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Exhibit 10.33
EXECUTION COPY
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COMPBENEFITS CORPORATION
and the
SUBSIDIARY GUARANTORS NAMED HEREIN
$36,000,000 Principal Amount
of
11.75% Senior Subordinated Notes Due April 12, 2016 of
COMPBENEFITS CORPORATION
SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
Dated as of April 13, 2006
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TABLE OF CONTENTS
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Page
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Section 1. PURCHASE AND SALE OF
NOTES.................................... 1
1.1 Issue of
Notes.................................................. 1
1.2 Purchase and Sale of
Notes...................................... 1
1.3 Registration of
Notes........................................... 3
1.4 Delivery
Expenses............................................... 3
1.5 Issue
Taxes..................................................... 3
1.6 Direct
Payment.................................................. 3
1.7 Lost Notes,
Etc................................................. 4
1.8
Indemnification.................................................
5
1.9 Further
Actions................................................. 6
1.10 Other
Covenants................................................. 7
Section 2. CLOSING
CONDITIONS............................................ 7
2.1 Delivery of
Documents........................................... 7
2.2 Legal Investment, Purchase Permitted by Applicable
Laws......... 9
2.3 Payment of
Fees................................................. 10
2.4 Compliance with
Agreements...................................... 10
2.5 Completion of Other
Transactions................................ 10
2.6 Representations and
Warranties.................................. 11
2.7 No Event of
Default............................................. 11
2.8 Equity
Acquisition.............................................. 11
2.9 Proceedings
Satisfactory........................................ 11
2.10 Consents and
Permits............................................ 11
2.11 No Material Adverse
Effect...................................... 11
2.12 No Material Judgment or
Order................................... 12
Section 3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY................. 12
3.1 Organization, Authorization,
Capitalization..................... 12
3.2 No Violation or Conflict, No
Default............................ 14
3.3 Use of
Proceeds................................................. 14
3.4 No Material Adverse Change; No Internal Control Event;
Financial
Statements......................................................
15
3.5 Full
Disclosure................................................. 16
3.6 Third Party
Consents............................................ 16
3.7 No Violation of Regulations of Board of Governors of
Federal
Reserve System..................................................
17
3.8 Private
Offering................................................ 17
3.9 Governmental
Regulations........................................ 17
3.10
Brokers.........................................................
18
3.11
Solvency........................................................
18
3.12 Ownership of Personal Property;
Liens........................... 18
3.13
Litigation......................................................
18
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3.14 Labor
Relations................................................. 19
3.15
Taxes...........................................................
19
3.16 Environmental
Matters........................................... 20
3.17
ERISA...........................................................
21
3.18 Intellectual
Property........................................... 22
3.19 Compliance with
Laws............................................ 23
3.20
Indebtedness....................................................
24
3.21
Investments.....................................................
24
3.22
Insurance.......................................................
24
3.23 Survival of Representations and
Warranties...................... 24
3.24 Compliance with
HIPAA........................................... 25
3.25 Stockholders
Agreements......................................... 25
3.26 No Burdensome Restrictions; Material
Agreements................. 25
3.27 Nature of
Business.............................................. 26
3.28 Transactions with
Affiliates.................................... 26
Section 4. REPRESENTATIONS AND WARRANTIES OF EACH
PURCHASER.............. 26
4.1 Purchase for Own
Account........................................ 27
4.2 Accredited
Investor............................................. 27
4.3
Authorization...................................................
27
4.4 Notes
Restricted................................................ 27
4.5 Source of
Funds................................................. 28
Section 5.
COVENANTS.....................................................
29
5.1 Payment of Notes, Satisfaction of
Obligations................... 29
5.2 Financial Statements and
Reports................................ 29
5.3 Compliance
Certificate.......................................... 31
5.4 Limitation on Restricted
Payments............................... 32
5.5 Limitation on Additional Indebtedness and Issuance of
Disqualified Stock..............................................
34
5.6 Limitation on Transactions With
Affiliates...................... 35
5.7 Restrictions on
Liens........................................... 36
5.8 Limitation on Sale of
Assets.................................... 36
5.9 Limitation on Capital
Expenditures.............................. 39
5.10 Limitation on Dividend and Other Payment Restrictions
Affecting
Subsidiaries....................................................
39
5.11 Change of
Control............................................... 40
5.12 Financial
Covenants............................................. 41
5.13 Fiscal Year; Organizational and Certain Other
Documents......... 42
5.14 Limitation on Ranking of Future
Indebtedness.................... 42
5.15 Usury
Laws...................................................... 43
5.16 Corporate Existence, Merger; Successor
Corporation.............. 43
5.17 Same
Business................................................... 46
5.18
Taxes...........................................................
46
5.19 Investment Company
Act.......................................... 47
5.20 Ownership of
Subsidiaries....................................... 47
5.21
Insurance.......................................................
47
5.22 Employee
Plans.................................................. 48
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5.23 ERISA
Notices................................................... 48
5.24 Inconsistent
Agreements......................................... 49
5.25 Compliance with Laws, Maintenance of
Licenses................... 49
5.26 Inspection of Properties and
Records............................ 49
5.27 Board of Director Observation
Rights............................ 50
5.28 Maintenance of Office or
Agency................................. 50
5.29 Private Placement
Number........................................ 50
5.30 Senior Indebtedness
Amendments.................................. 50
5.31 Limitation on the
Company....................................... 51
5.32 Notices of Certain Proceedings and Change of Senior
Bank........ 51
Section 6.
REDEMPTION....................................................
51
6.1 The Company's Right to
Redeem................................... 51
6.2 Selection of Notes to Be
Redeemed............................... 51
6.3 Notice of
Redemption............................................ 52
6.4 Effect of Notice of
Redemption.................................. 52
6.5 Payment of Redemption
Price..................................... 53
Section 7. DEFAULTS AND
REMEDIES......................................... 53
7.1 Events of
Default............................................... 53
7.2 Acceleration of Notes,
Remedies................................. 55
7.3 Premium on
Acceleration......................................... 55
7.4 Other
Remedies.................................................. 55
7.5 Waiver of Past
Defaults......................................... 56
7.6 Rights of Holders to Receive
Payment............................ 56
7.7 Undertaking for
Costs........................................... 56
Section 8.
SUBORDINATION.................................................
56
8.1 Notes Subordinated to Senior
Indebtedness....................... 56
8.2 No Payment on Notes in Certain
Circumstances.................... 56
8.3 Notes Subordinated to Prior Payment of All Senior
Indebtedness
on Dissolution, Liquidation or Reorganization...................
59
8.4 Noteholders to Be Subrogated to Rights of Holders of Senior
Indebtedness....................................................
60
8.5 Obligations of the Company
Unconditional........................ 60
8.6 Subordination Rights Not Impaired by Acts or Omissions of
the
Company or Holders of Senior Indebtedness.......................
61
8.7 Section 8 Not to Prevent Events of
Default...................... 61
Section 9. AMENDMENTS AND
WAIVERS........................................ 61
9.1 With Consent of
Holders......................................... 61
9.2 Revocation and Effect of
Consents............................... 62
9.3 Notation on or Exchange of
Notes................................ 63
9.4 Payment of
Expenses............................................. 63
Section 10.
DEFINITIONS..................................................
63
10.1
Definitions.....................................................
63
10.2 Rules of
Construction........................................... 87
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10.3 Accounting
Terms................................................ 87
Section 11. SUBSIDIARY
GUARANTY.......................................... 88
11.1
Guaranty........................................................
88
11.2 Execution and Delivery of Subsidiary
Guaranty................... 89
11.3 Future Subsidiary
Guarantors.................................... 90
11.4 Certain Bankruptcy
Events....................................... 90
11.5 Subordination of Subsidiary
Guarantees.......................... 90
Section 12.
MISCELLANEOUS................................................
91
12.1
Notices.........................................................
91
12.2 Successors and
Assigns.......................................... 92
12.3
Counterparts....................................................
92
12.4
Headings........................................................
92
12.5 Governing Law, Submission to
Jurisdiction....................... 92
12.6 Entire
Agreement................................................ 93
12.7
Severability....................................................
93
12.8 Further
Assurances.............................................. 93
12.9 Disclosure of Financial
Information............................. 93
12.10 Put and Call
Agreements......................................... 93
12.11 Tax
Forms....................................................... 94
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ANNEXES
Annex A Form of Note
Annex A-1 Form of Subsidiary Guaranty
Annex B Opinion of Counsel to the Company and its Subsidiaries
Annex C Opinion of Counsel to Purchasers
Annex D Form of Intercompany Note
Annex E Joinder Agreement
SCHEDULES
Schedule 1.1 Purchaser Information
Schedule 1.2 Wire Transfer Instructions
Schedule 2.11 Material Changes
Schedule 3.1 Capitalization
Schedule 3.8 Private Offerings
Schedule 3.10 Brokers
Schedule 3.14 Collective Bargaining Agreements
Schedule 3.17 Employee Benefit Plans
Schedule 3.18 Intellectual Property
Schedule 3.19 Compliance with Laws
Schedule 3.20 Existing Indebtedness
Schedule 3.22 Insurance
Schedule 3.26 Material Contracts
Schedule 3.28 Transactions with Affiliates
Schedule 5.6 Transactions With Affiliates
Schedule 10.1A Existing Investments
Schedule 10.1B Existing Liens
Schedule 10.1C Investor Group
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SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
This SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT is dated as of
April 13,
2006 (this "Agreement"), and entered into by and among CompBenefits
Corporation,
a Delaware corporation (the "Company"), the Subsidiary Guarantors
listed on the
signature pages hereto and the purchasers listed on the signature
pages hereto
(each a "Purchaser" and collectively, the "Purchasers").
Capitalized terms not otherwise defined herein shall have the
meanings
ascribed to such terms in Section 10.1 hereof.
In consideration of the premises, mutual covenants and
agreements
hereinafter contained and for other good and valuable
consideration, the receipt
and adequacy of which are hereby acknowledged, the Company agrees
and each of
the Purchasers agrees, severally but not jointly, as follows:
SECTION 1. PURCHASE AND SALE OF NOTES
1.1 Issue of Notes
(a) On or before the Closing, the Company will have authorized the
issue
and sale to the Purchasers, in the respective amounts set forth in
Schedule 1.1,
of $36,000,000 aggregate principal amount of its 11.75% Senior
Subordinated
Notes due April 12, 2016 (the "Notes"), to be substantially in the
form attached
hereto as Annex A.
(b) The Notes shall include such notations, legends or endorsements
set
forth thereon or required by law. Each Note shall be dated the date
of its
issuance. Subject to Section 1.7, the aggregate principal amount of
the Notes
issued by the Company may not exceed $36,000,000, except to the
extent interest
is added to the principal of any Note in accordance with the
provisions thereof.
The terms and provisions contained in the Notes shall constitute,
and are hereby
expressly made, a part of this Agreement and, to the extent
applicable, the
Company, by its execution and delivery of this Agreement, expressly
agrees to
such terms and provisions and to be bound thereby.
1.2 Purchase and Sale of Notes
(a) Purchase and Sale. The Company agrees to sell and, subject to
the terms
and conditions set forth herein and in reliance on the
representations and
warranties of the Company contained or incorporated herein, each of
the
Purchasers agrees, severally but not jointly, to purchase the Notes
set forth
opposite such Purchaser's name in Schedule 1.1 hereto at the
purchase price
indicated thereon.
(b) Closing. The purchase and sale of the Notes shall take place at
a
closing (the "Closing") at the offices of Vinson & Elkins
L.L.P., located at
2001 Ross Avenue, Suite 3700, Dallas, Texas 75201, at 10:00 a.m.,
local time, on
April 13, 2006, or such other Business Day as may be agreed upon by
the
Purchasers and the Company (the "Closing Date"). At the Closing,
the Company
will deliver to each of the Purchasers the Notes to be purchased by
such
Purchaser (in such permitted denomination or denominations and
registered in
such Purchaser's name or
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the name of such nominee or nominees as such Purchaser may
request), dated the
Closing Date, against payment of the purchase price therefor by
intra-bank or
Federal funds bank wire transfer of same day funds to such bank
account which is
identified on Schedule 1.2 hereto or such other account as the
Company shall
designate at least two Business Days prior to the Closing.
(c) Fees and Expenses. Subject to Section 8, whether or not the
Notes are
sold, the Company agrees to pay or reimburse all reasonable
expenses relating to
this Agreement, including but not limited to:
(i) Newstone's and each Purchaser's reasonable expenses incurred
in
connection with the transactions contemplated by this Agreement and
the
other Documents, including, without limitation, travel and lodging
expenses
and all costs incurred in connection with such Purchaser's review
of the
Company's and each of its Subsidiaries' business and
operations;
(ii) the reasonable fees and other charges and expenses of
Newstone's
counsel and the Purchasers' counsel in connection herewith and with
the
other Documents;
(iii) the reasonable cost of printing, reproducing and delivering
to
Newstone and each Purchaser's home, office or the office of
such
Purchaser's designee, insured to Newstone or such Purchaser's
satisfaction,
as applicable, this Agreement, the Stockholders Agreement, the
Registration
Agreement, the Notes and the other Documents;
(iv) any reasonable fees and expenses (including the reasonable
fees
and expenses of counsel) in connection with any registration or
qualification of the Notes required in connection with the offer
and sale
of the Notes pursuant to this Agreement under the securities or
"blue sky"
laws of any jurisdiction requiring such registration or
qualification or in
connection with obtaining any exemptions from such
requirements;
(v) Newstone's and each Purchaser's reasonable expenses (including
the
reasonable fees and expenses of counsel) relating to any amendment
to, or
modification of, or any waiver or consent or preservation of rights
under,
this Agreement or any of the other Documents; and
(vi) all other reasonable expenses, including without
limitation
counsel's fees, accountant's fees and any rating agency fees
incurred by
the Company in connection with the transactions contemplated by
this
Agreement and the other Documents.
The Company shall deliver to Newstone and each of the Purchasers or
to such
other persons as Newstone or such Purchaser shall direct,
concurrently with the
Closing, by intra-bank or Federal funds bank wire transfer of same
day funds,
and payment for any reasonable and documented out-of-pocket
expenses for which
Newstone or such Purchaser is entitled to reimbursement pursuant to
this Section
1.2(c), including, without limitation, the reasonable and
documented fees and
expenses of Newstone's counsel and such Purchaser's counsel in
accordance with
clause (ii) above.
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(d) Other Purchasers. Each Purchaser's obligations hereunder are
subject to
the execution and delivery of this Agreement by the other
Purchasers listed on
the signature pages hereof. The obligations of each Purchaser shall
be several
and not joint, and no Purchaser shall be liable or responsible for
the acts of
any other Purchaser under this Agreement.
1.3 Registration of Notes
The Company shall cause to be kept at its principal office a
register for
the registration and transfer of the Notes (the "Note Register").
The names and
addresses of the Holders of Notes, the amount of outstanding
principal and
interest owing to each Holder, the transfer of Notes, and the names
and
addresses of the transferees of the Notes shall be registered in
the Note
Register.
The Person in whose name any registered Note shall be registered
shall be
deemed and treated as the owner and holder thereof for all purposes
of this
Agreement, and the Company shall not be affected or bound by any
notice to the
contrary, until due presentment of such Note for registration of
transfer so
provided in this Section 1.3. Payment of or on account of the
principal,
premium, if any, and interest on any registered Notes shall be made
to or upon
the written order of such registered holder.
When Notes are presented to the Company, with a request to register
the
transfer of such Notes or to exchange such Notes for an equal
principal amount
of Notes of other authorized denominations, the Company shall
register the
transfer or make the exchange as requested if its reasonable
requirements for
such transaction are met.
1.4 Delivery Expenses
If a Holder surrenders any Note to the Company for any reason, the
Company
agrees to pay the cost of delivering to such Holder's home, office
or to the
office of such Holder's designee from the Company, insured to such
Holder's
reasonable satisfaction, the surrendered Note and each Note issued
in
substitution, replacement or exchange for, or upon conversion of,
the
surrendered Note.
1.5 Issue Taxes
The Company agrees to pay all Taxes (other than Taxes in the nature
of
income, franchise or gift taxes) and governmental fees in
connection with the
issuance, sale, delivery or transfer by the Company to each Holder
of the Notes
and the execution and delivery of the other Documents and any
modification of
any of such Notes and Documents and will save such Holder harmless
without
limitation as to time against any and all liabilities with respect
to all such
taxes and fees. The obligations of the Company under this Section
1.5 shall
survive the payment or prepayment of the Notes, at maturity, upon
redemption or
otherwise, and the termination of this Agreement and the other
Documents.
1.6 Direct Payment
(a) The Company will pay or cause to be paid all amounts payable
with
respect to any Note (without any presentment of such Note and
without any
notation of such payment
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being made thereon) by crediting (before 12:00 noon, New York City
time), by
Federal funds bank wire transfer in same day funds to each Holder's
account in
any bank in the United States as may be designated and specified in
writing by
such Holder at least two Business Days prior thereto. Each
Purchaser's initial
bank account for this purpose is on Schedule 1.1.
(b) Notwithstanding anything to the contrary contained in the
Notes, if any
principal amount payable with respect to a Note is payable, at
maturity, upon
redemption or otherwise, on a Legal Holiday, then the Company shall
pay such
amount on the next succeeding Business Day, and interest shall
accrue on such
amount until the date on which such amount is paid and payment of
such accrued
interest shall be made concurrently with the payment of such
amount; provided
that the Company may elect to pay in full (but not in part) any
such amount on
the last Business Day prior to the date such payment otherwise
would be due, and
no such additional interest shall accrue on such amount.
Notwithstanding
anything to the contrary contained in the Notes, if any interest
payable with
respect to a Note is payable on a Legal Holiday, then the Company
shall pay such
interest on the next succeeding Business Day, and such extension of
time shall
be included in the computation of the interest payment, provided
that the
Company may elect to pay in full (but not in part) any such
interest on the last
Business Day prior to the date such payment otherwise would be due,
and such
diminution in time shall be included in the computation of the
interest payment.
(c) Each (i) payment or prepayment of principal of the Notes, (ii)
payment
of interest on the Notes and (iii) payment of consent fees and
other amounts
paid in respect of the Notes in accordance with this Agreement and
the Notes,
shall be allocated pro rata among the Holders in accordance with
the respective
principal amounts of their Notes.
1.7 Lost Notes, Etc.
If a mutilated Note is surrendered to the Company or if the Holder
of a
Note claims and submits an affidavit or other evidence,
satisfactory to the
Company to the effect that the Note has been lost, destroyed or
wrongfully
taken, the Company shall issue a replacement Note if the customary
requirements
relating to replacement securities are reasonably satisfied. If
required by the
Company, such Holder must provide an indemnity bond, or other form
of indemnity,
sufficient in the judgment of the Company to protect the Company
from any loss
which it may suffer if a Note is replaced. If any Purchaser or any
other
institutional Holder (or nominee thereof) is the owner of any such
lost, stolen
or destroyed Note, then the affidavit of an authorized officer of
such owner,
setting forth the fact of loss, theft or destruction and of its
ownership of the
Note at the time of such loss, theft or destruction shall be
accepted as
satisfactory evidence thereof, and no further indemnity shall be
required as a
condition to the execution and delivery of a new Note other than
the unsecured
written agreement of such owner reasonably satisfactory to the
Company to
indemnify the Company, or at the option of the Purchaser, an
indemnity bond in
the amount of the Note remaining outstanding.
Every replacement Note is an obligation of the Company.
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1.8 Indemnification
In addition to all other sums due hereunder or provided for in
this
Agreement or any of the other Documents and any and all obligations
of the
Company to indemnify any Purchaser hereunder or under any of the
other
Documents, the Company hereby agrees, without limitation as to
time, to
indemnify each Purchaser, each Affiliate of a Purchaser and each
director,
officer, employee, counsel, agent or representative of such
Purchaser and its
Affiliates (collectively, the "Indemnified Parties") against, and
hold it and
them harmless from, to the fullest extent lawful, all losses,
claims, damages,
liabilities, costs (including, without limitation, costs of
preparation and
reasonable attorneys' fees and disbursements) and expenses,
including expenses
of investigation (collectively, "Losses"), incurred by it or them
and arising
out of or in connection with this Agreement, the Senior Credit
Agreement, the
other Documents or the transactions contemplated hereby or thereby
(or any other
document or instrument executed herewith or pursuant hereto or
thereto), whether
or not the transactions contemplated by this Agreement are
consummated and
whether or not any Indemnified Party is a formal party to any
proceeding;
provided, however, that the Company shall not be liable to any
Indemnified Party
for any Losses to the extent that it shall be finally determined by
a court of
competent jurisdiction (which determination is not subject to
appeal or review)
that such Losses arose from the gross negligence or willful
misconduct of such
Indemnified Party or result from a breach in bad faith of such
Indemnified
Party's obligations hereunder or under any other Document which (a)
is
independent of any wrongful act by the Company, its Subsidiaries or
Affiliates
or any of their respective representatives and (b) was not taken by
such
Indemnified Party in reliance upon any of, the representations,
warranties,
covenants or promises of the Company herein (including, without
limitation,
those incorporated by reference herein) or in the other Documents,
including
(without limitation) the certificates delivered by the Company
pursuant hereto
or thereto. The Company agrees to reimburse any Indemnified Party
promptly for
all such Losses as they are incurred by such Indemnified Party. The
obligations
of the Company to each Indemnified Party hereunder shall be
separate
obligations, and the Company's liability to any such Indemnified
Party hereunder
shall not be extinguished solely because any other Indemnified
Party is not
entitled to indemnity hereunder. The obligations of the Company
under this
Section 1.8 shall survive the payment or prepayment of the Notes,
at maturity,
upon acceleration, redemption or otherwise, any transfer of the
Notes by any
Purchaser and the termination of this Agreement, the Notes, the
Senior Credit
Agreement, the Stockholders Agreement, the Registration Agreement
and any of the
other Documents.
In case any action, claim or proceeding shall be brought against
any
Indemnified Party with respect to which indemnity may be sought
against the
Company hereunder, such Indemnified Party shall promptly notify the
Company in
writing and the Company shall assume the defense thereof, including
the
employment of counsel reasonably satisfactory to such Indemnified
Party and
payment of all reasonable fees and expenses incurred in connection
with the
defense thereof. The failure to so notify the Company shall not
affect any
obligation it may have to any Indemnified Party under this
Agreement or
otherwise except to the extent that (as finally determined by a
court of
competent jurisdiction (which determination is not subject to
review or appeal))
such failure materially and adversely prejudiced the Company. Each
Indemnified
Party shall have the right to employ separate counsel in such
action, claim or
proceeding and participate in the defense thereof, but the fees and
expenses of
such counsel shall be at the expense of each Indemnified Party
unless: (i) the
Company has agreed to pay such
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expenses; or (ii) the Company has failed promptly to assume the
defense and
employ counsel reasonably satisfactory to such Indemnified Party;
or (iii) the
named parties to any such action, claim or proceeding (including
any impleaded
parties) include any Indemnified Party and the Company or an
Affiliate of the
Company, and such Indemnified Party shall have been advised by
counsel that
either (x) there may be one or more legal defenses available to it
which are
different from or in addition to those available to the Company or
such
Affiliate or (y) a conflict of interest may exist if such counsel
represents
such Indemnified Party and the Company or its Affiliate; provided
that, if such
Indemnified Party notifies the Company in writing that it elects to
employ
separate counsel in the circumstances described in clause (i), (ii)
or (iii)
above, the Company shall not have the right to assume the defense
thereof and
such counsel shall be at the expense of the Company; provided,
however, that the
Company shall not, in connection with any one such action or
proceeding or
separate but substantially similar or related actions or
proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be
responsible hereunder for the fees and expenses of more than one
such firm of
separate counsel (in addition to any local counsel), which counsel
shall be
designated by such Indemnified Party. The Company shall not be
liable for any
settlement of any such action effected without its written consent
(which shall
not be unreasonably withheld). The Company agrees that it will not,
without the
Indemnified Party's prior written consent, consent to entry of any
judgment or
settle or compromise any pending or threatened claim, action or
proceeding in
respect of which indemnification or contribution may be sought
hereunder unless
the foregoing contains an unconditional release, in form and
substance
reasonably satisfactory to the Indemnified Parties, of the
Indemnified Parties
from all liability and obligation arising therefrom.
If the indemnification provided for in this Section 1.8 is
unavailable to,
or insufficient to hold harmless, any Indemnified Party in respect
of any Losses
referred to therein, then the Company shall have an obligation to
contribute to
the amount paid or payable by such Persons as a result of such
Losses in such
proportion as is appropriate to reflect the relative fault of the
Company, its
Subsidiaries and Affiliates, on the one hand, and such Indemnified
Party, on the
other hand, in connection with the actions which resulted in such
Losses as well
as any other relevant equitable considerations. The amount paid or
payable by
any such Person as a result of the Losses referred to above shall
be deemed to
include, subject to the limitations set forth in Section 1.8. any
reasonable
legal or other fees or expenses reasonably incurred by such Person
in connection
with any investigation, lawsuit or legal or administrative action
or proceeding.
The parties hereto agree that it would not be just and equitable
if
contribution pursuant to this Section 1.8 were determined by pro
rata allocation
or by any other method of allocation which does not take account of
the
equitable considerations referred to in the immediately preceding
paragraph. No
Person guilty of fraudulent misrepresentation (within the meaning
of Section
11(f) of the Securities Act) shall be entitled to contribution from
any Person
who is not guilty of such fraudulent misrepresentation.
1.9 Further Actions
During the period from the date hereof to the Closing Date, the
Company
shall (a) take all actions necessary or appropriate to cause its
representations
and warranties contained in Section 4 hereof to be true and correct
as of the
Closing Date (unless stated to refer to another date), both before
and after
giving effect to the transactions contemplated by this Agreement
and
6
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the other Documents, as if made on and as of such date, and (b)
take, or cause
to be taken, all action, and do, or cause to be done, all things
necessary,
proper or advisable under applicable law and regulations to
consummate and make
effective the transactions contemplated by this Agreement,
including, without
limitation, obtaining all consents and approvals of all Persons and
removing all
injunctive or other impediments or delays, legal or otherwise,
which are
necessary to the consummation of the transactions contemplated by
this Agreement
and the other Documents.
1.10 Other Covenants
The Company further covenants and agrees not to, and will ensure
that no
affiliate (as defined in Rule 501(b) of the Securities Act) of the
Company will
sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect
of any security (as defined in the Securities Act) that would be
integrated with
the sale of the Notes in a manner that would require the
registration under the
Securities Act of the sale to the Purchasers of the Notes.
SECTION 2. CLOSING CONDITIONS
The obligations of each Purchaser to purchase and pay for the Notes
to be
delivered to such Purchaser at the Closing shall be subject to the
satisfaction
of each of the following conditions on or before the Closing
Date:
2.1 Delivery of Documents
The Company shall have delivered to each Purchaser, and Newstone,
as
applicable, in form and substance reasonably satisfactory to such
Purchaser, the
following:
(a) The Notes being purchased by such Purchaser, duly executed by
the
Company, in the aggregate principal amount set forth opposite such
Purchaser's
name on Schedule 1.1.
(b) (i) An opinion, dated the Closing Date and addressed to such
Purchasers
and Newstone, from Goodwin Procter LLP counsel for the Company and
the
Subsidiary Guarantors, as to certain of the matters set forth on
Annex B.
(ii) All opinions delivered pursuant to the Senior Credit
Agreement,
dated the Closing Date and addressed to the Purchasers and Newstone
or
accompanied by a written authorization from the Person delivering
such
legal opinion stating that the Purchasers and Newstone may rely on
such
opinion as though it were addressed to them.
(iii) An opinion, dated the Closing Date and addressed to such
Purchaser and Newstone, from Vinson & Elkins L.L.P., counsel
for the
Purchasers, as to the matters set forth on Annex C.
(iv) An opinion, dated the Closing Date and addressed to such
Purchaser and Newstone, from Bruce Mitchell, counsel for the
Company and
certain of the Subsidiaries, as to certain of the matters set forth
on
Annex B.
7
<PAGE>
In rendering such opinions, each counsel may rely as to factual
matters
upon certificates or other documents furnished by officers and
directors of the
Constituent Companies (copies of which shall be delivered to such
Purchasers and
Newstone) and by government officials, and upon such other
documents as such
counsel deem appropriate as a basis for their opinion. Such counsel
shall opine,
as applicable, as to the Federal laws of the United States, the
laws of the
State of New York, the laws of the State of Delaware, and the laws
of the state
or states governing the Senior Credit Agreement, if other than the
State of New
York.
(c) The Consent, Amendment and Joinder Agreement to the
Stockholders
Agreement and Registration Agreement, duly executed by the Company
and other
parties thereto other than the Purchasers, (i) waiving any
violations of the
Stockholders Agreement resulting from Purchasers acquisition of the
Purchased
Equity, the redemption of the of the Series A Preferred Stock and
Series B
Preferred Stock, the issuance of the Notes and the other
transactions
contemplated by this Agreement, the Senior Credit Agreement and the
other
Documents, (ii) adding the Purchasers as parties to the
Stockholders Agreement
and Registration Agreement and (iii) agreeing that any Persons who
acquire
Note(s) and capital stock pursuant to the Put and Call Agreements
shall be added
as a party to the Stockholders Agreement and Registration Agreement
upon such
Persons execution of a joinder to the Stockholders Agreement and
Registration
Agreement (the "Amendment and Joinder Agreement").
(d) Resolutions of the Board of Directors of the Company, certified
by the
Secretary or Assistant Secretary of the Company, to be duly adopted
and in full
force and effect on such date, authorizing (i) the execution,
delivery and
performance of this Agreement, the Notes, the Senior Credit
Agreement and the
other Documents to which the Company is a party and the
consummation of the
transactions contemplated hereby and thereby, (ii) the issuance of
the Notes and
(iii) specific officers of the Company to execute and deliver this
Agreement,
the Notes, the Senior Credit Agreement, and any other Documents to
which the
Company is a party.
(e) (i) Certificates of the Chief Executive Officer and Chief
Financial
Officer of the Company, dated the Closing Date, certifying that (A)
all of the
conditions set forth in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.10
and 2.11 are
satisfied on and as of such date, (B) all of the representations
and warranties
of the Company contained or incorporated by reference herein are
true and
correct on and as of such date as though made on and as of such
date (unless
stated to relate to another date), both immediately prior to and
after giving
effect to the transactions contemplated by this Agreement and the
other
Documents and no event has occurred and is continuing, or would
result from the
issuance of the Notes or the incurrence of indebtedness under the
Senior Credit
Agreement, which constitutes or would constitute a Default or an
Event of
Default, (C) the Company has performed its obligations which are
required to be
performed on or before the closing under the Senior Credit
Agreement in
accordance therewith and with all applicable law, and (D) as to
such other
matters as such Purchasers may reasonably request, and (ii)
Certificate of the
Chief Financial Officer of the Company, dated the Closing Date,
certifying that
immediately following the purchase of the Notes and the
consummation of the
transactions contemplated by the Senior Credit Agreement, the
Company will have
a zero outstanding balance of Senior Revolver Debt, will have
outstanding not
more than $150,000,000 of Senior Term Debt, and will have
outstanding an
aggregate of at least $86,752,000 of Series A Convertible Preferred
Stock and at
least $44,573,000 of Series B Convertible Preferred Stock.
8
<PAGE>
(f) (i) audited consolidated financial statements of the Company
and the
Subsidiaries of the Company (as described in the first sentence of
Section
3.4(c)) for the fiscal years ended December 31, 2005, 2004, and
2003, and (ii)
unaudited consolidated financial statements of the Company and the
Subsidiaries
of the Company (as described in the first sentence of Section
3.4(c)) for the
two month period ended February 28, 2006, together with a
certificate of the
Chief Financial Officer of the Company to the effect that each of
the financial
statements referred to in clauses (i) and (ii) were prepared in
accordance with
GAAP and fairly present in all material respects the consolidated
financial
position, shareholders' equity and income of the Company and the
Subsidiaries of
the Company, respectively.
(g) Governmental certificates, dated the most recent practicable
date prior
to the Closing Date, showing that each of the Constituent Companies
is organized
and is in good standing in the jurisdiction of its incorporation
and is
qualified as a foreign corporation and in good standing in all
other
jurisdictions in which it has executive offices or transacts
business, except
where the failure to be so qualified could not reasonably be
expected to have a
Material Adverse Effect.
(h) Copies of each consent, license and approval required in
connection
with the execution, delivery and performance by the Company of this
Agreement,
the Notes, the Senior Credit Agreement, the Registration Agreement,
the
Stockholders Agreement, the Amendment and Joinder Agreement and the
other
Documents and the consummation of the transactions contemplated
hereby and
thereby.
(i) Copies of the Charter Documents of each of the Constituent
Companies,
certified as of a recent date by the Secretaries of State of their
respective
states of incorporation, and certified by the Secretary or
Assistant Secretary
of each of the Constituent Companies, as true and correct as of the
Closing
Date.
(j) Certificates of the Secretary or an Assistant Secretary of each
of the
Constituent Companies as to the incumbency and signatures of the
officers or
representatives of such entity executing this Agreement, the Notes,
the Senior
Credit Agreement, the Amendment and Joinder Agreement, the other
Documents and
any other certificate or other document to be delivered pursuant
hereto or
thereto, together with evidence of the incumbency of such Secretary
or Assistant
Secretary.
(k) The Pro Forma and the Projections, each in form and
substance
acceptable to Purchasers;
(l) The Management Rights Agreement, duly executed by the Company;
and
(m) Such additional information and materials as any Purchaser or
Newstone
may reasonably request, including, without limitation, copies of
any debt
agreements, security agreements and other contracts to which any of
the
Constituent Companies is a party.
2.2 Legal Investment, Purchase Permitted by Applicable Laws
Each Purchaser's acquisition of the Notes (a) shall not be
prohibited by
any applicable law or governmental regulation, release,
interpretation or
opinion (including, without limitation,
9
<PAGE>
Regulations U and X of the Board of Governors of the Federal
Reserve System),
(b) shall constitute a legal investment as of the Closing Date
under the laws
and regulations and orders of each jurisdiction to which such
Purchaser may be
subject (without resort to any "basket" or "leeway" provision), and
(c) shall
not subject such Purchaser to any penalty or, in its reasonable
judgment, other
onerous condition in or pursuant to any such law, regulation or
order; and such
Purchaser shall have received such certificates or other evidence
as such
Purchaser may reasonably request to establish compliance with this
condition.
2.3 Payment of Fees
[Intentionally Omitted]
2.4 Compliance with Agreements
The Company shall have performed and complied in all material
respects with
all agreements, covenants and conditions contained herein, in each
of the other
Documents and in any other document contemplated hereby or thereby
which are
required to be performed or complied with by the Company on or
before the
Closing Date. The Purchasers shall have received evidence, in form
and substance
reasonably satisfactory to them, that all transactions required by
the Senior
Credit Agreement to have occurred prior to or on the Closing Date
have been
consummated or will be consummated on the Closing Date and that
all
certificates, financial statements, opinions and other documents
delivered
thereunder were or will be delivered in a form reasonably
satisfactory to the
Purchasers and their counsel.
2.5 Completion of Other Transactions
Simultaneously with, prior to or immediately following the sale to
each
Purchaser of the Notes to be purchased by such Purchaser:
(a) The Company shall have redeemed all outstanding Series A
Preferred
Stock and Series B Preferred Stock at a price per share equal to
the Series A
Senior Preferred Liquidation Preference Amount or Series B Senior
Preferred
Liquidation Preference Amount (as such terms are defined in the
Company's
Amended and Restated Certificate of Incorporation), as
applicable.
(b) All of the other Purchasers listed in the signature pages
hereof shall
have consummated their purchase of Notes pursuant to this
Agreement.
(c) The Company and the lenders party thereto shall have executed
and
delivered the Senior Credit Agreement; none of the parties to the
Senior Credit
Agreement shall be in breach of any of their respective material
obligations
thereunder and all of the conditions precedent to the transactions
contemplated
thereby, other than the execution and delivery of this Agreement
and the
purchase and sale of the Notes, shall have been duly satisfied
without
amendment, modification or waiver of any material condition; and
the Company
shall have outstanding no Senior Revolver Debt and not more than
$150,000,000 of
Senior Term Debt.
10
<PAGE>
2.6 Representations and Warranties
Unless stated to relate to another date (in which case such
representations
and warranties shall be true and correct in all material respects
on and as of
such earlier date), all of the representations and warranties of
each of the
Constituent Companies contained or incorporated by reference herein
or in any of
the other Documents shall be true and correct on and as of the
Closing Date,
both before and after giving effect to the other transactions
contemplated
hereby and by the other Documents.
2.7 No Event of Default
No event shall have occurred and be continuing, or would result
from the
consummation of the transactions contemplated to be consummated on
or prior to
the Closing Date by this Agreement, the Senior Credit Agreement or
any of the
other Documents (including without limitation the purchase of the
Notes or the
incurrence of indebtedness pursuant to the Senior Credit
Agreement), which
constitutes or would constitute a Default or an Event of
Default.
2.8 Equity Acquisition
The Purchasers shall have acquired at least $10,000,000 worth of
capital
stock of the Company (the "Purchased Equity") from stockholders of
the Company
on terms and conditions acceptable to the Purchasers and Newstone
in their sole
discretion (such acquisition(s) of the Purchased Equity, the
"Equity Purchase
Transaction").
2.9 Proceedings Satisfactory
All proceedings taken in connection with the sale of the Notes,
the
transactions contemplated hereby, and all documents and papers
relating thereto,
shall be reasonably satisfactory to such Purchaser. Such Purchaser
and its
counsel shall have received copies of such documents and papers as
they may
reasonably request in connection therewith, or as a basis for the
Closing
opinions, all in form and substance satisfactory to such Purchaser
and its
counsel.
2.10 Consents and Permits
The Company shall have received all consents, permits, approvals
and
authorizations and sent or made all notices, filings, registrations
and
qualifications as may be required pursuant to any law, statute,
regulation or
rule (Federal, state, local or foreign) or pursuant to any other
agreement,
order or decree to which any of them is a party or to which any of
them is
subject, in connection with the transactions to be consummated on
or prior to
the Closing Date as contemplated by this Agreement or any of the
other
Documents.
2.11 No Material Adverse Effect
Subsequent to December 31, 2005, (a) the Constituent Companies,
taken as a
whole, shall not have suffered any adverse change in their
properties, business,
operations, assets, condition (financial or otherwise) or prospects
which could
reasonably be expected to result in a Material Adverse Effect; and
(b) except as
set forth in Schedule 2.11 hereto, (i) there shall not have been
any material
change in the capital stock of the Company or in the capital stock
or long-term
debt,
11
<PAGE>
or material increase in short-term debt, of the Constituent
Companies, taken as
a whole, (ii) none of the Constituent Companies shall have incurred
any
liability or obligation, direct or contingent, that is material to
the
Constituent Companies, taken as a whole, is required to be
disclosed on a
balance sheet in accordance with GAAP and is not disclosed on the
latest balance
sheet previously provided to the Purchasers.
2.12 No Material Judgment or Order
There shall not be on the Closing Date any judgment or order of a
court of
competent jurisdiction or any ruling of any agency of the Federal,
state or
local government that, in the reasonable judgment of any Purchaser
or its
counsel, would prohibit the sale or issuance of the Notes hereunder
or subject
the Company to any material penalty if the Notes were to be issued
and sold
hereunder.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants on the date hereof and as of
the
Closing, as follows:
3.1 Organization, Authorization, Capitalization
(a) Each of the Consolidated Parties (i) is duly organized,
validly
existing and in good standing under the laws of the jurisdiction of
its
incorporation or organization, (ii) has the corporate or other
necessary power
and authority, and the legal right, to own and operate its
Property, to lease
the Property it operates as lessee and to conduct the business in
which it is
currently engaged and (iii) is duly qualified as a foreign entity
and in good
standing under the laws of each jurisdiction where its ownership,
lease or
operation of Property or the conduct of its business requires
such
qualification, other than in such jurisdictions where the failure
to be so
qualified and in good standing could not reasonably be expected to
have a
Material Adverse Effect.
(b) Each of the Constituent Companies has taken all actions
necessary to
authorize it (i) to execute, deliver and perform all of its
obligations under
this Agreement, the Senior Credit Agreement and the other Documents
to which it
is a party, (ii) to issue and perform all of its obligations under
the Notes and
(iii) to consummate the transactions contemplated hereby and
thereby. Each of
this Agreement, the Notes, the Senior Credit Agreement, the
Amendment and
Joinder Agreement and the other Documents to which a Constituent
Company is a
party is a legally valid and binding obligation of such entity,
enforceable
against it in accordance with their respective terms, except for
(x) the effect
thereon of bankruptcy, insolvency, reorganization, moratorium and
other similar
laws relating to or affecting the rights of creditors generally and
(y)
limitations imposed by equitable principles upon the specific
enforceability of
any of the remedies, covenants or other provisions thereof and upon
the
availability of injunctive relief or other equitable remedies.
(c) The total Equity Interests of the Company consist of (i)
20,000
authorized shares of Series A Preferred Stock, of which 20,000
shares were
issued and outstanding on the date hereof and no shares will be
issued and
outstanding upon consummation of the transactions contemplated
hereby, (ii)
7,300 authorized shares of Series B Preferred Stock, of which
12
<PAGE>
7,272.727 shares were issued and outstanding on the date hereof and
no shares
will be issued and outstanding upon consummation of the
transactions
contemplated hereby, (iii) 100,000 authorized shares of Series A
Convertible
Preferred Stock, of which 86,002.49 shares were issued and
outstanding on the
date hereof and 86,002.49 shares will be issued and outstanding
upon
consummation of the transactions contemplated hereby, (iv) 41,000
authorized
shares of Series B Convertible Preferred Stock, of which
40,170.8501 shares were
issued and outstanding on the date hereof and 40,170.8501 shares
will be issued
and outstanding upon consummation of the transactions contemplated
hereby, (v)
150,000 authorized shares of Perpetual Preferred Stock, of which no
shares were
issued and outstanding on the date hereof and no shares will be
issued and
outstanding upon consummation of the transactions contemplated
hereby, (vi)
5,250,000 authorized shares of Convertible Nonvoting Common Stock,
of which
3,828,036.2616 shares were issued and outstanding on the date
hereof and
3,828,036.2616 shares will be issued and outstanding upon
consummation of the
transactions contemplated hereby, and (vii) 17,250,000 authorized
shares of
Common Stock, of which 8,711,154.7386 shares were issued and
outstanding on the
date hereof and 8,711,154.7386 shares will be issued and
outstanding upon
consummation of the transactions contemplated hereby, in each case
free and
clear of any Lien, limitation on voting rights, encumbrance, equity
or adverse
interest of any nature, except as set forth in the Shareholders
Agreement or
Permitted Liens. The record holders of the Company's capital stock,
immediately
prior to consummation of the Equity Purchase Transaction, and the
number of
shares held by each such Person are set forth on Schedule 3.1. The
Persons
listed on Schedule 3.1 are the only Subsidiaries of the Company.
Schedule 3.1
sets forth as of the Closing Date, the jurisdiction of
incorporation of each
such Subsidiary, the number of authorized shares of each class of
Capital Stock
of each such Subsidiary, the number of outstanding shares of each
class of
Capital Stock, and the number and percentage of outstanding shares
of each class
of Capital Stock of each such Subsidiary owned (directly or
indirectly) by any
Person. The Company owns, directly or indirectly, 100% of the
outstanding Equity
Interests or other securities evidencing equity ownership of each
of the
Consolidated Subsidiaries, in each case free and clear of any Lien
(other than
Permitted Liens), limitation on voting rights, encumbrance, equity
or adverse
interest of any nature, except for Permitted Liens. All of the
outstanding
Equity Interests of the Company and each of the Subsidiaries of the
Company have
been duly authorized and validly issued, are fully paid and
nonassessable and
were not issued in violation of, and are not subject to, any
preemptive or
similar rights. Except as set forth on Schedule 3.1, the Company
does not own,
directly or indirectly, any capital stock or any other securities
of any
corporation, nor does it have any Equity Interest in any firm,
partnership,
association or other entity. The Subsidiary Guarantors constitute
all of the
Subsidiaries of the Company which are not Regulated
Subsidiaries.
(d) On the Closing Date, the Notes will be duly authorized and
validly
issued. Except as set forth on Schedule 3.1, there are no
outstanding (i)
securities convertible into or exchangeable for any Equity
Interests of any of
the Constituent Companies, (ii) options, warrants or other rights
to purchase or
subscribe to Equity Interests of any of the Constituent Companies
or securities
convertible into or exchangeable for Equity Interests of any of the
Constituent
Companies, (iii) contracts, commitments, agreements,
understandings,
arrangements, calls or claims of any kind relating to the issuance
of any Equity
Interests of any of the Constituent Companies, any such convertible
or
exchangeable securities or any such options, warrants or rights or
(iv) voting
trusts, agreements, contracts, commitments, understandings or
arrangements with
respect to the voting of any of the Equity Interests of any of the
Constituent
Companies.
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<PAGE>
(e) Except for the Registration Agreement, none of the
Constituent
Companies has entered into an agreement to register its securities
under the
Securities Act. Except for this Agreement and as set forth on
Schedule 3.1
hereto, none of the Constituent Companies has entered into any
agreement to
issue, purchase or sell any of its securities.
(f) There are no securities of the Company registered under the
Exchange
Act or listed on a national securities exchange registered under
Section 6 of
the Exchange Act or quoted in a United States automated
inter-dealer quotation
system.
3.2 No Violation or Conflict, No Default
(a) Neither the execution, delivery or performance of this
Agreement, the
Notes, the Senior Credit Agreement, the Amendment and Joinder
Agreement or any
of the other Documents by the Company and the Subsidiary
Guarantors, nor the
compliance with their obligations hereunder or thereunder, nor the
consummation
of the transactions contemplated hereby and thereby, nor the
issuance, sale or
delivery of the Notes will:
(i) violate any provision of the Charter Documents of any of
the
Constituent Companies;
(ii) violate any statute, law, rule or regulation or any
judgment,
decree, order, regulation or rule of any court or governmental
authority or
body to which any of the Constituent Companies or any of their
respective
properties may be subject;
(iii) permit or cause the acceleration of the maturity of any debt
or
obligation of any of the Constituent Companies; or
(iv) violate, or be in conflict with, or constitute a default
under,
or permit the termination of, or require the consent of any Person
under,
or result in the creation or imposition of any Lien (other than
Permitted
Liens) upon any Property of any of the Constituent Companies under,
any
mortgage, indenture, loan agreement, note, debenture, agreement
for
borrowed money or any other agreement to which any of the
Constituent
Companies is a party or by which any of the Constituent Companies
(or their
respective properties) may be bound, other than such violations,
conflicts,
defaults, terminations and Liens, or such failures to obtain
consents,
which could not reasonably be expected to result in a Material
Adverse
Effect.
(b) None of the Constituent Companies is in default (without giving
effect
to any grace or cure period or notice requirement) under any
agreement for
borrowed money or under any agreement pursuant to which any of its
securities
were sold which default could reasonably be expected to have a
Material Adverse
Effect.
3.3 Use of Proceeds
The net proceeds from the sale of the Notes hereunder will be used
solely
to (a) repay any Indebtedness outstanding under the Company's
existing senior
credit facilities which is not continued as loans under the Senior
Credit
Agreement, (b) prepay any or all of CDVC's outstanding 12.5% senior
subordinated
notes due July 11, 2010, (c) redeem any or all of the
14
<PAGE>
Series A Preferred Stock and Series B Preferred Stock, (d) pay any
or all of the
fees and expenses incurred in connection with the Senior Credit
Agreement, this
Agreement and the transactions set forth therein and herein, and
(e) provide
liquidity for working capital.
3.4 No Material Adverse Change; No Internal Control Event;
Financial Statements
(a) No Material Adverse Change. Since December 31, 2005 neither the
Company
nor any of the Subsidiaries of the Company has suffered any
material adverse
change in their properties, business, operations, assets, condition
(financial
or otherwise) or prospects which could reasonably be expected to
result in a
Material Adverse Effect.
(b) No Internal Control Event. To the best knowledge of the
Company, no
Internal Control Event exists or has occurred since the date of the
last audited
financial statements delivered pursuant to Section 5.2(a) that has
resulted in
or could reasonably be expected to result in a misstatement in any
material
respect in any financial information delivered or to be delivered
to the
Holders, of (i) covenant compliance calculations provided
hereunder, or (ii) the
assets, liabilities, financial condition or results of operations
of the Company
and its Consolidated Subsidiaries on a consolidated basis.
(c) Financial Statements. The Company has previously provided to
each
Purchaser or its Account Manager (i) the audited consolidated
balance sheet of
the Company and the Subsidiaries of the Company as of December 31,
2005, 2004,
and 2003 and the related audited consolidated statements of income,
changes in
shareholders' equity and cash flows of the Company and the
Subsidiaries of the
Company for each such fiscal year, and (ii) the unaudited
consolidated balance
sheet of the Company and the Subsidiaries of the Company as of
February 28,
2006, and the related consolidated statements of income, changes
in
shareholders' equity and cash flows of the Company and the
Subsidiaries of the
Company for the two month period then ended. Such financial
statements present
fairly in all material respects the consolidated financial
position, results of
operations, shareholders' equity and cash flows of the Company and
the
Subsidiaries of the Company at the respective dates or for the
respective
periods to which they apply. Except as disclosed therein, such
statements and
related notes have been prepared in accordance with GAAP
consistently applied
throughout the periods involved, except, in the case of the
unaudited financial
statements, for the absence of footnotes and subject to annual
audit
adjustments. During the period from December 31, 2005, to and
including the
Closing Date, there has been no sale, transfer or other disposition
by any
Consolidated Party of any material part of the business or property
of the
Consolidated Parties, taken as a whole, and no purchase or other
acquisition by
any of them of any business or property (including any Capital
Stock of any
other Person) material in relation to the consolidated financial
condition of
the Consolidated Parties, taken as a whole, in each case, which is
not reflected
in the foregoing financial statements or in the notes thereto. The
balance
sheets and the notes thereto included in the foregoing financial
statements
disclose all material liabilities, actual or contingent, of the
Company, CDVC
and their respective Consolidated Subsidiaries as of the dates
thereof. All
financial statements concerning the Company and the Subsidiaries of
the Company
that will hereafter be furnished by the Company and the
Subsidiaries of the
Company to the Purchasers or any Holder pursuant to this Agreement
will be
prepared in accordance with GAAP consistently applied (except as
disclosed
therein) and will present fairly in all material respects the
financial
condition of the corporations covered thereby as at the dates
thereof and the
results of their
15
<PAGE>
operations for the periods then ended, except, in the case of the
unaudited
financial statements, for the absence of footnotes and subject to
annual audit
adjustments.
(d) Pro Forma. The Pro Forma was prepared in accordance with GAAP,
with
only such pro forma adjustments thereto as would be required to
present fairly
the information contained therein, and is based upon good faith
estimates and
assumptions believed by the Company to be reasonable at the time
made.
(e) Projections. True and complete copies of (i) projections of
the
consolidated revenues, earnings before depreciation, interest and
taxes,
operating margins, net income and capital expenditures of the
Company and the
Subsidiaries of the Company for each of the fiscal years ending
December 31,
2006, 2007, 2008, 2009 and 2010, prepared by senior management of
the Company
assuming the consummation of the transactions contemplated hereby
and by the
other Documents (the "Projections") and (ii) the assumptions and
supplemental
data used in preparing the Projections (collectively, the
"Supplemental Data")
have been delivered by the Company to the Purchasers. The
Projections were
prepared on a basis consistent with both the financial statements
of the Company
and its Consolidated Subsidiaries and the Supplemental Data which
represent a
reasonable basis for such preparation. The Projections and the
Supplemental Data
are based upon good faith estimates and assumptions believed by the
Company to
be reasonable and attainable at the time made; it being understood
by the
Purchasers, however, that projections as to future events are not
to be viewed
as facts and that actual results during the period or periods
covered by such
Projections may differ from the projected results and that such
differences may
be material.
3.5 Full Disclosure
Neither this Agreement (including without limitation the
representations
and warranties incorporated herein by reference), the financial
statements
referred to in Section 3.4, any Document, nor any other document,
certificate or
written statement furnished by or on behalf of any of the
Constituent Companies
or any of their respective agents or employees to any Purchaser in
connection
with the negotiation and sale of the Notes, when taken as a whole,
contains any
untrue statement of a material fact or omits or will omit to state
a material
fact necessary to make the statements contained herein or therein
not misleading
in light of the circumstances under which they were made. There is
no material
fact known to any of the Constituent Companies or any of their
respective agents
or employees that has had or could reasonably be expected to have a
Material
Adverse Effect and that has not been disclosed herein or in such
other
documents, certificates and written statements furnished to the
Purchasers for
use in connection with the transactions contemplated hereby.
3.6 Third Party Consents
Neither the nature of the Company nor of any of its businesses
or
properties, nor any relationship between the Company and any other
Person, nor
any circumstance in connection with the offer, issuance, sale or
delivery of the
Notes at the Closing nor the performance by the Constituent
Companies of their
other obligations hereunder or under any other Document, or the
consummation of
the transactions contemplated by, this Agreement, or any other
Document, as the
case may be, is such as to require a consent, approval or
authorization of, or
notice to, or
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filing, registration or qualification with, any governmental
authority or other
Person on the part of any Constituent Company as a condition to the
execution
and delivery of this Agreement or any of the other Documents or the
offer,
issuance, sale or delivery of the Notes at the Closing other than
such consents,
approvals, authorizations, notices, filings, registrations or
qualifications
which shall have been made or obtained, except for those that the
failure to
obtain could not reasonably be expected to result, individually or
in the
aggregate, in a Material Adverse Effect, on or prior to the Closing
Date (and
copies of which will be delivered to the Purchasers) and such
filings under
Federal and state securities laws which are permitted to be made
after the
Closing Date and which the Company hereby agrees to file within the
time period
prescribed by applicable law.
3.7 No Violation of Regulations of Board of Governors of Federal
Reserve System
None of the transactions contemplated by this Agreement (including,
without
limitation, the use of the proceeds from the sale of the Notes)
will violate or
result in a violation of Section 7 of the Exchange Act or any
regulation issued
pursuant thereto, including, without limitation, Regulations U and
X of the
Board of Governors of the Federal Reserve System.
3.8 Private Offering
Assuming the truth and correctness of the representations and
warranties
set forth in Section 4 hereof, the sale of the Notes hereunder is
exempt from
the registration and prospectus delivery requirements of the
Securities Act. In
the case of each offer or sale of the Notes, no form of general
solicitation or
general advertising was used by any of the Constituent Companies or
their
respective representatives, including, but not limited to,
advertisements,
articles, notices or other communications published in any
newspaper, magazine
or similar medium or broadcast over television or radio, or any
seminar or
meeting whose attendees have been invited by any general
solicitation or general
advertising.
The Purchasers are the sole purchasers of the Notes. Except as set
forth on
Schedule 3.8, no securities have been issued and sold by the
Company within the
six-month period immediately prior to the date hereof. None of the
securities
issued within such six-month period could be integrated with the
issuance of the
Notes as a single offering for purposes of the Securities Act, and
the Company
agrees that neither it, nor anyone acting on its behalf, will offer
or sell the
Notes, or any portion of them, if such offer or sale might bring
the issuance
and sale of the Notes to any Purchaser hereunder within the
provisions of
Section 5 of the Securities Act nor offer any similar securities
for issuance or
sale to, or solicit any offer to acquire any of the same from, or
otherwise
approach or negotiate with respect thereto, with anyone if the sale
of the Notes
and any such securities could be integrated as a single offering
for the
purposes of the Securities Act, including without limitation
Regulation D
thereunder. It is not necessary, in connection with the
transactions
contemplated hereby, to qualify an indenture under the Trust
Indenture Act of
1939, as amended.
3.9 Governmental Regulations
None of the Constituent Companies is subject to regulation under
the
Investment Company Act of 1940, as amended, the Federal Power Act,
the
Interstate Commerce Act, the
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Commodity Exchange Act or to any Federal or state statute or
regulation limiting
its ability to incur indebtedness for borrowed money or consummate
the
transactions contemplated hereby and by the other Documents.
3.10 Brokers
Except as set forth on Schedule 3.10, none of the Constituent
Companies has
dealt with any broker, finder, commission agent or other such
intermediary in
connection with the sale of the Notes and the transactions
contemplated by this
Agreement and the other Documents, and none of the Constituent
Companies is
under any obligation to pay any broker's or finder's fee or
commission or
similar payment in connection with such transactions.
The Company agrees to indemnify and hold the Holders harmless from
and
against any and all actions, suits, claims, costs, expenses,
losses, liabilities
and/or obligations in connection with or relating to any broker's
or finder's
fees or commission or similar payment in connection with such
transactions,
except with respect to such fees or commissions incurred by any
Purchaser for
its account, so long as the Company receives notice of any such
action, suit,
claim, etc., reasonably promptly after the Holders become aware
thereof;
provided that the failure to give such notice as provided in this
sentence shall
not relieve the Company of its obligations under this sentence
except to the
extent, and only to the extent, that the Company is materially
prejudiced by
such failure to give notice (as determined by a court of competent
jurisdiction
in a final nonappealable judgment).
3.11 Solvency
Immediately prior to and after giving effect to the issuance of the
Notes
and the execution, delivery and performance of this Agreement, the
Senior Credit
Agreement and the other Documents and any instrument governing
Indebtedness of
the Company incurred as of the Closing Date, the Company is
Solvent.
3.12 Ownership of Personal Property; Liens
Each Consolidated Party is the owner of, and has good and
marketable title
to, all of its respective Properties and assets, and none of such
assets, is
subject to any Lien other than Permitted Liens.
3.13 Litigation
(a) There is no action, claim, suit, citation or proceeding
(including,
without limitation, an investigation or partial proceeding, such as
a
deposition), whether commenced, or to the knowledge of the Company,
threatened
("Proceedings") against or affecting any of the Constituent
Companies or any of
their properties or assets, except for such Proceedings that, if
finally
determined adversely to any of the Constituent Companies, could not
reasonably
be expected to have a Material Adverse Effect, and there is no
Proceeding
seeking to restrain, enjoin, prevent the consummation of or
otherwise challenge
this Agreement or any of the other Documents or the transactions
contemplated
hereby or thereby.
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(b) None of the Constituent Companies is subject to any judgment,
order,
decree, rule or regulation of any court, governmental authority or
arbitration
board or tribunal that has had a Material Adverse Effect or that
could
reasonably be expected to have a Material Adverse Effect.
3.14 Labor Relations
None of the Constituent Companies, nor any Person for whom any
Constituent
Company is or may be responsible by law or contract, is engaged in
any unfair
labor practice that could reasonably be expected to have a Material
Adverse
Effect. There is (a) no unfair labor practice charge or complaint
pending or
threatened against any of the Constituent Companies, or any Person
for whom any
Constituent Company is or may be responsible by law or contract,
before the
National Labor Relations Board or any corresponding state, local or
foreign
agency, and no grievance or arbitration proceeding arising out of
or under any
collective bargaining agreement is so pending or, to the knowledge
of the
Company, threatened, (b) no strike, labor dispute, slowdown or
stoppage pending
or, to the knowledge of the Company, threatened against any of the
Constituent
Companies, or any Person for whom any Constituent Company is or may
be
responsible by law or contract, and (c) no union representation
claim or
question existing with respect to the employees of any of the
Constituent
Companies, or any Person for whom any Constituent Company is or may
be
responsible by law or contract, and no union organizing activities
taking place.
None of the Constituent Companies, nor any Person for whom any
Constituent
Company is or may be responsible by law or contract, is a party to
any
collective bargaining agreement. The hours worked by and payments
made to
employees of the Consolidated Parties have not been in violation in
any material
respect of the Fair Labor Standards Act or any other applicable
federal, state,
local or foreign law dealing with such matters. All payments due
from any
Consolidated Party, or for which any claim may be made against any
Consolidated
Party, on account of wages, employee health and welfare insurance
or other
benefits, have been paid or accrued as a liability on the books of
the
Consolidated Parties.
Except such as could not, singly or in the aggregate, reasonably
be
expected to result in a Material Adverse Effect, neither the
Company nor any of
the Subsidiaries of the Company has violated any applicable
Federal, state,
provincial or foreign law relating to employment or employment
practices or the
terms and conditions of employment, including, without
limitation,
discrimination in the hiring, promotion or pay of employees, wages,
hours of
work, plant closings and layoffs, collective bargaining, and
occupational safety
and health, or any provisions of ERISA or the rules and regulations
promulgated
thereunder or any other applicable law (whether foreign or
domestic) relating to
or governing the operation or maintenance of any plan or
arrangement falling
within the definition of an "employee benefit plan" (as such term
is defined in
Section 3 of ERISA) or any other employee benefit plan or
arrangement.
3.15 Taxes
All Tax Returns required to be filed by any of the Constituent
Companies
have been timely filed. All Taxes due or owing from any of the
Constituent
Companies that are due and payable have been paid, other than those
(a) being
contested in good faith and for which an adequate reserve or
accrual has been
established in accordance with GAAP, (b) those currently payable
without penalty
or interest and for which an adequate reserve or accrual has been
established or
extensions duly filed, or (c) in the case of other assessments and
other
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governmental charges or levies imposed upon a Constituent Company
or upon a
Constituent Company's income or profits, or upon any of its
Properties, those in
an aggregate amount not to exceed $50,000. The Company does not
know of (i) any
actual or proposed material additional Taxes or (ii) any probable
basis for the
imposition of any material additional Taxes for any fiscal period
against any of
the Constituent Companies.
3.16 Environmental Matters
To the knowledge of the Company, except as could not reasonably be
expected
to have a Material Adverse Effect:
(a) each of the Constituent Companies, and any Person for whom
any
Constituent Company is or may be responsible by law or contract
(which such
Person is included in the definition of "Company" for purposes of
this Section
3.16), is in full compliance with all Environmental Laws, which
compliance
includes, but is not limited to, (i) compliance with all standards,
schedules
and timetables therein, (ii) the possession of all permits,
licenses, approvals
and other authorizations required under the Environmental Laws or
with respect
to the operation of the Constituent Companies' or such Person's
business,
Property and assets, and compliance with the terms and conditions
thereof and
(iii) any Federal, state, local or foreign approvals required
pursuant to any
Environmental Laws that pertain or relate to the transactions
contemplated by
this Agreement;
(b) none of the Constituent Companies has received any
communication
(written or oral), whether from a governmental authority, citizens
group,
employee or otherwise, that alleges that any of the Constituent
Companies is not
in full compliance with any Environmental Law, none of the
Constituent Companies
has any liability under any Environmental Law, and there are no
past or present
actions, activities, circumstances, conditions, events or incidents
that may be
expected to prevent or interfere with full compliance with
applicable
Environmental Laws in the future;
(c) there is no Environmental Claim pending or threatened against
any of
the Constituent Companies;
(d) there are no past or present actions, activities,
circumstances,
conditions, events or incidents, including, without limitation, the
release,
emission, discharge, presence or disposal of any Material of
Environmental
Concern, that could be expected to form the basis of any
Environmental Claim
against any of the Constituent Companies;
(e) no real property or facility owned, used, operated, leased,
managed or
controlled by any of the Constituent Companies, or any predecessor
in interest,
is listed or proposed for listing on the National Priorities List
or the
Comprehensive Environmental Response, Compensation, and Liability
Information
System pursuant to the Comprehensive Environmental Response,
Compensation, and
Liability Act, as amended, or on any other state or local list
established
pursuant to any Environmental Law;
(f) there have been no releases (including, without limitation, any
past or
present releasing, spilling, leaking, pumping, pouring, emitting,
emptying,
discharging, injecting, escaping, leaching, disposing or dumping,
on-site or
off-site) of Materials of Environmental
20
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Concern by any of the Constituent Companies, or any predecessor in
interest, at,
on, under, from or into any facility or real property owned,
operated, leased,
managed or controlled by any of the Constituent Companies, and none
of the
Constituent Companies has incurred or expects to incur liability
for
contamination at, on, under, from or into any onsite or off-site
locations where
any of the Constituent Companies have stored, disposed or arranged
for the
disposal of Materials of Environmental Concern;
(g) no underground storage tank or other underground storage
receptacle, or
related piping, is located on a facility or Property currently
owned, operated,
leased, managed or controlled by any of the Constituent
Companies;
(h) there is no asbestos contained in or forming part of any
building,
building component, structure or office space, and no
polychlorinated biphenyls
(PCBS) or PCB-containing items are used or stored at any Property,
owned,
operated, leased, managed or controlled, whether currently or in
the past (for
which such matters the Constituent Companies could be liable), by
any of the
Constituent Companies.
"Environmental Claim" means any claim, action, cause of action,
investigation of which the Constituent Companies, including any of
their
employees, are aware, or notice (written or oral) by any Person
alleging
potential liability (including, without limitation, potential
liability for
investigatory costs, cleanup costs, governmental response costs,
natural
resources damages, property damages, personal injuries, or
penalties) arising
out of, based on or resulting from (a) the presence, or release
into the
environment, of any Material of Environmental Concern at any
location, whether
or not owned or operated by any of the Constituent Companies, or
(b)
circumstances forming the basis of any violation, or alleged
violation, of any
Environmental Law.
"Environmental Laws" means all Federal, state, local and foreign
laws and
regulations relating to pollution or protection of human health or
the
environment (including, without limitation, ambient air, surface
water, ground
water, land surface or subsurface strata), including, without
limitation, laws
and regulations relating to emissions, discharges, releases or
threatened
releases of Materials of Environmental Concern, or otherwise
relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal,
transport or handling of Materials of Environmental Concern.
"Materials of Environmental Concern" means chemicals,
pollutants,
contaminants, industrial, toxic or hazardous wastes, substances or
constituents,
petroleum and petroleum products (or any by-product or constituent
thereof),
asbestos or asbestos containing materials, or PCBS.
3.17 ERISA
No condition exists or event or transaction has occurred in
connection with
any "employee benefit plan" maintained or contributed to by the
Company or any
ERISA Affiliate (any such plan herein referred to as a "Plan") that
has resulted
or is reasonably likely to result in the Company or any ERISA
Affiliate
incurring any liability, fine or penalty except as could not
reasonably be
expected to have a Material Adverse Effect. No Plan is subject to
Title IV of
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ERISA or is a "multiemployer plan" (as defined in Section 3(37) of
ERISA). There
is no liability to the Company or to any ERISA Affiliate under
Title IV of
ERISA, whether actual or contingent. No amounts payable pursuant to
any Plan, or
any other policy, scheme, arrangement, contract, or agreement will,
in
connection with the transactions contemplated under this Agreement
or the other
Documents, fail to be deductible for Federal income tax purposes by
virtue of
section 280G of the Code. No Plan has been subject to any
compliance or closing
agreement program or other correction procedure, whether voluntary
or
involuntary, and there is no investigation, audit or inquiry
pending with
respect to a Plan by any regulatory agency. Each Plan is in
compliance with the
applicable provisions of ERISA, the Code, and any other applicable
law, except
to the extent that failure to so comply would not reasonably be
expected to have
a Material Adverse Effect. Each Plan may be terminated at any time
by the
Company or an ERISA Affiliate without any liability, cost, or
expense to the
Company or to an ERISA Affiliate other than a liability, cost, or
expense which,
in the aggregate, would not reasonably be expected to have a
Material Adverse
Effect. Except as set forth on Schedule 3.17 hereto, neither the
Company nor any
ERISA Affiliate is a "party in interest" or a "disqualified person"
with respect
to any "employee benefit plan." Neither the execution and delivery
of this
Agreement, the other Documents and the sale of the Notes to be
purchased by the
Purchasers nor the consummation of the financing transactions
contemplated
hereunder will result in a "prohibited transaction" within the
meaning of
Section 406 of ERISA or Section 4975 of the Code that is not
subject to an
exemption contained in ERISA or in the rules and regulations
adopted by the U.S.
Department of Labor thereunder. The representation by the Company
and the
Subsidiary Guarantors in the preceding sentence is made in reliance
upon and
subject to the accuracy of the Purchasers' representation in
Section 4.5 with
respect to their source of funds and is subject, in the event that
the source of
the funds used by the Purchasers in connection with this
transaction is an
insurance company general account, to the application of Prohibited
Transaction
Class Exemption 95-60, 60 Fed. Reg. 35,925 (1995), compliance with
the
regulations issued under Section 401(c)(1)(A) of ERISA, or the
issuance of any
other prohibited transaction exemption or similar relief, to the
effect that
assets in an insurance company general account do not constitute
assets of an
"employee benefit plan" within the meaning of Section 3(3) of ERISA
or of a
"plan" within the meaning of Section 4975(e)(1) of the Code. The
terms "employee
benefit plan" and "party in interest" shall have the meanings
assigned to such
terms in section 3 of ERISA, the term "disqualified person" shall
have the
meaning assigned to such term in section 4975 of the Code, the term
"prohibited
transaction" shall have the meaning assigned to such term in
Section 406 of
ERISA and section 4975 of the Code, and the term "ERISA Affiliate"
shall mean
all corporations and all trades or businesses (whether or not
incorporated)
which are under common control with the Company and which, along
with the
Company, are treated as a single employer under sections 414(b),
(c), (m) or (o)
of the Code.
3.18 Intellectual Property
(a) Schedule 3.18 hereto contains a complete and accurate list of
(a) all
of the Company's and the Subsidiaries' of the Company intellectual
property
which is the subject of a registration or application or
constitutes material
unregistered copyrights or trademarks and (b) all license
agreements to which
the Company or the Subsidiaries of the Company is a party or by
which they are
bound relating to intellectual property, whether as the licensee or
licensor
thereunder. The Constituent Companies own or possess adequate
licenses or other
rights to use all trademarks, service marks, trade names,
copyrights,
proprietary techniques, patents,
22
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technology, know-how and processes necessary to conduct the
business now
conducted by the Constituent Companies and, none of the Constituent
Companies
has received any notice of infringement of or conflict with (or
knows of such
infringement of or conflict with) asserted rights of others with
respect to
trademarks, service marks, trade names, copyrights, proprietary
techniques,
patents, technology, know-how or processes which, individually or
in the
aggregate, could reasonably be expected to result in any Material
Adverse
Effect. The Company does not in the conduct of its business as now
conducted,
infringe or conflict with any right of any third party, known to
the Constituent
Companies, where such infringement or conflict could reasonably be
expected to
result in any Material Adverse Effect.
(b) All proprietary information owned by each Consolidated Party
has been
maintained in confidence by the Consolidated Parties and their
respective former
and current employees, agents, consultants and independent
contractors in
accordance with protection procedures customarily used to protect
confidential
information. The Consolidated Parties have taken all commercially
reasonable
steps to restrict the right of all former and current members of
management and
key personnel of each Consolidated Party, including all former and
current
employees, agents, consultants and independent contractors who have
materially
contributed to or participated in the conception and development of
any of the
material intellectual property owned by any Consolidated Party
(collectively,
"Personnel"), to disclose proprietary information of the
Consolidated Parties
and their respective clients. The Consolidated Parties have taken
commercially
reasonable steps to require all Personnel either (i) to be party to
a
"work-for-hire" arrangement or agreement with the Consolidated
Parties, in
accordance with applicable federal and state law, that has accorded
the
Consolidated Parties full, effective, exclusive and original
ownership of all
tangible and intangible property thereby arising or (ii) to execute
appropriate
instruments of assignment in favor of the Consolidated Parties as
assignee that
have conveyed to the Consolidated Parties full, effective and
exclusive
ownership of all tangible and intangible property thereby arising.
To the
knowledge of the Consolidated Parties, no former or current
Personnel have any
claim against the Consolidated Parties in connection with such
Person's
involvement in the conception and development of any intellectual
property and
no such claim has been asserted or is threatened. None of the
current officers
and employees of any of the Consolidated Parties have any patents
issued or
applications pending for any device, process, design or invention
of any kind
now used or needed by any of the Consolidated Parties in the
furtherance of its
business operations, which patents or applications have not been
assigned to the
Consolidated Parties, with such assignment duly recorded in the
United States
Patent Office.
3.19 Compliance with Laws
The Company and each of the Subsidiaries of the Company has
obtained and
has maintained in good standing any licenses, permits, consents
and
authorizations required to be obtained by it under all laws or
regulations
relating to its business (collectively, the "Laws"), except those
the absence of
which (neither individually nor in the aggregate) could reasonably
be expected
to have a Material Adverse Effect, and each such license, permit,
consent and
authorization remains in full force and effect, except as to any of
the
foregoing the absence of which (individually or in the aggregate)
could not
reasonably be expected to have a Material Adverse Effect. The
Company and each
of the Subsidiaries of the Company are in compliance with the Laws
in all
material respects, except for any such failure which could not
reasonably be
expected to have a Material Adverse Effect, and there is no pending
or, to the
Company's or any
23
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of the Subsidiaries' of the Company knowledge, threatened, action
or proceeding
against the Company or any of the Subsidiaries of the Company under
any of the
Laws, other than any such actions or proceedings which,
individually or in the
aggregate, if adversely determined, could not reasonably be
expected to have a
Material Adverse Effect. To the knowledge of the Constituent
Parties, as of the
Closing Date, none of the Consolidated Parties or any of their
respective
material Properties or assets is subject to or in default with
respect to any
judgment, writ, injunction, decree or order of any court or other
Government
Body. Except as disclosed in Schedule 3.19, none of the
Consolidated Parties has
received any written communication prior to the Closing Date from
any Government
Body that alleges that any of the Consolidated Parties is not in
compliance in
any material respect with any Law, except for allegations that have
been
satisfactorily resolved and are no longer outstanding.
3.20 Indebtedness
Other than the Notes, the Senior Credit Agreement and the notes
issued
pursuant thereto, and the Indebtedness listed on Schedule 3.20,
none of the
Constituent Companies (a) is a party to any loan or similar
agreement, (b) has
any notes, bonds, debentures or other evidences of indebtedness
outstanding nor
(c) has guaranteed the obligations or liabilities of any
Person.
3.21 Investments
None of the Constituent Companies has any Investments, other than
Permitted
Investments.
3.22 Insurance
The Consolidated Parties maintain policies of fire and casualty,
liability,
business interruption and other forms of insurance in such amounts,
with such
deductibles and against such risks and losses as are in accordance
with normal
industry practice for the business and assets of the Consolidated
Parties. All
such policies are in full force and effect, all premiums due and
payable thereon
have been paid (other than retroactive or retrospective premium
adjustments that
are not yet, but may be, required to be paid with respect to any
prior period
under comprehensive general liability and worker's compensation
insurance
policies), and no notice of cancellation or termination has been
received with
respect to any such policy which has not been replaced on
substantially similar
terms prior to the date of such cancellation. The activities and
operations of
the Consolidated Parties have been conducted in a manner so as to
conform in all
material respects to all applicable provisions of such insurance
policies.
Schedule 3.22 hereto lists all material insurance policies
insuring, and all
material performance bonds issued in favor of, any of the
Consolidated Parties,
specifying (a) the name of the insurer or bonding company, (b) the
policy
number, (c) the risk insured or bonded, (d) the limits of coverage,
(e) any
notice of cancellation or nonrenewal received by any of the
Consolidated Parties
and (f) the date through which coverage will continue by virtue of
premiums
already paid.
3.23 Survival of Representations and Warranties
All of the Company's representations and warranties hereunder and
under the
Senior Credit Agreement, the Registration Agreement, the
Stockholders Agreement
and the other
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Documents shall survive the execution and delivery of the same,
any
investigation by any Purchaser and the issuance of the Notes.
3.24 Compliance with HIPAA
To the extent that and for so long as any Consolidated Party is a
"covered
entity" within the meaning of or otherwise subject to HIPAA, each
Consolidated
Party (a) has undertaken all necessary surveys, audits,
inventories, reviews,
analyses and/or assessments (including any necessary risk
assessments) of all
areas of its business and operations required by HIPAA and/or that
could be
materially adversely affected by the failure of such Consolidated
Party to be
HIPAA Compliant (as defined below), (b) has implemented all
required policies,
procedures and other actions necessary to be HIPAA Compliant, (c)
has executed
the Business Associate Agreements (as defined under HIPAA
regulations),
including the Business Associate Agreement delivered in connection
with the
Senior Credit Agreement, and (d) is HIPAA Compliant. For purposes
hereof, "HIPAA
Compliant" means that such Consolidated Party (x) is in compliance
with each of
the applicable requirements of the so-called "Administrative
Simplification"
provisions of HIPAA, and all final rules and regulations
promulgated thereunder,
on and as of each date that any part thereof, and all final rules
or regulations
thereunder, becomes effective in accordance with its or their
terms, as the case
may be (each such date, a "HIPAA Compliance Date") and (y) is not
and could not
reasonably be expected to become, as of any date following any such
HIPAA
Compliance Date, the subject of any civil or criminal penalty,
process, claim,
action or proceeding, or any administrative or other regulatory
review, survey,
process or proceeding (other than routine surveys or reviews
conducted by any
government health plan or other accreditation entity) that could
result in any
of the foregoing or that could in the case of (x) and (y)
reasonably be expected
to have a Material Adverse Effect.
3.25 Stockholders Agreements
Except for the Registration Agreement, the Stockholders Agreement
and the
Stock Option Plan, there are no shareholders agreements or other
agreements to
which the Company is a party pertaining to the Investor Group's
beneficial
ownership of the Capital Stock of the Company, including any
agreement that
would restrict the Investor Group's right to dispose of such
Capital Stock
and/or its right to vote such Capital Stock.
3.26 No Burdensome Restrictions; Material Agreements
(a) No Consolidated Party is a party to any agreement or instrument
or
subject to any other obligation or any charter or corporate
restriction or any
provision of any applicable law, rule or regulation which,
individually or in
the aggregate, could reasonably be expected to have a Material
Adverse Effect
other than the Senior Credit Agreement. Set forth on Schedule 3.26
is a complete
and accurate list of all Material Contracts of each Consolidated
Party, showing
the name thereof, the parties thereto, the subject matter and the
term thereof.
(b) Except as set forth in Schedule 3.26 as of the Closing Date,
each
Material Contract is in all material respects valid, binding and in
full force
and effect and will be enforceable by the Company or the Subsidiary
of the
Company which is a party thereto in accordance with its terms,
except as
affected by bankruptcy, insolvency, fraudulent conveyance,
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reorganization, moratorium or similar laws affecting creditors'
rights generally
and general equitable principles (whether in equity or at law).
Except as set
forth in Schedule 3.26, as of the Closing Date, each of the Company
and the
Subsidiaries has performed in all material respects all obligations
required to
be performed by it to date under the Material Contracts and it is
not (with or
without the lapse of time or the giving of notice, or both) in
breach or default
in any material respect thereunder and, to the knowledge of the
Company and the
Subsidiary Guarantors, no other party to any of the Material
Contracts is (with
or without the lapse of time or the giving of notice, or both) in
breach or
default in any material respect thereunder. As of the Closing Date,
neither the
Company nor any of the Subsidiaries, nor, to the knowledge of the
Company, any
other party to any Material Contract, has given notice of
termination of, or
taken any action inconsistent with the continuation of, any
Material Contract.
As of the Closing Date, none of such other parties has any
presently exercisable
right to terminate any Material Contract for any reason, including
as a result
of the execution, delivery or performance of the Documents or the
Senior Credit
Documents.
(c) Except as could not reasonably be expected to have a Material
Adverse
Effect, none of the Consolidated Parties has any knowledge of any
actual or
threatened (in writing) adverse change in the relationship between
any
Consolidated Party and any material customer, supplier distributor
or other
party with whom such Consolidated Party does business.
3.27 Nature of Business
As of the Closing Date, the Consolidated Parties are engaged in
the
business of providing full-service dental and vision benefits,
offering
network-based dental and vision care, reduced fee-for-service and
third party
administration and providing dental and vision coverage for plan
members.
3.28 Transactions with Affiliates
Except as set forth in Schedule 3.28, except for agreements and
arrangements entered into in the ordinary course of business on
terms and
conditions as favorable to any party thereto as would be obtainable
by it in a
comparable arms-length transaction with an independent, unrelated
third party
and except for agreements and arrangements among the Borrower and
its
Wholly-Owned Subsidiaries or among Wholly-Owned Subsidiaries of the
Borrower,
neither the Borrower nor any of its Subsidiaries will be a party to
or engaged
in any transaction with, and none of the properties and assets of
the Borrower
or any of its Subsidiaries will be subject to or bound by any
agreement or
arrangement with, (a) any Affiliate of any Consolidated Party or
(b) any member
of the Sponsor Group or any of their respective Affiliates.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER
Each Purchaser (as to itself only) and each Account Manager (as to
the
managed accounts of Purchasers) represents and warrants, on the
date hereof and
as of the Closing, to the Company that:
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4.1 Purchase for Own Account
Except as contemplated by the Put and Call Agreements, such
Purchaser or
such Account Manager is purchasing the Notes to be purchased by it
solely for
its own account (or in the case of Account Managers, on behalf of
managed
accounts) and not as nominee or agent for any other person (other
than for such
managed accounts, if applicable) and not with a view to, or for
offer or sale in
connection with, any distribution thereof (within the meaning of
the Securities
Act) that would be in violation of the securities laws of the
United States of
America or any state thereof, without prejudice, however, to its
right at all
times to sell or otherwise dispose of all or any part of said Notes
pursuant to
a registration statement under the Securities Act or pursuant to an
exemption
from the registration requirements of the Securities Act, and
subject,
nevertheless, to the disposition of its Property being at all times
within its
control.
4.2 Accredited Investor
Such Purchaser or such Account Manager is knowledgeable,
sophisticated and
experienced in business and financial matters; it has previously
invested in
securities similar to the Notes and it acknowledges that the Notes
have not been
registered under the Securities Act and understands that the Notes
must be held
indefinitely unless they are subsequently registered under the
Securities Act or
such sale is permitted pursuant to an available exemption from such
registration
requirement; such Purchaser (or, in the case of an Account Manager,
the managed
account on behalf of which the Account Manager is acting) is able
to bear the
economic risk of its investment in the Notes and is presently able
to afford the
complete loss of such investment; such Purchaser (or, in the case
of an Account
Manager, the managed account on behalf of which the Account Manager
is acting)
is an "accredited investor" as defined in Regulation D promulgated
under the
Securities Act and the Notes to be acquired by it pursuant to this
Agreement are
being acquired for its own account; and such Purchaser has been
afforded access
to information about each of the Constituent Companies and their
financial
condition and business sufficient to enable it to evaluate its
investment in the
Notes.
4.3 Authorization
Each Purchaser has taken all actions necessary to authorize it (or,
in the
case of an Account Manager, such Account Manager is duly authorized
by the
managed account for which it is acting) (a) to execute, deliver and
perform all
of its obligations under this Agreement, (b) to perform all of its
obligations
under the Notes and (c) to consummate the transactions contemplated
hereby and
thereby. This Agreement is a legally valid and binding obligation
of each
Purchaser enforceable against it in accordance with its terms,
except for (i)
the effect thereon of bankruptcy, insolvency, reorganization,
moratorium and
other similar laws relating to or affecting the rights of creditors
generally
and (ii) limitations imposed by Federal or state law or equitable
principles
upon the specific enforceability of any of the remedies, covenants
or other
provisions thereof and upon the availability of injunctive relief
or other
equitable remedies.
4.4 Notes Restricted
No transfer or sale (including, without limitation, by pledge
or
hypothecation) of Notes by any Holder which is otherwise permitted
hereunder,
other than a transfer or sale to the
27
<PAGE>
Company, shall be effective unless such transfer or sale is made
(a) pursuant to
an effective registration statement under the Securities Act and a
valid
qualification under applicable state securities or "blue sky" laws
or (b)
without such registration or qualification as a result of the
availability of an
exemption therefrom, and, if reasonably requested by the Company,
counsel for
such Holder shall have furnished the Company with an opinion,
reasonably
satisfactory in form and substance to the Company, to the effect
that no such
registration is required because of the availability of an
exemption from the
registration requirements of the Securities Act; provided, however,
that with
respect to transfers by Holders to their Affiliates, no such
opinion shall be
required. A transfer made by a Holder which is a state-sponsored
employee
benefit plan to a successor trust or fiduciary pursuant to a
statutory
reconstitution shall be expressly permitted and no opinions of
counsel shall be
required in connection therewith.
Notwithstanding anything to the contrary in this Section 4.4. each
Holder
shall be permitted to pledge the Notes held by it to a trustee for
the benefit
of secured noteholders pursuant to documents relating to the
financing of such
Holder.
4.5 Source of Funds
Each of the Purchasers hereby represents and warrants to the
Company that,
except as disclosed to the Company in writing, at least one of the
following
statements is an accurate representation as to the source of funds
to be used by
such Purchaser in connection with the financing hereunder:
(a) no part of such funds constitutes assets allocated to any
separate
account maintained by such Purchaser in which any employee benefit
plan (or its
related trust) has any interest;
(b) to the extent that any part of such funds constitutes assets
allocated
to any separate account maintained by such Purchaser, such
Purchaser has
disclosed to the Company the name of each employee benefit plan
whose assets in
such account exceed 10% of the total assets of such account as of
the date of
such purchase (and, for purposes of this subsection (b), all
employee benefit
plans maintained by the same employer or employee organization are
deemed to be
a single plan);
(c) to the extent that any part of such funds constitutes assets of
an
insurance company's general account, such insurance company has
complied with
all of the requirements of the regulations issued under Section
401(c)(1)(A) of
ERISA;
(d) such funds constitute assets of one or more employee benefit
plans, or
a separate account or trust fund comprised of one or more employee
benefit
plans, each of which such Purchaser has identified in writing to
the Company; or
(e) no part of such funds will cause the acquisition of the Notes
by such
Purchaser to constitute a "prohibited transaction" within the
meaning of Section
406 of ERISA or Section 4975 of the Code that is not subject to an
exemption
contained in ERISA or in the rules and regulations adopted by the
U.S.
Department of Labor thereunder.
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As used in this Section 4.5, the terms "employee benefit plan"
and
"separate account" shall have the respective meanings assigned to
such terms in
Section 3 of ERISA.
SECTION 5. COVENANTS
So long as any of the Notes remain unpaid and outstanding, the
Company
hereby covenants to the Holders of outstanding Notes and agrees
that it will
comply with, and will cause each of the Subsidiaries of the Company
to comply
with such of the following as are applicable to it or them as
follows:
5.1 Payment of Notes, Satisfaction of Obligations
Subject to Section 8 of this Agreement, the Company shall pay the
principal
of, premium, if any, and interest on the Notes on the dates and in
the manner
provided in the Notes. To the extent lawful, interest shall accrue
(including
after the commencement of any proceeding under any Bankruptcy Law)
on all past
due and unpaid amounts outstanding under the Notes (including
overdue
installments of principal or interest) at a default rate equal to
14.5% per
annum, compounded quarterly.
5.2 Financial Statements and Reports
(a) The Company shall keep proper books of record and account and
will
maintain, and will cause each of the Subsidiaries of the Company to
maintain, a
system of accounting established and administered in accordance
with sound
business practices to permit preparation of financial statements in
conformity
with GAAP. The Company will deliver to each Holder the financial
statements and
other reports described below:
(i) [Intentionally omitted.]
(ii) Quarterly Financials. As soon as available, and in any
event
within forty-five (45) days after the end of each of the first
three fiscal
quarters of each fiscal year of the Company (commencing with fiscal
year
2006), the Company will deliver the consolidated balance sheet of
the
Company and the Subsidiaries of the Company as of the end of such
fiscal
quarter and the related consolidated statements of income,
shareholders'
equity and cash flows of the Company and the Subsidiaries of the
Company
for the fiscal quarter then ended and the then elapsed portion of
such
fiscal year, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous
fiscal
year, all in reasonable detail and certified by the chief financial
officer
of the Company that they fairly present in all material respects
the
financial condition of the Company and the Subsidiaries of the
Company as
at the dates indicated and the results of their operations and
their cash
flows for the periods indicated and that such consolidated
financial
statements fairly present in all material respects the
consolidated
financial position of the Company and the Subsidiaries of the
Company as of
the dates indicated and the results of their operations and their
cash
flows for the periods indicated in conformity with GAAP applied on
a basis
consistent with prior years (except as otherwise disclosed in
such
financial statements), subject to changes resulting from normal
year-end
audit adjustments and the absence of notes.
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<PAGE>
(iii) Year-End Financials. As soon as available, and in any
event
within ninety (90) days after the end of each fiscal year of the
Company
(commencing with the fiscal year ended December 31, 2006), the
Company will
deliver: (A) the consolidated balance sheet of the Company and
the
Subsidiaries of the Company as of the end of such fiscal year and
the
related consolidated statements of income, shareholders' equity and
cash
flows of the Company and the Subsidiaries of the Company for such
fiscal
year, setting forth in each case in comparative form the
corresponding
figures for the previous fiscal year and the corresponding figures
from the
consolidated plan and financial forecast delivered pursuant to
subsection
5.2(v) for the fiscal year covered by such financial statements,
all in
reasonable detail and certified by the chief financial officer of
the
Company that they fairly present in all material respects the
financial
condition of the Company and the Subsidiaries of the Company as at
the
dates indicated and the results of their operations and their cash
flows
for the periods indicated and (B) in the case of such
consolidated
financial statements, (i) a report and opinion of a Registered
Public
Accounting Firm of nationally recognized standing reasonably
acceptable to
the Majority Holders, which report shall be unqualified, shall
express no
doubts about the ability of the Company and the Subsidiaries of the
Company
to continue as a going concern or like qualification or exception
and shall
not be subject to any qualification or exception as to the scope of
such
audit or with respect to the absence of any material misstatement,
and
shall state that such consolidated financial statements fairly
present in
all material respects the consolidated financial position of the
Company
and the Subsidiaries of the Company as of the dates indicated and
(ii) only
if and when the Company consummates an IPO or becomes subject to
regulation
by the SEC, an opinion of such Registered Public Accounting
Firm
independently assessing the Company's internal controls over
financial
reporting in accordance with Items 308 of SEC Regulation S-K,
PCAOB
Auditing Standard No. 2 and Section 404 of Sarbanes-Oxley
expressing a
conclusion that contains no statement that there is a material
weakness in
such internal controls, except for such material weaknesses as to
which the
Majority Holders do not object;
(iv) Promptly upon receipt thereof, copies of all reports submitted
to
the management of the Company by independent public accountants,
whether in
connection with each annual, interim or special audit of the
consolidated
financial statements of the Company made by such accountants or
otherwise,
including the management letter submitted by such accountants to
management
in connection with their annual audit;
(v) As soon as available and in any event within sixty (60)
days
following the end of each fiscal year, a consolidated plan and
financial
forecast for the Company and the Subsidiaries of the Company for
the
succeeding fiscal year;
(vi) Copies of any financial or other report or notice delivered
to,
or received from, any holders of Senior Indebtedness pursuant to
Section
6.01 of the Senior Credit Agreement (or any similar provision
contained in
any successor agreements) not otherwise delivered to the Holders
pursuant
to this Section 5.2;
(vii) Copies of all material reports, letters and other
correspondence
from local, state or Federal regulatory or other agencies relating
to the
business or material licenses or operating contracts of the Company
or any
of the Subsidiaries of the Company;
30
<PAGE>
(viii) Notice to each Holder of (A) any violation of or
noncompliance
with any Environmental Laws that could reasonably be expected to
have a
Material Adverse Effect, (B) any communication (written or oral)
or
Environmental Claim, whether from a governmental authority,
citizens group,
employee or otherwise, alleging that any of the Constituent
Companies is
not in compliance with any Environmental law or asserting liability
of any
of the Constituent Companies for contamination from or as a
result
(directly or indirectly) of any Materials of Environmental Concern,
which
noncompliance or liability could reasonably be expected to have a
Material
Adverse Effect, or (C) any releases or threatened releases
(including,
without limitation, any releasing, spilling, leaking, pumping,
pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
disposing
or dumping, onsite or off-site) of any Materials of Environmental
Concern
for which any of the Constituent Companies could be held liable,
either in
fact or by law, which releases could reasonably be expected to have
a
Material Adverse Effect;
(ix) Promptly upon the receipt thereof, copies of any notice from
any
Government Body with respect to the revocation, termination,
suspension or
material limitation of any material licenses or permits received or
held by
any of the Constituent Companies or notice from any Government Body
with
respect to the material violation or alleged material violation of
any Laws
by any of the Constituent Companies;
(x) Copies of such other information and data with respect to
the
Company or any of the Subsidiaries of the Company as from time to
time may
be reasonably requested by any Holder; and
(xi) To the extent the Company is required by law or the terms of
any
outstanding indebtedness to prepare such reports, and as soon as
such
reports are available, copies of all annual reports, quarterly
reports and
other periodic reports pursuant to Section 13 or 15(d) of the
Exchange Act
prepared by the Company.
(b) Each financial statement delivered pursuant to subsections
(a)(ii) and
(a)(iii) of this Section 5.2 shall be in a form reasonably
acceptable to each
Purchaser.
5.3 Compliance Certificate
(a) The Company shall each deliver to the Holders, within
forty-five (45)
days after the end of each fiscal quarter and within ninety (90)
days after each
fiscal year, an Officers' Certificate stating that a review of the
activities of
the Company and the Subsidiaries of the Company during the
preceding fiscal
quarter or fiscal year, as the case may be, has been made under the
supervision
of the signing Officers with a view to determining whether the
Company and the
Subsidiaries of the Company have kept, observed, performed and
fulfilled their
respective obligations under this Agreement, and further stating,
as to each
such Officer signing such certificate, that to his or her
knowledge, the Company
and the Subsidiaries of the Company each has kept, observed,
performed and
fulfilled each and every covenant contained in this Agreement (or,
if a Default
or Event of Default shall have occurred, describing all such
Defaults or Events
of Default of which he or she may have knowledge) and that to his
or her
knowledge no event has occurred and remains in existence by reason
of which
payments on account of the
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<PAGE>
principal of or premium or interest, if any, on the Notes are
prohibited or if
such event has occurred, a description of the event. The Officers'
Certificate
shall set forth all financial calculations for such fiscal quarter
or fiscal
year necessary to demonstrate compliance with the covenants
contained in this
Section 5.
(b) So long as not contrary to the then current recommendations of
the
American Institute of Certified Public Accountants, the financial
statements
delivered pursuant to Sections 5.2(a)(iii) shall be accompanied by
a written
statement of independent certified public accountants of recognized
national
standing selected by the Company that in making the examination
necessary for
certification of such financial statements nothing has come to
their attention
which would lead them to believe that the Company or any of the
Subsidiaries of
the Company has violated the provisions of Section 5.12 of this
Agreement or, if
any such violation has occurred, specifying the nature and period
of existence
thereof, it being understood that such accountants shall not be
liable directly
or indirectly to any Person for any failure to obtain knowledge of
any such
violation.
(c) The Company will deliver to the Holders, forthwith upon
becoming aware
of (i) any Default or Event of Default, (ii) any default or event
of default
under any other loan agreement, mortgage, indenture or instrument
referred to in
Section 7.1(e), or (iii) determination by the Registered Public
Accounting Firm
providing the opinion required under Section 5.2(a)(iii)(B)(ii) (in
connection
with its preparation of the opinion) or the Company's determination
at any time
of the occurrence or the existence of any Internal Control Event,
but only in
the case of this subclause (iii) if and when the Company
consummates an IPO or
becomes subject to regulation by the SEC, an Officers' Certificate
specifying in
reasonable detail such Default, Event of Default, default, event of
default or
Internal Control Event and the nature of any remedial or corrective
action the
Company proposes to take with respect thereto.
5.4 Limitation on Restricted Payments
(a) So long as any of the Notes remain unpaid and outstanding, and
except
as contemplated by this Agreement (including, for the avoidance of
doubt, the
redemption of the Senior Preferred Stock on the Closing Date), the
Company shall
not, and the Company shall not cause or permit any of the
Subsidiaries of the
Company to,
(i) declare or pay any dividends, either in cash or Property, on,
or
make any distribution to the holders (as such) in respect of, any
class of
Equity Interest in the Company or any of the Subsidiaries of the
Company
(other than Permitted Tax Dividends and other than dividends or
distributions payable in Equity Interests (other than Disqualified
Stock)
of the Company or dividends or distributions payable to the
Company);
(ii) purchase, redeem or otherwise acquire or retire for value
any
Equity Interests of the Company or any of its Subsidiaries or any
other
Affiliate of the Company;
(iii) (x) purchase, redeem, defease or otherwise acquire or retire
for
value any Indebtedness (other than the Notes) that is pari passu
with or
subordinated to the Notes or (y) make any payments on or in respect
of, or
purchase, redeem, defease or otherwise
32
<PAGE>
acquire or return for value any Indebtedness of the Company other
than the
Senior Indebtedness (it being understood that payments,
prepayments,
redemptions or the defeasance of any Senior Indebtedness shall not
be
restricted by this Section 5.4); or
(iv) make any Investment, other than Permitted Investments (all
such
payments and other actions set forth in clauses (i) through (iv)
hereof
being collectively referred to as "Restricted Payments").
(b) So long as no Default or Event of Default shall have occurred
and be
continuing or would occur as consequence of such Restricted
Payment, the
foregoing provision will not prohibit the following Restricted
Payments:
(i) the redemption, concurrently with an IPO, of up to $131,325,000
of
Convertible Preferred Stock; provided that concurrently with
such
redemption the Company delivers to the Holders a certificate of the
chief
executive officer or chief financial officer of the Company
attesting that
such redemption shall not constitute a Default or an Event of
Default;
(ii) the defeasance, redemption, repurchase or prepayment of
pari
passu or subordinated Indebtedness with the net proceeds from the
issuance
of Equity Interests (other than Disqualified Stock);
(iii) dividends paid or distributions made in respect of Equity
Interests with the net proceeds of the issuance of Equity Interests
(other
than Disqualified Stock);
(iv) dividends paid or distributed by any Wholly Owned Subsidiary
of
the Company to its direct parent;
(v) subject to the Change in Control provisions of this Agreement,
the
purchase or redemption of Common Stock with the net proceeds from
the
issuance of Equity Interests (other than Disqualified Stock);
(vi) Investments in CDVC or any Wholly Owned Subsidiary of the
Company, so long as (A) all such Investments in CDVC shall be made
by the
Company and shall consist of common stock (or additional
capital
contributions in respect of outstanding common stock), (B) all
such
Investments in Subsidiaries of the Company shall be made by the
Company or
any other Subsidiary of the Company, and (C) all such Investments
in
Subsidiaries of the Company shall (1) in the case of the
initial
capitalization of any such Subsidiary consist of common stock which
is
issued for consideration at least equal to the par value of such
shares or
(2) in all other cases, be evidenced by Intercompany Notes executed
by a
Subsidiary Guarantor which are subordinated to the payment and
performance
of the Notes;
(vii) the Company may purchase or redeem Capital Stock of the
Company
held by an employee of the Company, or any of its Subsidiaries upon
the
termination of employment of such person; provided such purchase
or
redemption is approved by the Board of Directors of the Company in
good
faith and the aggregate amount of such dividends and the
purchase
consideration for all such purchases or redemptions does not
33
<PAGE>
exceed $2,250,000 in the aggregate (including cash and the
principal amount
of any Indebtedness of the Company or any of its Subsidiaries
incurred to
purchase such Capital Stock) whenever made at any time after the
Closing
Date;
(viii) intercompany Indebtedness to the extent permitted by
clause
(b)(v) of Section 5.5;
(ix) loans by the Company in an aggregate amount not to exceed
$1,100,000 at any time outstanding to one or more officers or
other
employees of the Company or its Subsidiaries for the purpose of
acquiring
shares of Capital Stock of the Company or options to purchase
shares of
Capital Stock of the Company so long as no cash is paid by the
Company or
any Subsidiary of the Company in connection with any such loan or
the
acquisition of such Capital Stock or options to purchase shares of
Capital
Stock;
(x) CDVC may pay, or reimburse the Company for (or pay cash
dividends
to the Company to pay) the Company's actual out-of-pocket
ordinary
administrative expenses, accounting and legal costs and other
similar
expenses of the Company; provided that after giving effect to any
such
dividend or payment, the Company shall be in pro forma compliance
with all
financial covenants contained in this Agreement; and
(xi) Permitted Acquisitions.
5.5 Limitation on Additional Indebtedness and Issuance of
Disqualified Stock
(a) So long as any of the Notes remain unpaid and outstanding, the
Company
will not, and the Company will not permit any of the Subsidiaries
of the Company
(including without limitation, upon the creation or acquisition of
such
Subsidiary) to, directly or indirectly, create, incur, issue,
assume, guarantee
or otherwise become directly or indirectly liable with respect to
(collectively,
"incur") any Indebtedness or issue any Disqualified Stock.
(b) The foregoing limitations will not apply to:
(i) the incurrence by the Company and the Subsidiaries of the
Company
of Indebtedness under the Senior Credit Documents (and, subject to
Section
5.30, all renewals, refinancings and extensions thereof); provided
that the
aggregate principal amount at any one time outstanding (including
loans,
the nominal amount of outstanding letters of credit and all
unused
commitments) shall not exceed (A) $15,000,000 of Senior Revolver
Debt, (B)
$150,000,000 of Senior Term Debt, and (C) $15,000,000 of additional
Senior
Revolver Debt or additional Senior Term Debt, or any combination
thereof
which does not exceed in aggregate principal amount $15,000,000, in
each
case with respect to this clause (i) of Section 5.5(b), less the
aggregate
amount of any permanent reductions of commitments or repayments
under the
applicable tranche of the Senior Credit Agreement (including,
without
limitation, those required pursuant to Section 5.8 hereof) after
the Second
Amendment Effective Date;
(ii) the incurrence by the Company of the Indebtedness represented
by
the Notes;
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(iii) Indebtedness of the Company and its Subsidiaries in existence
on
the Closing Date to the extent disclosed on Schedule 3.20.
(iv) the incurrence by the Company and the Subsidiaries of the
Company
of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds
of which are used to extend, refinance, renew, replace, defease or
refund
other Indebtedness of the Company and the Subsidiaries of the
Company
referred to in clauses (ii), (iii) or (viii);
(v) the incurrence of unsecured intercompany Indebtedness between
or
among the Company and its Wholly Owned Subsidiaries; provided, that
(A)
such intercompany Indebtedness is evidenced by Intercompany Notes,
and (B)
the disposition, pledge or transfer of such Indebtedness to a
Person other
than a Wholly Owned Subsidiary (except for the pledge of such
Indebtedness
pursuant to the Senior Credit Documents) and the occurrence of any
event
pursuant to which such Wholly Owned Subsidiary is no longer a
Wholly Owned
Subsidiary shall each constitute an incurrence of Indebtedness that
is not
permitted by this clause (v);
(vi) Intentionally Omitted;
(vii) Hedging Obligations in respect of foreign currency
exchange
agreements entered into to manage exchange rate risks and not
for
speculative purposes;
(viii) the incurrence by the Company and its Subsidiaries of
Indebtedness in addition to the Indebtedness permitted by clauses
(i)
through (vii), (ix), (x) and (xi) of this Section 5.5(b), which is
either
(A) unsecured and incurred for borrowed money, (B) a Capitalized
Lease
Obligation or (C) Purchase Money Indebtedness in an aggregate
amount with
respect to the foregoing clauses (A), (B) and (C) which does not
exceed
$5,500,000 at any time outstanding;
(ix) to the extent such Preferred Stock is Indebtedness of the
Company, the Convertible Preferred Stock outstanding as of the
Closing Date
and the Perpetual Preferred Stock issued upon the conversion of
such
Convertible Preferred Stock;
(x) Indebtedness of the Company and its Subsidiaries incurred
under
any Cash Management Services Agreement; and
(xi) Indebtedness assumed in connection with Permitted Acquisitions
to
the extent such Indebtedness was not created in anticipation of
such
Permitted Acquisition; provided that (A) no Default or Event of
Default
shall have occurred and be continuing immediately before or
immediately
after giving effect to such incurrence and (B) the aggregate
principal
amount of such Indebtedness incurred during the term of this
Agreement
shall not exceed $11,000,000.
5.6 Limitation on Transactions With Affiliates
Except as set forth on Schedule 5.6, the Company shall not and the
Company
shall not permit any of the Subsidiaries of the Company to sell,
lease, transfer
or otherwise dispose of any of its properties or assets to or
purchase any
Property or assets from, or enter into any contract,
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agreement, understanding, loan, advance or guarantee with, or for
the benefit
of, an Affiliate (an "Affiliate Transaction"), other than (a)
transfers of
assets to any Constituent Company other than the Company, (b)
transactions
expressly permitted by Section 5.4, Section 5.5, Section 5.8 and
Section 5.16,
(c) payment by the Subsidiaries of reasonable compensation to and
reimbursement
of reasonable expenses incurred on behalf of the Subsidiaries by
their
respective officers and directors, (d) transactions among the
Company and its
Subsidiaries or among the Subsidiaries of the Company which is not
expressly
prohibited by this Agreement, the Registration Agreement or the
Notes, and (e)
so long as no Default or Event or Default has occurred and is
continuing, other
transactions which are engaged in by any Consolidated Party which
is upon fair
and reasonable terms, no less favorable to the Company or such
Subsidiary than
those that could have been obtained in a comparable transaction by
the Company
or such Subsidiary from a non-Affiliate. None of the Consolidated
Parties will
enter into any management, employment, consulting or similar
agreement or
arrangement with, or otherwise pay any professional, consulting
management or
similar fees to or for the benefit of, the Sponsors, any members of
their
families, any affiliates of the Sponsors or such family members,
and director,
officer or securityholder of any of the foregoing, other than for
the payment or
reimbursement of fees and expenses to the directors of the Company
not to exceed
$250,000 in any fiscal year.
The Company will not and will cause each other Consolidated Party
not to
(i) hereafter represent in any way or any manner that the assets of
any
Consolidated Party (other than, solely with respect to the Company,
the assets
related to DHMI and its Subsidiaries) are available to satisfy the
debts of DHMI
or any of its Subsidiaries or (ii) commi
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