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EXECUTION COPY
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
777 POST OAK BOULEVARD, SUITE 800
HOUSTON, TEXAS 77056
SUBORDINATED NOTE RESTRUCTURING AGREEMENT
-----------------------------------------
As of December 28, 2000
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4069
Ladies and Gentlemen:
This Subordinated Note Restructuring Agreement (this "RESTRUCTURING
AGREEMENT") is entered into between the undersigned, Boots & Coots International
Well Control, Inc., a Delaware corporation (the "COMPANY") and you.
WHEREAS, the Company and you have entered into a Subordinated Note and
Warrant Purchase Agreement dated as of July 23, 1998 (the "PURCHASE AGREEMENT"),
pursuant to which the Company issued to you its 11.28% senior subordinated notes
in the aggregate principal amount of $30,000,000 to mature July 23, 2006 (the
"11.28% NOTES") in exchange for payment of 100% of the aggregate principal
amount thereof (the "PURCHASE PRICE");
WHEREAS, pursuant to the Purchase Agreement, the Company issued and sold to
you a warrant evidencing rights to purchase an aggregate of 3,165,396 shares of
common stock, par value $0.0000l per share of the Company (the "COMMON STOCK")
at an initial exercise price per share of $6.70 (the "ORIGINAL WARRANT" and,
together with the 11.28% Notes, the "PREEXISTING OBLIGATIONS");
WHEREAS, the Company and you desire to restructure the Company's
obligations under the Purchase Agreement and the Preexisting Obligations by
executing and delivering this Restructuring Agreement, and thereby terminating
the Purchase Agreement and waiving any all past and present defaults by the
Company thereunder; and
WHEREAS, pursuant to this Restructuring Agreement, you agree to cancel and
terminate the 11.28% Notes and the Warrant in consideration for the Company's
deliveries and obligations hereunder, including, but not limited to, payment in
full of the Closing Payments, and the issuance to you of the Replacement Notes,
the Replacement Warrant, the New Warrant, and the Preferred Stock (all as
defined herein).
<PAGE>
NOW, THEREFORE, in consideration of the foregoing, the Company hereby
agrees with you as follows:
1. CASH PAYMENTS.
1.1 CLOSING PAYMENT. On the date of closing, which shall be December
28, 2000 (the "CLOSING DATE" or "DATE OF CLOSING"), the Company will pay you the
sum of $12,000,000 in immediately available funds plus the Expenses Cash Payment
(as defined in Section 12.2 hereof)(the "CLOSING PAYMENT"), by wire transfer to
the following account:
Bank of New York
New York, NY
Account Name: Prudential Managed Account
ABA #021-000-018
Acct. # 890-0304-391
1.2 CREDIT FACILITY PAYMENT. If and when the Company enters into a new
credit facility or commercial financing arrangement or amends and restates its
existing credit facility with a commercial lender the Company will on the
closing date thereof (the "CREDIT FACILITY PAYMENT DATE"), pay you the sum of
$500,000 in immediately available funds (the "CREDIT FACILITY PAYMENT"), by wire
transfer to the following account or to such other account which you shall
designate by notice to the Company:
Bank of New York
New York, NY
Account Name: Prudential Managed Account
ABA #021-000-018
Acct. # 890-0304-391
2. AUTHORIZATION OF ISSUE OF SECURITIES.
2.1 AUTHORIZATION OF ISSUE OF NOTES. The Company will authorize the
issue of its senior subordinated notes in the aggregate principal amount of
$7,000,000 plus the Expenses Note Amount (as defined in Section 12.2 herein), to
be dated the Closing Date, to mature December 28, 2005, to bear interest at
12.00% per annum, compounded quarterly, on the unpaid balance thereof from the
date thereof until the principal thereof shall have become due and payable and
on overdue payments at the respective rates specified therein; such subordinated
notes shall be substantially in the form of Exhibit A attached hereto. The term
"NOTES" as used herein shall include each such senior subordinated note
delivered pursuant to any provision of this Restructuring Agreement and each
such senior subordinated note delivered in substitution or exchange for any
other Note pursuant to any such provision. Capitalized terms used herein and
not otherwise defined have the meanings specified in Section 11.
2.2 AUTHORIZATION OF ISSUE OF PREFERRED STOCK. (a) The Company will
authorize the issue of $5,000,000 aggregate face value of Series E Cumulative
Senior Preferred Stock, par value $0.00001 per share (the "SERIES E STOCK") and
$8,000,000 aggregate face value of Series G Cumulative Convertible Preferred
Stock, par value $0.00001 per share (the "SERIES G STOCK"). The Company will
also authorize the issue of up to 60,775 of Series F Cumulative Senior Preferred
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Stock, which shall be issuable in exchange for Series E Stock and Series E PIK
Shares (as defined below) beginning five years from the date of issuance of the
Series E Stock (the "SERIES F STOCK" and, when issued, together with the Series
E Stock, Series E PIK Shares, Series G Stock and Series G PIK Shares, the
"PREFERRED STOCK").
(b) Subject to the terms, conditions and adjustments set forth in
the Certificate of Designation of the rights and preferences relating to the
Series E Stock (the "SERIES E DESIGNATION"); as substantially set forth in the
form of Exhibit B: the Series E Stock will bear a cumulative dividend at 10%
per annum, compounded semi-annually. The dividend may be paid in the form of
cash or, for a period of two years from the date of issuance, in whole or in
part in additional shares of Series E Stock having, for each such dividend
payment, an aggregate face value equal to the cash value of such dividend to be
paid in shares (such shares, "SERIES E PIK SHARES"). When issued, such Series E
PIK Shares shall have all of the rights, privileges and obligations of the
Series E Stock. Three years from the date of issuance, the cumulative dividend
on the Series E Stock (including the Series E PIK Shares) shall increase to 12%
per annum, compounded semi-annually. The Series E Stock may be redeemed (i)
within one year from the date of issuance, inclusive, at the Company's option,
at a price of 83.33% of the Adjusted Face Value (as defined in the Series E
Designation) of such shares plus all accrued and unpaid dividends, and (ii) from
one year from the date of issuance, at the Company's option, at a price equal to
the Adjusted Face Value of such shares; provided, that for purposes of each such
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redemption, Series E PIK Shares must also be redeemed at the Adjusted Face Value
of such shares, and provided, further, that beginning five years from the date
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of issuance of such Series E Stock, the Company must notify holders of Series E
Stock of any intent to redeem any such shares in writing no later than 30 days
prior to the proposed closing of such redemption. The Series E Stock shall rank
pari passu with the Company's Series A Cumulative Senior Preferred Stock (the
"SERIES A STOCK") and the Series F Stock, and any other series of stock
authorized and issued by the Board of Directors as pari passu with the Series E
Stock.
(c) Subject to the terms, conditions and adjustments set
forth in the Certificate of Designation of the rights and preferences relating
to the Series F Stock; as substantially set forth in the form of Exhibit C: the
Series F Stock will bear a cumulative dividend at 12% per annum, compounded
semi-annually. The Series F Stock may be converted at any time into shares of
Common Stock at a conversion price equal to 85% of the average, for 90 trading
days preceding the date of notice to the Company of such conversion, of the high
and low trading prices of the Common Stock on any national securities exchange
or national automatic quotation system where the Common Stock is listed for
trading, or if no such listing is in effect, the fair market value per share as
determined in good faith by the Board of Directors. The Series F Stock shall
rank pari passu with the Series A Stock and the Series E Stock, and any other
series of stock authorized and issued by the Board of Directors as pari passu
with the Series F Stock.
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(d) Subject to the terms, conditions and adjustments set forth in
the Certificate of Designation of the rights and preferences relating to the
Series G Stock; as substantially set forth in the form of Exhibit D: the Series
G Stock will bear a cumulative dividend at 10% per annum, compounded
semi-annually. The dividend may be paid in the form of cash or, for a period of
two years from the date of issuance, in whole or in part in additional shares of
Series G Stock having, for each such dividend payment, an aggregate face value
equal to the cash value of such dividend to be paid in shares (such shares,
"SERIES G PIK SHARES"). When issued, such Series G PIK Shares shall have all of
the rights, privileges and obligations of the Series G Stock. The Series G
Stock may be converted, at any time beginning September 3, 2001, into shares of
Common Stock at a conversion price of $1.19 per share, subject to adjustment in
the event of stock split, stock dividend, recapitalization, reorganization or
other similar event. The Series G Stock shall rank pari passu with the
Company's 10% Junior Redeemable Convertible Preferred Stock (the "10% STOCK"),
Series C Convertible Junior Preferred Stock, Series D Cumulative Junior
Preferred Stock, Series H Stock, and any other series of stock authorized and
issued by the Board of Directors as pari passu with the Series G Stock.
2.3 AUTHORIZATION OF AMENDMENT OF ORIGINAL WARRANT AND ISSUE OF NEW
WARRANTS. The Company will also authorize the (a) amendment and restatement of
the Original Warrant to reduce the exercise price thereof to $0.625 per share
and to cause such warrant to conform in all respects to Exhibit E hereto and (b)
issuance of its Common Stock Purchase Warrants (such amended Original Warrant
and any such Common Stock Purchase Warrants which have been issued pursuant to
this Restructuring Agreement, and any such Common Stock Purchase Warrants which
may be issued in substitution or exchange therefor, herein collectively called
the "WARRANTS") evidencing rights to purchase from the Company an aggregate of
8,800,000 shares of Common Stock, at an exercise price per share of $0.625, at
any time or from time to time, and prior to 5:00 p.m., New York City time, on
the later of (i) July 23, 2008 and (ii) six months after the date the Notes are
fully retired, all subject to the terms, conditions and adjustments set forth in
such warrants; such Common Stock Purchase Warrant shall be substantially in the
form of Exhibit F attached hereto.
3. TRANSFER OF SECURITIES.
3.1 TRANSFER. The Company hereby agrees to provide to you and, subject
to the terms and conditions herein set forth, you agree to or accept from the
Company on the Closing Date:
(a) the Closing Payment and, if owing, the Credit Facility
Payment;
(b) Notes in the aggregate principal amount of $7,000,000 plus the
Expenses Note Amount, registered in your name or the name of your nominee, in
the denomination or denominations specified by you to the Company;
(c) shares of Series E Stock in the aggregate face amount of
$5,000,000, registered in your name or the name of your nominee in the
denomination or denominations specified by you to the Company;
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(d) shares of Series G Stock in the aggregate face amount of
$8,000,000, registered in your name or the name of your nominee in the
denomination or denominations specified by you to the Company;
(e) the Warrants, in the form of two Warrant certificates, one
exercisable for the purchase from the Company of 8,800,000 shares of Common
Stock, and one exercisable for the purchase from the Company of 3,165,000 shares
of Common Stock (the Warrants, together with the items listed in subsections
(a), (b), (c) and (d) of this Section 3.1, the Closing Payment and, when
applicable, the Credit Facility Payment, the "COMPANY CLOSING DELIVERIES"),
as full and complete consideration and satisfaction of such Preexisting
Obligations. Upon receipt of the instruments and documents evidencing the
Preexisting Obligations, subject to Section 12.2 hereto, all Preexisting
Obligations including Preexisting Obligations arising from events of default
under the Purchase Agreement, the Preexisting Obligations, or any document
executed or delivered in connection therewith, shall be hereby and forever
waived by you.
3.2 CLOSING. The Company will provide you the Company Closing
Deliveries on the Closing Date at 10:00 am New York time, at the offices of
Weil, Gotshal & Manges LLP at 767 Fifth Avenue, New York, New York 10153.
3.3 CALL OPTION. Notwithstanding anything contained in this Purchase
Agreement to the contrary:
(a) from the date of execution of this Restructuring
Agreement through June 30, 2001, the Company may elect to and pay you in one
payment in immediately available funds, the sum of $18,000,000 plus the sum of
the Expenses Note Amount, all accrued but unpaid interest and dividends on the
Notes, the Series E Stock and the Series G Stock as of the date thereof plus the
face amount of any Series E PIK Shares (plus all accrued but unpaid interest and
dividends thereon) or Series G PIK Shares (plus all accrued but unpaid interest
and dividends thereon) issued on Series E Stock and Series G Stock,
respectively, minus the amount of the Credit Facility Payment if the Credit
Facility Payment had theretofore been paid by the Company to you (the "CALL
OPTION PRICE") by wire transfer to an account which you shall designate by
notice to the Company, in exchange for the immediate surrender to the Company
for cancellation and retirement:
(i) the Notes;
(ii) the Series E Stock;
(iii)the Series E PIK Shares;
(iv) the Series G Stock;
(v) the Series G PIK Shares; and
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<PAGE>
(vi) the Warrants.
(b) from July 1, 2001 through January 2, 2002, the Company may
elect to and pay you in one payment the Call Option Price by wire transfer to an
account which you shall designate by notice to the Company, in exchange for the
immediate surrender to the Company for cancellation and retirement:
(i) the Notes;
(ii) the Series E Stock;
(iii)the Series E PIK Shares;
(iv) the Series G Stock; and
(v) the Series G PIK Shares.
3.4 ORIGINAL ISSUE DISCOUNT. The Company and you hereby acknowledge
and agree that: (i) the fair market value of the Warrants on their date of
issuance is equal to an amount which is less than the product of (a) one-quarter
of one percent (0.25%) of the stated redemption price at maturity (as such term
is defined in the Code) of the Notes and (b) the number of complete years to
maturity of the Notes; (ii) a portion of the purchase price of the Notes which
is less than the product described in clause (i), above, will be allocable to
the Warrants pursuant to Treas. Reg. 1.1273-2(h), with the balance of the
purchase price of the Notes allocable to the Notes; and (iii) pursuant to Treas.
Reg. 1.1273, the original issue discount on the Notes shall be considered to be
zero. The foregoing agreement shall be applicable for all United States
federal, state and local tax purposes of the Company and you.
4. CONDITIONS PRECEDENT. Your obligation to accept the transfer of the
Company Closing Deliveries and to release the Company from the Preexisting
Obligations at the Closing hereunder is subject to the fulfillment, to your
satisfaction, on or before the Date of Closing, of the following conditions:
4.1 CERTAIN DOCUMENTS. You shall have received the following, each
dated the Date of Closing (unless a different date is indicated below), and each
in form, scope and substance reasonably satisfactory to you:
(a) the Notes to be acquired by you;
(b) the Preferred Stock to be acquired by you;
(c) the Warrants to be acquired by you;
(d) certified copies of the resolutions of the Board of Directors
of each of the Transaction Parties approving this Restructuring Agreement, the
Closing Payment, the Credit Facility Payment, the Preferred Stock, the Warrants,
the Notes and each of the other Note Documents to which each is or is to be a
party, and certified copies of all documents evidencing other reasonably
necessary corporate action and governmental approvals, if any, with respect to
each of the Note Documents to which each is a party;
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(e) a certificate of the Secretary or an Assistant Secretary
of each of the Transaction Parties certifying the names and true signatures of
the officers of such Transaction Party authorized to sign the Restructuring
Agreement, the Preferred Stock, the Warrants and the Note Documents to which it
is a party and the other documents to be delivered hereunder by such Transaction
Party;
(f) certified copies of the Certificate or Articles of
Incorporation (certified by the Secretary of State of the applicable state of
incorporation) dated at least within ten Business Days of the Date of Closing,
and bylaws, each as amended to date, of each of the Transaction Parties;
(g) a favorable opinion of Thompson Knight Brown, Parker &
Leahy, L.L.P., counsel to the Transaction Parties, substantially in the form of
Exhibit G attached hereto, and addressing such other matters incident to the
matters herein contemplated as you may reasonably request;
(h) evidence in form and substance reasonably acceptable to you
that certain portions of the Senior Debt existing immediately prior to the date
hereof under the Loan Agreement dated as of October 28, 1998 by and among the
Company and Comerica Bank-Texas, as agent bank (the "Comerica Facility") have
been converted into Series H Cumulative Convertible Preferred Stock of the
Company ("Series H Stock") in form and substance reasonably satisfactory to you
and the holder of the Senior Debt.
(i) an amendment to the Registration Rights Agreement, duly
executed and delivered by the Company, indicating that the shares of Common
Stock underlying the Preferred Stock and Warrants have been and are now covered
by such agreement;
(j) an amendment to the Participation Rights Agreement, duly
executed and delivered by the Company and the Company's stockholders parties
thereto, indicating that the shares of Common Stock underlying the Preferred
Stock and Warrants have been are now covered by such agreement;
(k) copies of a pro forma consolidated balance sheet for the
Transaction Parties as at the Closing Date, reflecting the restructuring
contemplated hereby (including issuance of the Notes hereunder and the
conversion of the junior participation to Series H Stock), certified by an
authorized financial officer of the Company and good-faith management
projections and pro forma financial statements for the Transaction Parties for
the fiscal year 2001;
(l) a Subordinated Guaranty Agreement, duly executed and
delivered by each Domestic Subsidiary of the Company;
(m) such other documents, agreements or information as you may
reasonably request.
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4.2 REPRESENTATIONS AND WARRANTIES; NO DEFAULT; NO MATERIAL ADVERSE CHANGE.
The representations and warranties of the Company and each of the other
Transaction Parties contained in this Restructuring Agreement and the other Note
Documents shall be true in all material respects on and as of the Date of
Closing, except to the extent of changes caused by the transactions herein
contemplated; there shall exist on the Date of Closing no Event of Default or
Default; there shall exist or have occurred no condition, event or act not
otherwise disclosed to you prior to the date hereof in writing which has had a
Material Adverse Effect and the Company and each of the other Transaction
Parties shall have delivered to you an Officer's Certificate, dated the Date of
Closing, to both such effects.
4.3 PURCHASE PERMITTED BY APPLICABLE LAWS. The transfer of the Company
Closing Deliveries to you and the release by you of the Company from the
Preexisting Obligations on the terms and conditions herein provided shall not
violate any applicable law or governmental regulation (including, without
limitation, Section 5 of the Securities Act or Regulation U or X of the Board of
Governors of the Federal Reserve System) and shall not subject you to any tax,
penalty, liability or other onerous condition under or pursuant to any
applicable law or governmental regulation, and you shall have received such
certificates or other evidence as you may reasonably request to establish
compliance with this condition.
4.4 PROCEEDINGS. All corporate and other proceedings taken or to be taken
in connection with the transactions contemplated hereby and all documents
incident thereto shall be reasonably satisfactory in substance and form to you,
and you shall have received all such counterpart originals or certified or other
copies of such documents as you may reasonably request.
4.5 RELATED PROCEEDINGS. All corporate and other proceedings taken or to be
taken in connection with the execution and delivery of, and performance under
the Restructuring Agreement, and all documents incident thereto, shall be
reasonably satisfactory in substance and form to you, and you shall have
received all such counterpart originals or certified or other copies of such
documents as you may reasonably request.
4.6 COMPANY CLOSING DELIVERABLES. You shall have received the Closing
Payment, the Credit Facility Payment, if accrued, the Notes, the Preferred Stock
and the Warrants issued pursuant to this Restructuring Agreement.
4.7 PRIVATE PLACEMENT NUMBER. Private Placement numbers issued by Standard
& Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation
Office of the National Association of Insurance Commissioners) shall have been
obtained for the Notes, the Preferred Stock and the Warrants.
4.8 FEES. Without limiting the provisions of Section 12.2, your special
counsel shall have received its reasonable fees, charges and disbursements to
the extent reflected in a statement of such special counsel rendered to the
Company at least one Business Day prior to the Closing.
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5. PREPAYMENTS. The Notes shall be subject to prepayment only with respect
to the prepayments specified in Sections 3.3, 5.1 and 5.2.
5.1 OPTIONAL PREPAYMENT OF NOTES. Following redemption in full of all
outstanding Series E Stock and Series F Stock pursuant to the terms thereof the
Company may, at its option, upon notice as provided in Section 5.4, prepay at
any time all or any part of the Notes, in an aggregate principal amount of not
less than $500,000 or integral multiples of $100,000 in excess thereof (or, if
less, the remaining aggregate principal amount of the Notes outstanding at such
time), plus accrued and unpaid interest thereon to the date of such prepayment,
provided that if such prepayments are made from the Closing Date through
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December 31, 2001, such prepayment of the Notes in full (but not in part) may be
made for a prepayment price of 83.33% of par value plus accrued and unpaid
interest, and provided, further, that thereafter prepayments pursuant to this
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Section 5.1 shall be made at a prepayment price of par value plus accrued and
unpaid interest.
5.2 PARTIAL PAYMENTS PRO RATA. Upon any permitted partial prepayment of
Notes pursuant to Section 5.1, the principal amount so prepaid shall be
allocated to all Notes at the time outstanding (including, for the purpose of
this Section 5.2 only, all such Notes prepaid or otherwise retired or purchased
or otherwise acquired by the Company or any of its Subsidiaries or Affiliates
other than by prepayment pursuant to Section 5.1) in proportion to the
respective outstanding principal amounts thereof.
5.3 RETIREMENT OF NOTES. The Company shall not, and shall not permit any of
its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in
part prior to their stated final maturity (other than by prepayment pursuant to
Section 5.1 or upon acceleration of such final maturity pursuant to Section
8.1), or purchase or otherwise acquire, directly or indirectly, Notes held by
any holder unless the Company or such Subsidiary or Affiliate shall have offered
to prepay or otherwise retire or purchase or otherwise acquire, as the case may
be, the same proportion of the aggregate principal amount of Notes held by each
other holder of Notes at the time outstanding upon the same terms and
conditions. Any Notes so prepaid or otherwise retired or purchased or otherwise
acquired by the Company or any of its Subsidiaries or Affiliates shall not be
deemed to be outstanding for any purpose under this Restructuring Agreement.
5.4 NOTICE OF PREPAYMENTS. The Company will give each holder of Notes
written notice of each required or optional prepayment under Section 5.1 not
less than 15 days prior to the date fixed for such prepayment. Each such notice
shall specify the date fixed for such redemption, the aggregate principal amount
of the Notes to be prepaid on such date, and the interest to be paid on the
prepayment date with respect to such principal amount being prepaid and shall
state that such prepayment is to be made pursuant to Section 5.1.
6. AFFIRMATIVE COVENANTS.
6.1 AFFIRMATIVE COVENANTS.
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So long as any Note shall remain unpaid (or, if no Note shall remain unpaid
but either (a) any Series E Stock shall remain outstanding or (b) any Series F
Stock, Series G Stock or Warrants shall be held by you or your affiliate: (i) if
at the time in question the Common Stock is listed or admitted to trading on any
national securities exchange or is traded in the over-the-counter market and is
subject to bid and asked prices with respect thereto being quoted in the Nasdaq
National Market, then only with respect to the covenants of the Company set
forth in Sections 6.2(i), (ii), (iii) and (x) and 6.3, or (ii) if the Common
Stock is not so listed, admitted to trading or subject to such bid and asked
prices being so quoted, then only with respect to the covenants of the Company
set forth in Sections 6.2, 6.3 and 6.4) the Company covenants that:
6.2 FINANCIAL STATEMENTS. The Company will deliver to each holder in
duplicate and without cost to you:
(i) as soon as practicable and in any event within 45 days after the
end of each quarterly period (other than the last quarterly period) in each
fiscal year, consolidated statements of income, stockholders' equity and
cash flows of the Company and its Subsidiaries for the period from the
beginning of the current fiscal year to the end of such quarterly period,
and a consolidated balance sheet of the Company and its Subsidiaries as at
the end of such quarterly period, setting forth in each case in comparative
form figures for the corresponding period in the preceding fiscal year, all
in reasonable detail and reasonably satisfactory in form to the Required
Holder(s) and certified by an authorized financial officer of the Company,
subject to changes resulting from year-end adjustment; provided, that
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delivery pursuant to clause (iii) below of copies of the Quarterly Report
on Form l0-Q or 10-QSB, as the case may be, of the Company for such
quarterly period filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this clause (i);
(ii) as soon as practicable and in any event within 90 days after the
end of each fiscal year, consolidated statements of income and cash flows
and a consolidated statement of stockholders' equity of the Company and its
Subsidiaries for such year, and a consolidated balance sheet of the Company
and its Subsidiaries as at the end of such year, setting forth in each case
in comparative form corresponding consolidated figures from the preceding
annual audit, all in reasonable detail and reasonably satisfactory in form
to the Required Holder(s) and reported on by independent public accountants
of recognized national standing selected by the Company whose report shall
be without limitation as to the scope of the audit and reasonably
satisfactory in substance to the Required Holder(s); provided, that
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delivery pursuant to clause (iii) below of copies of the Annual Report on
Form 10-K or l0-KSB, as the case may be, of the Company for such fiscal
year filed with the Securities and Exchange Commission shall be deemed to
satisfy the requirements of this clause (ii) with respect to consolidated
financial statements if such financial statements are included in such
report;
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(iii) promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports as it shall send to its
public stockholders and copies of all registration statements (without
exhibits) and all reports which it files with the Securities and Exchange
Commission (or any governmental body or agency succeeding to the functions
of the Securities and Exchange Commission);
(iv) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any Subsidiary by independent accountants in
connection with any annual, interim or special audit made by them of the
books of the Company or any Subsidiary;
(v) as soon as practicable and in any event within five Business Days
after obtaining Knowledge (a) of any condition or event which, in the
opinion of management of the Company, would have a Material Adverse Effect,
(b) that any Person has given any notice to the Company or any of its
Subsidiaries or taken any other action with respect to a claimed default or
event or condition of the type referred to in clause (iii) of Section 8.1,
(c) of the institution of any litigation involving claims against the
Company or any of its Subsidiaries equal to or greater than $100,000 with
respect to any single cause of action or of any adverse determination in
any court proceeding in any litigation involving a potential liability to
the Company or any of its Subsidiaries equal to or greater than $500,000
with respect to any single cause of action which makes the likelihood of an
adverse determination in such litigation against the Company or such
Subsidiary substantially more probable or (d) of any regulatory proceeding
which may have a Material Adverse Effect, an Officer's Certificate
specifying the nature and period of existence of any such condition or
event, or specifying the notice given or action taken by such Person and
the nature of any such claimed default, event or condition, or specifying
the details of such proceeding, litigation or dispute and what action the
Company or any of its Subsidiaries has taken, is taking or proposes to take
with respect thereto;
(vi) (a) within five Business Days after receipt, a copy of any notice
of complete or partial withdrawal liability under Title IV of ERISA and any
notice from the PBGC under Title IV of ERISA of an intent to terminate or
appoint a trustee to administer any Plan, (b) if requested by any holder of
the Notes, promptly after the filing thereof with the United States
Secretary of Labor or the PBGC or the Internal Revenue Service, copies of
each annual and other report with respect to each Plan or any trust created
thereunder, (c) immediately upon becoming aware of the occurrence of any
"reportable event," as such term is defined in Section 4043 of ERISA, for
which the disclosure requirements of Regulation Section 2615.3 promulgated
by the PBGC have not been waived, or of any "prohibited transaction," as
such term is defined in Section 4975 of the Code, in connection with any
Plan or any trust created thereunder, a written notice signed by an
authorized officer of the Company or the applicable member of the
Controlled Group specifying the nature thereof, what action the Company or
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the applicable member of the Controlled Group is taking or proposes to take
with respect thereto, and, when known, any action taken by the PBGC, the
Internal Revenue Service or the Department of Labor with respect thereto,
(d) promptly after the filing or receiving thereof by the Company or any
member of the Controlled Group of any notice of the institution of any
proceedings or other actions which may result in the termination of any
Plan, and (e) each request for waiver of the funding standards or extension
of the amortization periods required by Sections 303 and 304 of ERISA or
Section 412 of the Code promptly after the request is submitted by the
Company or any member of the Controlled Group to the Secretary of the
Treasury, the Department of Labor or the Internal Revenue Service, as the
case may be;
(vii) promptly upon delivery thereof to any bank or commercial lender
providing a credit facility to the Company, copies of all such notices,
reports and other materials which the Company or any Subsidiary is required
under such credit facility to deliver to such lender;
(viii) promptly upon completion thereof on an annual basis within 60
days following each fiscal year end, a copy of each operating budget and
projection of financial performance prepared by or for the Company or any
of its Subsidiaries;
(ix) within 10 days after the removal or resignation of, or the death
or disability of any Executive Officer or Responsible Officer of the
Company or any of its Subsidiaries, written notice thereof, together with
information in reasonable detail with respect thereto; and
(x) with reasonable promptness, such other information respecting the
condition or operations, financial or otherwise, of the Company or any of
its Subsidiaries as such holder may reasonably request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each Significant Holder an Officer's
Certificate in the form of Exhibit H attached hereto demonstrating (with
computations in reasonable detail) compliance by the Company and its
Subsidiaries with the provisions of Sections 7.1, 7.3(a)(v), 7.3(b), 7.3(c)and
7.3(e) and stating that there exists no Event of Default or Default, or, if any
Event of Default or Default exists, specifying the nature and period of
existence thereof and what action the Company proposes to take with respect
thereto. Together with each delivery of financial statements required by clause
(ii) above, the Company will deliver to each Significant Holder a certificate of
such accountants stating that, in making the audit necessary for their report on
such financial statements, they have obtained no knowledge of any Event of
Default or Default, or, if they have obtained knowledge of any Event of Default
or Default, specifying the nature and period of existence thereof. Such
accountants, however, shall not be liable to anyone by reason of their failure
to obtain knowledge of any Event of Default or Default which would not be
disclosed in the course of an audit conducted in accordance with generally
accepted auditing standards.
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The Company also covenants that immediately after obtaining Knowledge of an
Event of Default or Default, it will deliver to each Significant Holder an
Officer's Certificate specifying the nature and period of existence thereof and
what action the Company proposes to take with respect thereto.
6.3 INFORMATION REQUIRED BY RULE 144A. The Company will, upon the request
of the holder of any Security, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be reasonably necessary
in order to permit compliance with the information requirements of Rule 144A
under the Securities Act in connection with the resale of Notes or Warrants,
except at such times as the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act. For the purpose of this Section 6.3,
the term "qualified institutional buyer" shall have the meaning specified in
Rule 144A under the Securities Act.
6.4 INSPECTION OF PROPERTY. The Company will permit any Person designated
by any Significant Holder in writing, at the Company's expense during the
continuance of a Default or Event of Default and otherwise at such Significant
Holder's sole cost and expense, to visit and inspect, on behalf of such holder,
any of the properties of the Company and its Subsidiaries, to examine the
corporate books and financial records of the Company and its Subsidiaries and
make copies thereof or extracts therefrom and to discuss the affairs, finances
and accounts of any of such corporations with the principal officers of the
Company and its independent public accountants, all at such reasonable times and
as often as such holder may reasonably request; provided, that such Significant
--------
Holder and such other Person shall have agreed to comply with the
confidentiality provisions set forth in Section 12.8.
6.5 COVENANT TO SECURE NOTES EQUALLY. The Company will, if it or any
Subsidiary shall grant or assume any Lien upon any of its property or assets,
whether now owned or hereafter acquired, other than Liens permitted by the
provisions of Section 7.3(a) (unless prior written consent to the creation or
assumption thereof shall have been obtained pursuant to Section 12.3), make or
cause to be made effective a provision whereby the Notes will be secured by such
Lien equally and ratably with any and all other Indebtedness thereby secured so
long as any such other Indebtedness shall be so secured pursuant to such
agreements and instruments as shall be approved by the Required Holder(s), and
the Company will cause to be delivered to the holder of each Note an opinion of
independent counsel to the effect that such agreements and instruments are
enforceable in accordance with their terms and that the Notes are equally and
ratably secured with such other Indebtedness.
6.6 TAXES, EXISTENCE, REGULATIONS, PROPERTY, ETC. The Company will at all
times, except where failure or noncompliance could not reasonably be expected to
have a Material Adverse Effect (i) pay when due all taxes and governmental
charges of every kind upon it or against its income, profits or Property, unless
and only to the extent that the same shall be contested diligently in good faith
and adequate reserves in accordance with GAAP have been established therefor;
(ii) do all things reasonably necessary to preserve its existence,
qualifications, rights and franchises; (iii) comply with all applicable Legal
Requirements (including without limitation Requirements of Environmental Law) in
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respect of the conduct of its business and the ownership of its Property, and
(iv) cause its Property to be protected, maintained and kept in good repair,
ordinary wear and tear excepted, and make all replacements and additions to such
Property as may be reasonably necessary to conduct its business properly and
efficiently.
6.7 MAINTENANCE OF INSURANCE. The Company will carry and maintain, and
cause each Subsidiary to carry and maintain, insurance (subject to customary
deductibles and retentions) in at least such amounts and against such
liabilities and hazards and by such methods as customarily maintained by other
companies operating similar businesses.
6.8 MAINTENANCE OF DIRECTORS' AND OFFICERS' INSURANCE. The Company will
carry and maintain directors' and officers' liability insurance in at least such
amounts and against such liabilities and hazards and by such methods as
customarily maintained by other companies operating similar businesses which, in
any event, shall be in at least such amounts (subject to customary deductibles
and retentions) and against such liabilities and by such methods as are
maintained by the Company as of the Date of Closing.
6.9 ERISA COMPLIANCE. To the extent required under applicable statutory
funding requirements, the Company will fund, or will cause the applicable member
of the Controlled Group to fund, all current service pension liabilities as they
are incurred under the provisions of all Plans from time to time in effect, and
comply with all applicable provisions of ERISA, in each case, except to the
extent that failure to do the same could not reasonably be expected to have a
Material Adverse Effect. The Company covenants that it shall and shall cause
each member of the Controlled Group to (i) make contributions to each Plan in a
timely manner and in an amount sufficient to comply with the contribution
obligations under such Plan and the minimum funding standards requirements of
ERISA; (ii) prepare and file in a timely manner all notices and reports required
under the terms of ERISA including but not limited to annual reports; and (iii)
pay in a timely manner all required PBGC premiums, in each case, except to the
extent that failure to do the same could not reasonably be expected to have a
Material Adverse Effect.
6.10 SUBSIDIARIES.
(i) At the cost and expense of the Company, the Company will cause
each subsequently acquired or organized Domestic Subsidiary to execute and
deliver a Subordinated Guaranty Agreement in favor of the holders of the
Notes contemporaneously with such Domestic Subsidiary possessing or
acquiring any tangible or intangible assets or properties.
(ii) If and at any time a Subsidiary shall Guarantee or agree to
Guarantee any term or revolving credit facility or other instrument
evidencing indebtedness of the Company, then at the cost and expense of the
Company, the Company will cause each such Subsidiary, to the extent it has
not already done so, to execute and deliver a Subordinated Guaranty
Agreement, in favor of the holder of the Notes.
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6.11 MAINTENANCE OF BOOKS OF RECORD; RESERVES. The Company, both
individually and on a consolidated basis, will keep proper books of record
and account and set aside appropriate reserves, all in accordance with
GAAP.
7. NEGATIVE COVENANTS. So long as any Note shall remain unpaid the Company
covenants that:
7.1 FINANCIAL COVENANTS. The Company will not permit:
(a) TOTAL DEBT TO EBITDA RATIO. The ratio of Total Debt to EBITDA
for each of the rolling twelve month periods most recently ended, commencing
with the twelve month period ended on the earlier of (i) the last day of the
month containing the closing date of the Permitted Acquisition and (ii) December
31, 2001, to be greater than the 3.25 to 1.
(b) EBITDA TO CONSOLIDATED INTEREST EXPENSE. The ratio of
EBITDA to Consolidated Interest Expense, for each of the rolling twelve month
periods most recently ended, commencing with the twelve month period ended on
the earlier of (i) the last day of the month containing the closing date of the
Permitted Acquisition and (ii) December 31, 2001, to be less than 2.9 to 1.
(c) YEAR-TO-DATE EBITDA LEVELS. Permit EBITDA from January
1, 2001 to the last day of each period set forth below, to be less than the
minimum amount set forth opposite such period below:
Period Minimum Amount
------ --------------
March 31, 2001 $ 350,000
June 30, 2001 $1,200,000
September 30, 2001 $2,500,000
7.2 LIMITATION ON RESTRICTED PAYMENTS. The Company will not and will
not permit any Subsidiary to directly or indirectly declare, order, pay, make or
set apart any sum for any Restricted Payment.
7.3 LIENS, INDEBTEDNESS, AND OTHER RESTRICTIONS. The Company will not and
will not permit any Subsidiary to:
(a) LIENS. Create, assume or suffer to exist any Lien upon any of its
properties or assets, whether now owned or hereafter acquired (whether or not
provision is made for the equal and ratable securing of the Notes in accordance
with the provisions of Section 6.5), except:
------
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(i) Liens on property of the Company and its Subsidiaries outstanding
on the Date of Closing described in the letter dated as of December 28,
2000 from the Company to you (the "Prudential Letter"), including, without
limitation, those securing the Senior Debt;
(ii) Liens to secure debt financing permitted by Section 7.3(b)(ii).
(iii) statutory Liens incidental to the conduct of business or the
ownership of properties of the Company and its Subsidiaries (including
Liens in connection with worker's compensation, unemployment insurance and
other like laws (other than ERISA Liens), warehousemen's and mechanic's
liens and statutory landlord's liens) and Liens to secure the performance
of bids, tenders or purchase, construction or sales contracts, or to secure
statutory obligations, property taxes and assessments or governmental
charges, surety or appeal bonds or other Liens of like general nature which
in each case are incurred in the ordinary course of business and not in
connection with the borrowing of money, the obtaining of advances or credit
or the payment of the deferred purchase price of property and which do not
in any event materially impair the value or use of the property encumbered
thereby in the operation of the business of the Company and its
Subsidiaries; provided in each case, that the obligation secured is not
--------
overdue;
(iv) any Lien created to secure all or any part of the purchase price,
or to secure Indebtedness incurred or assumed to pay all or any part of the
purchase price, of property acquired by the Company or its Subsidiaries
after the Date of Closing, provided, that all of such Liens may not secure
--------
in excess of an aggregate of $8,000,000 of Indebtedness, and provided,
---------
further, that all such Indebtedness is supported by a contract with a
-------
credit-worthy sovereign, nationally-owned or major independent integrated
oil and gas company that provides for payment in full of such Indebtedness
as principal and interest thereon is scheduled to be paid, and which the
Company demonstrates to you will allow it to maintain compliance with the
ratio tests of Section 7.1 hereof, and, provided, further, that all such
-----------------
Liens shall be confined solely to the item or items of property so
acquired; and
(v) any Lien incurred in connection with a Permitted Acquisition that
is limited to the assets or business unit acquired (and the product,
proceeds and accretions thereto, including, without limitation, the cash
and accounts receivable generated by any such business unit and any assets
acquired by such business unit) securing any Indebtedness permitted by
Section 7.3(b)(vii).
(b) LIMITATION ON INDEBTEDNESS. Create, incur, assume or permit to
exist any Indebtedness other than:
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(i) Indebtedness incurred pursuant to this Restructuring Agreement, as
evidenced by the Notes, and the subordinated guaranty obligations of the
Company's Subsidiaries with respect thereto;
(ii) Senior Debt owing pursuant to the New Senior Credit Facility,
provided that as a condition to the Company's execution and delivery of the
--------
New Senior Credit Facility, $1,000,000 principal amount outstanding under
the Existing Credit Facility shall be converted to Series H Stock, and
provided, further, that that the principal amount of Indebtedness owing
------------------
pursuant thereto shall not be in excess of $6,000,000, (which Senior Debt
may be incurred whether or not the Company is in compliance with the tests
pursuant to Section 7.1 up to and through September 30, 2001), and the
senior guaranty obligations of the Company's Subsidiaries with respect
thereto;
(iii) trade payables and current Indebtedness (other than for borrowed
money) incurred in, and deposits and advances accepted in, the ordinary
course of business;
(iv) Indebtedness of the Company and its Subsidiaries outstanding on
the Date of Closing and described in the Prudential Letter, including,
without limitation, the Senior Debt owing pursuant to the Existing Senior
Credit Facility, but not including any refinancings of such Indebtedness,
other than a refinancing of the Senior Debt;
(v) Indebtedness secured by the Liens permitted pursuant to clause
(iv) of Section 7.3(a);
(vi) Indebtedness of up to $15,000,000 (or such greater amount as is
acceptable to you based on a case-by-case review by you of contract
opportunities that may exceed such maximum) incurred in connection with
interim project financing, supported by a contract with a credit-worthy
sovereign, nationally-owned or major independent integrated oil and gas
company, with such Indebtedness to be retired within the term of such
contract at or prior to project conclusion with the collection of
associated receivables, for specific purpose large-scale well control
events provided, that if such Indebtedness is recourse to the Company,
--------
it may be incurred if the Company demonstrates to you it will maintain
compliance with the ratio tests of Section 7.1 hereof; and
(vii) Indebtedness in connection with the Permitted Acquisition so
long as after giving effect thereto no Default or Event of Default shall
occur and be continuing and on a pro forma basis the Company is (and is
projected to be) in compliance with Section 7.1(a) hereof.
(c) LOANS AND INVESTMENTS. Make any loan, advance, extension of
credit or capital contribution to, or make or have any Investment in, any
Person, or make any commitment to make any such extension of credit or
Investment, except (i) Permitted Investments; (ii) normal and reasonable
advances in the ordinary course of business to officers and employees provided
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that the proceeds of such advances are not used to purchase securities of the
Company; (iii) accounts receivable and accounts payable arising in the ordinary
course of business; (iv) deposits in money market funds investing exclusively in
Permitted Investments; (v) Investments disclosed in the financial statements
delivered pursuant to Section 6.2; (vi) routine advances by any Transaction
Party to another Transaction Party (or any Subsidiary of a Transaction Party) in
the ordinary course of business other than Investments, not to exceed $500,000
in the aggregate at any time; and (vii) other Investments not to exceed $500,000
in the aggregate at any time.
(d) MERGERS, CONSOLIDATIONS AND ACQUISITIONS, ETC. In any
single transaction or series of transactions, directly or indirectly: (i)
liquidate or dissolve provided that any Subsidiary of the Company may liquidate,
dissolve or take action to wind-up its operations if (1) the Company determines
such action to be in the best interests of the Company and its Subsidiaries, (2)
liquidating dividends are paid to the Company, and (3) the Company gives the
holder of each Note written notice of such action at least thirty (30) days
prior to taking such action; (ii) be a party to any merger or consolidation
unless and so long as (1) no Default or Event of Default has occurred and is
then continuing, (2) immediately thereafter and giving effect thereto, no event
will occur and be continuing which constitutes a Default or an Event of Default,
(3) a Transaction Party is the surviving Person (provided, that the Company must
be the surviving Person in a merger or consolidation that involves the Company);
(4) the surviving Person ratifies and assumes each Subordinated Note Document to
which any party to such merger was a party, and (5) the holder of each Note is
given at least 30 days' prior notice of such merger or consolidation; or (iii)
acquire any real Property or any material personal Property after the Date of
Closing with respect to which the aggregate consideration in the form of cash
and assumed Indebtedness would exceed $3,000,000; provided the Company may make
Permitted Acquisitions so long as after giving effect thereto no Default or
Event of Default shall occur and be continuing and on a pro forma basis the
Company is (and is projected to be) in compliance with Section 7.1(a) hereof.
(e) LIMITATION ON ASSET DISPOSITIONS. Except for Permitted
Dispositions, the Company shall not (i) make or permit to be made any Asset
Disposition or series of Asset Dispositions provided, that a sale of equipment
by the Company or any of its Subsidiaries shall not be an Asset Disposition if
(x) at the time of such sale the Company or such Subsidiary intends in good
faith to replace the equipment so sold with similar equipment of the same or
greater Fair Market Value, (y) within 60 days of such sale the Company or such
Subsidiary actually replaces the equipment so sold with similar equipment of the
same or greater Fair Market Value and (z) such sale comports with the past
business practices of the Company or such Subsidiary, or (ii) transfer or
otherwise dispose of any equity interest in any of the Company's Subsidiaries or
any Indebtedness of any of the Company's Subsidiaries or issue or permit any
Subsidiary of the Company to issue any additional equity interest other than
equity issued to the Company as a wholly owned subsidiary.
(f) SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse, discount
(other than to the extent of finance and interest charges included therein) or
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otherwise sell for less than face value thereof, any of its notes or accounts
receivable, except notes or accounts receivable the collection of which is
doubtful in accordance with GAAP.
(g) TRANSACTIONS WITH AFFILIATES. Directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or otherwise deal with, in the ordinary course of business or
otherwise (i) any Affiliate, (ii) any Person owning, beneficially or of record,
directly or indirectly, either individually or together with all other Persons
to whom such Person is related by blood, adoption or marriage, stock of the
Company (of any class having ordinary voting power for the election of
directors) aggregating 5% or more of such voting power or (iii) any Person
related by blood, adoption or marriage to any Person described or coming within
the provisions of clause (i) or (ii) of this Section 7.3(g), except in the
ordinary course and pursuant to the reasonable requirements of the Company's or
such Subsidiary's business and upon fair and reasonable terms no less favorable
to the Company or such Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate.
(h) MANAGEMENT COMPENSATION RESTRICTION. Pay or incur any
liability for Executive Compensation in excess of what is then customary of
companies of similar type, size and profitability engaged in the same or similar
business as the Company.
7.4 NATURE OF BUSINESS. Except for Permitted Acquisitions and Permitted
Dispositions, the Company will not and will not permit any Subsidiary to change
the nature of its business or enter into any business which is substantially
dissimilar from the businesses in which it is presently engaged or presently
proposes to engage as described in public filings of the Company as of the date
hereof.
7.5 OTHER AGREEMENTS. The Company will not and will not permit any of its
Subsidiaries to enter into or permit to exist any agreement (i) which would
cause a Default or Event of Default hereunder or (ii) which contains any
provision which would be violated or breached by the performance of the
obligations of the Company and its Subsidiaries hereunder or under any of the
other Note Documents.
7.6 LIMITATION ON CERTAIN RESTRICTIVE AGREEMENTS. Except in connection with
Indebtedness permitted under Sections 7.3(b)(ii), (iv), (v) and (vi), the
Company will not, and will not permit any of its Subsidiaries to, enter into or
suffer to exist any contractual obligation, other than the Note Documents, which
in any way restricts the ability of the Company or any of its Subsidiaries to
(i) create, incur, assume or suffer to exist any Lien upon any of its property,
assets or revenues, (ii) make any prepayments or purchases of the Notes required
under this Restructuring Agreement, (iii) make any dividends or distributions,
or any payments required under this Restructuring Agreement or any other Note
Document or (iv) transfer any of its property or assets (whether as a dividend
or otherwise) to the Company or a Wholly Owned Subsidiary of the Company.
7.7 PROHIBITION AGAINST LAYERING. The Company will not and will not permit
any Subsidiary to incur, create, issue, assume, guarantee or in any other manner
become directly or indirectly liable with respect to or responsible for, or
19
<PAGE>
permit to remain outstanding, any Indebtedness that is contractually subordinate
or junior in right of payment to any Senior Debt or any Guarantee in respect
thereof and senior to the Notes or any Guaranty Agreement.
7.8 LIMITATION ON SUBSIDIARIES ACTIVITIES. (i) The Company will not permit
any Subsidiary to issue any Voting Stock of such Subsidiary or other equity
interest in such Subsidiary except to the Company or a Wholly Owned Subsidiary,
(ii) the Company will not and will not permit any Subsidiary to sell or transfer
any Indebtedness or Voting Stock of another Subsidiary or other equity interests
in such other Subsidiary except to the Company or a Wholly Owned Subsidiary and
(iii) the Company will not and will not permit any Subsidiary to form, create or
acquire any Subsidiary, except that the Company may (subject to the other
provisions of this Restructuring Agreement) form, create or acquire a Wholly
Owned Subsidiary so long as (a) immediately thereafter and giving effect
thereto, no event will occur and be continuing which constitutes a Default; (b)
such Subsidiary (and, where applicable, the Company) shall execute and deliver a
Guaranty Agreement and (c) the holder of each Note is given reasonable prior
notice of such formation, creation or acquisition, unless such Subsidiary has no
tangible or intangible assets or properties, in which case the holder of each
Note shall be given reasonable prior notice of the date upon which such
Subsidiary is expected to first possess or acquire any tangible or intangible
assets or properties.
8. EVENTS OF DEFAULT.
8.1 ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of any Note,
when the same shall become due, either by the terms thereof or otherwise as
herein provided; or
(ii) the Company defaults in the payment of any interest on any Note
and such default is continuing for more than five Business Days after the
date due; or
(iii) the Company or any Subsidiary (a) defaults (whether as primary
obligor or as guarantor or other surety) in any payment of principal of or
interest on any other obligation for money borrowed (or any Capitalized
Lease Obligation, any obligation under a conditional sale or other title
retention agreement, any obligation issued or assumed as full or partial
payment for property whether or not secured by a purchase money mortgage or
any obligation under notes payable or drafts accepted representing
extensions of credit) in an aggregate amount in excess of $1,000,000 beyond
any period of grace provided with respect thereto or (b) fails to perform
or observe any other agreement, term or condition contained in any
agreement under which any such obligation is created (or if any other event
thereunder or under any such agreement shall occur and be continuing) and
the effect of such failure or other event is to cause or permit the holder
of obligation to cause such obligation to become due (or to be repurchased
by the Company or any Subsidiary) prior to any stated maturity; or
20
<PAGE>
(iv) any representation or warranty made by the Company or any of its
Subsidiaries herein or in any of the other Note Documents, or by the
Company or any of its officers in any writing furnished in connection with
or pursuant to this Restructuring Agreement shall be false in any material
respect on the date as of which made; or
(v) the Company fails to perform or observe any term, covenant or
agreement contained in Section 7 (other than Section 7.1 which is addressed
in Section 8.1(xviii) below); or
(vi) the Company or any Subsidiary fails to perform or observe any
other agreement, covenant, term or condition contained herein, or in any of
the other Note Documents and such failure continues unremedied for a period
of 30 days after (a) written notice thereof is given by the holder of any
Note to the Company or (b) the Company otherwise obtains Knowledge of such
default, whichever is earlier; or
(vii) the Company or any Subsidiary makes an assignment for the
benefit of creditors or is generally not paying its debts as such debts
become due; or
(viii) any decree or order for relief in respect of the Company or any
Subsidiary is entered under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
or similar law, whether now or hereafter in effect (the "BANKRUPTCY LAW"),
of any jurisdiction; or
(ix) the Company or any Subsidiary petitions or applies to any
Tribunal for, or consents to, the appointment of, or taking possession by,
a trustee, receiver, custodian, liquidator or similar official of the
Company or any Subsidiary, or of any substantial part of the assets of the
Company or any Subsidiary, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a Subsidiary)
relating to the Company or any Subsidiary under the Bankruptcy Law of any
other jurisdiction; or
(x) any such petition or application is filed, or any such proceedings
are commenced, against the Company or any Subsidiary and the Company or
such Subsidiary by any act indicates its approval thereof, consent thereto
or acquiescence therein, or an order, judgment or decree is entered
appointing any such trustee, receiver, custodian, liquidator or similar
official, or approving the petition in any such proceedings, and such
order, judgment or decree remains unstayed and in effect for more than 60
days; or
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(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than 30
days; or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Subsidiary decreeing a split-up of the Company
or such Subsidiary which requires the divestiture of assets representing
10% or more of the consolidated net worth of the Company and the
Subsidiaries on a consolidated basis, or the divestiture of assets or stock
of a Significant Subsidiary, and such order, judgment or decree remains
unstayed and in effect for more than 30 days; or
(xiii) any judgment or order, or series of judgments or orders, in an
amount in excess of $500,000 (excluding any such judgment or order
described in the Prudential Letter, is rendered against the Company or any
Subsidiary and either (i) enforcement proceedings have been commenced by
any creditor upon such judgment or order or (ii) within 60 days after entry
thereof, such judgment is not discharged or execution thereof stayed
pending appeal, or within 60 days after the expiration of any such stay,
such judgment is not discharged; or
(xiv) any Termination Event with respect to a Plan shall have occurred
and, within 30 days after the occurrence thereof, (a) such Termination
Event (if correctable) shall not have been corrected and (b) the then
present value of such Plan's vested benefits exceeds the then current value
of assets accumulated in such Plan by more than the amount of $1,000,000
(or in the case of a Termination Event involving the withdrawal of a
"substantial employer" (as defined in Section 4001(a)(2) of ERISA), the
withdrawing employer's proportionate share of such excess shall exceed such
amount); or
(xv) the Company or any of its ERISA Affiliates as employer under a
Multiemployer Plan shall have made a complete or partial withdrawal from
such Multiemployer Plan and the plan sponsor of such Multiemployer Plan
shall have notified such withdrawing employer that such employer has
incurred a withdrawal liability in an aggregate amount exceeding
$1,000,000; or
(xvi) the Subordinated Guaranty Agreement shall for any reason cease
to be valid and binding on the applicable guarantor or any party to the
Guaranty Agreement states to any holder of a Note or asserts in writing
that the Guaranty Agreement is not valid and binding on such guarantor; or
(xvii) a Change in Control shall occur; or
(xviii) the Company fails to perform or observe any covenant contained
in Section 7.1 and such default is not waived or "deemed cured" within a
reasonable period of time which shall, for purposes of this Agreement, be
30 days (for purposes of this Section 8.1(xviii) only, a default under
Sections 7.1(a) and 7.1(b) will be "deemed cured" if the Company raises
funds(other than by incurring Indebtedness) and applies 50% of the proceeds
thereof to prepay Senior Debt and 50% of the proceeds thereof to repurchase
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Series E Stock and if, for purposes of compliance with the covenants of
Section 7.1(a) and 7.1(b), Total Debt were reduced by the amounts used in
such prepayment of Senior Debt and repurchase of Series E Stock, the
Company would have been in compliance on date of such default).
then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this Section 8.1, the holder of any Note (other than the Company or any of its
Subsidiaries or Affiliates) may at its option, by notice in writing to the
Company, declare such Note to be, and such Note shall thereupon be and become,
immediately due and payable at par together with interest accrued thereon,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Company, (b) if such event is an Event of Default
specified in clause (viii), (ix) or (x) of this Section 8.1, all of the Notes at
the time outstanding shall automatically become immediately due and payable
together with interest accrued thereon, with respect to each Note, without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by the Company, and (c) if such event is not an Event of Default
specified in clause (viii), (ix) or (x) of this Section 8.1, the Required
Holder(s) may at its or their option, by notice in writing to the Company,
declare all of the Notes to be, and all of the Notes shall thereupon be and
become, immediately due and payable together with interest accrued thereon, with
respect to each Note, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Company.
8.2 RESCISSION OF ACCELERATION. At any time after any or all of the
Notes shall have been declared immediately due and payable pursuant to Section
8.1, the Required Holder(s) may, by notice in writing to the Company, rescind
and annul such declaration and its consequences if (i) the Company shall have
paid all overdue interest on the Notes, the principal of the Notes which has
become due otherwise than by reason of such declaration, and interest on such
overdue interest and overdue principal at the rate specified in the Notes, (ii)
the Company shall not have paid any amounts which have become due solely by
reason of such declaration, (iii) all Events of Default and Defaults, other than
non-payment of amounts which have become due solely by reason of such
declaration, shall have been cured or waived pursuant to Section 12.3, and (iv)
no judgment or decree shall have been entered for the payment of any amounts due
pursuant to the Notes or this Restructuring Agreement. No such rescission or
annulment shall extend to or affect any subsequent Event of Default or Default
or impair any right arising therefrom.
8.3 NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to Section 8.1 or any such
declaration shall be rescinded and annulled pursuant to Section 8.2, the Company
shall forthwith give written notice thereof to the holder of each Note at the
time outstanding.
8.4 OTHER REMEDIES. If any Event of Default or Default shall occur and be
continuing, the holder of any Note may proceed to protect and enforce its rights
under this Restructuring Agreement, such Note and the other Note Documents by
exercising such remedies as are available to such holder in respect thereof
under applicable law, either by suit in equity or by action at law, or both,
whether for specific performance of any covenant or other agreement contained in
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this Restructuring Agreement or the other Note Documents or in aid of the
exercise of any power granted in this Restructuring Agreement or the other Note
Documents. No remedy conferred in this Restructuring Agreement or the other Note
Documents upon the holder of any Note is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law or in equity or by statute or otherwise.
9. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents,
covenants and warrants as follows:
9.1 ORGANIZATION AND QUALIFICATION. Each of the Transaction Parties is
a corporation duly organized and validly existing in good standing under the
laws of its state of incorporation, and is duly licensed and in good standing as
a foreign corporation in each jurisdiction in which the nature of the business
transacted or the property owned is such as to require licensing or
qualification as a foreign corporation. The Company has no Subsidiaries other
than the Subsidiaries listed on Schedule 9.1, each of which is a Wholly Owned
------------
Subsidiary of the Company. The execution, delivery and performance by the
Company of the Notes, the Warrants, this Restructuring Agreement, the other Note
Documents to which it is a party, and the execution, delivery and performance by
each of the other Transaction Parties of the Note Documents to which it is a
party, are within the Company's and the other Transaction Parties' respective
corporate powers and have been duly authorized by all necessary corporate
action. None of the transactions contemplated by this Restructuring Agreement,
including the issuance by the Company of the Notes, the Warrants, or the
Preferred Stock, or the exercise of such Warrants and conversion of such
Preferred Stock, requires approval of the stockholders of the Company pursuant
to the General Corporation Law of the State of Delaware nor the rules and
regulations of the American Stock Exchange or any other national or
international stock exchange, quotation system or over-the-counter market where
the Company's Common Stock is currently traded or where it potentially may be
traded in the foreseeable future.
9.2 FINANCIAL STATEMENTS. The Company has furnished you with the following
financial statements, identified by a principal financial officer of the
Company: (i) consolidated balance sheets of the Company and its Subsidiaries as
at December 31, 1999, and consolidated statements of income, stockholders'
equity and cash flows of the Company and its Subsidiaries for the fiscal year
ended on each date and (ii) consolidated balance sheets of the Company and its
Subsidiaries as of September 30, 2000, and consolidated statements of income,
stockholders' equity and cash flows for the nine months ended September 30,
2000, prepared by the Company. Such financial statements (including any related
schedules and/or notes) are true and correct in all material respects (subject,
as to interim statements, to changes resulting from audits and year-end
adjustments), have been prepared in accordance with GAAP consistently followed
throughout the periods involved and show all liabilities, direct and contingent,
of the Company and its Subsidiaries required to be shown in accordance with such
principles. The balance sheets fairly present the condition of the Company and
its Subsidiaries as at the dates thereof, and the statements of income,
stockholders' equity and cash flows fairly present the results of the operations
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of the Company and its Subsidiaries and their cash flows for the periods
indicated. There has been no Material Adverse Effect since September 30, 2000.
9.3 ACTIONS PENDING. Except as described in Schedule 9.3, there is no
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action, suit, investigation or proceeding pending or, to the Knowledge of the
Company, threatened against the Company or any of its Subsidiaries, or any
properties or rights of the Company or any of its Subsidiaries, by or before any
court, arbitrator or administrative or governmental body which, if adversely
determined, might result in a liability of greater than $100,000 or might
otherwise result in any Material Adverse Effect. There is no action, suit,
investigation or proceeding pending or threatened against the Company or any of
its Subsidiaries which purports to affect the validity or enforceability of this
Restructuring Agreement, any Note, any Warrant or any of the other Note
Documents.
9.4 OUTSTANDING INDEBTEDNESS. Neither the Company nor any of its
Subsidiaries has outstanding any Indebtedness except as permitted by Section
7.3(b), all of which Indebtedness is described in Schedule 9.4 attached hereto.
------------
There exists no default under (and no waiver of default is currently in effect
with respect to) the provisions of any instrument evidencing such Indebtedness
or of any agreement relating thereto, and no event or condition exists with
respect to any Indebtedness of the Company or any Subsidiary that would permit
(or that with notice or the lapse of time, or both, would permit) one or more
Persons to cause such Indebtedness to become due and payable before its stated
maturity or before its regularly scheduled dates of payment.
9.5 TITLE TO PROPERTIES. The Company has and each of its Subsidiaries has
good and marketable title to its respective real properties (other than
properties which it leases) and good title to all of its other respective
properties and assets, including the properties and assets reflected in the
balance sheet as of September 30, 2000, referred to in Section 9.2 (other than
properties and assets disposed of in the ordinary course of business) or as
otherwise described in the Company's current report to the Securities and
Exchange Commission ("SEC") on Form 8-K dated October 11, 2000, subject to no
Lien of any kind except Liens permitted by Section 7.3(a). All leases necessary
in any material respect for the conduct of the respective businesses of the
Company and its Subsidiaries are valid and subsisting and are in full force and
effect.
9.6 POSSESSION OF FRANCHISES, LICENSES. The Company and each of its
Subsidiaries possesses all franchises, certificates, licenses, permits and other
authorizations from governmental political subdivisions or regulatory
authorities, free from burdensome restrictions, that are reasonably necessary in
any material respect for the ownership, maintenance and operation of its
respective properties and assets, and none of the Company or any of its
Subsidiaries is in violation of any thereof in any material respect.
9.7 TAXES. The Company has and each of its Subsidiaries has filed all
federal, state and other income tax returns which, to the Knowledge of the
Company, are required to be filed, and each has paid all taxes as shown on such
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returns and on all assessments received by it to the extent that such taxes have
become due, except such taxes as are being contested in good faith by
appropriate proceedings and for which adequate reserves have been established in
accordance with GAAP.
9.8 CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company nor any
of its Subsidiaries is a party to any contract or agreement or subject to any
charter or other corporate restriction which could reasonably be expected to
have a Material Adverse Effect. Neither the execution nor delivery of this
Restructuring Agreement, the Notes, the Warrants or the other Note Documents,
nor the offering, issuance and sale of the Notes and the Warrants, nor
fulfillment of nor compliance with the terms and provisions of this
Restructuring Agreement, the Notes, the Warrants or the other Note Documents
will conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, or result in any violation of, or result in
the creation of any Lien upon any of the properties or assets of the Company or
any of its Subsidiaries pursuant to, the charter or bylaws of the Company or any
of its Subsidiaries, any award of any arbitrator or any agreement (including any
agreement with stockholders), instrument, order, judgment, decree, statute, law,
rule or regulation to which the Company or any of its Subsidiaries is subject.
Except as provided in the documentation of the Senior Debt, 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 such
Subsidiary, 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 Company of the type to be
evidenced by the Notes.
9.9 AUTHORIZED CAPITAL STOCK. The authorized capital stock of the Company
consists of 125,000,000 shares of common stock, $0.0000l per share par value,
and 5,000,000 shares of Preferred Stock, $0.00001 per share par value. As of
November 30, 2000, the outstanding capital stock of the Company consists of
31,625,166 shares of Common Stock and 141,763 shares of Existing Preferred
Stock. All of the outstanding shares of Common Stock are duly authorized,
validly issued, fully paid and nonassessable. The Company does not have
outstanding any warrants, options, convertible securities or other rights for
the purchase or acquisition of shares of its capital stock other than (a) the
Warrants and (b) as described in Schedule 9.9 attached hereto. The Series E
------------
Stock, Series F Stock, Series G Stock, Series E PIK Shares and Series G PIK
Shares (collectively, the "Convertible Shares") and the shares of Common Stock
issuable upon the exercise or conversion of such securities (the "Conversion
Shares"), and shares of Series F Stock issuable upon conversion of the Series E
Stock, have been duly and validly authorized, and when issued, will be validly
issued, fully paid and nonassessable. Such Conversion Shares have been duly
reserved for issuance upon the conversion of the Convertible Shares, and the
Series F Stock has been duly reserved for issuance upon the conversion of the
Series E Stock and Series E PIK Shares. The Company has duly reserved
11,965,396 shares of Common Stock for issuance upon the exercise of the
Warrants. No shareholder of the Company or any other Person is entitled to
preemptive or similar rights with respect to the shares of Common Stock which
are issuable upon the conversion of the Convertible Shares or the exercise of
the Warrants and, if and when issued upon the conversion of the Convertible
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Shares or the exercise of the Warrants in accordance with the provisions
thereof, such shares will be validly issued, fully paid and nonassessable
shares.
9.10 OFFERING OF THE SECURITIES. Neither the Company nor any agent acting
on its behalf has, directly or indirectly, offered the Securities for sale to,
or solicited any offers to buy the Securities other than the existing preferred
stock of the Company and the Series H Stock from, or otherwise approached or
negotiated with respect thereto with, any Person other than institutional
investors, and neither the Company nor any agent acting on its behalf has taken
or will take any action which would subject the issuance or sale of the
Securities to the provisions of Section 5 of the Securities Act or to any
similar provisions of any securities or Blue Sky law of any applicable
jurisdiction.
9.11 ERISA. No accumulated funding deficiency (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, exists with respect
to any Plan (other than a Multiemployer Plan). No liability to the PBGC has been
or is expected by the Company or any ERISA Affiliate to be incurred with respect
to any Plan (other than a Multiemployer Plan) by the Company, any Subsidiary or
any ERISA Affiliate which is or would be a Material Adverse Effect. Neither the
Company, any Subsidiary nor any ERISA Affiliate has incurred or presently
expects to incur any withdrawal liability under Title IV of ERISA with respect
to any Multiemployer Plan which is or would be a Material Adverse Effect. The
execution and delivery of this Restructuring Agreement and the issuance and sale
of the Securities will be exempt from, or will not involve any transaction which
is subject to, the prohibitions of section 406 of ERISA and will not involve any
transaction in connection with which a penalty could be imposed under section
502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the Code.
9.12 GOVERNMENTAL CONSENT. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Securities is such as to require any authorization, consent, approval, exemption
or other action by or notice to or filing with any court or administrative or
governmental or regulatory body (other than routine filings after the Date of
Closing with the Securities and Exchange Commission and/or state Blue Sky
authorities and the possible requirement that a filing be made pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended in connection
with an exercise of the Warrants) or the conversion of the Convertible Shares in
connection with the execution and delivery of this Restructuring Agreement or
the other Note Documents and the fulfillment of or compliance with the terms and
provisions of this Restructuring Agreement, the Registration Rights Agreement or
the Participation Rights Agreement or of the Securities.
9.13 ENVIRONMENTAL COMPLIANCE. The Company and its Subsidiaries and all of
their respective properties and facilities have complied at all times and in all
respects with all federal, state, local and regional statutes, laws, ordinances
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and judicial or administrative orders, judgments, rulings and regulations
relating to protection of the environment except, in any such case, where
failure to comply would not result in a Material Adverse Effect.
9.14 FISCAL YEAR. The fiscal year of the Company and each of its
Subsidiaries ends as of December 31 of each year.
9.15 DISCLOSURE. Neither this Restructuring Agreement, the other Note
Documents nor any other document, certificate or statement furnished to you by
or on behalf of the Company in connection herewith contains any untrue statement
of a material fact or omits to state a material fact reasonably necessary in
order to make the statements contained herein and therein not misleading. Other
than as has been described in the Company's reports on Forms 10-K, 10-Q, 8-K or
Schedule 14A as filed with the SEC, there is no fact peculiar to the Company or
any of its Subsidiaries which constitutes a Material Adverse Effect or in the
future may (so far as the Company can now foresee) constitute a Material Adverse
Effect and which has not been set forth in this Restructuring Agreement, the
other Note Documents or in the other documents, certificates and statements
furnished to you by or on behalf of the Company prior to the date hereof in
connection with the transactions contemplated hereby.
9.16 INVESTMENT COMPANY ACT. Neither the Company, any of its Subsidiaries
nor any Person controlling the Company or any of its Subsidiaries is an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
10. SUBORDINATION OF NOTES.
10.1 SUBORDINATION. Anything in this Agreement to the contrary
notwithstanding, the indebtedness evidenced by the Notes, together with interest
and all other sums due and owing pursuant to the Note Documents, shall be
subordinate and junior to the extent set forth in subparagraphs (i) to (v),
inclusive, below, to the Senior Debt.
(i) In the event of any insolvency, bankruptcy, liquidation,
reorganization or other similar proceedings, or any receivership
proceedings in connection therewith, relative to the Company, and in the
event of any proceedings for voluntary liquidation, dissolution or other
winding up of the Company, whether or not involving insolvency or
bankruptcy proceedings, then the Senior Debt shall first be paid in full
before any payment of or on account of principal, if any, or interest is
made by the Company upon the Notes.
The consolidation of the Company with, or the merger of the Company with or
into, another corporation or entity or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation or entity upon the terms
and conditions provided in Section 7.3(d) shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this paragraph if
such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Section 7.3(d).
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(ii) In any of the proceedings referred to in subparagraph (i) above,
any payment or distribution of any kind or character, whether in cash,
property, stock or obligations, which may be payable or deliverable by the
Company in respect of the Notes shall be paid or delivered directly to the
holders of Senior Debt (or to a banking institution selected by the court
or Person making the payment or delivery or designated by any holder of
Senior Debt) for application in payment thereof in accordance with the
priorities then existing among such holders, unless and until all Senior
Debt shall have been paid in full; provided, however, that
-------- -------
(a) if the payment or delivery by the Company of such cash,
property, stock or obligations to the holders of the Notes is
authorized by an order or decree giving effect, and stating in such
order or decree that effect is given, to the subordination of the
Notes to Senior Debt, and made in a reorganization proceeding under
any applicable bankruptcy or reorganization law, no payment or
delivery by the Company of such cash, property, stock or obligations
payable or deliverable with respect to the Notes shall be made to the
holders of Senior Debt; and
(b) no such delivery shall be made to holders of Senior Debt of
stock or obligations which are issued pursuant to reorganization
proceedings if such stock or obligations are subordinate and junior
(whether by law or agreement) at least to the extent provided in this
Section 10 to the payment of all Senior Debt then outstanding and to
the payment of any stock or obligations which are issued in exchange
or substitution for any Senior Debt then outstanding.
(iii) If the Company shall default in the payment of any principal of
or interest on any Senior Debt in an amount in excess of $250,000 owing
under any single instrument when the same becomes due and payable, whether
at maturity or at a date fixed for prepayment or by declaration of
acceleration or otherwise, then, unless and until the date on which such
default shall have been remedied by payment in full or waived in writing,
no holder of the Notes shall accept or receive any direct or indirect
payment of or on account of any indebtedness in respect of the Notes.
(iv) Upon the occurrence and during the continuance of any Default
Subordination Event (other than under circumstances when the terms of
subparagraph (i) above are applicable), no holder of the Notes shall accept
or receive any direct or indirect payment by set-off or otherwise of or on
account of any indebtedness in respect of the Notes during the Stand-Still
Period, provided that (a) there shall be no more than two Stand-Still
--------
Periods during the term of the Notes and only one in any period of 365
consecutive days and (b) in the case of any payment on or in respect of any
Notes which would (in the absence of any such Default Subordination Event)
have been due and payable on any date during such Stand-Still Period, the
provisions of this subparagraph (iv) shall not prevent such payment on or
after the date immediately following the termination of such Stand-Still
Period.
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(v) If any payment or distribution of any character, whether in cash,
securities or other property, shall be received by any holder of Notes in
contravention of any of the terms of this Section 10 and before all the
Senior Debt shall have been paid in full, such payment or distribution
shall be received in trust for the benefit of the holders of the Senior
Debt at the time outstanding and shall forthwith be paid over or delivered
and transferred to the holders of Senior Debt.
10.2 OBLIGATION OF THE COMPANY UNCONDITIONAL. The provisions of this
Section 10 are for the purpose of defining the relative rights of the holders of
Senior Debt on the one hand, and the holders of the Notes on the other hand,
against the Company and its property, and nothing herein shall impair, as
between the Company and the holders of the Notes, the obligation of the Company,
which is unconditional and absolute, to pay to the holders thereof the principal
thereof and interest thereon in accordance with their terms and the provisions
hereof, nor shall anything herein prevent the holders of the Notes from
exercising all remedies otherwise permitted by applicable law or hereunder upon
default hereunder or under the Notes (including, without limitation, the right
to demand payment and sue for performance hereof and of the Notes and to
accelerate the maturity thereof as provided in Section 8.1), subject to the
rights, if any, under this Section 10 of holders of Senior Debt to receive cash,
property, stock or obligations otherwise payable or deliverable by the Company
to the holders of the Notes.
10.3 SUBROGATION. Upon full and final payment of the Senior Debt, the
holders of the Notes shall be subrogated to the rights of the holders of the
Senior Debt to receive payments or distributions of assets of the Company made
on Senior Debt until the principal of and interest on the Notes shall be paid in
full, and, for the purposes of such subrogation, no payments to the holders of
Senior Debt of any cash, property, stock or obligations to which the holders of
the Notes would be entitled shall, as between the Company, its creditors (other
than the holders of the Senior Debt) and the holders of the Notes, be deemed to
be a payment by the Company to or on account of Senior Debt.
10.4 SUBORDINATION DEFINITIONS.
"DEFAULT SUBORDINATION EVENT" shall mean the existence of all of the
following: (i) a Subordination Event of Default shall have occurred and be
continuing in respect of any Senior Debt, (ii) the holders of the Notes shall
have received a notice from or on behalf of any holder of such Senior Debt
identifying each Subordination Event of Default which has occurred and is
continuing and that such notice constitutes a "DEFAULT SUBORDINATION NOTICE" and
(iii) no other Default Subordination Notice shall have been delivered by any
holder of Senior Debt within the 365 day period immediately preceding the giving
of such notice; provided that no fact or circumstances of a Subordinated Event
--------
of Default existing on the date of such Default Subordinated Notice may be used
as a basis for any subsequent Default Subordination Notice. The "STAND-STILL
PERIOD" relating to any Default Subordination Event shall be deemed to continue
until the earlier of (x) the Subordination Event of Default under the Senior
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Debt giving rise thereto shall have been cured or waived, (y) a period of 90
days shall have elapsed from the giving of the Default Subordination Notice
relating thereto and (z) the maturity of such Senior Debt shall have been
accelerated.
"SUBORDINATION EVENT OF DEFAULT" shall mean (i) any default in the payment
of any principal or interest on any Senior Debt in an amount in excess of
$250,000 or less owing under any single instrument when the same becomes due and
payable, or (ii) any event of default under any agreement evidencing Senior Debt
arising as a result of a breach of covenants which would entitle the holders of
such Senior Debt to accelerate the obligations under such Senior Debt.
11. DEFINITIONS. For the purpose of this Restructuring Agreement, the terms
defined in the introductory sentence and elsewhere in this Restructuring
Agreement shall have the respective meanings specified therein, and the
following terms shall have the meanings specified with respect thereto below
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
11.1 TERMS.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company,
except a Subsidiary. A Person shall be deemed to control another Person if such
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.
"AGREEMENT" means this Subordinated Note Restructuring Agreement, as it may
from time to time be amended, modified, restated or supplemented.
"ASSET DISPOSITION" shall mean, with respect to the Company or any
Subsidiary, any transaction or series of related transactions in which such
Person sells, conveys, transfers or leases (as lessor) or parts with control of
(collectively, for purposes of this definition, a "transfer"), directly or
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indirectly, any of its property or assets, including, without limitation, any
Indebtedness of any Subsidiary or capital stock of or other equity interests in
any Subsidiary (including the issuance of such stock or other equity interests
by such Subsidiary), other than transfers of cash or cash equivalents; provided,
--------
that a sale of equipment by the Company or any of its Subsidiaries shall not be
an Asset Disposition if (i) at the time of such sale the Company or such
Subsidiary intends in good faith to replace the equipment so sold with similar
equipment of the same or greater Fair Market Value, (ii) within 60 days of such
sale the Company or such Subsidiary actually replaces the equipment so sold with
similar equipment of the same or greater Fair Market Value, and (iii) such sale
comports with the past business practices of the Company or such Subsidiary.
"BANKRUPTCY LAW" shall have the meaning specified in clause (viii) of
Section 8.1.
"BOARD" shall mean the Board of Directors of the Company.
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"BUSINESS DAY" shall mean any day on which banks are open for business in
New York City (other than a Saturday, a Sunday or a legal holiday in the States
of New York or New Jersey).
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which,
under GAAP, would be required to be capitalized on the books of the Company or
any Subsidiary, taken at the amount thereof accounted for as indebtedness (net
of interest expense) in accordance with such principles.
"CHANGE IN CONTROL" shall mean (i) the acquisition (other than an
acquisition by the heirs, legatees, descendants, or blood relatives of a
shareholder as a result of the death of such shareholder) by (a) any person (as
such term is used in section 13(d) and section 14(d)(2) of the Exchange Act as
in effect on the Date of the Closing) or (b) related persons constituting a
group (as such term is used in Rule 13d-5 under the Exchange Act as in effect on
the Date of the Closing), of beneficial ownership of 25% or more of the
outstanding shares of Voting Stock of the Company provided, that the conversion
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of the Preferred Stock or exercise of the Warrants by you or the conversion of
the Series H Stock or the exercise of warrants or the ownership of shares of
common stock owned by Specialty Finance Fund I, LLC or its affiliates shall not
cause a "Change in Control" to occur hereunder or (ii) an event or series of
related events that results in the resignation or removal of (a) the Executive
Officers or (b) a majority of the Board of Directors of the Company.
"CLOSING" or "DATE OF CLOSING" shall have the meaning specified in Section
1.1.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, as now or
hereafter in effect, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.
"COMMON STOCK" shall have the meaning specified in the Recitals.
"CONFIDENTIAL INFORMATION" shall mean any material non-public information
regarding the Company or any of its Subsidiaries that is marked by the Company
as confidential and is provided to the holder of a Note, any Person that
purchases a participation in a Note or any offeree of a Note or of a
participation therein pursuant to this Restructuring Agreement, other than
information (i) that was publicly known or otherwise known to such holder, such
Person or such offeree at the time of disclosure, (ii) that subsequently becomes
publicly known through no act or omission of such holder, such Person or such
offeree or (iii) that otherwise becomes known to such holder, such Person or
such offeree other than through disclosure by the Company or any Subsidiary.
"CONSOLIDATED INTEREST EXPENSE" shall mean, with respect to any period, the
sum (without duplication) of the following (in each case, eliminating all
offsetting debits and credits between the Company and its Subsidiaries and all
other items required to be eliminated in the course of the preparation of
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consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP): (i) all interest and prepayment charges in respect of
Indebtedness of the Company and its Subsidiaries (including imputed interest in
respect of Capitalized Lease Obligations and net costs of Swaps) deducted in
determining consolidated net income for such period, together with all interest
capitalized or deferred during such period and not deducted in determining
consolidated net income for such period, and (ii) all debt discount and expense
amortized or required to be amortized in the determination of Consolidated Net
Income for such period.
"CONSOLIDATED NET INCOME" shall mean, with respect to any period, the net
income (or loss) of the Company and its Subsidiaries for such period (taken as a
cumulative whole), as determined in accordance with GAAP, after eliminating all
offsetting debits and credits between the Company and its Subsidiaries and all
other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries, in
accordance with GAAP.
"CONTROLLED GROUP" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company, are treated as a single
employer under Section 414 of the Code.
"CONVERTIBLE SECURITIES" shall mean any debt instrument that is by its
terms convertible, in whole or in part, into an equity interest in the Company
or any of its Subsidiaries.
"DIRECTOR" shall have the meaning set forth in Section 12.20(b) hereof.
"DOMESTIC SUBSIDIARY" shall mean any Subsidiary that is organized under the
laws of the United States, one of the several states thereof or the District of
Columbia.
"EBITDA" shall mean, for any period, the sum of (i) Consolidated Net
Income, plus (ii) to the extent deducted in the determination of Consolidated
Net Income, (a) all provisions for federal, state and other income tax, (b)
Consolidated Interest Expense and (c) provisions for depreciation and
amortization, provided, however, that so long as the Company shall have
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delivered to the holder of each Note financial information regarding a Permitted
Acquisition which discloses the prior operating results thereof, the pro forma
effect of such acquisition during such 12-month period shall be permitted to be
included in EBITDA for the Company or a Subsidiary as if such acquisition
occurred on the first day of such period.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules, regulations, rulings and
interpretations adopted by the Internal Revenue Service or the U.S. Department
of Labor thereunder.
"ERISA AFFILIATE" shall mean any corporation which is a member of the same
controlled group of corporations as the Company within the meaning of section
414(b) of the Code, or any trade or business which is under common control with
the Company within the meaning of section 414(c) of the Code.
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"EVENT OF DEFAULT" shall mean any of the events specified in Section 8.1,
provided, that there has been satisfied any requirement in connection with such
event for the giving of notice, or the lapse of time, or the happening of any
further condition, event or act, and "DEFAULT" shall mean any of such events,
whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"EXECUTIVE COMPENSATION" shall mean the aggregate of all salary, bonus and
other compensation paid by the Company or its Subsidiaries in whatever form paid
to or for the benefit of the Executive Officers.
"EXECUTIVE OFFICER" shall mean the chairman of the board, chief executive
officer, president, chief operating officer, chief financial officer or chief
accounting officer of the Company.
"EXISTING PREFERRED STOCK" shall mean, with respect to the Company, all of
the shares of 10% Junior Redeemable Convertible Preferred Stock , Series A
Stock, Series B Convertible Preferred Stock, Series C Cumulative Convertible
Junior Preferred Stock and Series D Cumulative Junior Preferred Stock, in each
case, that has been issued as of the Date of Closing.
"EXISTING SENIOR CREDIT FACILITY" shall mean that certain Loan Agreement
dated as of October 28, 1998 among the Company, as borrower, Comerica
Bank-Texas, as agent and as lender, as the same may from time to time be
supplemented, amended, renewed, extended, refunded or replaced.
"EXPENSES" shall have the meaning specified in Section 12.2.
"EXPENSES CASH PAYMENT" shall have the meaning specified in Section 12.2.
"EXPENSES NOTE AMOUNT" shall have the meaning specified in Section 12.2.
"FAIR MARKET VALUE" shall mean, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).
"GAAP" shall have the meaning specified in Section 11.2.
"GOVERNMENTAL AUTHORITY" shall mean any foreign governmental authority, the
United States of America, any State of the United States, and any political
subdivision of any of the foregoing, and any central bank, agency, department,
commission, board, bureau, court or other tribunal having jurisdiction over the
holder of any Note, any Transaction Party or their respective Property.
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"GUARANTEE" shall mean, with respect to any Person, any direct or indirect
liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise directly or indirectly liable, including, without
limitation, any such obligation in effect guaranteed by such Person through any
agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire
such obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the solvency or
any balance sheet or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or for
any transportation or services regardless of the non-delivery or non-furnishing
thereof, in any such case if the purpose or intent of such agreement is to
provide assurance that such obligation will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected against loss in respect thereof. The amount of any
Guarantee shall be equal to the outstanding principal amount of the obligation
guaranteed or such lesser amount to which the maximum exposure of the guarantor
shall have been specifically limited.
"HAZARDOUS SUBSTANCE" shall mean petroleum products and any hazardous or
toxic waste or substance defined or regulated as such from time to time by any
law, rule, regulation or order described in the definition of "Requirements of
Environmental Law".
"INDEBTEDNESS" shall mean, with respect to any Person or consolidated group
of Persons, without duplication, (i) all items (excluding items of contingency
reserves or of reserves for deferred income taxes) which in accordance with GAAP
would be included in determining total liabilities as shown on the liability
side of a balance sheet of such Person or consolidated group of Persons (but
---
excluding accounts payable in the ordinary course of business) as of the date on
---------
which Indebtedness is to be determined; (ii) all indebtedness secured by any
Lien on, or payable out of the proceeds of production from, any property or
asset owned or held by such Person subject thereto, whether or not the
indebtedness secured thereby shall have been assumed; (iii) redemption
obligations in respect of mandatorily redeemable preferred stock; (iv) Swaps;
(v) unfunded pension liabilities; (vi) obligations as an account party in
respect of letters of credit; and (vii) Guarantees of Indebtedness of other
Persons of the types described in the foregoing clauses (i) through (vi).
"INTANGIBLES" shall include, without limitation, (i) deferred charges; (ii)
the amount of any write-up in the book value of any acquired assets in excess of
fair market value and (iii) the aggregate of all amounts appearing on the assets
side of any such balance sheet for franchises, licenses, permits, patents,
patent applications, copyrights, trademarks, trade names, goodwill, treasury
stock, experimental or organizational expenses and other like intangibles.
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"INVESTMENT" shall mean the purchase or other acquisition of any securities
or Indebtedness of, or the making of any loan, advance, transfer of Property
(other than transfers in the ordinary course of business) or capital
contribution to, or the incurring of any liability (other than accounts arising
in the ordinary course of business), contingently or otherwise, in respect of
the Indebtedness of, any Person.
"JUNIOR PREFERRED STOCK" shall have the meaning set forth in the definition
"Restricted Payment."
"KNOWLEDGE" of the Company shall mean the actual knowledge of any Executive
Officer.
"LEGAL REQUIREMENT" shall mean any law, statute, ordinance, decree,
requirement, order, judgment, rule, or regulation (or interpretation of any of
the foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, whether presently existing or arising in the future.
"LIEN" shall mean any mortgage, pledge, priority, security interest,
encumbrance, contractual deposit arrangement, lien (statutory or otherwise) or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any production payment, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction) or
any other type of preferential arrangement for the purpose, or having the
effect, of protecting a creditor against loss or securing the payment or
performance of an obligation.
"MATERIAL ADVERSE EFFECT" shall mean any material and adverse effect on the
ability of the Company or any of its Subsidiaries to perform its obligations
under any Note Document to which it is a party or on the business, condition
(financial or otherwise), results of operations, assets, liabilities or
prospects of the Company and its Subsidiaries on a consolidated basis.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer plan"
(as such term is defined in section 400l(a)(3) of ERISA).
"NEW SENIOR CREDIT FACILITY" shall mean any credit instrument or agreement
at any time and from time to time entered into by the Company with any financial
institution or institutions within the limitations of Section 7.3(b)(ii), as the
same may from time to time be supplemented, amended, renewed, extended, refunded
or replaced.
"NOTE DOCUMENTS" shall mean this Restructuring Agreement, the Notes, the
Warrants, the Participation Rights Agreement, the Registration Rights Agreement,
the Guaranty Agreement, and all other instruments, certificates, documents and
other writings now or hereafter executed and delivered by any Transaction Party
or any other Person pursuant to or in connection with any of the foregoing or
any of the transactions contemplated thereby, and any and all amendments,
restatements, supplements and other modifications to any of the foregoing.
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"NOTES" shall have the meaning specified in Section 2.1.
"OBLIGATIONS" shall mean, as at any date of determination thereof, the sum
of the following: (i) the aggregate principal amount of Notes outstanding on
such date, plus (ii) all other outstanding liabilities, obligations and
----
Indebtedness of any Transaction Party under this Restructuring Agreement, any
Note, the Guaranty Agreement or any of the other Note Documents on such date.
"OBSERVER" shall have the meaning set forth in Section 12.20.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of a
Transaction Party by its President, one of its Vice Presidents or its Treasurer.
"PARTICIPATION RIGHTS AGREEMENT" shall mean the Participation Rights
Agreement, dated as of July 23, 1998, substantially in the form of Exhibit I
attached hereto, by and among you, the Company and certain holders of the
Company's common stock as the same may be amended, restated, supplemented or
otherwise modified from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED ACQUISITION" shall have the meaning set forth in the Prudential
Letter.
"PERMITTED DISPOSITION" shall have the meaning set forth in the Prudential
Letter.
"PERMITTED INV