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SECURITIES PURCHASE AGREEMENT
DATED February 1, 1999
BY AND AMONG
XXX XXXXXX, INC.,
XXXXXX, XXXXXXX STRATEGIC PARTNERS FUND, L.P.,
STRATEGIC ASSOCIATES, L.P.
AND
X. XXXX PRICE RECOVERY FUND II, L.P.
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TABLE OF CONTENTS
Page
SECTION 1 Definitions........................................................2
1.1 Defined Terms.....................................2
1.2 Other Defined Terms...............................4
SECTION 2 Authorization and Sale of Series D Stock, Issuance of Warrants
and Revised Debentures and Exchange of Debentures.................4
2.1 Authorization of Securities.......................4
2.2 Sale and Purchase of Preferred Stock and Closing
Warrants..........................................4
2.3 Exchange of Debentures............................5
2.4 Issuance of Debenture Warrants at the First
Closing...........................................5
2.5 Issuance of Additional Debenture Warrants.........5
SECTION 3 Closings; Delivery.................................................6
3.1 Closing Dates.....................................6
3.2 Delivery..........................................6
3.3 Use of Proceeds...................................6
SECTION 4 Representations and Warranties of the Company......................7
4.1 Organization, Good Standing and Qualification.....7
4.2 Capitalization....................................7
4.3 Subsidiaries......................................8
4.4 Partnerships, Joint Ventures......................9
4.5 Authorization.....................................9
4.6 Governmental Consents.............................9
4.7 Company SEC Reports and Financial Statements......9
4.8 Changes..........................................10
4.9 Accuracy of Prior Representations and Warranties.11
4.10 Conformity with Law; Absence of Litigation.......11
4.11 Disclosure.......................................12
4.12 FINOVA Credit Facility...........................12
4.13 IRS Dispute......................................12
4.14 U.S. Real Property Holding Corporation...........12
SECTION 5 Representations and Warranties of the Purchasers..................12
5.1 Accredited Investor; Experience; Risk............12
5.2 Authorization....................................13
5.3 Governmental Consents............................13
5.4 Organization, Good Standing and Qualification....13
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SECTION 6 Conditions to Closing of Purchasers...............................14
6.1 Representations and Warranties Correct...........14
6.2 Covenants........................................14
6.3 Opinion of Company's Counsel.....................14
6.4 No Material Adverse Change.......................14
6.5 Statement of Rights and Preferences..............14
6.6 State Securities Laws............................14
6.7 Issuance of Shares , Warrants and Revised
Debentures.......................................14
6.8 Certificates.....................................14
6.9 Registration Rights Agreement....................15
6.10 Consents.........................................15
6.11 Revised FINOVA Facility..........................15
6.12 Delivery of Financial Information................15
SECTION 7 Conditions to Closing of the Company..............................15
7.1 Representations..................................15
7.2 Purchase Price...................................15
7.3 Certificate......................................16
7.4 State Securities Laws............................16
7.5 Registration Rights Agreement....................16
SECTION 8 Covenants of the Company..........................................16
8.1 Information.....................................16
8.2 Communication....................................18
8.3 Access...........................................18
8.4 Directors' and Officers' Insurance...............18
8.5 Confidentiality..................................18
8.6 Restrictive Covenant. ..........................19
8.7 Foreign Corrupt Practices........................19
8.8 Payment of Expenses..............................19
SECTION 9 Miscellaneous.....................................................19
9.1 Amendment; Waiver................................19
9.2 Notices..........................................19
9.3 Severability.....................................21
9.4 Successors and Assigns...........................21
9.5 Survival of Representations, Warranties and
Covenants........................................21
9.6 Entire Agreement.................................21
9.7 Choice of Law....................................21
9.8 Counterparts.....................................21
9.9 Costs and Expenses...............................21
9.10 No Third-Party Beneficiaries.....................22
9.11 Indemnification..................................22
9.12 Dispute Resolution...............................23
ii
XXX XXXXXX, INC.
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of
February 1, 1999, by and among XXX XXXXXX, INC., a Washington corporation (the
"Company"), XXXXXX, XXXXXXX STRATEGIC PARTNERS FUND, L.P., a limited partnership
organized under the laws of the State of Delaware, STRATEGIC ASSOCIATES, L.P., a
limited partnership organized under the laws of the State of Delaware, and X.
XXXX PRICE RECOVERY FUND II, L.P., a limited partnership organized under the
laws of the State of Delaware (each a "Purchaser" and collectively the
"Purchasers").
W I T N E S S E T H
WHEREAS, the Company has issued and outstanding the shares of capital stock
described in Section 4.2 hereof and the Company has reserved for issuance
additional shares of capital stock upon the exercise of the outstanding
convertible securities, including rights, options and warrants, identified in
Section 4.2; and
WHEREAS, the Company proposes to issue and sell, and the Purchasers desire
to purchase from the Company, severally and in the amounts set forth on Exhibit
A hereto, shares of the Company's Series D Preferred Stock, par value $.01 per
share, on the terms and subject to the conditions set forth herein; and
WHEREAS, in connection with the sale of such shares of Series D Stock, the
Company proposes to issue to the Purchasers, severally and in the amounts set
forth on Exhibit A hereto, certain warrants to purchase shares of Common Stock
of the Company on the terms and subject to the conditions set forth herein; and
WHEREAS, the Company and the Purchasers desire to enter into a registration
rights agreement of even date herewith (which agreement shall restate and
supersede certain other registration rights agreements of the Company), pursuant
to which the Purchasers have, among other rights, certain registration rights;
and
WHEREAS, the Company and the Purchasers wish to amend certain terms of the
Company's 14% Subordinated Convertible Debentures issued on March 11, 1998 (the
"Original Debentures") and the Company will issue new debentures with revised
terms (the "New Debentures") and the holders of the Original Debentures will
exchange the Original Debentures for New Debentures and additional warrants to
purchase shares of Common Stock of the Company on the terms and subject to the
conditions set forth herein; and
WHEREAS, the Company and the Purchasers wish to amend certain terms of the
Company's outstanding warrants issued on March 11, 1998 (the "Original
Warrants") and the Company will issue revised warrants and the holders of the
Original Warrants will exchange the Original Warrants for such revised Warrants;
and
1
WHEREAS, at the First Closing (as defined in Section 3.1), the Purchasers
shall cause to be paid to FINOVA Capital Corporation ("FINOVA") the sum of $
1,950,000, such amount to reduce the indebtedness of the Company to FINOVA and
such payment to be deemed a payment of the purchase price for the Shares (as
defined in Section 1.1) to be purchased at the First Closing.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
SECTION 1
Definitions
1.1 Defined Terms. The following terms are defined as follows:
"Affiliate" means, with respect to any Person, (i) any Person that holds
direct or indirect beneficial ownership (as defined in Rule 13d-3 under the
Exchange Act) of voting securities or other voting interests representing at
least 5% of the outstanding voting power of a Person or equity securities or
other equity interests representing at least 5% of the outstanding equity
securities or equity interests in a Person, (ii) any brother, sister, parent,
child or spouse of such Person or any Person described in clause (i), and (iii)
any Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such entity.
"Closing Warrants" means the warrants issued to the Purchasers as part of
the consideration for entering into this Agreement, which may be exercised to
purchase in the aggregate 1,918,743 shares of the Company's common Stock which
constitute on the Closing Date twenty-five percent (25%) of the Company's issued
and outstanding stock on a fully diluted basis.
"Debenture Warrants" means the Warrants that (i) are issued at the First
Closing in replacement of prior warrants as described in Section 2.4, (ii) are
issued at the First Closing to the Purchasers pursuant to Section 2.1(d)(ii) of
the Debenture Purchase Agreement, dated as of March 11, 1998 ("Debenture
Purchase Agreement"), which in the aggregate may be exercised to purchase three
percent (3%) of the Common Stock on a fully diluted basis or (iii) are issuable
to the holders of New Debentures on January 1 of each year for so long as the
New Debentures remain outstanding.
"Common Stock" means the Company's Common Stock, par value $.01 per share.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2
"Knowledge" or derivations thereof shall mean information that is known or,
in the exercise of reasonable diligence, should have been known by the officers
of the Company.
"Lien" means any lien, pledge, mortgage, deed of trust, security interest,
claim, lease, charge, option, right of first refusal, easement, servitude,
transfer restriction under any shareholder or similar agreement, encumbrance or
any other restriction or limitation whatsoever.
"Management Option Plan" means the Xxx Xxxxxx, Inc. 1998 Stock Incentive
Plan as adopted by the Board of Directors of the Company on December 3, 1997.
"Material Adverse Effect" means any materially adverse effect on the
business, assets, liabilities, condition (financial or otherwise), results of
operations or prospects of the Company.
"Permits" means any approvals, authorizations, consents, licenses, permits
or certificates.
"Person" means an individual, partnership, limited liability company,
corporation, joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Preferred Stock" means any of the Series A Stock, the Series B Stock, the
Series C Stock or the Series D Stock.
"Registration Rights Agreement" means the Registration Rights Agreement of
even date herewith by and between the Company, the Purchasers and others in the
form attached hereto as Exhibit B.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Stock" means the Series A Preferred stock of the Company, $.01
par value per share.
"Series B Stock" means the Series B Preferred Stock of the Company, $.01
par value per share.
"Series C Stock" means the Series C Preferred Stock of the Company, $.01
par value per share.
"Series D Stock" means the Series D Preferred Stock of the Company, $.01
par value per share.
"Shares" means the Series D Stock to be sold to the Purchasers hereunder.
3
"Subsidiaries" means each corporation in which the Company owns or
controls, directly or indirectly, capital stock or other equity interests
representing at least 50% of the outstanding voting stock or other equity
interests, and includes without limitation J.J. Distribution Company, a
Washington corporation.
"Warrants" means collectively, the Closing Warrants and the Debenture
Warrants. The Warrants shall have the rights, preferences, privileges and
restrictions and be substantially in the form of Warrant Certificate attached
hereto as Exhibit D. All Warrants shall have a Termination Date (as defined
therein) five years from the date of their issuance, provided, however, that
Warrants issued in replacement of other warrants shall have a Termination Date
five years from the date of issuance of the original warrants.
1.2 Other Defined Terms. Additional capitalized terms shall have the
meanings assigned to them in the text of this Agreement. Terms defined in the
singular shall have a comparable meaning when used in the plural and vice versa.
SECTION 2
Authorization and Sale of Series D Stock,
Issuance of Warrants and Revised Debentures and Exchange of Debentures
2.1 Authorization of Securities. At the First Closing, the Company will
have authorized:
(a) the issuance and sale to each Purchaser of the number of shares of
Series D Stock set forth opposite its name in Exhibit A. The Series D Stock
will have the rights, preferences, privileges and restrictions set forth in
the Statement of Rights and Preferences attached to this Agreement as
Exhibit C hereto (the "Statement of Rights and Preferences");
(b) the issuance to each Purchaser of the number of Closing Warrants and
Debenture Warrants set forth opposite its name in Exhibit A; and
(c) the issuance to the holders of the Original Debentures (each of which
is a Purchaser) of an equal principal amount of the Company's New
Debentures substantially in the form set forth at Exhibit E.
2.2 Sale and Purchase of Preferred Stock and Closing Warrants. In reliance
on the representations and warranties of the Company contained herein and
subject to the terms and conditions hereof, at the First Closing, each Purchaser
agrees to purchase from the Company, severally, the number of Shares of Series D
Stock set forth opposite its name on Exhibit A hereto to be purchased at the
First Closing, and the Company agrees to sell to each Purchaser, such number of
shares of Series D Stock and to issue to each purchaser the number of Closing
Warrants set forth opposite its name on Exhibit A hereto. The Closing Warrants
shall have an exercise price equal to the Fair Market Value (as defined in the
Warrant) for the 15 trading days prior to the First Closing, subject to
adjustment as provided in Exhibit D. If the Company and the Purchasers so agree,
4
the Purchasers may purchase from the Company and the Company may issue and
sell to the Purchasers additional Shares (up to a maximum of 20,000 total
Shares) at one or more Additional Closings. At each Additional Closing, in
reliance on the representations and warranties of the Company contained herein
and subject to the terms and conditions hereof, each Purchaser will purchase
from the Company, severally, its pro rata share, based on its share of the
Shares purchased at the First Closing, of the number of Shares of Series D Stock
to be purchased by the Purchasers at such Additional Closing, and the Company
agrees to sell to each Purchaser, such number of shares of Series D Stock. The
aggregate purchase price for all of the Series D Stock to be sold to the
Purchasers at the First Closing shall be Two Million Dollars ($2,000,000),
reduced by the amount the expenses of Purchasers associated with the
transactions contemplated hereby, up to and including the First Closing. The
purchase price payable at any Additional Closings shall be based on the same
price per Share as the Shares purchased and sold at the First Closing and shall
be reduced by the amount of any further expenses of Purchasers associated with
the transactions contemplated hereby, up to and including such Closing.
2.3 Exchange of Debentures. At the First Closing, the Company agrees to
issue to each holder of Original Debentures, and subject to and in reliance upon
the representations, warranties, terms and conditions of this Agreement, each
holder of Original Debentures agrees to exchange the Original Debentures held by
such person for an equal principal amount of New Debentures. At the First
Closing, each holder of Original Debentures will deliver to the Company,
severally and not jointly, the Original Debentures to be exchanged by it for New
Debentures.
2.4 Issuance of Debenture Warrants at the First Closing. At the First
Closing:
(a) The Company agrees to issue to each holder of Original Warrants, and
subject to and in reliance upon the representations, warranties, terms and
conditions of this Agreement, each holder of Original Warrants agrees to
exchange the Original Warrants held by such person for an equal number of
Debenture Warrants. The Debenture Warrants so issued will have an exercise
price equal to $0.15 per share, subject to adjustment as provided in
Exhibit D. At the First Closing, each holder of Original Warrants will
deliver to the Company, severally and not jointly, certificates
representing the Original Warrants to be exchanged by it for Debenture
Warrants; and
(b) Pursuant to the terms of the Debenture Agreement, the Company shall
also issue to each Purchaser the number of additional Debenture Warrants
set forth opposite its name on Exhibit A, which in the aggregate entitle
the Purchasers to acquire three percent (3%) of the Common Stock on a fully
diluted basis and giving effect to the transactions contemplated hereby
(other than the issuance of those additional Debenture Warrants as provided
in Section 2.5). The Debenture Warrants so issued will have an exercise
price equal to $0.15 per share, subject to adjustment as provided in
Exhibit D.
2.5 Issuance of Additional Debenture Warrants. Until the New Debentures are
repaid in full, the holders of the New Debentures shall receive additional
Debenture Warrants on January 1 of each year to purchase two percent (2%) of the
shares of the Company's Common Stock then
5
outstanding, on a fully diluted basis. The Debenture Warrants so issued will
have an exercise price equal to the average Fair Market Value (as defined in the
Debenture Warrant) for the 15 days prior to the issuance of such Debenture
Warrant, subject to adjustment as provided in Exhibit D. Prior to each issuance,
the Company will reserve a sufficient number of shares of Common Stock for
issuance upon exercise of these Debenture Warrants.
SECTION 3
Closings; Delivery
3.1 Closing Dates. The first closing of the purchase and sale of the Series
D Stock (the "First Closing") shall be held at the offices of Stoel Rives, LLP,
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx 00000 on February 1,
1999, or on such other date or at such other place as the Purchasers and the
Company shall mutually agree. Any other closings that occur pursuant to the
terms hereof ("Additional Closings") shall be held on such dates and at such
times as the parties shall mutually agree. Any of the date of the First Closing
and any Additional Closing is referred to herein as a "Closing Date."
3.2 Delivery. At the First Closing and any Additional Closings, the Company
shall: (a) deliver to each Purchaser a certificate or certificates evidencing
the Shares being purchased by such Purchaser, and, at the First Closing, the
Warrants being issued to such Purchaser, registered in such Purchaser's name
against delivery to the Company or FINOVA, as the case may be, of payment in an
amount equal to the full purchase price of the Shares being purchased by such
Purchaser by certified check or wire transfer to an account designated by the
Company or, in the case of any payment to FINOVA, to an account designated by
FINOVA; (b) at the First Closing, deliver the Original Debentures in exchange
for the Revised Debentures and the Warrants and (c) make such other deliveries
as may be required under the terms of this Agreement.
3.3 Use of Proceeds. The Company agrees to use the full proceeds from the
First Closing solely to repay a portion of the existing borrowing under the
FINOVA line of credit and the Purchaser's expenses associated with the
transactions contemplated hereby. The proceeds of Additional Closings, if any,
shall be designated by the Purchasers, in their sole discretion, but shall not
exceed the scope or the amounts set forth below:
Purpose Maximum Amount
--------------------------- --------------
Bring certain obligations to $1,300,000
merchandise vendors that are
past due to current status
Payment of past due taxes $ 100,000
6
Payment of past due rents $ 100,000
TOTAL $1,500,000
The proceeds of a subsequent Additional Closing, the maximum amount of
which shall be $500,000, shall be designated by the Purchasers in their sole
discretion.
SECTION 4
Representations and Warranties of the Company
The Company hereby represents and warrants to, and agrees with, the
Purchasers as follows:
4.1 Organization, Good Standing and Qualification. Each of the Company and
its Subsidiaries (i) is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (ii) has all
requisite power and authority to carry on its business, (iii) is duly qualified
to transact business and is in good standing in all jurisdictions where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, except where the failure to do so would not be
material to the Company. The Company and each of the Subsidiaries has the
corporate power and authority and is in possession of all material franchises,
grants, authorizations, licenses, permits, easements, consents, certificates,
approvals and orders (i) to own, lease and operate its properties and to carry
on its business as now being conducted and (ii) in the case of the Company, to
execute and deliver this Agreement and the documents and instruments
contemplated hereby and to consummate the transactions contemplated hereby.
4.2 Capitalization.
4.2.1 The authorized capital stock of the Company is 25,000,000 shares,
consisting of 20,000,000 shares of common stock, par value $.01 per share
("Common Stock") of which 549,220 shares are issued and outstanding and no
shares are held in treasury, and 5,000,000 shares of Preferred Stock. Of
the authorized shares of Preferred Stock, 46,000 shares have been
designated as Series A Preferred Stock, of which 46,000 shares are issued
and outstanding; 25,000 shares have been designated as Series B Preferred
Stock, of which 25,000 shares are issued and outstanding; and 20,000 shares
have been designated as Series C Preferred Stock, none of which shares are
issued and outstanding. Upon the filing with the Secretary of State of
Washington of the Statement of Rights and Preferences, there will have been
designated a series of preferred stock, consisting of 40,000 shares of
Series D Stock, none of which will have been issued or outstanding. Subject
to the terms and conditions hereof, the Company has authorized the issuance
at the First Closing of 20,000 shares of Series D Stock. Schedule 4.2 lists
all options, warrants or other rights of any kind granted by the Company to
purchase or otherwise acquire capital stock of the Company issued and
outstanding prior to Closing. The Company has duly and validly reserved for
issuance 1,146,774 shares of Common Stock upon exercise or conversion of
rights, options, warrants and other convertible securities currently
7
outstanding or issued under the Management Option Plan. The Company
has reserved or, prior to the Closing, will reserve 2,203,112 shares of
Common Stock for issuance upon exercise of the Warrants other than those
Debenture Warrants issuable pursuant to Section 2.5. Except as set forth in
this Section 4.2.1 or as listed on Schedule 4.2 or Schedule 4.3, there are
outstanding (a) no shares of capital stock or other voting stock of the
Company or any Subsidiary, (b) no securities of the Company, any Subsidiary
or any Person convertible into or exchangeable for shares of capital stock
or voting securities of the Company or any Subsidiary, (c) no options,
warrants or other rights to acquire from the Company or any Subsidiary
(including any rights issuable or issued under any shareholder rights plan
or similar arrangement), and no obligations, contingent or otherwise, of
the Company or any Subsidiary to issue any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of the Company or any Subsidiary, (d) no equity equivalent in
the earnings or ownership of the Company, any Subsidiary or any Person or
any similar rights to share earnings or ownership, and (e) no outstanding
obligations of the Company to repurchase, redeem or otherwise acquire any
of its securities or to make any investment (by loan, capital contribution
or otherwise) in any entity or Person. All outstanding options, rights and
warrants have been duly and validly issued and are in full force and
effect. All shares of capital stock subject to issuance upon exercise of
any options, rights or warrants or otherwise, upon issuance pursuant to the
instruments under which they are issuable, shall be duly authorized,
validly issued, fully paid for and non-assessable and free of all
preemptive rights. No outstanding options, warrants or other securities
exercisable for or convertible into shares of capital stock of the Company
require anti-dilution adjustments by reason of the consummation of the
transactions contemplated hereby.
4.2.2 The issued and outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and non-assessable. The shares of
Series D Stock to be issued pursuant to this Agreement, upon delivery to
the Purchasers of certificates therefor against payment in accordance with
the terms of this Agreement, and the shares of Common Stock to be issued
upon exercise of the Warrants, (i) will be validly issued, fully paid and
non-assessable, (ii) will be free and clear of all Liens, and (iii)
assuming that the representations of the Purchasers in Section 5 hereof are
true and correct, will be issued in compliance with all applicable federal
and state securities laws.
4.3 Subsidiaries. Schedule 4.3 sets forth a complete and accurate list of
all Subsidiaries of the Company, showing (as to each such Subsidiary) the date
of its incorporation, the jurisdiction of its incorporation, the number of
shares of its authorized capital stock, the number and class of shares thereof
duly issued and outstanding, the names of all stockholders of such Subsidiaries
and the number and percentage of the outstanding shares of each such class
owned, directly or indirectly, by all such stockholders, including the Company.
At Closing, all of the outstanding capital stock of, or other ownership
interests in, each Subsidiary, will be owned by the Company, directly or
indirectly, free and clear of any Lien or any other limitation or restriction
(including restrictions on the right to vote). All outstanding shares of the
capital stock of the Company and any Subsidiary have been duly authorized,
validly issued, fully paid and non-assessable and are free of any preemptive
rights. There
8
are no outstanding securities of any Subsidiary convertible into or evidencing
the right to purchase or subscribe for any shares of capital stock of any
Subsidiary, there are no outstanding or authorized options, warrants, calls,
subscriptions, rights, commitments or any other agreements of any character
obligating any Subsidiary to issue any shares of its capital stock or any
securities convertible into or evidencing the right to purchase or subscribe for
any shares of such stock, and there are no agreements or understandings with
respect to the voting, sale, transfer or registration of any shares of capital
stock of any Subsidiary.
4.4 Partnerships, Joint Ventures. Neither the Company nor any Subsidiary is
a party to, or holds, any equity interests in any partnership, limited
partnership, limited liability company or other joint venture of any kind.
4.5 Authorization. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and each agreement, document or
instrument adopted, entered into or delivered by it as contemplated herewith
(the "Transaction Documents") and to perform its obligations hereunder and
thereunder. The execution, delivery and performance of the Agreement and the
transactions contemplated hereby have been duly authorized by all necessary
corporate, including shareholder (if required), action on the part of the
Company. Each Transaction Document to which it is a party has been duly and
validly executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
4.6 Governmental Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of the Company is
required in connection with the valid execution and delivery by the Company of
the Transaction Documents to which it is a party, or the consummation by the
Company of the transactions contemplated by the Transaction Documents to which
it is a party, except for (i) filings pursuant to federal or state securities
laws and (ii) the filing of registration statements with the SEC and any
applicable state securities commission.
4.7 Company SEC Reports and Financial Statements.
4.7.1 The Company has made available to Purchasers true and complete copies of
all periodic reports, statements and other documents that the Company has
filed with the SEC under the Exchange Act for the past three years
(collectively, the "Company SEC Reports"), each in the form (including
exhibits and any amendments thereto) required to be filed with the SEC. As
of their respective dates, each of the Company's SEC Reports (i) complied
in all respects with all applicable requirements of the Securities Act and
the Exchange Act, and the rules and regulations promulgated thereunder,
respectively, provided, however, that no representation is made with
respect to the timely filing of any such reports prior to December 5, 1997,
and
9
(ii) did 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. None of the Subsidiaries is
required to file any forms, reports or other documents with the SEC.
4.7.2 Each of the audited consolidated financial statements of the Company
(including any related notes and schedules thereto) included (or
incorporated by reference) in its Annual Report on Form 10-K for the fiscal
year ended January 31, 1998, is accurate and complete and presents fairly,
in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as
may be noted therein), and in conformity with the SEC's Regulation S-X, the
consolidated financial position of the Company and its consolidated
subsidiaries as of its date and the consolidated results of operations and
changes in financial position for the period then ended. Each of the
unaudited consolidated financial statements of the Company (including any
related notes and schedules thereto) included (or incorporated by
reference) in its Quarterly Report on Form 10-Q for the quarter and
nine-month period ended October 31, 1998, is accurate and complete and
fairly presents, in conformity with GAAP applied on a consistent basis
throughout the periods involved (except as may be noted therein), and in
conformity with the SEC's Regulation S-X, the consolidated financial
position of the Company and its consolidated subsidiaries as of its date
and the consolidated results of operations and changes in financial
position for the periods then ended.
4.7.3 Except as and to the extent set forth (or incorporated by reference) in
the Company's Quarterly Report on Form 10-Q for the quarter ended October
31, 1998 (the "Balance Sheet Date"), none of the Company or any of its
Subsidiaries has incurred any liability or obligation of any nature
whatsoever (whether due or to become due, accrued, fixed, contingent,
liquidated, unliquidated or otherwise) that would be required by GAAP to be
accrued on, reflected on, or reserved against it on, a consolidated balance
sheet (the "Balance Sheet") (or in the applicable notes thereto) of the
Company or any of its Subsidiaries prepared in accordance with GAAP
consistently applied as of the date and for the period required.
4.8 Changes. Except as set forth on Schedule 4.8, since the Balance Sheet
Date, there has not been:
4.8.1 any material change in the assets, liabilities, financial condition or
operating results of the Company or any of its Subsidiaries, except changes
in the ordinary course of business;
4.8.2 any material damage, destruction or loss to real or personal property,
whether or not covered by insurance;
4.8.3 any waiver by the Company or any of its Subsidiaries of a material legal
or contractual valuable right or of a debt owed to it outside of the
ordinary course of business;
10
4.8.4 any satisfaction or discharge of any Lien or payment of any obligation by
the Company or any of its Subsidiaries other than (i) in respect of normal
operating obligations in the ordinary course of business, and (ii) payments
to FINOVA under the FINOVA line of credit;
4.8.5 any change or amendment to a contract or arrangement by which the Company
or any of its Subsidiaries or any of their respective assets or properties
is bound or subject;
4.8.6 other than in the ordinary course of business, any material increase in
excess of $15,000 annually in any compensation arrangement or agreement
with any employee of the Company or any of its Subsidiaries receiving
compensation;
4.8.7 any events or circumstances (other than losses from operations in the
ordinary course of business) that otherwise could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect; and
4.8.8 none of the Company or any of its Subsidiaries has (i) declared or paid
any dividends, or authorized or made any distribution upon or with respect
to any class or series of its capital stock or equity interests, (ii)
incurred any indebtedness for money borrowed in excess of $15,000, (iii)
made any loans or advances to any Person, other than ordinary advances for
travel expenses not exceeding $15,000, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights for consideration in excess of
$15,000 in any one transaction or series of related transactions.
4.9 Accuracy of Prior Representations and Warranties. Each of the
representations and Warranties regarding the Company set forth in (i) Section 4
of the Preferred Stock Purchase Agreement, dated as of December 5, 1997 (the
"Preferred Agreement"); and (ii) Section 5 of the Subordinated Debenture
Purchase Agreement, dated as of March 11, 1998, each by and between the parties
hereto and other parties named therein, was true, complete and accurate in all
material respects when made. Except as set forth on Schedule 4.9, or as is
evident from the Company SEC Reports filed since December 5, 1997, since the
dates on which such representations and warranties were made, no event has
occurred that has had a Material Adverse Effect and that would cause any such
representation or warranty, if made as of the date of this Agreement, to be
materially false.
4.10 Conformity with Law; Absence of Litigation. The Company has not
violated any law or regulation or any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it which would have a Material Adverse
Effect. Except as set forth in Schedule 4.10, there are no claims, actions,
suits, proceedings or investigations pending or, to its Knowledge, threatened,
nor, to its Knowledge, are there any facts which with the passage of time, the
giving of notice or both, would likely result in any such claims, actions,
suits, proceedings or investigations against the Company or any of its
Subsidiaries, or any properties or rights of the Company or its Subsidiaries,
before any court, arbitrator or administrative, governmental or regulatory
authority or body, domestic or foreign, which would have a Material Adverse
Effect.
11
4.11 Disclosure. All written agreements, lists, schedules, instruments,
exhibits, documents, certificates, reports, statements and other writings
furnished to the Purchasers pursuant hereto or in connection with this Agreement
or the transactions contemplated hereby, are and will be complete and accurate
in all material respects. No representation or warranty by the Company contained
in this Agreement, in the schedules attached hereto or in any certificate
furnished or to be furnished by the Company to the Purchasers in connection
herewith will omit to state any material fact necessary in order to make any
statement contained herein or therein not misleading. There is no fact known to
the officers and directors of the Company that has specific application to the
Company and that materially adversely affects or, as far as such officers and
directors can reasonably foresee, materially threatens, the assets, business,
prospects, financial condition, or results of operations of the Company that is
required to be and has not been set forth in this Agreement or any schedule
hereto.
4.12 FINOVA Credit Facility. Attached hereto at Schedule 4.12(a) is a true,
complete and accurate copy of the Loan and Security Agreement, dated as of June
2, 1998, as amended, between FINOVA and the Company (the "FINOVA Facility").
Upon giving effect to that certain Amendment No. 2 and Limited Waiver and
Consent to Loan and Security Agreement, substantially in the form attached as
Schedule 4.12(b), no event of default will exist under the FINOVA Facility.
4.13 IRS Dispute. The Company SEC Reports, as updated by Schedule 4.13,
attached hereto, fairly describe the status of the Company's dispute with the
Internal Revenue Service.
4.14 U.S. Real Property Holding Corporation. The Company is not now and has
never been a "United States real property holding corporation" as defined in
Section 897(c)(2) of the Code and Section 1.897-2(b) of the Regulations
promulgated by the Internal Revenue Service, and the Company has filed with the
Internal Revenue Service all statements, if any, wit its United States income
tax returns which are required under Section 1.897(h) of such Regulations.
SECTION 5
Representations and Warranties of the Purchasers
Each of the Purchasers (severally and not jointly), hereby represents and
warrants to and agrees with the Company, as follows:
5.1 Accredited Investor; Experience; Risk.
5.1.1 Such Purchaser is an accredited investor and has been advised and
understands that the Series D Stock and the Warrants have not been
registered under the Securities Act, on the basis that no distribution or
public offering of the Series D Stock or Warrants is to be effected, except
in compliance with the applicable securities laws and regulations or
pursuant to an exemption therefrom; provided, however, that nothing in this
Section 5.1 shall limit the Purchaser's right to exercise the Warrants.
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5.1.2 Such Purchaser is purchasing the Series D Stock and Warrants for
investment purposes, for its own account and not with a view to, or for
sale in connection with, any distribution thereof in violation of federal
or state securities laws.
5.1.3 Such Purchaser has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the
purchase of the Series D Stock and Warrants pursuant to this Agreement.
5.1.4 The certificates representing the Series D Stock, the Warrants and any
securities issuable on exercise of the Warrants shall bear a legend
evidencing such restriction on transfer substantially in the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO REGISTRATION UNDER
THE ACT OR AN EXEMPTION THEREFROM."
5.2 Authorization. Such Purchaser has all requisite power and authority to
execute and deliver this Agreement and each of the Transaction Documents and to
perform its obligations hereunder and thereunder. The execution, delivery and
performance of the Agreement and the transactions contemplated hereby have been
duly authorized by all necessary, action on the part of such Purchaser. Each
Transaction Document to which it is a party has been duly and validly executed
and delivered by such Purchaser and constitutes the legal, valid and binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
5.3 Governmental Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of such Purchaser is
required in connection with the valid execution and delivery by such Purchaser
of the Transaction Documents to which it is a party, or the consummation by such
Purchaser of the transactions contemplated by the Transaction Documents to which
it is a party, except for such filings as have been made prior to the Closing.
5.4 Organization, Good Standing and Qualification. Such Purchaser (i) is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, (ii) has all requisite power and authority
to carry on its business, (iii) is duly qualified to transact business and is in
good standing in all jurisdictions where its ownership, lease or operation of
property or the conduct of its business requires such qualification, except
where the failure to do so would not be material to the Purchaser.
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SECTION 6
Conditions to Closing of Purchasers
Each Purchaser's obligation to purchase Shares at the First Closing or any
Additional Closing is, at the option of such Purchaser, subject to the
fulfillment to such Purchaser's reasonable satisfaction on or prior to such
Closing of the following conditions:
6.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 4 hereof shall be true and correct
when made, and shall be true and correct on the date of such Closing with the
same force and effect as if they had been made on and as of such date.
6.2 Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the date of such Closing
shall have been performed or complied with in all respects.
6.3 Opinion of Company's Counsel. The Purchasers shall have received at the
First Closing from Stoel Rives LLP, counsel to the Company, an opinion addressed
to the Purchasers, dated the Closing Date, in the form set forth on Exhibit F.
6.4 No Material Adverse Change. There shall not have occurred since the
date of this Agreement any events or circumstances that could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
6.5 Statement of Rights and Preferences. The Company's Articles of
Incorporation shall have been duly amended by the Company to include the Series
D Stock Statement of Rights and Preferences and filed with the Washington
Secretary of State.
6.6 State Securities Laws. All registrations, qualifications and Permits
required under applicable state securities laws, if any, shall have been
obtained for the lawful execution, delivery and performance of this Agreement at
such Closing.
6.7 Issuance of Shares , Warrants and Revised Debentures. The Company shall
have issued and delivered to the Purchasers the Shares, Warrants and Revised
Debentures required to be so delivered at such Closing pursuant to this
Agreement.
6.8 Certificates. Each of the Purchasers shall have received a certificate
of the Chief Executive Officer or Chief Financial Officer of the Company, dated
the date of such Closing, to the effect set forth in Sections 6.1, 6.2 and 6.4.
6.9 Registration Rights Agreement. The Company and all other parties
thereto shall have executed and delivered the Registration Rights Agreement to
Purchasers.
14
6.10 Consents. The Company shall have obtained all written consents
necessary for the Company to complete the transactions contemplated hereby,
including, without limitation, the consent of FINOVA.
6.11 Revised FINOVA Facility. The Company and FINOVA shall have executed an
Amendment and Waiver Agreement with respect to the FINOVA Facility,
substantially in the form of Schedule 4.12(b).
6.12 Delivery of Financial Information. The Company shall have delivered
the following financial information (i) calculation of loan covenant(s) in
default on November 30, 1998 and December 31, 1998, (ii) Fiscal Year 2000
financial projections on a monthly basis of Income Statement, Balance Sheet,
Cash Flows and Borrowing Capacity on the same format as previous internal
projections (which shall be based on the revised Fiscal Year 2000 projections
provided to FINOVA on December 23, 1998), (iii) monthly analysis for Fiscal Year
1999 of actual Income Statement, Balance Sheet, Cash Flows and Borrowing
Capacity on the same format as the Fiscal year 1999, 2000 and 2001 projections
(with the December 1998 and January 1999 amounts in projection form); (iv)
detailed aging of accounts payable as of the periods ended November and December
1998, (v) detailed analysis of sales delineated between men's and women's lines
and major category of goods, for the months of November 1998 and December 1998,
together with beginning and ending inventories for each such category, (vi)
updated summary of the estimated cost of new computer hardware and software
giving effect to new projected numbers of stores for Fiscal Year 2000, and (vii)
listing of cost saving measures, estimate amount saved and timetables for
implementation.
SECTION 7
Conditions to Closing of the Company
The Company's obligation to issue and sell Shares or Warrants at the First
Closing or any Additional Closing is, at the option of the Company, subject to
the fulfillment of the following conditions:
7.1 Representations. The representations and warranties made by the
Purchasers in Section 5 hereof shall be true and correct when made, and shall be
true and correct on the date of such Closing with the same force and effect as
if they had been made on and as of such date.
7.2 Purchase Price. The Purchasers shall have tendered the purchase price
for the shares to be purchased at such Closing.
7.3 Certificate. The Company shall have received a certificate from the
Purchasers to the effect set forth in Section 7.1.
7.4 State Securities Laws. All registrations, qualifications and Permits
required under applicable state securities laws, if any, shall have been
obtained for the lawful execution, delivery and performance of this Agreement.
15
7.5 Registration Rights Agreement. The Purchasers and the Company shall
have executed and delivered the Registration Rights Agreement to the Company.
SECTION 8
Covenants of the Company
Unless waived by the holders of not less than 75% of the Series D Stock
then outstanding:
8.1 Information. Following the First Closing and continuing so long as any
shares of Series D Stock remain outstanding (or such earlier time as provided
below), the Company shall deliver to each of the Purchasers the information
specified in this Section 8.1 unless any such Purchaser at any time specifically
requests that such information not be delivered to it:
8.1.1 Quarterly Financial Statements. As soon as available, but in any event not
later than forty-five (45) days after the end of each quarterly fiscal
period (other than the last quarterly fiscal period in any fiscal year of
the Company), the unaudited consolidated balance sheet of the Company and
its Subsidiaries as at the end of each such period and the related
unaudited consolidated statements of income and cash flows of the Company
and its Subsidiaries for such period and for the elapsed period in such
fiscal year, all in reasonable detail and stating in comparative form (i)
the figures as of the end of and for the comparable periods of the
preceding fiscal year and (ii) the figures reflected in the operating
budget (if any) for such period as specified in the financial plan of the
Company. All such financial statements shall be prepared in accordance with
GAAP applied on a consistent basis throughout the periods reflected therein
except as stated therein.
8.1.2 Annual Financial Statements. As soon as available, but in any event within
one hundred twenty (120) days after the end of each fiscal year of the
Company, a copy of the audited consolidated balance sheets of the Company
and its Subsidiaries as at the end of such fiscal year and the related
audited consolidated statements of operations, stockholders' equity and
cash flows of the Company and its Subsidiaries for such fiscal year, all in
reasonable detail and stating in comparative form the figures as at the end
of and for the immediately preceding fiscal year, accompanied (in the case
of the audited consolidated financial statements) by an opinion of an
accounting firm of recognized national standing selected by the Company,
which opinion shall state that such accounting firm's audit was conducted
in accordance with generally accepted auditing standards. All such
financial statements shall be prepared in accordance with GAAP applied on a
consistent basis throughout the periods reflected therein except as stated
therein.
8.1.3 Other Financial Information. Not less often than monthly, (i) financial
statements in the form internally generated by the Company, (ii) a
roll-forward activity report under the FINOVA line of credit, (iii) a
detailed aging of vendor payables, (iv) an "open to buy" report and (v)
weekly or monthly inventory status and sales reports by store;
16
8.1.4 Material Litigation. Within twenty (20) days after the Company learns of
the commencement or written threat of commencement of any litigation or
proceeding against the Company, any of its Subsidiaries or any of the
Partnerships or any of their respective assets that could reasonably be
expected to have a Material Adverse Effect, written notice of the nature
and extent of such litigation or proceeding.
8.1.5 Material Agreements. Within five (5) days after the expiration of the
applicable cure period, if any, or if no such cure period exists within
five (5) days after the receipt by the Company of written notice of a
default by the Company or any of its Subsidiaries under any material
contract, agreement or document to which it is a party or by which it is
bound, written notice of the nature and extent of such default.
8.1.6 Other Reports and Statements. Promptly upon (i) any distribution to its
stockholders generally, to its directors or to the financial community of
an annual report, quarterly report, proxy statement, registration statement
or other similar report or communication, (ii) filing by the Company with
the SEC or with The National Market System, Inc., the National Association
of Securities Dealers, Inc. or any national securities exchange or other
market system of any and all regular and other reports or applications, or
(iii) the issuance of any press release or other communication to the
general public, a copy of each such report, application release or other
communication.
8.1.7 Accountants' Management Letters, Etc. Promptly after receipt by the
Company, copies of all accountants' management letters and all management
and board responses to such letters, and copies of all certificates as to
compliance, defaults, material adverse changes, material litigation or
similar matters relating to the Company and its Subsidiaries, which shall
be prepared by the Company or its officers and delivered to the third
parties.
8.1.8 Stockholders' Lists. Within sixty (60) days after the end of each fiscal
year, a stockholders' list, showing the authorized and outstanding shares
by class (including the Common Stock equivalents of any convertible
security), the holders of all outstanding shares (both before giving effect
to dilution and on a fully diluted basis) and all outstanding options,
warrants and convertible securities, and detailing all options and warrants
granted, exercised or lapsed (including in each case, without limitation,
all option and warrant exercise prices, stock issuance prices' and other
terms) and all shares issued or sold (whether to directors or managers, in
connection with financing or otherwise).
8.1.9 Annual Budget. Promptly after management presents an annual budget to the
Board of Directors, a copy of such annual budget, but in no event later
than 30 days before year-end.
8.2 Communication. At the request of any Purchaser that continues to hold
Series D Stock, the Company shall hold weekly status meetings among the
Company's management group and such Purchasers to discuss items proposed by such
Purchasers.
17
8.3 Access. So long as the Purchasers hold at least fifteen percent (15%)
of the Series D Stock purchased hereunder, upon the written request of the
Purchasers, the Company shall afford the Purchasers and its accountants, counsel
and other representatives, full access during normal business hours to all of
its properties, books, contracts, commitments and records, permit them to copy
or make extracts therefrom and, the Company shall furnish promptly to Purchasers
all information concerning its business, properties and personnel as Purchasers
may reasonably request; provided, however, that no investigation pursuant to
this Section 8.3 shall affect any representations or warranties of either party
hereunder.
8.4 Directors' and Officers' Insurance. So long as the Purchasers hold at
least fifteen percent (15%) of the Series D Stock purchased hereunder, the
Company shall maintain a directors' and officers' liability insurance policy
providing coverage in the amount of not less than One Million Dollars
($1,000,000) and having such other terms as are reasonably acceptable to
Purchasers.
8.5 Confidentiality. From and after the date of this Agreement, each of the
Company and Purchasers agree to hold, and will cause its employees, agents and
representatives to hold, in confidence, unless compelled to disclose by judicial
or administrative process or, in the written opinion of their counsel, by other
requirements of law, information furnished by the Company, on the one hand, to
Purchasers and information furnished by Purchasers, on the other hand, to the
Company in connection with the transactions contemplated by this Agreement, and
each of such persons agree that they shall not release or disclose such
information to any other person, except their respective officers, directors,
partners, employees, auditors, attorneys, financial advisors and other
consultants, advisors and representatives who need to know such information and
who have been informed of the confidential nature of such information and have
been directed to treat such information as confidential. The foregoing
provisions of this Section 8.5 shall not apply to any such information which (i)
becomes generally available to the public other than as a result of a disclosure
by any person bound hereunder, (ii) was available to a person bound hereunder on
a non-confidential basis prior to its disclosure hereunder, (iii) becomes
available to any person bound hereunder on a non-confidential basis by virtue of
the disclosure thereof by a source other than the party providing such
information in reliance upon the protection of confidentiality reposed hereby,
or (iv) is required to be disclosed pursuant to an order of a court of competent
jurisdiction, provided that if disclosure is so required, the disclosing party
shall provide notice of the same to each other party hereto.
Notwithstanding anything herein to the contrary, from and after the date of
this Agreement, if either party to this Agreement or any agreement contemplated
herein shall be required by law to file as part of any public record this
Agreement or the agreements relating to any transactions contemplated hereby,
both parties shall jointly identify those provisions, if any, of such agreements
that shall remain confidential and shall request and seek confidential treatment
of those provisions in accordance with the applicable provisions of any
applicable law, rule or regulation, and shall take all reasonable actions
necessary to secure such confidential treatment.
8.6 Restrictive Covenant. Without the consent of the holders of 75% of the
Series D Stock then outstanding, the Company may not fail to use the proceeds of
the sale of any Shares as required under the terms of any agreement that was a
condition of any such sale.
18
8.7 Foreign Corrupt Practices. Neither the Company nor any Subsidiary will
offer or agree to offer anything of value to any governmental official,
political party or candidate for government office nor will it otherwise take
any action that would cause the Company to be in violation of the U.S. Foreign
Corrupt Practices Act or any law of similar effect.
8.8 Payment of Expenses. At each Closing, the purchasers may deduct from
the Purchase Price otherwise payable for the Shares being purchased at such
Closing, the amount of their reasonable expenses associated with the
transactions contemplated hereby and not earlier paid.
8.9 Additional Warrants. As long as the New Debentures remain outstanding,
on each anniversary of January 1, the Company shall issue to the holders of New
Debentures additional Debenture Warrants to acquire two percent (2%) of the then
outstanding shares of Common Stock of the Company, on a fully diluted basis. The
Debenture Warrants so issued will have an exercise price equal to the average
Fair Market Value (as defined in the Debenture Warrant) for the 15 days prior to
the issuance of such Debenture Warrant. The Company will reserve a sufficient
number of additional shares of Common Stock prior to each subsequent issuance of
Debenture Warrants.
SECTION 9
Miscellaneous
9.1 Amendment; Waiver. Neither this Agreement nor any provision hereof may
be amended, modified, supplemented or waived, except by a written instrument
executed by (i) the Company and (ii) the Purchasers.
9.2 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if in writing and delivered in Person,
transmitted by facsimile transmission (fax) or sent by registered or certified
mail (return receipt requested) or recognized overnight delivery service,
postage pre-paid, addressed as follows, or to such other address has such party
may notify to the other parties in writing:
9.2.1 if to the Company:
Xxx Xxxxxx, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, Xx.
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
with a copy to:
Stoel Rives, LLP
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
00
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxx, Esq.
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
9.2.2 if to the Purchasers:
c/x Xxxxxx, Xxxxxxx & Company, LLC
Xxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxx, Xxxxxx & Xxxxxxxxx
0000 X Xx. XX
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
and a copy to:
X. Xxxx Price Associates
000 Xxxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Xxx Xxxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
and a copy to:
Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
High Street Tower
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx, Esq.
Facsimile No.: 000-000-0000
A notice or communication will be effective (i) if delivered in Person or by
overnight courier, on the business day it is delivered, (ii) if transmitted by
telecopier or EMail, on the business day of actual
20
confirmed receipt by the addressee thereof, and (iii) if sent by registered or
certified mail, three (3) business days after dispatch.
9.3 Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
9.4 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors and permitted assigns of the parties hereto. No party hereto may
assign its rights or delegate its obligations under this Agreement without the
prior written consent of the other parties hereto.
9.5 Survival of Representations, Warranties and Covenants. All
representations and warranties made in, pursuant to or in connection with this
Agreement shall survive the execution and delivery of this Agreement, any
investigation at any time made by or on behalf of any Purchaser, and the sale
and purchase of the Series D Stock and payment therefor for a period of two (2)
years. All covenants shall survive as long as any of the Purchasers hold any
shares of Series D Stock.
9.6 Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof and thereof and
supersede and cancel all prior representations, alleged warranties, statements,
negotiations, undertakings, letters, acceptances, understandings, contracts and
communications, whether verbal or written, among the parties hereto and thereto
or their respective agents with respect to or in connection with the subject
matter hereof.
9.7 Choice of Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to principles
of conflict of laws.
9.8 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
9.9 Costs and Expenses. The Company shall pay all reasonable fees and
expense of the Purchasers. The Purchasers shall have the right to reduce the
amount of the purchase price to offset any amounts payable for their costs and
expenses associated with the transactions contemplated hereby.
9.10 No Third-Party Beneficiaries. Nothing in this Agreement will confer
any third party beneficiary or other rights upon any Person (specifically
including any employees of the Company and its Subsidiaries) or entity that is
not a party to this Agreement.
21
9.11 Indemnification.
9.11.1 The Company agrees to indemnify and hold harmless the Purchasers and
their Affiliates, and their respective partners, co-investors, officers,
directors, employees, agents, consultants, attorneys and advisers (each,
an "Indemnified Party"), from and against any and all actual losses,
claims, damages, liabilities, costs and expenses (including, without
limitation, environmental liabilities, costs and expenses and all
reasonable fees, expenses and disbursements of counsel), joint or several
(hereinafter collectively referred to as a "Loss"), which may be incurred
by or asserted or awarded against any Indemnified Party in connection
with or in any manner arising out of or relating to any investigation,
litigation or proceeding or the preparation of any defense with respect
thereto, arising out of or in connection with or relating to this
Agreement, the other Transaction Documents or the transactions
contemplated hereby or thereby or any use made or proposal to be made
with the proceeds of the Purchasers' purchase of the Series D Stock
pursuant to this Agreement, whether or not such investigation, litigation
or proceeding is brought by the Company, any of its Subsidiaries,
shareholders or creditors, whether or not any of the transactions
contemplated by this Agreement or the other Transaction Documents are
consummated, except to the extent such Loss is found in a final judgment
by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct.
9.11.2 An Indemnified Party shall give written notice to the Company of any
claim with respect to which it seeks indemnification within ten (10) days
after the discovery by such parties of any matters giving rise to a claim
for indemnification pursuant to Section 9.11(a); provided that the
failure of any Indemnified Party to give notice as provided herein shall
not relieve the Company of its obligations under this Section 9.11,
except to the extent that the Company is actually prejudiced by such
failure to give notice. In case any such action or claim is brought
against any Indemnified Party, the Company shall be entitled to
participate in and, unless in the reasonable good faith judgment of the
Indemnified Party a conflict of interest between such Indemnified Party
and the Company may exist in respect of such action or claim, to assume
the defense thereof, with counsel satisfactory to the Indemnified Party
and after notice from the Company to the Indemnified Party of its
election so to assume the defense thereof, the Company shall not be
liable to such Indemnified Party for any legal or other expenses
subsequently incurred by the latter in connection with the defense
thereof other than reasonable costs of investigation. In any event,
unless and until the Company elects in writing to assume and does so
assume the defense of any such action or claim the Indemnified Party's
costs and expenses arising out of the defense, settlement or compromise
of any such action or claim shall be Losses subject to indemnification
hereunder. If the Company elects to defend any such action or claim, then
the Indemnified Party shall be entitled to participate in such defense
with counsel of its choice at its sole cost and expense. The Company
shall not be liable for any settlement of any action or claim effected
without its written consent. Anything in this Section 9.11 to the
contrary notwithstanding, the Company shall not, without the Indemnified
Party's prior written consent, settle or compromise any claim or consent
to entry of any judgment in respect thereof that imposes any future
obligation on the Indemnified Party or that does not include, as an
unconditional term thereof,
22
the giving by the claimant or the plaintiff to the Indemnified Party, a
release from all liability in respect of such claim.
9.12 Dispute Resolution. Any dispute, controversy or claim arising out of
or relating to this Agreement, or the breach termination validity thereof, shall
be settled by arbitration in accordance with the American Arbitration
Association (AAA) Commercial Rules as at present in force. The number of
arbitrators shall be one. The arbitrator shall be neutral and appointed by the
AAA. The place of arbitration shall. commence no later than thirty (30) days
after the Arbitrator has been appointed. The losing party shall be responsible
for the costs and expenses incurred by both sides with respect to the
arbitration.
[The remainder of this page is intentionally blank.]
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SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Agreement to be executed effective as of the date first above written.
XXX XXXXXX, INC.
By: /s/ XXX X. XXXXXXX
----------------------------------------------------
Xxx Xxxxx Xxxxxxx
President and Chief Executive Officer
XXXXXX, XXXXXXX STRATEGIC
PARTNERS FUND, L.P.
By: Xxxxxx, Xxxxxxx Strategic Partners, L.P., its
general partner
By: /s/ XXXXXX X. XXXXXX
----------------------------------------------------
Xxxxxx X. Xxxxxx, a general partner
STRATEGIC ASSOCIATES, L.P.
By: Xxxxxx, Xxxxxxx & Company, LLC, its general partner
By: /s/XXXXXX X. XXXXXX
----------------------------------------------------
Xxxxxx X. Xxxxxx, a managing member
X. XXXX PRICE RECOVERY FUND II, L.P.
By: X. Xxxx Price Recovery Fund II Associates, LLC,
its general partner
By: /s/XXX X. XXXXXX
----------------------------------------------------
Xxx X. Xxxxxx, its managing director
24
