
Control) of any Participant or other person entitled to payment under the Plan.
The Plan may not be terminated during the same one-year period. Except to the
extent benefits have become payable but have not actually been paid, the Plan
terminates automatically on the first anniversary of the date of a Change in
Control, except to pay any remaining severance benefits to any Participant who
has a Termination of Employment on or before the Plan's termination date and
except to resolve claims for benefits under the Plan arising on or before the
Plan's termination date.
9
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SECTION 8
CLAIMS PROCEDURE
The claims procedure set forth in this section shall be the exclusive
procedure for the disposition of claims for benefits arising under this Plan.
(a)Original Claim. Any Participant, former Participant, or beneficiary of such
Participant or former Participant, if he or she so desires, may file with the
Principal Sponsor a written claim for benefits under this Plan. Within ninety
(90) days after the filing of such a claim, the Principal Sponsor shall notify
the claimant in writing whether the claim is upheld or denied in whole or in
part or shall furnish the claimant a written notice describing specific special
circumstances requiring a specified amount of additional time (but not more than
one hundred eighty (180) days from the date the claim was filed) to reach a
decision on the claim. If the claim is denied in whole or in part, the Principal
Sponsor shall state in writing:
(i)the specific reasons for the denial;
(ii)the specific references to the pertinent provisions of the Plan on which the
denial is based;
(iii)a description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is necessary; and
(iv)an explanation of the claims review procedure set forth in this section.
(b)Review of Denied Claim. Within sixty (60) days after receipt of notice that
the claim has been denied in whole or in part, the claimant may file with the
Principal Sponsor a written request for a review and may, in conjunction
therewith, submit written issues and comments. Within sixty (60) days after the
filing of such a request for review, the Principal Sponsor shall notify the
claimant in writing whether, upon review, the claim was upheld or denied in
whole or in part or shall furnish the claimant a written notice describing
specific special circumstances requiring a specified amount of additional time
(but not more than one hundred twenty (120) days from the date the request for
review was filed) to reach a decision on the request for review.
(c)General Rules.
(i)No inquiry or question shall be deemed to be a claim or a request for a
review of a denied claim unless made in accordance with the claims procedure.
The Principal Sponsor may require that any claim for benefits and any request
for a review of a denied claim be filed on forms to be furnished by the claimant
upon request.
(ii)All decisions on claims and on requests for a review of denied claims shall
be made by the Principal Sponsor or its delegatee.
(iii)The Principal Sponsor may, in its discretion, hold one or more hearings on
a claim or a request for a review of a denied claim.
(iv)A claimant may be represented by a lawyer or other representative (at the
claimant's own expense), but the Principal Sponsor reserves the right to require
the claimant to furnish written authorization. A claimant's representative shall
be entitled, upon request, to copies of all notices given to the claimant.
(v)The decision of the Principal Sponsor on a claim and on a request for a
review of a denied claim shall be served on the claimant in writing. If a
decision or notice is not
10
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received by a claimant within the time specified, the claim or request for a
review of a denied claim shall be deemed to have been denied.
(vi)Prior to filing a claim or a request for a review of a denied claim, the
claimant or his or her representative shall have a reasonable opportunity to
review a copy of the Plan and all other pertinent documents in the possession of
the Principal Sponsor.
(vii)The Principal Sponsor may permanently or temporarily delegate its
responsibilities under this claims procedure to an individual or a committee of
individuals.
11
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SECTION 9
MISCELLANEOUS
9.1. Type of Plan. Section 3 of the Plan is a severance pay welfare
benefit plan and not a pension benefit plan. Section 4 of the Plan is a payroll
practice. Any severance payment under Section 3 of the Plan will not be
contingent directly or indirectly upon an employee retiring and shall not be
made beyond 24 months after the employee's Termination of Employment. Section 4
is neither a severance pay welfare benefit plan nor a pension benefit plan. The
plan is established with the understanding that it is an unfounded welfare plan
maintained primarily for the benefit of a select group of management or highly
compensated individuals within the meaning of ERISA.
9.2. No Assignment. No Participant shall have any transmissible interest
in any benefit under the Plan nor shall any Participant have any power to
anticipate, alienate, dispose of, pledge or encumber the same, nor shall the
Employer recognize any assignment thereof, either in whole or in part, nor shall
any benefit be subject to attachment, garnishment, execution following judgment
or other legal process.
9.3. Named Fiduciaries. The Principal Sponsor and any committee appointed
hereunder to decide claims shall be named fiduciaries for the purpose of section
402(a) of ERISA.
9.4. Administrator. The Principal Sponsor shall be the administrator for
purposes of section 3(16)(A) of ERISA.
9.5. Service of Legal Process. The corporate secretary of ADC
Telecommunications, Inc. is designated as agent for service of legal process
against the Plan. Also, service of legal process may be made upon ADC
Telecommunications, Inc. as Plan Administrator.
9.6. Validity. The invalidity or unenforceability of any provision of the
Plan shall not affect the validity or enforceability of any other provision of
the Plan which shall remain in full force and effect.
9.7. Governing Law. This Plan Statement has been executed and delivered in
the State of Minnesota and has been drawn in conformity to the laws of that
State and shall, except to the extent that U.S. federal law is controlling, be
construed and enforced in accordance with the domestic laws of the State of
Minnesota without giving effect to any choice or conflict of law provision or
rule (whether of the State of Minnesota or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Minnesota.
9.8. No Employment Rights. Neither the terms of this Plan Statement nor
the benefits hereunder nor the continuance thereof shall be a term of the
employment of any employee, and the Employer shall not be obliged to continue
the Plan. The terms of this Plan Statement shall not give any employee the right
to be retained in the employment of the Employer. The Employer assumes no
obligation to the participants under this Plan Statement with respect to any
doctrine or principle of acquired rights or similar concept.
9.9. No Guarantee. Neither the members of any committee appointed by the
Principal Sponsor nor any of the Employer's officers in any way secure or
guarantee the payment of any benefit or amount which may become due and payable
hereunder to any Participant. Neither the members of any committee nor any of
the Employer's officers shall be under any liability or responsibility (except
to the extent that liability is imposed under ERISA) for failure to effect any
of the objectives or purposes of the Plan by reason of the insolvency of the
Employer.
9.10. No Co-Fiduciary Responsibility. Except as is otherwise provided in
ERISA, no fiduciary shall be liable for an act or omission of another person
with regard to a fiduciary responsibility that has been allocated to or
delegated in this Plan Statement or pursuant to procedures set forth in this
Plan Statement.
12
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AGREEMENT BY AND BETWEEN
California First National Bank
Santa Ana, California
and
The Office of the Comptroller of the Currency
WHEREAS, California First National Bank, of Santa Ana, California ("Bank"),
and the Comptroller of the Currency of the United States of America
("Comptroller" or "OCC") seek to ensure that the Bank will operate safely and
soundly and in accordance with all applicable laws, rules, regulations, and
conditions imposed in connection with the granting of the Bank's charter; and
WHEREAS, on or about June 3, 1999, Amplicon, Inc., of Santa Ana,
California("Amplicon"), filed an application with the OCC to charter the Bank.
According to the application, Amplicon would own one hundred percent (100%) of
the Bank's outstanding
and issued stock; and
WHEREAS, according to the Bank's Business Plan ("First Business Plan"), the Bank
was expected to purchase from Amplicon certain payment streams associated with
leases of capital assets, funding the purchases of those payment streams using
FDIC-insured bank deposits, with the leasing affiliate retaining ownership of
the underlying asset and the Bank taking a first lien position; and
WHEREAS, by letter dated April 13, 2000, the Comptroller granted Preliminary
Conditional Approval of Amplicon's request to charter the Bank; and
WHEREAS, on December 29, 2000, Amplicon filed a written request with the OCC
seeking approval of a significant change in the First Business Plan. According
to the Bank's amended business plan ("Second Business Plan"), a newly-formed
holding company ("Holding Company") will own one hundred percent (100%) of the
Bank's outstanding and issued stock and will also own one hundred percent (100%)
of Amplicon's outstanding and issued stock, and only fifty percent (50%) of the
Bank's assets would be derived from purchases of payment streams from the
Holding Company or any of its affiliates, and the Bank proposes to originate
thirty percent (30%) of its own lease assets, and acquire its remaining lease
assets from independent, third-party leasing companies; and
WHEREAS, by letter dated April 3, 2001, the Comptroller issued an Amended
Preliminary Conditional Approval Letter indicating that the Second Business Plan
was acceptable, subject to additional and revised pre-opening requirements and
ongoing conditions, including the requirement that the Bank's Board of Directors
execute this Agreement; and
WHEREAS, on or about May 23, 2001 , the Bank and Holding Company entered into a
Capital Assurances and Liquidity Maintenance Agreement, which Agreement sets
forth Holding Company's obligation to provide to the Bank any necessary capital
and/or liquidity support, all in order to ensure that the Bank continues to
operate in a safe and sound manner;
NOW, THEREFORE, the Bank, by and through its duly elected and acting Board,
agrees as follows:
ARTICLE I
JURISDICTION
(1) This Agreement shall be construed to be a "written agreement entered into
with the agency" within the meaning of 12 U.S.C. Section 1818(b)(1). (2) This
Agreement shall be construed to be a "written agreement between such depository
institution and such agency" within the meaning of 12 U.S.C. Section 1818(i)(2).
(3) This Agreement shall not be construed to be a "written agreement" within the
meaning of 12 C.F.R. Section 6.4. (4) This Agreement shall be construed to be a
"written agreement" within the meaning of 12 U.S.C. Section 1818(u)(1)(A). (5)
All correspondence related to this Agreement, and any information,
documentation, reports, plans and/or other written submissions which the Bank or
Board has agreed to submit pursuant to this Agreement shall be forwarded, by
overnight mail, to:
> > > > Steven J. VanderWal
> > > > Assistant Deputy Comptroller
> > > > Office of the Comptroller of the Currency
> > > > 1925 Palomar Oaks Way, Suite 202
> > > > Carlsbad, CA 92008
with copies sent by overnight mail to:
> > > > John F. Robinson
> > > > Deputy Comptroller
> > > > Office of the Comptroller of the Currency
> > > > 50 Fremont Street, Suite 3900
> > > > San Francisco, CA 94105
and to:
> > > > Jeffery Blackburn
> > > > National Bank Examiner
> > > > Office of the Comptroller of the Currency
> > > > 1925 Palomar Oaks Way, Suite 202
> > > > Carlsbad, CA 92008
and to:
> > > > Lance Cantor
> > > > District Counsel
> > > > Office of the Comptroller of the Currency
> > > > 50 Fremont Street, Suite 3900
> > > > San Francisco, CA 94105
(6) All correspondence related to this Agreement which the OCC directs to the
Bank or Board pursuant to this Agreement shall be forwarded, by overnight mail,
to:
> > > > Colin M. Forkner
> > > > President
> > > > California First National Bank
> > > > 5 Hutton Centre Drive, Suite 200
> > > > Santa Ana, CA 92707
and to:
> > > > Harris Ravine
> > > > Chairman of the Board
> > > > California First National Bank
> > > > 5 Hutton Centre Drive, Suite 200
> > > > Santa Ana, CA 92707
ARTICLE II
APPLICATION APPROVAL REQUIREMENTS
(1) The Bank expressly acknowledges that it is obligated to comply with, and
secure Holding Company's compliance with, the following conditions and
requirements issued by the OCC in connection with Amplicon's June 3, 1999
application to charter the Bank ("Application Approval Requirements"):
> (a) During the first three (3) years of the Bank's operations, the Bank shall
> achieve, and thereafter maintain, a Tier 1 capital to adjusted total assets
> ratio (leverage ratio), as those terms are defined at 12 C.F.R. Part 3,
> Subpart A and 12 C.F.R. Part 6, Subpart A, of at least eight percent (8%);
>
> (b) The Bank shall exercise in a timely manner all of its rights and
> obligations under the May 23, 2001 Capital Assurances and Liquidity
> Maintenance Agreement executed by and between the Bank and Holding Company;
>
> (c) During the first three (3) years of the Bank's operations under the Second
> Business Plan, the Bank must achieve at least four (4) consecutive calendar
> quarters of "minimum acceptable profitability," where minimum acceptable
> profitability is defined as after-tax profits of at least $100,000 per
> calendar quarter;
>
> (d) During the first three (3) years of the Bank's operations under the Second
> Business Plan, the total dollar amount of the Bank's classified assets, as
> determined by the OCC, must not exceed fifty percent (50%) of the Bank's
> capital; and
>
> (e) Prior to engaging in any significant deviation or change from the Second
> Business Plan, the Bank must give the OCC at least sixty (60) days advance
> written notice of its intentions, and further, must obtain the OCC's written
> determination not to object to such deviation or change. The OCC shall use its
> best efforts to review and indicate, within thirty (30) days, whether it will
> object to any significant deviation or change from the Second Business Plan
> submitted pursuant to this paragraph. The Bank expressly acknowledges that if
> the OCC issues a written determination of no objection, and the Bank engages
> in any significant deviation or change from the Second Business Plan, the Bank
> still must comply with the obligations and conditions detailed in Paragraph
> (1), Subparagraphs (a) - (d) of this Article, as well as any other additional
> obligations and conditions that the OCC deems appropriate.
ARTICLE III
REMEDIAL ACTION PLAN OR NEW BUSINESS PLAN
(1) If the Bank fails to comply with one or more of the Application Approval
Requirements identified in Article II of this Agreement, then within twenty (20)
days of receiving notice of that fact from the OCC, the Bank shall submit, at
the option of the Bank: (i) a Remedial Action Plan, (ii) a new or amended
Business Plan ("Third Business Plan"), or (iii) a Contingency Plan (see Article
IV) to the OCC for the agency's review and prior determination of no objection.
(2) If the Bank elects to submit a Remedial Action Plan to address the
Application Approval Requirement(s) that have not been met, the Remedial Action
Plan will detail, inter alia:
> (a) The Application Approval Requirements that are to be addressed by the
> Remedial Action Plan;
>
> (b) The action that the Bank will take under the Remedial Action Plan to
> comply with the Application Approval Requirements; and
>
> (c) The date by which the Application Approval Requirements will be met under
> the Remedial Action Plan.
(3) Alternatively, if the Bank elects to submit a Third Business Plan to address
the Application Approval Requirements that have not been met, the Third Business
Plan shall detail, inter alia:
> (a) A description of the proposed new business activities and product lines in
> which the Bank intends to engage;
>
> (b) Evidence that the Bank will have in place sufficient capitalization prior
> to implementing the proposed Third Business Plan so as to be able to support
> the projected volume and type of business activities or product lines. The
> Bank shall submit the formula or basis it used to arrive at the proposed
> capital structure, as well as provide an analysis as to how the proposed
> capital structure will be adequate relative to market factors, the Bank's
> planning and financial assumptions, and its projected organization and
> operating expenses;
>
> (c) Evidence that the Bank will be reasonably likely to achieve and maintain
> profitability after engaging in the new business activities or product line
> contemplated under the Third Business Plan. Included within that evidence must
> be a description of the geographic areas and customer groups from which the
> Bank proposes to draw approximately seventy five percent (75%) of this new
> business; an analysis of the Bank's proposed markets in terms of economic
> characteristics; an analysis of anticipated changes in the market and the
> effect that such changes will have on the Bank's new business activities or
> product line; a list of any potential competitors in the Bank's target market
> area; a discussion of major planning assumptions (such as market growth,
> interest rates, cost of funds, and competition) for the market analysis that
> was used in developing the Bank's new plans and objectives; and appropriate
> financial projections, including a projected balance sheet, and income and
> expense statement;
>
> (d) Evidence that the Bank will have in place competent management, including
> members of the Board, with the necessary ability and experience, prior to
> engaging in the new business activities or product lines contemplated under
> the Third Business Plan;
>
> (e) A detailed analysis, and all pertinent supporting documentation, regarding
> the new credit and collateral standards, risk management processes and
> internal audit program that will be employed in connection with the Third
> Business Plan;
>
> (f) An analysis of debt service requirements and obligations for any debt that
> has been or will be issued at the holding company or Amplicon company level;
>
> (g) Information detailing any new business activities that the Bank will
> engage in with Holding Company, or with any of Holding Company's subsidiaries
> or affiliates, or with the Bank's own subsidiaries or affiliates;
>
> (h) Any material information that relates to the then current financial
> condition of Holding Company or Bank, or any of their subsidiaries or
> affiliates;
>
> (i) Copies of all existing and proposed contracts with vendors, affiliates,
> service providers and other third parties that are relevant to the proposed
> new business activities or product line;
>
> (j) Any other evidence which the Bank desires to submit to establish that the
> Bank will be operated in a safe and sound manner after implementing the Third
> Business Plan; and
>
> (k) Any other information or evidence that the OCC deems necessary to
> accomplish its regulatory and supervisory activities, including any
> information considered necessary by the OCC to assist in a determination as to
> whether the OCC takes objection to the Third Business Plan.
(4) The OCC shall use its best efforts to review and indicate, within thirty
(30) days, whether it will object to any Remedial Action Plan or Third Business
Plan submitted pursuant to Paragraph (2) or (3) of this Article. (5) Immediately
upon being informed that the OCC does not object to the Bank's Remedial Action
Plan or to the Third Business Plan, the Board shall implement, and shall
thereafter ensure the Bank's adherence to, the Remedial Action Plan or Third
Business Plan. (6) Prior to engaging in any significant deviation or change from
the Third Business Plan, the Bank must give the OCC at least sixty (60) days
advance notice of its intentions, and further, must obtain the OCC's written
determination not to object to such deviation or change. The OCC shall use its
best efforts to review and indicate, within thirty (30) days, whether it will
object to any significant deviation or change from the Third Business Plan
submitted pursuant to this paragraph. (7) If the Third Business Plan still fails
to address the unmet Application Approval Requirements, the OCC may, in its sole
discretion, permit the Bank to submit to the OCC a Fourth Business Plan designed
to address those outstanding Application Approval Requirements. The Fourth
Business Plan shall be submitted to the OCC for non-objection, and shall comply
with the requirements of Paragraph (3) of this Article, as well as any other
requirements and conditions deemed appropriate by the OCC. Immediately upon
being informed that the OCC does not object to the Bank's Fourth Business Plan,
the Board shall implement, and shall thereafter ensure the Bank's adherence to,
the Fourth Business Plan.
ARTICLE IV
CONTINGENCY PLAN
(1) If the OCC determines, in its sole judgment, that it objects to the Remedial
Action Plan or the Third (or Fourth) Business Plan, and the Bank is unable to
satisfactorily resolve the OCC's objections, upon receiving notice in writing of
that fact from the OCC, the Bank shall develop and submit to the OCC for its
review and prior determination of no objection a Contingency Plan, which
Contingency Plan shall detail the Board's proposal to sell, merge, or liquidate
the Bank under 12 U.S.C. Section 181. (2) The Contingency Plan shall be
submitted to the OCC not later than forty five (45) days after receipt of the
written notice from the OCC as set forth in paragraph 1 of this Article. (3)
After the OCC has advised the Bank that it does not object to the Contingency
Plan, the Board shall immediately implement, and thereafter ensure adherence to,
the terms of the Contingency Plan. Failure to submit a timely, acceptable
Contingency Plan may be deemed a violation of this Agreement, in the exercise of
the OCC's sole discretion.
ARTICLE V
TERM OF AGREEMENT
(1) This Agreement shall become effective immediately upon its execution by both
parties (effective date), and shall remain in full force and effect for a period
of not less than three (3) years from the date that the Bank commences
operations. (2) If the Bank fails to meet any of the Application Approval
Requirements referenced in paragraph (1) of Article II, then this Agreement will
remain in full force and effect until the OCC, in its sole discretion, elects to
terminate the Agreement.
ARTICLE VI
CONCLUDING PROVISIONS
(1) It is expressly and clearly understood that if, at any time, the Comptroller
deems it appropriate in fulfilling the responsibilities of the OCC to undertake
any action affecting the Bank, nothing in this Agreement shall in any way
inhibit, estop, bar, or otherwise prevent the Comptroller from so doing. (2) Any
time limitations imposed by this Agreement shall begin to run from the effective
date of this Agreement. Such time requirements may be extended in writing by the
Comptroller or his duly authorized representative for good cause upon written
application by the Board. (3) The provisions of this Agreement shall be
effective upon execution by the Comptroller and its provisions shall continue in
full force and effect, subject to the limitations detailed in Article V, unless
or until such provisions are modified, waived, or terminated in writing by the
Comptroller. (4) To the extent that any of the provisions of this Agreement
conflict with the terms in any correspondence between the Comptroller and the
Bank, including the April 13, 2000 Preliminary Conditional Charter Approval
Letter, or the April 3, 2001 Amended Preliminary Conditional Approval Letter,
the provisions of this Agreement shall control. (5) As used here, the term
"Agreement" means a supervisory "written agreement entered into with the agency"
as contemplated by 12 U.S.C. Section 1818(b)(1), and expressly does not form,
and may not be construed to form, a contract binding on the OCC or the United
States. Notwithstanding the absence of mutuality of obligation, or of
consideration, or of a contract, the OCC may enforce any of the commitments or
obligations herein undertaken by the Bank under its supervisory powers,
including 12 U.S.C. Section 1818(b)(1), and not as a matter of contract law. The
Bank expressly acknowledges that neither the Bank nor the OCC has any intention
to enter into a contract. The Bank also expressly acknowledges that no OCC
officer or employee has statutory or other authority to bind the United States,
the U.S. Treasury Department, the OCC, or any other federal bank regulatory
agency or entity, or any officer or employee of any of those entities to a
contract affecting the OCC's exercise of its supervisory responsibilities. The
terms of this Agreement, including this paragraph, are not subject to amendment
or modification by any extraneous expression, prior agreements or arrangements,
or negotiations between the parties, whether oral or written. IN TESTIMONY
WHEREOF, the undersigned, authorized by the Comptroller, has hereunto set his
hand on behalf of the Comptroller.
Steven J. VanderWal /s/ May 23, 2001 Steven J. VanderWal
Assistant Deputy Comptroller
Office of the Comptroller of the Currency
> Date
IN TESTIMONY WHEREOF, the undersigned, as the duly elected and acting Board of
Directors of the Bank, have hereunto set their hands on behalf of the Bank.
Harris Ravine /s/ May 21, 2001 Harris Ravine, Chairman of the Board
Date
Colin M. Forkner /s/ May 21, 2001 Colin M. Forkner, President
> Date
Danilo Cacciamatta /s/ May 21, 2001 Danilo Cacciamatta, Director
> Date
S. Leslie Jewett /s/ May 21, 2001 S. Leslie Jewett, Director
> Date
Robert W. Kelley /s/ May 21, 2001 Robert W. Kelley, Director
> Date
|
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EXHIBIT 10.46
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE—GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
[LOGO]
1. Basic Provisions ("Basic Provisions").
1.1 Parties: This Lease ("Lease"), dated for reference purposes only,
April 5, 2000, is made by and between KILROY REALTY, L.P., a Delaware Limited
Partnership, KILROY REALTY CORPORATION, a Maryland Corporation, General Partner
("Lessor") and STAAR SURGICAL COMPANY, a Delaware Corporation ("Lessee"),
(collectively the "Parties," or individually a "Party").
1.2(a) Premises: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 27121 Aliso Creek Road, Suites 100, 105,
110 & 115, located in the City of Aliso Viejo, County of Orange, State of
California, with zip code 92656, as outlined on Exhibit "A" attached hereto
("Premises"). The "Building" is that certain building containing the Premises
and generally described as (describe briefly the nature of the Building): a
single story industrial/commercial/office building containing a total of
approximately 15,208 rentable square feet, as depicted on Exhibit "B," attached
hereto, located in a five (5) building industrial/commercial/office Industrial
Center containing a total of approximately 133,334 rentable square feet, as
depicted on Exhibit "C," attached hereto. The Premises contain approximately
6,164 rentable square feet.
In addition to Lessee's rights to use and occupy the Premises as hereinafter
specified, Lessee shall have non-exclusive rights to the Common Areas (as
defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any
rights to the roof, exterior walls or utility raceways of the Building or to any
other buildings in the Industrial Center. The Premises, the Building, the Common
Areas, the land upon which they are located, along with all other buildings and
improvements thereon, are herein collectively referred to as the "Industrial
Center." (Also see Paragraph 2.)
1.2(b) Parking: twelve (12) unreserved vehicle parking spaces ("Unreserved
Parking Spaces"); and three (3) reserved vehicle parking spaces ("Reserved
Parking Spaces"). (Also see Paragraph 2.6.)
1.3 Term: three (3) years and -0- months ("Original Term") commencing
May 1, 2000 ("Commencement Date") and ending April 30, 2003 ("Expiration Date").
(Also see Paragraph 3.)
1.4 Early Possession: Lessee acknowledges that Lesee is now in possession
of the Premises. See also paragraphs 50 and 51 of the Addendum to Lease ("Early
Possession Date"). (Also see Paragraphs 3.2 and 3.3.)
1.5 Base Rent: $8,155.00 per month ("Base Rent"), payable on the first day
of each month commencing upon the Commencement Date (Also see Paragraph 4.)
/x/If this box is checked, this Lease provides for the Base Rent to be adjusted
per Addendum 49, attached hereto.
1.6(a) Base Rent Paid Upon Execution: $8,155.00 as Base Rent for the month
of May, 2000.
1.6(b) Lessee's Share of Common Area Operating Expenses: forty and 53/100
percent (40.53%) of the Building and four and 623/1000 percent (4.623%) of the
Industrial Center ("Lessee's Share") as determined by /x/ prorata square footage
of the Premises as compared to the total square footage of the Building and the
Industrial Center, respectively or / / other criteria as described in Addendum
____.
1.7 Security Deposit: $8,150.00 ("Security Deposit"); see also paragraph
50 of the Addendum to Lease. (Also see Paragraph 5.)
1.8 Permitted Use: Manufacture, sale, warehouse and distribution of
medical devices, and office purposes associated therewith ("Permitted Use")
(Also see Paragraph 6.)
Page 1 of 30
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1.9 Insuring Party. Lessor is the "Insuring Party." (Also see Paragraph
8.)
1.10(a) Real Estate Brokers. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
// ________________________ represents Lessor exclusively ("Lessor's Broker");
// ________________________ represents Lessee exclusively ("Lessee's Broker");
or
// ________________________ represents both Lessor and Lessee ("Dual Agency").
(Also see Paragraph 15.)
1.10(b) Payment to Brokers. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate shares
as they may mutually designate in writing, a fee as set forth in a separate
written agreement between Lessor and said Broker(s) (or in the event there is no
separate written agreement between Lessor and said Broker(s), the sum of $ N/A)
for brokerage services rendered by said Brokers(s) in connection with this
transaction.
1.11 Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by N/A ("Guarantor"). (Also see Paragraph 37.)
1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 49 through 53, and Exhibits "A" through "D", all of
which constitute a part of this Lease.
2. Premises, Parking and Common Areas.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of the terms,
covenants and conditions set forth in this Lease. Unless otherwise provided
herein, any statement of square footage set forth in this Lease, or that may
have been used in calculating rental and/or Common Area Operating Expenses, is
an approximation which Lessor and Lessee agree is reasonable and the rental and
Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and free
of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the Commencement
Date. If a non-compliance with said warranty exists as of the Commencement Date,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify same at Lessor's expense. If Lessee does
not give Lessor written notice of a non-compliance with this warranty within
thirty (30) days after the Commencement Date, correction of that non-compliance
shall be the obligation of Lessee at Lessee's sole cost and expense.
2.3 Compliance with Covenants, Restrictions and Building Code. Lessor
warrants that any improvements (other than those constructed by Lessee or at
Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the Commencement Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Commencement Date. Said warranties shall not apply to any
Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. If the Premises do not comply with said warranties, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of
such non-compliance, take such action, at Lessor's expense, as may be reasonable
or appropriate to rectify the non-compliance. Lessor makes no warranty that the
Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable
Laws (as defined in Paragraph 2.4).
Page 2 of 30
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2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that it has
been advised by the Broker(s) to satisfy itself with respect to the condition of
the Premises (including, but not limited to, the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively, "Applicable Laws") and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee's occupancy of the
Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to said matters other than as set forth in this Lease.
2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such
event, Lessee shall, at Lessee's sole cost and expense, correct any
non-compliance of the Premises with said warranties.
2.6 Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said number.
Said parking spaces shall be used for parking by vehicles no larger than
full-size passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9).
(a) Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shipper, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities described
in this Paragraph 2.6, then Lessor shall have the right, without notice, in
addition to such other rights and remedies that it may have, to remove or tow
away the vehicle involved and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease, provide the parking
facilities required by Applicable Law.
2.7 Common Areas—Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general
non-exclusive use of Lessor, Lessee and other lessees of the Industrial Center
and their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.
2.8 Common Areas—Lessee's Rights. Lessor hereby grants to Lessee, for the
benefit of Lessee and its employees, suppliers, shippers, contractors, customers
and invitees, during the term of this Lease, the non-exclusive right to use, in
common with others entitled to such use, the Common Areas as they exist from
time to time, subject to any rights, powers, and privileges reserved by Lessor
under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Industrial Center. Under no circumstances
shall the right herein granted to use the Common Areas be deemed to include the
right to store any property, temporarily or permanently, in the Common Areas.
Any such storage shall be permitted only by the prior written consent of Lessor
or Lessor's designated agent, which consent may be revoked at any time. In the
event that any unauthorized storage shall occur then Lessor shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
2.9 Common Areas—Rules and Regulations. Lessor or such other person(s) as
Lessor may appoint shall have the exclusive control and management of the Common
Areas and shall have the right, from time
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to time, to establish, modify, amend and enforce reasonable Rules and
Regulations with respect thereto in accordance with Paragraph 40. Lessee agrees
to abide by and conform to all such Rules and Regulations, and to cause its
employees, suppliers, shippers, customers, contractors and invitees to so abide
and conform. Lessor shall not be responsible to Lessee for the non-compliance
with said rules and regulations by other lessees of the Industrial Center.
2.10 Common Areas—Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time:
(a) To make changes to the Common Areas, including, without limitation,
changes in the location, size, shape and number of driveways, entrances, parking
spaces, parking areas, loading and unloading areas, ingress, egress, direction
of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance purposes so
long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the Industrial Center
to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional improvements,
repairs or alterations to the Industrial Center, or any portion thereof; and
(f) To do and perform such other acts and make such other changes in, to or
with respect to the Common Areas and Industrial Center as Lessor may, in the
exercise of sound business judgment, deem to be appropriate.
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after the
Early Possession Date but prior to the Commencement Date, the obligation to pay
Base Rent shall be abated for the period of such early occupancy. All other
terms of this Lease, however, (including, but not limited to, the obligations to
pay Lessee's Share of Common Area Operating Expenses and to carry the insurance
required by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original
Term.
3.3 Delay in Possession. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by the
Commencement Date, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease, or the obligations of
Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not,
except as otherwise provided herein, be obligated to pay rent or perform any
other obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within ten (10) days after
the end of said sixty (60) day period, cancel this Lease, in which event the
Parties shall be discharged from all obligations hereunder; provided further,
however, that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. Except as may be otherwise
provided, and regardless of when the Original Term actually commences, if
possession is not tendered to Lessee when required by this Lease and Lessee does
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to the period
during which the Lessee would have otherwise enjoyed under the terms hereof, but
minus any days of delay caused by the acts, changes or omissions of Lessee.
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4. Rent.
4.1 Base Rent. Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time, to Lessor in lawful money of the
United States, without offset or deduction, on or before the day on which it is
due under the terms of this Lease. Base Rent and all other rent and charges for
any period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other persons or at such other addresses as Lessor may from time to
time designate in writing to Lessee.
4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined,
over Common Area Operating Expenses for the calendar year 2000, as the "Base
Year" for such Common Area Operating Expenses, during each calendar year of the
term of this Lease, commending January 1, 2001 in accordance with the following
provisions:
(a) "Common Area Operating Expenses" are defined, for purposes of this
Lease, as all costs incurred by Lessor relating to the ownership and operation
of the Industrial Center, including, but not limited to, the following:
(i) The operation, repair and maintenance, in neat, clean, good order and
condition, of the following:
(aa) The Common Areas, including parking areas, loading and unloading areas,
trash areas, roadways, sidewalks, walkways, parkways, driveways, landscaped
areas, striping, bumpers, irrigation systems, Common Area lighting facilities,
fences and gates, elevators and roof.
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems.
(ii) The cost of water, gas, electricity and telephone to service the Common
Areas.
(iii) Trash disposal, property management and security services and the
costs of any environmental inspections.
(iv) Reserves set aside for maintenance and repair of Common Areas.
(v) Any increase above the Base Real Property Taxes (as defined in Paragraph
10.2(b)) for the Building and the Common Areas.
(vi) Any "Insurance Cost Increase" (as defined in Paragraph 8.1).
(vii) The cost of insurance carried by Lessor with respect to the Common
Areas.
(viii) Any deductible portion of an insured loss concerning the Building or
the Common Areas.
(ix) Any other services to be provided by Lessor that are stated elsewhere
in this Lease to be a Common Area Operating Expense.
(b) Any Common Area Operating Expenses and Real Property Taxes that are
specifically attributable to the Building or to any other building in the
Industrial Center or to the operation, repair and maintenance thereof, shall be
allocated entirely to the Building or to such other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Industrial Center.
(c) The inclusion of the improvements, facilities and services set forth in
Subparagraph 4.2(a) shall not be deemed to impose an obligation upon Lessor to
either have said improvements or facilities or to provide those services unless
the Industrial Center already has the same, Lessor already
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provides the services, or Lessor has agreed elsewhere in this Lease to provide
the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses over the Base Year
Common Area Operating Expenses shall be payable by Lessee, commencing January 1,
2001, within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor setting forth the calendar year 2000
Base Year Common Area Operating Expenses and increases thereof after January 1,
2001. At Lessor's option, however, an amount may be estimated by Lessor from
time to time of Lessee's Share of annual Common Area Operating Expenses and the
same shall be payable monthly or quarterly, as Lessor shall designate,
commencing January 1, 2001, during each 12-month period of the Lease term, on
the same day as the Base Rent is due hereunder. Lessor shall deliver to Lessee
within ninety (90) days after the expiration of each calendar year, or as soon
thereafter as available, a reasonably detailed statement showing Base Year
Common Area Operating Expenses and Lessee's Share of increases of the actual
Common Area Operating Expenses over Base Year Common Area Operating Expenses
incurred during the preceding year. If Lessee's payments under this Paragraph
4.2(d) during said preceding year exceed Lessee's Share as indicated on said
statement, Lessee shall be credited the amount of such overpayment against
Lessee's Share of Common Area Operating Expenses next becoming due. If Lessee's
payments under this Paragraph 4.2(d) during said preceding year were less than
Lessee's Share as indicated on said statement, Lessee shall pay to Lessor the
amount of the deficiency within ten (10) days after delivery by Lessor to Lessee
of said statement. Payment of Lessee's Share of Common Area Operating Expenses
for any partial year after the Base Year shall be prorated based upon the actual
number of months or days involved in such subsequent year.
5. Security Deposit. Lessee shall deposit with Lessor upon Lessee's execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefore
deposit monies with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional monies with Lessor as an addition to the Security Deposit so that the
total amount of the Security Deposit shall at all times bear the same proportion
to the then current Base Rent as the initial Security Deposit bears to the
initial Base Rent set forth in Paragraph 1.5. Lessor shall not be required to
keep all or any part of the Security Deposit separate from its general accounts.
Lessor shall, at the expiration or earlier termination of the term hereof and
after Lessee has vacated the Premises, return to Lessee (or, at Lessor's option,
to the last assignee, if any, of Lessee's interest herein), that portion of the
Security Deposit not used or applied by Lessor. Unless otherwise expressly
agreed in writing by Lessor, no part of the Security Deposit shall be considered
to be held in trust, to bear interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.
6. Use.
6.1 Permitted Use.
(a) Lessee shall use and occupy the Premises only for the Permitted Use set
forth in Paragraph 1.8, or any other legal use which is reasonably comparable
thereto, and for no other purpose. Lessee shall not use or permit the use of the
Premises in a manner that is unlawful, creates waste or a nuisance, or that
disturbs owners and/or occupants of, or causes damage to the Premises or
neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its consent
to any written request by Lessee, Lessee's assignees or subtenants, and by
prospective assignees and subtenants of Lessee, its assignees and subtenants,
for a modification of said Permitted Use, so long as the same will
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not impair the structural integrity of the improvements on the Premises or in
the Building or the mechanical or electrical systems therein, does not conflict
with uses by other lessees, is not significantly more burdensome to the Premises
or the Building and the improvements thereon, and is otherwise permissible
pursuant to this Paragraph 6. If Lessor elects to withhold such consent, Lessor
shall within five (5) business days after such request give a written
notification of same, which notice shall include an explanation of Lessor's
reasonable objections to the change in use.
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous Substance" as
used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment, or the Premises; (ii) regulated or monitored by any governmental
authority; or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products or by-products thereof. Lessee
shall not engage in any activity in or about the Premises which constitutes a
Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Requirements (as defined in
Paragraph 6.3). "Reportable Use" shall mean (i) the installation or use of any
above or below ground storage tank, (ii) the generation, possession, storage,
use, transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority, and (iii) the presence
in, on or about the Premises of a Hazardous Substance with respect to which any
Applicable Laws require that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor's prior consent, but upon notice to Lessor and in compliance
with all Applicable Requirements, use any ordinary and customary materials
reasonably required to be used by Lessee in the normal course of the Permitted
Use, so long as such use is not a Reportable Use and does not expose the
Premises, or neighboring properties to any meaningful risk of contamination or
damage or expose Lessor to any liability therefor. In addition, Lessor may (but
without any obligation to do so) condition its consent to any Reportable Use of
any Hazardous Substance by Lessee upon Lessee's giving Lessor such additional
assurances as Lessor, in its reasonable discretion, deems necessary to protect
itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefor, including, but not limited
to, the installation (and, at Lessor's option, removal on or before Lease
expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements) and/or the deposit
of an additional Security Deposit under Paragraph 5 hereof.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises or the Building, other than as previously consented to by
Lessor, Lessee shall immediately give Lessor written notice thereof, together
with a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action, or proceeding given to, or received from,
any governmental authority or private party concerning the presence, spill,
release, discharge of, or exposure to, such Hazardous Substance including, but
not limited to, all such documents as may be involved in any Reportable Use
involving the Premises. Lessee shall not cause or permit any Hazardous Substance
to be spilled or released in, on, under or about the Premises (including,
without limitation, through the plumbing or sanitary sewer system).
(c) Indemnification. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys' and
consultants' fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's
obligations under this Paragraph 6.2(c)
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shall include, but not be limited to, the effects of any contamination or injury
to person, property or the environment created or suffered by Lessee, and the
cost of investigation (including consultants' and attorneys' fees and testing),
removal, remediation, restoration and/or abatement thereof, or of any
contamination therein involved, and shall survive the expiration or earlier
termination of this Lease. No termination, cancellation or release agreement
entered into by Lessor and Lessee shall release Lessee from its obligations
under this Lease with respect to Hazardous Substances, unless specifically so
agreed by Lessor in writing at the time of such agreement.
6.3 Lessee's Compliance with Requirements. Lessee shall, at Lessee's sole
cost and expense, fully, diligently and in a timely manner, comply with all
"Applicable Requirements," which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating in any manner to the Premises (including,
but not limited to, matters pertaining to (i) industrial hygiene, (ii)
environmental conditions on, in, under or about the Premises, including soil and
groundwater conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill, or release
of any Hazardous Substance), now in effect or which may hereafter come into
effect. Lessee shall, within five (5) days after receipt of Lessor's written
request, provide Lessor with copies of all documents and information, including,
but not limited to, permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in
writing (with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or involving
failure by Lessee or the Premises to comply with any Applicable Requirements.
6.4 Inspection; Compliance with Law. Lessor, Lessor's agents, employees,
contractors and designated representatives, and the holders of any mortgages,
deeds of trust or ground leases on the Premises ("Lenders") shall have the right
to enter the Premises at any time in the case of an emergency, and otherwise at
reasonable times, for the purpose of inspecting the condition of the Premises
and for verifying compliance by Lessee with this Lease and all Applicable
Requirements (as defined in Paragraph 6.3), and Lessor shall be entitled to
employ experts and/or consultants in connection therewith to advise Lessor with
respect to Lessee's activities, including, but not limited to, Lessee's
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance on or from the Premises. The costs and expenses of any such
inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee, is found to exist
or to be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In such case, Lessee shall upon request reimburse Lessor or
Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. Maintenance, Repairs, Utility Installations, Trade Fixtures and
Alterations.
7.1 Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance
with Covenants, Restrictions and Building Code), 7.2 (Lessor's Obligations), 9
(Damage or Destruction), and 14 (Condemnation), Lessee shall, at Lessee's sole
cost and expense and at all times, keep the Premises and every part thereof in
good order, condition and repair (whether or not such portion of the Premises
requiring repair, or the means of repairing the same, are reasonably or readily
accessible to Lessee, and whether or not the need for such repairs occurs as a
result of Lessee's use, any prior use, the elements or the age of such portion
of the Premises), including, without limiting the generality of the foregoing,
all equipment or facilities specifically serving the Premises, such as plumbing,
heating, air conditioning, ventilating, electrical, lighting facilities,
boilers, fired or unfired pressure vessels, fire hose connections if within the
Premises, fixtures, interior walls, interior surfaces of exterior walls,
ceilings, floors, windows, doors, plate glass, and skylights, but excluding any
items which are the responsibility of Lessor pursuant to Paragraph 7.2 below.
Lessee, in keeping the Premises in good order, condition and repair, shall
exercise and perform good maintenance practices. Lessee's
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obligations shall include restorations, replacements or renewals when necessary
to keep the Premises and all improvements thereon or a part thereof in good
order, condition and state of repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and maintain a
contract, with copies to Lessor, in customary form and substance for and with a
contractor specializing and experienced in the inspection, maintenance and
service of the heating, air conditioning and ventilation system for the
Premises. However, Lessor reserves the right, upon notice to Lessee, to procure
and maintain the contract for the heating, air conditioning and ventilating
systems, and if Lessor so elects, Lessee shall reimburse Lessor, upon demand,
for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under this Paragraph
7.1, Lessor may enter upon the Premises after ten (10) days' prior written
notice to Lessee (except in the case of an emergency, in which case no notice
shall be required), perform such obligations on Lessee's behalf, and put the
Premises in good order, condition and repair, in accordance with Paragraph 13.2
below.
7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement
pursuant to Paragraph 4.2, shall keep in good order, condition and repair the
foundations, exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipe and hose (if located in the
Common Areas) or other automatic fire extinguishing system including fire alarm
and/or smoke detection systems and equipment, fire hydrants, parking lots,
walkways, parkways, driveways, landscaping, fences, signs and utility systems
serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises. Lessee expressly waives
the benefit of any statute now or hereafter in effect which would otherwise
afford Lessee the right to make repairs at Lessor's expense or to terminate this
Lease because of Lessor's failure to keep the Building, Industrial Center or
Common Areas in good order, condition and repair.
7.3 Utility Installations, Trade Fixtures, Alterations.
(a) Definitions; Consent Required. The term "Utility Installations" is
used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "Alterations" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or Trade
Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to be
made any Alterations or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent. Lessee may, however, make
non-structural Utility Installations to the interior of the Premises (excluding
the roof) without Lessor's consent but upon notice to Lessor, so long as they
are not visible from the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing walls, or changing or
interfering with the fire sprinkler or fire detection systems and the cumulative
cost thereof during the term of this Lease as extended does not exceed
$2,500.00.
(b) Consent. Any Alterations or Utility Installations that Lessee shall
desire to make and which require the consent of the Lessor shall be presented to
Lessor in written form with detailed plans. All consents given by Lessor,
whether by virtue of Paragraph 7.3(a) or by subsequent specific consent, shall
be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this
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Lease shall be done in a good and workmanlike manner, with good and sufficient
materials, and be in compliance with all Applicable Requirements. Lessee shall
promptly upon completion thereof furnish Lessor with as-built plans and
specifications therefor. Lessor may (but without obligation to do so) condition
its consent to any requested Alteration or Utility Installation that costs
$2,500.00 or more upon Lessee's providing Lessor with a lien and completion bond
in an amount equal to one and one-half times the estimated cost of such
Alteration or Utility Installation.
(c) Lien Protection. Lessee shall pay when due all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense, defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof
against the Lessor or the Premises. If Lessor shall require, Lessee shall
furnish to Lessor a surety bond satisfactory to Lessor, in an amount equal to
one and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's attorneys' fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so.
7.4 Ownership, Removal, Surrender, and Restoration.
(a) Ownership. Subject to Lessor's right to require their removal and to
cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owned by Lessee, but considered a part of
the Premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee-Owned
Alterations and Utility Installations. Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.
(b) Removal. Unless otherwise agreed in writing, Lessor may require that
any or all Lessee-Owned Alterations or Utility Installations be removed by the
expiration or earlier termination of this Lease, and that the area affected by
the removal of the Lessee-Owned Alterations or Utility Installations be restored
to the condition that existed prior to the installation of the particular
Lessee-Owned Alteration or Utility Installation, notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(c) Surrender/Restoration. Lessee shall surrender the Premises by the end
of the last day of the Lease term or any earlier termination date, clean and
free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease. Except
as otherwise agreed or specified herein, the Premises, as surrendered, shall
include the Alterations and Utility Installations. The obligation of Lessee
shall include the repair of any damage occasioned by the installation,
maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment, and
Lessee-Owned Alterations and Utility Installations, as well as the removal of
any storage tank installed by or for Lessee, and the removal, replacement, or
remediation of any soil, material or ground water contaminated by Lessee, all as
may then be required by Applicable Requirements and/or good practice. Lessee's
Trade Fixtures shall remain the property of Lessee and shall be removed by
Lessee subject to its obligation to repair and restore the Premises per this
Lease.
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8. Insurance; Indemnity.
8.1 Payment of Premium Increases.
(a) As used herein, the term "Insurance Cost Increase" is defined as any
increase in the actual cost of the insurance applicable to the Building and
required to be carried by Lessor pursuant to Paragraphs 8.2(b), 8.3(a) and
8.3(b), ("Required Insurance"), over and above the Base Premium, as hereinafter
defined, calculated on an annual basis. "Insurance Cost Increase" shall include,
but not be limited to, requirements of the holder of a mortgage or deed of trust
covering the Premises, increased valuation of the Premises, and/or a general
premium rate increase. The term "Insurance Cost Increase" shall not, however,
include any premium increases resulting from the nature of the occupancy of any
other lessee of the Building. If the parties insert a dollar amount in Paragraph
1.9, such amount shall be considered the "Base Premium." If a dollar amount has
not been inserted in Paragraph 1.9 and if the Building has been previously
occupied during the twelve (12) month period immediately preceding the
Commencement Date, the "Base Premium" shall be the annual premium applicable to
such twelve (12) month period. If the Building was not fully occupied during
such twelve (12) month period, the "Base Premium" shall be the lowest annual
premium reasonably obtainable for the Required Insurance as of the Commencement
Date, assuming the most nominal use possible of the Building. In no event,
however, shall Lessee be responsible for any portion of the premium cost
attributable to liability insurance coverage in excess of $1,000,000 procured
under Paragraph 8.2(b).
(b) Lessee shall pay any Insurance Cost Increase to Lessor pursuant to
Paragraph 4.2. Premiums for policy periods commencing prior to, or extending
beyond, the term of this Lease shall be prorated to coincide with the
corresponding Commencement Date or Expiration Date.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force during the
term of this Lease a Commercial General Liability policy of insurance protecting
Lessee, Lessor and any Lender(s) whose names have been provided to Lessee in
writing (as additional insureds) against claims for bodily injury, personal
injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $2,000,000 per occurrence with
an "Additional Insured-Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an "insured contract"
for the performance of Lessee's indemnity obligations under this Lease. The
limits of said insurance required by this Lease or as carried by Lessee shall
not, however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by Lessee shall be primary to and not
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only.
(b) Carried by Lessor. Lessor shall also maintain liability insurance
described in Paragraph 8.2(a) above, in addition to and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
8.3 Property Insurance—Building, Improvements and Rental Value.
(a) Building and Improvements. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and to any Lender(s), insuring against loss or damage to
the Premises. Such insurance shall be for full replacement cost, as the same
shall exist from time to time, or the amount required by any Lender(s), but in
no event more than the commercially reasonable and available insurable value
thereof if, by reason of the unique nature or age of the improvements involved,
such latter amount is less than full replacement cost. Lessee-Owned Alterations
and Utility Installations, Trade Fixtures and Lessee's personal property shall
be insured by Lessee pursuant to Paragraph 8.4. If the coverage is available and
commercially appropriate, Lessor's policy or policies shall insure against all
risks of direct physical loss or damage
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(including the perils of flood and/or earthquake), including coverage for any
additional costs resulting from debris removal and reasonable amounts of
coverage for the enforcement of any ordinance or law regulating the
reconstruction or replacement of any undamaged sections of the Building required
to be demolished or removed by reason of the enforcement of any building,
zoning, safety or land use laws as the result of a covered loss, but not
including plate glass insurance. Said policy or policies shall also contain an
agreed valuation provision in lieu of any co-insurance clause, waiver of
subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located.
(b) Rental Value. Lessor shall also obtain and keep in force during the
term of this Lease a policy or policies in the name of Lessor, with loss payable
to Lessor and any Lender(s), insuring the loss of the full rental and other
charges payable by all lessees of the Building to Lessor for one year (including
all Real Property Taxes, insurance costs, all Common Area Operating Expenses and
any scheduled rental increases). Said insurance may provide that in the event
the Lease is terminated by reason of an insured loss, the period of indemnity
for such coverage shall be extended beyond the date of the completion of repairs
or replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any co-insurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income, Real
Property Taxes, insurance premium costs and other expenses, if any, otherwise
payable, for the next 12-month period. Common Area Operating Expenses shall
include any deductible amount in the event of such loss.
(c) Adjacent Premises. Lessee shall pay for any increase in the premiums
for the property insurance of the Building and for the Common Areas or other
buildings in the Industrial Center if said increase is caused by Lessee's acts,
omissions, use or occupancy of the Premises.
(d) Lessee's Improvements. Since Lessor is the Insuring Party, Lessor
shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 Lessee's Property Insurance. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by Lessor as the Insuring Party under Paragraph 8.3(a). Such insurance
shall be full replacement cost coverage with a deductible not to exceed $1,000
per occurrence. The proceeds from any such insurance shall be used by Lessee for
the replacement of personal property and the restoration of Trade Fixtures and
Lessee-Owned Alterations and Utility Installations. Upon request from Lessor,
Lessee shall provide Lessor with written evidence that such insurance is in
force.
8.5 Insurance Policies. Insurance required hereunder shall be in companies
duly licensed to transact business in the state where the Premises are located,
and maintaining during the policy term a "General Policyholders Rating" of at
least B+, V, or such other rating as may be required by a Lender, as set forth
in the most current issue of "Best's Insurance Guide." Lessee shall not do or
permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor,
within seven (7) days after the earlier of the Early Possession Date or the
Commencement Date, certified copies of, or certificates evidencing the existence
and amounts of, the insurance required under Paragraph 8.2(a) and 8.4. No such
policy shall be cancelable or subject to modification except after thirty (30)
days' prior written notice to Lessor. Lessee shall at least thirty (30) days
prior to the expiration of such policies, furnish Lessor with evidence of
renewals or "insurance binders" evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand.
8.6 Waiver of Subrogation. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages (whether in contract or in tort) against the
other, for loss or damage to their property arising out of or incident to the
perils
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required to be insured against under Paragraph 8. The effect of such releases
and waivers of the right to recover damages shall not be limited by the amount
of insurance carried or required, or by any deductibles applicable thereto.
Lessor and Lessee agree to have their respective insurance companies issuing
property damage insurance waive any right to subrogation that such companies may
have against Lessor or Lessee, as the case may be, so long as the insurance is
not invalidated thereby.
8.7 Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee's business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment. In case any action or proceeding be brought against Lessor by reason
of any of the foregoing matters, Lessee, upon notice from Lessor, shall defend
the same at Lessee's expense by counsel reasonably satisfactory to Lessor and
Lessor shall cooperate with Lessee in such defense. Lessor need not have first
paid any such claim in order to be so indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or neglect of any other
lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center. Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee's business or for any loss of income or profit therefrom.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined in Paragraph 9.1(d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50%) or more of the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any lessees of the
Building) of the Building shall, at the option of Lessor, be deemed to be
Premises Total Destruction.
(c) "Insured Loss" shall mean damage or destruction to the Premises, other
than Lessee-Owned Alterations and Utility Installations and Trade Fixtures,
which was caused by an event
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required to be covered by the insurance described in Paragraph 8.3(a)
irrespective of any deductible amounts or coverage limits involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or discovery
of a condition involving the presence of, or a contamination by, a Hazardous
Substance as defined in Paragraph 6.2(a), in, on, or under the Premises.
9.2 Premises Partial Damage—Insured Loss. If Premises Partial Damage that
is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such
damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect. In the event, however, that there is a shortage of
insurance proceeds and such shortage is due to the fact that, by reason of the
unique nature of the improvements in the Premises, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within ten (10) days
following receipt of written notice of such shortage and request therefor. If
Lessor receives said funds or adequate assurance thereof within said ten (10)
day period, Lessor shall complete them as soon as reasonably possible and this
Lease shall remain in full force and effect. If Lessor does not receive such
funds or assurance within said period, Lessor may nevertheless elect by written
notice to Lessee within ten (10) days thereafter to make restoration and repair
as is commercially reasonable with Lessor paying any shortage in proceeds, in
which case this Lease shall remain in full force and effect. If Lessor does not
receive such funds or assurance within such ten (10) day period, and if Lessor
does not so elect to restore and repair, then this Lease shall terminate sixty
(60) days following the occurrence of the damage or destruction. Unless
otherwise agreed, Lessee shall in no event have any right to reimbursement from
Lessor for any funds contributed by Lessee to repair any such damage or
destruction. Premises Partial Damage due to flood or earthquake shall be subject
to Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that there may be
some insurance coverage, but the net proceeds of any such insurance shall be
made available for the repairs if made by either Party.
9.3 Partial Damage—Uninsured Loss. If Premises Partial Damage that is not
an Insured Loss occurs, unless caused by a negligent or willful act of Lessee
(in which event Lessee shall make the repairs at Lessee's expense and this Lease
shall continue in full force and effect), Lessor may, at Lessor's option, either
(i) repair such damage as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) give
written notice to Lessee within thirty (30) days after receipt by Lessor of
knowledge of the occurrence of such damage of Lessor's desire to terminate this
Lease as of the date sixty (60) days following the date of such notice. In the
event Lessor elects to give such notice of Lessor's intention to terminate this
Lease, Lessee shall have the right within ten (10) days after the receipt of
such notice to give written notice to Lessor of Lessee's commitment to pay for
the repair of such damage totally at Lessee's expense and without reimbursement
from Lessor. Lessee shall provide Lessor with the required funds or satisfactory
assurance thereof within thirty (30) days following such commitment from Lessee.
In such event this Lease shall continue in full force and effect, and Lessor
shall proceed to made such repairs as soon as reasonably possible after the
required funds are available. If Lessee does not give such notice and provide
the funds or assurance thereof within the times specified above, this Lease
shall terminate as of the date specified in Lessor's notice of termination.
9.4 Total Destruction. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 8.6.
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9.5 Damage Near End of Term. If at any time during the last six (6) months
of the term of this Lease there is damage for which the cost to repair exceeds
one month's Base Rent, whether or not an Insured Loss, Lessor may, at Lessor's
option, terminate this Lease effective sixty (60) days following the date of
occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (i) the date which is ten (10) days after Lessee's
receipt of Lessor's written notice purporting to terminate this Lease, or (ii)
the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor's expense, repair such damage as soon as reasonably possible
and this Lease shall continue in full force and effect. If Lessee fails to
exercise such option and provide such funds or assurance during such period,
then this Lease shall terminate as of the date set forth in the first sentence
of this Paragraph 9.5.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous Substance
Condition for which Lessee is not legally responsible, the Base Rent, Common
Area Operating Expenses and other charges, if any, payable by Lessee hereunder
for the period during which such damage or condition, its repair, remediation or
restoration continues, shall be abated in proportion to the degree to which
Lessee's use of the Premises is impaired, but not in excess of proceeds from
insurance required to be carried under Paragraph 8.3(b). Except for abatement of
Base Rent, Common Area Operating Expenses and other charges, if any, as
aforesaid, all other obligations of Lessee hereunder shall be performed by
Lessee, and Lessee shall have no claim against Lessor for any damage suffered by
reason of any such damage, destruction, repair, remediation or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises under the
provisions of this Paragraph 9 and shall not commence, in a substantial and
meaningful way, the repair or restoration of the Premises within ninety (90)
days after such obligation shall accrue, Lessee may, at any time prior to the
commencement of such repair or restoration, give written notice to Lessor and to
any Lenders of which Lessee has actual notice of Lessee's election to terminate
this Lease on a date not less than sixty (60) days following the giving of such
notice. If Lessee gives such notice to Lessor and such Lenders and such repair
or restoration is not commenced within thirty (30) days after receipt of such
notice, this Lease shall terminate as of the date specified in said notice. If
Lessor or a Lender commences the repair or restoration of the Premises within
thirty (30) days after the receipt of such notice, this Lease shall continue in
full force and effect. "Commence" as used in this Paragraph 9.6 shall mean
either the unconditional authorization of the preparation of the required plans,
or the beginning of the actual work on the Premises, whichever occurs first.
9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue in full force and effect, but subject
to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor may at
Lessor's option either (i) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) if the
estimated cost to investigate and remediate such condition exceeds twelve (12)
times the then monthly Base Rent or $100,000, whichever is greater, give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of
the occurrence of such Hazardous Substance Condition of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the excess costs of (a) investigation and remediation of such
Hazardous Substance Condition to the extent required by Applicable Requirements,
over (b) an amount equal to twelve (12) times the then monthly Base Rent or
$100,000, whichever is greater. Lessee shall provide Lessor with the funds
required of Lessee
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or satisfactory assurance thereof within thirty (30) days following said
commitment by Lessee. In such event this Lease shall continue in full force and
effect, and Lessor shall proceed to make such investigation and remediation as
soon as reasonably possible after the required funds are available. If Lessee
does not give such notice and provide the required funds or assurance thereof
within the time period specified above, this Lease shall terminate as of the
date specified in Lessor's notice of termination.
9.8 Termination—Advance Payments. Upon termination of this Lease pursuant
to this Paragraph 9, Lessor shall return to Lessee any advance payment made by
Lessee to Lessor and so much of Lessee's Security Deposit as has not been, or is
not then required to be, used by Lessor under the terms of this Lease.
9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2(a), applicable to the Industrial Center, and except as
otherwise provided in Paragraph 10.3, any increases in such amounts over the
Base Real Property Taxes shall be included in the calculation of Common Area
Operating Expenses in accordance with the provisions of Paragraph 4.2.
10.2 Real Property Tax Definitions.
(a) As used herein, the term "Real Property Taxes" shall include any form of
real estate tax or assessment, general, special, ordinary or extraordinary, and
any license fee, commercial rental tax, improvement bond or bonds, levy or tax
(other than inheritance, personal income or estate taxes) imposed upon the
Industrial Center by any authority having the direct or indirect power to tax,
including any city, state or federal government, or any school, agricultural,
sanitary, fire, street, drainage, or other improvement district thereof, levied
against any legal or equitable interest of Lessor in the Industrial Center or
any portion thereof, Lessor's right to rent or other income therefrom, and/or
Lessor's business of leasing the Premises. The term "Real Property Taxes" shall
also include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring, or changes in Applicable Law taking
effect, during the term of this Lease, including but not limited to a change in
the ownership of the Industrial Center or in the improvements thereon, the
execution of this Lease, or any modification, amendment or transfer thereof, and
whether or not contemplated by the Parties.
(b) As used herein, the term "Base Real Property Taxes" shall be the amount
of Real Property Taxes which are assessed against the Premises, Building or
Common Areas in the calendar year during which the Lease is executed. In
calculating Real Property Taxes for any calendar year, the Real Property Taxes
for any real estate tax year shall be included in the calculation of Real
Property Taxes for such calendar year based upon the number of days which such
calendar year and tax year have in common.
10.3 Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in Real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
10.4 Joint Assessment. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from
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the respective valuations assigned in the assessor's work sheets or such other
information as may be reasonably available. Lessor's reasonable determination
thereof, in good faith, shall be conclusive.
10.5 Lessee's Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center. When
possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessor's property.
11. Utilities. Lessee shall pay directly for all utilities and services
supplied to the Premises, including, but not limited to, electricity, telephone,
security, gas and cleaning of the Premises, together with any taxes thereon. If
any such utilities or services are not separately metered to the Premises or
separately billed to the Premises, Lessee shall pay to Lessor a reasonable
proportion to be determined by Lessor of all such charges jointly metered or
billed with other premises in the Building, in the manner and within the time
periods set forth in Paragraph 4.2(d).
12. Assignment and Subletting.
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign, transfer,
mortgage or otherwise transfer or encumber (collectively, "assign") or sublet
all or any part of Lessee's interest in this Lease or in the Premises without
Lessor's prior written consent given under and subject to the terms of Paragraph
36.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of twenty-five
percent (25%) or more of the voting control of Lessee shall constitute a change
in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or series of
transactions (by way of merger, sale, acquisition, financing, refinancing,
transfer, leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee's assets occurs, which results or will
result in a reduction of the Net Worth of Lessee, as hereinafter defined, by an
amount equal to or greater than twenty-five percent (25%) of such Net Worth of
Lessee as it was represented to Lessor at the time of full execution and
delivery of this Lease or at the time of the most recent assignment to which
Lessor has consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, at whichever time said Net Worth of
Lessee was or is greater, shall be considered an assignment of this Lease by
Lessee to which Lessor may reasonably withhold its consent. "Net Worth of
Lessee" for purposes of this Lease shall be the net worth of Lessee (excluding
any Guarantors) established under generally accepted accounting principles
consistently applied.
(d) An assignment or subletting of Lessee's interest in this Lease without
Lessor's specific prior written consent shall, at Lessor's option, be a Default
curable after notice per Paragraph 13.1, or a non-curable Breach without the
necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment or subletting as a non-curable Breach, Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)
days' written notice ("Lessor's Notice"), increase the monthly Base Rent for the
Premises to the greater of the then fair market rental value of the Premises, as
reasonably determined by Lessor, or one hundred ten percent (110%) of the Base
Rent then in effect. Pending determination of the new fair market rental value,
if disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice,
with any overpayment credited against the next installment(s) of Base Rent
coming due, and any underpayment for the period retroactively to the effective
date of the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall be
subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an
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encumbrance or any deduction for depreciation or obsolescence, and considering
the Premises at its highest and best use and in good condition) or one hundred
ten percent (110%) of the price previously in effect, (ii) any index-oriented
rental or price adjustment formulas contained in this Lease shall be adjusted to
require that the base index be determined with reference to the index applicable
to the time of such adjustment, and (iii) any fixed rental adjustments scheduled
during the remainder of the Lease term shall be increased in the same ratio as
the new rental bears to the Base Rent in effect immediately prior to the
adjustment specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor shall be
limited to compensatory damages and/or injunctive relief.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting shall not
(i) be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, nor (iii) alter the primary liability of Lessee for
the payment of Base Rent and other sums due Lessor hereunder or for the
performance of any other obligations to be performed by Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations from
any person other than Lessee pending approval or disapproval of an assignment.
Neither a delay in the approval or disapproval of such assignment nor the
acceptance of any rent for performance shall constitute a waiver or estoppel of
Lessor's right to exercise its remedies for the Default or Breach by Lessee of
any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable under this Lease or the sublease and without
obtaining their consent, and such action shall not relieve such persons from
liability under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's obligation under this
Lease, Lessor may proceed directly against Lessee, any Guarantors or anyone else
responsible for the performance of the Lessee's obligations under this Lease,
including any sublessee, without first exhausting Lessor's remedies against any
other person or entity responsible therefor to Lessor, or any security held by
Lessor.
(e) Each request for consent to an assignment or subletting shall be in
writing, accompanied by information relevant to Lessor's determination as to the
financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including, but not limited to, the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000 or ten percent (10%) of the monthly Base Rent applicable to
the portion of the Premises which is the subject of the proposed assignment or
sublease, whichever is greater, as reasonable consideration for Lessor's
considering and processing the request for consent. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by reason of
accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, convenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph 12.2(c) shall
give Lessor the right (but not the obligation) to require that the Security
Deposit be increased by an amount equal to six (6) times the then monthly Base
Rent, and Lessor may make the actual receipt by Lessor of the Security Deposit
increase a condition to Lessor's consent to such transaction.
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(h) Lessor, as a condition to giving its consent to any assignment or
subletting, may require that the amount and adjustment schedule of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment schedule for property similar to the Premises as then constituted, as
determined by Lessor.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's interest
in all rentals and income arising from any sublease of all or a portion of the
Premises heretofore or hereafter made by Lessee, and Lessor may collect such
rent and income and apply same toward Lessee's obligations under this Lease;
provided, however, that until a Breach (as defined in Paragraph 13.1) shall
occur in the performance of Lessee's obligations under this Lease, Lessee may,
except as otherwise provided in this Lease, receive, collect and enjoy the rents
accruing under such sublease. Lessor shall not, by reason of the foregoing
provision or any other assignment of such sublease to Lessor, nor by reason of
the collection of the rents from a sublessee, be deemed liable to the sublessee
for any failure of Lessee to perform and comply with any of Lessee's obligations
to such sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor stating
that a Breach exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its obligations
under this Lease, Lessor, at its option and without any obligation to do so, may
require any sublessee to attorn to Lessor, in which event Lessor shall undertake
the obligations of the sublessor under such sublease from the time of the
exercise of said option to the expiration of such sublease; provided, however,
Lessor shall not be liable for any prepaid rents or security deposit paid by
such sublessee to such sublessor or for any other prior defaults or breaches of
such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further assign or
sublet all or any part of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee
to the sublessee, who shall have the right to cure the Default of Lessee within
the grace period, if any, specified in such notice. The sublessee shall have a
right of reimbursement and offset from and against Lessee for any such Defaults
cured by the sublessee.
13. Default; Breach; Remedies.
13.1 Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said default. A "Default" by Lessee is
defined as a failure by Lessee to observe, comply with or perform any of the
terms, covenants, conditions or rules applicable to Lessee under this Lease. A
"Breach" by Lessee is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is specified
herein, the failure by Lessee to cure such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:
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(a) The vacating of the Premises without the intention to reoccupy same, or
the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure by
Lessee to make any payment of Base Rent, Lessee's Share of Common Area Operating
Expenses, or any other monetary payment required to be made by Lessee hereunder
as and when due, the failure by Lessee to provide Lessor with reasonable
evidence of insurance or surety bond required under this Lease, or the failure
of Lessee to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) days following written notice thereof by or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure by
Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, if applicable) of (i) compliance with Applicable Requirements per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37,
(v) the subordination or non-subordination of this Lease per Paragraph 30, (vi)
the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or provisions
of this Lease, or of the rules adopted under Paragraph 40 hereof that are to be
observed, complied with or performed by Lessee, other than those described in
Subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a
period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee's Default is
such that more than thirty (30) days are reasonably required for its cure, then
it shall not be deemed to be a Breach of this Lease by Lessee if Lessee
commences such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making by Lessee
of any general arrangement or assignment for the benefit of creditors; (ii)
Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this Subparagraph 13.1(e) is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement of Lessee or of
any Guarantor, given to Lessor by Lessee or any Guarantor, was materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurances of security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease.
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13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may, at its
option (but without obligation to do so), perform such duty or obligation on
Lessee's behalf, including, but not limited to, the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be due
and payable by Lessee to Lessor upon invoice therefor. If any check given to
Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its own option, may require all future payments to be made under this
Lease by Lessee to be made only by cashier's check. In the event of a Breach of
this Lease by Lessee (as defined in Paragraph 13.1), with or without further
notice or demand, and without limiting Lessor in the exercise of any right or
remedy which Lessor may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease and the term hereof shall terminate and Lessee
shall immediately surrender possession of the Premises to Lessor. In such event
Lessor shall be entitled to recover from Lessee: (i) the worth at the time of
the award of the unpaid rent which had been earned at the time of termination;
(ii) the worth at the time of award of the amount by which the unpaid rent which
would have been earned after termination until the time of award exceeds the
amount of such rental loss that the Lessee proves could have been reasonably
avoided; (iii) the worth at the time of award of the amount by which the unpaid
rent for the balance of the term after the time of award exceeds the amount of
such rental loss that the Lessee proves could be reasonably avoided; and (iv)
any other amount necessary to compensate Lessor for all the detriment
proximately caused by the Lessee's failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom, including, but not limited to, the cost of recovering possession of
the Premises, expenses of reletting, including necessary renovation and
alteration of the Premises, reasonable attorneys' fees, and that portion of any
leasing commission paid by Lessor in connection with this Lease applicable to
the unexpired term of this Lease. The worth at the time of award of the amount
referred to in provision (iii) of the immediately preceding sentence shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco or the Federal Reserve Bank District in which the Premises
are located at the time of award plus one percent (1%). Efforts by Lessor to
mitigate damages caused by Lessee's Default or Breach of this Lease shall not
waive Lessor's right to recover damages under this Paragraph 13.2. If
termination of this Lease is obtained through the provisional remedy of unlawful
detainer, Lessor shall have the right to recover in such proceeding the unpaid
rent and damages as are recoverable therein, or Lessor may reserve the right to
recover all or any part thereof in a separate suit for such rent and/or damages.
If a notice and grace period required under Subparagraph 13.1(b), (c) or (d) was
not previously given, a notice to pay rent or quit, or to perform or quit, as
the case may be, given to Lessee under any statute authorizing the forfeiture of
leases for unlawful detainer shall also constitute the applicable notice for
grace period purposes required by Subparagraph 13.1(b), (c) or (d). In such
case, the applicable grace period under the unlawful detainer statute shall run
concurrently after the one such statutory notice, and the failure of Lessee to
cure the Default within the greater of the two (2) such grace periods shall
constitute both an unlawful detainer and a Breach of this Lease entitling Lessor
to the remedies provided for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
recover the rent as it becomes due, provided Lessee has the right to sublet or
assign, subject only to reasonable limitations. Lessor and Lessee agree that the
limitations on assignment and subletting in this Lease are reasonable. Acts of
maintenance or preservation, efforts to relet the Premises, or the appointment
of a receiver to protect the Lessor's interest under this Lease, shall not
constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor under the
laws or judicial decisions of the state wherein the Premises are located.
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(d) The expiration or termination of this Lease and/or the termination of
Lessee's right to possession shall not relieve Lessee from liability under any
indemnity provisions of this Lease as to matters occurring or accruing during
the term hereof or by reason of Lessee's occupancy of the Premises.
13.3 Inducement Recapture in Event of Breach. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor, as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or deed of trust covering the Premises.
Accordingly, if any installment of rent or other sum due from Lessee shall not
be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by any Lender(s) whose name and address shall have been furnished to Lessee
in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessee's parking, is taken by condemnation,
Lessee may, at Lessee's option, to be exercised in writing within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in the same proportion as the rentable
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floor area of the Premises taken bears to the total rentable floor area of the
Premises. No reduction of Base Rent shall occur if the condemnation does not
apply to any portion of the Premises. Any award for the taking of all or any
part of the Premises under the power of eminent domain or any payment made under
threat of the exercise of such power shall be the property of Lessor, whether
such award shall be made as compensation for diminution of value of the
leasehold or for the taking of the fee, or as severance damages; provided,
however, that Lessee shall be entitled to any compensation, separately awarded
to Lessee for Lessee's relocation expenses and/or loss of Lessee's Trade
Fixtures. In the event that this Lease is not terminated by reason of such
condemnation, Lessor shall to the extent of its net severance damages received,
over and above Lessee's Share of the legal and other expenses incurred by Lessor
in the condemnation matter, repair any damage to the Premises caused by such
condemnation authority. Lessee shall be responsible for the payment of any
amount in excess of such net severance damages required to complete such repair.
15. Brokers' Fees
15.1 Procuring Cause. The Broker(s) named in Paragraph 1.10 is/are the
procuring cause of this Lease.
15.3 Assumption of Obligations. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by operation of
law, shall be deemed to have assumed Lessor's obligation under this Paragraph
15.
15.4 Representations and Warranties. Lessee and Lessor each represent and
warrant to the other that it has had no dealings with any person, firm, broker
or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses, and/or attorney's fees
reasonably incurred with respect thereto.
16. Tenancy and Financial Statements.
16.1 Tenancy Statement. Each Party (as "Responding Party") shall within
ten (10) days after written notice from the other Party (the "Requesting Party")
execute, acknowledge and deliver to the Requesting Party a statement in writing
in a form similar to the then most current "Tenancy Statement" form published by
the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.
16.2 Financial Statement. If Lessor desires to finance, refinance, or sell
the Premises or the Building, or any part thereof, Lessee and all Guarantors
shall deliver to any potential lender or purchaser designated by Lessor such
financial statements of Lessee and such Guarantors as may be reasonably required
by such lender or purchaser, including, but not limited to, Lessee's financial
statements for the past three (3) years. All such financial statements shall be
received by Lessor and such lender or purchaser in confidence and shall be used
only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises. In the event
of a transfer of Lessor's title or interest in the Premises or in this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined.
18. Severability. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
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19. Interest on Past-Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10) days
following the date on which it was due, shall bear interest from the date due at
the prime rate charged by the largest state chartered bank in the state in which
the Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. No Prior or other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. Each Broker shall be an intended third party beneficiary
of the provisions of this Paragraph 22.
23. Notices.
23.1 Notice Requirements. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by messenger or
courier service) or may be sent by regular, certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, or by facsimile transmission
during normal business hours, and shall be deemed sufficiently given if served
in a manner specified in this Paragraph 23. The addresses noted adjacent to a
Party's signature on this Lease shall be that Party's address for delivery or
mailing of notice purposes. Either Party may by written notice to the other
specify a different address for notice purposes, except that upon Lessee's
taking possession of the Premises, the Premises shall constitute Lessee's
address for the purpose of mailing or delivering notices to Lessee. A copy of
all notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail, the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday or a Sunday or a legal
holiday, it shall be deemed received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any such act shall not be deemed to render
unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent
or similar act by Lessee, or be construed as the basis of an estoppel to enforce
the provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any Default or Breach by
Lessee of any provision hereof. Any payment given Lessor by Lessee may be
accepted by Lessor on account of monies or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or
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conditions shall be of no force or effect whatsoever unless specifically agreed
to in writing by Lessor at or before the time of deposit of such payment.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. No Right to Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Base Rent applicable during the month immediately preceding such
expiration or earlier termination. Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be governed
by the laws of the state in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one (1) month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 Self-Executing. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
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31. Attorneys' Fees. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach. Broker(s) shall be intended
third party beneficiaries of this Paragraph 31.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary "For Sale" signs and Lessor may at any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. All such activities of Lessor
shall be without abatement of rent or liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the exterior of the Premises
or the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign on
the Premises by or for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building, and the right to install advertising signs on the
Building, including the roof, which do not unreasonably interfere with the
conduct of Lessee's business; Lessor shall be entitled to all revenues from such
advertising signs.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably withheld or
delayed. Lessor's actual reasonable costs and expenses (including, but not
limited to, architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including, but not
limited to, consents to an assignment a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. In addition to the deposit
described in Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an
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amount of money (in addition to the Security Deposit held under Paragraph 5)
reasonably calculated by Lessor to represent the cost Lessor will incur in
considering and responding to Lessee's request. Any unused portion of said
deposit shall be refunded to Lessee without interest. Lessor's consent to any
act, assignment of this Lease or subletting of the Premises by Lessee shall not
constitute an acknowledgment that no Default or Breach by Lessee of this Lease
exists, nor shall such consent be deemed a waiver of any then existing Default
or Breach, except as may be otherwise specifically stated in writing by Lessor
at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the impositions by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. Guarantor.
37.1 Form of Guaranty. If there are to be any Guarantors of this Lease per
Paragraph 1.11, the form of the guaranty to be executed by each such Guarantor
shall be in the form most recently published by the American Industrial Real
Estate Association, and each such Guarantor shall have the same obligations as
Lessee under this lease, including, but not limited to, the obligation to
provide the Tenancy Statement and information required in Paragraph 16.
37.2 Additional Obligations of Guarantor. It shall constitute a Default of
the Lessee under this Lease if any such Guarantor fails or refuses, upon
reasonable request by Lessor to give: (a) evidence of the due execution of the
guaranty called for by this Lease, including the authority of the Guarantor (and
of the party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and resolution of its board of directors authorizing the making of
such guaranty, together with a certificate of incumbency showing the signatures
of the persons authorized to sign on its behalf, (b) current financial
statements of Guarantor as may from time to time be requested by Lessor, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect.
38. Quiet Possession. Upon payment by Lessee of the rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.
39. Options.
39.1 Definition. As used in this Lease, the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 Options Personal to Original Lessee. Each Option granted to Lessee in
this Lease is personal to the original Lessee named in Paragraph 1.1 hereof, and
cannot be voluntarily or involuntarily assigned or exercised by any person or
entity other than said original Lessee while the original Lessee is in full and
actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.
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39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding any
provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three
(3) or more notices of separate Defaults under Paragraph 13.1 during the twelve
(12) month period immediately preceding the exercise of the Option, whether or
not the Defaults are cured.
(b) The period of time within which an Option may be exercised shall not be
extended or enlarged by reason of Lessee's inability to exercise an Option
because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall terminate
and be of no further force or effect, notwithstanding Lessee's due and timely
exercise of the Option, if, after such exercise and during the term of this
Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee for a
period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during any twelve (12) month period, whether or not the Defaults are cured, or
(iii) if Lessee commits a Breach of this Lease.
40. Rules and Regulations. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees. Attached
hereto as Exhibit "D" are the Rules and Regulations currently adopted by Lessor.
41. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. Reservations. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. Authority. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
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46. Offer. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. Multiple Parties. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
Attached to this Lease and incorporated herein are the following:
Addendum paragaphs 49 through 53
Exhibits "A" through "D"
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY'S
REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND
STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE
BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS
TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS IN A
STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS
LOCATED SHOULD BE CONSULTED.
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The Parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: Executed at:
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on: on:
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By LESSOR:
By LESSEE:
KILROY REALTY, L.P.,
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STAAR SURGICAL COMPANY,
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A Delaware Limited Partnership
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A Delaware Corporation
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By: KILROY REALTY CORPORATION,
A Maryland Corporation,
General Partner By: By: /s/ WILLIAM C. HUDDLESTON
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Name Printed:
Name Printed:
William C. Huddleston
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Title:
Title:
Chief Oper. Officer
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By:
By:
/s/ SANDRA K WOOD
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Name Printed: Name Printed: Sandra K. Wood
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Title: Title: Assist VP Corp Ser
Address:
2250 E. Imperial Highway, Suite 360
Address:
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El Segundo, CA 90245
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Telephone: (310) 563-5500 Telephone: ( )
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Facsimile: (310) 416-9113 Facsimile: ( )
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BROKER:
BROKER:
Executed at:
Executed at:
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on: on:
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By:
By:
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Name Printed: Name Printed:
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--------------------------------------------------------------------------------
Title: Title:
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--------------------------------------------------------------------------------
Address: Address:
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--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Telephone: ( ) Telephone: ( )
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Facsimile: ( ) Facsimile: ( )
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--------------------------------------------------------------------------------
NOTE: These forms are often modified to meet changing requirements of law
and needs of the industry. Always write or call to make sure you are utilizing
the most current form:
Page 30 of 30
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AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 South Flower Street, Suite 600,
Los Angeles, CA 90017 (213) 687-8777
Page 31 of 30
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RENT ADJUSTMENTS(S)
STANDARD LEASE ADDENDUM
Dated April 5, 2000
By and Between (Lessor)
KILROY REALTY, L.P.,
A Delaware Limited Partnership
KILROY REALTY CORPORATION,
A Maryland Corporation, General Partner
(Lessee)
STAAR SURGICAL COMPANY,
A Delaware Corporation
Address of Premises:
27121 Aliso Creek Road, Suite 100
Aliso Viejo, California 92656
Paragraph 49
A. RENT ADJUSTMENTS:
The monthly rent for each month of the adjustment period(s) specified below
shall be increased using the method(s) indicated below:
(Check Method(s) to be Used and Fill in Appropriately)
/ / I. Cost of Living Adjustments(s) (COLA)
a. On (Fill in COLA Dates):
_________________________________________________________________ _______
___________________________________________________________________________________________
_____
the Base Rent shall be adjusted by the change, if any, from the Base Month
specified below, in the Consumer Price Index of the Bureau of Labor Statistics
of the U.S. Department of Labor for (select one): / / CPI W (Urban Wage Earners
and Clerical Workers) or / / CPI U (All Urban Consumers), for (Fill in Urban
Area): ____________________________________
All Items (1982-1984=100), herein referred to as "CPI".
b. The monthly rent payable in accordance with paragraph A.I.a. of this
Addendum shall be calculated as follows: the Base Rent set forth in paragraph
1.5 of the attached Lease, shall be multiplied by a fraction the numerator of
which shall be the CPI of the calendar month two months prior to the month(s)
specified in paragraph A.I.a. above during which the adjustment is to take
effect, and the denominator of which shall be the CPI of the calendar month
which is two months prior to (select one): / / the first month of the term of
this Lease as set forth in paragraph 1.3 ("Base Month") or / / (Fill in Other
"Base Month"): ____________________________________. The sum so calculated shall
constitute the new monthly rent hereunder, but in no event, shall any such new
monthly rent be less than the rent payable for the month immediately preceding
the rent adjustment.
c. In the event the compilation and/or publication of the CPI shall be
transferred to any other governmental department or bureau or agency or shall be
discontinued, then the index most nearly the same as the CPI shall be used to
make such calculation. In the event that the Parties cannot agree on such
alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with the then rules of said
Association and the decision of the arbitrators shall be binding upon the
parties. The cost of said Arbitration shall be paid equally by the Parties.
RENT ADJUSTMENTS
Page 1 of 2
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/ / II. Market Rental Value Adjustment(s) (MRV)
a. On (Fill in MRV Adjustment Date(s):
_______________________________________________________ _____
___________________________________________________________________________________________
_____
the Base Rent shall be adjusted to the "Market Rental Value" of the property as
follows:
1) Four months prior to each Market Rental Value Adjustment Date described
above, the Parties shall attempt to agree upon what the new MRV will be on the
adjustment date. If agreement cannot be reached within thirty days, then:
(a) Lessor and Lessee shall immediately appoint a mutually acceptable
appraiser or broker to establish the new MRV within the next thirty days. Any
associated costs will be split equally between the Parties, or
(b) Both Lessor and Lessee shall each immediately make a reasonable
determination of the MRV and submit such determination, in writing, to
arbitration in accordance with the following provisions:
(i) Within fifteen days thereafter, Lessor and Lessee shall each select an
/ / appraiser or / / broker ("Consultant"—check one) of their choice to act as
an arbitrator. The two arbitrators so appointed shall immediately select a third
mutually acceptable Consultant to act as a third arbitrator.
(ii) The Three arbitrators shall within thirty days of the appointment of
the third arbitrator reach a decision as to what the actual MRV for the Premises
is, and whether Lessor's or Lessee's submitted MRV is the closest thereto. The
decision of a majority of the arbitrators shall be binding on the Parties. The
submitted MRV which is determined to be the closest to the actual MRV shall
thereafter be used by the Parties.
(iii) If either of the Parties fails to appoint an arbitrator within the
specified fifteen days, the arbitrator timely appointed by one of them shall
reach a decision on his or her own, and said decision shall be binding on the
Parties.
(iv) The entire cost of such arbitration shall be paid by the party whose
submitted MRV is not selected, ie. the one that is NOT the closest to the actual
MRV.
2) Notwithstanding the foregoing, the new MRV shall not be less than the
rent payable for the month immediately preceding the rent Adjustment.
b. Upon the establishment of each New Market Rental Value:
1) the new MRV will become the new "Base Rent" for the purpose of
calculating any further Adjustments, and
2) the first month of each Market Rental Value term shall become the new
'Base Month' for the purpose of calculating any further Adjustments.
/X/ III. Fixed Rental Adjustment(s) (FRA)
The Monthly Base Rent shall be increased to the following amounts on the dates
set forth below:
On (Fill in FRA Adjustment Date(s)): The New Monthly Base Rent shall be: May
1, 2001 $8,560.00 May 1, 2002 $8,990.00 $ $
B. NOTICE
Unless specified otherwise herein, notice of any such adjustments, other
than Fixed Rental Adjustments, shall be made as specified in paragraph 23 of the
Lease.
RENT ADJUSTMENTS
Page 2 of 2
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PACIFIC PARK PLAZA
27121 ALISO CREEK ROAD
[MAP]
EXHIBIT "A"
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EXHIBIT "B"
[MAP]
Pacific Park Plaza
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EXHIBIT "C"
[MAP]
Pacific Park Plaza
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ADDENDUM TO THAT CERTAIN LEASE DATED
APRIL 5, 2000
By and Between
KILROY REALTY, L.P.,
A Delaware Limited Partnership
KILROY REALTY CORPORATION
A Maryland Corporation,
General Partner
("Lessor")
and
STAAR SURGICAL COMPANY,
A Delaware Corporation
("Lessee")
For that real property commonly known as
27121 Aliso Creek Road, Suite 100, Aliso Viejo, California 92656
50.Existing Leases and License Agreement. Lessee previously and/or now occupies
certain premises within the Industrial Center pursuant to Leases and a License
Agreement, with Security Deposits, Base Rental and Lessee's Share of Common Area
Operating Expenses ("CAM") summarized as follows:
Lease/License Agreement and Premises
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Monthly Base Rent
and Monthly CAM
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27141 Aliso Creek Road, Suites 200 & 250
Lease dated April 1, 1998; the Lease for this Premises has been terminated and
Lessee has completely vacated the Premises Base Rent
CAM = N/A
= N/A
27121 Aliso Creek Road, Suites 100, 105 & 110
Lease dated March 2, 1993, as amended
Base Rent
CAM
= $6,258.00/mo
= $1,204.92/mo
27121 Aliso Creek Road, Suite 115
License Agreement dated August 15, 1999
Base Rent
= $1,118.00/mo
Total Security Deposits held by Lessor:
$6,778.96
(collectively the "Existing Leases").
50.1Base Rent and CAM under the Existing Leases shall be prorated to midnight,
April 30, 2000.
50.2The Security Deposits paid by Lessee pursuant to the Existing Leases in the
amount of $6,778.96 shall be credited upon the Security Deposit of $8,150.00
required by paragraph 1.7 of the Lease. The balance due of $1,371.04 shall be
paid by Lessee to Lessor upon execution of this Lease.
50.3The Existing Leases shall be terminated, cancelled and surrendered to Lessor
as of midnight, April 30, 2000, except that Lessee shall remain obligated for
any defaults or obligations arising under the Existing Leases and which exist as
of 11:59 p.m., April 30, 2000.
51.Lessee Improvements and Allowance.
51.1Lessee Improvement Allowance. Lessee shall be entitled to a lessee
improvement allowance (the "Lessee Improvement Allowance") in the amount of
$7,600.00 for costs relating to the design and construction of Lessee
improvements to the Premises (the "Lessee Improvements").
51.2Disbursement of the Lessee Improvement Allowance. Except as otherwise set
forth in this paragraph 51, the Lessee Improvement Allowance shall be disbursed
by Lessor to Lessee in two (2) installments, each being equal to fifty percent
(50%) of the Lessee Improvement
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Allowance. The first installment shall be paid by Lessor to Lessee upon Lessee's
execution of a construction contract with its contractor, and the second
installment shall be paid at such time as the Lessee Improvements to the
Premises have been substantially completed for costs related to the construction
of the Lessee Improvements and for the following items and costs (collectively,
the "Lessee Improvement Allowance Items"): (i) payment of the fees of the
architect and the engineer who shall prepare the construction drawings for the
Lessee Improvements, (ii) the cost of construction of the Lessee Improvements as
set forth in the construction drawings, and (iii) the cost of other items
related to the design and construction of the Lessee Improvements.
51.3Unused Lessee Improvement Allowance; Excess Costs. In the event that, as of
the Commencement Date, there remains any unused portion of the Lessee
Improvement Allowance (the "Unused Allowance"), Lessee may, at Lessee's option,
either (i) credit any Unused Allowance against Base Rent payments next due under
this Lease, or (ii) receive a check from Lessor in the amount of the Unused
Allowance within ten (10) days after the Lease Commencement Date. In the event
that the Lessee Improvement Allowance is insufficient to pay all of the costs of
the Lessee Improvements (the "Excess Lessee Improvement Costs"), then Lessee
shall advance all funds necessary to pay the Excess Lessee Improvement Costs.
51.4The Lessee Improvements to be constructed by Lessee shall be subject to the
provisions of paragraphs 7.3 and 7.4 of this Lease as if and to the same extent
as if the Lessee Improvements are "Lessee-Owned Alterations."
52.Estoppel Certificate. The Tenancy Statement referred to in paragraph 16.1
and the "further writings" referred to in line 3 of paragraph 30.4 of the Lease
each shall be, at the option of the Lessor or a lender or purchaser from Lessor,
in the customary form of the requesting lender or a purchaser of all or a
portion of the Building.
53.Notices. Copies of any notices to be given by Lessee to Lessor pursuant to
paragraph 23.1 of the Lease also shall be given to the local office of Lessor
and to Lessor's attorney, as follows:
Kilroy Realty, L.P.
184 Technology Drive, Suite 200
Irvine, California 92618
Tel, No. (949) 790-0840
Fax No. (949) 790-0844
Marshall L. McDaniel
McDaniel & McDaniel
2250 E. Imperial Highway, Suite 1200
El Segundo, California 90245
Tel. No. (310) 640-1960
Fax No. (310) 322-8790
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EXHIBIT "D"
RULES AND REGULATIONS
MULTI-LESSEE INDUSTRIAL CENTER
The following Rules and Regulations have been adopted by Lessor pursuant to
paragraph 40 of the Lease:
1.Lessee acknowledges that it is occupying space within a multi-lessee
Industrial Center, and therefore any of its activities may have an affect upon
the use, occupancy, and quite enjoyment of the other lessees. As a result,
Lessee shall not conduct any business or engage in any work-related activities
outside of its Premises.
2.Except as specifically provided in the Lease to which these Rules and
Regulations are attached, no sign, placard, picture, advertisement, name or
notice shall be installed or displayed on any part of the outside or inside of
the Building or the Industrial Center without the prior written consent of
Lessor. Lessor shall have the right to remove, at Lessee's expense and without
notice, any sign installed or displayed in violation of this rule. All approved
signs or lettering on doors and walls shall be printed, painted, affixed or
inscribed at the expense of Lessee by a person or company designated by Lessor.
3.If Lessor objects in writing to any curtains, blinds, shades, screens or
hanging plants or other similar objects attached to or used in connection with
any window or door of the Premises, or placed on any windowsills which are
visible from the exterior of the Premises, Lessee shall immediately discontinue
such use. Lessee shall not place anything against or near glass partitions or
doors or windows which may appear unsightly, in Lessor's sole determination,
from outside the Premises.
4.Lessee shall not obstruct any sidewalks, halls, passages, exits, entrances,
elevators, escalators or stairways of the Industrial Center. The halls,
passages, exits, entrances, elevators, escalators and stairways are not open to
the general public, but are open, subject to reasonable regulations, to Lessee's
business invitees. Lessor shall, in all cases, retain the right to control and
prevent access thereto of all persons whose presence, in the judgment of Lessor,
would be prejudicial to the safety, character, reputation and interest of the
Industrial Center and its lessees; provided that nothing herein contained shall
be construed to prevent such access to persons with whom any lessee normally
deals in the ordinary course of its business, unless such persons are engaged in
illegal or unlawful activities. No lessee and no employee or invitee or any
lessee shall go upon the roof(s) of any building in the Industrial Center.
5.The directory of the Building or the Industrial Center will be provided
exclusively for the display of the name and location of lessees only, and Lessor
reserves the right to exclude any other names therefrom and to limit the amount
of space thereon dedicated to Lessee's name.
6.All cleaning and janitorial services for the Industrial Center and the
Premises shall be provided exclusively through Lessor. No person or persons
other than those approved by Lessor shall be employed by Lessee or permitted to
enter the Industrial Center for the purpose of cleaning the same. Lessee shall
not cause any unnecessary cleaning by carelessness or indifference to the good
order and cleanliness of the Premises. The provisions of this paragraph 6 shall
not be applicable if Lessor does not provide janitorial services for the
particular Premises of Lessee.
7.Lessor will furnish Lessee, free of charge, with two (2) keys or access cards
to each door lock in the Premises. Lessor may make a reasonable charge for any
additional keys. Lessee shall not make or have additional keys, and Lessee shall
not alter any lock or install any new additional lock or bolt on any door of the
Premises. If Lessee loses any keys, Lessor may change the lock at Lessee's
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expense. Lessee upon termination of its tenancy, shall deliver to Lessor the
keys to all doors which have been furnished to Lessee, and in the event of loss
of any keys so furnished, shall pay Lessor therefor and for the cost of
replacing the lock.
8.If Lessee requires telegraphic, telephonic, burglar alarm, satellite dishes,
antennae or similar services, it shall first obtain, and comply with, Lessor's
instructions in their installation. Provided that Lessor exclusively reserves
all rights to the installation of any kind of telecommunication equipment upon
the roof of the Building and the exclusive right to enter into exclusive or
non-exclusive agreements with telecommunication providers for providing services
to the Building and the Industrial Center.
9.Lessee shall not place a load upon any floor of the Premises which exceeds the
load per square foot which such floor was designed to carry and which is allowed
by law. Lessor shall have the right to prescribe the weight, size and position
of all equipment, materials, furniture or other property brought into the
Building and the Premises. Heavy objects shall, if considered necessary by
Lessor, stand on such platforms as determined by Lessor to be necessary to
properly distribute the weight, which platforms shall be provided at Lessee's
expense. Business machines and mechanical equipment belonging to Lessee, which
cause noise or vibration that may be transmitted to the structure of the
Building or to any space therein to such a degree as to be objectionable to
Lessor or to any other lessees in the Building, shall be placed and maintained
by Lessee in a manner to reduce to acceptable levels such noise or vibration.
10.Lessee shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited quantities
necessary for the operation or maintenance of Lessee's equipment. Lessee shall
not use or permit to be used in the leased Premises any foul or noxious gas or
substance, or permit or allow the Premises to be occupied or used in a manner
offensive or objectionable to Lessor or other occupants of the Building by
reason of noise, odors or vibrations, nor shall Lessee bring into or keep in or
about the Premises any birds or animals.
11.Lessee shall not use any method of heating or air conditioning other than
that supplied by Lessor.
12.Lessee shall not waste electricity, water or air conditioning and agrees to
cooperate fully with Lessor to assure the most effective operation of the
Building's heating and air conditioning and to comply with any governmental
energy-saving rules, laws or regulations of which Lessee has actual notice, and
shall refrain from attempting to adjust controls. Lessee shall keep corridor
doors closed.
13.Lessor reserves the right, exercisable without notice and without liability
to Lessee, to change the name and street address of the Building and the
Industrial Center.
14.In the event the Building containing the Premises is a multi-lessee Building
with an entrance lobby for access to the Lessee's Premises, Lessor reserves the
right to exclude from the Building between the hours of 6:00 p.m. to 7:00 a.m.
the following day, or such other hours as may be established from time to time
by Lessor, and on Sundays and legal holidays, any person unless that person is
known to the person or employee in charge of the Building or has a pass or is
properly identified. Lessee shall be responsible for all persons for whom it
requests passes and shall be liable to Lessor for all acts of such persons.
Lessor shall not be liable for damages for any error with regard to the
admission to or exclusion from the Building of any person. Lessor reserves the
right to prevent access to the Building in case of mob, riot, public excitement
or demonstration or other commotion by closing the doors or by other appropriate
action.
15.Lessee shall close and lock the doors of its Premises and entirely shut off
all water faucets or other water apparatus, and turn off lights and apparatus
consuming electricity or gas before Lessee and its employees leave the Premises.
Lessee shall be responsible for any damage or injuries sustained by other
lessees or occupants of the Building or by Lessor for noncompliance with this
rule.
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16.The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein. The expense of
any breakage, stoppage or damage resulting from the violation of this rule shall
be borne by the Lessee who, or whose employees or invitees shall have caused it.
17.Lessee shall not sell, or permit the sale at retail of newspapers, magazines,
periodicals, theater tickets or any other goods or merchandise to the general
public in or on the Premises (unless Lessees' use provision specifically allows
these activities). Lessee shall not make any room-to-room solicitation of
business from other lessees in the Industrial Center. Lessee shall not use the
Premises for any business or activity other than that specifically provided for
in the Lease.
18.Lessee shall not install any radio or television antenna, loudspeaker,
satellite dishes or other devices on the roof(s) or exterior walls of the
Building or the Industrial Center. Lessee shall not interfere with radio or
television broadcasting or reception from or in the Industrial Center or
elsewhere.
19.Lessee shall not drive nails, screw or drill into the partitions, woodwork or
plaster or in any way deface the Premises or any part thereof, except in
accordance with the provisions of the Lease pertaining to alterations. Lessor
reserves the right to direct electricians as to where and how telephone and
telegraph wires are to be introduced to the Premises. Lessee shall not cut or
bore holes for wires. Lessee shall not affix any floor covering to the floor of
the Premises in any manner except as approved by Lessor. Lessee shall repair any
damage resulting from noncompliance with this rule.
20.Lessee shall not install, maintain or operate upon the Premises any vending
machines without prior written consent of Lessor.
21.Canvassing, soliciting and distribution of handbills or any other written
material, and peddling in the Industrial Center are prohibited, and Lessee shall
cooperate with Lessor to prevent such activities.
22.Lessor reserves the right to exclude or expel from the Industrial Center any
person who, in Lessor's judgment, is intoxicated or under the influence of
liquor or drugs or who is in violation of any of the Rules and Regulations of
the Building.
23.Lessee shall store all its trash and garbage within its Premises or in other
facilities provided by Lessor. Lessee shall not place in any trash box or
receptacle any material which cannot be disposed of in the ordinary and
customary manner of trash and garbage disposal. All garbage and refuse disposal
shall be made in accordance with directions issued from time to time by Lessor.
24.The Premises shall not be used for the storage of merchandise held for sale
to the general public at the Premises, (unless Lessee's Lease specifically
permits on-site sales activity) for lodging or for manufacturing of any kind
(unless Lessee's Lease specifically permits manufacturing within the Premises),
nor shall the Premises be used for any improper, immoral or objectionable
purpose. No cooking shall be done or permitted on the Premises without Lessor's
consent, except the use by Lessee or Underwriters' Laboratory approved equipment
for brewing coffee, tea, hot chocolate and similar beverages shall be permitted,
and the use of a microwave oven for employees use shall be permitted, provided
that such equipment and use is in accordance with all applicable federal, state,
country and city laws, codes, ordinance, rules and regulations.
25.Lessee shall not use in any space or in the public halls of the Building any
hand truck except those equipped with rubber tires and side guards or such other
material-handling equipment as Lessor may approve. Lessee shall not bring any
other vehicles of any kind into the Building.
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26.Without the written consent of Lessor, Lessee shall not use the name of the
Building or the Industrial Center in connection with or in promoting or
advertising the business of Lessee.
27.Lessee shall comply with all safety, fire protection and evacuation
procedures and regulations established by Lessor or any governmental agency.
28.Lessee assumes any and all responsibility for protecting its Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
29.To the extent Lessor reasonably deems it necessary to exercise exclusive
control over any portions of the Industrial Center Common Areas for the mutual
benefit of the lessees in the Industrial Center, Lessor may do so subject to
nondiscriminatory additional Rules and Regulations.
30.Lessee's requirements for the use or operation of the Premises shall be
attended to only upon appropriate application to Lessor's asset management
office for the Industrial Center by an authorized individual. Employees of
Lessor shall not perform any work or do anything outside of their regular duties
unless under special instructions from Lessor, and no employee of Lessor will
admit any person (Lessor or otherwise) to any office without specific approval
from Lessor.
31.Lessor may waive any one or more of these Rules and Regulations for the
benefit of Lessee or any other lessee, but no such waiver by Lessor shall be
constructed as a waiver of such rules and Regulations in favor of Lessee or any
other lessee, nor prevent Lessor from thereafter enforcing any such Rules and
Regulations against any or all of the Lessees of the Industrial Center. Lessee
acknowledges that it is occupying space in a mixed-use, multi-lessee
commercial/industrial/office park, and that inherent in any such park is the
fact that Lessor may have to waive these Rules and Regulations selectively and
on a case by case basis.
32.These Rules and Regulations are in addition to, and shall not be constructed
to in any way modify or amend, in whole or part, the terms, covenants,
agreements and conditions of the Lease.
33.Lessor reserves the right to make such other and reasonable Rules and
Regulations as, in its sole judgment, from time to time may be needed for safety
and security, for care and cleanliness of the Industrial Center and for the
preservation of good order therein. Lessee agrees to abide by all such Rules and
Regulations herein set forth and any additional rules and regulations which are
adopted.
34.Lessee shall be responsible for the observance of all of the foregoing rules
by Lessee's employees, agents, clients, customers, invites, and guest.
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PARKING RULES AND REGULATIONS
The following rules and regulations shall govern the use of the parking
facilities which are a part of the Industrial Center, which can be modified at
any time in the sole discretion of Lessor:
1.All claimed damage or loss to motor vehicles must be reported, itemized in
writing and delivered to Lessor within five (5) business days after any claimed
damage or loss occurs. Any claim not so made is waived. Lessor is not
responsible for damage by water, fire, or defective brakes, or parts, or for the
act or omissions of others, or for articles left in vehicles.
2.Lessee shall not park or permit its employees to park in any parking areas
designated by Lessor as areas for parking by visitors to the Industrial Center
or for the exclusive use of lessees or other occupants of the Industrial Center.
Lessee shall not leave vehicles in the parking areas overnight or park any
vehicles in the parking areas other than automobiles, motorcycles, motor driven
or non-motor driven bicycles or trucks not to exceed four wheels.
3.Parking stickers or any other device or form of identification supplied by
Lessor as a condition of use of the parking facilities shall remain the property
of Lessor. Such parking identification device must be displayed as requested and
may not be mutilated in any manner. The serial number of the parking
identification device may not be obliterated. Devices are not transferable and
any device in the possession of an unauthorized holder will be void. Lessor may
charge a fee for parking stickers, card or other parking control devices
supplied by Lessor.
4.No overnight or extended term storage of vehicles shall be permitted.
5.Vehicles must be parked entirely within painted stall lines of a single
parking stall.
6.All direction signs and arrows must be observed.
7.The speed limit within all parking areas shall not exceed five (5) miles per
hour.
8.Parking is prohibited:
(a)in areas not striped for parking;
(b)in aisles;
(c)where "no parking" signs are posted;
(d)on ramps;
(e)in cross-hatched areas;
(f)in loading areas; and
(g)in such other areas as may be designated by Lessor or Lessor's parking
representative.
9.Every parker is required to park and lock his/her own vehicle. All
responsibility for damage to vehicles and the contents thereof is assumed by the
parker.
10.Loss or theft of parking identification devices must be reported to Lessor
immediately, and a lost or stolen report must be filed by the Lessee or user of
such parking identification device at the time. Lessor has the right to exclude
any vehicle from the parking facilities that does not have an identification
device.
11.Any parking identification devices reported lost or stolen found on any
unauthorized car will be confiscated and the illegal holder will be subject to
prosecution.
12.Washing, waxing, cleaning or servicing of any vehicle in any area not
specifically reserved for such purpose is prohibited.
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13.The parking operators, managers or attendants are not authorized to make or
allow any exceptions to these Parking Rules and Regulations.
14.Lessee's continued right to use any parking spaces in the parking facilities
is conditioned upon the employee or agent of Lessee abiding by these Parking
Rules and Regulations and those contained in this Lease. Further, if this Lease
terminates for any reason whatsoever, Lessee's right to use the parking spaces
in the parking facilities shall terminate concurrently therewith.
15.Lessor may refuse to permit any person who violates these Parking Rules and
Regulations to park in the parking facilities, and any violation of the Parking
Rules and Regulations shall subject the vehicle to removal, at such vehicle
owner's expense.
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QuickLinks
RENT ADJUSTMENTS(S) STANDARD LEASE ADDENDUM
PACIFIC PARK PLAZA 27121 ALISO CREEK ROAD
EXHIBIT A MAP
EXHIBIT B MAP
EXHIBIT C MAP
ADDENDUM TO THAT CERTAIN LEASE DATED APRIL 5, 2000 By and Between KILROY REALTY,
L.P., A Delaware Limited Partnership KILROY REALTY CORPORATION A Maryland
Corporation, General Partner ("Lessor") and STAAR SURGICAL COMPANY, A Delaware
Corporation ("Lessee")
For that real property commonly known as 27121 Aliso Creek Road, Suite 100,
Aliso Viejo, California 92656
EXHIBIT "D"
RULES AND REGULATIONS MULTI-LESSEE INDUSTRIAL CENTER
PARKING RULES AND REGULATIONS
|
ADC TELECOMMUNICATIONS, INC,
GLOBAL STOCK INCENTIVE PLAN
(as amended and restated through February 27, 2001)
Section 1. Purpose; Effect on Prior Plan.
(a) Purpose. The purpose of the ADC Telecommunications, Inc.
Global Stock Incentive Plan (the “Plan”) is to aid in maintaining and developing
management personnel capable of assuring the future success of ADC
Telecommunications, Inc. (the “Company”), to offer such personnel incentives to
put forth maximum efforts for the success of the Company’s business and to
afford such personnel an opportunity to acquire a proprietary interest in the
Company.
(b) Effect On Prior Plan . From and after the effective date of
the Plan, no stock options or restricted stock awards shall be granted under the
Company’s Stock Option and Restricted Stock Plan. All outstanding stock options
and restricted stock awards previously granted under the Stock Option and
Restricted Stock Plan shall remain outstanding in accordance with the terms
thereof.
Section 2. Definitions.
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) “Affiliate” shall mean (i) any entity that, directly or
indirectly through one or more intermediaries, is controlled by the Company and
(ii) any entity in which the Company has a significant equity interest, as
determined by the Committee.
(b) “Award” shall mean any Option, Stock Appreciation Right,
Restricted Stock or Performance Award granted under the Plan.
(c) “Award Agreement” shall mean any written agreement, contract
or other instrument or document evidencing any Award granted under the Plan.
(d) “Code” shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any regulations promulgated thereunder.
(e) “Committee” shall mean a committee of the Board of Directors
of the Company designated by such Board to administer the Plan and composed of
not less than three directors, each of whom is a “disinterested person” within
the meaning of Rule 16b-3.
(f) “Fair Market Value” shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee. Notwithstanding the foregoing,
for purposes of the Plan, the Fair Market Value of Shares on a given date shall
be (i) the last sale price of the Shares as reported on the Nasdaq National
Market System on such date, if the Shares are then quoted on the Nasdaq National
Market System or (ii) the closing price of the Shares or such date on a national
securities exchange, if the shares are then being traded an a national
securities exchange.
(g) “Incentive Stock Option” shall mean an option granted under
Section 6(a) of the Plan that is intended to meet the requirements of Section
422 of the Code or any successor provision thereto.
(h) “Key Employee” shall mean any employee of the Company or any
Affiliate who the Committee determines to be a key employee.
(i) “Non-Qualified Stock Option” shall mean an option granted
under Section 6(a) of the Plan that is not intended to be an Incentive Stock
Option.
(j) “Option” shall mean an Incentive Stock Option or a
Non-Qualified Stock Option.
(k) “Participant” shall mean a Key Employee designated to be
granted an Award under the Plan.
(l) “Performance Award” shall mean any right granted under
Section 6(d) of the Plan.
(m) “Person” shall mean any individual, corporation, partnership,
association or trust.
(n) “Restricted Stock” shall mean any Share granted under Section
6(c) of the Plan.
(o) “Rule 16b-3” shall mean Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, or any successor rule or regulation thereto.
(p) “Shares” shall mean shares of Common Stock, $.20 par value,
of the Company or such other securities or property as may become subject to
Awards pursuant to an adjustment made under Section 4(c) of the Plan.
(q) “Stock Appreciation Right” shall mean any right granted under
Section 6(b) of the Plan.
Section 3. Administration.
(a) Power and Authority of the Committee . The Plan shall be
administered by the Committee. Subject to the terms of the Plan and applicable
law, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to each
Participant under the Plan; (iii) determine the number of Shares to be covered
by (or with respect to which payments are to be calculated in connection with)
Awards; (iv) determine the terms and conditions of any Award or Award Agreement;
(v) amend the terms and conditions of any Award or Award Agreement and
accelerate the exercisability of Options or the lapse of restrictions relating
to Restricted Stock; (vi) determine whether, to what extent and under what
circumstances Awards may be exercised in cash, Shares, other securities, other
Awards or other property, or canceled, forfeited or suspended; (vii) determine
whether, to what extent and under what circumstances cash or Shares payable with
respect to an Award under the Plan shall be deferred either automatically or at
the election of the holder thereof or the Committee; (viii) interpret and
administer the Plan and any instrument or agreement relating to, or Award made
under, the Plan; (ix) establish, amend, suspend or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (x) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan. Unless otherwise expressly provided in the Plan,
all designations, determinations, interpretations and other decisions under or
with respect to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive and binding
upon any Participant, any holder or beneficiary of any Award and any employee of
the Company or any Affiliate.
(b) Meetings of the Committee. The Committee shall select one of
its members as its chairman and shall hold its meetings at such times and places
as the Committee may determine. A majority of the Committee’s members shall
constitute a quorum. All determinations of the Committee shall be made by not
less than a majority of its members. Any decision or determination reduced to
writing and signed by all of the members of the Committee shall be fully
effective as if it had been made by a majority vote at a meeting duly called and
held. The Committee may appoint a secretary and may make such rules and
regulations for the conduct of its business as it shall deem advisable.
Section 4. Shares Available for Awards.
(a) Shares Available . Subject to adjustment as provided in
Section 4(c), the number of Shares available for granting Awards under the Plan
shall be 181,246,832. If any Shares covered by an Award or to which an Award
relates are not purchased or are forfeited, or if an Award otherwise terminates
without delivery of any Shares or cash payments to be received thereunder, then
the number of Shares counted against the aggregate number of Shares available
under the Plan with respect to such Award, to the extent of any such forfeiture
or termination, shall again be available for granting Awards under the Plan. In
addition, any Shares that are used by a Participant as full or partial payment
to the Company of the purchase price of Shares acquired upon exercise of an
Option shall again be available for granting Awards.
(b) Accounting for Awards . For purposes of this Section 4,
(i) if an Award entitles the holder thereof to receive or
purchase Shares, the number of Shares covered by such Award or to which such
Award relates shall be counted on the date of grant of such Award against the
aggregate number of Shares available for granting Awards under the Plan; and
(ii) if an Award entitles the holder to receive cash payments but
the amount of such payments are denominated in or based on a number of Shares,
such number of Shares shall be counted on the date of grant of such Award
against the aggregate number of Shares available for granting Awards under the
Plan;
provided, however, that Awards that operate in tandem with (whether granted
simultaneously with or at a different time from), or that are substituted for,
other Awards may be counted or not counted under procedures adopted by the
Committee in order to avoid double counting.
(c) Adjustments. In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of cash, Shares,
other securities or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and type of Shares (or securities or other property) which
thereafter may be made the subject of Awards, (ii) the number and type of Shares
(or securities or other property) subject to outstanding Awards and (iii) the
exercise price with respect to any Award; provided, however, that the number of
Shares covered by any Award or to which such Award relates shall always be a
whole number.
(d) Incentive Stock Options. Notwithstanding the foregoing, the
number of Shares available for granting Incentive Stock Options under the Plan
shall not exceed 181,246,832, subject to adjustment as provided in the Plan and
Section 422 or 424 of the Code.
Section 5. Eligibility.
Any Key Employee, including any Key Employee who is an officer or
director of the Company or any Affiliate, shall be eligible to be designated a
Participant; provided, however, that an Incentive Stock Option shall not be
granted to an employee of an Affiliate unless such Affiliate is also a
“subsidiary corporation” of the Company within the meaning of Section 424(f) of
the Code.
Section 6. Awards.
(a) Options. The Committee is hereby authorized to grant Options
to Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
(i) Exercise Price. The purchase price per Share purchasable
under an Option shall be determined by the Committee; provided, however, that
such purchase price shall not be less than the Fair Market Value of a Share on
the date of grant of such Option.
(ii) Option Term. The term of each Option shall be fixed by the
Committee, but such term shall not exceed 10 years from the date on which such
Option is granted.
(iii) Time and Method of Exercise. The Committee shall determine
the time or times at which an Option may be exercised in whole or in part and
the method or methods by which, and the form or forms (including, without
limitation, cash, Shares, other securities, other Awards or other property, or
any combination thereof, having a Fair Market Value on the exercise date equal
to the relevant exercise price) in which, payment of the exercise price with
respect thereto may be made or deemed to have been made.
(b) Stock Appreciation Rights. The Committee is hereby
authorized to grant Stock Appreciation Rights to Participants subject to the
terms of the Plan and any applicable Award Agreement. A Stock Appreciation
Right granted under the Plan shall confer on the holder thereof a right to
receive upon exercise thereof the excess of (i) the Fair Market Value of one
Share on the date of exercise (or, if the Committee shall so determine, at any
time during a specified period before or after the date of exercise) over (ii)
the grant price of the Stock Appreciation Right as specified by the Committee,
which price shall not be less than the Fair Market Value of one Share on the
date of grant of the Stock Appreciation Right. Subject to the terms of the Plan
and any applicable Award Agreement, the grant price, term, methods of exercise,
dates of exercise, methods of settlement and any other terms and conditions of
any Stock Appreciation Right shall be as determined by the Committee. The
Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it may deem appropriate.
(c) Restricted Stock . The Committee is hereby authorized to
grant Awards of Restricted Stock to Participants with the following terms and
conditions and with such additional terms and conditions not inconsistent with
the provisions of the Plan as the Committee shall determine:
(i) Restrictions . Shares of Restricted Stock shall be subject
to such restrictions as the Committee may impose (including, without limitation,
any limitation on the right to vote a Share of Restricted Stock or the right to
receive any dividend or other right or property with respect thereto), which
restrictions may lapse separately or in combination at such time or times, in
such installments or otherwise as the Committee may deem appropriate.
(ii) Stock Certificates. Any Restricted Stock granted under the
Plan shall be evidenced by issuance of a stock certificate or certificates.
Such certificate or certificates shall be registered in the name of the
Participant and shall bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock.
(iii) Forfeiture; Delivery of Shares. Except as otherwise
determined by the Committee, upon termination of employment (as determined under
criteria established by the Committee) during the applicable restriction period,
all Shares of Restricted Stock at such time subject to restriction shall be
forfeited and reacquired by the Company; provided, however, that the Committee
may, when it finds that a waiver would be in the best interest of the Company,
waive in whole or in part any or all remaining restrictions with respect to
Shares of Restricted Stock. Shares representing Restricted Stock that is no
longer subject to restrictions shall be delivered to the holder thereof promptly
after the applicable restrictions lapse or are waived.
(iv) Limit on Restricted Stock Awards. Grants of Restricted Stock
shall be subject to the limitations set forth in Section 6(e) hereof.
(d) Performance Awards . The Committee is hereby authorized to
grant Performance Awards to Participants subject to the terms of the Plan and
any applicable Award Agreement. A Performance Award granted under the Plan (i)
shall be granted and payable in Shares (including, without limitation,
Restricted Stock) and (ii) shall confer on the holder thereof the right to
receive shares upon the achievement of such performance goals during such
performance periods as the Committee shall establish. Subject to the terms of
the Plan and any applicable Award Agreement, the performance goals to be
achieved during any performance period, the length of any performance period,
the amount of any Performance Award granted and the number of shares to be
issued pursuant to any Performance Award shall be determined by the Committee.
Grants of Performance Awards shall be subject to the limitations set forth in
Section 6(e) hereof.
(e) Limit on Restricted Stock and Performance Awards . The
maximum number of Shares under the Plan available for grants of Restricted Stock
and Performance Awards, in the aggregate, shall be 4,000,000 Shares.
(f) General.
(i) No Cash Consideration for Awards. Awards shall be granted
for no cash consideration or for such minimal cash consideration as may be
required by applicable law.
(ii) Awards May Be Granted Separately or Together.
Awards may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with or in substitution for any other Award or any award
granted under any plan of the Company or any Affiliate other than the Plan.
Awards granted in addition to or in tandem with other Awards or in addition to
or in tandem with awards granted under any such other plan of the Company or any
Affiliate may be granted either at the same time as or at a different time from
the grant of such other Awards or awards.
(iii) Forms of Payment Under Awards. Subject to the terms of the
Plan and of any applicable Award Agreement, payments to be made by the Company
or an Affiliate upon the grant, exercise or payment of an Award may be made in
Shares, cash or a combination thereof as the Committee shall determine, and may
be made in a single payment, in installments or on a deferred basis, in each
case in accordance with rules and procedures established by the Committee. Such
rules and procedures may include, without limitation, provisions for the payment
or crediting of reasonable interest on installments or deferred payments.
(iv) Limits On Transfer of Awards. No Award and no right under
any such Award shall be assignable, alienable, salable or transferable by a
Participant otherwise than by will or by the of descent and distribution;
provided, however, that a Participant may, in the manner established by the
Committee,
(A) designate a beneficiary or beneficiaries to exercise the
rights of the Participant and receive any property distributable with respect to
any Award upon the death of the Participant, or
(B) transfer a Non-Qualified Stock Option to any member of such
Participant’s immediate family (which, for purposes of this clause (B) shall
mean such Participant’s children, grandchildren or current spouse) or to one or
more trusts established for the exclusive benefit of one or more such immediate
family members or partnerships in which the Participant or such immediate family
members are the only partners, provided that (1) there is no consideration for
such transfer, and (2) the Non-Qualified Stock Options held by such transferees
continue to be subject to the same terms and conditions (including restrictions
or subsequent transfers) as were applicable to such Non-Qualified Stock Options
immediately prior to their transfer.
Each Award or right under any Award shall be exercisable during the
Participant’s lifetime only by the Participant, by a transferee pursuant to a
transfer permitted by clause (B) of this Section 6(f)(iv), or, if permissible
under applicable law, by the Participant’s or such transferee’s guardian or
legal representative. No Award or right under any such Award may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate.
(v) Term of Awards. Subject to the terms of the Plan, the term
of each Award shall be for such period as may be determined by the Committee.
(vi) Rule 16b-3 Six-Month Limitations. To the extent required in
order to comply with Rule 16b-3 only, any equity security offered pursuant to
the Plan may not be sold for at least six months after acquisition, except in
the case of death or disability, and any derivative security issued pursuant to
the Plan shall not be exercisable for at least six months, except in case of
death or disability. Terms used in the preceding sentence shall, for the
purposes of such sentence only, have the meanings, if any, assigned or
attributed to them under Rule 16b-3.
(vii) Restrictions; Securities Exchange Listing. All certificates
for Shares delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the Plan or the rules, regulations and
other requirements of the Securities and Exchange Commission and any applicable
federal or state securities laws, and the Committee may cause a legend or
legends to be placed on any such certificates to make appropriate reference to
such restrictions. If the Shares are traded on a securities exchange, the
Company shall not be required to deliver any Shares covered by an Award unless
and until such Shares have been admitted for trading on such securities
exchange.
(viii) Award Limitations Under the Plan. No Participant may be
granted any Award or Awards under the Plan, the value of which Award or Awards
are based solely on an increase in the value of Shares after the date of grant
of such Award or Awards, for more than 4,000,000 Shares, in the aggregate, in
any one calendar year period beginning with the 1994 calendar year. The
foregoing annual limitation specifically includes the grant of any Awards
representing qualified performance-based compensation, within the meaning of
Section 162(m) of the Code.
Section 7. Amendment and Termination; Adjustments.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan . The Board of Directors of the
Company may amend, alter, suspend, discontinue or terminate the Plan; provided,
however, that, notwithstanding any other provision of the Plan or any Award
Agreement, without the approval of the shareholders of the Company, no such
amendment, alteration, suspension, discontinuation or termination shall be made
that:
(i) absent such approval, would cause Rule 16b-3 to become
unavailable with respect to the Plan;
(ii) requires the approval of the Company’s shareholders under
any rules or regulations of the National Association of Securities Dealers, Inc.
or any securities exchange that are applicable to the Company; or
(iii) requires the approval of the Company’s shareholders under
the Code in order to permit Incentive Stock Options to be granted under the
Plan.
(b) Amendments to Awards. The Committee may waive any conditions
of or rights of the Company under any outstanding Award, prospectively or
retroactively, subject to Section 7(c) of the Plan. The Committee may not
amend, alter, suspend, discontinue or terminate any outstanding Award,
prospectively or retroactively, without the consent of the Participant or holder
or beneficiary thereof.
(c) Prohibition on Option Repricing. The Committee shall not
reduce the exercise price of any outstanding Option, whether through amendment,
cancellation or replacement grants, or any other means, without shareholder
approval.
(d) Correction of Defects, Omissions and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to carry the Plan into effect.
Section 8. Income Tax Withholding; Tax Bonuses.
(a) Withholding. In order to comply with all applicable federal
or state income tax laws or regulations, the Company may take such action as it
deems appropriate to ensure that all applicable federal or state payroll,
withholding, income or other taxes, which are the sole and absolute
responsibility of a Participant, are withheld or collected from such
Participant. In order to assist a Participant in paying all federal and state
taxes to be withheld or collected upon exercise or receipt of (or the lapse of
restrictions relating to) an Award, the Committee, in its discretion and subject
to such additional terms and conditions as it may adopt, may permit the
Participant to satisfy such tax obligation by (i) electing to have the Company
withhold a portion of the Shares otherwise to be delivered upon exercise or
receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes or (ii) delivering to the Company
Shares other than Shares issuable upon exercise or receipt of (or the lapse of
restrictions relating to) such Award with a Fair Market Value equal to the
amount of such taxes. The election, if any, must be made on or before the date
that the amount of tax to be withheld is determined.
(b) Tax Bonuses. The Committee, in its discretion, shall have
the authority, at the time of grant of any Award under this Plan or at any time
thereafter to approve bonuses to designated Participants to be paid upon their
exercise or receipt of (or the lapse of restrictions relating to) Awards in
order to provide funds to pay all or a portion of federal and state taxes due as
a result of such exercise or receipt (or the lapse of such restrictions). The
Committee shall have full authority in its discretion to determine the amount of
any such tax bonus.
Section 9. General Provisions.
(a) No Rights to Awards . No Key Employee, Participant or other
Person shall have any claim to be granted any Award under the Plan, and there is
no obligation for uniformity of treatment of Key Employees, Participants or
holders or beneficiaries of Awards under the Plan. The terms and conditions of
Awards need not be the same with respect to different Participants.
(b) Delegation. The Committee may delegate to one or more
officers of the Company or any affiliate or a committee of such officers the
authority, subject to such terms and limitations as the Committee shall
determine, to grant Awards to Key Employees who are not officers or directors of
the Company for purposes of Section 16 of the Securities Exchange Act of 1934,
as amended.
(c) Granting of Awards . The granting of an Award pursuant to
the Plan shall take place only when an Award Agreement shall have been duly
executed on behalf of the Company.
(d) No Limit on Other Compensation Arrangements . Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.
(e) No Right to Employment . The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate. In addition, the Company or an Affiliate may at any
time dismiss a Participant from employment, free from any liability or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
(f) Governing Law . The validity, construction and effect of
the Plan and any rules and regulations relating to the Plan shall be determined
in accordance with the laws of the State of Minnesota.
(g) Severability. If any provision of the Plan or any Award is
or becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended
to conform to applicable laws, or if it cannot be so construed or deemed amended
without, in the determination of the Committee, materially altering the purpose
or intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction or Award, and the remainder of the Plan or any such Award shall
remain in full force and effect.
(h) No Trust or Fund Created. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(i) No Fractional Shares. No fractional Shares shall be issued
or delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash shall be paid in lieu of any fractional Shares or whether
such fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(j) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.
Section 10. Effective Date of the Plan.
The Plan shall be effective as of the date of its approval by the
shareholders of the Company.
Section 11. Term of the Plan.
Awards shall be granted under the Plan during a period commencing
February 26, 1991, the date the Plan was approved by the shareholders of the
Company, through February 26, 2006, the date to which the shareholders of the
Company extended the expiration date of the Plan. However, unless otherwise
expressly provided in the Plan or in an applicable Award Agreement, any Award
theretofore granted may extend beyond the ending date of the period stated
above, and the authority of the Committee provided for hereunder with respect to
the Plan and any Awards, and the authority of the Board of Directors of the
Company to amend the Plan, shall extend beyond the end of such period. |
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Exhibit 10.8
AMENDMENT NO. 7
TO
REAL ESTATE PURCHASE AND SALE AGREEMENT
THIS AMENDMENT NO. 7 TO REAL ESTATE PURCHASE AND SALE AGREEMENT (this
"Amendment") dated as of May 25, 2001, is made by and between Pope Resources, a
Delaware limited partnership, its wholly owned subsidiary Olympic Property Group
LLC, a Washington limited liability company, and its wholly owned subsidiaries
Olympic Real Estate Development LLC, a Washington limited liability company,
Olympic Real Estate Management, Inc., a Washington corporation, and Olympic
Resorts LLC, a Washington limited liability company (collectively "Seller"), HCV
Pacific Partners LLC, a California limited liability company (or its assigns as
permitted herein) ("Buyer"), and Port Ludlow Associates LLC, a Washington
limited liability company (or its assigns as permitted herein) ("Assignee"),
regarding that certain Real Estate Purchase and Sale Agreement dated January 12,
2001, between Buyer and Seller, as amended by Amendment No. 1 dated February 8,
2001, Amendment No. 2 dated February 14, 2001, Amendment No. 3 dated
February 27, 2001, Amendment No. 4 dated March 26, 2001, Amendment No. 5 dated
May 15, 2001, and Amendment No. 6 dated May 18, 2001 (as amended, the
"Agreement"), for the purchase and sale of certain property located in Jefferson
and Pierce Counties, Washington, described therein (the "Property").
I. EFFECT OF AMENDMENT. This Amendment amends and modifies the Agreement.
In the event of any conflict between the Agreement and this Amendment, this
Amendment shall control. Except as contained within the Agreement and this
Amendment, there are no other agreements or understandings between Buyer and
Seller relating to the Property. Capitalized terms not otherwise defined herein
shall have the meanings given them under the Agreement.
II. EXTENSION OF TIME. In Sections XII and XIII of Amendment No. 5 (as
amended by Section II of Amendment No. 6) and in Section 16.9 of the Agreement
(as amended by Section XVI of Amendment No. 5 and Section II of Amendment
No. 6), the date "May 25, 2001," is hereby replaced in each instance by the date
"June 1, 2001." In Section XIX of Amendment No. 5 (as amended by Section II of
Amendment No. 6), the date "May 25, 2001," is hereby replaced by the date
"June 1, 2001."
III. EARNEST MONEY. Within three (3) business days after the mutual
execution and delivery of the OWSI Stock Purchase Agreement, Buyer shall deposit
with Escrow Officer the additional sum of Nine Hundred Thousand Dollars
(US$900,000.00), which sum shall be deemed part of the Earnest Money. Upon
Buyer's deposit of said additional sum, Buyer shall have paid to Escrow Officer
all Earnest Money due under Section 2.4 of the Agreement.
--------------------------------------------------------------------------------
Except as expressly amended by this Amendment, the Agreement is hereby
ratified and confirmed and shall take full force and effect.
BUYER: PORT LUDLOW ASSOCIATES LLC, a Washington limited liability company
By West Coast Northwest Pacific Partners LLC, a Washington limited liability
company, its manager
By:
/s/ RANDALL J. VERRUE
--------------------------------------------------------------------------------
Print Name: Randall J. Verrue
--------------------------------------------------------------------------------
Its: President
--------------------------------------------------------------------------------
Date:
5/25/01
--------------------------------------------------------------------------------
SELLER:
POPE RESOURCES L.P., a Delaware limited partnership, by POPE MGP, Inc., a
Delaware corporation, its managing general partner
By:
/s/ GREGORY M. MCCARRY
--------------------------------------------------------------------------------
Print Name: Gregory M. McCarry
--------------------------------------------------------------------------------
Its: V.P. Real Estates
--------------------------------------------------------------------------------
Date:
5/25/01
--------------------------------------------------------------------------------
OLYMPIC PROPERTY GROUP LLC, a Washington limited liability company
By:
/s/ GREGORY M. MCCARRY
--------------------------------------------------------------------------------
Print Name: Gregory M. McCarry
--------------------------------------------------------------------------------
Its: C.O.O.
--------------------------------------------------------------------------------
Date:
5/25/01
--------------------------------------------------------------------------------
2
--------------------------------------------------------------------------------
OLYMPIC REAL ESTATE DEVELOPMENT LLC, a Washington limited liability company
By:
/s/ GREGORY M. MCCARRY
--------------------------------------------------------------------------------
Print Name: Gregory M. McCarry
--------------------------------------------------------------------------------
Its: C.O.O.
--------------------------------------------------------------------------------
Date:
5/25/01
--------------------------------------------------------------------------------
OLYMPIC REAL ESTATE MANAGEMENT, INC., a Washington corporation By: /s/ TOM
GRIFFIN
--------------------------------------------------------------------------------
Print Name: Tom Griffin
--------------------------------------------------------------------------------
Its: Vice President
--------------------------------------------------------------------------------
Date:
5/25/01
--------------------------------------------------------------------------------
OLYMPIC RESORTS LLC, a Washington limited liability company
By:
/s/ GREGORY M. MCCARRY
--------------------------------------------------------------------------------
Print Name: Gregory M. McCarry
--------------------------------------------------------------------------------
Its: C.O.O.
--------------------------------------------------------------------------------
Date:
5/25/01
--------------------------------------------------------------------------------
3
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Exhibit 10.8
AMENDMENT NO. 7 TO REAL ESTATE PURCHASE AND SALE AGREEMENT
|
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISION
PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
EXHIBIT 10.22
RESEARCH AND TECHNOLOGY AGREEMENT
This Research and Technology Agreement (the “Agreement”) is made effective as
of January 24, 2001 (the “Effective Date”) between INTRABIOTICS
PHARMACEUTICALS, INC., a Delaware corporation, having its principal place of
business in Mountain View, California (hereinafter referred to as
“INTRABIOTICS”), and NEW CHEMICAL ENTITIES, INC., a Delaware corporation having
a principal place of business in Bothell, Washington (hereinafter referred to as
“NCE”).
WHEREAS, INTRABIOTICS is a biotechnology company involved in the development of
products useful for the treatment of infectious diseases or conditions;
WHEREAS, NCE has created a collection of proprietary natural products, related
drug discovery libraries and technologies to facilitate lead drug discovery; and
WHEREAS, the parties wish to collaborate to identify compounds within NCE’s
proprietary drug discovery libraries which have anti-fungal or anti-bacterial
activities, to identify compounds that INTRABIOTICS may develop and
commercialize.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
1.1 “Activity” means a response as measured in a specific
drug screen, at a level to be determined [ * ] in the course of the Research
Program.
1.2 “Confidential Information” shall have the meaning set
forth in Section 7.1.
1.3 “Disclosing Party” shall have the meaning set forth in
Section 7.1.
1.4 “Diversity Library” means NCE’s library of
unfractionated natural product extracts as it exists as of the Effective Date.
1.5 "Exclusive Research Program Patents” means all patents
and patent applications, both foreign and domestic, including, without
limitation, provisionals, converted provisionals, continuations, divisionals or
continuations in part, (i) covering Exclusive Research Program Technology; or
(ii) that claim methods of making or isolating a compound(s) within an
Identified Compound Family, provided that such claimed method of making or
isolating is limited only to such compound(s).
1.6 “Exclusive Research Program Technology” means all
information, know-how, trade secrets, inventions and data made during the course
of the parties’ performance under the Research Program that are directed to a
composition, formulation or use of a compound within an Identified Compound
Family. Exclusive Research Program Technology does not include information,
know-how, trade secrets, inventions or data applicable to methods of making,
separating, or purifying compounds within an Identified Compound Family.
1.7 “[ * ] Product” means the [ * ] Product for which a
party has paid to the other party the royalty payment in Section [ * ].
1.8 “FTE” means one (1) full time equivalent research
employee of NCE.
1.9 “Identified Compound(s)” means (i) a compound(s) that
has Activity against a Target, (ii) that is obtained from a Screening Library
and (iii) the chemical structure of which INTRABIOTICS requests in writing that
NCE identify pursuant to this Agreement.
1.10 “Identified Compound Family” means an Identified
Compound and all [ * ] as determined by the Research Committee according to the
procedure set forth in Appendix B, and mutually agreed to in writing by both
parties.
1.11 “Material” means microorganism cultures or strains
provided to INTRABIOTICS pursuant to Section 3.10.
1.12 “NCE Patents” means all patents and patent applications,
both foreign and domestic including without limitation, provisionals, converted
provisionals, continuations, divisionals or continuations in part covering NCE
Technology.
1.13 "NCE Research Program Patents" means all patents and
patent applications, both foreign and domestic, including, without limitation,
provisionals, converted provisionals, continuations, divisionals or
continuations in part, covering NCE Research Program Technology.
1.14 "NCE Research Program Technology" means all information,
know-how, trade secrets, inventions and data that are made during the course of
the parties’ performance under the Research Program that are not Exclusive
Research Program Technology.
1.15 “NCE Technology” means and includes technology, data,
information, know-how and inventions, in each case that is useful for producing
or isolating a compound within an Identified Compound Family and that was owned
by NCE prior to the Effective Date.
1.16 “Net Sales”means the gross amount invoiced by
INTRABIOTICS for the sale to a third party of Product in finished form by
INTRABIOTICS, its affiliates or its sublicensees, as applicable, less the
following deductions:
(i) Amounts
repaid or credited by reason of timely rejections, returns or recalls;
(ii) Taxes,
excises or other governmental charges upon or measured by the production, sale,
transportation, delivery or use of goods;
(iii)
Transportation and delivery charges actually incurred and separately included as
an item in the invoice, or as verified by other documentation including shipping
insurance and packing costs;
(iv) Normal and
customary trade, cash and quantity discounts and allowances granted to third
parties, including mandatory rebates to governmental agencies; and
(v) Third Party
royalties owed with respect to Product.
For any Products sold in combination with another product
(“Combination Products”), where amounts received by INTRABIOTICS are
attributable to sales of such Combination Products, then Net Sales will be
calculated for such combination product by multiplying the actual Net Sales of
such combination product [ * ]. If, on a country-by-country basis, the
Combination Products in the combination are not sold separately in said country,
Net Sales for the purpose of determining royalties of the combination product
shall be calculated by multiplying actual Net Sales of such combination product
by [ * ]. If, on a country-by-country basis, neither the Product nor the
Combination Products included in the combination product is sold separately in
said country, Net Sales for the purposes of determining royalties of the
combination product shall be determined by the parties in good faith on the
basis of respective fair market values.
1.17 "Other Product" means a Product for use in the Product
Field that is not a Screening Product.
1.18 “Premium Library” means NCE’s library of fractionated
natural products extracts as it exists as of the Effective Date.
1.19 “Product” means a product that is or includes a compound
within an Identified Compound Family(s) in all formulations and for all uses.
1.20 “Product Field” means any diagnostic, preventive or
therapeutic application.
1.21 “Receiving Party” shall have the meaning set forth in
Section 7.1.
1.22 “Requested Unavailable Compound(s)” shall have the
meaning set forth in Section 2.7.
1.23 “Research Program” means the work to be performed
pursuant to the plan set forth in Appendix B, by INTRABIOTICS, and by NCE in
identifying the chemical structure of Identified Compound(s) that is paid for by
INTRABIOTICS.
1.24 "Research Term" means the initial [ * ] term of the
Research Program or any extension thereof agreed to by the parties in writing.
1.25 “Screening Data” means the data resulting or derived
from the screening of the libraries by INTRABIOTICS, including but not limited
to the data describing the specific Activity of each of the samples of interest
to INTRABIOTICS, including [ * ].
1.26 “Screening Field” means the identification of compounds
having anti-bacterial or anti-fungal properties.
1.27 “Screening Libraries” means individually and
collectively the Diversity Library and Premium Library.
1.28 "Screening Product" means a Product for use as an
anti-bacterial agent or anti-fungal agent in each case in the Product Field.
1.29 “Successive Products” means all Products for which a
party makes the royalty payment set forth in Section 5.6 after it has made such
payment for the [ * ] Product.
1.30 “Target” means INTRABIOTICS’ targets of interest as
listed in Appendix B, as may be amended from time to time by INTRABIOTICS during
the Research Program.
1.31 “Technology Access Fee” shall have the meaning set forth
in Section 5.2.
1.32 “[ * ]” means the [ * ] Product for which a party makes
the royalty payment set forth in Section [ * ].
2. SCREENING LIBRARIES
2.1 Upon INTRABIOTICS’ request, NCE shall supply to
INTRABIOTICS one (1) aliquot, [ * ] of no less than the equivalent of [ * ] of
the original [ * ] or [ * ] of each sample, [ * ] in the Screening Libraries, at
NCE’s expense, in accordance with Appendix A.
2.2 INTRABIOTICS agrees that all right, title and interest
in and to the Screening Libraries shall be vested in NCE. NCE shall be free to
provide the Screening Libraries to third parties for screening purposes both
inside and outside the Screening Field.
2.3 INTRABIOTICS agrees that the Screening Libraries: (i)
will be maintained and used by INTRABIOTICS only at the sites designated in
Appendix C; (ii) will not be transferred to any other location; (iii) will only
be used by employees of INTRABIOTICS, or its permitted sublicensees and those
consultants of INTRABIOTICS who agree to be bound by the terms and conditions of
this Agreement including but not limited to this Section 2.3 listed in Appendix
C, who will require access thereto for the performance of this Agreement; (iv)
will only be used for screening against the Targets and for no other purpose,
with such use permitted only during the [ * ] period following the date that the
relevant Screening Library is received by INTRABIOTICS; (v) that INTRABIOTICS
will not attempt to identify any of the components contained in the Screening
Libraries except as expressly permitted in Section 2.5 with respect to [ * ];
and (vi) will not be transferred to any third party except in connection with a
sublicense pursuant to Section 4.1. INTRABIOTICS may, in its sole discretion,
amend Appendix B from time to time to add targets to the Target list.
2.4 In the event that INTRABIOTICS uses the Screening
Libraries for any purpose not permitted under this Agreement, in addition to any
other remedies NCE may have, NCE may cause INTRABIOTICS to (i) assign to NCE all
right, title and interest to all intellectual property arising from such use
(except to the extent such intellectual property would also cover a permitted
use) and (ii) execute those documents as requested by NCE necessary to document
and/or perfect the assignment of such intellectual property.
2.5 INTRABIOTICS shall have the right to conduct [ * ]
studies of the samples contained in the Screening Libraries, solely in order to
identify a [ * ] of such sample likely to demonstrate Activity. Such studies
will not include attempts to identify the chemical structures of any components
of any such [ * ]. INTRABIOTICS and its designees’ rights to such [ * ] and
such [ * ] methods shall be used solely for the benefit of INTRABIOTICS or NCE,
as applicable, under this Agreement.
2.6 In the event that INTRABIOTICS desires to isolate
and/or identify the chemical structure of a compound within a Screening
Library, INTRABIOTICS agrees, except to the extent permitted under under Section
2.5, that it will not attempt to perform such separation and or identification
itself, and will not request any person or entity other than NCE to perform such
separation or identification.
2.7 Should INTRABIOTICS [ * ] the Screening Libraries which
exhibit the relevant Activity, and should INTRABIOTICS desire to learn the
chemical structure of the compound exhibiting such Activity, INTRABIOTICS may,
at its election and in its sole discretion, request in writing that NCE disclose
to INTRABIOTICS the chemical structure of such compound (which shall be known
thereafter as an Identified Compound). INTRABIOTICS shall provide NCE with all
Screening Data which it has accumulated regarding such [ * ] in electronic
format. NCE shall conduct statistical analyses of the Screening Data provided by
INTRABIOTICS and perform such other work as necessary to determine the chemical
structure of the Identified Compound. NCE shall conduct these analyses under a
mutually agreed timetable established after the submission of such Screening
Data by INTRABIOTICS. Both parties acknowledge that [ * ]. Promptly following
identification by NCE of the structure of the Identified Compound, NCE shall
provide INTRABIOTICS with the chemical structure of the Identified Compound and
the relevant underlying data and statistical analysis that NCE relied on in
making such determination (the “Written Materials”), and INTRABIOTICS shall have
thirty (30) days from receipt of such chemical structure and Written Materials
to accept the licenses set forth in Article 3 with respect to the relevant
Identified Compound Family in accordance with the procedures set forth in
Section 3.2. INTRABIOTICS shall reimburse NCE as described in Sections 2.8 and
2.9 for the work performed in conducting such data analysis. If NCE has granted
rights to the compound of interest to a third party prior to identifying the
chemical structure of such compound for INTRABIOTICS, such compound shall be
designated “Requested Unavailable Compound(s).” If at any time during the term
of this Agreement, NCE is able to grant to INTRABIOTICS a license to any or all
of such Requested Unavailable Compound(s), NCE shall so notify INTRABIOTICS in
writing and such Requested Unavailable Compounds shall be deemed Identified
Compounds under this Agreement if the parties mutually agree to the terms of a
license.
2.8 NCE agrees to commit the personnel, facilities,
expertise and other resources reasonably necessary to perform its
responsibilities under the Research Program. During each year of the Research
Program, NCE will, at INTRABIOTICS’ expense in accordance with Section 2.9,
maintain a minimum of [ * ] and a maximum of [ * ] devoted to performing NCE’s
responsibilities under the Research Program, each of whom shall be appropriately
qualified to perform such work. The number of FTEs allocated by NCE shall be
set forth in Appendix B, as amended from time to time by mutual consent of the
parties. In addition, from time to time, upon the parties’ mutual agreement,
NCE will maintain at INTRABIOTICS’ cost additional FTEs in excess of [ * ]
committed to performance of work under the Research Program. In the first year,
INTRABIOTICS agrees to fund [ * ] at NCE under the Research Program.
2.9 INTRABIOTICS agrees to pay NCE research funding based
on the number of FTEs of NCE involved in performing research activities under
the Research Program, both during the initial [ * ] term thereof and any
extensions to which the Parties may agree, as determined under Section 2.8. For
each such FTE, INTRABIOTICS shall pay NCE at an annualized rate of [ * ] per
FTE, per year. [ * ].
2.10 INTRABIOTICS acknowledges that the Screening Libraries
and [ * ] thereof, as well as Identified Compounds, are experimental products of
unknown toxicity and hazard, and are furnished solely for research purposes.
During the term of this Agreement, NCE shall inform INTRABIOTICS of any actual
or potential toxicity or other possible hazardous property or handling condition
related to the Screening Libraries and parts thereof, as well as Identified
Compounds, which are known to NCE. INTRABIOTICS agrees to take all reasonable
precautions and conform with all applicable local regulations in the handling,
storage, use and disposal of the Screening Libraries and parts thereof, as well
as Identified Compounds.
2.11 The parties agree to cooperate with each other with
respect to the Research Program.
2.12 NCE agrees to provide to INTRABIOTICS technical
information available to NCE that is reasonably requested by INTRABIOTICS to
enable INTRABIOTICS to use the Screening Libraries for screening against Targets
during the Research Term as permitted by this Agreement and INTRABIOTICS shall
have the right to use such technical information for such purpose.
3. CLINICAL AND COMMERCIAL LICENSES.
3.1 Subject to the terms and conditions of this Agreement,
NCE grants to INTRABIOTICS:
(i) a worldwide exclusive license, with the
right to sublicense, under Exclusive Research Program Patents and Exclusive
Research Program Technology to conduct research and development with respect to,
and to make, have made, use, sell, offer to sell and import Product for use in
the Product Field;
(ii) a worldwide non-exclusive license, with
the right to sublicense, under NCE Research Program Patents, NCE Research
Program Technology, NCE Technology and NCE Patents to make and have made
Product, in research quantities as permitted under Section 3.8, and under
then-current GMP conditions to support the clinical program and for
commercialization of such Product.
3.2 Commencing upon receipt by INTRABIOTICS, pursuant to
Section 2.7, of (i) the chemical structure of the relevant Identified Compound
and (ii) written notice that rights to such Identified Compound are available
for license, INTRABIOTICS shall have thirty (30) days in which to accept the
licenses set forth in Section 3.1 with respect to the relevant Identified
Compound Family and pay the sum due pursuant to Section 5.4, and such licenses
shall be effective upon the date such sum is paid to NCE. INTRABIOTICS
acknowledges and agrees that if INTRABIOTICS fails to make the payment required
under Section 5.4 when due, it shall have no further right to obtain such
license with respect to the relevant Identified Compound Family.
3.3 INTRABIOTICS shall make reasonable commercial efforts
to develop and commercialize Products. In the event that INTRABIOTICS, in its
sole discretion, is not interested in pursuing research, development and
commercialization of at least one compound within an Identified Compound Family,
INTRABIOTICS shall notify NCE thereof in writing. If requested by NCE,
INTRABIOTICS shall grant to NCE a worldwide exclusive sublicense (with the right
to further sublicense) under the Exclusive Research Program Patents, and
Exclusive Research Program Technology, each to the extent they are directed to
such abandoned Identified Compound Family, to make, have made, use, sell, offer
to sell and import Product, and NCE shall pay to INTRABIOTICS all future
milestone payments and royalties that would have been paid by INTRABIOTICS to
NCE under Section 5.5 with respect to such Product. INTRABIOTICS shall provide
to NCE all records and files related to any patents required to be licensed to
NCE pursuant to this Section 3.3, and shall execute such documents and
reasonably cooperate with NCE as may be necessary to perfect and maintain such
patent protection or term extension. NCE shall promptly reimburse INTRABIOTICS
for all reasonable expenses that INTRABIOTICS incurs in connection with
rendering this assistance. Effective on the date of grant from INTRABIOTICS,
NCE shall assume all responsibility for prosecuting, maintaining and defending,
at NCE’s cost and expense, the relevant Exclusive Research Program Patent(s).
3.4 At the request of NCE, INTRABIOTICS shall actively and
in a timely fashion and using reasonable efforts consider granting to NCE a
worldwide, exclusive sublicense under the relevant Exclusive Research Program
Technology and Exclusive Research Program Patents, to make, have made, use,
sell, offer to sell and import one or more Other Products for the purpose of
granting a further sublicense to a third party. The decision to grant a
sublicense shall be at INTRABIOTICS sole discretion. In such event, NCE shall
pay to INTRABIOTICS [ * ] of the sublicense and milestone fees and royalties
received by NCE for and under such sublicense.
3.5 (a) During the Research Term, NCE shall retain,
consistent with its usual commercial practices, all microbial cultures from
which the samples, [ * ] provided to INTRABIOTICS were fermented or otherwise
obtained or derived.
(b) At the written request of INTRABIOTICS,
NCE shall identify, maintain and retain in the possession of NCE the microbial
culture that produces an Identified Compound or Identified Compound Family
specified in such writing by INTRABIOTICS to the extent that such microbial
culture is within the possession and control of NCE at the time of the request,
using commercially reasonable efforts to maintain viability of each such
culture. Subject to Section 3.5(a), NCE shall not be obligated to retain more
than [ * ] microbial cultures under this Section 3.5(b). Where required for the
filing or granting of an Exclusive Research Program Patent pursuant to this
Agreement, as reasonably determined by counsel for INTRABIOTICS, NCE will
cooperate with INTRABIOTICS in the required deposit of the producing culture
with ATCC or such other mutually acceptable depository. INTRABIOTICS shall be
responsible for all fees and expenses charged by the depository.
3.6 INTRABIOTICS shall make payment to NCE for each
microbial culture that is retained by NCE pursuant to Section 3.5(b), as
follows:
(i) [ * ] per year for the first culture and [ * ] per
year for each additional culture.
(ii) The amount of Section 3.6(i) shall be paid for each
culture at the time of the request and shall be prorated as appropriate for the
balance of the calendar year in which the request is made. For each additional
calendar year the applicable amount shall be due and payable on the first
business day of the calendar year.
3.7 NCE shall have the right to supply to INTRABIOTICS
compounds of an Identified Compound Family for research purposes at the FTE rate
set forth in Section 2.9. INTRABIOTICS agrees to purchase all of INTRABIOTICS’
research requirements of compounds within an Identified Compound Family that NCE
is willing to supply except those quantities of compounds that can be made using
synthetic methods, and shall make all orders of compounds in writing, specifying
quantity and delivery dates. Not later than thirty (30) days after the date of
such written order, NCE shall confirm in writing the quantity of compound that
it will supply and the delivery dates.
3.8 INTRABIOTICS shall have the right to produce or to
obtain from a third party such quantities of compound that NCE does not confirm
it will supply on the requested reasonable delivery dates, or that, despite
confirmation of INTRABIOTICS’ order, NCE does not deliver on the requested
delivery date or such other delivery date as is mutually agreed upon.
3.9 Upon written request of INTRABIOTICS to NCE, if
available to NCE, NCE shall provide to INTRABIOTICS a microbial culture that
produces the compound within the Identified Compound Family that is or is
included in a Product under development by INTRABIOTICS (the “Commercial
Product”). INTRABIOTICS shall pay NCE [ * ] concurrent with the delivery of such
written request.
3.10 INTRABIOTICS shall have the right to use the culture for
making and having made the Commercial Product under then-current GMP conditions
for clinical and commercial uses and INTRABIOTICS agrees to use such culture
obtained pursuant to Section 3.10 only for such purposes as are permitted under
the non-exclusive license grant set forth in Section 3.1(ii) and only for the
period that INTRABIOTICS retains a license under this Agreement for such
Commercial Product.
3.11 INTRABIOTICS agrees that INTRABIOTICS will use NCE
Technology, NCE Research Program Technology and Exclusive Research Program
Technology only as licensed under this Agreement and only for the period of the
license grant.
4. RESEARCH LICENSE
4.1 NCE hereby grants to INTRABIOTICS a non-exclusive,
worldwide, royalty-free license, with the right to grant sublicenses to the
third party contractors named in Appendix C, to use the Screening Libraries in
the Screening Field to conduct the Research Program in accordance with this
Agreement.
4.2 INTRABIOTICS shall have the right to have such
screening performed by the contractors listed in Appendix C, provided that such
contractors agree in writing to be bound by the terms and conditions of this
Agreement with respect to use of the Screening Libraries including, but not
limited to, Section 2.3. The screening work performed by such contractors shall
be considered work performed by INTRABIOTICS for the purposes of this Agreement,
4.3 No licenses, other than those expressly granted in this
Agreement, whether express or implied, are granted by this Agreement.
5. FEES
5.1 INTRABIOTICS agrees to pay to NCE an initial payment of
[ * ] payable upon the Effective Date.
5.2 INTRABIOTICS shall pay to NCE a “Technology Access Fee”
of [ * ] which shall be due and payable in [ * ] due each quarter. The first
such installment shall be due upon the Effective Date and each of the following
[ * ] payments shall be due on the first day of each calendar quarter following
the first calendar quarter of 2001. [ * ].
5.3 In the event that this Agreement is terminated for any
reason other than breach by NCE, any portion of the Technology Access Fee that
has not been paid, shall become immediately due and payable.
5.4 (a) INTRABIOTICS shall pay to NCE the following
payments:
i. [ * ] payable with respect to the [ * ] within [ * ]
after NCE provides to INTRABIOTICS the structure of the [ * ] and notifies
INTRABIOTICS in writing that NCE has not granted rights to a third party with
respect to such [ * ].
ii. [ * ] payable with respect to [ * ] after NCE
provides to INTRABIOTICS the structure of [ * ] and notifies INTRABIOTICS in
writing that NCE has not granted rights to a third party with respect to such [
* ].
5.5 INTRABIOTICS shall pay to NCE the following payments
not later than [ * ] after the achievement of the corresponding milestone event:
i. [ * ]*
ii. [ * ]*
iii. [ * ]*
iv. [ * ]**
* [ * ]
** [ * ]
Each party acknowledges that although INTRABIOTICS desires to
develop several Products under this Agreement, there is no guarantee that
INTRABIOTICS will be able to develop any Products under this Agreement.
[ * ].
5.6 Subject to Section 5.8, INTRABIOTICS will pay to NCE
royalty payments of (i) [ * ] of Net Sales of the [ * ], and (ii) [ * ] of Net
Sales of the [ * ].
i. If [ * ] is a [ * ] product then the
royalty payment owed shall be reduced by [ * ]
ii. The parties shall each keep complete and
accurate records pertaining to the sale or other disposition of all Products for
which royalty payments are due hereunder and the royalty payments and other
amounts payable under this Agreement in sufficient detail to permit the
receiving party to confirm the accuracy of all payments due hereunder. The
receiving party shall have the right to cause an independent, certified public
accountant to audit such records to confirm the paying party’s or its licensee’s
Net Sales as reported hereunder and royalty payments for the preceding year.
Such audit rights may be exercised no more often than once a year, within three
(3) years after the calendar quarter to which such records relate, upon
reasonable notice to the party whose records are being audited and during normal
business hours. The party conducting the audit will bear the full cost of such
audit unless such audit discloses an underpayment of more than ten percent (10%)
from the amount of royalty payments due. In such case, the audited party shall
bear the full cost of such audit. Within thirty (30) days of the completion of
such audit, the audited party shall pay to the other party the amount of any
underpayment disclosed in such audit. The terms of this Section 5.6 shall
survive any termination or expiration or termination of this Agreement for a
period of three (3) years.
5.7 INTRABIOTICS agrees that INTRABIOTICS will not
research, develop, make, use or sell Identified Compound and/or Product without
making the payments of Sections 5.2 and 5.4 of this Agreement.
5.8 In the event that INTRABIOTICS grants a license to a
third party to make, have made, use, import, offer for sale or sell Other
Product, then INTRABIOTICS shall pay to NCE the greater of (i) [ * ] of the
license and milestone fees and royalties received by INTRABIOTICS for and under
such license or (ii) the amounts [ * ] from INTRABIOTICS with respect to such
Other Product under [ * ].
5.9 The royalty obligations under Section 5.6 shall expire
on a Product-by-Product and country-by-country basis on the later of (i) ten
(10) years from the date of first commercial sale of a royalty-bearing Product
in the relevant country or (ii) the expiration of the last to expire Exclusive
Research Program Patent covering the Product in such country.
6. INTELLECTUAL PROPERTY
6.1 Inventorship of any inventions arising out of the
Research Program shall be determined according to U.S. patent law. NCE shall
own all right, title and interest in the NCE Research Program Patents, Exclusive
Research Program Patents, Exclusive Research Program Technology and NCE Research
Program Technology in each case, regardless of inventorship. INTRABIOTICS shall
own all Screening Data and all intellectual property rights related thereto.
6.2 Each party shall continue to own all intellectual
property owned by such party prior to the Effective Date.
6.3 Except as provided in this Section 6, each party shall
file, prosecute, defend and maintain, at its sole discretion and expense, any
and all patent applications and patents covering technology owned by such party.
6.4 INTRABIOTICS shall have the right to file, prosecute,
maintain and defend, at the cost and expense of INTRABIOTICS and with counsel
selected by INTRABIOTICS, the Exclusive Research Program Patents.
6.5 Both parties shall cooperate as necessary to effect the
intentions of this Section 6 including, without limitation:
(a) executing all papers and instruments, or using
reasonable efforts to cause its employees or agents to execute such papers and
instruments, so as to effectuate the ownership of intellectual property rights
set forth in this Section 6 and to enable the other party to file and to
prosecute patent applications and to maintain patents in any country;
(b) effecting any required microorganism or other
biological deposits to support the Exclusive Research Program Patents, as
reasonably determined by counsel for INTRABIOTICS;
(c) promptly informing the other party of any
matters coming to such party’s attention that may affect the preparation, filing
or prosecution or maintenance of any NCE Research Program Patents and Exclusive
Research Program Patents; and
(d) undertaking no actions that are potentially
deleterious to the preparation, filing, prosecution or maintenance of NCE
Research Program Patents and Exclusive Research Program Patents.
6.6 If INTRABIOTICS elects (i) to abandon a granted
Exclusive Research Program Patent or (ii) not to file an application for patent
protection with respect to Exclusive Research Program Technology or (iii) to
abandon a filed Exclusive Research Program Patent without refiling thereof,
INTRABIOTICS shall provide to NCE reasonable notice thereof in writing, and NCE,
at its option, shall have the right to maintain, file and prosecute any such
Exclusive Research Program Patents at the cost and expense of NCE, with the
consent of INTRABIOTICS, which shall not be unreasonably withheld. INTRABIOTICS
shall retain INTRABIOTICS’ license under any such Exclusive Research Program
Patents.
6.7 Each party shall promptly notify the other party in
writing of any alleged or threatened infringement of the NCE Research Program
Patents or Exclusive Research Program Patents of which it becomes aware and
provide any information available to that party relating to such infringement.
6.8 INTRABIOTICS shall have the right and option, but not
the obligation, to bring and control, by counsel of its own choice and at its
own expense, any action or proceeding with respect to third party infringement
of any Exclusive Research Program Patents that are either issued at the time of
commencement of, or issue during the pendency of, any such action or proceeding,
and under which NCE has granted a license to INTRABIOTICS. Upon written notice
to NCE, INTRABIOTICS may require NCE to participate in such action as a
necessary party, at INTRABIOTICS’s expense. No settlement, consent judgment or
other voluntary final disposition of the action which adversely affects any
Exclusive Research Program Patent may be entered into without the consent of
NCE, which consent shall not unreasonably be withheld. Any recovery of damages
by INTRABIOTICS for any such action shall be retained by INTRABIOTICS.
7. CONFIDENTIALITY
7.1 “Confidential Information” shall mean any technical or
business information furnished by one party (the “Disclosing Party”) to the
other party (the “Receiving Party”) in connection with this Agreement, whether
orally or in writing. Such Confidential Information shall include, without
limitation, the existence and terms of this Agreement (which shall be
Confidential Information of both parties), trade secrets, know-how, inventions,
technical data or specifications, testing methods, business or financial
information, research and development activities, product and marketing plans,
and customer and supplier information, including, but not limited to, such items
that become known to a party during visits to the facilities of the other party.
The Screening Data shall be deemed INTRABIOTICS’ Confidential Information.
7.2 The Receiving Party agrees that it shall:
(a) Maintain all Confidential
Information and Material in strict confidence, except that the Receiving Party
may disclose or permit the disclosure of any Confidential Information and
Material to its affiliates, directors, officers, employees, consultants,
advisors and contractors listed in Appendix C and commercial and clinical
manufacturers of Product covered by Exclusive Research Program Patents or
Exclusive Research Program Technology licensed to INTRABIOTICS who are obligated
to maintain the confidential nature of such Confidential Information and who
need to know such Confidential Information and Material for the purposes set
forth in this Agreement;
(b) Use all Confidential
Information and Material solely for the purposes set forth in, or as permitted
by, this Agreement; and
(c) Allow its affiliates,
directors, officers, employees, consultants and advisors to reproduce the
Confidential Information and Material only to the extent necessary to effect the
purposes set forth in this Agreement, with all such reproductions being
considered Confidential Information and Material.
7.3 Each party shall be responsible for any breaches of
Section 7.2. by any of its affiliates, directors, officers, employees,
consultants , advisors and contractors. Each party will require those of its
affiliates, directors, officers, employees, consultants, advisors and
contractors who have access to the Confidential Information and Material be
bound by written agreement to the confidentiality obligations and use
restrictions herein.
7.4 The obligations of the Receiving Party under Section
7.2. above shall not apply to any portion of the Disclosing Party’s Confidential
Information to the extent that the Receiving Party can demonstrate by competent
proof that such Confidential Information:
(a) Was generally known to the
public or otherwise part of the public domain prior to the time of its
disclosure under this Agreement;
(b) Entered the public domain
after the time of its disclosure under this Agreement through means other than
an unauthorized disclosure resulting from an act or omission by the Receiving
Party or its affiliates, directors, officers, employees, consultants, advisors,
agents and contractors;
(c) Was already known to the
Receiving Party, other than under an obligation of confidentiality, at the time
of disclosure by the Disclosing Party;
(d) Is or was disclosed to the
Receiving Party at any time, whether prior to or after the time of its
disclosure under this Agreement, by a third party having no fiduciary
relationship with the Disclosing Party and having no obligation of
confidentiality to the Disclosing Party with respect to such Confidential
Information; or,
(e) Is required to be disclosed
to comply with applicable laws or regulations (such as disclosure to the United
States Securities and Exchange Commission, the United States Environmental
Protection Agency, the United States Food and Drug Administration, or the United
States Patent and Trademark Office or to their foreign equivalents), or to
comply with a court or administrative order, provided that the Disclosing Party
receives prior written notice of such disclosure and that the Receiving Party
takes all reasonable and lawful actions to obtain confidential treatment for
such disclosure and, if reasonably possible, to minimize the extent of such
disclosure.
7.5 The obligations set forth in this Article 7 shall
remain in effect after termination or expiration of this Agreement for a period
of ten (10) years.
8. INDEMNIFICATION
8.1 INTRABIOTICS shall defend, indemnify and hold NCE and
its directors, officers, employees, shareholders and agents, harmless from and
against any and all third party claims, suits or demands for liabilities,
damages, losses, costs and expenses (including the reasonable fees of attorneys
and other professionals) arising out of or resulting from (i) the development,
manufacture, use, distribution or sale of any Product by INTRABIOTICS, its
affiliates, distributors, co-marketers, licensees or sublicensees or any person
or entity that prepares or manufactures Product for or on behalf of any of the
foregoing or any person or entity who receives or obtains (directly or
indirectly) Product from any of the foregoing, (ii) any breach of Section 10 of
this Agreement, (iii) INTRABIOTICS’ use of the Screening Libraries (except to
the extent arising from third party claims of infringement of intellectual
property rights related to the Screening Libraries), and/or (iv) the breach by a
subcontractor listed in Appendix C of any term of this Agreement. Such
obligation shall not apply to those losses which arise out of the negligence or
intentional misconduct of NCE.
8.2 NCE shall defend, indemnify and hold INTRABIOTICS and
its directors, officers, employees, shareholders and agents, harmless from and
against any and all third party claims, suits or demands for liabilities,
damages, losses, costs and expenses (including the reasonable fees of attorneys
and other professionals) arising out of or resulting from (i) any breach of
Section 10 of this Agreement, and/or (ii) the development, manufacture, use,
distribution or sale of any Product by NCE, its affiliates, distributors,
co-marketers or sublicensees or any person or entity that prepares or
manufactures Product for or on behalf of any of the foregoing or any person or
entity who receives or obtains (directly or indirectly) Product from any of the
foregoing. Such obligation shall not apply to those losses which arise out of
the negligence or intentional misconduct of INTRABIOTICS.
8.3 A person or entity that intends to claim
indemnification under this Section (the “Indemnitee”) shall promptly notify the
other party (the “Indemnitor”) of any loss, claim, damage, liability or action
in respect of which the Indemnitee intends to claim such indemnification, and
the Indemnitor shall assume the defense thereof with counsel mutually
satisfactory to the Indemnitee whether or not such claim is rightfully brought;
provided, however, that an Indemnitee shall have the right to retain its own
counsel, with the reasonable fees and expenses to be paid by the Indemnitor if
Indemnitor does not assume the defense, or if representation of such Indemnitee
by the counsel retained by the Indemnitor would be inappropriate due to actual
or potential differing interests between such Indemnitee and any other person
represented by such counsel in such proceedings. The indemnity agreement in this
Section shall not apply to amounts paid in settlement of any loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Indemnitor, which consent shall not be withheld or delayed unreasonably.
The Indemnitor shall not settle any claim to be indemnified that could adversely
affect the Indemnitee without the consent of the Indemnitee, which consent shall
not be unreasonably withheld. The failure to deliver notice to the Indemnitor
within a reasonable time after the commencement of any such action, only if
prejudicial to its ability to defend such action, shall relieve such Indemnitor
of any liability to the Indemnitee under this Section. The Indemnitee under this
Section, its employees and agents, shall cooperate fully with the Indemnitor and
its legal representatives in the investigations of any action, claim or
liability covered by this indemnification.
9. TERMINATION
9.1 (a) This Agreement shall commence as of the
Effective Date and, unless sooner terminated as provided hereunder, shall
terminate when neither party has any remaining payment obligations to the other
party under this Agreement (i.e., upon the date that both parties have ceased to
research, develop and commercialize Products);
(b) When a party has made all of the payments
required by this Agreement with respect to a Product, such party shall have a
fully paid up license to make, have made, use, import, offer for sale or sell
such Product that shall survive termination of this Agreement.
9.2 INTRABIOTICS may terminate this Agreement at will
effective no earlier than [ * ] by providing NCE with [ * ] months prior written
notice.
9.3 Breach.
(a) Failure by either party to comply with
any of its material obligations contained in this Agreement shall entitle the
other party to give to the party in default notice specifying the nature of the
default and requiring it to cure such default. If such default is not cured
within sixty (60) days (thirty (30) days in the event of a default with respect
to an obligation to pay money) after the receipt of such notice, the notifying
party shall be entitled, without prejudice to any of its other rights conferred
on it by this Agreement, and in addition to any other remedies available to it
by law or in equity, to terminate this Agreement in its entirety, by giving
written notice to take effect immediately upon delivery of such notice. The
right of either party to terminate this Agreement, as provided in this Section
9.3, shall not be affected in any way by its waiver or failure to take action
with respect to any previous default.
(b) An election of remedy by a party for a
material breach of this Agreement under this Section 9.3 on one occasion shall
not constitute a waiver as to any other remedy that may be available to such
party under this Section 9.3 as to any material breach on another occasion.
9.4 The following sections shall survive termination of
this Agreement: 2.2, 2.3, 2.4, 2.6, 3.11, 5.3, 5.6 (ii), 5.7, 6.1, 6.2, 6.3,
6.5, 9.1(b), 9.4 and 10.4, and Articles 7, 8, 11 and 12.
9.5 Upon the earlier of termination of this Agreement or
termination of the Research Program, INTRABIOTICS shall return all Screening
Libraries to NCE.
10. REPRESENTATIONS AND WARRANTIES
10.1 Mutual Representations and Warranties
Each party represents to the other that:
(a) Such party is duly organized and validly
existing under the laws of the state or country of its incorporation and has
full corporate power and authority to enter into this Agreement and to carry out
the provisions hereof;
(b) Such party is duly authorized to execute
and deliver this Agreement and to perform its obligations hereunder;
(c) This Agreement is a legal and valid
obligation binding upon it and enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by such party does not
conflict with any agreement, instrument or understanding, oral or written, to
which it is a party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative or other agency
having jurisdiction over it;
(d) It has not entered into any agreement with
any third party which is in conflict with the rights granted to the other party
under this Agreement, and shall not have taken any action that would in any way
prevent it from granting the rights granted to the other party under this
Agreement, or that would otherwise materially conflict with or adversely affect
the rights granted to the other party under this Agreement. and
10.2 INTRABIOTICS further represents and warrants to NCE that
as of the Effective Date, without having made an investigation, INTRABIOTICS has
no actual knowledge that the screening procedures that are to be used by
INTRABIOTICS under this Agreement infringes the intellectual property rights of
a third party.
10.3 NCE further represents and warrants to INTRABIOTICS
that:
(a) All information provided to INTRABIOTICS
with respect to its ownership rights with regard to Identified Compounds, and
Products, and related intellectual property rights, shall, to its knowledge, but
without obligation to investigate, be complete and accurate.
(b) As of the Effective Date, NCE has not
received any notices of infringement or misappropriation or any written
communications relating in any way to a possible infringement or
misappropriation with respect to the use of the Screening Libraries, and without
having made an investigation it has no knowledge that the use of the Screening
Libraries as contemplated by this Agreement will or may involve any infringement
or unauthorized use of any intellectual property rights of any third party;
(c) To the best of NCE’s knowledge, as of the
Effective Date, NCE owns the Screening Libraries that are to be provided to
INTRABIOTICS under this Agreement and has the right to grant the license thereto
that is granted to INTRABIOTICS under this Agreement.
(d) To the best of its knowledge, but without
the obligation to investigate, as of the Effective Date, NCE has no actual
knowledge that any data or information given to INTRABIOTICS relating to the
Screening Libraries is untrue or inaccurate in any material respect; and
(e) As of the Effective Date, without having
made an investigation, NCE has no actual knowledge that the Screening Libraries
that are to be provided to INTRABIOTICS under this Agreement or that the
procedures that NCE plans to use for identifying compounds under this Agreement
infringes the intellectual property rights of a third party.
(f) NCE will not grant to INTRABIOTICS a
license in accordance with Sections 3.1 and 3.2 of this Agreement unless NCE has
the right to grant to INTRABIOTICS such a license.
10.4 Each party will follow good scientific practices in the
performance of its duties pursuant to this Agreement. HOWEVER, THE WORK TO BE
PERFORMED HEREIN IS EXPERIMENTAL AND EACH PARTY EXPRESSLY DISCLAIMS ANY STATED
OR IMPLIED WARRANTIES OF PATENTABILITY, MERCHANTABILITY, OR FITNESS FOR
PARTICULAR PURPOSE OF ANY MATERIALS TO BE SUPPLIED BY SUCH PARTY TO THE OTHER
PARTY UNDER THIS AGREEMENT. IN NO EVENT SHALL EITHER PARTY OR ITS RESPECTIVE
AFFILIATES AND PERMITTED SUBLICENSEES BE LIABLE FOR SPECIAL, EXEMPLARY,
CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, STRICT
LIABILITY OR OTHERWISE, EXCEPT TO THE EXTENT SUCH PARTY MAY BE REQUIRED TO
INDEMNIFY THE OTHER PARTY FROM SUCH DAMAGES CLAIMED BY THIRD PARTIES UNDER
SECTION 8.
11. NOTICE
11.1 NOTICES shall be sent as follows:
If to NCE: New Chemical Entities, Incorporated 18804 North Creek Parkway
Bothell, WA 98011 USA Attn.: Dr. Dwight Baker Tel. (425) 424-7250
Fax (425) 424-7299
If to INTRABIOTICS: IntraBiotics Pharmaceuticals, Inc. 2021 Stierlin Court
Mountain View, CA 94043 USA Attn.: Dr. John Fiddes Tel. (650)
526-6800 Fax (650) 969-0663
12. MISCELLANEOUS
12.1 Relationship of Parties. Nothing in this Agreement is
intended or shall be deemed to constitute a partnership, agency,
employer-employee or joint venture relationship between the parties. No party
shall incur any debts or make any commitments for the other, except to the
extent, if at all, specifically provided herein.
12.2 Assignment. Neither party shall be entitled to assign
its rights hereunder without the express written consent of the other party
hereto, except that either party may assign their respective rights and transfer
their respective duties hereunder to an affiliate, to any assignee of all or
substantially all of their business to which this Agreement relates, or in the
event of their respective merger or consolidation. Any assignment not in
accordance with this Section 12.2 shall be void and of no effect. No assignment
and transfer shall be valid or effective unless and until the
assignee/transferee shall agree in writing to be bound by the provisions of this
Agreement in which case the Agreement will inure to the benefit of such
successors and assigns.
12.3 Further Actions. Each party agrees to execute,
acknowledge and deliver such further instruments, and to do all such other acts,
as may be necessary or appropriate in order to carry out the purposes and intent
of this Agreement.
12.4 Use of Name. Except as otherwise provided herein,
neither party shall have any right, express or implied, to use in any manner the
name or other designation of the other party or any other trade name or
trademark of the other party for any purpose in connection with the performance
of this Agreement.
12.5 Waiver. A waiver by either party of any of the terms
and conditions of this Agreement in any instance shall not be deemed or
construed to be a waiver of such term or condition for the future, or of any
subsequent breach hereof. All rights, remedies, undertakings, obligations and
agreements contained in this Agreement shall be cumulative and none of them
shall be in limitation of any other remedy, right, undertaking, obligation or
agreement of either party.
12.6 Severability. If any term, condition or provision of
this Agreement is held to be unenforceable for any reason, it shall, if
possible, be interpreted to achieve the intent of the parties to this Agreement
to the extent possible rather than voided. In any event, all other terms,
conditions and provision of this Agreement shall be deemed valid and enforceable
to the full extent.
12.7 Amendment. No amendment, modification or supplement of
any provisions of this Agreement or the Appendices thereto (except with respect
to the addition or deletion of Targets) shall be valid or effective unless made
in writing and signed by a duly authorized officer of each party.
12.8 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware without regard
to its choice of law principles. In the event that either party desires to
initiate litigation with respect to this Agreement, such litigation shall be
conducted in a court of competent jurisdiction in the State of Delaware and each
party hereby submits to the jurisdiction of such court(s) and agrees that venue
is proper in such court(s).
12.9 Entire Agreement. This Agreement, together with the
Exhibits hereto, sets forth the entire agreement and understanding between the
parties as to the subject matter hereof and merges all prior discussions and
negotiations between them. Neither of the parties shall be bound by any
conditions, definitions, warranties, understandings or representations with
respect to such subject matter other than as expressly provided herein or as
duly set forth on or subsequent to the date hereof in writing and signed by a
proper and duly authorized officer or representative of each party.
12.10 Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective permitted successors and assigns.
12.11 Descriptive Headings. The descriptive headings of this
Agreement are for convenience only, and shall be of no force or effect in
construing or interpreting any of the provisions of this Agreement.
12.12 Counterparts. This Agreement may be executed
simultaneously in any number of identical counterparts, any one of which need
not contain the signature of more than one party but all such counterparts taken
together shall constitute one and the same agreement.
12.13 Dispute Resolution. In the event of a dispute between
the parties relating to the subject matter of this Agreement other than disputes
arising from facts supporting the entry of a Temporary Restraining Order or
Preliminary Injunction or similar emergency relief, the parties shall first
submit such dispute to their respective Chief Operating Officers for
resolution. If the Chief Operating Officers are unable to resolve such dispute
within thirty (30) days after its submission, either party make seek such relief
or remedy as it may elect.
12.14 To the extent that there is an inconsistency between the
Appendices and the main portion of this Agreement, the main portion of the
Agreement shall determine the rights and obligations of the parties.
IN WITNESS WHEREOF, the parties hereto, intending to be bound hereby, have
caused this Agreement to be executed as of the dates indicated herein:
INTRABIOTICS PHARMACEUTICALS, INC. NEW CHEMICAL ENTITIES, INC. By: /s/ Kenneth
J. Kelley
--------------------------------------------------------------------------------
By: /s/ Barry Berkowitz
--------------------------------------------------------------------------------
(Signature) (Signature) Name: Kenneth J. Kelley Name: Barry Berkowitz
--------------------------------------------------------------------------------
Title: Chairman and Chief Executive Officer Title: CEO
--------------------------------------------------------------------------------
Date: January 24, 2001
--------------------------------------------------------------------------------
Date: 1/24/01
--------------------------------------------------------------------------------
APPENDIX A
to RESEARCH AND TECHNOLOGY AGREEMENT
dated January 24, 2001 between NCE, Inc. and INTRABIOTICS
[ * ]
(one page of text omitted here)
APPENDIX B
to RESEARCH AND TECHNOLOGY AGREEMENT
dated January 24, 2001 between NCE, Inc. and INTRABIOTICS
[ * ]
(3 ½ pages of continuous text omitted here)
APPENDIX C
to RESEARCH AND TECHNOLOGY AGREEMENT
dated January 24, 2001 between NCE, Inc. and INTRABIOTICS
[ * ]
--------------------------------------------------------------------------------
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED. |
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.04
AMENDED AND RESTATED SERVICES AGREEMENT
THIS AMENDED AND RESTATED SERVICES AGREEMENT (“Agreement”) is effective
as of September 11, 2001 (the “Effective Date”) by and between Intuit Inc., a
Delaware corporation, with offices at 2535 Garcia Avenue, Mountain View, CA
94043 (“Intuit”), and Ingram Micro Inc., a Delaware corporation, with principal
offices located at 1600 East St. Andrew Place, Santa Ana, California 92705
(“Vendor”).
Preamble
Vendor and Intuit are parties to a Services Agreement (“Initial
Agreement”) pursuant to which Vendor agreed to provide Intuit with certain
services, including inventory management, order management and related services.
Vendor and Intuit now seek to amend and restate the Initial Agreement in its
entirety in accordance with the terms and conditions set forth in this
Agreement.
NOW THEREFORE, for good and valuable consideration received and to be received
by Vendor, Vendor and Intuit agree as follows:
Terms and Conditions
1. Definitions. For purposes of this Agreement, the following terms shall
have the definitions set forth in this Section 1:
(a) “Annualized Inventory Turn” shall refer to the number calculated by
dividing Ingram’s gross monthly shipments of Current Products (as defined
herein) by the average daily number of Current Products held by Vendor during
such month, and then multiplying the quotient by twelve (12).
(b) “Business Day” shall mean Monday through Friday, excluding New Year’s Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day,
or in the event any of these holidays fall on a Saturday or Sunday, the day on
which the holidays observed.
(c) “Current Products” shall mean the products in the Inventory that, at the
time the Annualized Inventory Turns are being calculated, are being offered to
Customers and shall exclude Promotional Products (as defined herein).
(d) “Customers” shall mean Intuit’s customers.
(e) “Intuit” shall mean Intuit and any other Intuit affiliate with respect to
which Intuit (i) owns fifty percent (50%) or more of the outstanding stock or
other equity interests, or otherwise directs the day to day management of
through a written management agreement (including, but not limited to, apps.com,
Inc., Boston Light Software Corp., Computing Resources, Inc., EmployeeMatters,
Inc. d/b/a QuickBooks Employee, Lacerte Software Corporation, Quicken Loans
Inc., and Turning Mill Software, Inc.), and
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* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
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(ii) identifies in a written notice given to Vendor (provided that in the event
that the addition of such Intuit affiliate results in a material change with
respect to the cost of the Services to be provided hereunder, then such addition
shall be considered a request for a change in the scope of services subject to
Section 3(c)). With respect to the Intuit affiliates specifically referenced in
this Section 1(d), by execution of this Agreement, Vendor acknowledges receipt
of written notice that such affiliates are included in the definition of Intuit.
(f) “Intuit Supplier” shall mean manufacturers or other producers or
distributors of Inventory from which Vendor may be required to arrange for the
transportation and delivery of such Inventory to the Facilities or Customers.
(g) “Inventory” shall mean product inventory acquired or owned by Intuit that
is made available to Vendor for storage and order processing under the terms of
this Agreement.
(h) “Non-Current Products” shall mean all Intuit products in the Inventory
that, at the time the Annualized Inventory Turns are being calculated, are no
longer being offered to Customers.
(i) “Promotional Products” shall mean non-standard Intuit products in the
Inventory that are intended to be distributed on a promotional basis (e.g., 90
day trials distributed in CD sleeves).
(j) “Services” shall mean the inventory management, order management and
related services described in Section 3, Exhibit A and the Statement of Work (as
defined herein).
2. Independent Contractor. In accordance with the mutual intentions of
Intuit and Vendor, this Agreement establishes between them an independent
contractor relationship, and all of the terms and conditions of this Agreement
shall be interpreted in light of that relationship. The parties do not intend to
create a partnership or employment relationship between Intuit and Vendor, and
nothing in this Agreement shall be construed to create such a relationship
between the parties.
3. Services.
(a) The Services and Service Level Requirements. Vendor agrees to perform, on
behalf of Intuit, the Services set forth in Exhibit A as such Services are more
fully described in a separate statement of work agreement as may be negotiated
between the parties from time to time (the “Statement of Work”). All such
Services shall be performed in the manner described herein and in accordance
with the fee schedule attached hereto as Exhibit B and the service level
requirements set forth in Exhibit C and the Statement of Work. Vendor agrees to
begin performing the Services as of September 10, 2001 (the “First Shipment
Date”), provided that Vendor shall perform
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any preparation necessary to be able to perform as of the First Shipment Date
during the period following the Effective Date and prior to the First Shipment
Date.
(b) Changes to Scope of Services. Intuit may request in writing changes that
affect the scope of the Services to be performed hereunder. If the parties
mutually agree to such a change, then Vendor promptly shall notify Intuit if it
believes that the change should result in an adjustment in the fees to be paid
to Vendor for the Services. The parties shall then negotiate in good faith a
reasonable and equitable adjustment to the applicable fees and/or the Statement
of Work. Vendor shall continue to perform the Services pursuant to the existing
Statement of Work, and shall not be bound by any change requested by Intuit,
until such change has been agreed upon in writing by the parties.
(c) Program Managers. Each party agrees that its principal point of contact for
all matters relating to the Services shall be its “Program Manager” designated
in the Statement of Work. Each party may designate an alternate Program Manager
by written notice to the other party, provided, however, that each such party
consults with the other party when selecting an alternate Program Manager.
(d) Personnel. During the Term, as more fully described in the Statement of
Work, Vendor shall dedicate a minimum of [*] full-time Vendor employees to the
provision of the Services. Vendor shall consult with Intuit regarding the
selection of and any material changes in the composition of the managerial-level
employees who are dedicated to the performance of the Services.
(e) Inventory. Vendor shall receive, store and process the Inventory in the
manner set forth in this Agreement and the Statement of Work. Vendor will use
and manage the Inventory only as necessary to perform the Services and as
directed by Intuit in writing. If Intuit authorizes Vendor to use other Intuit
materials in performing the Services, Vendor agrees to use such materials solely
in connection with the performance of the Services. In the event that Vendor
uses, distributes or otherwise disposes of the Inventory or other Intuit
materials, or permits any third party to use, distribute or otherwise dispose of
the Inventory or other Intuit materials other than as set forth in this
Agreement, the Statement of Work or authorized in writing by Intuit, then, in
addition to any other remedies that may be available to Intuit hereunder, Vendor
shall, upon written notice from Intuit (i) immediately cease such unauthorized
use, distribution or disposition, (ii) to the extent that any such unauthorized
use has the potential to result in a material loss or security threat to Intuit,
notify Intuit within three (3) Business Days of the results of its investigation
surrounding such circumstances, and (iii) within [*] Business Days implement a
plan that is reasonably certain to protect against similar occurrences in the
future. Vendor shall comply with all applicable laws, rules and regulations with
respect to the handling and disposition of the Inventory, including, without
limitation, all environmental and occupational and employment laws, rules and
regulations.
--------------------------------------------------------------------------------
* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
3
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(f) Controls Against Theft. Vendor agrees to implement and maintain reasonable
controls against theft or misappropriation with respect to the Inventory and any
other Intuit materials under Vendor’s control. In fulfilling this obligation,
Vendor shall utilize controls that are at least equivalent to the controls that
it maintains for other similarly sensitive products or components under its
control, provided that such controls are at least comparable to the prevailing
standards used within the industry to control against theft or misappropriation
of inventory similar to the Inventory.
(g) Cooperation. Vendor acknowledges and agrees that, in order to perform the
Services, it will be necessary for Vendor to work directly with Intuit’s
manufacturers and other third party service providers. Vendor agrees to
cooperate with such manufacturers and third party service providers, including,
without limitation, by managing shipments and returns and processing claims for
lost Inventory on behalf of Intuit.
4. Shipping Costs; Facilities.
(a) Shipping Costs. Vendor shall be solely responsible for arranging and
managing all transportation and shipping associated with the delivery of
Inventory to the Facilities (“Inbound Delivery”) as well as the delivery of the
Inventory from Vendor’s Facilities to Customers (“Outbound Delivery”) as stated
in the Statement of Work, including, without limitation, the selection and
management of carriers, and the processing of all records and claims with
respect to such transportation. Notwithstanding the foregoing, (i) Intuit shall
have the right to direct Vendor to refrain from shipping Inventory with carriers
that have an unacceptably high number of delays or other performance
deficiencies, and (ii) Vendor agrees to utilize such carriers and following such
shipping instructions as may be directed by Customers that have their own
transportation requirements. Intuit shall be responsible for all shipping costs
associated with Inbound Inventory. All shipping costs for Outbound Delivery
shall be based on Vendor’s freight rate schedule then in effect, the current
version of which is set forth in Exhibit B. In the event of a change in a
carrier’s freight rates or discounts offered to Vendor, Vendor may change the
freight rate schedule by notifying Intuit not less than thirty (30) days prior
to the effective date of the change. Intuit shall pay Vendor for shipping costs
in accordance with Section 7.
(b) Facilities. Vendor shall use the facilities identified in the Statement of
Work when performing the Services (each a “Facility”). Vendor shall be fully
responsible for the maintenance and operation of each Facility, and shall bear
all costs and expenses associated with securing and maintaining the Facilities,
including, but not limited to, lease costs, improvements, insurance costs,
utilities, communication expenses, security and repair and maintenance costs.
Intuit or its agent shall have the right, upon reasonable advance notice, to
inspect the Facilities and the Inventory to verify Vendor’s compliance with this
Agreement and the Statement of Work; during any such inspection, Intuit shall be
entitled to count Inventory, monitor Vendor’s Inventory handling procedures and
review applicable bills of lading. Vendor may use other Facilities to
4
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perform the Services; provided, however, that Vendor [*]. In the event that the
parties are unable, through such good faith negotiations, to agree within
forty-five (45) days following receipt of written notice of such closure on
appropriate pricing adjustments or other measures, then Intuit shall have the
right to terminate this Agreement and the Statement of Work without liability.
5. Electronic Sharing of Information and Reporting.
(a) Vendor shall ensure that its information management systems relating to the
Services (e.g., order processing and inventory management systems) provide the
electronic information that is required in the Statement of Work.
(b) Vendor shall provide Intuit with a set of performance, utilization and
status reports as further described in the Statement of Work, which reports
shall be provided by Vendor to Intuit in accordance with the delivery procedures
and format(s) specified in the Statement of Work.
6. Reviews.
[*]
(b) Quarterly Reviews. Not less than twenty (20) days following the end of each
calendar quarter, designated team members from both parties will meet and confer
(via conference call, if necessary) to review the business and performance
during the past calendar quarter. These meetings (the “Quarterly Reviews”) will
include a performance review, continuous improvement projects, and management
status reviews, cost reduction initiatives and other operational areas and
issues. In connection with each Quarterly Review that occurs on or after
January 1, 2002, the parties shall gather the data and rate Vendor’s performance
in accordance with the a Quarterly Review form (the “Quarterly Review Form”)
that measures Vendor’s compliance with the service level requirements set forth
in Exhibit C. Such Quarterly Reviews may result in the payment of additional
compensation based on such performance ratings (“Quarterly Review Payouts”). The
maximum amount of such Quarterly Review Payouts will be $[*] annually, and $[*]
of such maximum amount will be allocated to payouts that may be earned by Vendor
based on Vendor’s performance ratings relating to [*]. On or before January 1,
2002, the parties will mutually agree upon (i) the content and format of the
Quarterly Review Form, (ii) the scoring process to be used for the Quarterly
Review Form to determine the amount (if any) of the Quarterly Review Payouts to
be paid to Vendor, and (iii) the allocation of the remaining $[*] of the maximum
annual amount of the Quarterly Review Payouts to the remaining areas (i.e., [*])
of Vendor’s performance that are rated on the Quarterly Review Form and for
which payouts may be earned by Vendor.
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* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
5
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7. Compensation and Payment.
(a) Subject to the performance by Vendor of its obligations set forth in this
Agreement and the Statement of Work, and except as otherwise provided herein or
therein, Intuit will pay Vendor for the performance of the Services in the
amounts and in accordance with the schedule specified in Exhibit B. No
compensation shall be paid for services rendered by Vendor unless the Services
are set forth in the Statement of Work. Vendor shall invoice and Intuit shall
pay for the Services in accordance with this Section 7, [*], and (ii) comply
with the terms contained therein with regard to the payment and reporting
relating to the Services.
[*]
(c) Vendor shall have the right, in accordance with the warehouse storage rates
set forth in Exhibit B, to charge Intuit for the warehouse storage of all
Non-Current Products and/or Promotional Products that are not shipped from
Vendor’s Facilities within ninety (90) days from the date such Non-Current
and/or Promotional Products arrive at Vendor’s Facilities.
(d) Intuit shall pay Vendor a one-time fee of [*] dollars ($[*]) for fixed
costs associated with Vendor’s preparations to provide the Services. In no event
shall Intuit be responsible for the payment of any additional fixed costs
incurred during the period between the Effective Date and the First Shipment
Date (regardless of whether such First Shipment Date occurs on the date set
forth in the Statement of Work or at sometime thereafter, as mutually agreed
upon by the parties). Following the First Shipment Date, Vendor will submit
monthly invoices for the fixed costs outlined in Exhibit B. Vendor will submit
separate [*] invoices for (i) freight costs incurred for shipping Inventory to
Customers, (ii) supply costs, and (iii) variable costs; each such invoice shall
set forth, in reasonable detail, descriptions of the costs incurred during the
preceding week, the calculation of the costs related thereto, prior approved
disbursements or out-of-pocket expenses then due (if any), and such other
information as may be reasonably requested by Intuit. Vendor shall invoice
Intuit for travel expenses in accordance with Intuit’s then-current reimbursable
expenses guidelines. Vendor will send all invoices to Intuit Inc., Accounts
Payable, M.S. 247, P. O. Box 391296 Mountain View, CA 94039-1296, or to such
other address as Intuit may designate from time to time. All invoices must
reference the number and date of this Agreement.
(e) Except as otherwise provided in this Agreement, all undisputed payments
will be made by Intuit within forty-five (45) days after receipt of the
applicable invoice, and shall be sent to Vendor at its address specified in the
invoice. In the event that Intuit disputes any invoice rendered or amount paid,
Intuit promptly will notify Vendor in writing and the parties shall work
together to resolve such dispute expeditiously, provided that the time for
payment of the disputed amount on the invoice shall be extended until resolution
of the dispute.
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* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
6
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(f) Vendor shall separately detail in each invoice provided under this
Agreement any applicable taxes for goods or services, and shall separately
enumerate each category of taxes that Intuit may be required to pay Vendor in
connection with the performance of the Services (e.g., sales, use, etc.). Vendor
will be responsible and shall pay any taxes based on Vendor’s net income. Vendor
will reimburse and indemnify Intuit for any such taxes and contributions and
interest and penalties that Intuit may be compelled to pay on account of
Vendor’s non-payment of such taxes.
(g) Vendor agrees that the Inventory and any other Intuit materials provided by
Intuit hereunder shall remain the property of Intuit. Vendor shall at all times
hold the Inventory and any other Intuit materials free and clear of all liens,
claims, and encumbrances, except such liens, claims and encumbrances of third
parties that are unrelated to the Services, Vendor or its employees and
contractors.
(h) Vendor will maintain complete and accurate records relating to any fees and
payments charged or made in connection with the Services provided under this
Agreement. Up to a maximum of two times in any calendar year, Intuit may audit
the books, systems, processes and records of Vendor relating to Vendor’s
fulfillment of its obligations under this Agreement at Intuit’s expense during
normal business hours. Such audit shall be for the purpose of assuring that the
Vendor’s performance is in accordance with its obligations under this Agreement
and the Statement of Work. Each audit will be conducted in a manner designed to
minimize disruption to Vendor’s normal business and shall be conducted on a
non-look back basis, i.e. periods to be audited shall exclude periods already
audited. In the event Intuit discovers a performance deficiency during an audit,
Intuit’s remedy will be as follows: (i) Intuit shall notify Vendor in writing of
the deficiency within fourteen (14) days of discovery; and (ii) Vendor will have
ten (10) days after receipt of such notice to prepare a plan to correct the
deficiency, and twenty (20) days after receipt of such notice to complete
correction of the deficiency. Notwithstanding anything to the contrary contained
herein, Intuit retains the right to pursue any and all remedies available to
Intuit under this Agreement, including, but not limited to, the right to
terminate this Agreement under Section 8(b) and any remedies available to Intuit
under law or equity.
8. Term/ Termination.
(a) Unless otherwise terminated in accordance with this Agreement, the term of
this Agreement shall begin on the Effective Date and will continue for a period
of three (3) year(s) after the Effective Date (the “Term”). Vendor shall begin
and complete the Services on the dates specified in the Statement of Work.
(b) Either party may terminate this Agreement (i) due to a material breach of
this Agreement or the Statement of Work by the other party if such material
breach remains uncured for a period of thirty (30) days following receipt of
written notice by the breaching party; and (ii) by giving (30) days’ written
notice to the other party in the event
7
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of: (A) any sale or transfer of all or substantially all of such other party’s
assets; or (B) any acquisition of a controlling interest in such other party’s
voting stock.
(c) Intuit reserves the right to terminate this Agreement if Vendor fails to
comply with any of the performance requirements set forth in the Service Level
Attachment, attached hereto as Exhibit C. The termination right granted to
Intuit under this Section 8(c) shall not limit or prevent Intuit from
terminating this Agreement for any other basis permitted under this Agreement.
In addition, the rights and remedies set forth in this Section are in addition
to the corrective actions and specific remedies set forth in the Exhibit C,
which shall be cumulative. Intuit’s right to terminate pursuant to this
Section 8(c) shall be subject to the following procedure:
(i) Intuit may notify Vendor in writing of any performance
deficiencies within fourteen (14) days of receipt of the monthly report
regarding performance. Vendor will have ten (10) days after receipt of such
notice to prepare a plan to correct the deficiency, and twenty (20) days after
receipt of such notice to complete correction of the deficiency.
(ii) Intuit will have the option to terminate this Agreement if
(i) Intuit gives more than one (1) notice of deficiency relating to
substantially the same performance level requirement set forth in Exhibit C
within any twelve (12) month period during the Term, (ii) Vendor fails to
prepare a plan to correct a deficiency within ten (10) days or to fully
implement a correction to a deficiency within twenty (20) days of receipt of any
notice of deficiency, or (iii) Intuit issues three (3) or more notices of
deficiency during any consecutive eighteen (18) month period (regardless of
whether such notices relate to the same or different performance level
requirements). Intuit’s termination right under this Section 8(c) may be
exercised upon thirty (30) calendar days from the date of such notice, and
Vendor shall have no further right to cure any such deficiency.
(d) Either party may terminate this Agreement for convenience, without cause,
upon at least one hundred eighty (180) days’ prior written notice to the other
party.
(e) In the event of an early termination of this Agreement, Intuit shall
compensate Vendor for the Services provided on or before the effective date of
the termination and shall compensate Vendor for any approved disbursements and
out-of-pocket expenses reasonably incurred by Vendor in connection with this
Agreement. Upon termination or expiration of this Agreement, or at any prior
time upon the request of Intuit, Vendor will promptly deliver to Intuit or its
designee, all Inventory in its possession and all Confidential Information and
Materials (as hereinafter defined) Vendor agrees not to retain any copies of
Confidential Information or Materials after the termination or expiration of
this Agreement. All Inventory shall be returned in substantially the same
condition as it was received by Vendor. Notwithstanding the foregoing, if Intuit
or Vendor terminates this Agreement in accordance with Section 8, Intuit shall
be responsible for the costs of removing the Inventory and delivering it to a
new location.
(f) Prior to the effective date of the termination or expiration of this
Agreement, Vendor and Intuit shall develop a mutually acceptable plan to permit
Intuit to transition
8
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the Services in a seamless manner to a succeeding service provider. Vendor
agrees to provide reasonable assistance to Intuit in the provision any
transition assistance, including, but not limited to, relocation of Inventory,
employment of full-time staffing necessary for management of the Inventory
transition plan, technical assistance in transitioning and integrating existing
databases and information technology systems with alternative solutions,
assistance in transitioning to alternative transportation providers, managing
Customer service responsibilities transition including returns processing, and
providing a dedicated program manager for a period of thirty (30) days following
the relocation of the Inventory.
(g) The provisions of Sections 7, 8(e), 8(f), 8(g), 11, 12, 13, 14, 15, 16 and
18 as well as corresponding provisions of any of the Exhibits, will survive any
termination or expiration of this Agreement.
9. Business Continuity.
(a) Vendor shall (i) be responsible for business continuity of operations
within the scope of the Services being provided; (ii) within thirty (30) days
after the Effective Date, submit to Intuit for approval a business continuity
plan in a mutually agreed upon format; and (iii) update the business continuity
plan, subject to Intuit’s approval, to reflect changes in technology and
industry standards on an annual basis.
(b) Vendor shall provide Intuit reasonable assistance in Intuit’s assessment of
Intuit’s business continuity requirements and provide, for Intuit’s approval, a
set of alternatives for the development of a viable Intuit business continuity
program, and the estimated fees associated with each alternative.
(c) Vendor shall immediately provide Intuit with a notice of a disaster and,
upon the occurrence of a disaster at a site at which Vendor performs all or part
of the Services, use best efforts to implement the business continuity plan for
such site.
(d) Vendor shall use its best efforts to restore the Services immediately, but
in any event within the period of time set forth in the business continuity plan
approved by Intuit. In the event of a disaster, Vendor shall not charge Intuit
any fees in excess of the fees set forth in Exhibit B for Vendor to perform the
actions outlined in the mutually agreed upon business continuity plan. Whenever
a force majeure or a disaster causes Vendor to allocate limited resources
between or among Vendor’s customers, Intuit shall receive no less priority in
respect to such allocation than any of Vendor’s other customers.
10. Preferred Logistics Provider. Subject to the performance by Vendor of
its obligations hereunder, Intuit agrees that Vendor shall be Intuit’s preferred
logistics provider throughout the Term such that if Intuit, including any of its
business units, desires to outsource any freight and shipping management,
inventory logistics or similar order fulfillment requirements, Intuit will
advise Vendor of the opportunity (with at least as much notice as it provides
other potential service providers) and permit Vendor to
9
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present a proposal to perform such services. In the event that Vendor proposes
to perform the requested services at the same fee and terms (or better) as other
potential service providers, Intuit agrees that it will utilize Vendor with
respect to such services. Notwithstanding the foregoing, neither Intuit nor any
of its business units shall be required to provide Vendor with the opportunity
to make a proposal with respect to freight, shipping, inventory logistics or
similar fulfillment requirements where (i) Intuit obtains such services together
with other services, or (ii) such services are de minimus and/or Intuit elects
not to engage in a competitive bidding process with respect to such services.
11. Ownership. As between the parties, each party shall retain all right,
title and interest (including copyright and other proprietary or intellectual
property rights), in its respective trademarks, service marks, trade names,
logos, technical notes, technical documentation, scripts, software
documentation, training materials, Confidential Information (as defined herein)
and any other materials supplied by one party to the other or acquired by one
party, on the other’s behalf, under this Agreement, and all legally protectable
elements, derivative works, modifications and enhancements thereto (the
“Materials”). Nothing in this Agreement shall effect a transfer of copyright
rights from either party to the other. Intuit shall retain all right title and
interest in the Inventory, including without limitation, any software therein.
12. Confidential Information.
(a) For the purposes of this Agreement, “Confidential Information” means the
existence and terms and conditions of this Agreement, and all non-public
information about the disclosing party’s (or its suppliers’) business or
activities that is proprietary and confidential, which shall include all
business, financial, technical and other information of either party, whether or
not it is marked or designated by such party as “confidential or “proprietary”
at the time of disclosure. Confidential Information will not include information
that: (i) is in or enters the public domain without breach of this Agreement;
(ii) the receiving party lawfully receives from a third party without
restriction on disclosure and without breach of a nondisclosure obligation;
(iii) the receiving party rightfully knew prior to receiving such information
from the disclosing party; or (iv) the receiving party develops independent of
any information originating from the disclosing party.
(b) Each party agrees that: (i) it will not disclose to any third party any
Confidential Information disclosed to it by the other party except as expressly
permitted in this Agreement; (ii) it will not use any Confidential Information
disclosed to it by the other party except as necessary to perform its
obligations under this Agreement; and (iii) it will take all reasonable measures
to maintain the confidentiality of all Confidential Information of the other
party in its possession or control, which will in no event be less than the
measures it uses to maintain the confidentiality of its own information of
similar importance. Notwithstanding the foregoing, each party may disclose
Confidential Information to the extent required by a court of competent
jurisdiction or other governmental authority or otherwise as required by law,
provided that such party uses reasonable efforts to request confidential
treatment or a protective order before such
10
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disclosure; or on a “need-to-know” basis under an obligation of confidentiality
to its legal counsel and accountants.
(c) Each party acknowledges and agrees that its breach of the provisions under
this Section 12 will result in irreparable harm to Intuit and that Intuit will
have the right to enforce this Agreement and any of its provisions by
injunction, specific performance and/or other equitable relief without prejudice
to any other rights and remedies that Intuit may have.
(d) Nothing in this Agreement shall relieve any party of any of its obligations
under any separate non-disclosure agreement between the parties, including any
obligation with respect to procedures for handling customer data or other
similarly sensitive information. Vendor agrees to comply with the Security
Requirements agreement as in effect from time to time (the current version of
which is attached as Exhibit F); provided that Vendor will not be obligated to
comply with any changes to the Security Requirements unless Intuit provides
Vendor with written notice of such changes. References in Exhibit F to “Company”
shall be deemed to refer to Vendor.
(e) All Customer information provided by Intuit to Vendor, or obtained by
Vendor from the Customers during the course of performing the Services on
Intuit’s behalf (“Customer Information”), including, without limitation, name,
phone number, e-mail address, delivery address, company name and billing
address, shall be considered Confidential Information for purposes of this
Agreement, unless the Customer Information falls within in one of the exceptions
stated in Section 12(a). Vendor agrees that, except to the extent necessary to
fulfill its obligations hereunder, it will not use any Customer Information for
any purpose.
13. Representations and Warranties.
(a) Each party to this Agreement represents and warrants that: (i) it is a
corporation duly incorporated, validly existing and in good standing; (ii) it
has all requisite corporate power and authority to execute, deliver and perform
its obligations hereunder; (iii) it is duly licensed, authorized or qualified to
do business and is in good standing in every jurisdiction in which a license,
authorization or qualification is required for the ownership or leasing of its
assets or the transaction of business of the character transacted by it except
when the failure to be so licensed, authorized or qualified would not have a
material, adverse effect on its ability to fulfill its obligations hereunder;
(iv) it shall comply with all laws and regulations applicable to the performance
of its obligations hereunder and shall obtain all applicable permits and
licenses required of it in connection with its obligations hereunder; and (v) it
is not a party to any agreement with a third party, the performance of which is
reasonably likely to affect adversely its ability or the ability of the other
party to perform fully its respective obligations hereunder.
(b) Vendor represents and warrants that any and all Services rendered under
this Agreement shall be performed by Vendor in accordance with the highest
standards of competence within Vendor’s industry. Vendor represents and warrants
that to the extent it must perform the Services under this Agreement at Intuit’s
facilities, it will do so
11
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in accordance with Intuit’s performance standards and policies attached hereto
as Exhibit G. Vendor shall notify Intuit in writing in advance of Vendor’s
desire to retain any subcontractors to support the performance of the Services,
but only in such instances when such subcontractors shall be assisting Ingram in
the performance of services solely for Intuit. Intuit reserves the right, in its
sole discretion, to disapprove such retention. Any such delegation of Vendor’s
duties to any subcontractor approved by Intuit shall not relieve Vendor of its
obligations under this Agreement.
(c) EXCEPT FOR THE EXPRESS WARRANTIES MADE OR REFERENCED IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY WARRANTIES, EXPRESS OR IMPLIED, CONCERNING THE SUBJECT
MATTER OF THIS AGREEMENT, AND EACH PARTY HEREBY DISCLAIMS ANY AND ALL IMPLIED
WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.
14. Indemnification.
(a) Vendor agrees to defend, indemnify and hold Intuit and its affiliates, and
all of their respective officers, directors, agents and employees, harmless from
and against any and all claims, including liabilities, actions, judgments,
costs, and expenses and reasonable attorneys’ fees (collectively “Claims”),
asserted by a third party arising out of or related to: (i) any breach or
alleged breach of any of Vendor’s representations and warranties hereunder;
(ii) Vendor’s negligent acts, omissions and/or willful misconduct in supplying
the Services under this Agreement; (iii) any obligations imposed by law with
respect to any withholding taxes, social security, unemployment or disability
insurance, or similar items in connection with any payments made to Vendor for
the rendering of Services hereunder; (iv) any claim that the Services infringe
or violate any third party’s copyright, U.S. patent, trade secret, or trademark,
or other intellectual property right; or, (v) any actual, alleged or
contributory patent or copyright infringement, misappropriation of Confidential
Information, or violation of other intellectual or proprietary rights related to
the provision of the Services.
(b) Intuit agrees to defend, indemnify and hold Vendor and its affiliates, and
all of their respective officers, directors, agents and employees, harmless from
and against any and all claims, including liabilities, actions, judgments,
costs, and expenses and reasonable attorneys’ fees, asserted by a third party
arising out of or related to: (i) any breach or alleged breach by Intuit of any
of Intuit’s representations and warranties hereunder; (ii) the negligent acts,
omissions and/or willful misconduct of Intuit in using the Services provided
under this Agreement; (iii) any claim that the Inventory infringes or violates
any third party’s copyright, U.S. patent, trade secret, or trademark, or other
intellectual property right, or (iv) any actual, alleged or contributory patent
or copyright infringement, misappropriation of Confidential Information, or
violation of other intellectual or proprietary rights related to the Inventory.
(c) The party seeking indemnification under Section 14(a) or 14(b), as the case
may be (the “Indemnified Party”), will give prompt written notice to the other
party (the
12
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“Indemnifying Party”). (The failure by an Indemnified Party to give notice as
provided, above, shall not relieve the Indemnifying Party of its obligations
under this Section 14(c), except to the extent that the failure results in the
failure of actual notice and the Indemnifying Party is damaged as a result of
the failure to give notice.) In addition, the Indemnified Party will allow the
Indemnifying Party to direct the defense and settlement of any such claim, with
counsel of the Indemnifying Party’s choosing, and will provide the Indemnifying
Party, at the Indemnifying Party’s expense, with information and assistance that
is reasonably necessary for the defense and settlement of the claim. The
Indemnified Party shall have the right to employ separate counsel and to
participate in (but not control) any such action, but the fees and expenses of
such counsel shall be at the expense of the Indemnified Party unless: (i) the
employment of counsel by the Indemnified Party has been authorized by the
Indemnifying Party; (ii) the Indemnified Party has been advised by its counsel
in writing that there is a conflict of interest between the Indemnifying Party
and the Indemnified Party in the conduct of the defense of the action (in which
case the Indemnifying Party shall not have the right to direct the defense of
the action on behalf of the Indemnified Party); or (iii) the Indemnifying Party
has not in fact employed counsel to assume the defense of the action within a
reasonable time following receipt of the notice given pursuant to this
Section 14(c), in each of which cases the fees and expenses of such counsel
shall be at the expense of the Indemnifying Party. An Indemnifying Party shall
not be liable for any settlement of an action effected without its written
consent (which consent shall not be unreasonably withheld), nor shall an
Indemnifying Party settle any such action without the written consent of the
Indemnified Party (which consent shall not be unreasonably withheld). No
Indemnifying Party will consent to the entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to the Indemnified Party a release from all liability
with respect to the claim.
15. Insurance. Vendor will, at Vendor’s expense, maintain insurance policies
that cover Vendor’s activities under this Agreement and the Statement of Work
and the activities of Vendor’s employees, agents, and representatives,
including, but not limited to, workers compensation insurance and comprehensive
general liability, errors and omissions liability and media liability with
minimum limits of insurance of $2 million per claim and $4 million annual
aggregate. Vendor will name Intuit as an additional insured on each such policy.
Upon the request of Intuit, Vendor shall provide Intuit with a certificate of
insurance evidencing such coverages.
16. Limitation of Liability.
(a) NEITHER VENDOR NOR INTUIT SHALL BE LIABLE TO THE OTHER PARTY, THE
CUSTOMERS, OR ANY OTHER PARTY FOR ANY LOSS, DAMAGE, OR INJURY WHICH RESULTS FROM
THE USE BY THE PARTY, A CUSTOMER, OR ANY OTHER PARTY OF INVENTORY DELIVERED TO
THE OTHER PARTY OR A CUSTOMER UNLESS THE LOSS OR DAMAGE RESULTS DIRECTLY FROM
THE INTENTIONALLY TORTIOUS OR FRAUDULENT ACTS OR OMISSIONS OF VENDOR OR INTUIT,
AS THE CASE MAY BE.
13
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(b) IN NO EVENT SHALL ANY PARTY BE LIABLE TO ANY OTHER PARTY HERETO FOR ANY
INCIDENTAL, SPECIAL, INDIRECT, PUNITIVE AND/OR CONSEQUENTIAL DAMAGES, EVEN IF
THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING FROM OR
RELATED TO THE PERFORMANCE OR ANY FAILURE TO PERFORM ANY OF SUCH PARTY’S
OBLIGATIONS UNDER THIS AGREEMENT. THE FOREGOING LIMITATION OF LIABILITY SHALL
NOT APPLY TO LIMIT DAMAGE RECOVERY WHICH ARISES FROM OR IS RELATED TO (I) A
PARTY’S GROSS NEGLIGENCE IN THE PERFORMANCE OF OR THE FAILURE TO PERFORM SUCH
PARTY’S OBLIGATIONS HEREUNDER, OR (II) A PARTY’S BREACH OF ITS OBLIGATIONS UNDER
SECTION 12 OF THIS AGREEMENT. THE FOREGOING LIMITATION ON LIABILITY ALSO SHALL
NOT SERVE TO LIMIT (A) ANY PARTY’S RECOVERY FOR DIRECT DAMAGES FOR BREACH OF
THIS AGREEMENT OR ANY REMEDY SPECIFICALLY SET FORTH HEREIN, OR (B) EITHER
PARTY’S OBLIGATION UNDER SECTION 14 TO INDEMNIFY THE OTHER AGAINST CLAIMS MADE
BY THIRD PARTIES.
17. Dispute Resolution. Except with respect to claims involving either
party’s intellectual property rights or the breach or anticipated breach of
either party’s obligations set forth in Section 12, each party agrees to submit
in writing any dispute arising out of or relating to this Agreement to mid-level
management representatives designated by each party, who will meet by conference
or otherwise in an effort to resolve such dispute within five (5) days. If after
the fifth day, such dispute cannot be resolved, then each party’s respective
Vice-President, or substantial equivalent, shall attempt to resolve the dispute.
In the event that the Vice Presidents are unable to resolve any such dispute
within twenty (20) days, the parties shall mutually determine a date and
location for a meeting between the senior management of each party.
Notwithstanding the foregoing, the parties agree, unless otherwise agreed in
writing, (i) to try to resolve any such dispute within thirty (30) days after
the commencement of any such dispute and (ii) to continue performance of their
additional obligations hereunder that are not the subject of dispute during such
period. Either party may bring an action in any court of competent jurisdiction
if, at the expiration of such thirty (30) day period, the parties remain unable
to resolve such dispute.
18. General.
(a) Press Releases. The parties may agree to issue joint press releases and
other appropriate announcements and presentations regarding the existence or
performance of this Agreement, the content and timing of which shall be mutually
agreed upon by the parties in writing. Notwithstanding the foregoing, unless
required by law, neither party will, without the prior written approval of the
other party, make any public statement, press release, presentation, or other
announcement relating to the terms, existence of or performance by either party
of its obligations under this Agreement.
(b) Assignment. Neither party may assign this Agreement, in whole or in part,
without the other party’s prior written consent, which consent shall not be
unreasonably withheld or delayed. Any attempt by either party to assign this
Agreement other than as permitted above will be null and void. Subject to the
foregoing, this Agreement shall be
14
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binding upon and shall inure to the benefit of both parties, their successors
and permitted assigns.
(c) Law and Jurisdiction. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to its
conflicts of laws principles. The parties hereby consent to the exclusive
jurisdiction and venue in the state and federal courts in either Orange County
or Santa Clara County, California.
(d) Notice. Unless otherwise stated, all notices required under this Agreement
shall be in writing and shall be considered given (i) when delivered personally;
(ii) five (5) days after mailing, when sent certified mail, return receipt
requested and postage prepaid; (iii) one (1) business day after dispatch, when
sent via a commercial overnight carrier, fees prepaid; or (iv) upon delivery
when sent by facsimile transmission confirmed by telephone. All communications
will be addressed as follows (unless changed by notice):
To Vendor:
IM-Logistics
1600 East St. Andrew Place
Santa Ana, California 92705
Attn: Bryan Moynahan, Vice President
Phone: (714) 382-4808
Fax: (714) 566-7994 with a copy to:
Ingram Micro Inc.
1600 East St. Andrew Place
Santa Ana, California 92705
Attn: General Counsel
Phone: (714) 382-2924
Fax:(714) 566-9370 To Intuit:
Intuit Inc.
2650 Casey Ave.
Mountain View, California 94043
Attn: David Foster
Director, Supply Chain Management
Phone: (650) 944-2889
Fax: (650) 944-3033 with a copy to:
Intuit Inc.
2632 Marine Way
Mountain View, CA 94043
Attn: General Counsel, Legal Dept.
Phone: (650) 944-6000
Fax: (650) 944-6622
(e) Force Majeure. Except with respect to delays or failures caused by the
negligent act or omission of either party, any delay in or failure of
performance by either party under this Agreement will not be considered a breach
of this Agreement and will be excused to the extent caused by war, riot or
similar civil disturbance, concerted labor action, earthquake, or similar acts
of God, provided that the party affected by such event shall immediately begin
or resume performance as soon as practicable after the circumstances giving rise
to the event of force majeure have abated. Excusable delays do not include
lockout, shortage of labor, lack of or inability to obtain raw materials, fuel
or supplies or any other industrial disturbance. In no event shall any
occurrence of a force majeure event relieve Vendor of its obligations under
Section 9. In the event that Vendor is not able to fully resume performance
within thirty (30) days after the force majeure event has commenced, Intuit
shall have the right to terminate this Agreement and/or the Statement of Work
immediately upon written notice to Vendor.
15
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(f) Severability. If any provision of this Agreement is found illegal or
unenforceable, such provision will be deemed restated, in accordance with
applicable law, to reflect as nearly as possible the original intention of the
parties, and the remainder of the Agreement will continue in full force and
effect.
(g) Entire Agreement. This Agreement, including any attachments, schedules or
exhibits attached hereto, is the complete and exclusive agreement between the
parties with respect to the subject matter hereof, superseding any prior
agreements and communications (both written and oral) regarding such subject
matter, including, but not limited to, the Initial Agreement. Notwithstanding
the foregoing, nothing in this Section 18(g) shall be deemed to supercede the
Statement of Work. This Agreement may only be modified, or any rights under it
waived, by a written document executed by both parties.
(h) Waiver. The failure by either party to enforce any term or provision of
this Agreement will not be deemed a waiver of future enforcement by that party
of that or any other term or provision.
(i) No Third Party Beneficiaries. This Agreement is intended for the sole and
exclusive benefit of the signatories and is not intended to benefit any third
party. Only the parties to this Agreement may enforce it.
(j) Counterparts. This Agreement may be executed in counterparts, each of shall
constitute an original, and all of which shall constitute one agreement.
(k) Headings. The headings in this Agreement are for convenience of reference
only and have no legal effect.
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IN WITNESS WHEREOF, the authorized representatives of the parties have
executed this Agreement as of the date of Effective Date.
Ingram Micro Inc. INTUIT INC. By: /s/ BRIAN C. MOYNAHAN
By: /s/ KEN R. MUDGE Name: Brian C. Moynahan Name: Ken R. Mudge Title:
VP/GM, Sales Title: VP Procurement & Operations
17
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LIST OF EXHIBITS
EXHIBIT A DESCRIPTION OF SERVICES EXHIBIT B PAYMENTS AND FEES
EXHIBIT C SERVICE LEVEL COMMITMENTS EXHIBIT D [*] EXHIBIT E [*]
EXHIBIT F INTUIT SECURITY REQUIREMENTS EXHIBIT G PERFORMANCE STANDARDS AND
POLICIES
--------------------------------------------------------------------------------
* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
18
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Exhibit A
Description of Services
The Services shall include, but not be limited to, the following
services (as those services are more fully described in the Statement of Work):
(a) information technology services, including, but not limited to, reporting
services relating to IML’s provision of information technology; (b) inventory
management services, including, but not limited to, services relating to
postponement processes; (c) order management; (d) warehousing and receiving
services, including, but not limited to, services relating to inventory control;
(e) fulfillment services; (f) services relating to the launch and operation of a
virtual warehouse; (g) transportation services for inbound and outbound
Inventory, including, but not limited to, tracking services for the Inventory
during shipment; (h) customer services, including, but not limited to, claims
and return processes; and (i) invoicing services.
--------------------------------------------------------------------------------
Exhibit B
Payments and Fees
Monthly Fixed Cost
•
• Dedicated Resources and Equipment
[*] $[*]
$[*]
Variable Cost
• Pick, pack and Ship (per unit) [*] • Pick, pack and Ship (per
unit) RUSH [*] • Returns (per unit) [*] • Product Destruction (per lb.)
[*] • [*] [*] [*] • [*] [*] [*] • Pallet Storage per
month $[*]/pallet [*] • Labor rates for [*] Between 8
and 5 p.m. (local time) Mon. thru Fri $[*]/hr/person Overtime
$[*]/hr/person • Other expenses and travel cost for [*] Cost+[*]
[*]
Freight Rates
See attached freight schedules.
--------------------------------------------------------------------------------
* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
--------------------------------------------------------------------------------
Proposed Intuit “CUSTOM RATES”
[*] Ground Commercial
weight zone 2 zone 3 zone 4 zone 5 zone
6 zone 7 zone 8
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1 [*] [*] [*] [*] [*] [*] [*] 2 [*] [*] [*] [*] [*]
[*] [*] 3 [*] [*] [*] [*] [*] [*] [*] 4 [*] [*] [*] [*]
[*] [*] [*] 5 [*] [*] [*] [*] [*] [*] [*] 6 [*] [*]
[*] [*] [*] [*] [*] 7 [*] [*] [*] [*] [*] [*] [*] 8 [*]
[*] [*] [*] [*] [*] [*] 9 [*] [*] [*] [*] [*] [*] [*]
10 [*] [*] [*] [*] [*] [*] [*] 11 [*] [*] [*] [*] [*]
[*] [*] 12 [*] [*] [*] [*] [*] [*] [*] 13 [*] [*] [*]
[*] [*] [*] [*] 14 [*] [*] [*] [*] [*] [*] [*] 15 [*]
[*] [*] [*] [*] [*] [*] 16 [*] [*] [*] [*] [*] [*] [*]
17 [*] [*] [*] [*] [*] [*] [*] 18 [*] [*] [*] [*] [*]
[*] [*] 19 [*] [*] [*] [*] [*] [*] [*] 20 [*] [*] [*]
[*] [*] [*] [*] 21 [*] [*] [*] [*] [*] [*] [*] 22 [*]
[*] [*] [*] [*] [*] [*] 23 [*] [*] [*] [*] [*] [*] [*]
24 [*] [*] [*] [*] [*] [*] [*] 25 [*] [*] [*] [*] [*]
[*] [*]
Proposed Intuit Rates as a % Discount Off Street
[*] Ground Commercial
weight Zone 2 zone 3 zone 4 zone 5 zone
6 zone 7 zone 8
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1 [*] [*] [*] [*] [*] [*] [*] 2 [*] [*] [*] [*] [*]
[*] [*] 3 [*] [*] [*] [*] [*] [*] [*] 4 [*] [*] [*] [*]
[*] [*] [*] 5 [*] [*] [*] [*] [*] [*] [*] 6 [*] [*]
[*] [*] [*] [*] [*] 7 [*] [*] [*] [*] [*] [*] [*] 8 [*]
[*] [*] [*] [*] [*] [*] 9 [*] [*] [*] [*] [*] [*] [*]
10 [*] [*] [*] [*] [*] [*] [*] 11 [*] [*] [*] [*] [*]
[*] [*] 12 [*] [*] [*] [*] [*] [*] [*] 13 [*] [*] [*]
[*] [*] [*] [*] 14 [*] [*] [*] [*] [*] [*] [*] 15 [*]
[*] [*] [*] [*] [*] [*] 16 [*] [*] [*] [*] [*] [*] [*]
17 [*] [*] [*] [*] [*] [*] [*] 18 [*] [*] [*] [*] [*]
[*] [*] 19 [*] [*] [*] [*] [*] [*] [*] 20 [*] [*] [*]
[*] [*] [*] [*] 21 [*] [*] [*] [*] [*] [*] [*] 22 [*]
[*] [*] [*] [*] [*] [*] 23 [*] [*] [*] [*] [*] [*] [*]
24 [*] [*] [*] [*] [*] [*] [*] 25 [*] [*] [*] [*] [*]
[*] [*]
[*] [*] [*] [*]
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* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
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[*]
NEXT DAY PRIORITY SERVICE (BY NOON)
Zone
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Weight A B C D E F
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0 – 500 [*] [*] [*] [*] [*] [*] 501 — 1000 [*] [*] [*] [*]
[*] [*] 1001 — up [*] [*] [*] [*] [*] [*]
Minimum - [*]
NEXT DAY SERVICE (BY 5:00 PM)
Zone
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Weight A B C D E F
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0 – 500 [*] [*] [*] [*] [*] [*] 501 — 1000 [*] [*] [*] [*]
[*] [*] 1001 — up [*] [*] [*] [*] [*] [*]
Minimum - [*]
SECOND DAY SERVICE
Zone
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Weight A B C D E F
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0 – 500 [*] [*] [*] [*] [*] [*] 501 — 1000 [*] [*] [*] [*]
[*] [*] 1001 — up [*] [*] [*] [*] [*] [*]
Minimum - [*]
THREE DAY SERVICE
Zone
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Weight A B C D E F
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0 – 500 [*] [*] [*] [*] [*] [*] 501 — 1000 [*] [*] [*] [*]
[*] [*] 1001 — up [*] [*] [*] [*] [*] [*]
Minimum - [*]
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* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
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Inbound LTL and TL – (Retail Only)
Ingram Micro will source LTL and TL carriers through our current optimization
model. Based on cost/service parameters, the selection will be tied to the
desired service level and lowest cost provider
National Inbound LTL Players
[*]
LTL Inbound Transit Times
Carrier From To Days
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[*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
[*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
[*]
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* Indicates the preferred LTL carrier selection based on transit and “normal”
business flow.
The current Inbound LTL pricing is based on a flat rate per pound of [ * ].
National Inbound TL Players
[*]
The TL player or combo thereof will be selected based on commitment to the TL
sourcing required to meet service levels. TL carriers are insured for [*] per
load. Under no circumstance can truckload product value shipped from MMI be over
[*] in replacement cost. [*] Costs are subject to change for various reasons
including but not limited to fuel surcharge. The current rates in effect are as
follows:
From To Rate/Mile Fuel Surcharge/Mile Markup
Total Cost
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[*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
[*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
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* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
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Outbound Freight Sourcing – (Retail Only)
IML will make available to Intuit the complete list of carriers that have
current contracts in place with IML. IML will leverage IM-First for pre-paid
carrier selection, which optimizes the freight by shipping lane. Inbound and
Outbound freight rates are subject to change at any time.
For shipments other than LTL and TL, IML will leverage the current IML volume
freight rates and will provide Intuit market competitive rates including an
administrative fee that is based on IML’s markup.
The current Outbound LTL pricing is based on a flat rate per pound of [*].
Outbound TL pricing will be addressed on an as needed basis through a process of
market spot quotation.
In the event that Intuit would instruct IML to 3rd Party Bill Freight charges,
Intuit agrees to open discussions with IML regarding the back-end costs incurred
by IML and how those can be shared.
[*]
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* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
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DOMESTIC ZONE CHART
[Graphic – map of the United States showing breakdown of shipping regions for
the shipper [*]]
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* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
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APPENDIX A
Ingram Micro
SAME DAY / NEXT FLIGHT OUT
Minimum [*] Rate Per Pound [*]
PRIORITY SERVICE (BY NOON)
Minimum $ [*]
ZONE A B C D E F
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0 — 500 [*] [*] [*] [*] [*] [*] 501 — 1000 [*] [*] [*] [*]
[*] [*] 1001 & UP [*] [*] [*] [*] [*] [*]
NEXT DAY SERVICE (BY 5:00 PM)
Minimum $ [*]
ZONE A B C D E F
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0 — 500 [*] [*] [*] [*] [*] [*] 501 — 1000 [*] [*] [*] [*]
[*] [*] 1001 & UP [*] [*] [*] [*] [*] [*]
SECOND DAY SERVICE
Minimum $ [*]
ZONE A B C D E F
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0 — 500 [*] [*] [*] [*] [*] [*] 501 — 1000 [*] [*] [*] [*]
[*] [*] 1001 & UP [*] [*] [*] [*] [*] [*]
THREE DAY SERVICE
Minimum $ [*]
ZONE A B C D E F
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0 — 500 [*] [*] [*] [*] [*] [*] 501 — 1000 [*] [*] [*] [*]
[*] [*] 1001 & UP [*] [*] [*] [*] [*] [*]
• Rates are Door to Door and subject the terms and conditions of the
Agreement. • [*] • [*] • [*]
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* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
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Exhibit C
Service Level Commitments
Beginning January 1, 2002, IML shall be required to perform the Services in
accordance with the Service Level Commitments described in this Exhibit C.
Order Management & Customer Service
• [*]% of orders will be printed (released to the warehouse) on the same
business day received. This calculation will exclude all exception orders such
as new store opening, future dated orders, ship completes, backorders, and
pallet orders. • [*]% of all electronic proof of delivery (ePOD) data that
is provided by the carriers (that have existing EDI 214 connections with IML)
will be delivered to Intuit within [*] of report availability from carrier to
IML. • [*]% of all manual proof of delivery (POD) information (from those
carriers that do not have existing EDI214 connections with IML) will be
delivered to Intuit within [*] of delivery notification from carrier to IML.
• No less than [*]% uptime of online access to IML’s system (Impulse) via
IngramMicro.com and/or CAPS during regular business hours due to an IML systemic
failure. IML will notify Intuit a minimum of [*] prior to any Scheduled Downtime
(as defined herein) to IML’s systems (IMpulse, IngramMicro.com and CAPS). •
IML response to customer shipment claim inquiries (as defined in the Statement
of Work) is no more than 48 hours from the time IML receives the customer
inquiry. IML will provide final resolution (acceptance or denial) on 98% of all
claims within 15 business days.
Fulfillment Services
• [*]% On-Time Fulfillment: Provided IML has adequate Inventory to fulfill
the order, and provided the order is received before the[*]. (Local Standard
Time) Cut-Off Time, IML will process [*]% of all printed orders on the business
day received unless daily volume exceeds [*] orders, [*] lines, or [*] units in
the [*] facility and [ * ] orders, [*] lines, or [*] units in the [*] facility.
Printed orders in excess of these amounts will be given an additional business
day for processing. This calculation will exclude all exception orders such as
new store opening, future dated orders, ship completes, backorders, and pallet
orders. [*]% of those orders released after the[*]. (Local Standard Time)
Cut-Off Time will be processed by IML by the Cut-Off Time on the following
business day. • [*]% Fulfillment Accuracy: calculated by adding the total
approved short ship units (code SS) + overship units (code OS) + warehouse
picking error units (code WW) and dividing the sum by total units shipped
[*]
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* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
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ERP and IT Integration
• [*]% up time for any IML-operated FTP site used for scheduled business
transactions for Intuit and or its business partner(s) • Turnaround time
of no more than one hour for an EDI997 response to an Intuit EDI850 transaction
provided no value added network (VAN) outages. • [*]% Advanced Ship Notice
(ASN/EDI856) accuracy as measured by Intuit number of monthly failure
notifications caused by IML. • No more than [*] within a given month where
IML business applications fail to process or send scheduled transactions. •
IML will communicate any IML system failures affecting Intuit, and provide to
Intuit updates as to the status of such failures based on the following
escalation procedure:
Priority Level Description Escalate After First Update to
Customer
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P1 Production system is down; unable to conduct business or possibility of
immediate severe financial impact to business [*] 1 hour from time of
original call P2 Production system partially impacted;
business continues; some financial impact possible [*] 2 - 3 hours from time
of original call P3 Minimal Impact to production systems
[*] Within 24 hours
• IML will notify Intuit once per day of all rejected orders on the FTP EDI
acknowledgment report (EDP945), which will be posted, to the Intuit/IML FTP site
nightly. In addition, IML will notify Intuit within 3 business hours of any
order that is rejected the same day it has been received by IML. • IML
will ensure Impulse up time % of at least [*]% of the time during the term
excluding Scheduled Down time for batching and end of fiscal month activity as
follows:
For purposes of these Service Level Commitments, “Scheduled Downtime” for IML’s
CAPS and the WEB systems include downtimes that affect Intuit’s access to real
time pricing and availability, ordering, order status and rma status; provided
that such downtimes occur during the following times:
Monday thru Friday — Midnight to 4AM PST
Saturday — 8PM to Midnight PST
Sunday — Midnight to 9AM and 3PM to 7PM PST
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* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
--------------------------------------------------------------------------------
Scheduled Downtime shall also include the following times:
IML’s system shuts down on Saturday at 3PM PST until Monday at 4AM PST on the
following dates during the remainder of this fiscal year:
August 25, 2001
September 29, 2001
October 27, 2001
November 24, 2001
December 29, 2001
IML will publish scheduled downtime dates for years 2002 & 2003 as they become
available.
These additional periods of Scheduled Downtime are necessary because IML
performs batch processing for its fiscal month ends and shuts down its systems
during these times.
Orders received during downtimes will be queued and processed when the system is
available.
Report Capabilities & Metrics
• Intuit will rely upon [*]% accuracy for all IML produced reports. IML will
perform self-audits to ensure accuracy and inform Intuit immediately of any
defects and provide Intuit with a corrective action plan within 1 business day.
Intuit may conduct random audits to ensure compliance. Accuracy of IML reports
is considered critical to business and Intuit will institute the following plan:
[*]
• Timeliness of reports. Daily FTP files to be available by 5:30 AM PST and
the weekly FTP files to be available by 5:30 AM PST Monday mornings. •
Reports covered by these Service Level Commitments are described in in
Attachment C of the Statement of Work.
Warehousing & Inventory Management
• [*]% Sku/Product set up accuracy, based on Intuit-provided information/Sku
set up documentation. • [*]% Inventory Shrinkage Accuracy based on twice
yearly physical audits and calculated based on total sku level net physical
inventory adjustments in units divided by total inventory movement in units from
the previous physical inventory date. IML will resolve any inventory discrepancy
within [*] and report back data, root cause and solution to Intuit.
--------------------------------------------------------------------------------
* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
--------------------------------------------------------------------------------
• [*]% Inventory Accuracy based on daily cycle count/shortages. Monthly
calculation on absolute cycle count unit inventory adjustments divided by total
inventory unit movement. IML will resolve any inventory discrepancy within [*]
and report back data, root cause and solution to Intuit. • No more than
[*] of all Intuit’s contract manufacturer’s Less than Truckload (LTL) and
Truckload (TL) orders arriving no more than [*] business days for Replenishment
and, upon Intuit’s request, [*] business day for expedited orders from Intuit’s
contract manufacturer’s facility to IML’s distribution center and as scheduled
below.
• Intuit’s contract manufacturer located in [*] • Intuit’s contract
manufacturer located in [*] (except [*], which will be [*] business days)
Countdown to measure this service level will start [*]. Shipment date =
day 0. Corrective action is as follows in the schedule below. [*]
Returns Management
• [*]% accuracy on returns reconciliation calculated on total
Intuit-approved return unit discrepancies (code RT) divided by total return unit
inventory movement. • [*]% of all data collection for door logging of all
inbound RMA’s, inclusive of shipping ID number for audit purposes •
Returns Cycle Time: No more than [*] business days to process Intuit returns
from the date of IML’s receipt of such returns.
--------------------------------------------------------------------------------
* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
--------------------------------------------------------------------------------
EXHIBIT D
[*]
--------------------------------------------------------------------------------
* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
1
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Exhibit E
[*]
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* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
1
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Exhibit F: Basic Security Requirements for Customer Data
Definitions
For the purposes of this Exhibit, the following definitions shall apply.
Personally-Identifiable Information: Information that identifies or can be
used to identify, contact, or locate the person to whom such information
pertains. It includes, without limitation, the following information:
Secret Information: Information that is used to protect other
Personally-Identifiable Information. Generally, Secret Information is not
disclosed to outside parties under any circumstances. Secret Information
includes customer passwords, private encryption keys, and private signature
keys.
Sensitive Information: Any information that could be misused in such a way as
to jeopardize the financial or legal position of its owner, or of the person or
company described by the information. Sensitive Information includes customer
account numbers, Social Security numbers, taxpayer identification numbers,
credit card numbers, customer account balances, customer financial information
and transactional activity, medical records, and legal records.
Restricted Information: Information that is not Secret or Sensitive, but whose
permissible use has been restricted by its owner. Restricted information
includes customer names, customer street or e-mail addresses, customer telephone
numbers, and records of customer services and other data relating to the
products and services offered, received, or purchased by customers of Intuit or
the Company.
A. Controlling Access to Personally-Identifiable Information
1. Access to Personally-Identifiable Information stored on Company’s systems
must not be granted to members of Company’s staff, subcontractors, or other
agents, unless all of the following conditions are met:
a) The staff member, subcontractor, or other agent requesting the access can
be uniquely identified (e.g., by a unique User ID)[*]; b) The staff
member, subcontractor, or other agent requesting the access has entered a
correct password or other authorizing token to indicate that he/she is the
authorized user of this account. If passwords are the only method used for
authentication, they must satisfy certain minimal standards mutually agreeable
to Intuit and Company that make them sufficiently robust to effectively resist
both educated guessing and brute-force attacks. [*] c) In all cases,
access permissions must be established in a manner that allows only for the
minimum access level(s) required for each staff member, subcontractor, or other
agent to perform his or her job function. The ability to read, write, modify or
delete Personally-Identifiable Information must be limited to those individuals
who are specifically authorized to perform those data maintenance functions.
d) [*]
2. Personally-Identifiable Information stored on Company’s systems must be
stored behind firewalls with access to such information limited as described in
paragraph A.1. 3. It is recommended that Secret Information never be
stored in clear text on Company’s systems. At a minimum, it is recommended that
financial services industry-standard encryption techniques be employed to
safeguard Secret Information in Company’s systems from retrieval by unauthorized
persons. Whenever possible, it is recommended that message digest algorithms
such as SHA-1 or MD5 be used to hash and verify the user’s password, and that
“salt” be added to the input string prior to encoding to make it unlikely that
the same password text chosen by different users will yield identical encodings.
4. Passwords used by Company’s customers are not required to conform to
the password standards described in paragraph A.1.b; however, Company must not
provide any of its customers with access to Personally-Identifiable Information
other than that which pertains to such customer, except as permitted in writing
by the affected person or as otherwise required by law. 5. Procedures must
be in place to modify or revoke access permissions to Personally-Identifiable
Information when staff members leave the Company or when their job
responsibilities change. 6. Printed material that contains
Personally-Identifiable Information must be stored in secured areas to which
access is limited to those staff members who have a business need to access it.
It must also be disposed of in a secure manner. Whenever possible, it is
recommended that secure disposal alternatives such as on-site shredding prior to
recycling or placement in publicly-accessible locked trash bins with subsequent
off-site shredding by a licensed contractor be implemented.
B. Transmitting Personally-Identifiable Information
1. Unless restricted by law, or as discussed in paragraph D.1, Company must
not electronically transmit Secret or Sensitive Information over
publicly-accessible networks without using 128-bit SSL or another
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* We have requested confidential treatment for certain portions of this
document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission (SEC). We omitted such portions from this
filing and filed them separately with the SEC.
--------------------------------------------------------------------------------
mechanism that affords similar or greater security and confidentiality. If
legal restrictions limit the use of 128-bit SSL encryption technology, Company
must use the strongest encryption technology permitted. 2.
Personally-Identifiable Information must never be passed in a URL (e.g., using a
Get method) in a manner that potentially exposes the information to third
parties and causes such information to appear in log files.
C. Maintaining a Secure Environment
1. To protect the accuracy and integrity of Personally-Identifiable
Information, all such data stored in electronic form must be backed up regularly
(no less often than weekly), and the backups stored in secure,
environmentally-controlled, limited-access facilities. 2. Company must use
commercially-reasonable efforts to install any security-related fixes identified
by its hardware or software vendors, if the security threat being addressed by
the fix is one that significantly threatens the privacy or integrity of any
Personally-Identifiable Information covered by this Agreement. Such upgrades
must be made as soon as they can safely be installed and integrated into
Company’s existing architecture and systems. 3. Intuit may, from time to
time, advise Company of recent security threats that have come to its attention,
and require Company to implement specific modifications to its software,
policies, or procedures that may be necessary to counter these threats. Company
must implement these modifications within a mutually-agreeable time, or must
obtain written permission from Intuit to take some other commercially-reasonable
course of action to preserve the privacy and integrity of any
Personally-Identifiable Information. 4. Company must immediately notify
the Intuit Security SPOC (see below) if it knows or suspects that
Personally-Identifiable Information has been compromised or disclosed to
unauthorized persons, or if there has been any meaningful or substantial
deviation from the requirements of this Exhibit. 5. Notwithstanding the
minimum standards set forth in this Exhibit, Company must use
commercially-reasonable efforts to monitor and periodically incorporate
reasonable industry-standard security safeguards.
D. Electronic Mail
1. Company must not send any Secret Information in an e-mail message over
publicly-accessible networks unless the e-mail is encrypted using a
previously-approved encryption mechanism or is otherwise made secure with an
approach that has been mutually agreed upon in advance by Intuit and Company. It
is recommended that Company not send any Sensitive or Restricted Information in
an e-mail message over publicly-accessible networks unless the e-mail is
encrypted or otherwise secured as described above. 2. Company and its
subcontractors and agents must not reveal the Personally-Identifiable
Information of one customer to any other customer or other third party, in any
e-mail or other communication, except as permitted in writing by the affected
person, as deemed appropriate in light of the interests of the affected person,
or as otherwise required by law.
E. Reviews, Audits, and Remedies
1. Upon 14 days’ prior written notice to Company, Intuit (or its agent) may
enter Company’s premises and inspect such of Company’s books, records,
facilities and computer systems as Intuit and Company shall mutually agree is
necessary to ensure that Company complies with the terms and conditions of this
Exhibit. Intuit or its agent shall comply with Company’s standard policies and
procedures that apply to third party companies that have access to Company’s
premises, and Intuit or its agent shall access Company’s premises during
Company’s normal business hours. 2. Notwithstanding any cure period in
this Agreement to the contrary, Intuit, at Intuit’s reasonable discretion, may
require correction of any demonstrated problem that significantly threatens the
security of Personally-Identifiable Information within a shorter period of time.
Intuit shall provide written notice of the problem to Company, and Company must
immediately take appropriate steps to correct the problem. If Company fails to
correct any demonstrated security problem within a commercially-reasonable time,
factoring in the work that must be completed to address the problem, and
resulting in the material disclosure or threatened disclosure of
Personally-Identifiable Information, Intuit may instruct Company to take such
interim measures as are necessary to protect Personally-Identifiable
Information. If Company fails or refuses to take such interim and/or permanent
measures which are necessary to prevent the material disclosure of
Personally-Identifiable Information within a commercially reasonable time,
Intuit may terminate any and all affected agreements between Intuit and Company
for cause.
F. Compliance with U.S. Laws and Regulations Company shall comply with
all applicable federal, state, and local laws and regulations. G. Changes to
Requirements Intuit may, in its sole discretion, amend these requirements
from time to time, as required by law or otherwise.
Page 2 of 3
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H. Contact Information The primary business contact person for each
party under this Agreement shall designate a primary and an alternate single
point of contact for security issues for such party (a “Security SPOC”) and
provide mail, email, telephone, home telephone, and pager or portable telephone
contact information for such persons. Both parties agree that either the primary
or alternate Security SPOC will be available at all times (“24/7/365”). Such
designation and information must be given in writing to the other party within
ten (10) business days after the effective date of the Agreement. Any updates to
the same shall be given promptly in writing to the other party.
Page 3 of 3
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Exhibit G
Intuit Performance Standards and Guidelines
Vendor agrees to adhere to the following standards for performance under this
Agreement:
1) Personal Conduct. Vendor, including its employees and subcontractors, shall
adhere to the same type of rules of personal conduct governing Intuit’s
employees, including, without limitation, the following rules of conduct:
(a) No person under the influence of intoxicants or narcotics shall be allowed
on Intuit’s property, nor shall any person have in his or her possession any
intoxicant or narcotics.
(b) Unprofessional conduct such as horseplay, wrestling, fighting, gambling,
fighting, and threatening behavior, will not be permitted.
(c) There shall be no instances of sexual harassment or any other type of
harassment of any kind, including harassment on the basis of sex, race, color,
religion, gender, age, mental or physical disability, medical condition,
national origin, martial status, veteran status, sexual orientation, or other
characteristic protected under federal or state law or local ordinance. Vendor’s
personnel shall not harass any other person by verbal, physical, or visual means
or in any manner.
2) Accident Prevention. Vendor, including its employees and subcontractors,
shall exercise precaution at all times during the performance of Services in
connection with this Agreement for the protection of persons (including Vendor’s
employees and subcontractors) and property. Vendor shall observe any and all
safety provisions of applicable laws and regulations. Vendor shall guard
machinery and equipment, and eliminate any other hazards in accordance with the
applicable Safety Orders of the Industrial Accident Commission of the State of
California. Vendor shall provide all necessary barriers, signs, lights, and
watchmen during the performance of Services in connection with this Agreement.
Any and all damages during the performance of the Services under this Agreement
from whatever cause, shall be borne and sustained by Vendor, and all work shall
be solely at Vendor’s risk until it has been finally approved and accepted by
Intuit.
3) Security. Vendor shall at all times perform Services under this Agreement in
a manner to avoid the risk of loss, theft, or damage by vandalism, sabotage or
other means to any property. Vendor shall promptly take all reasonable
precautions which are necessary and adequate to protect against conditions which
involve a risk of loss, theft or damage to its property, Intuit’s property, and
the work site. Vendor shall continuously inspect all its work, materials, and
equipment facilities to discover and determine any of the above-described
conditions and Vendor shall be solely responsible for discovery, determination
and correction of any such conditions. Vendor shall cooperate with Intuit on all
security matters and Vendor shall promptly comply with any project security
requirements established by Intuit. Compliance with these security requirements
shall not relieve Vendor of its responsibility for maintaining adequate
security, nor shall such compliance be construed as limiting Vendor’s obligation
to undertake reasonable action as required to comply with the terms and
conditions of this Agreement. Vendor shall prepare and maintain accurate reports
of incidents of loss, theft or vandalism and Vendor shall furnish these reports
to Intuit in a timely manner. Vendor is solely responsible for the safety of its
own personnel.
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4) Entry on Intuit’s Property. While Vendor is on Intuit’s property, Vendor will
maintain strict work discipline and shall comply with Intuit’s site policies,
procedures, and programs relevant to Vendor’s provision of Services. In the
event of any accident or other occurrence resulting in personal injury or
illness when Vendor is on Intuit’s property, Vendor shall immediately notify
Intuit. Upon Intuit’s request, Vendor shall provide Intuit with documentation
fully describing the accident and injury or illness and the actions implemented
to prevent similar occurrences.
5) Governmental Permits and Notifications. Vendor shall investigate the need
for, and shall procure in its own name to the extent allowed by law, all
governmental permits, notifications, approvals and inspections required for the
performance of Vendor’s Services under this Agreement. Vendor shall promptly
notify Intuit in writing if any such permit or approval lapses, or is modified
or revoked. If, under applicable law, any such permits or approvals must be
procured in Intuit’s name, Vendor shall promptly so inform Intuit and shall
assist Intuit in obtaining such permits or approvals.
6) Occupational Safety and Health. All laws, interim and permanent standards,
rules and regulations of the Occupational Safety and Health Act; all state and
federal laws and regulations relating to safety and health standards, procedures
and programs relating to safety and health are incorporated into this Agreement
by this reference. Vendor agrees to perform the Services in compliance with, and
to furnish only supplies, articles, and equipment that comply with, such laws,
standards, regulations, policies, procedures, and programs.
7) Warning Signals. To the extent required by law or necessary to protect the
health and safety of Intuit’s employees, agents and visitors, Vendor shall
ensure that the area of work where Vendor is to furnish the Services is
appropriately isolated and posted with clear and conspicuous warning notices
advising Intuit’s employees, agents and visitors of any hazards that may be
associated with the work performed by Vendor hereunder.
8) Cooperation. Vendor shall cooperate with Intuit in performing Services under
this Agreement so as to minimize any potential interference with Intuit’s other
activities, to protect the safety and health of Intuit’s employees, agents and
visitors, and to safeguard the security and integrity of Intuit’s property.
9) Environmental Health and Safety: Vendor shall comply with Intuit’s
environmental, health, and safety site policies, procedures, and programs that
may apply to Vendor’s obligation to provide Services. Vendor acknowledges and
agrees that it is Vendor’s responsibility to understand all site policies,
procedures, and programs relating to environmental protection, safety and health
and to ensure that Vendor’s employees and contractors understand such policies,
procedures, and programs. Vendor agrees to provide Services in compliance with,
and to furnish only supplies, articles, and equipment that comply with such
policies, procedures, and programs.
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10) Releases to Environment: In performing Services under this Agreement, Vendor
shall not discharge, release or emit, or cause to be discharged, released or
emitted, any hazardous or non-hazardous substance into the environment, without
the prior written approval of an authorized representative of Intuit’s
Environmental, Health and Safety Department. If any discharge, release or
emission not so approved by Intuit occurs, Vendor shall inform Intuit
immediately, shall promptly undertake all reasonable efforts to contain and
cease such activity, and shall restore all property to its original condition.
11) Hazardous Materials. Whenever Vendor uses or stores flammable, explosive, or
other hazardous materials or hazardous equipment or uses hazardous or unusual
methods necessary for its performance of the Services, Vendor shall exercise
utmost care and shall carry on such activities under supervision of properly
trained personnel and in accordance with all Intuit policies, programs and
procedures related to hazardous materials. Vendor shall not take any remedial
action with regard to hazardous materials used in the performance of the
Services or enter into any settlement agreement, consent decree or other
compromise relating thereto without first notifying Intuit in writing of
Vendor’s intention to do so and affording Intuit ample opportunity to protect
its interests. Whenever Vendor is aware of any of the following actions
regarding hazardous materials that are instituted, completed or threatened,
Vendor shall immediately notify Intuit, in writing: i) any government or
regulatory action, ii) any claim against Vendor or Intuit, and iii) any reports,
complaints, notices or warnings of asserted violations to any governmental
agency.
12) Waste Handling. Vendor shall manage, handle and dispose of all wastes
generated by its Services properly and in accordance with all applicable
governmental requirements, including those applicable to hazardous waste and all
Intuit policies, programs, and procedures related to waste handling. Vendor
shall promptly deliver to Intuit copies of manifests or applicable shipping
documents reflecting the legal and proper disposal of any hazardous materials
that Vendor has caused to be removed from any of Intuit’s premises. Except as
otherwise approved in writing by an authorized representative of Intuit, Vendor
shall not (i) dispose of any waste on, in, under or about Intuit’s property or
any container thereon, or (ii) list Intuit as a waste generator.
13) Disputes and Work Stoppages. No dispute between labor organizations and
Vendor shall be permitted to occur or be manifested on any Intuit site, and
Vendor agrees to employ personnel and other agents for the Services who will
work at all times in harmony with Intuit’s personnel and other agents. Vendor
agrees not to participate in or encourage any cessation of the Services that may
occur as a result of any such labor dispute, however Vendor may participate in
lawful negotiations. Should there be a stoppage of the Services that involves,
but is not limited to, the participation of Vendor’s personnel or other agents,
or third party actions involving informational or organizational picketing,
Vendor agrees to take appropriate and prompt action to provide qualified
personnel or other agents to perform the Services. If Vendor is unable to
provide such personnel or other agents, Vendor agrees to reimburse Intuit any
financial expenses incurred by Intuit in causing the Services to be provided by
another.
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SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release (the "Agreement"), dated as of July 18,
2001, is entered into between and among EWS Holdings LLC ("EWS") and Edward W.
Sharpless ("Sharpless") (collectively, the "Plaintiffs"), on the one hand, and
VirtualSellers.com, Inc. ("VirtualSellers") and Dennis Sinclair ("Sinclair")
(collectively, the "Defendants"), on the other hand.
WHEREAS, effective May 19, 2000, Sullivan Park, LLC ("Sullivan Park") and
VirtualSellers entered into a purchase and sale agreement (the "Purchase and
Sale Agreement") (attached hereto as Exhibit "A"); and
WHEREAS Sullivan Park, LLC ("Sullivan Park") changed its name to EWS Holdings,
LLC; and
WHEREAS effective May 19, 2000, Sharpless and VirtualSellers entered into an
employment agreement (the "Employment Agreement") (attached here to as Exhibit
"B"); and
WHEREAS, ;the Plaintiffs have instituted an action in Los Angeles Superior Court
entitled EWS Holdings, LLC, et. al. v. VirtualSellers.com, Inc., et. al., Case
No. BC 251732 (the "Action") alleging fraud, breach of contract, breach of the
covenant of good faith and fair dealing, and unlawful, unfair, and fraudulent
business practices with respect to the Purchase and Sale and Equipment
Agreements; and
WHEREAS, Defendants would have asserted numerous defenses to Plaintiffs'
allegations, including but not limited to a claim that Plaintiffs made
misrepresentations to Defendants in the course of negotiating and procuring the
execution of the Purchase and Sale Agreement; and
WHEREAS, Plaintiffs, on the one hand, and Defendants, on the other hand, wish to
resolve this Action and the disputes therein;
NOW THEREFORE, in consideration of the execution of this Agreement, the releases
and promises made herein, and for other good and valuable consideration, the
receipt of which and adequacy of which are hereby acknowledged by each party to
this Agreement, it is hereby agreed as follows:
1. Settlement of Disputed Claims. As a direct result of settlement negotiations,
the parties agree that this Action, and any and all claims arising out of the
conduct and agreements to which the Action relates, are settled as provided
below. The parties agree that they are entering into this Agreement as a
compromise of disputed claims, to avoid the cost and expense of further
litigation. By this Agreement, Defendants do not admit any wrongdoing,
liability, or obligation whatsoever, and this Agreement shall not be construed
by any person as any such admission.
2. Representations and Warranties. VirtualSellers hereby represents and warrants
that on May 19, 200, it received from Sullivan Park the assets that were to be
delivered to it on the Closing Date pursuant to the Purchase and Sale Agreement
and, accordingly, the Shares (as hereinafter defined) are being issued on a
fully-paid and non-assessable basis.
3. Consideration.
(a) Shares of VirtualSellers Common Stock. Immediately upon execution of this
Agreement, VirtualSellers shall cause to be issued to Sharpless, six million,
five hundred thousand (6,500,000) shares of unregistered common stock of
VirtualSellers (the "Shares"). This Agreement shall not be effective, and shall
be void and of absolutely no force or effect, unless and until the Shares are
issued to, and received by, Sharpless. The Shares shall bear the following
legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT") AND, UNLESS SO REGISTERED, MAY NOT BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE 1993 ACT (IF APPLICABLE), OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1993 ACT, AND IN EACH CASE IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS CONTAINED IN A
SETTLEMENT AGREEMENT DATED AS OF JULY 18, 2001 AMONG EWS HOLDINGS LLC, EDWARD W.
SHARPLESS, DENNIS SINCLAIR AND VIRTUALSELLERS.COM, INC.
For a period of fifty-two (52) weeks, commencing on the date of execution of
this Agreement by all parties hereto, Sharpless shall be restricted from selling
or otherwise transferring in excess of 50,000 Shares per calendar week; provided
that no such limitation shall apply to the sale of transfer of any of the Shares
made after the expiration of such period.
VirtualSellers simultaneously herewith shall execute and deliver to Sharpless an
irrevocable letter of consent, in the form attached hereto as Exhibit "C".
Sharpless shall cause his broker to transmit on a monthly basis to
VirtualSellers, a copy of Sharpless' monthly brokerage account statement showing
all sales of any Shares during the fifty-two (52) week period. Additionally,
Sharpless promptly shall prepare and transmit to VirtualSellers documents
similar to such statements to report any private (non-brokered) sales of Shares
during such period.
(b) Cash Payment. Immediately upon execution of this Agreement by all parties,
VirtualSellers shall pay to Sharpless the sum of US $8,884.92, as repayment for
unreimbursed business expenses incurred by Sharpless on behalf of
VirtualSellers. Said payment shall be made payable to the Order of Edward W.
Sharpless.
(c) Resignation. Effective immediately upon execution of this Agreement by all
parties, the Employment Agreement automatically shall terminate, without penalty
or notice, and Sharpless shall be deemed to have resigned from all positions and
offices theretofore held by him with or for VirtualSellers, or any affiliate of
VirtualSellers (including Sullivan Park, Inc.),
4. Dismissal With Prejudice of the Action. Promptly upon receipt of each and
every item specified in paragraph 2(a)-(c), Plaintiffs shall take all necessary
steps to procure the dismissal of the Action with prejudice.
5. Releases.
(a) By Plaintiffs. Plaintiffs, jointly and severally, do hereby agree to fully,
finally, and forever release, quit claim, and discharge Defendants, jointly and
severally, and as applicable, their predecessors, successors, subsidiaries,
divisions, alter egos, affiliated corporations, and related entities, and their
past or present officers, directors, trustees, faculty members, partners,
employees, attorneys, assigns, agents, representatives, and any of all of them,
from any and all claims, liabilities, demands, debts, accounts, obligations,
actions, and causes of action, known or unknown, at law or in equity, which they
may have had or claim to have had up through the date of the execution of this
Agreement.
(b) By Defendants. Defendants, jointly and severally, do hereby agree to fully,
finally, and forever release, quit claim, and discharge Plaintiffs, jointly and
severally, and as applicable, their predecessors, successors, subsidiaries,
divisions, alter egos, affiliated corporations, and related entities, and their
past or present officers, directors, trustees, faculty members, partners,
employees, attorneys, assigns, agents, representatives, and any of all of them,
from any and all claims, liabilities, demands, debts, accounts, obligations,
actions, and causes of action, known or unknown, at law or in equity, which they
may have had or claim to have had up through the date of the execution of this
Agreement.
(c) Definition. The matters described in this paragraph 5 are hereby defined as
the "Release Matters."
(d) Exception. The foregoing released do not extend to any claims, rights, or
remedies the parties may have under this Agreement.
6. Waiver of Section 1542. It is the intention of the parties that this
Agreement shall be effective as a full and final accord and satisfaction, and
release or each and every Released Matter. In furtherance of this intention, the
parties acknowledge that they are familiar with Section 1542 of the California
Civil code, which provides as follows:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing this release, which if
known by him must have materially affected his settlement with debtor
The releasing parties hereby waive and relinquish every right or benefit that
they have or may have under Section 1542 of the California Civil Code to the
full extent that they may lawfully waive such right or benefit with regard to
the Released Matters, if Section 1542 applies. In connection with such waiver
and relinquishment, the releasing parties acknowledge that they are aware that
they may later discover facts in addition to or different from those which they
now know or believe to be true with respect to the Released Matters, but that it
is their intention to hereby fully, finally, and forever settle and release all
Released Matters, known or unknown, suspected or unsuspected, which now exist,
may exist, or previously existed between each releasing party and those persons
granted releases. In furtherance of such intention, the releases given herein
shall be, and shall remain, in effect as a full and complete release as to all
Released Matters, notwithstanding the discovery or existence of such additional
or different facts.
7. Successors in Interest. The parties hereby agree that this Agreement shall be
binding upon the parties and each of them, and, as applicable, upon their heirs,
executors, administrators, dependents, predecessors, successors, subsidiaries,
divisions, alter egos, affiliated corporations, and related entities, and their
past and present officers, directors, trustees, faculty members, partners,
employees, attorneys, assigns, agents, representatives, and any or all of them.
8. No Assignment. Each party warrants and represents that it has not assigned or
transferred to any other person any of the claims, causes of action, or other
matters which are releases by this Agreement.
9. Entire Agreement. This Agreement contains the entire agreement and
understanding concerning the subject matter hereof between the parties, and
supersedes and replaces all prior negotiations, proposed agreements, and
agreements, except for and provided that this Agreement shall not supersede or
replace the Stock Option Agreement executed by VirtualSellers and dated as of
April 24, 2001 (attached hereto as Exhibit "D"). Each of the parties to this
Agreement acknowledges that no other party to this Agreement, nor any agent or
attorney of any such party, has made any promise, representation, or warranty
whatever, express or implied, not contained in this Agreement, to induce either
party to execute this Agreement. The parties further acknowledge that they are
not executing this Agreement in reliance on any promise, representation, or
warranty not contained in this Agreement. It is expressly understood and agreed
that this Agreement may not be altered, amended, or modified, or otherwise
changed in any respect, except by a writing duly executed by the parties, their
successors or assigns in interest, or their authorized representatives.
10. Advice of Counsel. Each party represents that they have been represented, or
have had the opportunity to be represented, by independent legal counsel of
their own choice throughout all of the negotiations which preceded the execution
of this Agreement and that they have executed this Agreement with the consent
and upon the advice of such independent legal counsel, or that they have had the
opportunity to seek such consent and advice. Each party acknowledges that they
have had read this Agreement and assents to all the terms and conditions
contained herein without any reservation whatsoever and that they have had, or
have had the opportunity to have had, the same explained to them by their own
counsel, who have answered any all questions which have been asked of them, with
regard to the meaning of any provision hereof.
11. Governing Law. This Agreement shall in all respect be interpreted, enforced.
and governed by and under the laws of the State of California.
12. Counterparts and Fax Signatures. This Agreement may be executed in one or
more counterparts, each of which shall be an original as against any party who
signs it, and all of which shall constitute one and the same document. Delivery
of an executed copy of this Agreement by electronic facsimile transmission, or
other means of electronic communication capable of producing a printed copy,
will be deemed to be execution and delivery of this Agreement as of the date on
which it is executed.
13. Construction. The headings of sections herein are for convenience of
reference only and shall not affect the meaning and interpretation of this
Agreement. It is understood and acknowledged that this Agreement shall not be
construed in favor of or against any party hereto by reason of the extent to
which any party or its counsel has participated in the drafting of this
Agreement.
14. Authorization to Execute Agreement. Each individual who executes this
Agreement on behalf of any party hereby represents and warrant that they do so
with the knowledge and express approval of the party on whose behalf they
execute the Agreement.
15. Time if of the Essence. The parties agree and acknowledge that in connection
with this Agreement and the obligations thereunder, time is of the essence.
16. Attorneys' Fees. In the event of any litigation relating to this Agreement,
the prevailing party shall be entitled to recover its reasonable attorneys'
fees, expenses, and costs.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
DATED: July 31, 2001
VIRTUALSELLERS.COM, INC.
By: /s/ Dennis Sinclair
Dennis Sinclair
[SIGNATURES CONTINUED ON NEXT PAGE]
DATED: July ___, 2001
DENNIS SINCLAIR
By: /s/ Dennis Sinclair
Dennis Sinclair
DATED: July 26, 2001
EWS HOLDINGS LLC
By: /s/ Edward W. Sharpless
Edward W. Sharpless
DATED: July 26, 2001
EDWARD W. SHARPLESS
By: /s/ Edward W. Sharpless
Edward W. Sharpless |