EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
AMONG
XXXX MICROPRODUCTS INC.
THE TEACHERS' RETIREMENT SYSTEM OF ALABAMA
AND
THE EMPLOYEES' RETIREMENT SYSTEM OF ALABAMA
OCTOBER 2, 2006
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS................................................................1
1.1. Defined Terms...................................................................................1
1.2. GAAP............................................................................................8
1.3. Headings........................................................................................8
1.4. Plural Terms....................................................................................8
1.5. Time............................................................................................8
1.6. Governing Law...................................................................................8
1.7. Construction....................................................................................8
1.8. Calculation of Interest and Fees................................................................8
1.9. Other Interpretive Provisions...................................................................9
ARTICLE 2 PURCHASE AND SALE OF THE NOTES..................................................................9
2.1. Purchase and Sale of the Notes..................................................................9
ARTICLE 3 PROVISIONS OF THE NOTES AND THE WARRANT.........................................................9
3.1. General Provisions As To Payments...............................................................9
3.2. Interest.......................................................................................10
3.3. Principal Repayment............................................................................10
3.4. Optional Prepayments...........................................................................10
3.5 Late Fees......................................................................................11
ARTICLE 4 CONDITIONS PRECEDENT...........................................................................11
4.1. Conditions to Purchase and Sale of Notes.......................................................11
ARTICLE 5 REPRESENTATIONS AND WARRANTIES.................................................................12
5.1. The Company's Representations and Warranties...................................................12
ARTICLE 6 COVENANTS......................................................................................15
6.1. Affirmative Covenants..........................................................................15
6.2. Negative Covenants.............................................................................17
ARTICLE 7 DEFAULT........................................................................................18
7.1. Events of Default..............................................................................18
7.2. Remedies.......................................................................................19
ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF INVESTOR.....................................................19
8.1. Representations and Warranties of the Investor.................................................19
ARTICLE 9 SUBORDINATION OF NOTES.........................................................................20
9.1. Notes and Liens Subordinate to Senior Indebtedness.............................................20
9.2. Liens Subordinate to Senior Lenders' Liens.....................................................20
ARTICLE 10 TRANSFER OF SECURITIES.........................................................................20
10.1. Restriction on Transfer........................................................................20
10.2. Restrictive Legends............................................................................20
i
10.3. Notice of Transfer.............................................................................21
ARTICLE 11 MISCELLANEOUS..................................................................................22
11.1. Notices........................................................................................22
11.2. Expenses.......................................................................................23
11.3. Indemnification................................................................................23
11.4. Waivers; Amendments............................................................................23
11.5. Successors and Assigns.........................................................................23
11.6. No Third Party Rights..........................................................................24
11.7. Partial Invalidity.............................................................................24
11.8. Counterparts...................................................................................24
ii
SECURITIES PURCHASE AGREEMENT
DATE October 2, 2006
PARTIES Xxxx Microproducts Inc.
0000 Xxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000 (the "Company")
The Teachers' Retirement System of
Alabama, and
The Employees' Retirement System of
Alabama
X.X. Xxx 000000
000 Xxxxx Xxxxx Xxxxxx, Xxx. 000
Xxxxxxxxxx, XX 00000 (collectively, the "Investor")
RECITALS
A. The Company desires to issue to the Investor, and the Investor
desires to purchase from the Company, senior subordinated notes in the aggregate
principal amount of $35,000,000 (the "Notes"), on the terms and for the
consideration provided herein.
B. The proceeds of the Notes shall be used (i) to capitalize a newly
created wholly-owned subsidiary of the Company, New ProSys Corp., a Georgia
corporation ("New ProSys"), (ii) to fund a portion of the purchase price to
acquire certain assets from, and a portion of the capital stock of, ProSys
Information Systems, Inc., a Georgia corporation ("Old ProSys"), (iii) to use
for Old ProSys's and New ProSys's working capital, and (iv) to pay the costs and
expenses of this transaction.
C. In consideration of the Investor's agreement to purchase the Notes,
the Company desires to issue to the Investor, and the Investor desires to
purchase from the Company, a warrant to purchase shares of the common stock of
the Company, subject to the terms and conditions contained in this Agreement and
the Warrant (as defined below).
AGREEMENT
IN CONSIDERATION of the foregoing premises, and the mutual covenants
set forth herein, the parties agree as follows:
ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS
1.1. DEFINED TERMS. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the meanings set out respectively
after each:
"Affiliate" shall mean, with respect to any Person, (a) each Person
that, directly or indirectly, owns or controls, whether beneficially or as a
trustee, guardian or other fiduciary, five percent (5%) or more of any class of
capital stock of such Person, (b) each Person that controls, is controlled by or
is under common control with such Person or any Affiliate of such Person or
1
(c) each of such Person's employees, officers, directors, joint venturers and
partners; provided, however, that in no case shall the Investor be deemed to be
an Affiliate of the Company for purposes of this Agreement. For the purpose of
this definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
"Business Day" shall mean any day (a) which is not a Saturday or
Sunday, and (b) on which commercial banks are not authorized or required to
close in San Francisco, California or Montgomery,
Alabama.
"Capital Asset" shall mean, with respect to any Person, tangible
property owned or leased (in the case of a Capital Lease) by such Person, or any
expense incurred by any Person that is required by GAAP to be reported as an
asset on such Person's balance sheet.
"Capital Leases" shall mean any and all lease obligations that, in
accordance with GAAP, are required to be capitalized on the books of a lessee.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean all property in which the Investor has a Lien
to secure the Obligations, pursuant to the Security Agreements and the Pledge
Agreements.
"Company" shall have the meaning given to that term in the introductory
Section hereof entitled PARTIES.
"Contractual Obligation" of any Person shall mean, any material
indenture, note, security, deed of trust, mortgage, security agreement, lease,
guaranty, instrument, contract, agreement or other form of obligation to which
such Person is a party or by which such Person or any of its property is bound.
"Default" shall mean any event or circumstance not yet constituting an
Event of Default which with the giving of any notice or the lapse of any period
of time or both, would become an Event of Default.
"Dollars" and "$" shall mean the lawful currency of the United States
of America and, in relation to any payment under this Agreement, same day or
immediately available funds.
"Environmental Laws" means all Requirements of Law relating to the
protection of human health or the environment, including, without limitation,
(a) all Requirements of Law pertaining to reporting, licensing, permitting,
investigation, and remediation of emissions, discharges, releases, or threatened
releases of hazardous materials, chemical substances, pollutants, contaminants,
or hazardous or toxic substances, materials or wastes whether solid, liquid, or
gaseous in nature, into the air, surface water, groundwater, or land, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of chemical substances, pollutants,
contaminants, or hazardous or toxic substances, materials, or
2
wastes, whether solid, liquid, or gaseous in nature; and (b) all Requirements of
Law pertaining to the protection of the health and safety of employees or the
public.
"Event of Default" shall have the meaning given to that term in Section
7.1.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
"Final Maturity Date" shall mean August 1, 2013.
"Financial Statements" shall mean, with respect to any accounting
period for any Person, statements of income and of changes in cash flow of such
Person for such period, and balance sheets of such Person as of the end of such
period, setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year if such period is less than a
full fiscal year or, if such period is a full fiscal year, corresponding figures
from the preceding annual audit, all prepared in reasonable detail and in
accordance with GAAP.
"GAAP" shall mean generally accepted accounting principles and
practices as in effect in the United States of America from time to time,
consistently applied.
"Governmental Authority" shall mean any domestic or foreign national,
state or local government, any political subdivision thereof, any department,
agency, authority or bureau of any of the foregoing, or any other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Governmental Charges" shall mean all levies, assessments, fees, claims
or other charges imposed by any Governmental Authority upon or relating to (i)
the Company, (ii) employees, payroll, income or gross receipts of the Company,
(iii) the ownership or use of any of its assets by the Company or (iv) any other
aspect of the business of the Company.
"Governmental Rule" shall mean any material law, rule, regulation,
ordinance, order, code interpretation, judgment, decree, directive, guidelines,
policy or similar form of decision of any Governmental Authority.
"Indebtedness" of any Person shall mean and include (a) all items of
indebtedness and liabilities which, in accordance with GAAP, would be included
in determining liabilities that are shown on the liability side of the balance
sheet of such Person, (b) all indebtedness and liabilities of other Persons
assumed or guaranteed by such Person or in respect of which such Person is
secondarily or contingently liable whether by any agreement to acquire
indebtedness and liabilities or to supply or advance funds or otherwise, and (c)
all indebtedness and liabilities of other Persons secured by any Lien in any
property of such Person (including without limitation Capital Leases).
"Indemnitees" shall have the meaning given to that term in Section
11.3.
"Interest Rate" shall mean the fixed rate of interest equal to 9% per
annum.
3
"Investor" shall have the meaning given to that term in the
introductory Section hereof entitled PARTIES.
"Lien" shall mean, with respect to any property, any security interest,
mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such
property or the income therefrom, including, without limitation, the interest of
a vendor or lessor under a conditional sale agreement, Capital Lease or other
title retention agreement, or any agreement to provide any of the foregoing, and
the filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction.
"Margin Stock" shall have the meaning given to that term in Regulation
U issued by the Federal Reserve Board, as amended from time to time, and any
successor regulation thereto.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, assets, operations, prospects or financial or other condition of
the Company; (b) the ability of the Company to pay or perform the Obligations in
accordance with the terms of this Agreement and the other Transaction Documents;
or (c) the rights and remedies of the Investor under this Agreement, the other
Transaction Documents or any related document, instrument or agreement.
"Net Worth" shall mean, with respect to any Person at any time, the
remainder at such time, determined on a consolidated basis in accordance with
GAAP, of (a) the total assets of such Person and its Subsidiaries minus (b) the
total liabilities of such Person and its Subsidiaries.
"New ProSys" shall have the meaning given to that term in Recital B.
"Notes" shall mean the 9% Senior Subordinated Notes issued by the
Company to the Investor dated the date hereof in the aggregate original
principal amount of $35,000,000, as follows: (i) $23,000,000 payable to The
Teachers' Retirement System of
Alabama, and (ii) $12,000,000 payable to The
Employees' Retirement System of
Alabama.
"Obligations" shall mean and include, with respect to the Company, all
obligations owed by the Company to the Investor under the Notes, and all amounts
arising pursuant to the terms of this Agreement or any of the other Transaction
Documents, including without limitation all interest, fees, charges, expenses,
attorneys' fees and accountants' fees chargeable to the Company or payable by
the Company hereunder or thereunder.
"Old ProSys" shall have the meaning given to that term in Recital B.
"Permitted Dividend" shall mean and include:
(a) Dividends payable solely in the common stock of the
Company (and cash paid in lieu of fractional shares in connection
therewith); and
(b) Repurchases of employee stock pursuant to repurchase
agreements.
4
"Permitted Indebtedness" shall mean and include:
(a) Senior Indebtedness;
(b) the Obligations;
(c) other amounts owed by the Company to the Investor or the
Investor's affiliates;
(d) Indebtedness to subcontractors and trade creditors
incurred in the ordinary course of business;
(e) Unsecured Indebtedness of the Company;
(f) Purchase money Indebtedness incurred to acquire a Capital
Asset provided that such Indebtedness does not exceed the purchase
price of such Capital Asset;
(g) Indebtedness under Capital Leases and operating leases;
(h) Indebtedness of any Subsidiary of the Company to the
Company arising from the extension by the Company to such Subsidiary of
working capital financing;
(i) Indebtedness arising from the endorsement of instruments
in the ordinary course of business;
(j) Indebtedness of the Company under Rate Contracts,
provided, that (A) all such arrangements are entered into in connection
with bona fide hedging operations and not for speculation and (B) the
aggregate net amount owed by the Company under, on account of or
otherwise in connection with such Rate Contracts does not exceed
$50,000,000 (marked to market) at any time; and
(k) Other Indebtedness not exceeding $1,000,000 at any time.
"Permitted Liens" shall mean and include:
(a) Liens for taxes or other governmental charges not at the
time delinquent or thereafter payable without penalty or being
contested in good faith, provided provision is made to the reasonable
satisfaction of the Investor for the eventual payment thereof if
subsequently found payable;
(b) Liens of carriers, warehousemen, mechanics, materialmen,
vendors, and landlords incurred in the ordinary course of business for
sums not overdue or being contested in good faith;
(c) Deposits under workers' compensation, unemployment
insurance and social security laws or to secure the performance of
bids, tenders, contracts (other than for the repayment of borrowed
money) or leases, or to secure statutory obligations of
5
surety or appeal bonds or to secure indemnity, performance or other
similar bonds in the ordinary course of business;
(d) Liens arising out of a judgment or award not exceeding
$500,000 (exclusive of any amounts covered by insurance issued by a
Person not an Affiliate of the Company) with respect to which an appeal
is being prosecuted, a stay of execution pending appeal having been
secured;
(e) Liens securing purchase money Indebtedness if such
Indebtedness is Permitted Indebtedness pursuant to clause (f) of the
definition thereof and such Liens do not extend to property other than
the property financed with such Indebtedness;
(f) Liens securing obligations under a Capital Lease if such
lease is Permitted Indebtedness pursuant to clause (g) of the
definition thereof and such Liens do not extend to property other than
the property leased under such Capital Lease;
(g) Liens securing Senior Indebtedness;
(h) Leases, subleases, licenses and sublicenses granted to the
Company the granting of which is not prohibited pursuant to the
definition of Permitted Indebtedness;
(i) Liens in favor of customs and revenue authorities which
secure payment of duties in connection with the importation of goods;
(j) Liens existing on property acquired by the Company or any
of its Subsidiaries at the time of such acquisition (including Liens on
the assets of any Person at the time such Person becomes a Subsidiary
of the Company);
(k) Liens on insurance policies and the proceeds thereof
incurred solely to secure the financing of premiums owing with respect
thereto;
(l) Liens in favor of the Company;
(m) Liens in favor of the Investor and/or the Investor's
affiliates; and
(n) Such minor defects, irregularities, encumbrances,
easements, rights of way, and clouds on title as normally exist on
similar properties which do not, individually or in the aggregate,
materially impair the property affected thereby or the use thereof.
"Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, an
unincorporated association, a limited liability company, a joint venture, a
trust or other entity.
"Pledge Agreement(s)" shall mean the Pledge Agreement dated the date
hereof between the Company and the Investor, as amended, supplemented or
otherwise modified from time to
6
time, and/or the Pledge Agreement dated the date hereof between New ProSys and
the Investor, as amended, supplemented or otherwise modified from time to time.
"Rate Contracts" shall mean swap agreements (as that term is defined in
Section 101 of the Federal Bankruptcy Reform Act of 1978, as amended) and any
other agreements or arrangements designed to provide protection against
fluctuations in interest or currency exchange rates.
"Requirement of Law" applicable to any Person shall mean (a) the
Articles or Certificate of Incorporation and Bylaws, Partnership Agreement or
other organizational or governing documents of such Person, (b) any Governmental
Rule applicable to such Person, (c) any material license, permit, approval or
other authorization granted by any Governmental Authority to or for the benefit
of such Person and (d) any material judgment, decision or determination of any
Governmental Authority or arbitrator, in each case applicable to or binding upon
such Person or any of its property or to which such Person or any of its
property is subject.
"Restricted Securities" means the Notes, the Warrant, and the common
stock of the Company to be issued under the Warrant, to the extent the Notes,
the Warrant and such common stock have not then been sold to the public pursuant
to (a) registration under the Securities Act or (b) Rule 144 (or similar or
successor rule) promulgated under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement(s)" shall mean the Security Agreement dated the
date hereof between New ProSys and the Investor, as amended, supplemented or
otherwise modified from time to time, and/or the Security Agreement dated the
date hereof between Old ProSys and the Investor, as amended, supplemented or
otherwise modified from time to time.
"Senior Indebtedness" means all indebtedness, liabilities and
obligations of the Company and its Subsidiaries incurred for general corporate
purposes (including, without limitation, for acquisitions and letters of credit,
and including indebtedness arising in connection with securitization programs)
howsoever created, arising or evidenced, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter created or incurred
and whether it is sole, joint, several or joint and several.
"Senior Lenders" shall mean any lenders (whether one or more) who are
providing Senior Indebtedness.
"Subsidiary" of any Person shall mean (a) any corporation of which more
than 50% of the issued and outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other Subsidiaries or by one or
more of such Person's other Subsidiaries, (b) any partnership, joint venture,
limited liability company or other association of which more than 50% of the
equity interest having the power to vote, direct or control the
7
management of such partnership, joint venture or other association is at the
time owned and controlled by such Person, by such Person and one or more of the
other Subsidiaries or by one or more of such Person's other Subsidiaries and (c)
any other Person included in the Financial Statements of such Person on a
consolidated basis.
"Transaction Documents" shall mean this Agreement, the Notes, the
Warrant, the Pledge Agreements and the Security Agreements.
"Transfer" shall mean any sale, transfer, assignment, or other
disposition with or without consideration of any interest in any security,
including any disposition of any securities or of any interest therein which
would constitute a sale thereof within the meaning of the Securities Act.
"Warrant" shall mean the Warrant of Xxxx Microproducts Inc., dated the
date hereof, given by the Company to the Investor, as amended, supplemented or
otherwise modified from time to time, as more fully described in Section 4.1(g).
1.2. GAAP. Unless otherwise indicated in this Agreement, all accounting
terms used in this Agreement shall be construed, and all accounting and
financial computations hereunder shall be computed, in accordance with GAAP. If
GAAP changes during the term of this Agreement such that any covenants contained
herein would then be calculated in a different manner or with different
components, the Company and the Investor agree to negotiate in good faith to
amend this Agreement in such respects as is necessary to conform those covenants
as criteria for evaluating the Company's financial condition to substantially
the same criteria as were effective prior to such change in GAAP; provided,
however, that, until the Company and the Investor so amend this Agreement, all
such covenants shall be calculated in accordance with GAAP as in effect
immediately prior to such change.
1.3. HEADINGS. Headings in this Agreement are for convenience of
reference only and are not part of the substance hereof.
1.4. PLURAL TERMS. All terms defined in this Agreement in the singular
form shall have comparable meanings when used in the plural form and vice versa.
1.5. TIME. All references in this Agreement to a time of day shall mean
Montgomery,
Alabama time, unless otherwise indicated.
1.6. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of
Alabama without reference to
conflicts of law rules.
1.7. CONSTRUCTION. This Agreement is the result of negotiations among,
and has been reviewed by, the Company and the Investor and their respective
counsel. Accordingly, this Agreement shall be deemed to be the product of all
parties hereto, and no ambiguity shall be construed in favor of or against the
Company or the Investor.
1.8. CALCULATION OF INTEREST AND FEES. All calculations of interest and
fees under this Agreement for any period (a) shall include the first day of such
period and exclude the last day of
8
such period and (b) shall be calculated on the basis of a 360 day year
consisting of twelve (12) thirty (30) day months.
1.9. OTHER INTERPRETIVE PROVISIONS. References in this Agreement to
"Recitals," "Articles," "Sections," "Paragraphs," Subparagraphs," "Exhibits" and
"Schedules" are to recitals, articles, sections, paragraphs, subparagraphs,
exhibits and schedules herein and hereto unless otherwise indicated. References
in this Agreement to any document, instrument or agreement (a) shall include all
exhibits, schedules and other attachments thereto, (b) shall include all
documents, instruments or agreements issued or executed in replacement thereof,
and (c) shall mean such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified and supplemented from time to time and
in effect at any given time. The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
words "include" and "including" and words of similar import when used in this
Agreement shall not be construed to be limiting or exclusive.
ARTICLE 2 PURCHASE AND SALE OF THE NOTES
2.1. PURCHASE AND SALE OF THE NOTES. Upon satisfaction of the
conditions set forth in Section 4.1, at such time and location as the Company
and the Investor may agree, the Company shall sell the Notes to the Investor and
the Investor shall purchase the Notes from the Company and deliver to the
Company $35,000,000 in cash by wire transfer of immediately available funds to
one or more accounts designated by the Company.
ARTICLE 3 PROVISIONS OF THE NOTES AND THE WARRANT
3.1. GENERAL PROVISIONS AS TO PAYMENTS.
(a) The Company shall make each payment in respect of the
principal of and accrued interest on the Notes, or any other amount due
to the Investor under this Agreement or any other Transaction Document,
not later than 3:00 p.m., on the day when due, to the Investor as
provided in the Notes, or in such manner as instructed from time to
time in writing by the Investor. All payments hereunder shall be made
in United States Dollars by wire transfer of immediately available
funds.
(b) Whenever any payment (including principal of or interest
on the Notes or other amount) hereunder or under any other Transaction
Document shall become due, or otherwise would occur, on a day that is
not a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included
in the computation of such interest, or other amount, if applicable.
(c) The Company hereby authorizes the Investor to make
appropriate notations on any grid attached to the Notes, including the
date, outstanding principal amount and any prepayment thereof, which
notations shall be conclusive absent manifest error; provided, however,
that the failure of the Investor to make such notation or any error on
the Notes shall not affect the obligation of the Company to repay, in
accordance
9
with the terms of the Notes and this Agreement, the principal amount of
the Notes together with all interest and other amounts due hereunder.
3.2. INTEREST.
(a) Interest shall be payable on the principal amount of the
Notes outstanding from time to time at the Interest Rate, which shall
be calculated as specified in Section 1.8.
(b) Interest on the Notes shall accrue from the date hereof
(or, if later, the date the Investor purchases the Notes) until paid,
and shall be payable on the date specified in the Notes and on maturity
of the Notes, whether by acceleration or otherwise.
(c) In no event whatsoever shall the aggregate of all amounts
deemed interest under the Notes and charged or collected pursuant to
the terms of this Agreement or pursuant to the Notes exceed the highest
rate permissible under any law which a court of competent jurisdiction
shall, in a final determination, deem applicable hereto. If any
provisions of this Agreement or the Notes are in contravention of any
such law, such provisions shall be deemed amended to conform thereto.
3.3. PRINCIPAL REPAYMENT.
(a) The Company shall repay the Notes in semi-annual
installments as follows: (i) an aggregate of $500,000 plus accrued
interest on February 1, 2007, (ii) an aggregate of $500,000 plus
accrued interest on August 1, 2007, (iii) an aggregate of $875,000 plus
accrued interest on February 1, 2008, (iv) an aggregate of $875,000
plus accrued interest on August 1, 2008, (v) an aggregate of $1,250,000
plus accrued interest on February 1, 2009; (vi) an aggregate of
$1,250,000 plus accrued interest on August 1, 2009, (vii) an aggregate
of $1,625,000 plus accrued interest on February 1, 2010, (viii) an
aggregate of $1,625,000 plus accrued interest on August 1, 2010, (ix)
an aggregate of $2,000,000 plus accrued interest on February 1, 2011,
(x) an aggregate of $2,000,000 plus accrued interest on August 1, 2011,
(xi) an aggregate of $2,500,000 plus accrued interest on February 1,
2012, (xii) an aggregate of $2,500,000 plus accrued interest on August
1, 2012, (xiii) an aggregate of $8,750,000 plus accrued interest on
February 1, 2013, and (xiv) an aggregate of $8,750,000 plus accrued
interest on August 1, 2013.
(b) Any and all principal of the Notes remaining unpaid,
together with all interest accrued but unpaid thereon, automatically
and unconditionally shall be due and payable in full on the Final
Maturity Date.
3.4. OPTIONAL PREPAYMENTS.
(a) The Company may, at any time, at its option, prepay any
one or more of the Notes in whole and from time to time in part,
without premium or penalty, upon not less than thirty (30) Business
Day's prior written notice to the Investor; provided, however, that
each partial prepayment shall be in an aggregate principal amount not
less than $1,000,000 or integral multiples of $100,000 in excess
thereof. Each prepayment of
10
a Note shall include payment in cash of the principal amount of such
Note proposed to be prepaid on such prepayment date, and all accrued
but unpaid interest thereon to the date of such prepayment on the
portion of the Note being prepaid. All principal being prepaid shall be
applied to the Notes in inverse order of maturity.
(b) Each notice of prepayment pursuant to this Section 3.4
shall specify the proposed date of such prepayment, the principal
amount of the Note to be prepaid, and the calculation of the interest
owing on such principal amount.
3.5 LATE FEES. Company will pay to Investor a late charge equal to five
percent (5%) of the amount of any payment, including principal and interest
(including interest accruing during the period from the payment due date until
the date actually paid), which has not been paid within three (3) Business Days
of the date such payment was due, but in no case less than $.50 or more than the
maximum amount allowed by applicable law. Collection or acceptance by Investor
of such late charge shall not constitute a waiver of any rights or remedies of
Investor provided herein or in any other Transaction Document.
ARTICLE 4 CONDITIONS PRECEDENT
4.1. CONDITIONS TO PURCHASE AND SALE OF NOTES. The obligations of the
Investor to purchase and of the Company to sell the Notes hereunder are subject
to the satisfaction of the following conditions:
(a)
Securities Purchase Agreement. Each of the Company and the
Investor shall have received, in form and substance satisfactory to it
and its counsel, a duly executed copy of this Agreement and the other
Transaction Documents, including the Warrant as more fully described in
Section 4.1(g), each in form and substance satisfactory to it and its
counsel.
(b) No Default. No Default or Event of Default shall exist.
(c) No Litigation. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or
proposed before any court, governmental agency or legislative body to
enjoin, restrain or prohibit, or to obtain damages in respect of, or
which is related to or arises out of this Agreement or the consummation
of the transactions contemplated hereby.
(d) Payment of Origination Fee, and Fees and Expenses. The
Company shall have paid (i) an origination fee in the amount of $87,500
to the Investor, and (ii) the reasonable legal fees and expenses of the
Investor's legal counsel.
(e) Representations and Warranties; Performance of Covenants.
The representations and warranties of the Company contained herein
shall be correct in all material respects as though made on and as of
the date hereof. The Company shall have satisfied each of the
conditions precedent set forth herein on and as of the date hereof. The
representations and warranties of the Investor contained herein shall
be correct in all material respects as though made on and as of the
date hereof. The Investor shall have satisfied each of the conditions
precedent set forth herein on and as of the date hereof.
11
(f) Consent of Holders of Senior Indebtedness. The holders of
the Senior Indebtedness outstanding on the date hereof shall have
consented to the transaction contemplated by this Agreement.
(g) Warrant. The Company shall have issued to the Investor the
Warrant to purchase 125,000 shares of stock in the Company at a price
of $5.15 per share at any time during a period of 5 years from the date
of the purchase of the Notes.
ARTICLE 5 REPRESENTATIONS AND WARRANTIES
5.1. THE COMPANY'S REPRESENTATIONS AND WARRANTIES. In order to induce
the Investor to enter into this Agreement, the Company hereby represents and
warrants to the Investor as follows:
(a) Due Incorporation, Qualification, Etc. The Company (i) is
a corporation duly organized, validly existing and in good standing
under the laws of California; (ii) has the power and authority to own,
lease and operate its properties and carry on its business as now
conducted; and (iii) is duly qualified, licensed to do business and in
good standing as a foreign corporation in each jurisdiction where the
failure to be so qualified or licensed might have a Material Adverse
Effect, including, without limitation, the State of
Alabama.
(b) Authority. The execution, delivery and performance by the
Company of each Transaction Document, and the consummation of the
transactions contemplated thereby (i) are within the Company's power
and (ii) have been duly authorized by all necessary action on the part
of the Company.
(c) Enforceability. Each Transaction Document executed by the
Company has been duly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
limited by bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors' rights generally
and general principles of equity.
(d) Non-Contravention. The execution and delivery by the
Company of the Transaction Documents and the performance and
consummation of the transactions contemplated thereby do not (i)
violate any Requirement of Law applicable to the Company; (ii) violate
any provision of, or result in the material breach or the acceleration
of, or entitle any other Person to accelerate (whether after the giving
of notice or lapse of time or both), any Contractual Obligation of the
Company; or (iii) result in the creation or imposition of any Lien upon
any material property, asset or revenue of the Company (except such
Liens as may be created in favor of the Investor under the Pledge
Agreement).
(e) Approvals. Other than as obtained as of the date hereof,
no material consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority or
other Person (including, without limitation, the shareholders of any
Person), is required in connection with the execution and delivery of
the
12
Transaction Documents executed by the Company and the performance and
consummation of the transactions contemplated thereby.
(f) No Violation or Default. The Company is not in violation
of or in default with respect to (i) any Requirement of Law; (ii) any
Contractual Obligation, where, such violation or default could have a
Material Adverse Effect. Without limiting the generality of the
foregoing, the Company (A) has not violated any Environmental Laws, (B)
does not have any liability under any Environmental Laws or (C) has not
received notice or other communication of an investigation, and the
Company is not under investigation by any Governmental Authority having
authority to enforce Environmental Laws, where such violation,
liability or investigation could have a Material Adverse Effect. No
Event of Default or Default has occurred and is continuing.
(g) Litigation. Except as set forth (with the dollar amounts
claimed) in Schedule 5.1(g), no actions (including, without limitation,
derivative actions), suits, proceedings or investigations are pending
or, to the knowledge of the Company, threatened against the Company at
law or in equity in any court or before any other Governmental
Authority which (i) could (alone or in the aggregate) have a Material
Adverse Effect or (ii) seeks to enjoin, either directly or indirectly,
the execution, delivery or performance by the Company of the
Transaction Documents or the transactions contemplated thereby.
(h) Title. The Company owns and has good and marketable title
to, or a valid leasehold interest in, all its respective real
properties and good title to its other respective assets and properties
as reflected in the most recent Financial Statements delivered to the
Investor (except those assets and properties disposed of in the
ordinary course of business or otherwise in compliance with this
Agreement since the date of such Financial Statements) and all assets
and properties acquired by the Company since such date (except those
disposed of in the ordinary course of business or otherwise in
compliance with this Agreement). Such assets and properties are subject
to no Lien, except for Permitted Liens.
(i) Financial Statements. The Financial Statements of the
Company which have been delivered to the Investor, (i) are in
accordance with the books and records of the Company, which have been
maintained in accordance with good business practice; (ii) have been
prepared in conformity with GAAP; and (iii) fairly present the
financial positions of the Company at such date. The Company has no
contingent obligations, liability for taxes or other outstanding
obligations which are material in the aggregate, except as disclosed in
the audited Financial Statements of the Company dated December 31,
2005, furnished by the Company to the Investor prior to the date
hereof.
(j) Other Regulations. The Company is not subject to
regulation under the Investment Company Act of 1940, the Public Utility
Holding Company Act of 1935, the Federal Power Act, any state public
utilities code or any federal or state statute or regulatory scheme
which would limit its ability execute, deliver and perform any of the
Transaction Documents executed or to be executed by it.
13
(k) Patent and Other Rights. The Company owns, and has the
full right to license without the consent of any other Person, all
patents, licenses, trademarks, trade names, trade secrets, service
marks, copyrights and all rights with respect thereto, which are
required to conduct its business as now conducted.
(l) Governmental Charges. The Company has filed or caused to
be filed all tax returns which are required to be filed by it. The
Company has paid, or made provision for the payment of, all taxes and
other Governmental Charges which have or may have become due pursuant
to such returns or otherwise, except such Governmental Charges, if any,
which are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided or
which could not have a Material Adverse Effect if unpaid.
(m) Margin Stock. The Company owns no Margin Stock which, in
the aggregate, would constitute a substantial part of the assets of the
Company, and no proceeds of the Notes will be used to purchase or
carry, directly or indirectly, any Margin Stock or to extend credit,
directly or indirectly, to any Person for the purpose of purchasing or
carrying any Margin Stock.
(n) New and Old ProSys. Set forth in Schedule 5.1(n) is the
jurisdiction of incorporation of each of New ProSys and Old ProSys, the
classes of common stock of each of New ProSys and Old ProSys and the
number of shares and percentages of shares of each such class owned
directly or indirectly by the Company.
(o) Catastrophic Events. Neither the Company nor any of its
properties is or has been affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or other casualty that could have a
Material Adverse Effect. There are no disputes presently subject to
grievance procedure, arbitration or litigation under any of the
collective bargaining agreements, employment contracts or employee
welfare or incentive plans to which the Company is a party, and there
are no strikes, lockouts, work stoppages or slowdowns, or, to the best
knowledge of the Company, jurisdictional disputes or organizing
activity occurring or threatened which could have a Material Adverse
Effect.
(p) Burdensome Contractual Obligations, Etc. Neither the
Company nor any of its properties is subject to any Contractual
Obligation or Requirement of Law which could have a Material Adverse
Effect.
(q) No Material Adverse Effect. No event has occurred and no
condition exists which could reasonably be expected to have a Material
Adverse Effect.
(r) Accuracy of Information Furnished. None of the Transaction
Documents and none of the other certificates, statements or information
furnished to the Investor by or on behalf of the Company in connection
with the Transaction Documents or the transactions contemplated thereby
contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the
14
statements therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE 6 COVENANTS
6.1. AFFIRMATIVE COVENANTS. Until the satisfaction in full by the
Company of all Obligations, the Company will comply with the following
affirmative covenants, unless the Investor shall otherwise consent in writing:
(a) Financial Statements, Reports, etc. The Company shall
furnish to the Investor the following, each in such form and such
detail as the Investor shall reasonably request:
(i) Within fifty (50) days after the last day of each
fiscal quarter of the Company, (A) a copy of the Financial
Statements of the Company for such quarter and for the fiscal
year to date (including consolidated Financial Statements for
the Company and its Subsidiaries), certified by the president
or chief financial officer of the Company to present fairly
the financial condition, results of operations and other
information reflected therein and to have been prepared in
accordance with GAAP (subject to year-end audit adjustments),
(B) the Form 10-Q Report filed by the Company with the
Securities and Exchange Commission for such quarter, and (C)
to the extent the Company prepares individual financial
statements for New ProSys and Old ProSys, a copy of such
individual financial statements;
(ii) Within ninety-five (95) days after the close of
each fiscal year of the Company, (A) copies of the audited
Financial Statements of the Company for such year (including
consolidated Financial Statements for the Company and its
Subsidiaries), prepared by independent certified public
accountants acceptable to the Investor, (B) copies of the
unqualified opinions (or qualified opinions reasonably
acceptable to the Investor) and management letters delivered
by such accountants in connection with all such Financial
Statements, (C) certificates of all such accountants to the
Investor stating that in making the examination necessary for
their opinion they have obtained no knowledge of any Event of
Default or Default which has occurred and is continuing, or
if, in the opinion of such accountants, an Event of Default or
Default has occurred and is continuing, a statement as to the
nature thereof (or other certificates of such accountants
reasonably acceptable to the Investor), (D) the Form 10-K
Report filed by the Company with the Securities and Exchange
Commission for such year, and (E) to the extent the Company
prepares individual financial statements for New ProSys and
Old ProSys, a copy of such individual financial statements;
(iii) Contemporaneously with the quarterly and
year-end financial statements required by the foregoing
clauses (i) and (ii), a certificate of the president or chief
financial officer of the Company in such detail as the
Investor may reasonably request which sets forth the
calculations conducted to verify that the Company is in
compliance with the net worth covenant set forth in
15
Section 6.2(g) and stating that no Event of Default and no
Default has occurred and is continuing, or, if any such Event
of Default or Default has occurred and is continuing, a
statement as to the nature thereof and what action the Company
proposes to take with respect thereto;
(iv) As soon as possible and in no event later than
five (5) Business Days after they are sent, made available or
filed, copies of all registration statements and reports filed
by the Company with the Securities and Exchange Commission
(including 8Q reports) and all reports, proxy statements and
financial statements sent or made available by the Company to
its shareholders generally; and
(v) Such other instruments, agreements, certificates,
opinions, statements, documents and information relating to
the operations or condition (financial or otherwise) of the
Company, and compliance by the Company with the terms of this
Agreement and the other Transaction Documents as the Investor
may from time to time reasonably request.
(b) Books and Records. The Company shall at all times keep
proper books of record and account in which full, true and correct
entries will be made of its transactions in accordance with GAAP.
(c) Inspections. The Company shall permit any Person
designated by the Investor, upon reasonable notice and during normal
business hours, to visit and inspect any of the properties and offices
of the Company, to examine the books of account of the Company and to
discuss the affairs, finances and accounts of the Company with, and to
be advised as to the same by, their officers, all at such times and
intervals as the Investor may reasonably request.
(d) Insurance. The Company shall carry and maintain insurance
of the types and in the amounts customarily carried from time to time
during the term of this Agreement by others engaged in substantially
the same business as the Company and operating in the same geographic
area as the Company, including fire, public liability, property damage
and worker's compensation, such insurance to be carried with companies
and in amounts reasonably satisfactory to the Investor. The Company
shall name the Investor as additional insured or loss payee, as
appropriate and to the extent of its interest, on all such insurance.
(e) Governmental Charges The Company shall promptly pay and
discharge before delinquent all taxes and other Governmental Charges
prior to the date upon which penalties accrue thereon, except such
Governmental Charges as may in good faith be contested or disputed by
appropriate proceedings, provided that in each such case appropriate
reserves are maintained in accordance with GAAP.
(f) Use of Proceeds. The Company shall use the proceeds of the
Notes only for the purposes set forth in Recital C. The Company shall
not use any part of the proceeds of the Notes, directly or indirectly,
for the purpose of purchasing or carrying
16
any Margin Stock or for the purpose of purchasing or carrying or
trading in any securities under such circumstances as to involve the
Company or the Investor in a violation of Regulations T, U or X issued
by the Federal Reserve Board.
(g) General Business Operations. The Company shall (i)
preserve and maintain its corporate existence and all of its rights,
privileges and franchises reasonably necessary to the conduct of its
business, (ii) conduct its business activities in compliance with all
Requirements of Law and Contractual Obligations, the violation of which
could have a Material Adverse Effect, and (iii) keep all property
useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted.
(h) Information. Without in any way limiting the generality of
Sections 6.1(a) and (c), the Company shall meet with representatives of
the Investor on a semi-annual basis and will provide the Investor with
quarterly written reports regarding the Company's business operations
and financial condition.
(i) Employment Plan. On or before October 30, 2006, the
Company shall submit to the Investor a plan specifying the actions to
be taken and the types of staffing to be increased in Alabama as a
result of growing the Company's Value Added Reseller business.
6.2. NEGATIVE COVENANTS. Until the satisfaction in full by the Company
of all Obligations, the Company will comply with the following negative
covenants, unless the Investor shall otherwise consent in writing:
(a) Indebtedness. The Company shall not create, incur, assume
or permit to exist any Indebtedness except for Permitted Indebtedness;
provided, however, at no time shall the aggregate outstanding amount of
Permitted Indebtedness described in clauses (a), (b) and (c) of the
"Permitted Indebtedness" definition exceed the sum of the Company's
accounts receivable plus inventory balances on a consolidated basis.
(b) Liens. The Company shall not create, incur, assume or
permit to exist any Lien on or with respect to any of its assets or
property of any character, whether now owned or hereafter acquired,
except for Permitted Liens.
(c) Asset Dispositions. The Company shall not sell, lease,
transfer or otherwise dispose of any of its assets or property, whether
now owned or hereafter acquired, except in the ordinary course of its
business. Upon any such sale in the ordinary course of business, the
Investor will, at the Company's request, release its Lien, if any, in
any assets so sold.
(d) Dividends, Redemptions, Etc. The Company shall not (i) pay
any dividends or make any distributions on its capital stock; (ii)
purchase, redeem, retire, defease or otherwise acquire for value any of
its capital stock; (iii) return any capital to any holder of its
capital stock as such; (iv) make any distribution of assets, capital
stock, obligations or securities to any holder of its capital stock as
such; or (v) set apart any sum for any such purpose; except that the
Company may pay Permitted Dividends.
17
(e) Transactions With Affiliates. The Company shall not enter
into any Contractual Obligation with any Affiliate or engage in any
other transaction with any Affiliate except that the Company may (i)
buy and sell assets to and from its Subsidiaries for fair value and
(ii) engage in other transactions with its Subsidiaries or with
Affiliates upon terms at least as favorable to the Company as
arms-length transactions with unaffiliated Persons.
(f) Accounting Changes. The Company shall not change (i) its
fiscal year (currently January 1 through December 31) or (ii) its
accounting practices except as required by GAAP.
(g) Net Worth Covenant. The Company shall not permit its Net
Worth, for any fiscal quarter, to be less than $87,500,000.
(h) Financing Covenant. The Company shall submit to Investor
quarterly certification of compliance with the covenant set forth in
Section 6.2(a).
(i) No Conflicting Agreements. The Company shall not enter
into or become a party to any agreement if such agreement would cause
the Company to be in violation of any of its agreements herein.
ARTICLE 7 DEFAULT
7.1. EVENTS OF DEFAULT. The occurrence or existence of any one or more
of the following shall constitute an "Event of Default" hereunder:
(a) The Company shall fail to pay within 3 Business Days of
when due any principal, interest or other payment required under the
terms of this Agreement or any of the other Transaction Documents; or
(b) The Company shall fail to observe or perform any covenant,
obligation, condition or agreement contained in this Agreement or the
other Transaction Documents and such failure shall continue for 15
Business Days after receipt of written notice of such failure from the
Investor; or
(c) Any material representation, warranty, certificate, or
other statement (financial or otherwise) made or furnished by or on
behalf of the Company to the Investor in or in connection with this
Agreement or any of the other Transaction Documents, or as an
inducement to the Investor to enter into this Agreement, shall be
false, incorrect, incomplete or misleading in any material respect when
made or furnished; or
(d) The Company shall (i) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian of itself
or of all or a substantial part of its property, (ii) be unable, or
admit in writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of its or any
of its creditors, (iv) be dissolved or liquidated, (v) become insolvent
(as such term may be defined or interpreted under any applicable
statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or
its debts under
18
any bankruptcy, insolvency or other similar law now or hereafter in
effect or consent to any such relief or to the appointment of or taking
possession of its property by any official in an involuntary case or
other proceeding commenced against it, or (vii) take any action for the
purpose of affecting any of the foregoing; or
(e) Proceedings for the appointment of a receiver, trustee,
liquidator or custodian of the Company or of all or a substantial part
of the property thereof, or an involuntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to the
Company or the debts thereof under any bankruptcy, insolvency or other
similar law now or hereafter in effect shall be commenced and an order
for relief entered or such proceeding shall not be dismissed or
discharged within 60 days of commencement; or
(f) Any Transaction Document or any material term thereof
shall cease to be, or be asserted by the Company not to be, a legal,
valid and binding obligation of the Company enforceable in accordance
with its terms; other than as a result of the Investor's own actions or
inactions; or
(g) An "Event of Default" as defined under the senior debt
agreements shall exist, and any applicable grace or cure period with
respect thereto shall have expired.
7.2. REMEDIES. Upon the occurrence or existence of any Event of Default
(other than an Event of Default referred to in Section (d) or (e)) and at any
time thereafter during the continuance of such Event of Default, the Investor
may by written notice to the Company declare all outstanding Obligations payable
by the Company hereunder to be immediately due and payable without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived, anything contained herein or in the Notes to the contrary
notwithstanding. Upon the occurrence or existence of any Event of Default
referred to in Section (d) or (e), immediately and without notice all
outstanding Obligations payable by the Company hereunder shall automatically
become immediately due and payable, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived, anything
contained herein or in the Notes to the contrary notwithstanding. In addition to
the foregoing remedies, upon the occurrence and during the existence of any
Event of Default, the Investor may exercise any right, power or remedy permitted
to it by law, either by suit in equity or by action at law, or both.
ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF INVESTOR
8.1. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor
represents and warrants to the Company as of the date hereof as follows:
(a) Purchase for its Own Account. The Investor is purchasing
the Notes for its own account, without a view to the distribution
thereof in violation of the Securities Act, all without prejudice,
however, to the right of such Investor at any time, in accordance with
this Agreement or the Transaction Documents, lawfully to sell or
otherwise to dispose of all or any part of the Notes held by it.
19
(b) Accredited Investor. The Investor is an "accredited
investor" within the meaning of Regulation D under the Securities Act.
(c) Authority, Etc. The Investor has the power and authority
to enter into and perform this Agreement, the Subordination Agreements
and the other Transaction Documents to which it is a party, and the
execution and performance hereof and thereof have been duly authorized
by all proper and necessary action.
(d) Securities Act Compliance. The Investor understands that
the Company has not registered the Notes under the Securities Act, and
the Investor agrees that the Notes may not be sold or transferred or
offered for sale or transfer by it without registration under the
Securities Act or the availability or an exemption therefrom, all as
more fully provided in Article 10 hereof.
ARTICLE 9 SUBORDINATION OF NOTES
9.1. NOTES AND LIENS SUBORDINATE TO SENIOR INDEBTEDNESS. The Company,
and the Investor by its acceptance of the Notes, covenant and agree that the
Obligations are hereby expressly made subordinate and subject in right of
payment to the prior payment of all Senior Indebtedness, and the Investor's
Liens in the ProSys Shares (as defined in the Pledge Agreement executed by the
Company) are hereby expressly made subordinated and subject in right to any
Liens in favor of Senior Lenders. The Investor agrees to execute and deliver to
any creditor of any Senior Indebtedness a subordination agreement in the form of
Exhibit A attached hereto.
9.2. LIENS SUBORDINATE TO SENIOR LENDERS' LIENS. The Investor, by its
acceptance of the Liens in New ProSys's assets and in Old ProSys's assets, and
in the ProSys Shares (as defined in the Pledge Agreement executed by New
ProSys), covenants and agrees that the Investor's Liens in New ProSys's assets
and in Old ProSys's assets and in the ProSys Shares (as defined in the Pledge
Agreement executed by New ProSys) are hereby expressly made subordinated and
subject in right to any Liens in favor of Senior Lenders. The Investor agrees to
execute and deliver to any Senior Lender having a Lien in New ProSys's assets
and/or Old ProSys's assets and/or the ProSys Shares (as defined in the Pledge
Agreement executed by New ProSys), a subordination agreement in the form of
Exhibit B attached hereto.
ARTICLE 10 TRANSFER OF SECURITIES
10.1. RESTRICTION ON TRANSFER. The Restricted Securities shall not be
transferable except a holder of Restricted Securities may transfer such
Restricted Securities upon the conditions specified in this Article 10, which
conditions are intended to insure compliance with the provisions of the
Securities Act in respect of the transfer thereof.
10.2. RESTRICTIVE LEGENDS. Each certificate for the Restricted
Securities, and each certificate for any such securities issued to subsequent
transferees of any such certificate, shall (unless otherwise permitted by the
provisions of Section 10.3 hereof) be stamped or otherwise imprinted with a
legend in substantially the following form:
20
------------------------------------------------------------ ---------------------------------------------------------
THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED NEITHER THIS CERTIFICATE NOR THE SHARES EVIDENCED BY
TO THE PRIOR PAYMENT IN FULL OF ALL SENIOR INDEBTEDNESS THIS CERTIFICATE HAVE BEEN REGISTERED UNDER THE
TO THE EXTENT PROVIDED IN THE SECURITIES PURCHASE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
AGREEMENT DATED OCTOBER 2, 2006, AMONG XXXX LAWS OF ANY STATE. NEITHER THIS CERTIFICATE NOR THE
MICROPRODUCTS INC., THE TEACHERS' RETIREMENT SYSTEM OF SHARES EVIDENCED BY THIS CERTIFICATE MAY BE SOLD,
ALABAMA AND THE EMPLOYEES' RETIREMENT SYSTEM OF ALABAMA TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE
(THE "
SECURITIES PURCHASE AGREEMENT"). THIS NOTE MAY OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM. IN
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN ADDITION, THE TRANSFER OF BOTH THIS CERTIFICATE AND
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THE SHARES EVIDENCED BY THIS CERTIFICATE IS SUBJECT
THEREFROM. IN ADDITION, THE TRANSFER OF THIS NOTE IS TO THE CONDITIONS SPECIFIED IN ARTICLE 10 OF THE
SUBJECT TO THE CONDITIONS SPECIFIED IN ARTICLE 10 OF THE
SECURITIES PURCHASE AGREEMENT DATED OCTOBER 2, 2006
SECURITIES PURCHASE AGREEMENT. NO TRANSFER OF THIS NOTE AMONG XXXX MICROPRODUCTS INC., THE TEACHERS'
SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE RETIREMENT SYSTEM OF ALABAMA AND THE EMPLOYEES'
BEEN FULFILLED. A COPY OF THE SECURITIES PURCHASE RETIREMENT SYSTEM OF ALABAMA (THE "SECURITIES
AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PURCHASE AGREEMENT"). NO TRANSFER OF THIS
PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER. THE HOLDER OF CERTIFICATE OR THE SECURITIES EVIDENCED BY THIS
THIS NOTE, BY ACCEPTANCE OF THIS NOTE, AGREES TO BE CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH
BOUND BY THE PROVISIONS OF THE SECURITIES PURCHASE CONDITIONS HAVE BEEN FULFILLED. A COPY OF THE
AGREEMENT.
SECURITIES PURCHASE AGREEMENT IS ON FILE AND MAY BE
INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE
ISSUER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE
OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE
PROVISIONS OF THE
SECURITIES PURCHASE AGREEMENT.
------------------------------------------------------------ ---------------------------------------------------------
10.3. NOTICE OF TRANSFER.
(a) Each holder shall, prior to any Transfer of any Restricted
Securities, give written notice to the Company of such holder's
intention to effect such Transfer and to comply in all other respects
with the provisions of this Section 10.3 in making such proposed
Transfer. Each such notice shall describe the manner and circumstances
of the proposed Transfer. Upon request by the Company, the holder
delivering such notice shall deliver a written opinion, addressed to
the Company, of counsel for such holder, stating that in the opinion of
such counsel (which opinion shall be reasonably satisfactory to the
Company) such proposed Transfer does not involve a transaction
requiring registration of such Restricted Securities under the
Securities Act. Such holder shall thereupon be entitled to transfer the
Restricted Securities in accordance with the terms of the notice
delivered to the Company, if the Company does not reasonably object to
such Transfer and request such opinion, within five days after delivery
of such notice or, if the Company does request such opinion, upon its
receipt thereof. Each certificate or other instrument evidencing the
securities issued upon the Transfer of any Restricted Securities (and
each certificate or other instrument evidencing any untransferred
balance of such Restricted Securities) shall bear the legend set forth
in Section 10.2 above unless (i) such opinion of counsel is to the
effect that registration of any future Transfer is not required
21
by the applicable provisions of the Securities Act or (ii) the Company
shall have waived the requirement of such legend.
(b) Notwithstanding the foregoing provisions of this Section
10.3, the restrictions imposed by this Section 10.3 upon the
transferability of any Restricted Securities shall cease and terminate
when (i) any such Restricted Securities are sold or otherwise disposed
of pursuant to an effective registration statement under the Securities
Act or as otherwise contemplated by paragraph (a) above in a manner
that does not require that the Restricted Securities so transferred
continue to bear the legend set forth in Section 10.2 above or (ii) the
holder of such Restricted Securities has met the requirements for
Transfer of such Restricted Securities under Rule 144(k). Whenever the
restrictions imposed by this Section shall terminate, upon the written
request of the holder of any Restricted Securities as to which such
restrictions have terminated, as promptly as practicable but in any
event within ten (10) Business Days of receipt of such request, the
Company shall, without charge, issue, register and deliver a new
instrument not bearing the restrictive legend set forth in Section 10.3
above and not containing any other reference to the restrictions
imposed by this Section.
(c) Reference is made to Section 10 of the Warrant for
shelf-registration provisions.
ARTICLE 11 MISCELLANEOUS
11.1. NOTICES. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon the
Company or the Investor under this Agreement or the other Transaction Documents
shall be in writing and faxed, mailed or delivered, if to the Company or the
Investor, at its respective facsimile number or address set forth below. All
such notices and communications shall be effective (a) when sent by Federal
Express or other overnight service of recognized standing, on the Business Day
following the deposit with such service; (b) when mailed via certified mail
return receipt requested postage prepaid and addressed as aforesaid through the
United States Postal Service, upon receipt; (c) when delivered by hand, upon
delivery; and (d) when sent by facsimile, upon confirmation of receipt.
The Company: Xxxx Microproducts Inc.
0000 Xxxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxx Xxxx, President or
Xxxxx X. Xxxxxx, Chief Financial Officer
Facsimile: (000) 000-0000
22
The Investor The Teachers' Retirement System of Alabama, and
The Employees' Retirement System of Alabama
X.X. Xxx 000000
000 Xxxxx Xxxxx Xxxxxx, Xxx. 000
Xxxxxxxxxx, XX 00000
Attention: Xx. Xxxxx X. Xxxxxxx, CEO
Facsimile: (000) 000-0000
11.2. EXPENSES. The Company shall pay within 30 Business Days of a
written demand therefor all reasonable fees and expenses, including reasonable
attorneys' fees and expenses, incurred by the Investor in the enforcement or
attempted enforcement of any of the Obligations, including, without limitation,
all such fees and expenses incurred in connection with any "workout" or
restructuring affecting the Transaction Documents or the Obligations or any
bankruptcy or similar proceeding involving the Company.
11.3. INDEMNIFICATION. To the fullest extent permitted by law, the
Company agrees to protect, indemnify, defend and hold harmless the Investor and
its respective officers, employees, agents and any affiliates thereof
("Indemnitees") from and against any liabilities, losses, damages or expenses of
any kind or nature and from any suits, claims or demands (including in respect
of or for reasonable attorney's fees and other expenses) arising on account of
or in connection with any matter or thing or action or failure to act by
Indemnitees, or any of them, arising out of or relating to the Transaction
Documents, including without limitation any use by the Company of any proceeds
of the Notes, except to the extent such liability arises from the willful
misconduct or gross negligence of such Indemnitees. Upon receiving knowledge of
any suit, claim or demand asserted by a third party that the Investor believes
is covered by this indemnity, the Investor shall give the Company notice of the
matter and an opportunity to defend it, at the Company's sole cost and expense.
Any failure or delay of the Investor to notify the Company of any such suit,
claim or demand shall not relieve the Company of its obligations under this
Section 11.3 but shall reduce such obligations to the extent of any increase in
those obligations caused solely by an such unreasonable failure or delay. The
obligations of the Company under this Section 11.3 shall survive the payment and
performance of the Obligations.
11.4. WAIVERS; AMENDMENTS. Any term, covenant, agreement or condition
of this Agreement or any other Transaction Document may be amended or waived if
such amendment or waiver is in writing and is signed by the Company and the
Investor. No failure or delay by the Investor in exercising any right hereunder
shall operate as a waiver thereof or of any other right nor shall any single or
partial exercise of any such right preclude any other further exercise thereof
or of any other right. Unless otherwise specified in such waiver or consent, a
waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given.
11.5. SUCCESSORS AND ASSIGNS. This Agreement and the other Transaction
Documents shall be binding upon and inure to the benefit of the Company, the
Investor, all future holders of the Notes and their respective successors and
permitted assigns, except that the Company may not assign or transfer any of its
rights or obligations under any Transaction Document (other than the
Subordination Agreements) without the prior written consent of the Investor, and
the Investor
23
may only assign or transfer in accordance with Article 10. All references in
this Agreement to any Person shall be deemed to include all successors and
assigns of such Person.
11.6. NO THIRD PARTY RIGHTS. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than the parties hereto and their permitted successors and assigns
hereunder, any benefit or legal or equitable right, remedy or claim under or by
virtue of this Agreement or under or by virtue of any provision herein.
11.7. PARTIAL INVALIDITY. If at any time any provision of this
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law or any jurisdiction, neither the legality, validity or enforceability of
the remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
11.8. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
(THE SIGNATURE PAGE FOLLOWS)
24
IN WITNESS WHEREOF, the Company and the Investor have caused this
Securities Purchase Agreement to be executed as of the day and year first above
written.
THE COMPANY: XXXX MICROPRODUCTS INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Financial Officer
THE INVESTOR: THE TEACHERS' RETIREMENT SYSTEM
OF ALABAMA
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chief Executive Officer
THE EMPLOYEES' RETIREMENT
SYSTEM OF ALABAMA
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chief Executive Officer
25
