Exhibit 4.1
EXECUTION VERSION
LOAN AND WARRANT AGREEMENT
This Loan and Warrant Agreement is entered into and dated as of
September 29, 2005 (as amended, supplemented or otherwise modified from time
to time, together with the Disclosure Schedule, this "AGREEMENT"), among
Xxxxxx Companies, Inc., a Missouri corporation (the "BORROWER"), the Lenders
identified on the signature pages hereto (each, a "LENDER" and collectively,
the "LENDERS"), and Omicron Master Trust, a Bermuda business trust ("OMT"),
as administrative agent for the Lenders (in such capacity, the
"ADMINISTRATIVE AGENT").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Borrower desires to borrow certain sums from each of the
Lenders and, in consideration thereof issue certain notes and warrants to
each of the Lenders, and each Lender, severally and not jointly, desires to
make a loan to the Borrower and accept such notes and warrants from the
Borrower, all pursuant to the terms set forth herein.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained
in this Agreement, and for other good and valuable consideration the receipt
and adequacy of which are hereby acknowledged, the Borrower and the Lenders
agree as follows:
ARTICLE I.
DEFINITIONS
1.1. Definitions. In addition to the terms defined elsewhere in
-----------
this Agreement, when used herein the following terms shall have the meanings
set forth in this Section 1.1:
"ACTION" means any action, suit, inquiry, notice of
violation, proceeding (including any partial proceeding such as a
deposition) or investigation pending or threatened in writing
against or affecting the Borrower, any Subsidiary or any property
of the Borrower or any Subsidiary before or by any court,
arbitrator, governmental or administrative agency, regulatory
authority (federal, state, county, local or foreign), stock market,
stock exchange or trading facility.
"AFFILIATE" means, with respect to any Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with such Person, as such terms are used in and construed
under Rule 144.
"BORROWER COUNSEL" means Xxxxxxxx Xxxxxx LLP.
"BUSINESS DAY" means any day except Saturday, Sunday and
any day that is a federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
"CAPITAL LEASE OBLIGATIONS" of any Person shall mean the
obligations of such Person to pay rent or other amounts under any
lease of (or other arrangement conveying
the right to use) real or personal property, or a combination
thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person
under GAAP and, for the purposes of this Agreement, the amount of
such obligations at any time shall be the capitalized amount
thereof at such time determined in accordance with GAAP.
"CASH EQUIVALENTS" means:
(a) investments in Debt obligations maturing within one
year from the date of acquisition thereof to the extent the principal
thereof and interest thereon is backed by the full faith and credit of the
United States of America;
(b) investments in commercial paper maturing within 180 days
or less from the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from Standard & Poor's
Ratings Services, a division of The McGraw Hill Companies, or any successor
thereto, or from Xxxxx'x Investors Service, Inc. or any successor thereto;
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing within 180 days from the date of
acquisition thereof issued or guaranteed by or placed with, and money market
deposit accounts issued or offered by, any domestic office of any commercial
bank organized under the laws of the United States of America or any State
thereof that has a combined capital and surplus and undivided profits of not
less than $500,000,000, in each case denominated in dollars; and
(d) money market mutual funds, at least 90% of the
investments of which are in cash or investments contemplated by clauses (a),
(b) and (c) of this definition.
"CLOSING" means the First Closing, Second Closing, Third
Closing and/or Fourth Closing, as applicable.
"CLOSING DATE" means the with respect to the First
Closing, the date of the First Closing; with respect to the Second
Closing, the date of the Second Closing; with respect to the Third
Closing, the date of the Third Closing; and with respect to the
Fourth Closing, the date of the Fourth Closing.
"COMMISSION" means the U.S. Securities and Exchange
Commission.
"COMMON STOCK" means the common stock of the Borrower,
$0.01 par value per share, and any securities into which such
common stock may hereafter be reclassified.
"COMMON STOCK EQUIVALENTS" means any securities of the
Borrower or any Subsidiary which entitle the holder thereof to
acquire Common Stock at any time, including without limitation, any
Debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exchangeable
for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive,
directly or indirectly, Common Stock.
2
"CONTINGENT OBLIGATION" with respect to any Person, any
obligation of such Person arising from any guaranty, indemnity or
other assurance of payment or performance of any Debt, lease,
dividend or other obligation ("primary obligations") of any other
Person (the "primary obligor") in any manner, whether directly or
indirectly, including (i) the direct or indirect guaranty,
endorsement (other than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale
with recourse by such Person of the obligation of a primary
obligor, (ii) the obligation to make take or pay or similar
payments, if required, regardless of nonperformance by any other
party or parties to an agreement, (iii) any obligation of such
Person, whether or not contingent, (A) to purchase any such primary
obligation or any property constituting direct or indirect security
therefor, (B) to advance or supply funds (1) for the purchase or
payment of any such primary obligations or (2) to maintain working
capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (C) to
purchase property, securities or services primarily for the purpose
of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation
or (D) otherwise to assure or hold harmless the holder of such
primary obligation against loss in respect thereof; provided,
however, that the term "Contingent Obligation" shall not include
(i) any product warranties extended in the ordinary course of
business, (ii) indemnities made to officers and directors of any
such Person whether pursuant to the governing organizational
documents of such Person or otherwise and (iii) any environmental
indemnities. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount
of the primary obligation with respect to which such Contingent
Obligation is made (or, if less, the maximum amount of such primary
obligation for which such Person may be liable pursuant to the
terms of the instrument evidencing such Contingent Obligation) or,
if not stated or determinable, the maximum reasonably anticipated
liability with respect thereto (assuming such Person is required to
perform thereunder), as determined by such Person in good faith.
"DEBT" as applied to a Person means, without duplication:
(i) all items which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a
balance sheet of such Person as of the date as of which Debt is to
be determined, including Capital Lease Obligations; (ii) all
Contingent Obligations of such Person; (iii) all reimbursement
obligations in connection with letters of credit or letter of
credit guaranties issued for the account of such Person; and (iv)
in the case of Borrower (without duplication), the Notes. The Debt
of a Person shall include any recourse Debt of any partnership or
joint venture in which such Person is a general partner or joint
venturer.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule
attached to this Agreement.
"DOLLARS" means U.S. dollars.
"EFFECTIVE DATE" means the date that a Registration
Statement is first declared effective by the Commission.
3
"ELIGIBLE MARKET" means any of the New York Stock
Exchange, the American Stock Exchange, the Nasdaq National Market
or the Nasdaq SmallCap Market.
"EQUITY INTEREST" means (i) shares of corporate stock,
partnership interests, membership interests and any other interest
that confers on a Person the right to receive a share of the
profits and losses of, or a distribution of the assets of, the
issuing Person and (ii) all warrants, options or other rights to
acquire any Equity Interest set forth in clause (i) of this defined
term.
"EXCHANGE ACT" means the U.S. Securities Exchange Act of
1934, as amended.
"EVENT OF DEFAULT" has the meaning assigned to such term
in the Notes.
"FIRST CLOSING" means the closing of the purchase and sale
of the Notes and Warrants pursuant to Section 2.1.
"FIRST CLOSING DATE" means the date of the First Closing.
"FIRST CLOSING NOTES" means the Notes issued on the First
Closing Date.
"FOURTH CLOSING" means the closing of the purchase and
sale of the Notes and Warrants pursuant to Section 2.4.
"FOURTH CLOSING NOTES" means the Notes issued on the Fourth
Closing Date.
"GAAP" means U.S. generally accepted accounting principles
as in effect from time to time applied on a consistent basis during
the periods involved.
"LENDER PERCENTAGE" means, with respect to any Lender as
of any date, the percentage equal to a fraction the numerator of
which shall be the outstanding principal balance of such Lender's
Notes and the denominator of which shall be the aggregate
outstanding principal balance of all Notes.
"LIEN" means (a) any lien, charge, claim, security
interest, encumbrance, right of first refusal or other restriction,
wherever created or charged, (b) with respect to any property, the
interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to
such property, and (c) in the case of securities, any purchase
option, call or similar right of a third party with respect to such
securities.
"LOAN" means each advance made to the Borrower by a Lender
on a Closing Date, which such advance shall be evidenced by a Note.
"LOAN AMOUNT" means, for each Closing and with respect to
each Lender, the principal amount of the Notes purchased at such
Closing by such Lender as set forth in Schedule A.
4
"NOTES" means (i) with respect to the First Closing,
collectively, each of the senior convertible promissory notes, due
on the date that is 42 months after the First Closing Date, (ii)
with respect to the Second Closing, collectively, each of the
senior convertible promissory notes, due on the date that is 42
months after the Second Closing Date, (iii) with respect to the
Third Closing, collectively, each of the senior convertible
promissory notes, due on the date that is 42 months after the Third
Closing Date, and (iv) with respect to the Fourth Closing,
collectively, each of the senior convertible promissory notes, due
on the date that is 42 months after the Fourth Closing Date, each
issuable by the Borrower to one of the Lenders pursuant to the
terms hereof, in the form of Exhibit A hereto.
---------
"OPCO" means Zoltek Vegyipari Reszvenytarsasag, a
corporation formed under the laws of the Republic of Hungary, whose
registered office is at X-0000 Xxxxxxxxxxxxx, Xxxxx Xxxxxx ter 1.,
registered by the Court of Komarom-Esztergom county acting as Court
of Registration under registration No. 00-00-000000.
"PERMITTED LIENS" means: (a) liens for taxes, assessments
or governmental charges not delinquent or being contested in good
faith and by appropriate proceedings and for which adequate
reserves in accordance with GAAP are maintained on the books of the
Borrower or the applicable Subsidiary; (b) liens arising out of
deposits in connection with workers' compensation, unemployment
insurance, old age pensions or other social security or retirement
benefits legislation; (c) deposits or pledges to secure bids,
tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds, and other
obligations of like nature arising in the ordinary course of
business of the Borrower or a Subsidiary; (d) liens imposed by law,
such as mechanics', workers', materialmens', carriers' or other
like liens arising in the ordinary course of business of the
Borrower or a Subsidiary which secure the payment of obligations
which are not past due or which are being diligently contested in
good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP are maintained on the books of the
Borrower or the applicable Subsidiary; (e) liens existing on the
First Closing Date and disclosed in Section 1.1 of the Disclosure
Schedule, and any extensions, renewals or replacements thereof,
provided that no additional property shall be encumbered by such
liens and the unpaid principal amount of the Debt secured thereby
shall not be increased on or after the date of any such extension,
renewal or replacement; (f) purchase money security interests or
liens for the purchase of fixed assets to be used in the business
of the Borrower or a Subsidiary, securing solely the fixed assets
so purchased and the proceeds thereof; (g) capitalized leases which
do not violate any provision of this Agreement; (h) liens of
commercial depository institutions, arising in the ordinary course
of business, constituting a statutory or common law right of setoff
against amounts on deposit with such institution; (i) liens in
favor of the Administrative Agent and the Lenders pursuant to the
Transaction Documents; and (j) rights of way, zoning restrictions,
easements and similar encumbrances affecting the Borrowers' real
property which do not materially interfere with the use of such
property.
"PERSON" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
5
"PROCEEDING" means an action, claim, suit, investigation
or proceeding (including, without limitation, an investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
"REGISTRATION STATEMENT" means one or more registration
statements meeting the requirements of the Registration Rights
Agreement and covering the resale of Underlying Shares by the
Lenders who shall be named "selling shareholders" thereunder.
"REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreement, dated as of the date of this Agreement, among the
Borrower and the Lenders, in the form of Exhibit B hereto.
---------
"RELATED PARTIES" means, with respect to any specified
Person, such Person's Affiliates and the respective directors,
officers, employees, agents and advisors of such Person and such
Person's Affiliates.
"REQUIRED LENDERS" means collectively one or more Lenders
that made one or more Loans in an initial principal amount
representing greater than 50% of the aggregate initial principal
amount of all Loans.
"REQUIRED MINIMUM" means, as of any date, the maximum
aggregate number of shares of Common Stock then issued or
potentially issuable in the future pursuant to the Transaction
Documents that the Borrower is obligated to issue, whether
contingently or otherwise, including, without limitation, any
Underlying Shares issuable upon exercise or conversion (as
applicable) in full of all Warrants and Notes and assuming that any
previously unconverted Notes are held until the maturity date
thereof, and all interest on the Notes is paid with shares of
Common Stock.
"RESTRICTED PAYMENT" means, as to any Person, (a) any
dividend or other distribution by such Person (whether in cash,
securities or other property) with respect to any Equity Interests
of such Person, (b) any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such Equity Interest, (c) the
acquisition for value by such Person of any Equity Interests issued
by such Person or any other Person that controls such Person and
(d) any payment by such Person to its officers or directors other
than (i) in compliance with existing Borrower stock option plans,
(ii) salaries in the ordinary course of business, and (iii)
payments required by the terms of the 2003 Debentures (as defined
in the Notes), the 2004 Debentures (as defined in the Notes), the
2004 Notes (as defined in the Notes), the 2005 Notes (as defined in
the Notes) and the Notes, in each case to the extent held by such
officers and directors.
"RULE 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same effect as such
Rule.
6
"SECOND CLOSING" means the closing of the purchase and
sale of the Notes and Warrants pursuant to Section 2.2.
"SECOND CLOSING NOTES" means the Notes issued on the Second
Closing Date.
"SECURITIES" means the Notes, the Warrants and the
Underlying Shares issuable under the Notes and the Warrants.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
"SECURITY AGREEMENT" has the meaning set forth in Section
2.6(a)(v).
"SHAREHOLDER AGREEMENT" has the meaning set forth in
Section 2.6(a)(iv).
"STRATEGIC TRANSACTION" means a transaction or
relationship in which (1) the Borrower issues shares of Common
Stock to a Person which the Board of Directors of the Borrower
determines in good faith is, itself or through its Subsidiaries, an
operating company in a business synergistic with the business of
the Borrower and (2) the Borrower expects to receive benefits in
addition to the investment of funds, but shall not include a
transaction in which the Borrower issues securities primarily for
the purpose of raising capital or to an entity whose primary
business is investing in securities.
"SUBSIDIARY" means, with respect to any Person (the
"PARENT") at any date, any corporation, limited liability company,
partnership, association or other entity the accounts of which
would be consolidated with those of the parent in the parent's
consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership,
association or other entity of which securities or other ownership
interests representing 50% or more of the equity or 50% or more of
the ordinary voting power is or, in the case of a partnership, 50%
or more of the general partnership interests are, as of such date,
owned, controlled or held by the parent or one or more subsidiaries
of the parent. Unless otherwise expressly provided, "Subsidiary"
shall mean a Subsidiary of the Borrower.
"THIRD CLOSING" means the closing of the purchase and sale
of the Notes and Warrants pursuant to Section 2.3.
"THIRD CLOSING NOTES" means the Notes issued on the Third
Closing Date.
"TRADING DAY" means (i) a day on which the Common Stock is
traded on a Trading Market (other than the OTC Bulletin Board), or
(ii) if the Common Stock is not traded on a Trading Market (other
than the OTC Bulletin Board), a day on which the Common Stock is
traded in the over the counter market, as reported by the OTC
Bulletin Board, or (iii) if the Common Stock is not traded on any
Trading Market and not quoted on the OTC Bulletin Board, a day on
which the Common Stock is quoted in the over the counter market as
reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding to its functions of
reporting prices); provided, that in
7
the event that the Common Stock is not listed or quoted as set forth
in (i), (ii) and (iii) hereof, then Trading Day shall mean a
Business Day.
"TRADING MARKET" means Nasdaq National Market or any
Eligible Market on which the Common Stock is then listed or quoted.
"TRANSACTION DOCUMENTS" means this Agreement, the Notes,
the Warrants, the Registration Rights Agreement, Security
Agreement, Mortgage and Guarantee Agreement and any other documents
or agreements executed or delivered in connection with the
transactions contemplated hereunder.
"UNDERLYING SHARES" means the shares of Common Stock
issuable upon conversion of the Notes, as payment of interest
thereunder, and upon exercise of the Warrants, and in satisfaction
of any other obligation of the Borrower to issue shares of Common
Stock pursuant to the Transaction Documents.
"VWAP" means, with respect to any date of determination,
the daily volume weighted average price (as reported by Bloomberg
using the VAP function) of the Common Stock on such date of
determination, or if there is no such price on such date of
determination, then the daily volume weighted average price on the
date nearest preceding such date.
"WARRANTS" means collectively, the Common Stock purchase
warrants in the form of Exhibit C, issuable pursuant to Sections
---------
2.1, 2.2, 2.3 and 2.4.
ARTICLE II.
LOAN; PURCHASE AND SALE
2.1. First Closing.
-------------
(a) The purchase and sale of the First Closing Notes
pursuant to the terms of this Section 2.1 shall take place at the offices of
Proskauer Rose LLP, 0000 Xxxxxxxx, Xxx Xxxx, XX 00000 on the date this
Agreement is executed and delivered by the parties or at such other location
or time as the parties may agree.
(b) Subject to the terms and conditions of this Agreement,
each Lender agrees, severally and not jointly, to purchase at the First
Closing and the Borrower agrees to sell and issue to each Lender at the
First Closing, that aggregate principal amount of Notes set forth opposite
such Lender's name on Schedule A hereto under the heading "First Closing
Notes" and a Warrant, for the aggregate purchase price ("FIRST CLOSING
PURCHASE PRICE") set forth opposite such Lender's name on Schedule A hereto
under the heading "First Closing Purchase Price".
2.2. Second Closing.
--------------
(a) The Company may following the date (the "SECOND
CLOSING TRIGGER DATE") on which each of the Borrower Second Closing
Deliverables pursuant to Section 2.7 can be delivered to each Lender require
a Second Closing to occur by delivering a written notice to
8
each Lender within five (5) Trading Days of the Second Closing Trigger Date
(the "SECOND CLOSING NOTICE") indicating the Borrower's exercise of its
rights under this Section 2.2 and the date of the Second Closing which date
shall be the 10th Trading Day following the Second Closing Notice (the
"SECOND CLOSING DATE"). The purchase and sale of the Second Closing Notes
pursuant to the terms of this Section 2.2 shall take place at the offices of
Proskauer Rose LLP, 0000 Xxxxxxxx, Xxx Xxxx, XX 00000, unless the
requirement to deliver the Second Closing Deliverables or any portion
thereof, as applicable, has been waived by the Required Lenders.
(b) Subject to the terms and conditions of this Agreement,
each Lender agrees, severally and not jointly, to purchase at the Second
Closing and the Borrower agrees to sell and issue to each Lender at the
Second Closing, that aggregate principal amount of Notes set forth opposite
such Lender's name on Schedule A hereto under the heading "Second Closing
Notes" and a Warrant, for the aggregate purchase price ("SECOND CLOSING
PURCHASE PRICE") set forth opposite such Lender's name on Schedule A hereto
under the heading "Second Closing Purchase Price".
2.3. Third Closing.
-------------
(a) At any time after the later of occur of (i) the day
following the date the Registration Statement(s) covering the resale of the
Underlying Shares issued at the First Closing and the Second Closing shall
become effective and (ii) the 120th day following the First Closing Date
(the "THIRD CLOSING TRIGGER DATE"), the Borrower may, at its option, require
a Third Closing to occur by delivering an irrevocable written notice to each
Lender within thirty (30) days of the Third Closing Trigger Date (the "THIRD
CLOSING NOTICE") indicating the Borrower's exercise of its rights under this
Section 2.2 and the date of the Third Closing, which date shall be the 10th
Trading Day following the Third Closing Notice (the "THIRD CLOSING DATE").
The purchase and sale of the Third Closing Notes pursuant to the terms of
this Section 2.3 shall take place at the offices of Proskauer Rose LLP, 0000
Xxxxxxxx, Xxx Xxxx, XX 00000.
(b) Subject to the terms and conditions of this Agreement,
including without limitation Sections 2.3(c) and 2.5 hereof, each Lender
agrees, severally and not jointly, to purchase at the Third Closing and the
Borrower agrees to sell and issue to each Lender at the Third Closing, that
aggregate principal amount of Notes set forth opposite such Lender's name on
Schedule A hereto under the heading "Third Closing Notes" and a Warrant for
the aggregate purchase price (the "THIRD CLOSING PURCHASE PRICE") set forth
opposite such Lender's name on Schedule A hereto under the heading "Third
Closing Purchase Price".
(c) The Conversion Price for the Third Closing Notes shall
be equal to 100% of the arithmetic average of the VWAP of the Borrower's
Common Stock for the 10 Trading Days immediately preceding the Third Closing
Date.
2.4. Fourth Closing.
--------------
(a) At any time after the later to occur of (i) the 120th
day following the Third Closing or (ii) 120th day following the date the
Registration Statement covering the resale of the Underlying Shares issued
at the Third Closing shall become effective (the "FOURTH CLOSING
9
TRIGGER DATE"), the Borrower may, at its option, require a Fourth Closing to
occur by delivering an irrevocable written notice to each Lender within
thirty (30) days of the Fourth Closing Trigger Date (the "FOURTH CLOSING
NOTICE") indicating the Borrower's exercise of its rights under this Section
2.3 and the date of the Fourth Closing, which date shall be the 10th Trading
Day following the Fourth Closing Notice (the "FOURTH CLOSING DATE"). The
purchase and sale of the Fourth Closing Notes pursuant to the terms of this
Section 2.4 shall take place at the offices of Proskauer Rose LLP, 0000
Xxxxxxxx, Xxx Xxxx, XX 00000.
(b) Subject to the terms and conditions of this Agreement,
including without limitation Sections 2.4(c) and 2.5 hereof, each Lender
agrees, severally and not jointly, to purchase at the Fourth Closing and the
Borrower agrees to sell and issue to each Lender at the Fourth Closing, that
aggregate principal amount of Notes set forth opposite such Lender's name on
Schedule A hereto under the heading "Fourth Closing Notes" and a Warrant for
the aggregate purchase price (the "FOURTH CLOSING PURCHASE PRICE") set forth
opposite such Lender's name on Schedule A hereto under the heading "Fourth
Closing Purchase Price".
(c) Notwithstanding anything to the contrary, the Borrower
may only issue a Fourth Closing Notice or require a Fourth Closing (and any
Fourth Closing Notice issued otherwise will be void) if the arithmetic
average of the Closing Prices of the Borrower's Common Stock for each of the
thirty (30) Trading Days immediately preceding the Fourth Closing Date shall
equal or exceed $16.00 per share (as adjusted for stock splits, stock
dividends, stock combinations and other similar events).
(d) The Conversion Price for the Fourth Closing Notes
shall be equal to 110% of the arithmetic average of the VWAP of the
Borrower's Common Stock for the 10 Trading Days immediately preceding the
Fourth Closing Date.
2.5. Lender's Closing Right.
----------------------
(a) Notwithstanding anything to the contrary, from the
Effective Date until the one year anniversary of the Effective Date, in the
event the Borrower has not exercised its right to cause a Third Closing or a
Fourth Closing to occur, each Lender shall have the right to require such
Third Closing or Fourth Closing, at any time and from time to time, by
delivering a written notice to the Borrower within thirty (30) days of the
Third Closing Trigger Date or the Fourth Closing Trigger Date, as
applicable, (the "LENDER CLOSING NOTICE") indicating such Lender's exercise
of its rights under this Section 2.5 and the date of the applicable Closing,
which date shall be no later than 10 Trading Days following delivery of the
Lender Closing Notice (such date, the "THIRD CLOSING DATE" or "FOURTH
CLOSING DATE", as the case may be).
(b) Notwithstanding anything to the contrary, the
conversion price for the Notes issuable under this Section 2.5 shall be
equal to 110% of the arithmetic average of the VWAP of the Borrower's Common
Stock for the 10 Trading Days immediately preceding the Third Closing Date
or Fourth Closing Date, as the case may be, but in no event shall such 10
Trading Day arithmetic average of the Closing Prices be less than $14.00 per
share (as adjusted for stock splits, stock dividends, stock combinations and
other similar events).
10
2.6. First Closing Deliveries.
------------------------
(a) At the First Closing, the Borrower shall deliver or
cause to be delivered to each Lender the following, appropriately dated (the
"BORROWER FIRST CLOSING DELIVERABLES"):
(i) a Note, in the aggregate principal amount of the
First Closing Purchase Price indicated opposite such Lender's name
on Schedule A registered in the name of such Lender;
(ii) a Warrant, duly executed by the Borrower and
registered in the name of such Lender, pursuant to which such
Lender shall have the right to acquire the number of shares of
Common Stock indicated opposite such Lender's name on Schedule A
under the heading "First Closing - Warrant Shares";
(iii) the Registration Rights Agreement, duly executed
by the Borrower;
(iv) a letter agreement, duly executed by Xxxxx Xxxx,
Chief Executive Officer of the Borrower, in his individual
capacity, and accepted and agreed to by the Borrower (as amended,
supplemented or otherwise modified from time to time, the
"SHAREHOLDER AGREEMENT");
(v) evidence of proper applications made to, and
approvals received from, each Trading Market with respect to the
trading of Underlying Securities thereon;
(vi) the legal opinion of Borrower Counsel, in
agreed form, addressed to the Administrative Agent and such Lender;
(vii) an officer's certificate reasonably satisfactory
to the Lenders from an officer of the Borrower that each of the
conditions set forth in Section 6.1 hereof has been satisfied; and
(viii) any other document reasonably requested by the
Administrative Agent or such Lender.
(b) At the First Closing, each Lender shall deliver or
cause to be delivered to the Borrower the following:
(i) the First Closing Purchase Price, in United
States dollars and in immediately available funds, by wire transfer
to an account designated in writing by the Borrower for such
purpose; and
(ii) the Registration Rights Agreement, duly
executed by such Lender.
11
2.7. Second Closing Deliveries.
-------------------------
(a) At the Second Closing, the Borrower shall deliver or
cause to be delivered to each Lender the following, appropriately dated (the
"BORROWER SECOND CLOSING DELIVERABLES"):
(i) a Note, in the aggregate principal amount of
the Second Closing Purchase Price indicated opposite such Lender's
name on Schedule A registered in the name of such Lender;
(ii) a Warrant, duly executed by the Borrower and
registered in the name of such Lender, pursuant to which such
Lender shall have the right to acquire the number of shares of
Common Stock indicated opposite such Lender's name on Schedule A
under the heading "Second Closing - Warrant Shares";
(iii) a security agreement, duly executed by Opco,
the Administrative Agent and each other Lender, in the form
attached hereto as Exhibit F (as amended, supplemented or otherwise
modified from time to time, the "SECURITY AGREEMENT");
(iv) a mortgage agreement, duly executed by Opco,
the Administrative Agent and each other Lender, in the form
attached hereto as Exhibit D (as amended, supplemented or otherwise
modified from time to time, the "MORTGAGE");
(v) a guarantee agreement, duly executed by Opco,
the Borrower and each other Lender, in the form attached hereto a
Exhibit E (as amended, supplemented or otherwise modified from time
to time, the "GUARANTEE AGREEMENT");
(vi) evidence of proper applications made to, and
approvals received from, each Trading Market with respect to the
trading of Underlying Securities thereon;
(vii) the legal opinion of Borrower Counsel, in
agreed form, addressed to the Administrative Agent and such Lender;
(viii) a legal opinion of Hungarian counsel to the
Borrower and Opco as to certain matters (including, without
limitation, perfection, tax and qualification matters) arising
under the Guarantee Agreement and the Security Agreement, all in
form and substance reasonably satisfactory to the Administrative
Agent and such Lender;
(ix) any and all consents from all Persons that
are necessary or reasonably required by the Administrative Agent or
such Lender in connection with the Transaction Documents,
including, without limitation (1) the consents and certificate
referred to in Section 6.1(g), and (2) relating to the Republic of
Hungary or any local governmental authority contained therein;
(x) an officer's certificate reasonably satisfactory
to the Lenders from an officer of the Borrower that each of the
conditions set forth in Section 6.1 hereof has been satisfied;
12
(xi) appropriate lien and record search reports
showing that there are no liens on the collateral security granted
under the Mortgage and the Security Agreement, other than Liens
expressly permitted thereby; and
(xii) any other document reasonably requested by the
Administrative Agent or such Lender.
(b) At the Second Closing, each Lender shall deliver or
cause to be delivered to the Borrower the following:
(i) the Second Closing Purchase Price, in United
States dollars and in immediately available funds, by wire transfer
to an account designated in writing by the Borrower for such
purpose;
(ii) the Mortgage, duly executed by such Lender;
(iii) the Guarantee Agreement, duly executed by such
Lender; and
(iv) the Security Agreement, duly executed by such
Lender.
2.8. Third Closing Deliveries.
------------------------
(a) At the Third Closing, the Borrower shall deliver or
cause to be delivered to each Lender the following, appropriately dated (the
"BORROWER THIRD CLOSING DELIVERABLES"):
(i) a Note, in the aggregate principal amount of
the Fourth Closing Purchase Price indicated opposite such Lender's
name in Schedule, registered in the name of such Lender;
(ii) a Warrant, duly executed by the Borrower and
registered in the name of such Lender, pursuant to which such
Lender shall have the right to acquire the number of shares of
Common Stock indicated opposite such Lender's name on Schedule A
hereto under the heading "Third Closing - Warrant Shares";
(iii) evidence of proper applications made to, and
approvals received from, each Trading Market with respect to the
trading of Underlying Securities thereon;
(iv) the legal opinion of Borrower Counsel, in
agreed form, addressed to the Administrative Agent and such Lender;
(v) an officer's certificate reasonably satisfactory
to the Lenders from an officer of the Borrower that each of the
conditions set forth in Section 6.1 hereof has been satisfied.
13
(vi) any other document reasonably requested by the
Administrative Agent or such Lender.
(b) At the Third Closing, each Lender shall deliver or cause
to be delivered to the Borrower the Third Closing Purchase Price, in United
States dollars and in immediately available funds, by wire transfer to an
account designated in writing by the Borrower for such purpose.
2.9. Fourth Closing Deliveries.
-------------------------
(a) At the Fourth Closing, the Borrower shall deliver or
cause to be delivered to each Lender the following, appropriately dated (the
"BORROWER FOURTH CLOSING DELIVERABLES" and together with the Borrower First
Closing Deliverables, Borrower Second Closing Deliverables and the Borrower
Third Closing Deliverables, the "BORROWER DELIVERABLES"):
(i) a Note, in the aggregate principal amount of
the Fourth Closing Purchase Price indicated opposite such Lender's
name in Schedule, registered in the name of such Lender;
(ii) a Warrant, duly executed by the Borrower and
registered in the name of such Lender, pursuant to which such
Lender shall have the right to acquire the number of shares of
Common Stock indicated opposite such Lender's name on Schedule A
hereto under the heading "Fourth Closing - Warrant Shares";
(iii) evidence of proper applications made to, and
approvals received from, each Trading Market with respect to the
trading of Underlying Securities thereon;
(iv) an officer's certificate reasonably satisfactory
to the Lenders from an officer of the Borrower that each of the
conditions set forth in Section 6.1 hereof has been satisfied.
(v) the legal opinion of Borrower Counsel, in
agreed form, addressed to the Administrative Agent and such Lender;
and
(vi) any other document reasonably requested by the
Administrative Agent or such Lender.
(b) At the Fourth Closing, each Lender shall deliver or
cause to be delivered to the Borrower the Fourth Closing Purchase Price, in
United States dollars and in immediately available funds, by wire transfer
to an account designated in writing by the Borrower for such purpose.
14
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Borrower. Subject to
----------------------------------------------
the qualifications and disclosures set forth beside the specific reference to
this Agreement in the Disclosure Schedule (the parties hereto agreeing that
a reference in the Disclosure Schedule to a particular Section shall only
apply to the representation in such Section), the Borrower hereby makes the
following representations and warranties to the Administrative Agent and
each Lender:
(a) Subsidiaries. The Borrower does not directly or
------------
indirectly control or own any Equity Interest in any Subsidiary, other than
as listed in Section 3.1(a) of the Disclosure Schedule. Except as disclosed
in Section 3.1(a) of the Disclosure Schedule, the Borrower owns, directly or
indirectly, all of the Equity Interests of each Subsidiary free and clear of
any Lien, and all the issued and outstanding Equity Interests of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights.
(b) Organization and Qualification. Each of the Borrower
------------------------------
and each Subsidiary is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization (as applicable), with the requisite power
and authority to own and use its properties and assets and to carry on its
business as currently conducted. Neither the Borrower nor any Subsidiary is
in violation of any of the provisions of its respective certificate or
articles of incorporation, bylaws or other organizational or charter
documents. Each of the Borrower and each Subsidiary is duly qualified to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could
not, individually or in the aggregate, have or reasonably be expected to
result in (i) an adverse effect on the legality, validity or enforceability
of any Transaction Document, (ii) a material and adverse effect on the
results of operations, assets, prospects, business or condition (financial
or otherwise) of the Borrower and the Subsidiaries, taken as a whole, or
(iii) an adverse impairment to the Borrower's ability to perform on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or
(iii), a "MATERIAL ADVERSE EFFECT").
(c) Authorization; Enforcement. The Borrower and each
--------------------------
Subsidiary party to a Transaction Document has the requisite power and
authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
thereunder. The execution and delivery by the Borrower and each Subsidiary
party to a Transaction Document of each of the Transaction Documents to
which it is a party and the consummation by it of the transactions
contemplated thereunder have been duly authorized by all necessary action on
the part of the Borrower or such Subsidiary, as the case may be, and no
further consent or action is required by the Borrower, such Subsidiary, or
their respective Boards of Directors, members, partners, managers or
shareholders, as applicable. Each of the Transaction Documents to which the
Borrower or any Subsidiary is a party has been (or upon delivery will be)
duly executed by the Borrower or such Subsidiary, as the case may be, and,
when delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Borrower and such Subsidiary, to the
extent a party thereto, enforceable against
15
the Borrower or such Subsidiary, as the case may be, in accordance with its
terms except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and
remedies or by equitable principles of general application.
(d) No Conflicts. The execution, delivery and performance
------------
of the Transaction Documents by the Borrower and each Subsidiary party to a
Transaction Document and the consummation by the Borrower and such
Subsidiaries of the transactions contemplated thereby do not and will not
(i) conflict with or violate any provision of the Borrower's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become
a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of, any agreement, contract, credit facility, Debt or other instrument
(evidencing Debt of the Borrower or a Subsidiary or otherwise) or other
understanding to which the Borrower or any Subsidiary is a party or by which
any property or asset of the Borrower or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Borrower or any Subsidiary is subject
(including federal and state securities laws and regulations) and the rules
and regulations of any self-regulatory organization to which the Borrower or
its securities are subject, or by which any property or asset of the
Borrower or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
Payments of cash on account of principal of or interest under the Notes,
upon any Event of Default under the Notes upon a Buy-In under and as such
term is defined in a Warrant will not require the consent of, any payment
to, or the springing of any Lien in favor of any lender to or creditor of
the Borrower or any Subsidiary (under a credit facility, loan agreement or
otherwise) and will not result in a default under any such credit
facilities, loans or other agreements.
(e) Filings, Consents and Approvals. Neither the Borrower
-------------------------------
nor any Subsidiary is required to obtain any consent, waiver, authorization
or order of, give any notice to, or make any filing or registration with,
any court or other federal, state, local or other governmental authority or
other Person in connection with the execution, delivery and performance by
it of any Transaction Document to which it is a party, other than (i) the
filing with the Commission of one or more Registration Statements in
accordance with the requirements of the Registration Rights Agreement, (ii)
the application(s) to the Trading Market on which the Common Stock is listed
for trading for the listing of the Underlying Shares for trading thereon in
the time and manner required thereby which have been made and obtained prior
to the applicable Closing Date, and (iii) the requirements, disclosed in
Section 3.1(e) of the Disclosure Schedule, if any.
(f) Issuance of the Securities. Each of the Securities
--------------------------
have been duly authorized and, when issued and paid for in accordance with
the Transaction Documents or otherwise, have been or, when issued, will be
duly and validly issued, fully paid and nonassessable, free and clear of all
Liens. The Borrower has reserved from its duly authorized capital stock a
number of shares of Common Stock issuable upon conversion of the Notes (as
16
may be issued on account of interest thereunder) and exercise of the
Warrants, which number of reserved shares is not less than the Required
Minimum calculated as of the date hereof.
(g) Capitalization. The number of shares and type of all
--------------
authorized, issued and outstanding capital stock of the Borrower, and all
shares of Common Stock reserved for issuance under the Borrower's various
option and incentive plans and all warrants, debentures and Common Stock
Equivalents (on a pro forma basis immediately after giving effect to the
transactions contemplated by the Transaction Documents), is set forth in
Section 3.1(g) of the Disclosure Schedule. Except as set forth in Section
3.1(g) of the Disclosure Schedule, no securities of the Borrower are
entitled to preemptive or similar rights, and no Person has any right of
first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the Transaction
Documents. Except as a result of the purchase and sale of the Securities and
except as set forth in Section 3.1(g) of the Disclosure Schedule, there are
no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights
or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire, any shares of Common Stock, or any
contract, commitment, understanding or arrangement by which the Borrower is
or may become bound to issue additional shares of Common Stock or Common
Stock Equivalents. The issue and sale of the Securities will not,
immediately or with the passage of time, obligate the Borrower to issue
shares of Common Stock or other securities to any Person (other than the
Lenders) and will not result in a right of any holder of Borrower securities
to adjust the exercise, conversion, exchange or reset price under such
securities.
(h) SEC Reports; Financial Statements. The Borrower has
---------------------------------
filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Borrower was
required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC REPORTS" and, together with this
Agreement and Section 3.1(h) of the Disclosure Schedule to this Agreement,
the "DISCLOSURE MATERIALS") on a timely basis or has timely filed a valid
extension of such time of filing and has filed any such SEC Reports prior to
the expiration of any such extension. Except as set forth in Section 3.1(h)
of the Disclosure Schedule, as of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities
Act and the Exchange Act and the rules and regulations of the Commission
promulgated thereunder, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except as set forth in Section 3.1(h) of the Disclosure
Schedule, the financial statements of the Borrower included in the SEC
Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Except as set forth in Section
3.1(h) of the Disclosure Schedule, such financial statements have been
prepared in accordance GAAP, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Borrower and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case
of unaudited statements, to normal, immaterial, year-end audit adjustments
and the absence of footnotes. All material agreements to which the Borrower
or any Subsidiary is a party or to which the property or assets of the
17
Borrower or any Subsidiary are subject are included as part of or
specifically identified in the SEC Reports.
(i) Press Releases. The press releases disseminated by the
--------------
Borrower during the two (2) years preceding the date of this Agreement taken
as a whole do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(j) Material Changes. Since the date of the latest audited
----------------
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in a
Material Adverse Effect, (ii) the Borrower has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice
and (B) liabilities not required to be reflected in the Borrower's financial
statements pursuant to GAAP or not required to be disclosed in filings made
with the Commission, (iii) the Borrower has not altered its method of
accounting or the identity of its auditors, (iv) the Borrower has not
declared or made any dividend or distribution of cash or other property to
its shareholders or purchased, redeemed or made any agreements to purchase
or redeem any shares of its capital stock, and (v) the Borrower has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Borrower stock incentive plans. Except as noted in the
Borrower's SEC Reports, the Borrower does not have pending before the
Commission any request for confidential treatment of information.
(k) Litigation. Except as set forth in Section 3.1(k) of
----------
the Disclosure Schedule, there is no Action which (i) adversely affects or
challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) except as otherwise set
forth in the SEC Reports, would reasonably be expected, individually or in
the aggregate, to result in a Material Adverse Effect. Neither the Borrower
nor any Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty.
There has not been, and to the knowledge of the Borrower, there is not
pending or contemplated, any investigation by the Commission involving the
Borrower or any current or former director or officer of the Borrower. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Borrower or any
Subsidiary under the Exchange Act or the Securities Act.
(l) Labor Relations. No material labor dispute exists or,
---------------
to the knowledge of the Borrower, is imminent with respect to any of the
employees of the Borrower or any Subsidiary.
(m) Compliance. Except as set forth in Section 3.1(m) of
----------
the Disclosure Schedule, neither the Borrower nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Borrower or any Subsidiary under), nor has the Borrower or
any Subsidiary received notice of a claim that it is in default under or
that it is in violation of, any
18
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (other
than defaults or violations that have been cured or waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or
(iii) is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal,
state and local laws relating to taxes, environmental protection,
occupational health and safety, product quality and safety and employment
and labor matters, except in each case as could not, individually or in the
aggregate, have or could not reasonably be expected to result in a Material
Adverse Effect. The Borrower is in compliance with the applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules
and regulations thereunder promulgated by the Commission, except where such
noncompliance could not have or reasonably be expected to result in a
Material Adverse Effect. The Borrower is not, to the best of its knowledge
(after due inquiry), in default in any material respect with the terms,
conditions or covenants set forth in (i) the Securities Purchase Agreement,
or the debentures or warrants issued pursuant thereto, among the Borrower
and the lenders therein, dated as of December 19, 2003, (ii) the Securities
Purchase Agreement, or the debentures or warrants issued pursuant thereto,
among the Borrower and the lenders therein, dated as of March 11, 2004 or
(iii) the Loan and Warrant Agreement, or the notes and warrants issued
pursuant thereto, among the Borrower and the lenders therein dated as of
October 14, 2004.
(n) Regulatory Permits. The Borrower and the Subsidiaries
------------------
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the SEC
Reports, except where the failure to possess such permits could not,
individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect ("MATERIAL PERMITS"), and neither the Borrower
nor any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(o) Title to Assets. The Borrower and the Subsidiaries
---------------
have good and marketable title in fee simple to all real property owned by
them that is material to the business of the Borrower and the Subsidiaries
and good and marketable title in all personal property owned by them that is
material to the business of the Borrower and the Subsidiaries, in each case
free and clear of all Liens, except for Permitted Liens, which are set forth
in Section 3.1(k) of the Disclosure Schedule, and except for such Liens as
do not materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Borrower and the Subsidiaries. Any real property and facilities held under
lease by the Borrower and the Subsidiaries that are material to the business
of the Borrower and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Borrower and the Subsidiaries
are in compliance.
(p) Patents and Trademarks. The Borrower and the
----------------------
Subsidiaries own, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or material for use in
connection with their respective businesses as described in the SEC Reports
and which the failure to so have could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect (collectively, the "INTELLECTUAL PROPERTY RIGHTS"). Neither the
Borrower nor any Subsidiary has received a written notice that any
Intellectual Property
19
Right violates or infringes upon the rights of any Person. Except as set
forth in the SEC Reports, to the knowledge of the Borrower, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
(q) Insurance. The Borrower and the Subsidiaries are
---------
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and customary in the
businesses in which the Borrower and the Subsidiaries are engaged. Neither
the Borrower nor any Subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost.
(r) Transactions With Affiliates and Employees. Except as
------------------------------------------
set forth in the SEC Reports, none of the officers or directors of the
Borrower or any Subsidiary and, to the knowledge of the Borrower, none of
the employees of the Borrower or any Subsidiary is presently a party to any
transaction with the Borrower or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to
the knowledge of the Borrower, any entity in which any officer, director, or
any such employee has a substantial interest or is an officer, director,
trustee or partner.
(s) Internal Accounting Controls. Except as set forth in
----------------------------
the SEC Reports, the Borrower and the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences. The Borrower has
established disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the Borrower and designed such disclosure
controls and procedures to ensure that material information relating to the
Borrower, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Borrower's Form 10-K or 10-Q, as the case may be, is being
prepared. The Borrower's certifying officers have evaluated the
effectiveness of the Borrower's controls and procedures in accordance with
Item 307 of Regulation S-K under the Exchange Act for the Borrower's most
recently ended fiscal quarter or fiscal year-end (such date, the "EVALUATION
DATE"). The Borrower presented in its most recently filed Form 10-K or Form
10-Q the conclusions of the certifying officers about the effectiveness of
the disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Borrower's internal controls (as such term is defined in Item
308(c) of Regulation S-K under the Exchange Act) or, to the Borrower's
knowledge, in other factors that could significantly affect the Borrower's
internal controls.
(t) Solvency. Based on the financial condition of the
--------
Borrower as of the applicable Closing Date (and assuming that the Closing
shall have occurred), (i) the Borrower's
20
fair saleable value of its assets exceeds the amount that will be required
to be paid on or in respect of the Borrower's existing Debts and other
liabilities (including known contingent liabilities) as they mature; (ii)
the Borrower's assets do not constitute unreasonably small capital to carry
on its business for the current fiscal year as now conducted and as proposed
to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Borrower,
and projected capital requirements and capital availability thereof; and
(iii) the current cash flow of the Borrower, together with the proceeds the
Borrower would receive, were it to liquidate all of its assets, after taking
into account all anticipated uses of the cash, would be sufficient to pay
all amounts on or in respect of its Debt when such amounts are required to
be paid. The Borrower does not intend to incur Debts beyond its ability to
pay such Debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its Debt).
(u) Certain Fees. Except as set forth in Section 3.1(u) of
------------
the Disclosure Schedule, no brokerage or finder's fees or commissions are or
will be payable by the Borrower to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by this Agreement. Neither the
Administrative Agent nor any Lender shall have any obligation with respect
to any fees or with respect to any claims (other than such fees or
commissions owed by such Person pursuant to written agreements executed by
such Person which fees or commissions shall be the sole responsibility of
such Person) made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.
(v) Certain Registration Matters. Assuming the accuracy of
----------------------------
the Lenders' representations and warranties set forth in Sections
3.2(b)-(e), no registration under the Securities Act is required for the
offer and sale of the Securities by the Borrower to the Lenders under the
Transaction Documents. The Borrower has not granted or agreed to grant to
any Person any rights (including without limitation "PIGGY BACK"
registration rights) to have any securities of the Borrower registered with
the Commission or any other governmental authority that have not been
satisfied.
(w) Listing and Maintenance Requirements. Except as
------------------------------------
specified in the SEC Reports, the Borrower has not, in the two years
preceding the date hereof, received notice from any Eligible Market to the
effect that the Borrower is not in compliance with the listing or
maintenance requirements thereof. The Borrower is, and has no reason to
believe that it will not in the foreseeable future continue to be, in
compliance with the listing and maintenance requirements for continued
listing of the Common Stock on the Trading Market. The issuance and sale of
the Securities under the Transaction Documents does not contravene the rules
and regulations of the Trading Market, and except as set forth in this
Agreement, no approval of the shareholders of the Borrower thereunder is
required for the Borrower to issue and deliver to the Lenders the maximum
number of Securities contemplated by Transaction Documents, including as may
be required pursuant to Nasdaq Rule Filing SR-NASD-2003-40 (March 14, 2003)
concerning shareholder approval requirements when officers and directors
participate in discounted private placements and Nasdaq Rule Filing
SR-NASD-2003-61 (March 28, 2003) concerning shareholder approval
requirements in connection with a change of control.
21
(x) Environmental Matters. Neither the Borrower nor any
---------------------
Subsidiary (i) is in violation of any statute, rule, regulation, decision or
order of any governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or toxic substances or
relating to the protection or restoration of the environment or human
exposure to hazardous or toxic substances (collectively, "ENVIRONMENTAL
LAWS"), (ii) owns or operates any real property contaminated with any
substance that is subject to any Environmental Laws, (iii) is liable for any
off-site disposal or contamination pursuant to any Environmental Laws, and
(iv) is subject to any claim relating to any Environmental Laws, which
violation, contamination, liability or claim has had or could reasonably be
expected to have a Material Adverse Effect, individually or in the
aggregate; and there is no pending investigation threatened in writing by
any governmental authority that might lead to such a claim.
(y) Investment Company. The Borrower is not, and is not an
------------------
Affiliate of, an "INVESTMENT COMPANY" within the meaning of the Investment
Company Act of 1940, as amended.
(z) Application of Takeover Protections. The Borrower and
-----------------------------------
its Board of Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Borrower's Articles of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Administrative Agent
or the Lenders as a result of the Administrative Agent, the Lenders and the
Borrower fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Borrower's issuance
of the Securities and the Lenders' ownership of the Securities.
(aa) No Additional Agreements. The Borrower does not have
------------------------
any agreement or understanding with the Administrative Agent or any Lender
with respect to the transactions contemplated by the Transaction Documents
other than as specified therein, except that any officer or director who
participates in this transaction as a Lender shall not be entitled to any
anti-dilution protection (other than on account of stock splits, stock
combinations and similar events) under the Notes or the Warrants acquired by
them or their Affiliates so as not to violate Nasdaq Rule Filing
SR-NASD-2003-40 (March 14, 2003).
(bb) Disclosure. The Borrower confirms that neither it nor
----------
any Person acting on its behalf has provided the Administrative Agent or any
of the Lenders or their agents or counsel with any information that the
Borrower believes constitutes material, non-public information. The Borrower
understands and confirms that the Administrative Agent and the Lenders will
rely on the foregoing representations and warranties in effecting
transactions in securities of the Borrower. All disclosure provided to the
Administrative Agent and the Lenders regarding the Borrower, its business
and the transactions contemplated hereby, furnished by or on behalf of the
Borrower (including the Borrower's representations and warranties set forth
in this Agreement and the Disclosure Schedule) are true and correct and do
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
22
(cc) Acknowledgment Regarding Lenders' Purchase of
---------------------------------------------
Securities. The Borrower acknowledges and agrees that each of the Lenders is
----------
acting solely in the capacity of an arm's length lender with respect to the
Transaction Documents and the transactions contemplated hereby. The Borrower
further acknowledges that neither the Administrative Agent nor any Lender is
acting as a financial advisor or fiduciary of the Borrower (or in any
similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and any advice given by the Administrative
Agent or any Lender or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby is merely incidental to the Lenders' purchase of the Securities or
the Administrative Agent's performance of its duties under the Transaction
Documents. The Borrower further represents to the Administrative Agent and
each Lender that the Borrower's decision to enter into this Agreement has
been based solely on the independent evaluation by the Borrower and its
representatives.
3.2. Representations and Warranties of the Lenders. Each
---------------------------------------------
Lender, for itself and for no other Lender, hereby represents and warrants
to the Borrower as follows:
(a) Organization; Authority. Such Lender is an entity duly
-----------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate, partnership,
limited liability company or other applicable like power and authority to
enter into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations thereunder.
The execution, delivery and performance by such Lender of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate or, if such Lender is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of such
Lender. Each of this Agreement, the Registration Rights Agreement, the
Mortgage, the Security Agreement and Guarantee Agreement has been duly
executed by such Lender, and when delivered by such Lender in accordance
with the terms hereof, will constitute the valid and legally binding
obligation of such Lender, enforceable against it in accordance with its
terms.
(b) Investment Intent. Such Lender is acquiring its Note
-----------------
and Warrant for investment purposes and not with a view to or for
distributing or reselling them or any part thereof, without prejudice,
however, to such Lender's right at all times to sell or otherwise dispose of
all or any part thereof in compliance with applicable federal and state
securities laws. Subject to the immediately preceding sentence, nothing
contained herein shall be deemed a representation or warranty by such Lender
to hold any Securities for any period of time. Such Lender is acquiring such
Note and Warrant in the ordinary course of its business. Such Lender does
not have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities.
(c) Lender Status. At the time each Lender was offered its
-------------
Note and its Warrant, it was, and at the date of each Closing will be, it
is, an "accredited investor" as defined in Rule 501(a) under the Securities
Act. Such Lender is not a registered broker-dealer under Section 15 of the
Exchange Act.
(d) General Solicitation. Such Lender is not taking any
--------------------
Note or Warrant as a result of any advertisement, article, notice or other
communication regarding either of them
23
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.
(e) Access to Information. Such Lender acknowledges that
---------------------
it has reviewed the Disclosure Materials and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Borrower concerning the terms
and conditions of the offering of the Securities and the merits and risks of
investing in the Securities; (ii) access to information about the Borrower
and the Subsidiaries and their respective financial condition, results of
operations, business, properties, management and prospects sufficient to
enable it to evaluate its investment; and (iii) the opportunity to obtain
such additional information that the Borrower possesses or can acquire
without unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment. Neither such inquiries
nor any other investigation conducted by or on behalf of such Lender or its
representatives or counsel shall modify, amend or affect such Lender's right
to rely on the truth, accuracy and completeness of the Disclosure Materials
and the Borrower's representations and warranties contained in the
Transaction Documents.
(f) Limited Ownership. The purchase by such Lender of the
-----------------
Securities issuable to it at the applicable Closing (including the
Underlying Shares that would be issuable upon the conversion and exercise of
such Securities) will not result in such Lender (individually or together
with other Persons with whom such Lender has identified, or will have
identified, itself as part of a "group" in a public filing made with the
Commission involving the Borrower's securities) acquiring, or obtaining the
right to acquire, in excess of 19.999% of the Common Stock or the voting
power of the Borrower on a post transaction basis that assumes that the
applicable Closing shall have occurred. Such Lender does not presently
intend to, alone or together with others, make a public filing with the
Commission to disclose that it has (or that it together with such other
Persons have) acquired, or obtained the right to acquire, as a result of the
applicable Closing (when added to any other securities of the Borrower that
it or they then own or have the right to acquire), in excess of 19.999% of
the Common Stock or voting power of the Borrower on a post transaction basis
that assumes that the applicable Closing shall have occurred.
(g) Independent Investment Decision. Such Lender has
-------------------------------
independently evaluated the merits of its decision to invest in the Notes
and the Warrants pursuant to this Agreement, such decision has been
independently made by such Lender and such Lender confirms that it has only
relied on the advice of its own business and/or legal counsel and not on the
advice of any other Lender's business and/or legal counsel in making such
decision.
The Borrower acknowledges and agrees that no Lender makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2. The
Borrower acknowledges and agrees that the Administrative Agent does not make
and has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
this Section 3.2.
24
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1. (a) Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of the
Securities other than pursuant to an effective registration statement, to
the Borrower, to an Affiliate of a Lender or in connection with a pledge as
contemplated in Section 4.1(b), the Borrower may require the transferor
thereof to provide to the Borrower an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Borrower, to the effect that such transfer does not
require registration of such transferred Securities under the Securities
Act.
(b) Certificates evidencing the Securities will contain the
following legend, so long as is required by this Section 4.1(b) or Section
4.1(c):
[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON
CONVERSION/EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED]
[THESE SECURITIES HAVE NOT BEEN REGISTERED] WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE BORROWER. [THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION/EXERCISE OF
THESE SECURITIES] [THESE SECURITIES] MAY BE PLEDGED IN A MANNER
CONSISTENT WITH THE SECURITIES ACT IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
The Borrower acknowledges and agrees that a Lender may
from time to time pledge, and/or grant a security interest in some or all of
the Securities pursuant to a bona fide margin agreement in connection with a
bona fide margin account in accordance with the Securities Act and, if
required under the terms of such agreement or account, such Lender may
transfer pledged or secured Securities to the pledgees or secured parties.
Such a pledge or transfer would not be subject to approval or consent of the
Borrower and no legal opinion of legal counsel to the pledgee, secured party
or pledgor shall be required in connection with the pledge, but such legal
opinion may be required in connection with a subsequent transfer, following
default, by the Lender transferee of the pledge. No notice shall be required
of such pledge. At the appropriate Lender's expense, the Borrower will
execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities including the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) under the Securities Act
or other
25
applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.
(c) Certificates evidencing Underlying Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)): (i)
following a sale of such Securities under a registration statement
(including a Registration Statement), or (ii) following any sale of such
Securities pursuant to Rule 144, or (iii) while such Securities are eligible
for sale under Rule 144(k), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission).
Borrower may not make any notation on its records or give instructions to
any transfer agent of the Borrower that enlarge the restrictions on transfer
set forth in this Section.
4.2. Furnishing of Information. As long as any Lender owns the
-------------------------
Securities issued or issuable to it, the Borrower covenants to timely file
(or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Borrower after the
date hereof pursuant to the Exchange Act. Upon the request of any such
Person, the Borrower shall deliver to such Person a written certification of
a duly authorized officer as to whether it has complied with the preceding
sentence. As long as any Lender owns Securities, if the Borrower is not
required to file reports pursuant to such laws, it will prepare and furnish
to the Lenders and make publicly available in accordance with Rule 144(c)
such information as is required for the Lenders to sell the Underlying
Shares under Rule 144. The Borrower further covenants that it will take such
further action as any holder of Securities may reasonably request, all to
the extent required from time to time to enable such Person to sell such
Underlying Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
4.3. Acknowledgment of Dilution. The Borrower acknowledges that
--------------------------
the issuance of the Securities (including the Underlying Shares) will result
in dilution of the outstanding shares of Common Stock, which dilution may be
substantial. The Borrower further acknowledges that its obligations under
the Transaction Documents, including without limitation its obligation to
issue the Securities (including the Underlying Shares) pursuant to the
Transaction Documents, are unconditional and absolute and not subject to any
right of set off, counterclaim, delay or reduction, regardless of the effect
of any such dilution or any claim that the Borrower may have against the
Administrative Agent or any Lender.
4.4. Integration. The Borrower shall not, and shall use
-----------
its best efforts to ensure that no Affiliate of the Borrower shall, sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of
any security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the
Securities to the Lenders, or that would be integrated with the offer or
sale of the Securities for purposes of the rules and regulations of any
Trading Market.
4.5. Listing of Common Stock. From the date hereof through
-----------------------
the Effectiveness Period (as such term is defined in the Registration Rights
Agreement) the Borrower agrees (i) if the Borrower applies to have the
Common Stock traded on any Trading Market other than the Trading Market
which the Common Stock is currently listed for trading, it will include in
such application the Underlying Shares, and will take such other action as
is necessary or desirable to
26
cause such securities to be listed on such other Trading Market as promptly
as possible and (ii) it will take all action reasonably necessary to
continue the listing and trading of its Common Stock on a Trading Market and
will comply in all material respects with the Borrower's reporting, filing
and other obligations under the bylaws or rules of the Trading Market.
4.6. Reservation of Shares. The Borrower shall maintain a
---------------------
reserve from its duly authorized shares of Common Stock to comply with its
conversion obligations under the Notes and its exercise obligations under
the Warrants. If on any date the Borrower would be, if notice of exercise or
conversion were to be delivered on such date, precluded from issuing the
number of Underlying Shares, as the case may be, issuable upon conversion in
full of the Notes or exercise in full under the Warrants due to the
unavailability of a sufficient number of authorized but unissued or reserved
shares of Common Stock, then the Board of Directors of the Borrower shall
promptly prepare and mail to the shareholders of the Borrower proxy
materials or other applicable materials requesting authorization to amend
the Borrower's articles of incorporation or other organizational document to
increase the number of shares of Common Stock which the Borrower is
authorized to issue so as to provide enough shares for issuance of the
Underlying Shares. In connection therewith, the Board of Directors shall (a)
adopt proper resolutions authorizing such increase, (b) recommend to and
otherwise use its best efforts to promptly and duly obtain shareholder
approval to carry out such resolutions (and hold a special meeting of the
shareholders as soon as practicable, but in any event not later than the
60th day after delivery of the proxy or other applicable materials relating
to such meeting) and (c) within five Business Days of obtaining such
shareholder authorization, file an appropriate amendment to the Borrower's
articles of incorporation or other organizational document to evidence such
increase.
4.7. Conversion and Exercise Procedures. The form of Exercise
----------------------------------
Notice included in and as defined in the Warrants and the form of Conversion
Notice included in and as defined in the Notes set forth the totality of the
procedures required by the Lenders in order to exercise the Warrants and
convert the Notes. No additional legal opinion or other information or
instructions shall be necessary to enable the Lenders to exercise the
Warrants or convert Notes. The Borrower shall honor exercises of the
Warrants and conversions of the Notes and shall deliver Underlying Shares in
accordance with the terms, conditions and time periods set forth in the
Transaction Documents.
4.8. Subsequent Registrations; Subsequent Placements.
-----------------------------------------------
(a) From the First Closing Date through and including the
Effective Date, the Borrower will not file a registration statement (other
than on a Form S-8 and pursuant to the Registration Rights Agreement) with
the Commission with respect to any securities of the Borrower.
(b) Prior to the first year anniversary of the Second
Closing Date, in the event the Borrower or any Subsidiary, directly or
indirectly, determines to offer, sell, grant any option to purchase, or
otherwise dispose of (or announces any offer, sale, grant or any option to
purchase or otherwise dispose of) any Common Stock or Common Stock
Equivalents (other than under and pursuant to the Notes and the Warrants) or
any of its Subsidiaries' equity or Common Stock Equivalents, including
without limitation, pursuant to a private placement, an equity line of
credit or a shelf registration statement in accordance with Rule 415 under
the Securities Act,
27
(such offer, sale, grant, disposition or announcement being referred to as
"SUBSEQUENT PLACEMENT"), the Borrower shall deliver to each Lender a written
notice (the "SUBSEQUENT PLACEMENT NOTICE") of its intention to effect such
Subsequent Placement, which specifies in reasonable detail the type of
securities being offered (the "OFFERED SECURITIES"), all of the other
material terms of such Subsequent Placement, the amount of proceeds intended
to be raised thereunder, the names of the investors (including the
investment manager of such investors, if any) and the investment bankers
with whom such Subsequent Placement is proposed to be effected, and attached
to which shall be a term sheet or similar document. Each Lender shall have
until 6:30 p.m. (New York City time) on the fifth Trading Day after their
respective receipt of the Subsequent Placement Notice to notify Borrower of
its intention to participate ("NOTICE OF ACCEPTANCE"), subject to completion
of mutually acceptable documentation, in such financing on the same terms as
set forth in the Subsequent Placement Notice, provided however, that as to
any transaction or series of related transactions, the Borrower shall have
no obligation to offer the Lenders the right to participate, in the
aggregate, in an amount that exceeds the lesser of (i) 25% of the securities
offered and (ii) a portion of the Subsequent Placement equal to the then
outstanding principal amount of the Notes divided by the aggregate purchase
price of the Subsequent Placement.
(c) The Borrower shall have five (5) Trading Days from the
expiration of the period set forth in Section 4.8(b) above to issue, sell or
exchange all or any part of such Offered Securities as to which a Notice of
Acceptance has not been given by the Lenders (the "REFUSED SECURITIES"), but
only to the offerees described in the Subsequent Placement Notice and only
upon terms and conditions (including, without limitation, unit prices and
interest rates) that are not more favorable to the acquiring Person or
Persons or less favorable to the Borrower than those set forth in the
Subsequent Placement Notice.
(d) Any Offered Securities not acquired by the Lenders or
other persons in accordance with this Section 4.8(b) above may not be
issued, sold or exchanged until they are again offered to the Lenders under
the procedures specified in this Agreement.
(e) The period set forth in the first sentence of Section
4.8(b) shall be extended for the number of Trading Days during such period
in which (i) trading in the Common Stock is suspended by any Trading Market
or the Commission, or (ii) the Registration Statement is not effective or
the prospectus included in the Registration Statement may not be used by the
Lenders for the resale of the Underlying Shares following the required
effective date as set forth in Section 2(b) of the Registration Rights
Agreement.
(f) The Borrower's obligations under Section 4.8(b) shall
not apply to any grant or issuance by the Borrower of any of the following:
(i) the issuance of securities upon the exercise or conversion of any Common
Stock Equivalents issued by the Borrower prior to the date of this Agreement
(but will apply to any amendments, modifications and reissuances thereof),
and (ii) the grant of options or warrants, or the issuance of additional
securities, under any duly authorized company stock option, restricted stock
plan or stock purchase plan in existence on the First Closing Date, (iii)
the issuance of Common Stock in payment of interest on the Notes, or (iv)
the issuance of Common Stock Equivalents pursuant to a Strategic
Transaction.
28
4.9. Securities Laws Disclosure; Publicity. By 8:30 a.m. (New
-------------------------------------
York City time) on both the Trading Day following the day this Agreement is
executed and on each subsequent Closing Date, the Borrower shall issue a
press release reasonably acceptable to the Lenders and the Administrative
Agent disclosing the transactions contemplated hereby on the date of this
Agreement and file a Current Report on Form 8-K disclosing the material
terms of the transactions contemplated hereby. The Borrower will file an
additional Current Report on Form 8-K, if necessary, on each applicable
Closing Date to disclose the applicable Closing. In addition, the Borrower
will make such other filings and notices in the manner and time required by
the Commission and the Trading Market on which the Common Stock is listed.
Notwithstanding the foregoing, the Borrower shall not publicly disclose the
name of the Administrative Agent, any Lender, or include the name of the
Administrative Agent or any Lender in any filing with the Commission (other
than the Registration Statement and any exhibits to filings made in respect
of this transaction in accordance with periodic filing requirements under
the Exchange Act) or any regulatory agency or Trading Market, without the
prior written consent of the Administrative Agent or such Lender, as the
case may be, except to the extent such disclosure is required by law or
Trading Market regulations, in which case the Borrower shall provide the
Administrative Agent and the Lenders with prior notice of such disclosure.
4.10. Limitation on Issuance of Future Priced Securities. Following
--------------------------------------------------
the First Closing and for so long as Notes remain outstanding, the Borrower
shall not issue or agree to issue any "FUTURE PRICED SECURITIES" as such
term is described by NASD IM-4350-1.
4.11. Indemnification of Lenders. In addition to the indemnity
--------------------------
provided in the Registration Rights Agreement and in Section 8.18, the
Borrower will indemnify and hold the Lenders and their directors, officers,
shareholders, partners, employees and agents (each, a "LENDER PARTY")
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys' fees and costs of
investigation that any such Lender Party may suffer or incur as a result of
or relating to any misrepresentation, breach or inaccuracy of any
representation, warranty, covenant or agreement made by the Borrower in any
Transaction Document. In addition to the indemnity contained herein, the
Borrower will reimburse each Lender Party for its reasonable legal and other
expenses (including the cost of any investigation, preparation and travel in
connection therewith) incurred in connection therewith, as such expenses are
incurred.
4.12. Non-Public Information. The Borrower covenants and agrees
----------------------
that neither it nor any other Person acting on its behalf will provide the
Administrative Agent, any Lender or any agent or counsel to the
Administrative Agent or any Lender with any information that the Borrower
believes constitutes material non-public information. The Borrower
understands and confirms that the Administrative Agent and each Lender shall
be relying on the foregoing representations in effecting transactions in
securities of the Borrower.
4.13. Certain Trading Restrictions. Each Lender agrees that neither
----------------------------
it nor its Affiliates (taken as a whole) will enter into or maintain a net
short position with respect to the Common Stock. Accordingly, each Lender
agrees that neither it nor its Affiliates will enter into or maintain any
short sale of the Common Stock at a time when there is no equivalent
offsetting
29
long position in the Common Stock held by such Lender. For purposes of
determining whether there is an equivalent offsetting long position in the
Common Stock held by such Lender, the Underlying Shares issuable upon
exercise of all warrants (including the Warrants) and conversion of all
debentures and notes (including the Notes and in each case any shares
issuable on account of interest under such notes or debentures) held by such
Lender (without regard to any exercise or conversion caps contained therein,
and whether or not any exercise or conversion notice shall have been
tendered by such Lender) shall be deemed held long by such Lender for
purposes of this Section.
4.14. Existence; Conduct of Business. The Borrower will, and will
------------------------------
cause each of the Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises
material to the conduct of its business, provided that the foregoing shall
not prohibit (a) any sale, lease, transfer or other disposition permitted by
Section 5.1, or (b) any merger of (i) any domestic Subsidiary with any other
domestic Subsidiary, (ii) any domestic Subsidiary with and into the
Borrower, (iii) any foreign Subsidiary (other than Opco and its
Subsidiaries) with any other foreign Subsidiary, or (iv) any Subsidiary of
Opco with Opco or any other Subsidiary of Opco.
4.15. Maintenance of Cash and Cash Equivalents. While any Notes are
----------------------------------------
outstanding, the Borrower will, at all times, maintain unrestricted cash and
Cash Equivalents, together with availability under the Borrower's revolving
line of credit, in an aggregate amount not less than $500,000, free and
clear of all Liens (other than Permitted Liens within the meaning of clauses
(a), (h) or (i) of such defined term). In the event that such unrestricted
cash and Cash Equivalents maintained by the Borrower hereunder shall at the
end of any fiscal quarter (as reflected in Borrower's Quarterly Report on
Form 10-Q under the Exchange Act for such fiscal quarter) be in an aggregate
amount less than such amount, the Borrower shall deliver to each Lender at
the Borrower's expense, a letter of credit (in form and substance acceptable
to such Lender) and issued by a bank reasonably acceptable to such Lender in
a face amount equal to the sum of 100% of the then outstanding principal
amount of such Lender's Note plus interest payable thereon until the
maturity date thereof. Such letters of credit shall provide, among other
things, that the beneficiary thereof shall have the right to draw thereunder
upon presentation of a draft together with a certificate signed by such
Lender referring to this Agreement and the Notes held by such Lender and
certifying that an Event of Default has occurred and is continuing under the
Transaction Documents.
4.16. Use of Proceeds. The Borrower shall use the net proceeds from
---------------
the sale of the Securities hereunder for (i) working capital purposes, (ii)
for the payment of all outstanding principal and interest of the Borrower's
Debt secured by the assets and/or properties listed on Schedule 4.16, within
15 days of the Second Closing Date and (iii) capital expenditures associated
with the addition of carbon fiber and acrylic fiber precursor production
lines, but not (a) for the satisfaction of any portion of the Borrower's or
any of its Subsidiaries' other Debt (other than payment of the Borrower's
existing line of credit and trade payables and accrued expenses in the
ordinary course of the Borrower's business and consistent with prior
practices), (b) to redeem any Common Stock or Common Stock Equivalents or
(c) to settle any outstanding Action or Proceeding.
30
4.17. 2005 Notes Conversion Price, Anti-dilution, Prohibition on
----------------------------------------------------------
Indebtedness.
------------
(a) On the nine month anniversary of the Second Closing
Date, the Borrower and the holders of the 2005 Notes shall amend the
conversion price of the 2005 Notes (as defined in the Notes) to an amount
equal to the product of (a) 0.9 and (b) the arithmetic average of the VWAP
of the Closing Prices of the Borrower's Common Stock for each of the 20
Trading Days immediately preceding the nine month anniversary of the Second
Closing Date; provided that such conversion price shall not be (i) less than
$12.50 or (ii) greater than $20.00 or the conversion price currently in
effect for the 2005 Notes.
(b) Each Lender agrees that the Debt evidenced by the
Notes shall be permitted under Section 5.03 of the 2005 Loan Agreement (as
defined in the Notes).
(c) Each Lender agrees that the issuance of the Notes will
not trigger the anti-dilution provisions set forth in Section 11 of the 2005
Notes or Section 9 of the warrants issued pursuant to the 2005 Loan
Agreement.
4.18. Lender's Obligations.
--------------------
(a) On or prior to the six month anniversary of the Second
Closing Date, the Lenders shall exercise all unexercised warrants issued to
such Lenders by the Borrower on December 19, 2003 and March 11, 2004.
(b) Each Lender agrees to convert the entire outstanding
principal amount of the 2004 Notes into Common Stock in accordance with
their terms no later than the 30 Trading Days following the Second Closing
Date.
ARTICLE V.
NEGATIVE COVENANTS
The Borrower covenants and agrees that from and after the
First Closing Date and (except as provided in Section 5.3) so long as any
there remains any outstanding principal amount under the Notes, the Borrower
shall not, and shall not permit its Subsidiaries to:
5.1. Dispositions of Assets or Subsidiaries. Sell, convey, assign,
--------------------------------------
lease, abandon or otherwise transfer or dispose of, voluntarily or
involuntarily, any material properties or assets, tangible or intangible
(including any spin-offs of any divisions, lines of business or subsidiaries
and also including sale, assignment, discount or other disposition of
accounts, contract rights, chattel paper, equipment or general intangibles
with or without recourse or of capital stock, shares of beneficial interest,
partnership interests or limited liability company interests of a Subsidiary
of the Borrower), except transactions involving the sale of inventory or
upgrade or exchange of machinery, in either case, in the ordinary course of
business and for usual and ordinary prices.
5.2. Restricted Payments. Declare or make, or agree to pay for or
-------------------
make, directly or indirectly, any Restricted Payment, provided that (a) the
--------
Borrower may declare and pay, and agree to pay, dividends with respect to
its Equity Interests payable solely in Common Stock,
31
(b) any wholly owned Subsidiary of the Borrower may declare and pay
dividends with respect to its Equity Interests to the Borrower or any other
wholly owned Subsidiary of the Borrower, (c) the Borrower may pay bonuses to
its officers, directors and employees consistent with past practices, (d)
the Borrower may pay director's fees to its directors consistent with past
practices, and (e) the Borrower may pay fees to its directors for bona fide
consulting services consistent with past practices.
5.3. Permitted Debt. At any time prior to the Second Closing,
--------------
create, incur, assume, guarantee or suffer to exist any Debt, except:
(i) Debt evidenced by the Notes, the 2005 Notes
(as defined in the Notes), the 2004 Notes (as defined in the Notes), the
2004 Debentures (as defined in the Notes) and the 2003 Debentures (as
defined in the Notes);
(ii) subordinated Debt approved in writing by the
Required Lenders;
(iii) accounts payable by such Borrower or a
Subsidiary to trade creditors, accrued expenses and other liabilities
incurred in the ordinary course of business;
(iv) Capital Lease Obligations which do not in the
aggregate exceed $500,000 at any time outstanding;
(v) Debt for accrued payroll taxes so long as
payment thereof is not past due and payable unless such taxes are being
contested in good faith and by appropriate proceedings and for which
adequate reserves in accordance with GAAP are maintained on the books of the
Borrower or the applicable Subsidiary;
(vi) Contingent Obligations not in excess of the
sum of (i) an aggregate of $1,402,864.50, incurred in connection with that
certain Letter of Credit dated June 21, 2004 issued by Xxxxxxxx & Xxxxxx
Bank in the amount of $85,864.50 in favor of Cisco Systems, and that certain
Letter of Credit dated December 17, 2004 issued by Xxxxxxxx & Ilsley Bank in
the amount of $1,317,000 in favor of Contractor Bonding and Insurance
Company (the "EXISTING LETTERS OF CREDIT") or any extension or renewal
thereof, and (ii) $300,000; provided that upon termination of or permanent
reduction in the Existing Letters of Credit, the amount of Contingent
Obligations the Borrower may incur shall be reduced to reflect such
termination or permanent reduction.
(vii) Debt in respect of netting services, overdraft
protections and otherwise in connection with deposit accounts of the
Borrower or any Subsidiary; and
(viii) Debt incurred in the ordinary course of
business solely to support any Borrower or any Subsidiary's insurance or
self-insurance obligations in the ordinary course of business (including to
secure worker's compensation and other similar insurance coverages).
Upon consummation of the Second Closing, without any further action
by the Borrower or the Lenders the restrictions set forth in this Section
5.3 shall terminate and be of no further force and effect.
32
ARTICLE VI.
CONDITIONS PRECEDENT
6.1. Conditions Precedent to the Obligations of the Lenders.
------------------------------------------------------
The obligation of each Lender to make its Loan on each Closing Date is
subject to the satisfaction or waiver by such Lender of each of the
following conditions:
(a) Representations and Warranties. The representations
------------------------------
and warranties of the Borrower contained herein shall be true and correct in
all respects as of the date when made and as of such Closing Date as though
made on and as of such date;
(b) Performance. The Borrower shall have performed,
-----------
satisfied and complied in all respects with, and caused each of its
Subsidiaries to perform, satisfy and comply in all respects with, all
covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by it at or prior to applicable
Closing;
(c) No Injunction. No treaty and no U.S. or foreign
-------------
statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents;
(d) Adverse Changes. Since the date of execution of this
---------------
Agreement, no event or series of events shall have occurred that reasonably
would be expected to have or result in a (i) an adverse effect on the
legality, validity or enforceability of any Transaction Document, or (ii) a
material and adverse effect on the results of operations, assets, business
or condition (financial or otherwise) of (i) the Borrower, (ii) any
Subsidiary party to a Transaction Document, or (iii) the Borrower and the
Subsidiaries, taken as a whole;
(e) No Suspensions of Trading in Common Stock; Listing.
--------------------------------------------------
Trading in the Common Stock shall not have been suspended by the Commission
or any Trading Market (except for any suspensions of trading of not more
than one Trading Day solely to permit dissemination of material information
regarding the Borrower) at any time since the date of execution of this
Agreement, and the Common Stock shall have been at all times since such date
listed for trading on a Trading Market;
(f) Nasdaq Listing. The Nasdaq Stock Market shall have
--------------
waived application of the 15 day prior notice contained in NASD Marketplace
Rule 4310(17)(D) or such timeframe shall have expired without objection;
(g) 2004 Note Conversion Price. The Borrower shall amend
--------------------------
the conversion price of the 2004 Notes (as defined in the Notes) to $9.50;
(h) Bank Consent. To the extent applicable, the Borrower
------------
shall have received the consent of each bank or other lender or provider of
credit to the Borrower or any Subsidiary whose consent is required with
respect to the transactions contemplated by the Transaction Documents as
well as an estoppel certificate indicating the absence of any event of
default or any default which could with or without the passage of time or
notice or both in an event of default
33
under any document or agreement governing the transactions with such bank,
lender or provider or credit; and
(i) Borrower Deliverables. The Lenders shall have received
---------------------
the Borrower Deliverables, as applicable.
6.2. Conditions Precedent to the Obligations of the Borrower to
----------------------------------------------------------
deliver the Notes and the Warrants. The obligation of the Borrower to
----------------------------------
deliver the Notes and the Warrants on each Closing Date is subject to the
satisfaction or waiver by the Borrower hereunder of each of the following
conditions:
(a) Representations and Warranties. The representations
------------------------------
and warranties of each Lender contained herein shall be true and correct in
all respects as of the date when made and as of such Closing Date as though
made on and as of such date;
(b) Performance. Each Lender shall have performed,
-----------
satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by such Lender at or prior to such
Closing;
(c) No Injunction. No statute, rule, regulation, executive
-------------
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents; and
(d) Nasdaq Listing. The Nasdaq Stock Market shall have
--------------
waived application of the 15 day prior notice contained in NASD Marketplace
Rule 4310(17)(D) or such timeframe shall have expired without objection.
ARTICLE VII.
ADMINISTRATIVE AGENT
7.1. Each Lender hereby irrevocably appoints the Administrative
Agent as its agent and authorizes the Administrative Agent to take such
actions on its behalf and to exercise such powers as are delegated to the
Administrative Agent by the terms hereof, together with such actions and
powers as are reasonably incidental thereto.
7.2. The Person serving as the Administrative Agent hereunder
shall have the same rights and powers in its capacity as a Lender as any other
Lender and may exercise the same as though it were not the Administrative
Agent, and such Person and its Affiliates may lend money to and generally
engage in any kind of business with the Borrower or any Subsidiary or other
Affiliate thereof as if it were not the Administrative Agent hereunder.
7.3. The Administrative Agent shall not have any duties or
obligations except those expressly set forth herein. Without limiting the
generality of the foregoing, (i) the Administrative Agent shall not be
subject to any fiduciary or other implied duties, regardless of whether an
Event of Default (or an event which, with the giving of notice, lapse of
time, or both, would
34
constitute an Event of Default) has occurred and is continuing, (ii) the
Administrative Agent shall not have any duty to take any discretionary
action or exercise any discretionary powers, except discretionary rights and
powers expressly contemplated by the Transaction Documents that the
Administrative Agent is required to exercise in writing by the Required
Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 8.4), and (iii)
except as expressly set forth herein, the Administrative Agent shall not
have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Borrower, any Affiliate thereof or
any Subsidiary that is communicated to or obtained by the Person serving as
Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken
by it with the consent or at the request of the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 8.4) or in the absence of its own gross
negligence or willful misconduct. The Administrative Agent shall be deemed
not to have knowledge of any Event of Default (or any event which, with the
giving of notice, lapse of time, or both, would constitute an Event of
Default) unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender (and, promptly after its
receipt of any such notice, it shall give each Lender and the Borrower
notice thereof), and the Administrative Agent shall not be responsible for
or have any duty to ascertain or inquire into (a) any statement, warranty or
representation made in or in connection with any Transaction Document, (b)
the contents of any certificate, report or other document delivered
thereunder or in connection therewith, (c) the performance or observance of
any of the covenants, agreements or other terms or conditions set forth
therein, (d) the validity, enforceability, effectiveness or genuineness
thereof or any other agreement, instrument or other document or (e) the
satisfaction of any condition set forth in Article VI or elsewhere in the
Transaction Documents.
7.4. The Administrative Agent shall be entitled to rely upon,
and shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing
believed by it to be genuine and to have been signed or sent by the proper
Person. The Administrative Agent also may rely upon any statement made to it
orally or by telephone and believed by it to be made by the proper Person,
and shall not incur any liability for relying thereon. The Administrative
Agent may consult with legal counsel (who may be counsel for the Borrower or
any Subsidiary), independent accountants and other experts selected by it,
and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountants or experts.
7.5. The Administrative Agent may perform any and all its duties
and exercise its rights and powers by or through any one or more sub agents
appointed by the Administrative Agent, provided that no such delegation
--------
shall serve as a release of the Administrative Agent or waiver by the
Borrower or any Lender of any rights hereunder. The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its
rights and powers through their respective Related Parties. The exculpatory
provisions of the preceding paragraphs shall apply to any such sub-agent and
to the Related Parties of the Administrative Agent and any such sub agent,
and shall apply to their respective activities in connection with the
activities as Administrative Agent.
35
7.6. Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent
may resign at any time by notifying the Lenders and the Borrower. Upon any
such resignation, the Required Lenders shall have the right to appoint a
successor. If no successor shall have been so appointed by the Required
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent gives notice of its resignation, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed
to and become vested with all the rights, powers, privileges and duties of
the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder. The fees
payable by the Borrower to a successor Administrative Agent shall be the
same as those payable to its predecessor unless otherwise agreed between the
Borrower and such successor. After the Administrative Agent's resignation
hereunder, the provisions of this Article and Section 8.18 shall continue in
effect for the benefit of such retiring Administrative Agent, its sub-agents
and their respective Related Parties in respect of any actions taken or
omitted to be taken by any of them while it was acting as Administrative
Agent.
7.7. Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon any
Transaction Document, any related agreement or any document furnished
thereunder.
ARTICLE VIII.
MISCELLANEOUS
8.1. Fees and Expenses. The Borrower shall be responsible for the
-----------------
reasonable legal fees, charges and disbursements of the Administrative Agent
and each Lender in the event that the Borrower requests any waiver or
amendment of the provisions of any Transaction Document following the First
Closing. Except as otherwise specified in the Transaction Documents
(including without limitation Section 8.19), and except that Borrower shall
reimburse OMT (i) $55,000 for its legal fees of which amount $20,000 of
which has been previously paid by the Borrower, and (ii) expenses incurred
in connection with its entering into the Transaction Documents, including,
without limitation, fees and expenses relating to the cost of Hungarian
counsel (OMT may deduct such amounts from the First Closing Purchase Price
deliverable to the Borrower at the First Closing), each party shall pay the
fees and expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of the
Transaction Documents. The Borrower shall pay all stamp and other taxes and
duties levied in connection with the sale of the Securities.
8.2. Entire Agreement. The Transaction Documents, together with
----------------
the Exhibits and Schedules thereto, contain the entire understanding of the
parties with respect to the subject
36
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have
been merged into such documents, exhibits and schedules. At or after the
First Closing, and without further consideration, each party will execute
and deliver to the other party hereto such further documents as may be
reasonably requested in order to give practical effect to the intention of
the parties under the Transaction Documents.
8.3. Notices. All notices or other communications or deliveries
-------
required or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile number specified in this Section prior to 6:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile number specified in this Section on a day that is not a
Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day,
(c) the Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt
by the party to whom such notice is required to be given. The addresses and
facsimile numbers for such notices and communications shall be as follows:
If to the Borrower: Xxxxxx Companies, Inc.
0000 XxXxxxxx Xx.
Xx. Xxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Chief Financial Officer
With a copy to: Xxxxxxxx Xxxxxx LLP
Xxx X.X. Xxxx Xxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxx, Esq.
If to any Lender: To the address and facsimile number set
forth under such Lender's name on its
signature page attached hereto.
If to the
Administrative To the address and facsimile number set
Agent: forth under the Administrative Agent's
name on its signature page attached
hereto.
or such other address or facsimile number as may be designated in writing
hereafter, in the same manner, by such Person.
8.4. Amendments; Waivers
-------------------
(a) No failure or delay by the Administrative Agent or any
Lender in exercising any right or power under any Transaction Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or
37
discontinuance of steps to enforce such a right or power, preclude any other
or further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Administrative Agent and the Lenders under the
Transaction Documents are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provision of any
Transaction Document or consent to any departure by the Borrower or any
Subsidiary therefrom shall in any event be effective unless the same shall
be permitted by paragraph (b) of this Section, and then such waiver or
consent shall be effective only in the specific instance and for the purpose
for which given.
(b) Neither any Transaction Document (which, for purposes
of this Section 8.4(b), shall include the Shareholders Agreement) nor any
provision thereof may be waived, amended or modified except pursuant to an
agreement or agreements in writing entered into by the Borrower and the
Required Lenders or by the Borrower and the Administrative Agent with the
consent of the Required Lenders, provided that no such agreement shall (i)
increase the amount of the Loan agreed to be made by any Lender without the
written consent of such Lender, (ii) change the rate of interest applicable
to any Loan or the conversion price with respect to any Note unless the
resulting rate of interest or conversion price (as the case may be) applies
to all Loans or Notes (as the case may be), (iii) change any other term of
any Transaction Document if, as a result thereof, the rights and obligations
of any Lender under the Transaction Documents would be disproportionately
(based on its pro rata share) affected relative to the rights and
obligations of any other Lender under the Transaction Documents, or (iv)
change any of the provisions of this Section or the definition of the term
"REQUIRED LENDERS" or any other provision hereof specifying the number or
percentage of Lenders required to waive, amend or modify any rights
hereunder or make any determination or grant any consent hereunder, or
change the currency in which Loans are to be made or payments under the
Transaction Documents are to be made, or provide for additional borrowers,
without the written consent of each Lender, and provided further that no
such agreement shall amend, modify or otherwise affect the rights or duties
of the Administrative Agent without the prior written consent of the
Administrative Agent.
8.5. Construction. The headings herein are for convenience only,
------------
do not constitute a part of this Agreement and shall not be deemed to limit
or affect any of the provisions hereof. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their
mutual intent. This Agreement shall be construed as if drafted jointly by
the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement or any of the Transaction Documents.
8.6. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties and their successors and
permitted assigns. The Borrower may not assign this Agreement or any rights
or obligations hereunder without the prior written consent of the Lenders.
Any Lender may assign its rights under this Agreement to any Person to whom
such Lender assigns or transfers any Securities.
8.7. No Third-Party Beneficiaries. This Agreement is intended for
----------------------------
the benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other Person.
38
8.8. Governing Law. All questions concerning the construction,
-------------
validity, enforcement and interpretation of this Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the
State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement, the Notes, the Warrants and the Registration Rights
Agreement (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York, Borough of Manhattan
(the "NEW YORK COURTS"). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to the
enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such New York Court, or that
such Proceeding has been commenced in an improper or inconvenient forum.
Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. Each party hereto hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby. If either party shall commence a
Proceeding to enforce any provisions of a Transaction Document, then the
prevailing party in such Proceeding shall be reimbursed by the other party
for its reasonable attorneys' fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such Proceeding.
8.9. Survival. The representations, warranties, agreements and
--------
covenants contained herein shall survive each of the Closings and the
delivery, exercise and conversion of the Securities.
8.10. Execution. This Agreement may be executed in two or more
---------
counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall
create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) the same with the same force and effect
as if such facsimile signature page were an original thereof.
8.11. Severability. If any provision of this Agreement is held to
------------
be invalid or unenforceable in any respect, the validity and enforceability
of the remaining terms and provisions of this Agreement shall not in any way
be affected or impaired thereby and the parties will attempt to agree upon a
valid and enforceable provision that is a reasonable substitute therefor,
and upon so agreeing, shall incorporate such substitute provision in this
Agreement.
8.12. Rescission and Withdrawal Right. Notwithstanding anything to
-------------------------------
the contrary contained in (and without limiting any similar provisions of)
the Transaction Documents,
39
whenever any Lender exercises a right, election, demand or option under a
Transaction Document and the Borrower does not timely perform its related
obligations within the periods therein provided, then such Lender may
rescind or withdraw, in its sole discretion from time to time upon written
notice to the Borrower, any relevant notice, demand or election in whole or
in part without prejudice to its future actions and rights.
8.13. Replacement of Securities. If any certificate or instrument
-------------------------
evidencing any Securities is mutilated, lost, stolen or destroyed, the
Borrower shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof, or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Borrower of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any
reasonable third-party costs associated with the issuance of such
replacement Securities.
8.14. Remedies. In addition to being entitled to exercise all
--------
rights provided herein or granted by law, including recovery of damages, the
Lenders and the Borrower will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive
in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.
8.15. Payment Set Aside. To the extent that the Borrower makes a
-----------------
payment or payments to any Lender pursuant to any Transaction Document or a
Lender enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Borrower, a trustee, receiver or any other
person under any law (including, without limitation, any bankruptcy law,
state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff
had not occurred.
8.16. Independent Nature of Lenders. The obligations of each Lender
-----------------------------
under each Transaction Document are several and not joint with the
obligations of each other Lender, and no Lender shall be responsible in any
way for the performance or observance of the obligations of any other Lender
under any Transaction Document. The decision of each Lender to acquire
Securities pursuant to this Agreement has been made by such Lender and each
Lender confirms that it has only relied on the advice of its own business
and/or legal counsel and not on the advice of any other Lender's business
and/or legal counsel. Nothing contained herein, or in any Transaction
Document, and no action taken by any Lender pursuant hereto or thereto,
shall be deemed to constitute the Lenders (or any of them) as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Lenders are in any way acting in concert or as a group
with respect to the transactions contemplated by the Transaction Documents.
Except as specifically provided in the Transaction Documents, each Lender
shall be entitled to independently protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
other Transaction Documents, without joining any
40
other Lender as an additional party in any proceeding for such purpose. Each
Lender represents that it has been represented by its own separate legal
counsel in its review and negotiations of this Agreement and the Transaction
Documents and that Proskauer Rose LLP represents only OMT in connection with
this Agreement and the Transaction Documents.
8.17. Limitation of Liability. Notwithstanding anything herein to
-----------------------
the contrary, the Borrower acknowledges and agrees that the liability of any
Lender arising directly or indirectly, under any Transaction Document, of
any and every nature whatsoever, shall be satisfied solely out of the assets
of such Lender, and that no trustee, officer, other investment vehicle
affiliated with such Lender or any investor, shareholder or holder of shares
of beneficial interest of such a Lender shall be personally liable for any
liabilities of such Lender.
8.18. Adjustments in Share Numbers and Prices. In the event of any
---------------------------------------
stock split, subdivision, dividend or distribution payable in shares of
Common Stock (or other securities or rights convertible into, or entitling
the holder thereof to receive directly or indirectly shares of Common
Stock), combination or other similar recapitalization or event occurring
after the date hereof, each reference in this Agreement to a number of
shares or a price per share shall be deemed amended to appropriately account
for such event.
8.19. Expenses; Indemnity; Damage Waiver
----------------------------------
(a) The Borrower shall pay (i) all reasonable out of
pocket costs and expenses incurred by the Administrative Agent and its
Related Parties, including the reasonable fees, charges and disbursements of
counsel for the Administrative Agent, in connection with the administration
of each Transaction Document, and (ii) all reasonable out of pocket costs
and expenses incurred by any Lender, including the reasonable fees, charges
and disbursements of any counsel for any Lender and any consultant or expert
witness fees and expenses, in connection with the enforcement or protection
of its rights in connection with the Transaction Documents, including its
rights under this Section, or in connection with the Loans made, including
all such reasonable out of pocket costs and expenses incurred during any
workout, restructuring or negotiations in respect of such Loans.
(b) The Borrower shall indemnify each Lender and each
Related Party thereof (each such Person being called an "INDEMNITEE")
----------
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the reasonable fees,
charges and disbursements of any counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of any Transaction Document or any
agreement or instrument contemplated thereby, the performance by the parties
to the Transaction Documents of their respective obligations thereunder or
the consummation of the Transactions or any other transactions contemplated
thereby, (ii) any Loan or the use of the proceeds thereof, or (iii) any
actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any
other theory and regardless of whether any Indemnitee is a party thereto,
provided that such indemnity shall not, as to any Indemnitee, be available
to the extent that such losses, claims, damages, liabilities or related
expenses are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Indemnitee.
41
(c) To the extent that the Borrower or any Subsidiary
fails to pay any amount required to be paid by it to the Administrative
Agent under this Section 8.18, each Lender severally agrees to pay to the
Administrative Agent an amount equal to the product of such unpaid amount
multiplied by a fraction, the numerator of which is the outstanding
-------------
principal balance of such Lender's Loans and the denominator of which is the
outstanding principal balance of all Lenders' Loans (in each case determined
as of the time that the applicable unreimbursed expense or indemnity payment
is sought or, in the event that no Lender shall have any outstanding Loans
at such time, as of the last time at which any Lender had any outstanding
Loans), provided that the unreimbursed expense or indemnified loss, claim,
--------
damage, liability or related expense, as applicable, was incurred by or
asserted against the Administrative Agent in its capacity as such.
(d) To the extent permitted by applicable law, the
Borrower shall not assert, and hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential
or punitive damages (as opposed to direct and actual damages) arising out
of, in connection with, or as a result of, any Transaction Document or any
agreement, instrument or other document contemplated thereby, the
transactions contemplated by the Loan Documents or the use of the proceeds
thereof.
(e) All amounts due under this Section shall be payable
promptly but in no event later than ten days after written demand therefor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
42
LOAN AND WARRANT AGREEMENT
--------------------------
IN WITNESS WHEREOF, the parties hereto have caused this
Loan and Warrant Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
XXXXXX COMPANIES, INC.
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Financial Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF LENDERS FOLLOW]
LOAN AND WARRANT AGREEMENT
--------------------------
IN WITNESS WHEREOF, the parties hereto have caused this
Loan and Warrant Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
OMICRON MASTER TRUST, in its capacity as
Administrative Agent
By: /s/ Xxxxx Xxxxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Managing Partner
Address for Notice:
c/o Omicron Capital, L.P.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxx Xxxxxxxxx
With a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
LOAN AND WARRANT AGREEMENT
--------------------------
IN WITNESS WHEREOF, the parties hereto have caused this
Loan and Warrant Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
[LENDER]
By:
---------------------------------
Name:
Title:
SCHEDULE A
----------
----------------------------------------------------------------------------------------------------------------
First Closing First Second Closing Second Third Closing Third Fourth Closing Fourth
Notes/First Closing- Notes/Second Closing- Notes/Third Closing- Notes/Fourth Closing-
Closing Warrant Closing Purchase Warrant Closing Warrant Closing Warrant
Purchase Price Shares Price Shares Purchase Price Shares Purchase Price Shares
----------------------------------------------------------------------------------------------------------------
---------------
Omicron
Master Trust 2,750,000.00 77,000.00 8,250,000.00 231,000.00 11,000,000.00 5,500,000.00
---------------
Smithfield
Fiduciary LLC 750,000.00 21,000.00 2,250,000.00 63,000.00 3,000,000.00 1,500,000.00
---------------
Iroquois
Capital, L.P. 500,000.00 14,000.00 1,500,000.00 42,000.00 2,000,000.00 1,000,000.00
---------------
Cranshire
Capital, L.P. 500,000.00 14,000.00 1,500,000.00 42,000.00 2,000,000.00 1,000,000.00
---------------
Midsummer
Investment Ltd. 500,000.00 14,000.00 1,500,000.00 42,000.00 2,000,000.00 1,000,000.00
---------------
Total 5,000,000.00 15,000,000.00 20,000,000.00 10,000,000.00
