CONTINGENT CONVERTIBLE NOTE PURCHASE AGREEMENT

Exhibit 10.29

 

EXECUTION COPY

 

CONTINGENT CONVERTIBLE NOTE PURCHASE AGREEMENT

 

by and between

 

DIEDRICH COFFEE, INC.

 

and

 

SEQUOIA ENTERPRISES, L.P.

 

 

Dated as of May 10, 2004

 

TABLE OF CONTENTS

 

 

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CONTINGENT CONVERTIBLE NOTE PURCHASE AGREEMENT

 

This Contingent Convertible Note Purchase Agreement (this “ Agreement ”) is entered into as of May 10, 2004 (the “ Effective Date ”) by and between Diedrich Coffee, Inc., a Delaware corporation (the “ Company ”), and Sequoia Enterprises, L.P., a California limited partnership (“ Lender ”).

 

R E C I T A L S

 

WHEREAS, the Company desires to borrow from Lender and Lender desires to loan to the Company, pursuant to the terms and conditions of this Agreement, an aggregate principal amount of up to $5,000,000 (the “ Loan Amount ”), which loan (the “ Loan ”) shall be evidenced by one or more unsecured convertible promissory notes in the form attached hereto as Exhibit A (the “ Notes ”);

 

WHEREAS, the Notes shall be convertible into common stock, par value $0.01 per share of the Company (the “ Common Stock ”) on the terms and subject to the conditions set forth herein and therein; and

 

WHEREAS, as an additional inducement for Lender to enter into this Agreement, the Company is willing to issue to Lender one or more warrants to purchase shares of Common Stock upon payment of the principal of any Note, which warrants shall be in the form attached hereto as Exhibit B (the “ Warrants ”), and be exercisable on the terms and subject to the conditions set forth herein and therein.

 

A G R E E M E N T

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants, agreements, representations and warranties hereinafter set forth, the parties hereby agree as follows:

 

1. DEFINITIONS .

 

1.1 Certain Defined Terms . As used in this Agreement, the following terms shall have the following respective meanings:

 

“ Affiliate ” means, with respect to any specified Person, a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified.

 

“ Availability ” means, on any date, the Loan Amount, less the sum of (a) the principal amount of all Notes outstanding under this Agreement, plus (b) the product of (i) the number of days from the Effective Date to the date on which Availability is to be determined, multiplied by (ii) $2,740.

 

“ Beneficial Owner ” shall have the meaning ascribed to such term in Rule 13d-3 of the Exchange Act.

 

“ Business Day ” shall mean any day other than a Saturday, a Sunday or a day on which banks in Los Angeles, California are authorized or obligated to close their regular banking business.

 

“ Change of Control ” shall mean (a) a transaction (or series of transactions) in which a Third Party becomes the Beneficial Owner, directly or indirectly, of equity representing 15% or more of the voting equity of the Company; (b) a transaction (or series of transactions) in which an Affiliate of the Company (other than an Affiliate controlled by Heeschen) becomes the Beneficial Owner, directly or indirectly, of equity representing 25% or more of the voting equity of the Company; (c) a merger,

consolidation or other business combination transaction (or series of transactions) involving the Company, the result of which is that a Third Party who, immediately prior to such transaction or transactions is not the Beneficial Owner, directly or indirectly, of more than 25% of the voting equity of the Company, becomes the Beneficial Owner, directly or indirectly, of more than 25% of the voting equity of the Company or the successor entity in such transaction or transactions; or (d) a sale of all or substantially all of the assets of the Company.

 

“ Credit Agreement ” shall mean that certain Credit Agreement, by and between Bank of the West and the Company, dated as of September 3, 2002, as amended, or as may subsequently be amended or restated.

 

“ Default ” shall mean any event or circumstance that with the giving of notice or passage of time, or both, would become an Event of Default.

 

“ EBITDA ” shall mean, with respect to any Person for any fiscal period, earnings (exclusive of extraordinary gains and non-cash credits to income) and before deductions for interest, income taxes, non-cash impairment charges from intangibles that exist as of the end of the third fiscal quarter of Fiscal Year 2004 and other non-cash charges that exist as of the end of the third fiscal quarter of Fiscal Year 2004, depreciation and amortization of the Company and its subsidiaries on a consolidated basis.

 

“ Effective Tangible Net Worth ” shall mean, on a consolidated basis, the total assets (exclusive of goodwill, patents, trademarks, trade names, copyrights, organization expense, investments in and all amounts due from Affiliates, officers, or employees), less total liabilities (less Indebtedness subordinated to the Notes, if any) of the Company and its subsidiaries in accordance with GAAP.

 

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“ Fiscal Quarter ” shall mean each fiscal quarter of the Company, with the first three quarters consisting of twelve weekly periods and the fourth quarter consisting of the sixteen or seventeen weekly periods ending on the Wednesday closest to June 30.

 

“ Fiscal Year ” shall mean each fiscal year of the Company, with each such fiscal year ending on the Wednesday closest to June 30.

 

“ GAAP ” shall mean generally accepted accounting principles in the United States in effect from time to time.

 

“ Heeschen ” means Paul C. Heeschen, sole general partner of Lender.

 

“ Indebtedness ” of any Person shall mean all obligations for borrowed money, accounts payable, accrued compensation, accrued expenses and capitalized lease obligations of such Person as of the date as of which indebtedness is to be determined, and shall also include all indebtedness and liabilities of others assumed or guaranteed by such Person or in respect of which such Person is secondarily or contingently liable (other than by endorsement of instruments in the course of collection) whether by reason of any agreement to acquire such indebtedness or to supply or advance sums or otherwise.

 

“ Lender Affiliate ” means Heeschen, any Affiliate of Heeschen (including Lender), or any partner or other equity holder of Lender.

 

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“ LIBOR Rate ” means the fluctuating U.S. dollar rate reported by Northern Trust as the “London Interbank Offered Rate” for deposits with maturity periods of up to twelve (12) months as established on the dates Notes are issued and the dates on which the LIBOR rate is reset, as appropriate.

 

“ Lien ” means any mortgage, deed of trust, or pledge, security interest, hypothecation, assignment, assigned deposit, arrangement, encumbrance (including any conditional sale or other title retention agreement), encroachment, lien (statutory or otherwise), claim, option, reservation or defect of any kind, or preference, or priority, or other security agreement or preferential arrangement of any kind or nature whatsoever or the filing or agreement to give any financing statement under the uniform commercial code of any jurisdiction.

 

“ Material Adverse Effect ” shall mean (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, or financial condition of the Company and its subsidiaries, taken as a whole; (b) a material impairment of the ability of the Company to perform under this Agreement or to avoid any Event of Default; or (c) a material adverse change in the legality, validity, binding effect or enforceability of this Agreement.

 

“ Maturity Date ” shall mean the earliest of (i) the date of consummation of a Change of Control transaction, (ii) the date Notes are declared due and payable by Lender upon an Event of Default, or (iii) May 10, 2007.

 

“ Person ” shall mean any corporation, natural person, firm, joint venture, partnership, limited liability company, trust, unincorporated organization, government or any department or agency of any government.

 

“ Restricted Stock ” shall mean the shares of Common Stock issued upon conversion of the Notes or upon exercise of the Warrants, and any Common Stock issued with respect to such Common Stock by way of a stock dividend or stock split, provided that such shares shall no longer be Restricted Stock at such time as such Common Stock (i) has been sold pursuant to an effective registration statement under the Securities Act, (ii) has been transferred in compliance with Rule 144 under the Securities Act (or any successor provision thereto) or (iii) is transferable by Lender (or, if such Common Stock is held by a Lender Affiliate, such Lender Affiliate), pursuant to paragraph (k) of Rule 144 (or any successor provision thereto).

 

“ SEC ” shall mean the Securities Exchange Commission.

 

“ Securities ” shall mean the Notes, the Warrants and any Common Stock issuable upon conversion or exercise of such Notes and Warrants.

 

“ Securities Act ” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“ Senior Indebtedness ” shall mean any Indebtedness of the Company senior in right of payment to any Outstanding Balance, including, all amounts outstanding under the Credit Agreement.

 

“ Third Party ” shall mean any Person or group of Persons acting in concert who are not Affiliates of the Company or Lender Affiliates.

 

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2. LOAN AND WARRANTS .

 

2.1 Issuance of Notes .

 

(a) Subject to the terms and conditions set forth herein, at the election of the Company, on the Effective Date, and on the first day of each Fiscal Quarter thereafter until the Maturity Date, upon 10 Business Days advance written notice (a “ Note Request ”), the Company may issue to Lender, and Lender shall acquire from the Company, one or more Notes, provided that (i) no Note shall be issued with an initial principal amount of less than $300,000 or more than the Availability, (ii) at no time shall the aggregate Outstanding Balance of all Notes exceed the Loan Amount, and (iii) the principal amount of the first Note to be issued, if any (the “ Initial Note ”) shall be not less than all amounts then owed by the Company and its subsidiaries under all outstanding Senior Indebtedness (except, subject to Section 9.2(b)(ii) , for letters of credit issued under the Credit Agreement, which may remain outstanding).

 

(b) Subject to the foregoing, the Company may reborrow principal amounts previously repaid hereunder by issuing a new Note therefor, provided that the principal amount of such new Note does not exceed the Availability on such date.

 

2.2 Issuance of Warrants .

 

(a) Until such time as the aggregate principal amount of all Notes repaid shall equal the Loan Amount, upon the payment of principal on any Note (upon payment, prepayment or at maturity), the Company shall be obligated to issue to Lender Warrants, as follows:

 

(i) on the date of payment of principal on a Note or Notes of at least $300,000, a Warrant shall be issued for all principal on repaid Notes with respect to which a Warrant has not been issued as of the date of such payment; or

 

(ii) on June 30 and December 31 of each year, a Warrant shall be issued for all principal on repaid Notes with respect to which a Warrant has not otherwise been issued (including with respect to all amounts prepaid under Section 3.3(a)(ii) ); and

 

(iii) a Warrant shall be issued on the Maturity Date for all principal on repaid Notes (including Notes repaid on the Maturity Date) with respect to which a Warrant has not otherwise been issued.

 

(b) Each Warrant shall initially be for the number of shares of Common Stock equal to (i) the principal repaid on Notes to which the Warrant relates, divided by (ii) the weighted average closing price of the Common Stock on the Nasdaq Stock Market (or such other market or exchange where the Company’s stock price is reported at that time) on the date of issuance of the Notes to which the Warrant relates (the “ Warrant Closing Share Price ”). In no event shall a Warrant be issued for an amount including a fractional share, and if such calculation would otherwise result in a Warrant being issued for a fractional share, such fractional share shall be carried forward and added to the number of shares of Common Stock for which the next Warrant issued, if any, may be exercised.

 

(c) The number of shares to which a Warrant is subject may be decreased if, upon the Change of Control, 85% of the average price paid per share of Common Stock by any Person who engages in a transaction or series of transactions resulting in the Change of Control (the “ Change of Control Price ”), exceeds the applicable Warrant Closing Share Price (as appropriately adjusted for any stock splits, stock dividends, or other events described in Section 4 of the Warrant). In such event the Warrant shall be exercisable for the number of shares of Common Stock equal to (i) the principal repaid

 

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on Notes to which the Warrant relates, divided by (ii) 85% of the Change of Control Price. The per share purchase price for the shares to be purchased upon exercise of each Warrant shall be equal to the Conversion Price per share (as defined below) applicable at the time of exercise.

 

3. INTEREST; PAYMENT; COMMITMENT FEE .

 

3.1 Payments and Repayments . To the extent not previously converted pursuant to Section 4 , the Company will pay the unpaid principal balance (the “ Outstanding Balance ”) of each Note plus all accrued and unpaid interest thereon on the Maturity Date. The Outstanding Balance of any Note and all accrued and unpaid interest thereon and any and all other sums payable to Lender thereunder may be prepaid prior to the Maturity Date without penalty or obligation, except as set forth herein. The Company shall provide Lender at least 10 days advance notice of its intention to prepay the Outstanding Balance on any Notes. Lender will apply partial prepayments on any Notes first to all accrued and unpaid interest and then to principal.

 

3.2 Interest . Interest shall accrue from the date such Note is issued on the Outstanding Balance on each Note at the one-month, two-month or three-month, whichever period is closest to the remaining days in the calendar quarter, LIBOR Rate in effect on the date of issuance plus 3.30% per annum. The interest rate will be reset on the first day of each calendar quarter to the three-month LIBOR Rate then in effect plus 3.30% per annum. Interest shall be calculated on the basis of a 360 day year and actual days elapsed. Interest shall be payable in arrears.

 

3.3 Required Payments .

 

(a) Until the Maturity Date, the Company will be required to make payments to Lender monthly (each, a “ Monthly Payment ”) on the first Business Day of each month no later than 10:00 a.m. on such day (each, a “ Payment Date ”), equal to the sum of:

 

(i) all accrued interest on the Outstanding Balance of each of the outstanding Notes for the prior month, plus

 

(ii) a principal payment on each Note equal to a percentage of the Outstanding Balance on the date of such Monthly Payment such that, when amortized in equal payments of interest over the term of the Note (from the date of issuance to May 10, 2007), 60% of the Outstanding Balance on the date of issuance of such Note shall be repaid by Maturity, plus

 

(iii) a fee equal to 0.0833% of the Availability (the “ Commitment Fee ”).

 

(b) On the Maturity Date, the Company will be required to make a payment to Lender of an amount equal to the sum of:

 

(i) all accrued interest on the Outstanding Balance of each of the outstanding Notes since the last Payment Date, plus

 

(ii) all Outstanding Balances, plus

 

(iii) a Commitment Fee equal to the product of (A) 0.0833% multiplied by a fraction, the numerator of which is the number of days elapsed from the last Payment Date to but not including the Maturity Date and the denominator of which is 30 (provided that such fraction not exceed one) and (B) the Availability.

 

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(c) Any payments made to Lender pursuant to Sections 3.3(a) or (b) shall be made by wire transfer of immediately available funds and shall be accompanied by a statement that sets forth the amount of the payment attributable to interest, principal and the Commitment Fee, respectively.

 

4. CONTINGENT CONVERSION; ISSUANCE OF SHARES .

 

4.1 Conversion of Notes . If there is a Change of Control at any time prior to payment in full of the Outstanding Balance of the Notes, Lender shall, subject to the provisions of this Section 4 , have the right immediately prior to the consummation of such Change of Control, to convert the Outstanding Balance of any or all of the Notes (plus accrued and unpaid interest) into Common Stock. The number of shares of Common Stock into which each Note will be converted will equal the quotient of (a) the lesser of (i) $5,000,000 minus the aggregate principal amount of all Notes repaid (and for which Warrants have been issued pursuant to Section 2. 2 of this Agreement) and (ii) the Outstanding Balance of such Note to be converted plus all accrued and unpaid interest on such Note to but not including the date of conversion divided by (b) the applicable Conversion Price. No Warrant shall be issued with respect to any Outstanding Balance which is converted into Common Stock.

 

4.2 Conversion Price . The “ Conversion Price ” for a Note shall equal the greater of (a) the closing price of the Common Stock on the Nasdaq Stock Market (or such other market or exchange where the Company’s stock price is reported at that time) on the date that the Note was issued (as appropriately adjusted for any stock splits, stock dividends, or other events described in Section 7(b) of the Note) and (b) 85% of the Change of Control Price. To the extent that the consideration paid to stockholders of the Company in a transaction constituting a Change of Control is other than cash, the Board of Directors of the Company shall determine the cash value of such non-cash consideration for purposes of calculating the Conversion Price.

 

4.3 Issuance of Shares of Common Stock. As soon as practicable after conversion of any or all of the Notes or exercise of a Warrant, the Company at its expense shall cause to be issued in the name of and delivered to Lender, a certificate or certificates for the number of shares of Common Stock to which Lender shall be entitled upon such conversion or exercise (bearing such legends as may be required by applicable state and federal securities laws). No fractional shares will be issued upon conversion of the Notes or exercise of a Warrant. If upon conversion of all of the Notes Lender elects to convert, or exercise of Warrants, in the aggregate a fraction of a share would otherwise result, in lieu of such fractional share the Company shall pay the cash value of such fractional share, calculated on the basis of the average Conversion Price applicable to all of the Notes converted at such time or Warrants exercised at such time, as applicable.

 

4.4 Notice of Conversion . Before Lender shall be entitled to convert any Note into shares of Common Stock, it shall (i) surrender the Notes to be converted at the office of the Company and (ii) give written notice to the Company of its election to convert the same pursuant to this Section 4 , which notice shall state (A) the Notes being converted, and (B) Lender’s calculation of the number of shares of Common Stock to be issued upon conversion of such Notes. Such conversion shall be deemed to have been made immediately prior to the consummation of a Change of Control and Lender shall be treated for all purposes as the record holder of such shares of Common Stock as of such date.

 

4.5 Common Stock Issuable upon Conversion of Notes and Exercise of Warrants . Subject to the following sentence, the Company shall, at all times, reserve and keep available, solely for issuance and delivery upon conversion of the Notes and exercise of the Warrants, such number of shares of Common Stock as the Board of Directors of the Company shall reasonably determine to be sufficient to effect the conversion of all Notes and exercise of all Warrants, and shall take all action necessary to ensure that the shares of Common Stock issued upon such conversion or exercise are validly issued, fully

 

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paid and nonassessable, and issued free and clear from all preemptive rights, Liens and restrictions on transfer (other than under the Securities Act and applicable state securities laws). Notwithstanding anything contained herein to the contrary, the Company shall not be obligated to issue any shares of Common Stock upon the exercise of Warrants or conversion of Notes, to the extent that the number of shares of Common Stock to be issued would exceed, at the time of issuance (i) the number of authorized and unissued shares of Common Stock under the Company’s Amended and Restated Certificate of Incorporation, less (ii) all shares of Common Stock reserved for issuance (other than with respect to the Notes and the Warrants), provided that if any issuance of shares of Common Stock is limited pursuant to this sentence, the Company shall use its commercially reasonable efforts to obtain stockholder approval at the next regularly scheduled meeting of the stockholders of an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock to permit such issuance.

 

4.6 Registration Rights .

 

(a) The Company will use commercially reasonable efforts to continue its qualification for registration on Form S-3 or any comparable or successor form or forms in connection with the resale of securities. Provided that the Company is qualified to use Form S-3, the Lender (or the Lender Affiliate, if such Restricted Stock is held by a Lender Affiliate) shall have the right to request registration on Form S-3 and any necessary registration or qualification required under state blue sky laws (such requests shall be in writing and shall state the number of shares of Restricted Stock to be disposed of and the intended methods of disposition of such shares by the Lender or Lender Affiliate); provided, however, that the Company shall not be obligated to effect any such registration (i) if the Lender or Lender Affiliate proposes to sell Restricted Stock at an aggregate price to the public of less than $1,000,000, (ii) if the Restricted Stock no longer qualifies as such, (iii) if, in a given 12-month period, the Company has effected one (1) such registration in such period, (iv) if it is to be effected more than five (5) years after the date hereof, (v) if the Company is presently engaged in (or has completed within the prior six (6) months) an underwritten public offering of securities and the managing underwriter shall be of the opinion that such registration would adversely affect the marketing of the securities to be sold or that were sold by the Company in its public offering or (vi) if such registration would conflict with or violate the terms of any registration rights granted by the Company prior to the date hereof.

 

(b) In connection with each registration hereunder, Lender (and the Lender Affiliates, if any Restricted Stock to be included in the registration statement is held by such Lender Affiliates) shall furnish to the Company such information with respect to itself and themselves and the proposed distribution by it and them as shall be necessary in order to assure compliance with Federal and applicable state securities laws.

 

(c) The expenses incurred in effecting a registration pursuant to this Section 4.6 shall be borne by the Company. These expenses include registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, and expenses of any regular or special audits incident to or required by any such registration. The selling expenses of the Lender Affiliates, which include underwriting discounts, selling commissions and stock transfer fees applicable to the sale of Restricted Stock and the fees and disbursements of counsel for any Lender Affiliate, shall be borne by the Lender Affiliates requesting registration.

 

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5. CONDITIONS PRECEDENT .

 

5.1 Conditions Precedent to Each Loan . The obligation of Lender to purchase any Note is subject to the following conditions:

 

(a) the representations and warranties of the Company shall be true and correct in all material respects on and as of the date of issuance of such Note, as though made on and as of such date;

 

(b) no Default or Event of Default shall have occurred and be continuing or result from such Note issuance;

 

(c) since the last issuance of a Note, there shall have not occurred any Material Adverse Effect or any event reasonably likely to result in a Material Adverse Effect;

 

(d) the aggregate Outstanding Balance of all Notes issued and to be issued at such time shall not exceed the Loan Amount;

 

(e) the number of shares of Common Stock authorized and unissued (and unreserved for issuance) shall be greater than the number of shares of Common Stock issuable upon conversion of the Note (assuming for such purpose, a Conversion Price equal to the closing price of the Common Stock on the Nasdaq Stock Market (or such other market or exchange where the Company’s stock price is reported at that time) on the business day prior to the proposed date of issuance of the Note);

 

(f) the Company has total assets of at least $2,000,000 according to its most recent financial statements prepared in accordance with the rules and requirements of the Securities and Exchange Commission; and

 

(g) the principal amount of the Note to be issued shall not exceed the Availability.

 

By delivering a Note Request to Lender, unless the Company otherwise notifies Lender in writing, the Company will be deemed to have certified to the satisfaction of the conditions set forth above as of the date of issuance of the applicable Note.

 

5.2 Conditions Precedent to Issuance of Securities . The obligation of the Company to issue any Securities is subject to the following conditions:

 

(a) the representations and warranties of Lender shall be true and correct in all material respects on and as of the date of such issuance, as though made on and as of such date; and

 

(b) if Lender is not the Person to whom such Security is to be issued, then the Lender Affiliate in whose name such Security is to be issued, shall have certified to the Company as to the representations and warranties of Lender set forth in Section 7 as to such Lender Affiliate.

 

By accepting any Security, Lender or such Lender Affiliate shall be deemed to have certified to the Company as to the satisfaction of the conditions set forth above as of the date of issuance of the applicable Security.

 

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6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY .

 

The Company hereby represents and warrants to Lender the following:

 

6.1. SEC Reports; Financial Condition; Capitalization .

 

(a) Since January 1, 2000, the Company has filed all required forms, reports and documents (collectively, the “ Company SEC Reports ”) with the SEC. As of their respective dates, or if amended, as of the date of such amendment, the Company SEC Reports complied in all material respects with all applicable requirements of the Securities Act and the Exchange Act, as the case may be, applicable to such Company SEC Reports, each as in effect on the dates such forms, reports and documents were filed.

 

(b) The financial statements for the most recent Fiscal Year and the Fiscal Quarters ended subsequent thereto filed with the SEC (collectively, the “ Financial Statements ”), are complete and correct in all material respects and present fairly in accordance with GAAP the consolidated and consolidating financial condition of the Company and its subsidiaries at such dates and the results of its operations and changes in financial position for the fiscal periods then ended, subject, in the case of the financial statements dated as of the Fiscal Quarter, to normal year-end audit adjustments.

 

(c) The authorized capital stock of the Company consists of:

 

(i) 8,750,000 shares of Common Stock, of which, on the date hereof, (A) 5,161,263 shares are issued and outstanding, (B) 1,424,166 shares are reserved for issuance pursuant to the Company’s stock plans and (C) 518,000 shares are reserved for issuance upon the exercise of outstanding warrants to purchase Common Stock, and

 

(ii) 3,000,000 shares of preferred stock of the Company, $.01 par value per share, none of which are issued and outstanding on the date hereof.

 

6.2 Corporate Existence; Compliance with Law . The Company and each of its subsidiaries: (a) is duly organized, validly existing and in good standing as a corporation under the laws of the jurisdiction of its organization and is qualified to do business in each other jurisdiction where its leasing or ownership of property or conduct of its business requires such qualification and where failure to so qualify is reasonably likely to have a Material Adverse Effect, (b) has the corporate power and authority and the legal right to own and operate its properties and to conduct its business in the manner now conducted, and (c) is in material compliance with all applicable laws and its contractual obligations where the failure to so comply is reasonably likely to have a Material Adverse Effect.

 

6.3 Corporate Power; Authorization; Enforceable Obligations . The Company has the power and authority and the legal right to execute, deliver and perform and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. This Agreement constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to the effect of applicable bankruptcy and other similar laws affecting the rights of creditors generally and the effect of equitable principles whether applied in an action at law or a suit in equity.

 

6.4 No Conflict . The execution, delivery and performance of this Agreement by the Company, the borrowing hereunder and the use of the proceeds thereof, will not (i) violate any law applicable to the Company or its subsidiaries, (ii) violate any contractual obligation of the Company or its subsidiaries in any material respect, or (iii) conflict with the certificate of incorporation or bylaws of the Company.

 

6.5 No Material Litigation . No litigation, investigation or proceeding of or before any arbitrator, court or Governmental Authority is pending or, to the knowledge of the Company, threatened by or against the Company or its subsidiaries or against their respective properties or revenues which is likely to be adversely determined and which, if adversely determined, is likely to have a Material Adverse Effect.

 

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6.6 Taxes . The Company and each of its subsidiaries has filed or caused to be filed all U.S. and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property, other than taxes which are being contested in good faith by appropriate proceedings and as to which the Company or such subsidiary, as applicable, has established adequate reserves in conformity with GAAP.

 

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