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EXHIBIT 3
CONVERTIBLE PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
dated as of December 20, 1996 between Alcohol Sensors International, Ltd., a New
York corporation (the "Company"), and American International Insurance Company,
a New York corporation (the "Purchaser").
In consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, and
unless the context clearly requires a different meaning, the following terms
have the meanings indicated:
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" means this Agreement, together with all Annexes
and Schedules hereto, as the same may be amended, supplemented or modified in
accordance with the terms hereof from time to time.
"Balance Sheet" means the consolidated balance sheet of the
Company as of June 30, 1996, which is contained in the Quarterly Report.
"Business Day" means any day other than Saturday and Sunday
and any other day on which banking institutions in the State of New York are
required or authorized by law to close.
"Certificate of Amendment" means the Certificate of Amendment
to the Certificate of Incorporation of the Company, which, among other things,
sets forth the number, designation, relative rights, preferences and limitations
of the Preferred Stock as fixed by the Board of Directors of the Company, and
which is in the form set forth in Annex I hereto.
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"Certificates" means, collectively, the certificates
evidencing the Preferred Shares and the Warrant Certificate.
"Closing" has the meaning provided in Section 2.1(b).
"Closing Date" has the meaning provided in Section 2.1(c).
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act or the
Exchange Act.
"Common Shares" means the shares of Common Stock issuable upon
conversion of the Preferred Shares or the exercise of the Warrants, as the case
may be.
"Common Stock" means the common stock, par value $0.001 per
share, of the Company.
"Confidential Memorandum" means the Confidential Private
Placement Memorandum dated October 22, 1996 relating to the proposed private
placement of certain preferred stock of the Company provided by the Company to
the Purchaser.
"Environmental Law" means any federal, state, local or foreign
law (including common law), statute, code, ordinance, rule, regulation or other
requirement relating to the environment, natural resources, or public or
employee health and safety and includes, but is not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the
Clean Air Act, 33 U.S.C. Section 2601 et seq., the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq., the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. Section 136 et seq., the Oil Pollution Act of 1990, 33
U.S.C. Section 2701 et seq. and the Occupational Safety and Health Act, 29
U.S.C. Section 651 et seq., as such laws have been and may from time to time be
further amended or supplemented, and the regulations promulgated pursuant
thereto, and all analogous state or local statutes and any applicable transfer
statutes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
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"Indemnifiable Costs and Expenses", "Indemnifying Party" and
"Indemnified Person" have the meanings provided in Section 7.1.
"Liens" means any and all security interests, liens, claims,
encumbrances, pledges, options, Taxes and charges of any kind or nature.
"Material Adverse Effect" means, with respect to the Company,
any action, event or occurrence which has or is reasonably likely to have a
material adverse effect on the business, assets, condition (financial or
otherwise), results of operations or prospects of the Company and its
Subsidiaries, taken as a whole.
"Person" means any individual, company, corporation,
partnership, limited liability company, trust, division, governmental,
quasi-governmental or regulatory entity or authority or other entity.
"Preferred Shares" means the 833,333 shares of Preferred Stock
to be sold and purchased pursuant to this Agreement.
"Preferred Stock" means the Company's Series A Cumulative
Non-redeemable Convertible Preferred Stock, par value $0.001 per share, with the
terms set forth in the Certificate of Amendment.
"Quarterly Report" means the Company's Quarterly Report on
Form 10-Q filed with the Commission for the quarterly period ended June 30,
1996.
"Registration Rights Agreement" means the Registration Rights
Agreement between the Company and the Purchaser to be executed on the Closing
Date in the form of Annex II hereto.
"SEC Documents" has the meaning provided in Section 3.8.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"Shareholders Agreement" means the Shareholders Agreement
among the Purchaser, the Company, Xxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxx, Xxxx X.
Xxxxxx, Xxxxxxx X. Xxxxxxxxx and Xxxxxx Xxxxxx to be executed on the Closing
Date in the form of Annex III hereto.
"Stock Option Plan" has the meaning provided in Section 3.2.
"Subsidiaries" means Alcohol Sensors Europe, plc, a British
company.
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"Tax Authority" and "Taxes" have the respective meanings
provided in Section 3.12.
"Warrant Certificate" means the Warrant Certificate relating
to the Warrants to be executed and delivered by the Company and accepted by the
Purchaser on the Closing Date in the form of Annex IV hereto.
"Warrants" means the 833,333 warrants of the Company with the
terms set forth in the Warrant Certificate to be sold and purchased pursuant to
this Agreement.
The foregoing definitions shall be equally applicable to both the singular and
plural forms of the defined terms. The use of the word "including" herein shall
be interpreted to mean "including, without limitation," unless the context
clearly requires another interpretation.
ARTICLE II
PURCHASE OF PREFERRED SHARES AND WARRANTS
Section 2.1. Purchase of Preferred Shares and Warrants; the
Closing.
(a) Subject to the terms and conditions herein set forth, the
Company agrees that it will sell to the Purchaser, and the Purchaser agrees that
it will purchase from the Company, on the Closing Date the Preferred Shares and
the Warrants for an aggregate purchase price of $2,500,000.
(b) The sale and purchase of the Preferred Shares and Warrants
by the parties hereto will take place at a closing (the "Closing") at the
offices of Kramer, Levin, Naftalis & Xxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx or at such other location as shall be agreed to by the Company and the
Purchaser not later than three Business Days after the date on which the
conditions set forth in Article VI are satisfied or such other date as the
Company and the Purchaser may mutually agree.
(c) The Company shall notify the Purchaser of the date and
time of the Closing (the "Closing Date"), which notice shall be given no later
than three Business Days prior to the Closing Date. Such notice shall specify
the account of the Company to which the purchase price is to be wire
transferred.
(d) Delivery of the Preferred Shares and Warrants to be
purchased by the Purchaser pursuant to this Agreement shall be made at the
Closing by the Company delivering to the Purchaser, against payment of the
purchase price therefor, Certificates for the Preferred Shares and Warrants, in
such amounts and registered in the names (which shall be the Purchaser or such
other Person as shall be an Affiliate of the Purchaser or a nominee of the
Purchaser or such
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Affiliate holding for the benefit of the Purchaser or Affiliate) as the
Purchaser shall have designated in writing to the Company at least two Business
Days prior to the Closing Date. The Purchaser acknowledges and agrees that each
Certificate shall bear a legend to reflect the applicability of Federal and
state securities laws limitations on the transfer of the Preferred Shares and
Warrants as follows (or a substantively equivalent legend):
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE ACT
AND ANY APPLICABLE STATE SECURITIES LAW OR UNLESS AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE."
(e) Payment of the purchase price for the Preferred Shares and
Warrants shall be made by the Purchaser at the Closing Date by wire transfer in
immediately available funds to the designated account of the Company.
Section 2.2. Closing Covenant. The parties hereto agree to act
in good faith in taking any and all actions as shall reasonably be necessary to
facilitate the Closing of the purchase and sale of the Preferred Shares and the
Warrants and the other transactions contemplated by this Agreement, including
the satisfaction of the respective closing conditions of the parties set forth
herein.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
The Company represents and warrants to, and covenants with,
the Purchaser as of the date of this Agreement and as of the Closing Date that:
Section 3.1. Corporate Organization, etc. Each of the Company
and each Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all necessary corporate power and authority to conduct its business as currently
conducted and to own or lease the properties and assets it now owns or holds
under lease. Each of the Company and each Subsidiary is duly qualified or
licensed to do business and is in good standing as a foreign corporation in
every jurisdiction in which the conduct of its business or the ownership or
leasing of its properties requires it to be so qualified or licensed, except
where the failure to be so qualified or licensed or in good standing would not
individually, or in the aggregate, have a Material Adverse Effect on the
Company. The Company has heretofore delivered to the Purchaser true, complete
and correct copies of the Certificate of Incorporation and by-laws of the
Company and each Subsidiary, each as currently in effect, and no action has been
taken or authorized to amend or in contemplation of the amendment of such
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documents (other than in connection with the Certificate of Amendment) or to
liquidate or dissolve the Company or any Subsidiary.
Section 3.2. Capitalization. As of the date hereof and
immediately prior to the Closing, (i) the authorized capital stock of the
Company consists of 28,000,000 shares of preferred stock, which includes
3,000,000 shares of Preferred Stock, and 25,000,000 shares of Common Stock; (ii)
no shares of preferred stock (including Preferred Stock) of the Company are
outstanding; (iii) 600,000 shares of Common Stock are reserved for issuance upon
the exercise of options issued pursuant to the Company's 1996 Stock Option Plan
(the "Stock Option Plan") and 3,744,225 shares of Common Stock are reserved for
issuance upon the exercise of warrants and options; (iv) 833,333 shares of
Common Stock are reserved for issuance upon the conversion of the Preferred
Stock and 833,333 shares of Common Stock are reserved for issuance upon the
exercise of the Warrants; (v) 8,708,846 shares of Common Stock are outstanding;
and (vi) 55,672 shares of Common Stock are held in treasury. All of the
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and non-assessable and were issued in compliance with all
applicable Federal and state laws concerning the issuance of securities. The
rights, preferences, privileges and restrictions of the Preferred Stock and the
Warrants are as set forth in the Certificate of Amendment and Warrant
Certificate, respectively. Except for the Stock Option Plan and the transactions
contemplated hereby and except as set forth in Schedule 3.2 hereto, there are no
outstanding options, warrants, rights (including registration, conversion or
preemptive rights and rights of first refusal), proxy or shareholders agreements
or other agreements or arrangements of the Company or any Subsidiary granted to
or with any Person to purchase or acquire or otherwise relating to any
securities of the Company or any Subsidiary or any securities convertible or
exchangeable into such securities. Without limiting the generality of the
foregoing and except as provided in the Registration Rights Agreement, neither
the Company nor any Subsidiary has granted or agreed to grant any registration
rights, including piggyback rights, to any Person.
Section 3.3 Subsidiaries. Except as set forth in Schedule 3.3
hereto, (i) the Company does not have, and is not committed to purchase or
acquire, any equity interest or equivalent interest (direct or indirect) in any
Person other than the Subsidiaries, (ii) all outstanding shares of capital stock
of each such Subsidiary are held solely by the Company and have been duly
authorized and validly issued and are fully paid and non-assessable and (iii)
the Company owns all of the issued and outstanding capital stock of each of the
Subsidiaries and has good and marketable title to all such shares of capital
stock free and clear of any and all Liens.
Section 3.4. Execution and Delivery, etc. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
the Registration Rights Agreement, the Warrant Certificate and the Shareholders
Agreement, to consummate the transactions contemplated hereby and thereby,
including the issuance of the Preferred Shares, the Warrants and, upon
conversion of the Preferred Shares or exercise of the Warrants, the Common
Shares, and to perform its obligations hereunder, thereunder and under the
Certificate of
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Amendment. The execution and delivery by the Company of this Agreement, the
Registration Rights Agreement, the Warrant Certificate and the Shareholders
Agreement and the performance of its obligations hereunder, thereunder and under
the Certificate of Amendment, including the issuance of the Preferred Shares,
the Warrants and the Common Shares upon conversion of the Preferred Shares or
exercise of the Warrants, have been duly authorized by all necessary corporate
and other action, and no further authorization on the part of the Company is
necessary to authorize such execution, delivery and performance. This Agreement
has been, and the Registration Rights Agreement, the Warrant Certificate and the
Shareholders Agreement when executed and delivered by the Company will be, duly
executed and delivered by the Company. This Agreement constitutes, and the
Registration Rights Agreement, the Warrant Certificate and the Shareholders
Agreement, when so executed and delivered, will constitute, legal, valid and
binding agreements of the Company, enforceable against the Company in accordance
with their respective terms, except as enforceability may be subject to the
application of general equitable principles and to bankruptcy, insolvency,
moratorium or other similar laws affecting creditors' rights generally.
Section 3.5. Duly Authorized Shares, etc. The Preferred Shares
and the Warrants have been duly authorized and, upon issuance at the Closing,
will be validly issued, fully paid and non-assessable, and free and clear of any
and all Liens, and the issuance of such Preferred Shares and Warrants are not
and will not be subject to any preemptive or similar right of any other
stockholder of the Company. The Common Shares have been duly authorized and
reserved for issuance upon conversion of the Preferred Shares or exercise of the
Warrants, as applicable, and, upon issuance in accordance with the terms of the
Certificate of Amendment or the Warrant Certificate, as applicable, will be
validly issued, fully paid and non-assessable, and free and clear of any and all
Liens, and the issuance of such Common Shares is not and will not be subject to
any preemptive or similar right of any other stockholder of the Company.
Section 3.6. Consents and Approvals of Governmental
Authorities. Except for (i) the filing of the Certificate of Amendment with the
Secretary of State of New York and (ii) certain required filings under New York
State "blue sky" or securities laws, which filings shall be made on a timely
basis by the Company, no consent, approval or authorization of, or declaration,
filing or registration with, any governmental or regulatory authority is
required in connection with the execution and delivery by the Company of this
Agreement, the Registration Rights Agreement, the Warrant Certificate and the
Shareholders Agreement, the consummation of the transactions contemplated hereby
or thereby, including the issuance of the Preferred Shares, the Warrants or the
Common Shares upon the conversion of the Preferred Shares or the exercise of the
Warrants, and the performance by the Company of its obligations hereunder,
thereunder or under the Certificate of Amendment.
Section 3.7. No Violation. The execution and delivery by the
Company of this Agreement, the Registration Rights Agreement, the Warrant
Certificate and the Shareholders Agreement, the consummation of the transactions
contemplated hereby and thereby, including the
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issuance of the Preferred Shares, the Warrants and the Common Shares upon the
conversion of the Preferred Shares or the exercise of the Warrants, and the
performance by the Company of its obligations hereunder, thereunder and under
the Certificate of Amendment do not and will not (with the giving of notice or
the passage of time or both) (a) conflict with or violate or result in a breach
of or constitute a default under, or result in any right of termination by any
other Person or the creation of any Lien upon any properties or assets of the
Company or any Subsidiary pursuant to: (i) the Certificate of Incorporation or
by-laws of the Company or any Subsidiary or (ii) any material note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, lease, contract,
agreement or other instrument to which the Company or any Subsidiary is a party
or by which any of their properties are bound; (b) violate any applicable law,
rule, regulation, judgment, injunction, order or decree binding upon the Company
or any of the Subsidiaries or to which any of their properties is subject; (c)
result in the loss or impairment of any material approval, license, franchise,
permit, legal privilege or legal right enjoyed or possessed by the Company or
any of the Subsidiaries; or (d) otherwise result in the creation of any Lien.
Section 3.8. SEC Documents; Confidential Memorandum. From
November 9, 1995 through the date of this Agreement, the Company filed all
forms, reports and other documents required to be filed by it with the
Commission pursuant to the Exchange Act and the Securities Act, true, correct
and complete copies of which (other than preliminary materials and exhibits)
have been provided to the Purchaser by the Company. The Company shall timely
file with the Commission and promptly provide the Purchaser with a true, correct
and complete copy of any such forms, reports and other documents required to be
filed with the Commission on or prior to the Closing Date. All such forms,
reports and documents filed from November 9, 1995 through the Closing Date are
referred to herein as the "SEC Documents." Each of the SEC Documents (i) was or,
as to documents not yet filed at the date of this Agreement, will be prepared in
accordance with the requirements of the Securities Act or the Exchange Act, as
the case may be, in all material respects and (ii) did not, or as to documents
not yet filed at the date of this Agreement, will not, as of its date, 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 made
therein, in the light of the circumstances under which they were made, not
misleading. The Confidential Memorandum did not, as of the date thereof, and, as
of the Closing Date, will 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 made therein, in light of the circumstances under
which they were made, not misleading.
Section 3.9. Financial Statements, Projections, etc. The
consolidated financial statements of the Company and the Subsidiaries (including
any notes thereto) contained in the SEC Documents were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as indicated in the notes thereto or as
otherwise permitted by the Commission with respect to the omission of certain
note and other disclosures in interim financial statements) and each fairly
presents the consolidated financial position, results of operations and cash
flows of the Company and the Subsidiaries as at the
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respective dates indicated therein and for the respective periods indicated
therein (subject, in the case of unaudited statements, to normal and recurring
year-end adjustments which were not and are not expected, individually or in the
aggregate, to be material in amount). Neither the Company nor any Subsidiary has
any debts, obligations or liabilities of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, probable of assertion
or not, that are required to be disclosed in accordance with generally accepted
accounting principles other than those reflected or disclosed in the Balance
Sheet and the notes thereto and those incurred after the date of the Balance
Sheet in the ordinary course of business. The financial projections in relation
to the Company provided to the Purchaser prior to the date hereof were prepared
in good faith and on the basis of the assumptions set forth therein, which the
Company believes are reasonable.
Section 3.10. Absence of Certain Changes. Since December 31,
1995, except, as otherwise set forth in (i) the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995 and the Company's Quarterly
Reports on Form 10-Q for the respective quarterly periods ended March 31, 1996
and June 30, 1996 or (ii) Schedule 3.10 hereto, in each case as filed with the
Commission, each of the Company and each Subsidiary has conducted its business
in all material respects in the ordinary course consistent with past practices,
and without limiting the generality of the foregoing, there has not been:
(a) Any change, occurrence or circumstance in or
affecting the business, assets, liabilities, financial condition, operations or
prospects of the Company or any Subsidiary that has had or may reasonably be
expected to have a Material Adverse Effect on the Company;
(b) Any resignation or termination of any key
officers, employees or consultants of the Company or any of the Subsidiaries;
and the Company, to the best of its knowledge, does not know of the impending
resignation or termination of employment of any such officer, employee or
consultant;
(c) Any material change, except in the ordinary
course of business, in the contingent obligations of the Company or any of the
Subsidiaries by way of guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not
covered by insurance, that has had or may reasonably be expected to have a
Material Adverse Effect on the Company;
(e) Any waiver by the Company or any of the
Subsidiaries of a valuable right or of a material debt owed to any of them;
(f) Any direct or indirect loans or advances made by
the Company or any of the Subsidiaries to any shareholder, employee, consultant,
officer, director or Affiliate of the
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Company or any of the Subsidiaries, other than loans or advances made in the
ordinary course of business;
(g) Any material change in any compensation
arrangement or agreement with any employee, consultant, officer, director or
shareholder;
(h) Any declaration or payment of any dividend or
other distribution of the assets of the Company or any of the Subsidiaries or
any direct or indirect redemption, purchase, retirement or other acquisition of
any shares of its capital stock;
(i) Any debt, obligation or liability incurred,
assumed or guaranteed by the Company or any of the Subsidiaries, except those
for immaterial amounts or for current liabilities incurred in the ordinary
course of business;
(j) Any sale, assignment or transfer of any of the
assets or rights of the Company or any Subsidiary (other than the sale of their
respective inventory in the ordinary course of business), including patents,
trademarks, copyrights, trade secrets or other intangible assets or intellectual
property, or any mortgage or pledge of or Lien imposed upon any of the assets or
properties of the Company or any Subsidiary, except in the ordinary course of
business;
(k) Any change in or default under any material
agreement to which the Company or any of the Subsidiaries is a party or by which
any of them is bound that has had or may reasonably be expected to have a
Material Adverse Effect on the Company;
(l) Any purchase or other acquisition of any
operating business or a material amount of assets or the capital stock of any
other Person;
(m) Any agreement or understanding to do or enter
into any of the foregoing; or
(n) Any other event or condition of any character
that, either individually or cumulatively, has had or may reasonably be expected
to have a Material Adverse Effect on the Company.
Section 3.11. Compliance with Laws and Instruments. Each of
the Company and each of the Subsidiaries is, and their business has been
operated, in compliance with their respective organizational documents and all
applicable laws, rules, regulations, decrees, injunctions, judgments, orders,
rulings, awards, settlements and writs, except where the failure to comply
therewith would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
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Section 3.12. Taxes. "Taxes" shall mean all taxes, charges,
fees, Liens, duties or other assessments, however denominated, including any
interest or penalties that may become payable in respect thereof, imposed by the
United States government, any state, local or foreign government or any agency
or political subdivision of any such government (a "Tax Authority"), which taxes
shall include, without limiting the generality of the foregoing, all income
taxes, payroll and employee withholding taxes, unemployment insurance, social
security, sales and use taxes, excise taxes, capital taxes, franchise taxes,
gross receipt taxes, occupation taxes, real and personal property taxes, value
added taxes, stamp taxes, transfer taxes, workers' compensation taxes and other
obligations of the same or of a similar nature. All tax returns or reports
required to be filed by or on behalf of the Company or any Subsidiary have been
timely filed or requests for extensions have been timely filed and, to the best
knowledge of the Company, any such extension has been granted and has not
expired, and all such filed returns are complete and accurate. All Taxes due
from the Company or any Subsidiary for periods through the Closing Date have
been paid in full or an adequate provision has been made for any such Taxes on
the financial statements included in the Quarterly Report (in accordance with
generally accepted accounting principles). There is no audit, examination,
deficiency, or refund litigation pending or threatened, with respect to any
Taxes of the Company or any Subsidiary that could result in a determination that
would have a Material Adverse Effect on the Company. All Taxes, interest,
additions and penalties due with respect to completed and settled examinations
or concluded litigation relating to it have been paid in full or adequate
provision has been made for any such Taxes on the financial statements included
in the Quarterly Report (in accordance with generally accepted accounting
principles). The Company has not executed an extension or waiver of any statute
of limitations on the assessment or collection of any Tax that is currently in
effect. No rulings have been issued by or agreements entered into with any Tax
Authority with respect to the Company or any Subsidiary.
Section 3.13. ERISA and Employee Benefit Plans. Except as
listed in Schedule 3.13, neither of the Company nor any Subsidiary maintains,
sponsors, is required to make contributions to or otherwise has any liability,
direct, indirect, contingent or otherwise, with respect to any pension, profit
sharing, thrift or other retirement plan, employee stock ownership plan,
deferred compensation, stock ownership, stock purchase, performance share, bonus
or other incentive plan, severance plan, health or group insurance plan, welfare
plan, or other similar plan, agreement, policy, arrangement or understanding,
whether written or oral, whether or not such plan is intended to be qualified
under Section 401(a) of the Code, including any employee benefit plan within the
meaning of Section 3(3) of ERISA, which plan covers any employee or former
employee of the Company or any Subsidiary (collectively, the "Plans"). The
Company has delivered to the Purchaser true, correct and complete copies of (i)
any employment agreements and any procedures and policies (including summaries
of any procedures and policies that are unwritten) relating to the employment of
employees of the Company and each Subsidiary and the use of temporary employees
and independent contractors by the Company and each Subsidiary, (ii) each Plan
and all related trust agreements, insurance and other material contracts, and
summary plan descriptions and summaries of material modifications relating to
each Plan and any
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related material communications distributed to participants under the Plans and
(iii) the latest reports which have been filed (or are in fully completed form
for filing) with the Internal Revenue Service and the Department of Labor with
respect to each Plan. No Plan is subject to Title IV of ERISA. With respect to
each Plan, to the best knowledge of the Company, no party in interest or
disqualified person (as defined in Section 3(14) of ERISA and Section 4975 of
the Code, respectively) has at any time engaged in a transaction which could
subject the Company or any of the Subsidiaries, directly or indirectly, to a
Tax, penalty or liability for prohibited transactions imposed by ERISA or
Section 4975 of the Code. To the best knowledge of the Company, no fiduciary (as
defined in Section 3(21) of ERISA) with respect to any Plan has breached any of
the responsibilities or obligations imposed upon fiduciaries under Title I of
ERISA. Each Plan is and has been operated in compliance in all material respects
with its terms and all applicable reporting, disclosure and other requirements
of ERISA and the Code as they relate to such Plan, including where applicable
the group health plan continuation coverage requirements set forth in Part 6 of
Subtitle B of Title I of ERISA and Section 4980B of the Code, and by its terms
can be terminated at any time. As of the Closing Date, the Company and each
Subsidiary shall have made all required contributions under each Plan for all
periods through and including the Closing Date or adequate accruals therefor
will have been provided for by the Company or such Subsidiary. No Person will be
entitled to any severance benefits under the terms of any Plan solely by reason
of the transactions contemplated by this Agreement, the Registration Rights
Agreement, the Warrant Certificate or the Shareholders Agreement. There are no
actions, claims, lawsuits or arbitrations pending or, to the best knowledge of
the Company, threatened with respect to any Plan. No Plan provides for the
payment of retiree or post-termination medical, health, disability, life
insurance or other welfare benefits. Neither the Company nor any of the
Subsidiaries has or has ever had any ERISA Affiliate. For purposes of this
Agreement, "ERISA Affiliate" means any Person which would be treated as a single
employer with the Company or any Subsidiary under Section 414(b), (c), (m) or
(o) of the Code and the regulations promulgated thereunder or Title IV of ERISA.
Neither the Company nor any Subsidiary has incurred any liability to the Pension
Benefit Guaranty Corporation. Each Plan which is intended to be "qualified"
within the meaning of Section 401(a) of the Code (and the exempt trust
thereunder), has been determined by the Internal Revenue Service to satisfy the
qualification requirements of Sections 401(a) and 501(a) of the Code and every
Plan (and related trust) which is intended to comply with the terms and
requirements of applicable statutes does so comply in all material respects.
Each of the Company and each Subsidiary has never contributed to, or withdrawn
in a complete or partial withdrawal from, any multiemployer plan (within the
meaning of Subtitle E of Title IV of ERISA) or incurred contingent liability
under Section 4204 of ERISA. Neither the Company nor any Subsidiary has proposed
or agreed to any increase in benefits under any Plan (or the creation of new
benefits) or change in employee coverage which would increase the expense of
maintaining any such Plan. The consummation of the transactions contemplated by
this Agreement and the Registration Rights Agreement, the Warrant Certificate
and the Shareholders Agreement will not result in an increase in the amount of
compensation or benefits or accelerate the vesting or timing of payment of any
benefits or compensation payable in respect of any employee.
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Section 3.14. Contracts, etc. Neither the Company nor any of
the Subsidiaries, nor to the best knowledge of the Company any other party
thereto, is in default or breach (and there is no event which, with notice or
lapse of time or both, would constitute such a default or breach) under any
agreement, arrangement, bond, commitment, contract, franchise, indemnity,
indenture, instrument, lease, license or understanding, whether or not in
writing, to which it is a party or to which any of its assets are subject, in
each case that has had or may reasonably be expected to have a Material Adverse
Effect on the Company.
Section 3.15. Legal Proceedings, etc. (i) There is no legal,
administrative, arbitral or other investigation, claim, action or proceeding
pending or, to the best knowledge of the Company, threatened against the Company
or any of the Subsidiaries or any of their respective directors, officers or
employees or to which any of their properties are subject or against any Plan or
the trustee of any Plan which challenges the validity of this Agreement, the
Registration Rights Agreement, the Warrant Certificate, the Shareholders
Agreement, the Certificate of Amendment, the Preferred Stock, the Warrants or
any action taken or to be taken pursuant hereto or thereto, which seeks to
impose or confirm any limitation on the ability of the Purchaser effectively to
acquire, hold or exercise full rights of ownership of the Preferred Shares, the
Warrants or the Common Shares, or, except as disclosed on Schedule 3.15 hereto,
which in the aggregate with all other such investigations, claims, actions and
proceedings would have a Material Adverse Effect on the Company; (ii) neither
the Company nor any Subsidiary is a party or is subject to the provisions of any
order, writ, injunction, award, settlement, judgment or decree of any court,
board or other governmental agency or instrumentality or administrative agency
or any arbiter, which would, individually or in the aggregate, have a Material
Adverse Effect on the Company; and (iii) there is no action, suit, proceeding or
investigation by the Company or any Subsidiary currently pending or which the
Company or any Subsidiary intends to initiate.
Section 3.16. Brokerage. No placement agent, banker, broker or
finder has acted directly or indirectly for the Company in connection with this
Agreement or the transactions contemplated hereby, and no placement agent,
banker, broker or finder is entitled to any commission, brokerage or finder's
fee in respect thereof based in any way on agreements, arrangements or
understandings made by or on behalf of the Company.
Section 3.17. Agreements; Action. (a) Except as otherwise
disclosed in Schedule 3.17 hereto, there are no agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, injunctions,
awards, settlements, writs or decrees to which the Company or any Subsidiary is
a party or by which it is bound which may involve or contain (i) obligations
(contingent or otherwise) of, or payments to, the Company or any Subsidiary in
excess of $50,000 (other than obligations of, or payments to, the Company or any
Subsidiary arising from purchase or sale agreements entered into in the ordinary
course of business), (ii) the license of any patent, copyright, trade secret or
other proprietary right to or from the Company (other than licenses arising from
the purchase of "off the shelf" or other standard products), (iii) provisions
restricting or affecting the development, manufacture or distribution of the
Company's
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or any Subsidiary's products or services or (iv) indemnification by
the Company or any Subsidiary with respect to infringements of proprietary
rights (other than indemnification obligations arising from purchase or sale
agreements entered into in the ordinary course of business).
(b) Since December 31, 1995, neither the Company nor
any Subsidiary has incurred any indebtedness for money borrowed or any other
liabilities (other than with respect to obligations incurred in the ordinary
course of business) individually in excess of $50,000 or, in the case of
indebtedness and/or liabilities individually less than $50,000, in excess of
$250,000 in the aggregate.
(c) For the purposes of subsections (a) and (b)
above, all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same Person (including Persons
the Company has reason to believe are affiliated therewith) shall be aggregated
for the purpose of meeting the individual minimum dollar amounts of such
subsections.
(d) Neither the Company nor any Subsidiary has
engaged in the past three (3) months in any discussion (i) with any Person or
any representative of such Person regarding the consolidation or merger of the
Company or any Subsidiary with or into any such Person or another Person, (ii)
with any Person regarding the sale, conveyance or disposition of all or
substantially all of the assets of the Company or any Subsidiary, or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company or any Subsidiary is disposed of or
(iii) regarding any other form of acquisition, liquidation, dissolution or
winding up of the Company or any Subsidiary.
Section 3.18. Transactions with Related Persons. (a) Except as
otherwise disclosed in Schedule 3.18 hereto, there are no agreements,
understandings or proposed transactions of the Company or any Subsidiary with,
and no debts, obligations or liabilities of the Company or any Subsidiary owed
to, any of their respective officers, directors, shareholders, employees,
consultants or Affiliates or any Affiliate thereof other than (i) for payment of
salary for services rendered, (ii) reimbursement for reasonable expenses
incurred on behalf of the Company or any such Subsidiary and (iii) for other
standard employee benefits made generally available to all employees (including
stock option agreements outstanding under any stock option plan approved by the
Board of Directors of the Company or any such Subsidiary). None of the officers,
directors or shareholders of the Company or any Subsidiary, or any members of
their immediate families or any of their Affiliates, is indebted to, or has any
cause of action or legal claim against, the Company or any Subsidiary or, to the
best knowledge of the Company, has any direct or indirect ownership interest in
any Person with which the Company or any Subsidiary is affiliated or with which
the Company or any Subsidiary has a business relationship, or any Person which
competes with the Company or any Subsidiary, except that officers, directors
and/or shareholders of the Company or any Subsidiary may own stock in publicly
traded companies
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which may compete with the Company or any Subsidiary. No officer, director or
shareholder of the Company or any Subsidiary, or any member of their immediate
families or any of their Affiliates, is, directly or indirectly, interested in
any material contract with the Company or any Subsidiary. Except as otherwise
disclosed in Schedule 3.18, neither the Company nor any Subsidiary is a
guarantor, indemnitor or contributor of any indebtedness or liability of any
other Person.
Section 3.19. Title to Properties and Assets; Liens, etc. Each
of the Company and each Subsidiary has good and marketable title to its
properties and assets, and good title to its leasehold estates, in each case
subject to no Lien, other than (i) those identified on the Balance Sheet, (ii)
those resulting from taxes which have not yet become delinquent, (iii) minor
Liens which do not materially detract from the value of the property or
materially impair the operations of the Company or such Subsidiary and (iv)
those that have otherwise arisen in the ordinary course of business. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company and each Subsidiary are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. Schedule 3.19 hereto sets forth a true, complete and
correct list of all of the real property that is leased to the Company and each
Subsidiary. The Company and each Subsidiary enjoys peaceful and undisturbed
possession of all such real property leased to it. Neither the Company nor any
Subsidiary has ever owned or presently owns any real property. The Company has
never manufactured or produced, and does not presently manufacture or produce,
any of its products or goods; except as set forth on Schedule 3.19, such
products and goods have been and are presently manufactured and produced by
independent third Persons.
Section 3.20. Patents and Trademarks. Each of the Company and
each Subsidiary owns or possesses sufficient legal rights to all trademarks,
service marks, trade names, copyrights, trade secrets, patents, information,
other proprietary rights and processes necessary for its business as now
conducted and as proposed to be conducted, without any known infringement of the
rights of others. There are no outstanding options, licenses or agreements of
any kind relating to the foregoing, nor is the Company or any Subsidiary bound
by or a party to any options, licenses or agreements of any kind with respect to
the trademarks, service marks, trade names, copyrights, trade secrets, patents,
licenses, information and other proprietary rights and processes of any other
Person other than such licenses or agreements arising from the purchase of "off
the shelf" or standard products. Each of the Company and each Subsidiary has not
received any communications alleging that the Company or any Subsidiary has
violated or, by conducting its business as proposed, would violate any of the
trademarks, service marks, trade names, copyrights, trade secrets, patents or
other proprietary rights of any other Person. Each of the Company and each
Subsidiary is not aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree, injunction, award, settlement or
order of any court or administrative agency, that would interfere with his or
her duties to the Company or any
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Subsidiary or that would conflict with the Company's or any Subsidiary's
business as presently conducted and as proposed to be conducted.
Section 3.21. Employees. Each of the Company and each
Subsidiary has no collective bargaining agreements with any of its employees.
There is no labor union organizing activity pending or, to the Company's best
knowledge, threatened with respect to the Company or any Subsidiary. To the
Company's best knowledge, no employee of the Company or any Subsidiary, nor any
consultant with whom the Company or any Subsidiary has contracted, is in
violation of any term of any employment contract, proprietary information
agreement or any other agreement relating to the right of any such individual to
be employed by, or to contract with, the Company or such Subsidiary because of
the nature of the business to be conducted by the Company or such Subsidiary;
and, to the Company's best knowledge, the continued employment by the Company
and each Subsidiary of its present employees, and the performance of the
Company's and each Subsidiary's contracts with its independent contractors, will
not result in any such violation. The Company and the Subsidiaries have not
received any notice alleging that any such violation has occurred. Except as set
forth in Schedule 3.21 hereto, no employee or consultant of the Company or of
any Subsidiary has been granted the right to continued employment by the Company
or such Subsidiary or to any material compensation following termination of
employment with or by the Company or such Subsidiary.
Section 3.22. Permits. Each of the Company and each Subsidiary
has all franchises, permits, licenses, consents and approvals and any similar
authority, all of which are in full force and effect, necessary for the conduct
of its business as now being conducted by it, the lack of which would have a
Material Adverse Effect on the Company.
Section 3.23. Environmental Matters. As used herein, "Subject
Premises" means the real property now owned, operated, used or leased or
previously owned, operated, used or leased (but only through the date of
termination of such ownership, operation, use or lease) by, to or for the
Company or the Subsidiaries or any of their Affiliates. (i) To the best
knowledge of the Company, none of the Subject Premises has any condition or
conditions which would require notification or remediation under any
Environmental Law (collectively, "Environmental Defects"); (ii) except as set
forth on Schedule 3.23 hereto, to the best knowledge of the Company, there are
not now and never have been any underground tanks or above-ground tanks located
on the Subject Premises; (iii) neither the Company nor any of the Subsidiaries,
nor, to the Company's best knowledge, any other Person has at any time during
its possession of the Subject Premises disposed of any wastes, Hazardous Waste
(as defined below) or otherwise, other than in accordance with applicable
Environmental Laws and Environmental Permits (as defined below); (iv) neither
the Company nor any of the Subsidiaries has received any letter or other
communication, written or oral, from the Federal Environmental Protection Agency
or any other local, state or Federal regulatory agencies or any other Person
relating to the existence of Environmental Defects at the Subject Premises; (v)
to the best knowledge of the Company, there do not exist any judgments, orders,
directives, decrees or awards of any court, arbitrator or
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administrative or governmental agency or entity or any other Person concerning
the Company or any of the Subsidiaries or any of their agents' or contractors'
compliance with any Environmental Law or Environmental Permit (in the case of
agents and contractors, relating to the Company, any of the Subsidiaries or the
Subject Premises); (vi) no claims have been asserted or, to the best knowledge
of the Company, are threatened against the Company or any of the Subsidiaries
relating to any Environmental Defect or condition which with the passage of time
could become an Environmental Defect; (vii) to the best knowledge of the
Company, there do not exist any consent decrees, administrative orders,
settlement agreements or other settlement documents entered into with any
administrative or governmental agency or entity or any other Person concerning
compliance with any Environmental Law or Environmental Permit applicable to the
Company or any Subsidiary or any of the Subject Premises; (viii) the Subject
Premises and all operations conducted thereon by the Company or any Subsidiary
are and have at all times been conducted in compliance in all material respects
with all Environmental Laws and Environmental Permits; (ix) the Company and each
Subsidiary have obtained and currently maintain in full force and effect all
environmental permits, approvals, authorizations, licenses, variances,
registrations and permissions (collectively, "Environmental Permits") required
for the conduct of their respective businesses and operations; and (x) to the
best knowledge of the Company, there are no Hazardous Substances or Hazardous
Waste on, under or about the Subject Premises other than those customarily used
in or incident to the business of the Company or any Subsidiary, which in any
event are used or maintained in all material respects in accordance with all
applicable Environmental Laws and Environmental Permits. For purposes hereof,
"Hazardous Substances" or "Hazardous Waste" are defined as any pollutant,
contaminant, chemical or industrial or toxic substance or waste, petroleum
products, asbestos, urea formaldehyde, radon, polychlorinated biphenyls,
flammable explosives, nuclear radioactive fuel or waste or any other substance,
waste, material, substance, pollutant or contaminant that is defined as a
hazardous waste or substance under any applicable Environmental Law or that may
cause damage to human health or the environment, safety or real property and/or
any substance for which the generation, manufacture, storage, treatment or
release is prohibited or regulated under any Environmental Law.
Section 3.24. Offering Valid. Assuming the accuracy of the
representations and warranties of the Purchaser contained in Article IV hereof,
the offer, sale and issuance of the Preferred Shares, the Warrants and the
Common Shares upon conversion of the Preferred Shares or exercise of the
Warrants, as applicable, will be exempt from the registration requirements of
the Securities Act and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of the
Preferred Shares or Warrants to any Person or Persons or has taken or will take
any other action so as to bring the sale of such Preferred Shares, Warrants or
the Common Shares by the Company within the registration provisions of the
Securities Act.
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Section 3.25. Full Disclosure. This Agreement, the
Registration Rights Agreement, the Warrant Certificate and the Shareholders
Agreement and all other documents delivered by the Company to the Purchaser or
its attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby, do not contain any untrue statement
of a material fact nor, to the Company's best knowledge, omit to state a
material fact necessary in order to make the statements contained herein or
therein in light of the circumstances under which they were made not misleading.
To the Company's best knowledge, there are no facts which (individually or in
the aggregate) materially adversely affect the business, assets, liabilities,
financial condition, operations or prospects of the Company that have not been
set forth in this Agreement, the Registration Rights Agreement, the Warrant
Certificate or the Shareholders Agreement or in other documents delivered to the
Purchaser or its attorneys or agents in connection herewith.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants to the Company as of the
date of this Agreement and as of the Closing Date that:
Section 4.1. Organization, Existence and Authority of
Purchaser; Enforceability. The Purchaser is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation. The Purchaser has all necessary corporate power and authority to
execute and deliver this Agreement, the Registration Rights Agreement and the
Shareholders Agreement, to consummate the transactions contemplated hereby and
thereby and to perform its obligations hereunder and thereunder. The execution
and delivery by the Purchaser of this Agreement, the Registration Rights
Agreement and the Shareholders Agreement, and the performance of its obligations
hereunder and thereunder, have been duly authorized by all necessary corporate
and other action, and no further authorization on the part of the Purchaser is
necessary to authorize such execution, delivery and performance. This Agreement
has been, and the Registration Rights Agreement and the Shareholders Agreement
when executed and delivered by the Purchaser will be, duly executed and
delivered by the Purchaser. This Agreement constitutes, and the Registration
Rights Agreement, the Warrant Certificate and the Shareholders Agreement, when
so executed and delivered, will constitute, legal, valid and binding agreements
of the Purchaser, enforceable against the Purchaser in accordance with their
respective terms, except as enforceability may be subject to the application of
general equitable principles and to bankruptcy, insolvency, moratorium or other
similar laws affecting creditors' rights generally.
Section 4.2. No Consent or Violation. No consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority is required in connection with the execution and
delivery by the Purchaser of this Agreement, the Registration
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Rights Agreement, the Warrant Certificate and the Shareholders Agreement, the
consummation of the transactions contemplated hereby and thereby and the
performance by the Purchaser of its obligations hereunder and thereunder. The
execution and delivery by the Purchaser of this Agreement, the Registration
Rights Agreement, the Warrant Certificate and the Shareholders Agreement, the
consummation of the transactions contemplated hereby and thereby and the
performance by the Purchaser of its obligations hereunder and thereunder do not
and will not (with the giving of notice or the passage of time or both) (a)
conflict with or violate or result in a breach of or constitute a default under,
or result in any right of termination by any other Person or the creation of any
Lien upon any properties or assets of the Purchaser pursuant to: (i) the
organizational documents of the Purchaser or (ii) any material note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, lease, contract,
agreement or other instrument to which the Purchaser is a party or by which any
of its properties are bound or (b) violate any applicable law, rule, regulation,
judgment, injunction, order or decree binding upon the Purchaser or to which any
of its properties is subject.
Section 4.3. Purchase for Own Account. The Preferred Shares
and the Warrants to be acquired by the Purchaser pursuant to this Agreement will
be acquired for its own account for investment purposes and not with a view to
the resale or distribution of any part thereof.
Section 4.4 Restricted Securities. The Purchaser understands
that the Preferred Shares and the Warrants being acquired pursuant hereto are
characterized as "restricted securities" under the Federal and state securities
laws inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act and
applicable state securities laws only in certain limited circumstances. The
Purchaser is familiar with Rule 144 ("Rule 144") of the Commission, as presently
in effect, and understands the resale limitations imposed thereby and by the
Securities Act and applicable state securities laws, pursuant to which the
Preferred Shares and the Warrants (and the Common Shares issuable upon
conversion of the Preferred Shares or exercise of the Warrants) must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act and applicable state securities laws or is exempt from such
registration.
Section 4.5. Accredited Investor. The Purchaser is an
"accredited investor" within the meaning of Rule 501(a) of Regulation D,
promulgated under the Securities Act, and was not organized for the specific
purpose of acquiring the Preferred Shares and the Warrants.
Section 4.6. Investor Sophistication. The Purchaser, by reason
of its business and financial experience, has such knowledge, sophistication and
experience in business and financial matters as to be capable of evaluating the
merits and risks of the prospective investment and is able to bear the economic
risk of such investment.
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Section 4.7. Brokerage. No placement agent, banker, broker or
finder has acted directly or indirectly for the Purchaser in connection with
this Agreement or the transactions contemplated hereby, and no placement agent,
banker, broker or finder is entitled to any commission, brokerage or finder's
fee in respect thereof based in any way on agreements, arrangements or
understandings made by or on behalf of the Purchaser.
ARTICLE V
CERTAIN COVENANTS
Section 5.1. Use of Proceeds. The proceeds from the sale of
the Preferred Shares and Warrants will be used by the Company for its working
capital needs.
Section 5.2. Certain Actions. From the date hereof through the
Closing Date, the Company (i) shall not, and shall cause each Subsidiary not to,
take any action that would cause any of the representations or warranties of the
Company set forth herein to become untrue or misleading and (ii) shall not take
any action which if taken after the Closing Date would require adjustment of the
conversion price of the Preferred Shares, adjustment of the exercise price of
the Warrants or adjustment of the number of Common Shares issuable upon
conversion of the Preferred Shares pursuant to the Certificate of Amendment or
upon exercise of the Warrants pursuant to the Warrant Certificate.
ARTICLE VI
CLOSING CONDITIONS
CONDITIONS PRECEDENT TO CLOSING
Section 6.1. Conditions Precedent to Obligations of the
Purchaser. The obligation of the Purchaser to purchase the Preferred Shares and
Warrants hereunder is subject to the satisfaction of the following conditions on
or before the Closing Date:
(a) The representations and warranties made by the Company
herein and in the Registration Rights Agreement, the Warrant Certificate and the
Shareholders Agreement shall be true and correct on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date.
(b) The Company shall have performed and complied in all
material respects with all covenants, agreements and conditions set forth or
contemplated herein and in the Registration Rights Agreement, the Warrant
Certificate and the Shareholders Agreement required to be performed or complied
with by it on or prior to the Closing Date.
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(c) The Company shall have filed the Certificate of Amendment
with the Secretary of State of New York and the Certificate of Amendment shall
be in full force and effect.
(d) The Company shall have executed and delivered the
Registration Rights Agreement, the Warrant Certificate and the Shareholders
Agreement.
(e) The purchase of and payment for the Preferred Shares and
Warrants hereunder shall not (i) be prohibited by any applicable law, rule or
regulation, (ii) subject the Purchaser to any penalty or other onerous condition
pursuant to any applicable law, rule or regulation or (iii) be prevented,
prohibited or materially restricted by any judgment, injunction (whether
temporary or permanent), order or decree at the Closing Date.
(f) All authorizations, consents, approvals, permits and
licenses and filings with, by or in respect of any federal, state, local or
foreign governmental authority, agency, court or other body required to be
taken, given or obtained that are necessary in connection with the transactions
contemplated herein and in the other documents related hereto, shall have been
taken, given or obtained, be in full force and effect and not be subject to any
waiting periods or any pending proceedings or appeals, administrative, judicial
or otherwise.
(g) Since the date of this Agreement, there shall not have
occurred any change, occurrence or circumstance in or affecting the business,
assets, liabilities, financial condition, operations or prospects of the Company
or any Subsidiary that has had or may reasonably be expected to have a Material
Adverse Effect on the Company.
(h) At least one vacancy shall exist on the Board of Directors
of the Company to be filled on the Closing Date by the Purchaser pursuant to the
Shareholders Agreement.
(i) The Closing Date shall not be later than 5:00 p.m., New
York time, on December 20, 1996, or such later time as the Purchaser may agree
to.
(j) On or before the Closing Date, the Purchaser shall have
received all of the following from the Company in form and substance reasonably
satisfactory to the Purchaser:
(i) Certificates representing the Preferred Shares and the
Warrant Certificate issued to the Purchaser in accordance with Section
2.1;
(ii) Certificate of the Secretary of the Company dated as of
the Closing Date certifying as to (A) the Certificate of Incorporation
of the Company, recently certified by the Secretary of State of New
York, as duly filed and currently in full force and effect without
further amendment, other than as amended by the Certificate of
Amendment; (B) the by-laws of the Company as currently in full force
and effect; (C) the resolutions, in form and substance reasonably
satisfactory to the Purchaser, of the shareholders and the
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Board of Directors of the Company duly authorizing the execution,
delivery and performance of this Agreement, the Registration Rights
Agreement, the Warrant Certificate, the Shareholders Agreement and any
other documents, instruments or agreements executed in connection
herewith or therewith to which it is a party and the absence of other
resolutions relating thereto; (D) the absence of proceedings for the
merger, consolidation, sale of assets, dissolution, liquidation or
similar proceedings with respect to the Company; and (E) the incumbency
and signature of the individuals authorized to execute and deliver
documents on the Company's behalf;
(iii) Certificate of the Secretary of each of the Subsidiaries
dated as of the Closing Date certifying as to (A) the Certificate of
Incorporation of such Person, recently certified by the appropriate
governmental authority of the jurisdiction in which such Person is
organized, as duly filed and currently in full force and effect without
further amendment; (B) the by-laws of such Person as currently in full
force and effect; (C) the absence of proceedings for the merger,
consolidation, sale of assets, dissolution, liquidation or similar
proceedings with respect to such Person; and (D) the incumbency and
signature of the individuals authorized to execute and deliver
documents on such Person's behalf;
(iv) Certificate executed by an officer of the Company dated
as of the Closing Date, certifying that the representations and
warranties of the Company contained in this Agreement, the Registration
Rights Agreement, the Warrant Certificate and the Shareholders
Agreement are true and correct as of the Closing Date with the same
effect as though such representations and warranties had been made on
and as of such date;
(v) An opinion addressed to the Purchaser and dated as of the
Closing Date of Xxxxxx & Xxxx, special counsel to the Company,
substantially in the form of Annex V hereto; and
(vi) Such additional documentation as the Purchaser may
reasonably request.
Section 6.2. Conditions Precedent to Obligations of the
Company. The obligations of the Company to issue and sell the Preferred Shares
and Warrants pursuant to this Agreement are subject to the satisfaction of the
following conditions on or before the Closing Date:
(a) The representations and warranties made by the Purchaser
herein and in the Registration Rights Agreement and the Shareholders Agreement
shall be true and correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date.
(b) The Purchaser shall have performed and complied in all
material respects with all covenants, agreements and conditions set forth or
contemplated herein and in the Registration
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Rights Agreement and the Shareholders Agreement required to be performed or
complied with by it on or prior to the Closing Date.
(c) The sale of the Preferred Shares and Warrants by the
Company hereunder shall not (i) be prohibited by any applicable law, rule or
regulation or (ii) be prevented, prohibited or materially restricted by any
judgment, injunction (whether temporary or permanent), order or decree at the
Closing Date.
(d) The Purchaser shall have delivered to the Company the
funds in connection with the sale of the Preferred Shares and the Warrants in
accordance with Section 2.1.
(e) The Purchaser shall have executed and delivered the
Registration Rights Agreement, the Warrant Certificate and the Shareholders
Agreement.
(f) All authorizations, consents, approvals, permits and
licenses and filings with, by or in respect of any federal, state, local or
foreign governmental authority, agency, court or other body required to be
taken, given or obtained that are necessary in connection with the transactions
contemplated herein and in the other documents related hereto, shall have been
taken, given or obtained, be in full force and effect and not be subject to any
waiting periods or any pending proceedings or appeals, administrative, judicial
or otherwise.
(g) The Closing Date shall not be later than 5:00 p.m., New
York time, on December 20, 1996 or such later time as the Company may agree to.
ARTICLE VII
INDEMNIFICATION
Section 7.1. General. (a) The Company (the "Indemnifying
Party") agrees and covenants to hold harmless and indemnify the Purchaser and
each of its Affiliates, and their respective managed accounts, shareholders,
employees, directors, officers, principals, equity holders, controlling Persons,
advisors and agents (each of the foregoing Persons being an "Indemnified
Person"), from and against any losses, claims, damages, liabilities and expenses
(including reasonable attorneys' fees and expenses of investigation) incurred by
such Indemnified Person (collectively, "Indemnifiable Costs and Expenses") in
connection with (i) any actual or threatened third-party action, suit,
proceeding or investigation arising out of or based in any manner upon the
Purchaser's negotiation, execution or performance of its obligations hereunder
or under the Registration Rights Agreement, the Warrant Certificate or the
Shareholders Agreement or its ownership of the Preferred Shares, the Warrants or
Common Shares, (ii) arising out of or based upon any breach by the Indemnifying
Party of any its representations, warranties or covenants contained herein, in
the Registration Rights Agreement, the Warrant Certificate or the Shareholders
Agreement or in any agreement, instrument or document delivered by the
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Company hereunder or thereunder or (iii) enforcing the rights of an Indemnified
Person under this Agreement or under the Registration Rights Agreement, the
Warrant Certificate or the Shareholders Agreement.
(b) The Indemnifying Party further agrees promptly upon demand
by each Indemnified Person to reimburse each Indemnified Person for any
Indemnifiable Costs and Expenses as they are incurred by it; provided that if
the Indemnifying Party reimburses an Indemnified Person hereunder for any
expenses incurred in connection with a lawsuit, claim, inquiry or other
proceeding or investigation for which indemnification is sought, such
Indemnified Person agrees to refund such reimbursement of expenses to the extent
it is finally judicially determined that the indemnity provided for in this
Article VII is not applicable to such Indemnified Person in accordance with the
terms hereof or otherwise. The Indemnifying Party further agrees that the
indemnification, contribution and reimbursement commitments set forth in this
Article VII shall apply whether or not an Indemnified Person is a formal party
to any such lawsuits, claims or other proceedings. The indemnity, contribution
and expense reimbursement obligation of the Indemnifying Party under this
Article VII shall be in addition to any liability it may otherwise have.
(c) The obligations of the Indemnifying Party hereunder shall
survive the Closing and any repurchase, conversion, exchange or transfer of the
Preferred Shares or Warrants and the termination of this Agreement and shall not
be extinguished with respect to any Person because any other Person is not
entitled to indemnity or contribution hereunder.
Section 7.2 Procedure. Promptly after receipt by an
Indemnified Person of notice from any third party of the commencement of any
lawsuit, inquiry or other proceeding or investigation thereof, such Indemnified
Person will, if a claim in respect thereof is to be made against the
Indemnifying Party hereunder, notify the Indemnifying Party in writing of the
commencement thereof; but the omission so to notify the Indemnifying Party will
not relieve the Indemnifying Party (x) from any liability which it may have to
any Indemnified Person hereunder unless the Indemnifying Party is actually
prejudiced thereby or (y) from any liability which it may have to any
Indemnified Person otherwise than pursuant to this Article VII. Each Indemnified
Person shall permit the Indemnifying Party to assume the defense of such claim
with counsel reasonably satisfactory to such Indemnified Person; provided,
however, that any Indemnified Person shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person
unless (A) the Indemnifying Party has agreed to pay such fees or expenses, (B)
the Indemnifying Party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such Indemnified Person in a timely
manner or (C) in the reasonable judgment of such Indemnified Person, based upon
advice of its counsel, a conflict of interest may exist between such Indemnified
Person and the Indemnifying Party with respect to such claims (in which case, if
such Indemnified Person notifies the Indemnifying Party in writing that such
Indemnified Person elects to employ separate counsel at the expense of the
Indemnifying Party,
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the Indemnifying Party shall not have the right to assume the defense of such
claim on behalf of such Indemnified Person). The Indemnifying Party will not be
subject to any liability for any settlement made without its consent (but such
consent will not be unreasonably withheld or delayed). No Indemnified Person
will be required to consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Person of a release from all
liability in respect of such claim or litigation. An Indemnifying Party who is
not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all
Indemnified Persons with respect to such claim, as well as one local counsel in
each relevant jurisdiction.
Section 7.3. Contribution. (a) In order to provide for just
and equitable contribution in circumstances under which the indemnity provided
for in this Article VII is for any reason held to be unenforceable by the
Indemnified Person, the Indemnifying Party, in lieu of indemnifying such
Indemnified Person, shall have an obligation to contribute, and shall contribute
to the amount paid or payable by such Indemnified Person as a result of such
losses, claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnifying Party and the Indemnified Persons, but also to reflect the relative
fault of the Indemnifying Party and the Indemnified Persons in connection with
the statement or omissions which result in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations;
provided, however, that no Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The relative fault of the Indemnifying Party and the
Indemnified Persons shall be determined, if applicable, by reference to, among
other things, whether the untrue statement of a material fact or the omission to
state a material fact has been made by, or relates to information supplied by,
the Indemnifying Party or Indemnified Persons and the Persons' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a Person as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include any reasonable legal or other fees or expenses reasonably
incurred by such Person in connection with investigation or defending any such
claim.
(b) The Company and the Purchaser agree that it would not be
just and equitable if contribution pursuant to the immediately preceding
paragraph were determined by any method of allocation which does not take into
account the equitable considerations referred to in such paragraph.
Section 7.4. Notification. Each party agrees to notify in
writing promptly the other party of the commencement of any litigation or
proceeding against it or any of its shareholders, officers, directors or agents
in connection with the issue of any the Preferred Shares, Warrants or Common
Shares.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1. Entire Agreement; Survival of Provisions. This
Agreement, together with the other agreements, instruments and documents
expressly referred to herein, constitute the entire agreement of the parties
with respect to the transactions contemplated hereby and supersede all prior
agreements and understandings with respect thereto, whether written or oral. All
of the covenants of the parties made herein shall remain operative and in full
force and effect regardless of acceptance of any of the Preferred Shares or
Warrants and payment therefor. The representations and warranties set forth
herein shall survive the execution and delivery of this Agreement, the issuance
of the Preferred Shares and the Warrants, the Closing and the issuance of the
Common Shares upon conversion of the Preferred Shares or exercise of the
Warrants, as applicable, and shall in no way be affected by any investigation of
the subject matter thereof made by or on behalf of the Purchaser or the Company.
The representations, warranties, agreements and covenants made herein and in the
Registration Rights Agreement, the Warrant Certificate and the Shareholders
Agreement shall be deemed to have been relied upon by the parties hereto.
Section 8.2. No Waiver; Modifications in Writing. No failure
or delay by a party in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to any party at law or in equity or otherwise. No waiver of or consent
to any departure by a party from any provision of this Agreement shall be
effective unless signed in writing by the parties entitled to the benefit
thereof. No amendment, modification or termination of any provision of this
Agreement shall be effective unless signed in writing by all parties. Any
amendment, supplement or modification of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
from the terms of any provision of this Agreement, shall be effective only in
the specific instance and for the specific purpose for which made or given.
Section 8.3. Notices. All notices, demands and other
communications provided for hereunder shall be in writing, shall be given by
registered or certified mail, return receipt requested, telegram, telecopy,
courier service or personal delivery, addressed to the Company as follows:
Alcohol Sensors International, Ltd.
00 Xxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, President
Telecopy: (000) 000-0000
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with a copy to:
Xxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx
Telecopy: (000) 000-0000
and to the Purchaser as follows:
American International Insurance Company
000 Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Telecopy: (000) 000-0000
with copies to:
American International Group, Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
Kramer, Levin, Naftalis & Xxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
or to such other address as any party shall designate in writing, and shall be
deemed given when received.
Section 8.4. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
Section 8.5. Binding Effect; Assignment. The rights and
obligations of the parties under this Agreement may not be assigned or otherwise
transferred to any other Person, except with the prior written consent of the
other party hereto, provided that the Purchaser may assign or otherwise transfer
any or all of such rights and/or obligations to any of its Affiliates without
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obtaining any such consent. Except as expressly provided in this Agreement, this
Agreement shall not be construed so as to confer any right or benefit upon any
Person other than the parties to this Agreement and their respective successors
and permitted assigns. This Agreement shall be binding upon and shall inure to
the benefit of the Company, the Purchaser and their respective successors and
permitted assigns.
Section 8.6. Governing Law. This Agreement shall be deemed to
be a contract made under and shall be governed by and construed in accordance
with the internal laws of the State of New York without reference to the
principles of conflict of laws.
Section 8.7. Consent to Jurisdiction and Service of Process.
Any suit, action or proceeding arising out of or relating to this Agreement or
the Registration Rights Agreement, the Warrant Certificate or the Shareholders
Agreement or the transactions contemplated hereby or thereby may be instituted
in any Federal court situated in the State of New York or any state court of the
State of New York in each case, in the Borough of Manhattan, City of New York,
and each party agrees not to assert, by way of motion, as a defense or
otherwise, in any such suit, action or proceeding, any claim that it is not
subject personally to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement, the Registration Rights
Agreement, the Warrant Certificate or the Shareholders Agreement or the subject
matter hereof or thereof may not be enforced in or by such court. Each party
further irrevocably submits to the jurisdiction of such court in any such suit,
action or proceeding. Any and all service of process and any other notice in any
such suit, action or proceeding shall be effective against any party if given
personally or by registered or certified mail, return receipt requested, or by
any other means of mail that requires a signed receipt, postage fully prepaid,
mailed to such party as herein provided. Nothing herein contained shall be
deemed to affect the right of any party to serve process in any manner permitted
by law or to commence legal proceedings or otherwise proceed against any other
party in any other jurisdiction.
Section 8.8. Further Assurances. Each of the parties hereto
shall execute and deliver such documents, instruments and agreements and take
such further actions as may be reasonably required or desirable to carry out the
provisions of this Agreement and the Registration Rights Agreements, the Warrant
Certificate and the Shareholders Agreement and the transactions contemplated
hereby and thereby, and each of the parties hereto shall cooperate with each
other in connection with the foregoing.
Section 8.9. Specific Performance. The Company acknowledges
that irreparable damage would occur to the Purchaser in the event that any of
the provisions of this Agreement, the Registration Rights Agreement, the Warrant
Certificate or the Shareholders Agreement were not performed by the Company in
accordance with their specific terms or were otherwise breached by the Company
and that money damages would not provide an adequate remedy to the Purchaser. It
is accordingly agreed that the Purchaser shall be entitled to an injunction and
other equitable
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remedies to prevent breaches by the Company of this Agreement, the Registration
Rights Agreement, the Warrant Certificate and the Shareholders Agreement and to
enforce specifically the terms and provisions hereof or thereof in any court of
the United States or any state thereof having jurisdiction, this being in
addition to any other remedy to which the Purchaser may be entitled at law or in
equity.
Section 8.10. Severability of Provisions. Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 8.11. Headings. The Article and Section headings used
or contained in this Agreement are for convenience of reference only and shall
not affect the construction of this Agreement.
Section 8.12. Costs, Expenses and Taxes. The Company shall pay
any and all stamp, transfer and other similar Taxes payable or determined to be
payable in connection with the execution and delivery at the Closing Date of
this Agreement or the original issuance of the Preferred Shares or Warrants, and
shall save and hold Purchaser harmless from and against any and all liabilities
with respect to or resulting from any delay in paying, or omission to pay, such
Taxes. The Company and the Purchaser shall pay all costs and expenses that each
respectively incurs with respect to the negotiation, execution and delivery of
this Agreement, the Registration Rights Agreement, the Warrant Certificate and
the Shareholders Agreement.
Section 8.13. Waiver of Jury Trial. The parties hereto hereby
irrevocably waive all right to a trial by jury in any action, proceeding or
counterclaim arising out of or relating to this Agreement, the Registration
Rights Agreement, the Warrant Certificate or the Shareholders Agreement or the
transactions contemplated hereby or thereby.
Section 8.14. Publicity. The parties agree that no public
release or announcement concerning this Agreement, the Registration Rights
Agreements, the Warrant Certificate or the Shareholders Agreement or the
transactions contemplated hereby or thereby shall be made without advance review
and approval by each party hereto, except as otherwise required by applicable
law.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers hereunto duly authorized,
as of the date first above written.
ALCOHOL SENSORS INTERNATIONAL, LTD.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President & CEO
AMERICAN INTERNATIONAL INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxxxxx
Name: Xxxxxx X. Xxxxxxxx
Title: Senior Vice President and
Director
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Annex I: Certificate of Amendment
Annex II: Registration Rights Agreement
Annex III: Shareholders Agreement
Annex IV: Warrant Certificate
Annex V: Opinion of Xxxxxx & Xxxx
Schedule 3.2: Rights and Agreements Relating to Securities of the Company
and the Subsidiaries
Schedule 3.3: Certain Disclosure Relating to Subsidiaries and Other Matters
Schedule 3.10: Disclosure Relating to Certain Changes
Schedule 3.13: ERISA Plans
Schedule 3.15: Legal Proceedings
Schedule 3.17: Certain Agreements
Schedule 3.18: Transactions with Related Persons and Guarantees
Schedule 3.19: Real Property and Certain Disclosure Relating to Manufacturing
Schedule 3.21: Certain Agreements with Employees and Consultants
Schedule 3.23: Environmental Matters
