EXHIBIT C
LOAN AGREEMENT
By and Among
SYSTEMONE TECHNOLOGIES INC.,
as Borrower
and
HANSEATIC AMERICAS LDC,
ENVIRONMENTAL OPPORTUNITIES FUND II, L.P. and
ENVIRONMENTAL OPPORTUNITIES FUND II (INSTITUTIONAL), L.P.
as Lenders
Dated: As of August 7, 2000
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 1
Section 1.1 Definitions 1
ARTICLE II LOAN 7
Section 2.1 Loan 7
Section 2.2 Notes 7
Section 2.3 Interest 8
Section 2.4 Repayment of Principal 8
Section 2.5 Late Charges 8
Section 2.6 Optional and Mandatory Prepayment 8
Section 2.7 Security 9
Section 2.8 Replacement of Any Notes 9
Section 2.9 Payments and Computations 9
Section 2.10 Warrants 10
ARTICLE III CONDITIONS PRECEDENT OF LENDING 10
Section 3.1 Borrowing 10
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE BORROWER 12
Section 4.1 Incorporation 12
Section 4.2 Authorization 12
Section 4.3 Conflicts 12
Section 4.4 Capitalization 13
Section 4.5 Subsidiaries 14
Section 4.6 SEC Documents; Financial Statements 14
Section 4.7 Taxes 15
Section 4.8 Title; Credit Arrangements; Defaults 15
Section 4.9 Employee Benefit Plans 16
Section 4.10 Disputes and Litigation 17
Section 4.11 Compliance With Law; Licenses;
Franchises; Environmental Laws 17
Section 4.12 Use of Proceeds 18
Section 4.13 Principal Exchange/Market 18
Section 4.14 No Material Adverse Change 18
Section 4.15 No Undisclosed Liabilities 18
Section 4.16 No Undisclosed Events or
Circumstances 18
Section 4.17 Brokers. 19
Section 4.18 Private Placement 19
Section 4.19 Disclosure 19
ARTICLE V REPRESENTATIONS AND WARRANTIES
OF THE LENDERS 19
Section 5.1 Formation 19
Section 5.2 Authorization 19
Section 5.3 Conflicts 20
Section 5.4 Private Placement 20
ARTICLE VI CERTAIN COVENANTS 21
Section 6.1 General Covenants 21
Section 6.2 Financial and Other Information 22
ARTICLE VII EVENTS OF DEFAULT 23
Section 7.1 Events of Default 23
Section 7.2 Enforcement 25
Section 7.3 Waiver Of Jury Trial 25
ARTICLE VIII REGISTRATION 26
Section 8.1 Registration and Listing 26
Section 8.2 Registration Requirements 26
Section 8.3 Expenses of Registration 29
Section 8.4 Registration Period 29
Section 8.5 Indemnification 30
Section 8.6 Contribution 32
ARTICLE IX MISCELLANEOUS 33
Section 9.1 Modification of Agreement 33
Section 9.2 Remedies Cumulative, etc 33
Section 9.3 No Waiver, etc. 33
Section 9.4 Notices 34
Section 9.5 Survival of Representations 34
Section 9.6 Entire Agreement 34
Section 9.7 Expenses 34
Section 9.8 Benefit of Agreement 35
Section 9.9 Governing Law 35
Section 9.10 Captions 35
Section 9.11 Severability 35
Section 9.12 SUBORDINATION 35
Section 9.13 Counterparts 35
Annex 1 - Lenders
Exhibit A - Form of Notes
Exhibit B - Form of Warrant Certificate
Exhibit C - Form of Security Agreement
Exhibit D - Form of Legal Opinion
Schedule 4.3 - Consents
Schedule 4.7 - Taxes
Schedule 4.8 - Credit Arrangements
Schedule 4.12 - Use of Proceeds
LOAN AGREEMENT
LOAN AGREEMENT dated as of the 7th day of August, 2000 by and
among SYSTEMONE TECHNOLOGIES INC., a corporation duly organized
and validly existing under the laws of the State of Florida
(hereinafter referred to as the "Borrower"), and the undersigned
ENVIRONMENTAL OPPORTUNITIES FUND II, L.P., ENVIRONMENTAL
OPPORTUNITIES II (INSTITUTIONAL), L.P., and HANSEATIC AMERICAS LDC
(hereinafter referred to, collectively, as the "Lenders" and,
individually, as a "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower is primarily engaged in the business of
manufacturing industrial parts washers that incorporate the
Borrower's proprietary waste minimization technologies (such
activities being hereinafter referred to, collectively, as the
"Business"); and
WHEREAS, in order to provide funds for the operation and
expansion of the Business, the Borrower has requested that the
Lenders loan an aggregate amount of $2,500,000 (hereinafter
referred to as the "Loan") to the Borrower; and
WHEREAS, the Lenders have each agreed to loan their
respective Proportionate Share (as hereinafter defined) of the
Loan to the Borrower, subject to the terms and conditions
hereinafter set forth; and
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the
following additional terms shall have the following meanings,
unless the context indicates otherwise:
(i) The term "Additional Warrants" shall have the meaning
ascribed and assigned to such term in Section 2.10 of this
Agreement.
(ii) The term "Additional Warrant Certificates" shall have
the meaning ascribed and assigned to such term under Section 2.10
of this Agreement.
(iii) The term "Additional Warrant Shares" shall have the
meaning ascribed and assigned to such term under Section 2.10 of
this Agreement.
(iv) The term "Affiliate" shall mean any person who is a
director or officer of the subject referenced or is a Person
which, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with such
Person; and, for purposes of this Agreement, the term "control"
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or
by contract or otherwise.
(v) The term "Benefit Plans" shall mean all pension,
profit-sharing, bonus, incentive, welfare or other employee
benefit plans within the meaning of Section 3(3) of ERISA, and
related trusts, insurance and annuity contracts, funding media and
related agreements and arrangements, other than Multiemployer
Plans.
(vi) The term "Borrower" shall have the meaning ascribed and
assigned to such term as set forth in the preamble of this
Agreement.
(vii) The term "Business" shall have the meaning ascribed
and assigned to such term in the preamble of this Agreement.
(viii) The term "Business Day" shall mean any day other than
a Saturday, a Sunday or any other day on which commercial banks in
New York, New York are required or permitted by law to close.
(ix) The term "Capital Indebtedness" shall mean
indebtedness of the Borrower with respect to money borrowed
pursuant to the Loan and Security Agreement dated May 17, 1999 (as
amended December 21, 1999) between the Borrower and Capital
Business Credit, a division of Capital Factors, Inc.
(x) The term "Closing Date" shall mean the date upon which
the conditions set forth in Section 3.1 of this Agreement shall
have been completed and fulfilled to the satisfaction of the
Lenders.
(xi) The term "Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
(xii) The term "Commission" shall mean the United States
Securities and Exchange Commission.
(xiii) The term "Common Stock" shall mean the Borrower's
common stock, par value $.001.
(xiv) The term "Default Period" shall have the meaning
assigned and ascribed to such term under Section 8.2 of this
Agreement.
(xv) The term "Defined Benefit Plan" shall mean any Benefit
Plan which is a "defined benefit plan" within the meaning of
Section 3(35) of ERISA.
(xvi) The term "Effectiveness Period" shall have the
meaning assigned and ascribed to such term under Section 8.4 of
this Agreement.
(xvii) The term "Environmental Laws" shall mean any and all
federal, national, state or local laws, statutes, ordinances,
rules, regulations, orders or determinations of any federal,
national, state or local governmental authority pertaining to
health or the environment.
(xviii) The term "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended from time to time, and any
successor statute of similar import, together with the regulations
promulgated thereunder by the United States Treasury Department,
the United States Department of Labor and/or the PBGC.
(xvix) The term "Event of Default" or "Events of Default"
shall have the meaning set forth in Section 7.1 of this Agreement.
(xx) The term "Exchange Act" shall mean the U.S. Securities
Exchange Act of 1934, as amended from time to time, and any
successor statute of similar import, together with the regulations
promulgated thereunder by the Commission.
(xxi) The term "Financing Statements" shall mean the Uniform
Commercial Code UCC-1 financing statements to be filed with the
applicable Governmental Authorities of each relevant jurisdiction
pursuant to which the Lenders shall perfect their security
interest under the Security Agreement.
(xxii) The term "Generally Accepted Accounting Principles"
shall mean generally accepted principles and practices as
developed and modified by the American Institute of Certified
Public Accountants, the Financial Accounting Standards Board and
industry practices and custom, applied on a consistent basis.
(xxiii) The term "Governmental Authority" shall mean any
federal, state, county or municipal, or foreign, governmental
agency, board, commission, officer, official or entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government whose consent or approval
is required as a prerequisite to (i) the continued uninterrupted
operation of the Business, or (ii) the performance of any act or
obligation or the observance of any agreement or condition of the
Borrower under this Agreement or the other Loan Documents.
(xxiv) The term "Holder" shall have the meaning assigned and
ascribed to such term under Section 8.2 of this Agreement.
(xxv) The term "Indemnified Party" shall have the meaning
assigned and ascribed to such term under Section 8.5(c) of this
Agreement.
(xxvi) The term "Indemnifying Party" shall have the meaning
assigned and ascribed to such term under Section 8.5(c) of this
Agreement.
(xxvii) The term "Initial Warrants" shall mean warrants to
purchase an aggregate of 714,285 shares of the Common Stock
(allocated among the Lenders as set forth on Annex 1).
(xxviii) The term "Initial Warrant Certificate" shall mean
the form of warrant certificate attached hereto as Exhibit B.
(xxix) The Term "Initial Warrant Shares" shall mean the
shares of Common Stock issuable upon exercise of the Warrants.
(xxx) The term "Lenders" shall have the meaning ascribed
and assigned to such term as set forth in the preamble of this
Agreement.
(xxxi) The term "Lien" shall mean any mortgage, deed of
trust, security interest, pledge, lien, or other charge or
encumbrance of any nature except Permitted Encumbrances.
(xxxii) The term "Liquidated Damages" shall have the meaning
assigned and ascribed to such term under Section 8.2 of this
Agreement.
(xxxiii) The term "Loan" shall have the meaning ascribed and
assigned to such term as set forth in the preamble of this
Agreement.
(xxxiv) The term "Loan Documents" shall mean any and all
agreements, documents, certificates and instruments executed by
the Borrower, and/or any other Person and delivered by the
Borrower, and/or any other Person to the Lenders, or any of them,
pursuant to and in connection with the Loan and this Agreement,
including, without limitation, the Notes, the Warrant
Certificates, the Security Agreement, and the Financing
Statements, in each case as amended, supplemented, restated or
otherwise modified from time to time in accordance with the
provisions thereof.
(xxxv) The term "Material Adverse Effect" shall mean a
material adverse effect on: (x) the business, properties,
operations, income, assets or condition, financial or otherwise,
of the Borrower, or (y) the ability of the Borrower to perform, or
the Lenders to enforce, any obligation or liability under the Loan
Documents, or any of them.
(xxxvi) The term "Maturity Date" shall mean February 7,
2002.
(xxxvii) The term "Multiemployer Plan" shall mean any
"multiemployer plan" within the meaning of Section 3(37) of ERISA.
(xxxviii) The term "Notes" shall mean those notes, each in
the form attached hereto as Exhibit A dated the Closing Date,
executed by the Borrower, as the maker, and delivered to each
Lender, as payee, in the aggregate principal amount of Two Million
Five Hundred Thousand Dollars ($2,500,000), which Notes,
collectively, evidence the Loan under this Agreement.
(xxxix) The term "Obligations" shall mean all obligations and
liabilities of the Borrower, or any successor(s) thereof, owed to
the Lenders, or any of them, in connection with the Loan, whether
direct or indirect, absolute or contingent, joint or several, now
or hereafter existing, due or to become due to or held by the
Lenders, or any of them.
(xxxx) The term "PBGC" shall mean the Pension Benefit
Guaranty Corporation and any Person succeeding to any or all of
its functions and duties under ERISA.
(xxxxi) The term "Permitted Encumbrances" shall mean (a)
Liens in favor of the Lenders; (b) Liens for taxes, assessments or
other governmental charges not delinquent or being contested in
good faith and by appropriate proceedings and with respect to
which proper reserves have been taken by the Borrower; (c) Liens
disclosed in the financial statements referred to in Section 4.6
of this Agreement (including, without limitation, the Lien
securing the Capital Indebtedness); (d) deposits or pledges of
cash to secure obligations under worker's compensation, social
security or similar laws, or under unemployment insurance; (e)
deposits or pledges of cash to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds, utility deposits and other
obligations of like nature arising in the ordinary course of such
Borrower's business; (f) judgment Liens that have been stayed or
bonded and mechanics, workers', landlord's, materialmen's or other
like Liens arising in the ordinary course of such Borrower's
business with respect to obligations which are not due or which
are being contested in good faith by such Borrower; and (g) Liens
placed upon fixed assets hereafter acquired to secure a portion of
the purchase price thereof, provided that (x) any such lien shall
not encumber any other property of such Borrower and (y) the
aggregate amount of Indebtedness secured by such Liens incurred as
a result of such purchases during any fiscal year shall not exceed
$5,000,000.
(xxxxi) The term "Person" shall mean an individual, a
partnership, a corporation, a trust, an unincorporated
association, and a government or any department, agency or
political subdivision thereof.
(xxxxii) The term "Proportionate Share" with respect to any
Lender shall, at and prior to Closing, mean the percentage set
forth opposite the name of such Lender on Annex 1 and, thereafter
at any time, shall mean the percentage of the aggregate principal
amount then outstanding of all Notes represented by the Note or
Notes held by such Lender.
(xxxxiii) The term "Registrable Securities" shall mean the
Warrant Shares, which in any case (i) have not been resold
pursuant to an effective registration statement or pursuant to
Rule 144 under the Securities Act and (ii) may not be resold
pursuant to Rule 144 under the Securities Act. For purposes of
this Agreement, securities will be considered ineligible for
resale pursuant to Rule 144 under the Securities Act unless the
Borrower's transfer agent has accepted an instruction from the
Borrower specifying that such securities are eligible for sale
pursuant to Rule 144. The term "holder of Registrable Securities"
includes any person who holds securities which are convertible
into or exercisable for Registrable Securities.
The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act and
applicable rules and regulations thereunder, and the declaration
or ordering of the effectiveness of such registration statement.
(xxxxiv) The term "Registration Expenses" shall mean all
expenses to be incurred by the Borrower in connection with the
Lenders' registration rights under Article VIII of this Agreement,
including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the
Borrower and its independent certified public accountants, blue
sky fees and expenses, reasonable fees and disbursements of
counsel for the Lenders for a "due diligence" examination of the
Borrower and review of the Registration Statement and related
documents, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation
of regular employees of the Borrower, which shall be paid in any
event by the Borrower).
(xxxxv) The term "Registration Statement" shall have the
meaning assigned and ascribed to such term under Section 8.2 of
this Agreement.
(xxxxvi) The term "Required Lenders" shall mean those
Lenders with a Proportionate Share in the aggregate exceeding 66-
2/3%.
(xxxxvii) The term "SEC Documents" shall have the meaning
ascribed and assigned to such term under Section 4.6 of this
Agreement.
(xxxxviii) The term "Security Agreement" shall mean that
certain Security Agreement in the form attached hereto as Exhibit
C, dated the Closing Date, whereby the Borrower has pledged,
assigned, hypothecated, conveyed, transferred, given and granted
to the Lenders, and each of them, a continuing pledge, of and
security interest in all of the security described therein.
(xxxxix) The term "Securities Act" shall mean the U.S.
Securities Act of 1933, as amended from time to time, and any
successor statute of similar import, together with the regulations
promulgated thereunder by the Commission.
(l) The term "Selling Expenses" shall mean all
underwriting discounts and selling commissions applicable to the
sale of Registrable Securities and all fees and disbursements of
counsel for the Lenders, and each of them, not included within
"Registration Expenses".
(li) The term "Shareholders Agreement" shall mean the
Shareholders Agreement dated May 2, 2000 of the Borrower, as in
effect on the date hereof.
(lii) The term "Subordinated Notes" shall mean the
Borrower's 8.25% Subordinated Convertible Notes due February 23,
2003 in the aggregate original principal amount of $17,000,000.
(liii) The term "Subordination Agreements" shall mean the
Subordination Agreements, dated the date hereof, executed by the
Lenders, respectively, with respect to the Capital Indebtedness.
(liv) The term "Subsidiary" shall mean (i) any present or
future corporation at least a majority of the outstanding voting
stock, of which shall, at the time, be owned by the Borrower, by
the Borrower and one or more Subsidiaries of the Borrower or by
one or more Subsidiaries of the Borrower, or (ii) any other Person
which is otherwise controlled by the Borrower and one or more
Subsidiaries of the Borrower, directly or indirectly. For purposes
hereof, outstanding voting stock shall be deemed to be capital
stock of any class or classes, however designated, having ordinary
voting power for the election of the members of the board of
directors or other governing body of such corporation.
(lv) The term "Warrants" shall mean the Initial Warrants and
the Additional Warrants.
(lvi) The term "Warrant Certificates" shall mean the
Initial Warrant Certificates and the Additional Warrant
Certificates.
(lvii) The term "Warrant Shares" shall mean the Initial
Warrant Shares and the Additional Warrant Shares.
ARTICLE II
LOAN
Section 2.1 Loan. Subject to the satisfaction of the
conditions precedent set forth in Section 3.1 hereof, each of the
Lenders hereby agrees to make a loan to the Borrower in the amount
of its Proportionate Share of the Loan. Any amounts repaid or
prepaid hereunder or under the Notes may not be reborrowed by the
Borrower.
Section 2.2 Notes. The obligation of the Borrower to repay
all monies advanced by the Lenders, and each of them, to the
Borrower in connection with the Loan shall be evidenced by the
Notes, each in the form of Exhibit A annexed hereto, which the
Borrower shall have duly executed and delivered to each Lender on
the Closing Date. Each such Note shall (i) be dated the Closing
Date, (ii) be registered in the name of the Lender to whom issued,
(iii) have a principal sum equal to the amount advanced by such
Lender to the Borrower, which shall be payable in the amounts and
on the dates as provided for in Section 2.4 hereof and (iv) bear
interest at such rates payable on the dates and in the manner
provided for in Section 2.3 hereof.
Section 2.3 Interest. Each Note shall bear interest computed
daily until final repayment in full of said Note in accordance
with Section 2.4 of this Agreement. Each Note shall bear an
initial interest rate of twelve percent per annum (12%) for the
period from and after the Closing Date through the six-month
anniversary of the Closing Date, which shall increase to fourteen
percent per annum (14%) for the period from and after the six-
month anniversary of the Closing Date through the nine-month
anniversary of the Closing Date, and shall thereafter increase by
an additional two percent (2%) per annum at the end of each
successive 90-day period (commencing on the nine-month anniversary
of the Closing Date) until final repayment in full of said Note.
Any such change in the interest rate charged on the Loan shall not
affect or alter the terms and conditions of this Agreement and the
Notes, all of which shall remain in full force and effect;
provided, however, that in no event shall the interest charged on
the Loan and the Notes ever exceed the lesser of (x) sixteen
percent per annum (16%) or (y) that permitted by applicable usury
law. Interest on the Loan and the Notes shall be due and payable
on the Maturity Date and continuing thereafter until the Loan and
the Notes are repaid in full.
Section 2.4 Repayment of Principal. Unless the Required
Lenders have previously demanded payment therefor after the
occurrence of an Event of Default in accordance with this
Agreement and the Notes, the Loan shall be due and payable in full
to the Lenders, and each of them, on the Maturity Date.
Section 2.5 Late Charges. In the event that any payment,
including, without limitation, interest and/or principal, required
to be made by the Borrower under this Agreement or the Notes shall
not be received by any Lender within ten days after the same shall
become due and payable, such Lender may charge, and if so charged,
the Borrower shall pay, a late charge equal to five cents for each
dollar of such delinquent payment for the purpose of defraying the
expense incident to the handling of such delinquent payment.
Section 2.6 Optional and Mandatory Prepayment. (a) The
Borrower shall have the right at any time to prepay the whole, or
any part, of the unpaid principal amount of the Loan, without
premium or penalty, upon the terms hereinafter set forth, and
provided that interest on the principal amount thereof to be so
prepaid accrued to the date of such prepayment shall be paid
concurrently therewith; provided, however, that the Borrower shall
not prepay the Loan, or any part thereof, unless such prepayment
upon all the Notes is contemporaneously made, pro rata based upon
the outstanding principal amount of the Notes, respectively.
(b) Upon the consummation from time to time by the
Borrower of any sale for cash of any debt or equity securities, or
of any other financing transaction for borrowed money (other than
capital leasing transactions or purchase money financings), and
subject to the Subordination Agreements, the net proceeds thereof
shall in each case forthwith be applied by the Borrower to the
prepayment of the Loan, without premium or penalty, but together
with all interest on the principal amount thereof to be so prepaid
accrued to the date of such prepayment; it being understood and
agreed that any prepayment made by the Borrower pursuant to this
paragraph (b) shall be made upon all Notes contemporaneously, pro
rata based upon the outstanding principal amount of the Notes,
respectively.
(c) Notices of prepayment shall be given by the
Borrower to the Lenders, respectively, not less than five days
prior to the date specified therein for prepayment. Upon giving of
notice of prepayment as aforesaid, the Loan or portion thereof so
specified for prepayment shall on the prepayment date specified in
such notice become due and payable, and from and after the
prepayment date so specified (unless the Borrower shall default in
making such prepayment) interest on the principal of the Loan or
portion thereof so specified for prepayment shall cease to accrue,
and the principal of the Loan or portion thereof so specified for
prepayment shall be paid by the Borrower as aforesaid.
Section 2.7 Security. As security for the due and punctual
payment and performance of the obligations of the Borrower under
the Notes, this Agreement and the other Loan Documents, the
Borrower shall have duly executed and delivered to the Lenders a
Security Agreement, in the form of Exhibit C annexed hereto, dated
the Closing Date, and such other customary security related
documents.
Section 2.8 Replacement of Any Notes. Upon receipt by the
Borrower of evidence satisfactory to it of the loss, theft,
destruction or mutilation of any Note, and (in case of loss, theft
or destruction) of indemnity reasonably satisfactory to it, and
upon surrender and cancellation of any of the Notes, if mutilated,
the Borrower, upon reimbursement to it of all reasonable expenses
incidental thereto, shall make and deliver to any Lender a new
Note, of like tenor, in lieu of such Note. Any Note made and
delivered in accordance with the provisions of this Section 2.8
shall be dated as of the Closing Date.
Section 2.9 Payments and Computations. All computations of
interest under this Agreement and the Notes shall be made on the
basis of a year of 360 days consisting of twelve months of 30 days
each, in each case for the actual number of days elapsed
(including the first day but excluding the last day) occurring in
the period for which such interest is payable. Whenever any
payment under the Notes shall be due on a day other than 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 payment of interest. All payments
received by the Lenders, or any of them, shall be applied, first,
to the payment of interest, fees and expenses, with any balance to
the payment and reduction of principal. All payments made by the
Borrower under the Notes shall be made irrespective of, and
without any reduction for, any set-off or counterclaims.
Notwithstanding any other provision contained in this Agreement,
the Borrower shall not make any payment on account of principal of
or interest on any Note unless payment is contemporaneously made
on account of all Notes pro rata on the basis of the respective
Proportionate Shares of the Lenders.
Section 2.10 Warrants. In connection with the facilities
provided hereunder, the Borrower shall, on the Closing Date, issue
and deliver to each of the Lenders the number of Initial Warrants
set forth opposite the name of such lender on Annex 1 (hereinafter
with respect to all Lenders referred to as the "Initial Warrant
Shares"). In addition, in the event the Borrower does not
punctually satisfy any Note on or prior to the Maturity Date, the
Borrower shall forthwith issue and deliver to the original holders
thereof a number of additional warrants (hereinafter, with respect
to all Lenders, referred to as the "Additional Warrants") to
purchase shares of Common Stock (hereinafter with respect to all
Lenders referred to as the "Additional Warrant Shares") equal to
the number of Initial Warrants issued on the Closing Date to such
original holder, such Additional Warrants to be evidenced by
warrant certificates (hereinafter referred to, collectively, as
the "Additional Warrant Certificates"), each registered in the
name of such original holder and dated the Maturity Date, in the
form of the Warrant Certificate (except that all such Additional
Warrants shall be immediately exercisable, and provided that the
terms of the Additional Warrants as aforesaid shall, for purposes
of issuance thereof and without limiting the operation thereof, be
subject to adjustment pursuant to Section 6 of the form of Warrant
Certificate as if in effect from and after the Closing Date).
ARTICLE III
CONDITIONS PRECEDENT OF LENDING
Section 3.1 Borrowing. The obligation of each of the Lenders
to fund its Proportionate Share of the Loan shall be subject to
the following conditions precedent, any and all of which may be
waived by the Required Lenders, in their sole discretion, and each
of which the Borrower hereby agrees to use its best efforts to
satisfy:
(i) the Notes, each dated the Closing Date, shall have
been duly executed and delivered by the Borrower to the Lenders,
respectively;
(ii) an Initial Warrant Certificate, registered in the
name of each Lender and representing the number of Initial
Warrants set forth opposite the name of such Lender on Annex 1,
dated the Closing Date, shall have been issued by the Borrower and
delivered to such Lender;
(iii) the Security Agreement, dated the Closing Date,
and a sufficient number of the related Financing Statements, shall
have been duly executed and delivered by the Borrower to the
Lenders;
(iv) each of the Lenders shall have received a
certificate of the Secretary or an Assistant Secretary of the
Borrower stating: (a) that attached thereto is a true and complete
copy of the certificate of incorporation and by-laws of the
Borrower, as well as the text of the corporate resolutions adopted
by the Board of Directors of the Borrower authorizing the
transactions contemplated by this Agreement and designating the
officers who are authorized to execute this Agreement, the Notes
and the Warrants; (b) that none of the same has been modified and
all are in full force and effect; (c) that the individual signing
this Agreement is a duly elected officer of the Borrower; and (d)
that set forth thereon is a true specimen of the signature of
each officer of the Borrower who is authorized to execute the
Notes and the Warrant Certificates; and containing a certification
by another officer of the Borrower as to the incumbency and
signature of the Secretary or Assistant Secretary executing such
certificate;
(v) the representations and warranties of the
Borrower contained under Article IV hereof shall be true and
correct in all material respects at and as of the Closing Date
with the same effect as though all such representations and
warranties were made at and as of the time of the Closing Date
(except for representations and warranties which are of a specific
date or which relate to a specific period other than or not
including the time of the Closing Date, as the case may be, and
except for changes therein contemplated or permitted by this
Agreement) and the Borrower shall have complied with all of its
covenants contained in this Agreement; and there shall not exist
any fact or circumstance which constitutes, or, with notice or
passage of time or otherwise would constitute, an Event of
Default;
(vi) each of the Lenders shall have received an
opinion of Xxxxxxxxx Xxxxxxx, P.A., counsel to the Borrower, dated
the Closing Date, in form satisfactory to the Required Lenders and
to their respective counsel, in the form of Exhibit D annexed
hereto;
(vii) all consents, acknowledgements, approvals,
permits and orders with respect to the transactions contemplated
by the Loan Documents shall have been obtained;
(viii) the Borrower shall have paid to Xxxxxxx Xxxxxx
Xxxxxx all amounts then due under the financial advisory agreement
dated May 2, 2000 between the Borrower and said firm, as confirmed
pursuant to the letter of even date herewith;
(ix) all dividends on the Series B Convertible
Preferred Stock, Series C Convertible Preferred Stock and Series D
Convertible Preferred Stock accrued through and including June 30,
2000 shall have been paid in full; and any and all adjustments to
the Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock, Series D Convertible Preferred Stock and the
Borrower's warrants issued in connection with the Series D
Convertible Preferred Stock, and each of them, arising from events
and circumstances through and including the Closing Date
(including, without limitation, the transactions contemplated in
this Agreement) shall have been effectuated and noticed to the
holders of such securities; and
(x) the Lenders shall have received such additional
documents, instruments, certificates and searches, in form and
substance satisfactory to the Lenders and counsel to the Lenders,
as the Lenders may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE BORROWER
The Borrower hereby represents, warrants and covenants to
each Lender that:
Section 4.1 Incorporation. The Borrower is duly organized,
validly existing and in good standing under the laws of the State
of Florida and has full corporate power and authority to own or
hold under lease the assets and properties material to the
operation of the Business which it owns or holds under lease and
to perform all of its obligations under the agreements material to
the operation of the Business to which it is a party, including,
without limitation, this Agreement, the Notes, the Warrant
Certificates and the Security Agreement. The Borrower is in good
standing in each other jurisdiction wherein the failure so to
qualify would have a Material Adverse Effect. The copies of the
certificate of incorporation and by-laws of the Borrower which
have been delivered to the Lenders by the Borrower are complete
and correct.
Section 4.2 Authorization. The execution and delivery by the
Borrower of the Loan Documents to which it is a party, and each of
them, the performance by the Borrower of its covenants and
agreements under the Loan Documents to which it is a party, and
each of them, and the consummation by the Borrower of the
transactions contemplated by the Loan Documents to which it is a
party, and each of them, have been duly authorized by all
necessary corporate action. When executed and delivered by the
Borrower, the Loan Documents, and each of them, shall constitute
the valid and legally binding obligations of the Borrower
enforceable against the Borrower in accordance with their
respective terms, except as may be limited by bankruptcy,
insolvency or other laws affecting generally the enforceability of
creditors' rights and by limitations on the availability of
equitable remedies.
Section 4.3 Conflicts. Neither the execution and delivery
of the Loan Documents, nor any of them, nor the consummation by
the Borrower of the transactions contemplated in the Loan
Documents, nor any of them, will violate any provision of the
certificate of incorporation or by-laws of the Borrower or any
law, rule, regulation, writ, judgment, injunction, decree,
determination, award or other order of any court, government, or
governmental agency or instrumentality, domestic or foreign,
binding upon the Borrower, or except as set forth under Schedule
4.3 annexed hereto, conflict with or result in any breach of or
event of termination under any of the terms of, or the creation or
imposition of any mortgage, deed of trust, pledge, lien, security
interest or other charge or encumbrance of any nature pursuant to,
the terms of any contract (except for the liens created by the
Security Agreement) or agreement to which the Borrower is a party
or by which the Borrower or any of its properties or assets is
bound which in any case would cause a Material Adverse Effect.
Without limiting the generality of the foregoing, the consummation
by the Borrower of the transactions contemplated by this Agreement
will not result in violation by the Borrower of any covenant
contained in the Subordinated Notes, and the Subordinated Notes
and the amounts payable thereunder, including principal, premium,
if any, and accrued interest shall be subordinate and junior to
the Loan, and all interest thereon, and all other amounts due
under this Agreement. None of the transactions contemplated in
this Agreement (including, without limitation, the use of the
proceeds of the Loan) violates, shall violate or shall result in a
violation of
Section 7 of the Securities Exchange Act of 1934, as amended, or
any regulations issued pursuant thereto, including, without
limitation, Regulations G, T, U and X of the Board of Governors of
the Federal Reserve System.
Section 4.4 Capitalization. (a) The authorized capital stock
of the Borrower consists of (i) 25,000,000 shares of Common Stock
and (ii) 1,500,000 shares of preferred stock, of which (A) 150,000
shares have been designated Series B Convertible Preferred Stock,
(B) 150,000 shares have been designated Series C Convertible
Preferred Stock and (C) 150,000 shares have been designated Series
D Convertible Preferred Stock. As of the date hereof and at the
Closing Date (but excluding the effect of issuance of dividends on
Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock and Series D Convertible Preferred Stock as of
June 30, 2000), 4,742,923 shares of Common Stock are and will be
issued and outstanding, 53,122 shares of Series B Convertible
Preferred Stock are and will be issued and outstanding, 70,947
shares of Series C Convertible Preferred Stock are and will be
issued and outstanding and 20,000 shares of Series D Convertible
Preferred Stock will be issued and outstanding, respectively. All
of the outstanding shares of the capital stock of the Borrower are
validly issued, fully paid and non-assessable. As of the date
hereof and at the Closing Date, the following additional
securities are and will be issued and outstanding: (i) options to
purchase an aggregate of 627,335 shares of Common Stock, (ii)
warrants to purchase 1,202,922 shares of Common Stock, including
the Initial Warrants issued pursuant to the terms of this
Agreement (but excluding the effect of anti-dilution adjustments
in the warrants issued in connection with the Series D Preferred
Stock arising from consummation of the transactions hereunder) and
(iii) subordinated debentures convertible into an aggregate of
1,085,094 shares of Common Stock. There are no other scrip, rights
to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights exchangeable or convertible
into, any shares of capital stock of the Borrower, or contracts,
commitments, understandings or arrangements by which the Borrower
is or may become bound to issue additional shares of capital stock
of the Borrower or options, warrants, scrip, rights to subscribe
to, or commitments to purchase or acquire, any shares, or
securities or rights convertible into shares, of capital stock of
the Borrower (except as contemplated by this Agreement). No event
has occurred prior to the date hereof which, subsequent to the
date hereof, will cause any adjustment in any conversion or
exercise price or ratio with respect to any such securities
pursuant to any anti-dilution provisions thereunder, nor as a
result of any such event, will the number of shares of capital
stock issuable upon such conversion or such exercise, as the case
may be, be subject to adjustment. No such conversion or exercise
price or ratio will be subject to adjustment as a consequence of
the consummation of the transactions contemplated by this
Agreement, nor, as a consequence of such consummation, will the
numbers of shares of capital stock issuable upon such conversion
or
such exercise, as the case may be, be subject to adjustment,
except that as a consequence of consummation of the transaction
hereunder the Series B Convertible Preferred Stock, the Series C
Convertible Preferred Stock and the Series D Convertible Preferred
Stock, and the warrants issued in connection with the Series D
Preferred Stock, will be adjusted as herein set forth.
(b) The issuance of the Warrants has been duly authorized
and, upon issuance the Warrants shall be validly issued, fully-
paid and non-assessable and entitled to the rights set forth in
the Warrant Certificates. The Warrant Shares have been duly
authorized and reserved for issuance and upon exercise of the
Warrants, will be validly issued, fully-paid and non-assessable,
free and clear of any Liens created by the Borrower and not
subject to any preemptive rights or adverse claims, and the
holders thereof shall be entitled to all rights and preferences
accorded to a holder of Common Stock.
Section 4.5 Subsidiaries. The Borrower does not, directly
or indirectly, beneficially or legally own or hold any capital
stock or other proprietary interest in any corporation,
partnership, joint venture, business trust or other legal entity.
Section 4.6 SEC Documents; Financial Statements. The Common
Stock is registered pursuant to Section 12(g) of the Exchange Act,
and the Borrower has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the
Commission pursuant to the reporting requirements of the Exchange
Act, including material filed pursuant to Section 13(a) or 15(d),
in addition to one or more registration statements and amendments
thereto heretofore filed by the Borrower with the Commission (all
of the foregoing including filings incorporated by reference
therein being referred to herein as the "SEC Documents"). The
Borrower has delivered or made available to the Lenders true and
complete copies of all SEC Documents (including, without
limitation, proxy information and solicitation materials and
registration statements) filed with the Commission since September
27, 1996 and all annual SEC Documents filed with the Commission
since September 27, 1996. Without limiting any other
representation or warranty herein, the Borrower has not provided
the Lenders with any information which, according to applicable
law, rule or regulation, should have been disclosed publicly by
the Borrower but which has not been so disclosed. As of their
respective dates, the SEC Documents (as amended by any amendments
filed prior to the Closing Date and provided to the Lenders)
complied in all material respects with the requirements of the
Securities Act and the Exchange Act, and other federal, state and
local laws, rules and regulations applicable to such SEC
Documents, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the
Borrower included in the SEC Documents
comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of
the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in
accordance with Generally Accepted Accounting Principles applied
on a consistent basis during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the
notes thereto or (ii) the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects
the financial position of the Borrower as of the dates thereof and
the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
Section 4.7 Taxes. Except as set forth on Schedule 4.7
annexed hereto, the Borrower has filed or caused to be filed all
federal, state, municipal, foreign and other tax returns, reports
and declarations, or extensions therefor, required to be filed by
it, so as to prevent any valid lien, charge or encumbrance of any
nature on its assets or properties and, except as set forth on
Schedule 4.7 annexed hereto, has paid or shall pay all taxes which
have been or shall become due with respect to the periods covered
by said returns or pursuant to any assessment received by it in
connection therewith, which lien, charge, encumbrance or failure
to pay would, individually, or in the aggregate, have a Material
Adverse Effect. Except as set forth on Schedule 4.7 annexed
hereto, all assessments and charges (including penalties and
interest, if any) related to periods ended on or before December
31, 1999 have been or will be paid by the Borrower, including any
necessary adjustments with state and local tax authorities, the
failure to pay which would, individually, or in the aggregate,
have a Material Adverse Effect, and except as set forth on
Schedule 4.7 annexed hereto, no material deficiency in payment of
any taxes for any period has been asserted by any taxing authority
which remains unsettled at the date hereof.
Section 4.8 Title; Credit Arrangements; Defaults. The
Borrower has good, valid, and marketable title to all assets and
properties owned by it and material to its business, in each case
free and clear of all Liens other than (i) Liens created pursuant
to the Capital Indebtedness, (ii) Liens in favor of the Lenders,
and (iii) Liens specifically permitted by the Lenders in writing,
and, without limiting the foregoing, the assets and properties
owned by the Borrower and shown on the consolidated balance sheet
as of and at March 31, 2000 included in the SEC Documents which
are, individually, or in the aggregate, material to the Borrower's
business or condition, are owned by the Borrower, in each case
free and clear of all Liens other than (i) Liens created pursuant
to the Capital Indebtedness, (ii) Liens in favor of the Lenders,
and (iii) Liens specifically permitted by the Lenders in writing.
The Borrower leases or owns all material properties and assets
necessary for the operation of its business as currently
conducted. Set forth on Schedule 4.8 attached hereto is a list of
all contracts, agreements, mortgages, arrangements (written or
oral), and other documents to which the Borrower is a party or by
which the Borrower or any of its assets or properties is or may be
bound, with respect to obligations of the Borrower for borrowed
money or guaranties therefor, or any restriction on the repayment
of indebtedness incurred or on the payment of dividends on any
securities of any such entity. No event has occurred, or, is
alleged to have occurred, which constitutes or with lapse of time
or giving of notice or both, would constitute a default or a basis
for a claim of force majeure or other claim of excusable delay or
non-performance under any of the foregoing; and no such event has
occurred, or is alleged to have occurred, under any other
contract, agreement, license, lease, or other document to which
the Borrower is a party, which would, individually or in the
aggregate, have a Material Adverse Effect.
Section 4.9 Employee Benefit Plans. All Benefit Plans and
all Multiemployer Plans in which the employees of the Borrower
participate comply in all material respects with all requirements
of the Department of Labor and the Internal Revenue Service
promulgated under ERISA and with all other applicable law. The
Borrower does not have any employees covered by any Multiemployer
Plan. The Borrower has not taken or failed to take any action with
respect to the Benefit Plans which might create any liability on
the part of the Borrower which, individually, or in the aggregate,
would have a Material Adverse Effect. Each "fiduciary" (within the
meaning of section 3(21)(A) of ERISA) as to each Benefit Plan and,
to the best of the knowledge of the Borrower, as to each
Multiemployer Plan, has complied in all material respects with the
requirements of ERISA and all other applicable law in respect of
each such Plan. In addition, as of the date hereof:
(i) No Defined Benefit Plan or, to the best of the
knowledge of the Borrower, any Multiemployer Plan, has incurred an
"accumulated funding deficiency" (within the meaning of section
412(a) of the Code), whether or not waived;
(ii) No "reportable event" (within the meaning of
section 4043 of ERISA) has occurred with respect to any Benefit
Plan or, to the best of the knowledge of the Borrower, any
Multiemployer Plan; there have been no terminations of any Defined
Benefit Plan or, to the best of the knowledge of the Borrower, any
Multiemployer Plan, or any related trust; and no such termination
of any of the foregoing reasonably can be expected to occur;
(iii) No "prohibited transaction" (within the meaning
of section 406 of ERISA or section 4975(c) of the Code) has
occurred with respect to any Benefit Plan, or to the best of the
knowledge of the Borrower, any Multiemployer Plan;
(iv) The aggregate present value of accrued benefits
of the Defined Benefit Plans is not more than the aggregate value
of the assets of such plans; there has been no withdrawal
liability incurred by the Borrower with respect to any
Multiemployer Plans; and the Borrower has not withdrawn (partially
or totally within the meaning of ERISA) from any Multiemployer
Plan; and
(v) Other than claims in the ordinary course for
benefits with respect to any Benefit Plan, or, to the best of the
knowledge of the Borrower, any Multiemployer Plan, there are no
actions, suits, or claims pending with respect to any Plan or any
circumstances known to the Borrower which might give rise to any
such action, suit, or claims, which, individually, or in the
aggregate, would have a Material Adverse Effect.
Section 4.10 Disputes and Litigation. There is no action,
suit, proceeding, or claim, pending or, to the knowledge of the
Borrower, threatened, and no investigation by any court or
government or governmental agency or instrumentality, domestic or
foreign, pending or, to the best of the knowledge of the Borrower,
threatened, against the Borrower before any court, government or
governmental agency or instrumentality, domestic or foreign, nor
is there any outstanding order, writ, judgment, stipulation,
injunction, decree, determination, award, or other order of any
court or government or governmental agency or instrumentality,
domestic or foreign, against the Borrower, in each case which
would have, individually or in the aggregate, a Material Adverse
Effect.
Without limiting any other representation or warranty herein, all
claims, actions, suits or proceedings pending or, to the knowledge
of the Borrower, threatened against the Borrower before any court,
governmental agency or instrumentality, domestic or foreign, are
covered by, and within the limits of coverage of, insurance
maintained by the Borrower. The use by the Borrower of its assets
and the conduct of its business does not, to its knowledge,
involve infringement or claimed infringement of any patent,
trademark, servicemark, tradename, copyright, license or similar
right.
Section 4.11 Compliance With Law; Licenses; Franchises;
Environmental Laws.
(a) The Borrower is not, and is not directly or
indirectly controlled by or acting on behalf of any party which
is, an "investment company" within the meaning of the U.S.
Investment Company Act of 1940, as amended.
(b) The Borrower has (or has made timely application
for) all franchises, licenses, permits and other governmental and
non-governmental approvals necessary to enable it to carry on its
business and operations as currently conducted, the failure to
have which would, individually or in the aggregate, have a
Material Adverse Effect. All such franchises, licenses, permits,
and governmental and other approvals are in full force and effect,
there has been no material default or breach thereunder, and there
is no pending or, to the best of the knowledge of the Borrower,
threatened proceeding under which any may be revoked, terminated
or suspended. The execution and delivery of this Agreement, and
the consummation of the transactions contemplated hereby, will not
conflict with, contravene or terminate any such franchises,
licenses, permits or governmental or other approvals. The Borrower
has not violated, nor is alleged to have violated, any law, rule,
regulation, judgment, stipulation, injunction, decree,
determination, award or other order of any government, or
governmental agency or instrumentality, domestic or foreign,
binding upon the Borrower which violation, individually or in
aggregate, might have a Material Adverse Effect.
(c) Neither the consummation of the transactions
contemplated by this Agreement nor, to the knowledge of the
Borrower, any real property utilized by the Borrower nor, to the
knowledge of the Borrower, any condition thereon violates any
Environmental Laws, other than any such violations which would not
have a Material Adverse Effect, and no provisions of any
Environmental Laws or regulations in any way affect the
consummation of the transactions contemplated by this Agreement.
Section 4.12 Use of Proceeds. The Borrower shall apply the
proceeds of the Loan solely in accordance with Schedule 4.12
annexed hereto.
Section 4.13 Principal Exchange/Market. The principal market
on which the Common Stock is currently traded is Nasdaq.
Section 4.14 No Material Adverse Change. Since March 31,
2000, the date through which the most recent quarterly report of
the Borrower on Form 10-QSB has been prepared and filed with the
Commission, a copy of which is included in the SEC Documents, no
event which had or is likely to have a Material Adverse Effect has
occurred or exists with respect to the Borrower.
Section 4.15 No Undisclosed Liabilities. The Borrower does
not have any liabilities or obligations not disclosed in the SEC
Documents other than those liabilities incurred in the ordinary
course of their respective businesses since March 31, 2000 or
liabilities or obligations, individually or in the aggregate,
which do not or would not have a Material Adverse Effect on the
Borrower.
Section 4.16 No Undisclosed Events or Circumstances. No
event or circumstances has occurred or events with respect to the
Borrower, or its business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement of the
Borrower which has not been publicly announced or disclosed.
Section 4.17 Brokers. The Borrower has taken no action which
would give rise to any claim by any Person (other than Xxxxxxx
Xxxxxx Xxxxxx) for brokerage commissions, finder's fees or similar
payments relating to this Agreement or the transactions
contemplated hereby.
Section 4.18 Private Placement. The Borrower has heretofore
given each Lender access to all information which it has requested
regarding the business and affairs of the Borrower. Neither the
Borrower nor anyone acting on its behalf has directly or
indirectly offered any shares of Common Stock or any other
securities for sale to, or solicited any offer to buy any of the
same from, anyone so as to bring the offer, sale, issuance and/or
delivery of the Notes, the Warrants or the Warrant Shares, or any
of them, within the registration requirements of the Securities
Act of 1933, as amended or any applicable state securities laws.
Neither the offer, sale, issuance and/or delivery of the Notes,
the Warrant or the Warrant Shares, nor any of them, in accordance
with the terms of this Agreement will result in any contravention
of any applicable federal or state securities laws, and will not
require any approval or consent of any governmental authority,
commission or agency.
Section 4.19 Disclosure. No representation or warranty made
under any provisions of the Loan Documents, or any of them, and
none of the information furnished by the Borrower set forth
herein, in the exhibits or schedules hereto or in any document
specifically referenced in this Agreement and delivered to any of
the Lenders, or any authorized representative of any of the
Lenders, pursuant to this Agreement, contains any untrue statement
of a material fact or omits to state a material fact necessary to
make the statements herein or therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE LENDERS
Each of the Lenders, severally, represents, warrants and
covenants to the Borrower that:
Section 5.1 Formation. Such Lender is duly organized,
validly existing and in good standing under the laws of its
jurisdiction of formation, and has full power and authority to
acquire its Proportionate Share of the Loan, the Warrants, and the
Warrant Shares, and to perform its obligations under the Loan
Documents, and each of them.
Section 5.2 Authorization. The execution and delivery of
the Loan Documents, and each of them, by such Lender, the
performance by such Lender of its covenants and agreements under
the Loan Documents, and each of them, and the consummation by such
Lender of the transactions contemplated by the Loan Documents, and
each of
them, have been duly authorized by all necessary action. When
executed and delivered by such Lender, the Loan Documents, and
each of them, will constitute the valid and legally binding
obligations of such Lender enforceable against such Lender in
accordance with their respective terms, except as may be limited
by bankruptcy, insolvency, or other laws affecting generally the
enforceability of creditors' rights and by limitations on the
availability of equitable remedies.
Section 5.3 Conflicts. Neither the execution and delivery
of the Loan Documents, nor any of them, nor the consummation of
the transactions contemplated in the Loan Documents, nor any of
them: will violate any provision of the organizational documents
of such Lender or any law, rule, regulation, writ, judgment,
injunction, decree, determination, award, or other order of any
court, government or governmental agency or instrumentality,
domestic or foreign, binding upon such Lender; or conflict with or
result in any breach of any of the terms of, or constitute a
default under or result in the termination of or the creation or
imposition of any mortgage, deed of trust, pledge, lien, security
interest or other charge or encumbrance of any nature pursuant to,
the terms of any contract or agreement to which such Lender is a
party or by which such Lender or any of its assets and properties
is bound, which breach, default, termination, creation,
imposition, or other charge or encumbrance would, individually or
in the aggregate, have a material adverse impact on the ability of
such Lender to consummate the transactions contemplated by the
Loan Documents.
Section 5.4 Private Placement. (a) Without limiting the
scope of the representations and warranties of the Borrower set
forth in Article IV of this Agreement, such Lender acknowledges
that, at its request, it has received certain information from the
Borrower and that it has had the opportunity to ask
representatives of the Borrower questions and receive answers in
connection with the transactions contemplated hereby, and so as to
verify the accuracy of the information so received. Each Lender
acknowledges that an investment in the Borrower involves a high
degree of risk. Such Lender is an "accredited investor" as defined
under Regulation D promulgated by the Commission.
(b) Each Lender is acquiring the Warrants for its own
account and not with a view to distribution in violation of any
securities laws. Each Lender does not have any present intention
to sell the Warrants or the Warrant Shares and does not have any
present arrangement (whether or not legally binding) to sell the
Warrants to or through any person or entity; provided, however,
that by its representations and warranties herein, each Lender
does not agree to hold the Warrants or the Warrant Shares for any
minimum or other specific term and reserves the right to dispose
of the Warrants or the Warrant Shares at any time in accordance
with federal and state securities laws applicable to such
disposition.
ARTICLE VI
CERTAIN COVENANTS
Section 6.1 General Covenants. The Borrower covenants and
agrees with the Lenders, and each of them, that, until the
Maturity Date and thereafter for as long as any portion of the
Loan shall remain outstanding and until the full and final payment
of the Loan:
(a) The Borrower shall punctually pay or cause to be
paid the principal of and interest on the Loan according to the
terms hereof and of the Notes.
(b) The Borrower shall comply with and perform each
and every covenant contained in the Security Agreement.
(c) Contemporaneously with the formation or
acquisition of any Subsidiary, the Borrower shall cause such
Subsidiary to guarantee the Loan, and to join in the Security
Agreement in order to secure such guaranty, in each case in form
and substance in all respects satisfactory to the Required
Lenders.
(d) From and after the satisfaction or discharge of
the Capital Indebtedness, the Borrower shall, at the request of
the Required Lenders, enter into an amendment to the Security
Agreement in form and substance satisfactory to the Required
Lenders, to add to the Collateral thereunder all goodwill, know-
how, technology, trade secrets, computer programs, customer lists,
tradenames, tradename rights, trademarks, trademark rights,
trademark applications, service marks, patents, patent rights,
patent applications, copyrights and copyright applications, and
all licenses and products in connection with any of the foregoing,
all licenses, permits, agreements of any kind providing for the
use, possession or authority to use or possess property of others
or providing for others to use or possess or have authority to use
or possess property of the Borrower, and all recorded data of any
kind or nature regardless of the medium of recording, including,
without limitation, all software, writings, plans, drawings,
blueprints, specifications and schematics, all equipment, and all
fixtures.
(e) Except for the consolidation of a Subsidiary with,
or merger of a Subsidiary into, another Subsidiary or the
Borrower, the Borrower shall and shall cause each Subsidiary to do
or cause to be done all things necessary or appropriate to
preserve and keep in full force and effect its corporate
existence, rights and material franchises, and use its best
efforts to qualify as a foreign corporation entitled to do
business in every jurisdiction in which the failure so to qualify
would, individually or in the aggregate, have a Material Adverse
Effect.
(f) The Borrower shall not, nor permit any Subsidiary
to, enter into any transaction described under clauses (i) through
(iv), inclusive, of Section 2.3(b) of the Shareholders Agreement,
without the prior written consent of the Required Lenders (which
shall not unreasonably be withheld).
(g) The Borrower shall not modify, amend, increase or
extend the Capital Indebtedness nor the documents in evidence
thereof, without the prior written consent of the Required Lenders
(which shall not be unreasonably withheld).
Section 6.2 Financial and Other Information. The Borrower
covenants and agrees with each Lender that, until the Maturity
Date and thereafter for as long as any portion of the Loan shall
remain outstanding and until the full and final payment of the
Loan, the Borrower shall furnish to each Lender:
(a) as soon as available and in any event within 60
days after the end of each of the first three quarters of each
fiscal year of the Borrower, unaudited balance sheets of the
Borrower and its Subsidiaries as of the end of such quarter and
unaudited statements of operations and cash flows for such quarter
and for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter (all in reasonable
detail and with all notes and supporting schedules), certified by
the chief financial officer of the Borrower as presenting fairly
the financial condition of the Borrower and the Subsidiaries as of
the dates and for the periods indicated and as having been
prepared in accordance with Generally Accepted Accounting
Principles consistently applied, except as may be otherwise
disclosed in such financial statements or the notes thereto;
provided that the delivery within the time periods specified above
of the Borrower's Quarterly Report on either Form 10-QSB or 10-Q
prepared in compliance with the requirements therefor and filed
with the Commission shall be deemed to satisfy the requirements of
this Section 6.2(a);
(b) as soon as available and in any event within 120
days after the end of each fiscal year of the Borrower, audited
consolidated balance sheets of the Borrower and its Subsidiaries
as of the end of such year and audited consolidated statements of
operations, cash flows and changes in stockholders' equity for
such year (all in reasonable detail and with all notes and
supporting schedules), certified without qualification by KPMG
Peat Marwick LLP or such other independent public accountants
satisfactory to the Required Lenders, as presenting fairly the
financial condition of the Borrower and the Subsidiaries as of the
dates and for the periods indicated and as having been prepared in
accordance with Generally Accepted Accounting Principles
consistently applied, except as may be otherwise disclosed in such
financial statements or the notes thereto; provided that the
delivery within the time period specified above of the Borrower's
Annual Report on either
Form 10-KSB or 10-K prepared in compliance with the requests
therefor and filed with the Commission shall be deemed to satisfy
the requirements of this Section 6.2(b);
(c) concurrently with the financial statements
furnished pursuant to clauses (a) and (b) of this Section 6.2, a
certificate of the chief executive officer or the chief financial
officer of the Borrower stating that no Event of Default hereunder
and no event or act which, with the giving of notice or the
passage or lapse of time, or both, would constitute such an Event
of Default or other event shall exist, specifying all such events,
and the circumstances thereof, and the steps if any being taken to
remedy the same;
(d) promptly upon their becoming available, copies of
all financial statements, reports, notices, proxy statements and
other communications sent by the Borrower to stockholders or to
creditors generally, and copies of each regular or periodic report
and any registration statements, prospectuses or written
communication (other than transmittal letters) filed by the
Borrower with the Commission or any successor agency; and with
such other information relevant to the financial condition,
properties and operations of the Borrower or any of the
Subsidiaries as any Lenders may from time to time reasonably
request; and
(e) prompt written notice after any officer of the
Borrower knows or has reason to know that: (i) a default or an
Event of Default hereunder, or any condition, event or act which
with the giving of notice or the passage or lapse of time, or
both, would constitute such an Event of Default, has occurred and
is continuing, together with a specification of the same and the
steps if any being taken to remedy the same; or (ii) any other
circumstances or event has or is reasonably likely to have a
Material Adverse Effect.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1 Events of Default. The entire unpaid principal
amount of the Loan, together with all accrued interest thereon, at
the option of the Required Lenders exercised by notice to the
Borrower, shall forthwith become and be due and payable if any one
or more of the following events (herein called "Events of
Default") shall have occurred (for any reason whatsoever and
whether such happening shall be voluntary or involuntary or come
about or be effected by operation of law or pursuant to or in
compliance with any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body) and be continuing at the time of such notice, that is to
say:
(a) if default shall be made in the due and punctual
payment of the principal of or interest on the Loan when and as
the same shall become due and payable, whether at maturity, by
acceleration or otherwise, and such default shall have continued
for a period of ten days;
(b) if any representation or warranty made by the
Borrower in any of the Loan Documents shall prove to have been
false, incorrect or misleading in any material respect on the date
as of which is made;
(c) if default shall be made in the performance or
observance of any of the other covenants, agreements or conditions
of the Borrower contained in this Agreement, the Notes or in any
other Loan Document, and such default shall have continued for a
period of 30 days after notice thereof by the Required Lenders to
the Borrower;
(d) if this Agreement, the Notes or any other Loan
Document shall cease to be enforceable in accordance with its
terms against the Borrower;
(e) if (i) the Borrower or any Subsidiary shall
default beyond any period of grace provided with respect thereto
in the payment of principal of, premium, if any, or interest on
any obligation in an amount in excess of $250,000 in respect of
borrowed money when due, whether by acceleration or otherwise
(including, without limitation, in connection with the Capital
Indebtedness or the Subordinated Notes); or (ii) the Borrower or
any Subsidiary shall default in the performance or observance of
any other agreement, term or condition contained in such
obligation or in any agreement under which any such obligation is
created, if the effect of any such default is to cause or permit
the holder or holders of such obligations (or a trustee on behalf
of such holder or holders) to cause such obligation to become due
prior to the date of its stated maturity, unless, in the case of
each of (i) and (ii), such holder or holders or trustee shall have
waived such default after its occurrence or unless such holder or
holders or trustee shall have failed to give any notice, or take
any other action, required to create an event of default
thereunder;
(f) if final judgment for the payment of money in
excess of $250,000 shall be rendered by a court of record against
the Borrower or any Subsidiary and not be covered by insurance
maintained by the Borrower or such Subsidiary, and the Borrower or
such Subsidiary, respectively, shall not discharge the same or
provide for its discharge in accordance with its terms, or shall
not procure a stay of execution thereon within 30 days from the
date of entry thereof and, within the period during which
execution of such judgment shall have been stayed, appeal
therefrom, and cause the execution thereof to be stayed during
such appeal;
(g) if the Borrower or any Subsidiary shall:
(i) admit in writing its inability to pay its
debts generally as they become due;
(ii) file a petition in bankruptcy or a petition
to take advantage of any insolvency act;
(iii) make an assignment for the benefit of
creditors;
(iv) consent to the appointment of a receiver of
itself or of the whole or any substantial part of its
property; or
(v) file a petition or answer seeking
reorganization or arrangement under the Federal
bankruptcy laws or any other applicable law or statute
of the United States of America or any State, district
or territory thereof;
(h) if a court of competent jurisdiction shall enter,
except at the direct or indirect request of the Lenders, an order,
judgment, or decree appointing, without the consent of the
Borrower or any Subsidiary, a receiver of the Borrower or any
Subsidiary, respectively, or of the whole or any substantial part
of its property, or approving a petition filed against it seeking
reorganization or arrangement of the Borrower or any Subsidiary
under the Federal bankruptcy laws or any other applicable law or
statute of the United States of America or any State, district or
territory thereof, or any other jurisdiction, and such order,
judgment or decree shall not be vacated or set aside or stayed
within 60 days from the date of entry thereof; or
(i) if, under the provisions of any other law for the
relief or aid of debtors, any court of competent jurisdiction
shall assume custody or control of the Borrower or any Subsidiary
or of the whole or any substantial part of its property and such
custody or control shall not be terminated or stayed within 60
days from the date of assumption of such custody or control.
Section 7.2. Enforcement. In the case any one or more of the
Events of Default specified in Section 7.1 hereof shall have
occurred and be continuing, the Lenders, or any of them, may
proceed to protect and enforce their respective rights either by
suit in equity and/or by action at law, whether for the specific
performance of any covenant or agreement contained in this
Agreement, its Note or its rights under any other Loan Document,
or the Required Lenders may proceed to enforce the payment of all
Obligations or to enforce any other legal or equitable right of
the Lenders. The Borrower hereby expressly waives presentment,
demand or notice of any kind in connection with the exercise by
the Lenders, or any of them, of their respective rights hereunder,
except as explicitly provided herein. In the event an Event of
Default shall have occurred and any holder of a Note shall employ
attorneys, or incur other costs and expenses for the collection of
payments due or to become due, or for the enforcement or
performance or observance of any obligation or agreement of the
Borrower, the Borrower agrees that it will pay to such holder, on
demand, the reasonable fees of such attorney together with all
other costs and expenses incurred by such holder.
Section 7.3 Waiver Of Jury Trial. THE BORROWER HEREBY WAIVES
ANY AND ALL RIGHTS THAT IT MAY NOW OR HEREAFTER HAVE UNDER THE
LAWS OF THE UNITED STATES OF AMERICA OR ANY STATE OR OTHER
JURISDICTION, TO A TRIAL BY JURY OF ANY AND ALL ISSUES ARISING
EITHER DIRECTLY OR INDIRECTLY IN ANY ACTION OR PROCEEDING BETWEEN
THE BORROWER, THE LENDERS OR THEIR SUCCESSORS AND ASSIGNS, OUT OF
OR IN ANY WAY CONNECTED WITH THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS. IT IS INTENDED THAT SAID WAIVER SHALL APPLY TO ANY AND
ALL DEFENSES, RIGHTS, AND/OR COUNTERCLAIMS IN ANY ACTION OR
PROCEEDING.
ARTICLE VIII
REGISTRATION
Section 8.1 Registration and Listing. Until the earlier
of (i) such time as the Lenders or their respective assigns no
longer own Registrable Securities or (ii) the expiration of the
Effectiveness Period, the Borrower will cause the Common Stock to
continue to be registered under Section 12(g) of the Exchange Act,
will comply in all respects, with its reporting and filing
obligations under the Exchange Act, and will not take any action
or file any document (whether or not permitted by the Exchange Act
or the rules thereunder) to terminate or suspend such reporting
and filing obligations. The Borrower shall take further action as
any holder of Registrable Securities may reasonably request, all
to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by
(i) Rule 144 under the Securities Act, as such rule may be amended
from time to time, or (ii) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any
holder of Registrable Securities, the Borrower shall deliver to
such holder a written statement as to whether it has complied with
such information and requirements. Until the earlier of (i) such
time as the Lenders or their respective assigns no longer own
Registrable Securities or (ii) the expiration of the Effectiveness
Period, the Borrower shall use its reasonable business efforts to
continue the listing or trading of the Common Stock on Nasdaq, the
Nasdaq National Market or a principal exchange and comply in all
respects with the Borrower's reporting, filing and other
obligations under the bylaws or rules of Nasdaq and any exchange
or market on which shares of the Common Stock are then traded.
Section 8.2 Registration Requirements. The Borrower shall
use its reasonable business efforts to effect the registration of
the Registrable Securities (including without limitation the
execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable
regulations issued under the Securities Act) as would permit or
facilitate the resale or distribution of all the Registrable
Securities in the manner (including manner of sale) and in all
states reasonably requested by the holder thereof (each a
"Holder"). Such reasonable business efforts by the Borrower shall
include the following:
(a) the Borrower shall, as expeditiously as reasonably
possible after the Closing Date:
(i) Prepare and file a registration statement
with the Commission pursuant to Rule 415 under the Securities
Act on such appropriate registration form of the Commission
as shall be reasonably selected by the Borrower covering the
Registrable Securities (hereinafter referred to as a
"Registration Statement") within 45 days following the
Closing Date. Thereafter, the Borrower shall use its
reasonable business efforts to cause such Registration
Statement to be declared effective by the Commission within
90 days following the Closing Date. In the event that such
Registration Statement is not declared effective within 90
days following the Closing Date, there shall be a 30 day
grace period. The Borrower shall use its reasonable best
efforts to cause the Registration Statement to become
effective during this 30 day grace period, if applicable. In
the event that such Registration Statement has not been
declared effective within 120 days from the Closing Date,
then the Borrower shall, until the Registration Statement is
declared effective, pay in cash to the Lenders, and each of
them, an amount equal to 2% of the Loan then outstanding
(hereinafter referred to as the "Liquidated Damages")
advanced by such Lender for each 30 day period, or part
thereof, beginning on the 121st day following the Closing
Date (hereinafter referred to as the "Default Period") that
the Registration Statement has not been declared effective;
provided, however, that the Default Period shall terminate
and Liquidated Damages shall cease to accrue on the date upon
which all such Registrable Securities may be immediately sold
under Rule 144 in the reasonable opinion of counsel to the
Borrower (provided that the Borrower's transfer agent has
accepted an instruction from the Borrower to such effect). If
any applicable Default Period is less than 30 days such cash
payment shall be on a pro rata basis. Such cash payment shall
be calculated by the Borrower on the earlier of (i) the
effective date of such Registration Statement or (ii) the
last day of each Default Period, and a check in lawful money
of the United States of America shall be sent within
three business days of such calculation to each of the
Lenders. Following the initial effective date of such
Registration Statement, Liquidated Damages shall also be
payable to each of the Lenders by the Borrower for periods
(in excess of the time period in which the Borrower is
required to file a Current Report on Form 8-K) during which
the Registration Statement does not remain effective;
provided, however, that such Liquidated Damages shall not be
payable by the Borrower in the event that all such
Registrable Securities may be immediately sold by the Lenders
pursuant to Rule 144. Notwithstanding the foregoing, if the
Default Period commences from the failure of the Borrower to
cause to become effective the Registration Statement solely
by reason of the failure of any Lender to provide such
information as (i) the Borrower may reasonably request from
such Lender to be included in the Registration Statement or
(ii) the Commission or Nasdaq may request in connection with
such Registration Statement, the Borrower shall not be
required to pay such Liquidated Damages to such Lender during
the period of delay attributable to such Lender's failure.
The Borrower and the Lenders hereby acknowledge and agree
that it may be difficult, if not impossible, to determine
with any reasonable accuracy the actual damages arising from
the failure to secure effectiveness of the Registration
Statement by the time hereinbefore specified, or to maintain
the Registration Statement thereafter, and that the amount of
the Liquidated Damages is a reasonable estimate thereof,
provided that payment thereof shall in no manner be construed
as impairing the right of the Lenders, and each of them, to
require specific performance of this Agreement.
(ii) Prepare and file with the Commission such
amendments and supplements to such Registration Statement and
the prospectus used in connection with such Registration
Statement as may be necessary to comply with the provisions
of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement and notify
each of the Lenders of the filing and effectiveness of such
Registration Statement and any amendments or supplements.
(iii) Furnish to each of the Lenders such number
of copies of a current prospectus conforming with the
requirements of the Securities Act, copies of the
Registration Statement, any amendment or supplement thereto
and any documents incorporated by reference therein and such
other documents as each of the Lenders may reasonably require
in order to facilitate the disposition of Registrable
Securities owned by each of the Lenders.
(iv) Use its best efforts to register and qualify
the securities covered by such Registration Statement under
such other securities or "Blue Sky" laws of such
jurisdictions
as shall be reasonably requested by each of the Lenders;
provided that the Borrower shall not be required in
connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of
process in any such states or jurisdictions.
(v) Notify each of the Lenders immediately of
the happening of any event as a result of which the
prospectus (including any supplement thereto or thereof)
included in such Registration Statement, as then in effect,
includes an untrue statement of material fact or omits to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading in
light of the circumstances then existing, and use its best
efforts to promptly update and/or correct such prospectus.
(vi) Notify each of the Lenders immediately of
the issuance by the Commission or any state securities
commission or agency of any stop order suspending the
effectiveness of the Registration Statement or the initiation
of any proceedings for that purpose. The Borrower shall use
its reasonable best efforts to prevent the issuance of any
stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible time.
(vii) Permit a single firm of counsel, designated
by the Lenders, to review the Registration Statement and all
amendments and supplements thereto within a reasonable period
of time prior to each filing, and shall not file any document
in a form to which such counsel reasonably objects.
(viii) Use its reasonable business efforts to list
the Registrable Securities covered by such Registration
Statement with all securities exchange(s) and/or markets on
which the Common Stock is then listed, and prepare and file
any required filings with the National Association of
Securities Dealers, Inc. or any exchange or market where the
Common Stock is traded.
(ix) Otherwise use its reasonable business
efforts to comply with all applicable rules and regulations
of the Commission and make available to its security holders,
as soon as reasonably practicable, earnings statements
covering a period of twelve months beginning with three
months after the effective date of the Registration
Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
(b) The Borrower shall make available for inspection
by the Lenders and their representative(s), any underwriter
participating in any disposition pursuant to a Registration
Statement, and any attorney or accountant retained by the Lenders
or underwriter, all financial and other records customary for
purposes of the Lender's due diligence examination of the Borrower
and all SEC Documents filed subsequent to the Closing Date,
pertinent corporate documents and properties of the Borrower, and
cause the Borrower's officers, directors and employees to supply
all information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with such
Registration Statement, provided that such parties agree to keep
such information confidential.
Section 8.3 Expenses of Registration. All Registration
Expenses incurred in connection with any registration,
qualification or compliance with registration pursuant to this
Article VIII shall be borne by the Borrower, and all Selling
Expenses of any Lender shall be borne by such Lender.
Section 8.4 Registration Period. In the case of the
registration effected by the Borrower pursuant to this Article
VIII, the Borrower will use its reasonable business efforts to
keep such registration effective (hereinafter referred to as the
"Effectiveness Period") until the earliest to occur of (a) two
years from the date of exercise of the last Warrant to be
exercised prior to the expiration thereof, provided that, without
limiting any provision of Section 8.2(a)(i), the Borrower may
suspend the effectiveness of the Registration Statement if its
Board of Directors determines, upon advice of counsel, that in
order to maintain effectiveness of the Registration Statement, the
Borrower would be required to disclose a significant corporate
development which disclosure would have a material effect on the
Borrower; provided, however, that the period of time which such
Registration Statement is required to be effective shall be
increased by the number of days that the Registration Statement's
effectiveness was suspended, if any, (b) the date on which the
Lenders have completed the sale or distribution described in the
Registration Statement relating thereto, or (c) the date on which
such Registrable Securities may be sold under Rule 144(k) in the
reasonable opinion of counsel to the Borrower (provided that the
Borrower's transfer agent has accepted an instruction from the
Borrower to such effect).
Section 8.5 Indemnification. (a) The Borrower will indemnify
each holder of Registrable Securities, each of its officers,
directors and partners, and each person controlling such holder of
Registrable Securities, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder with
respect to which registration, qualification or compliance has
been effected pursuant to this Agreement, and each underwriter, if
any, and each person who controls, within the meaning of Section
15 of the Securities Act and the rules and regulations thereunder,
any underwriter, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a
material fact
contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the
like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any
violation by the Borrower of the Securities Act or any state
securities law or in either case, any rule or regulation
thereunder applicable to the Borrower and relating to action or
inaction required of the Borrower in connection with any such
registration, qualification or compliance, and will reimburse each
holder of Registrable Securities, each of its officers, directors
and partners, and each person controlling such holder of
Registrable Securities, each such underwriter and each person who
controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action,
provided that the Borrower will not be liable in any such case to
a holder of Registrable Securities to the extent that any such
claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission based upon written
information relating to such holder or underwriter and furnished
to the Borrower by such holder or the underwriter (if any)
therefor and stated to be specifically for use therein. The
indemnity agreement contained in this Section 8.5(a)shall not
apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without
the consent of the Borrower(which consent will not be unreasonably
withheld).
(b) Each holder of Registrable Securities will,
severally and not jointly, if Registrable Securities held by it
are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the
Borrower, each of its directors, officers, partners, and each
underwriter, if any, of the Borrower's securities covered by such
a registration statement, each person who controls the Borrower or
such underwriter within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder, each
other holder of Registrable Securities (if any), and each of their
directors, officers and partners, and each person controlling such
other holder(s) of Registrable Securities against all claims,
losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement
therein not misleading, in each case only insofar as such untrue
statement or alleged untrue statement or omission relates to such
holder of Registrable Securities, and will reimburse the Borrower
and such other holder(s) of Registrable Securities and their
directors, officers and partners, underwriters or control persons
for any
legal or any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished
to the Borrower by such holder of Registrable Securities and
stated to be specifically for use therein, and provided that the
maximum amount for which such holder of Registrable Securities
shall be liable under this indemnity shall not exceed the net
proceeds received by such holder of Registrable Securities from
the sale of the Registrable Securities. The indemnity agreement
contained in this Section 8.5(b) shall not apply to amounts paid
in settlement of any such claims, losses, damages or liabilities
if such settlement is effected without the consent of such holder
of Registrable Securities (which consent shall not be unreasonably
withheld).
(c) Each party entitled to indemnification under this
Article (hereinafter referred to as the "Indemnified Party") shall
give notice to the party required to provide indemnification
(hereinafter referred to as the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as
to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim in any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the
failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under
this Article VIII except to the extent that the Indemnifying Party
is materially and adversely affected by such failure to provide
notice. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified
Party, 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 Party
of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and
litigation resulting therefrom.
Section 8.6 Contribution. If the indemnification provided
for in this Article VIII herein is unavailable to the Indemnified
Parties in respect of any losses, claims, damages or liabilities
referred to herein (other than by reason of the exceptions
provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of
such losses, claims, damages or liabilities as between the
Borrower on the one hand and any holder of Registrable Securities
on the other, in such proportion as is appropriate to reflect the
relative fault of the Borrower and of such holder of Registrable
Securities in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault
of the Borrower on the one hand and of any holder of Registrable
Securities on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material
fact relates to information supplied by the Borrower or by such
holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 8.6 exceed the amount that such
Indemnifying Party would have been obligated to pay by way of
indemnification if the indemnification provided for under Section
8.5(a) or 8.5(b) hereof had been available under the
circumstances.
The Borrower and the Lenders agree that it would not be just
and equitable if contribution pursuant to this Section 8.6 were
determined by pro rata allocation (even if the holders or the
underwriters were treated as one entity for such purpose) or by
any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as
a result of the losses, claims, damages and liabilities referred
to in the immediately preceding paragraphs shall be deemed to
include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this section, no holder
of Registrable Securities or underwriter shall be required to
contribute any amount in excess of the amount by which (i) in the
case of any holder, the net proceeds received by such holder from
the sale of Registrable Securities or (ii) in the case of an
underwriter, the total price at which the Registrable Securities
purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that
such holder or underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement, omission or
alleged omission. 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.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Modification of Agreement. No modification,
amendment or waiver of any provision of, nor any consent required
by, this Agreement, nor any consent to any departure by the
Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Required Lenders and
then such modification, amendment, waiver or consent shall be
effective only in the specific instance and for the purpose which
given; provided, however, that, without the written consent of the
affected Lender, no such action shall: reduce the amount of
principal or required principal payments due to such Lender;
reduce the rate of interest payable to such Lender; postpone any
date fixed for payment of principal or interest to such Lender; or
amend the definition of "Required Lenders". No notice to or demand
on the Borrower in any case shall entitle the Borrower to any
other or further notice or demand in the same, similar or other
circumstances.
Section 9.2 Remedies Cumulative, etc. No right, power or
remedy herein conferred upon or reserved to the Lenders is
intended to be exclusive of any other right, power or remedy or
remedies, and each and every right, power and remedy of the
Lenders, or any of them, pursuant to this Agreement, or the other
Loan Documents, now or hereafter existing at law or in equity or
by statute or otherwise shall, to the extent permitted by law, be
cumulative and concurrent and shall be in addition to every other
right, power or remedy pursuant to this Agreement, or the other
Loan Documents, or now or hereafter existing at law or in equity
or by statute or otherwise, and the exercise or beginning of the
exercise by the Lenders, or any of them, of any one or more of
such rights, powers or remedies shall not preclude the
simultaneous or later exercise by the Lenders of any or all such
other rights, powers or remedies.
Section 9.3 No Waiver, etc. To the fullest extent permitted
by law, no failure or delay by the Lenders, or any of them, to
insist upon the strict performance of any term, condition,
covenant or agreement of this Agreement or the other Loan
Documents, or to exercise any right, power or remedy hereunder or
thereunder or consequent upon a breach hereof or thereof, shall
constitute a waiver of any such term, condition covenant,
agreement, right, power or remedy or of any such breach, or
preclude the Lenders, or any of them, from exercising any such
right, power or remedy at any later time or times.
Section 9.4 Notices. All notices, requests or instructions
hereunder shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid, or by telecopy (or
like transmission) as follows:
(1) if to the Borrower:
0000 X.X. 00xx Xxxxxx
Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxx,
Chief Executive Officer
with a copy to:
Xxxx X. Xxxxxxx, Esq.
Xxxxxxxxx Xxxxxxx, P.A.
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
(2) if to the Lenders, at the addresses set forth
on Annex 1, with a copy to:
Xxxxxx Xxxxxx, Esq.
Krugman & Kailes LLP
Park 00 Xxxx - Xxxxx Xxx
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
Any notice so addressed and mailed shall be deemed to be given
when so mailed. Any notices addressed and otherwise delivered
shall be deemed to be given when actually received by the
addressee. Any of the above addresses or telecopy numbers may be
changed at any time by notice given as provided above; provided,
however, that any such notice of change of address shall be
effective only upon receipt.
Section 9.5 Survival of Representations. Each
representation, warranty, covenant and agreement of the parties
hereto herein contained shall survive the Closing Date,
notwithstanding any investigation at any time made by or on behalf
of any party hereto.
Section 9.6 Entire Agreement. This Agreement and the other
Loan Documents referred to herein contain the entire agreement
between the parties hereto with respect to the transactions
contemplated hereby, and supersede all prior understandings,
arrangements and agreements with respect to the subject matter
hereof.
Section 9.7 Expenses. The Borrower shall promptly pay, or
reimburse the Lenders, and each of them, on demand for, all
out-of-pocket fees and expenses incurred by it, including, without
limitation, the reasonable fees and expenses of counsel to the
Lenders, in connection with the negotiation, preparation,
execution and delivery of this Agreement and the other Loan
Documents and any other instruments and documents required
hereunder and thereunder (whether or not the transactions
contemplated hereby shall be consummated). The Borrower shall also
reimburse the Lenders, for all out-of-pocket fees and expenses
incurred by it, including without limitation the reasonable fees
and expenses of counsel, in the enforcement of this Loan Agreement
or the other Loan Documents.
Section 9.8 Benefit of Agreement. This Loan Agreement shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns; provided, however, that
the Borrower may not assign any of its rights or obligations under
this Agreement or the other Loan Documents without the prior
written consent of the Lenders. Without limiting the generality of
the foregoing and notwithstanding any other provision contained in
this Agreement or the other Loan Documents, the Lenders, or any of
them, may, at any time, sell or otherwise assign all or any part
of their respective Notes and any related rights hereunder and
under any of the Loan Documents to their respective Affiliates
and, with the prior written consent of the Borrower (which shall
not be unreasonably withheld or delayed) to any non-Affiliate. The
foregoing shall not in any manner restrict the grant of any
participating interest therein and in any related rights hereunder
and under any of the Loan Documents, nor the assignment or
transfer of any rights under any Warrant Certificate or under
Article VIII hereunder.
Section 9.9 Governing Law. This Loan Agreement shall be
governed by and construed in accordance with the laws of the State
of New York applicable in the case of agreements made and to be
performed entirely within such state.
Section 9.10 Captions. The captions appearing herein are for
the convenience of the parties only and shall not be construed to
affect the meaning of the provisions of this Agreement.
Section 9.11 Severability. In the event that one or more of
the provisions of this Agreement shall for any reason be held to
be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, but this Agreement shall be
construed as if such invalid, illegal or unenforceable provision
and never been contained herein.
Section 9.12 SUBORDINATION. THE RIGHTS AND REMEDIES OF THE
LENDERS HEREUNDER ARE SUBJECT TO AND SUBORDINATED TO THE TERMS AND
PROVISIONS OF THOSE CERTAIN SUBORDINATION AGREEMENTS, EACH DATED
THE DATE HEREOF, ENTERED INTO BY THE LENDERS, RESPECTIVELY, WITH
CAPITAL BUSINESS CREDIT, A DIVISION OF CAPITAL FACTORS, INC.
Section 9.13 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, this Loan Agreement has duly executed by
the parties hereto as of the date first-above written.
SYSTEMONE TECHNOLOGIES INC.
By s/Xxxx Xxxxxx
---------------------------
HANSEATIC AMERICAS LDC
By: Hansabel Partners LLC
By: Hanseatic Corporation
By s/Xxxx X. Xxxxxxxxx
---------------------------
Xxxx X. Xxxxxxxxx
President
ENVIRONMENTAL OPPORTUNITIES
FUND II, L.P.
By: Fund II Mgt. Co., LLC
General Partner
By s/Xxxxx X. XxXxxxx
---------------------------
Xxxxx X. XxXxxxx
Manager
ENVIRONMENTAL OPPORTUNITIES
FUND II (INSTITUTIONAL), L.P.
By: Fund II Mgt. Co., LLC
General Partner
By s/Xxxxx X. XxXxxxx
---------------------------
Xxxxx X. XxXxxxx
Manager
ANNEX 1
Proportionate Proportionate Allocation of
Lender Share Amount of Loan Initial Warrants
Hanseatic Americas LDC 50% $1,250,000 357,143
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Environmental Opportunities 10.7% 267,500 76,429
Fund II, L.P.
x/x Xxxxxxx Xxxxxx Xxxxxx
0000 Xxxxx Tower
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Environmental Opportunities Fund II 39.3% 982,500 280,714
(Institutional), L.P. ----------
c/o Sanders Xxxxxx Xxxxxx $2,500,000
3100 Chase Tower
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
EXHIBIT A
SYSTEMONE TECHNOLOGIES INC.
PROMISSORY NOTE
$ August 7, 2000
----------- New York, New York
SECTION 1. General. SYSTEMONE TECHNOLOGIES INC., a Florida
corporation (hereinafter referred to as the "Borrower"), with
offices at 0000 X.X. 00xx Xxxxxx, Xxxxx, Xxxxxxx 00000, for value
received, hereby promises to pay to , or
order, the principal amount of $ , on the Maturity
Date (as defined in the Loan Agreement hereinafter described), in
such coin or currency of the United States of America as at the
time of payment shall be legal tender therein for the payment of
public and private debts and to pay interest on such principal
amount at the rates and on the dates described in Section 2.3 of
the Loan Agreement hereinafter described. The Borrower further
agrees to pay interest at such rates described in Section 2.5 of
the Loan Agreement hereinafter described on any overdue principal
and (to the extent permitted by law) on any overdue interest,
from the due date thereof until the obligation of the Borrower
with respect to the payment thereof shall be discharged; all
payments and prepayments of principal of this Note and all
payments of the interest on this Note to be made at
, or such other location as shall be specified in writing
by the holder of this Note to the Borrower.
SECTION 2. Governing Law. This Note shall be governed by
and construed in accordance with the laws of the State of New
York applicable to agreements made and to be performed entirely
within such state.
SECTION 3. Related Agreements. This Note is issued
pursuant to, and is one of the Notes referred to in, the Loan
Agreement dated as of August 7, 2000 (herein referred to as the
"Loan Agreement") among the Borrower, Hanseatic Americas LDC,
Environmental Opportunities Fund II, L.P. and Environmental
Opportunities Fund II (Institutional), L.P., and is entitled to
the benefits and subject to the provisions thereof (including,
without limitation, those providing for the optional and
mandatory prepayment of this Note and the acceleration of the
maturity hereof), and to the benefits of the Security Agreement,
dated the date hereof, among the Borrower, Hanseatic Americas
LDC, Environmental Opportunities Fund II, L.P. and Environmental
Opportunities Fund II (Institutional), L.P. Copies of such
agreements may be obtained by any holder of this Note at the
principal executive offices of the Borrower.
SECTION 4. SUBORDINATION. THE RIGHTS AND REMEDIES OF THE
HOLDER HEREOF ARE SUBJECT TO AND SUBORDINATED TO THE TERMS AND
PROVISIONS OF A SUBORDINATION AGREEMENT, DATED OF EVEN DATE
HEREOF, ENTERED INTO WITH CAPITAL BUSINESS CREDIT, A DIVISION OF
CAPITAL FACTORS, INC.
IN WITNESS WHEREOF, the undersigned has executed this
Note as of the date first-above written.
SYSTEMONE TECHNOLOGIES INC.
By
-------------------------
Xxxx Xxxxxx
Chief Executive Officer
EXHIBIT B
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD,
OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF,
UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THE SECURITIES
ACT OR AN OPINION OF COUNSEL IS OBTAINED STATING THAT SUCH
DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM
SUCH REGISTRATION.
August 7, 2000
SYSTEMONE TECHNOLOGIES INC.
(Incorporated under the laws of the State of Florida)
Warrant for the Purchase of Shares of Common Stock
No. WRT-___
FOR VALUE RECEIVED, SYSTEMONE TECHNOLOGIES INC., a Florida
corporation (the "Company"), hereby certifies that
or assigns (the "Holder") is entitled, subject to the
provisions of this Warrant, to purchase from the Company, up to
( ) fully paid and
non-assessable shares of Common Stock at a price of $3.50 per
share (the "Exercise Price").
The term "Common Stock" means the Common Stock, par value
$.001 per share, of the Company as constituted on the date of
issuance of this Warrant (the "Base Date"). The number of shares
of Common Stock to be received upon the exercise of this Warrant
may be adjusted from time to time as hereinafter set forth. The
shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter referred to as
"Warrant Stock." The term "Other Securities" means any other
equity or debt securities that may be issued by the Company in
addition thereto or in substitution for the Warrant Stock in
accordance with the terms hereof. The term "Company" means and
includes the corporation named above as well as (i) any immediate
or more remote successor corporation resulting from the merger or
consolidation of such corporation (or any immediate or more
remote successor corporation of such corporation) with another
corporation, or (ii) any corporation to which such corporation
(or any immediate or more remote successor corporation of such
corporation) has transferred its property or assets as an
entirety or substantially as an entirety.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Warrant, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date. Any
such new Warrant executed and delivered shall constitute an
additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed or
mutilated shall be at any time enforceable by anyone.
The Holder agrees with the Company that this Warrant is
issued, and all the rights hereunder shall be held subject to,
all of the conditions, limitations and provisions set forth
herein.
1. Exercise of Warrant.
1.1 Cash Exercise. This Warrant may be exercised, in whole or in
part, at any time, or from time to time during the period
commencing on the date hereof and expiring 5:00 p.m. Eastern Time
on the fifth anniversary of the Base Date (the "Expiration Date"),
by presentation and surrender of this Warrant to the Company at
its principal office, or at the office of its stock transfer
agent, if any, with the Warrant Exercise Form attached hereto duly
executed and accompanied by payment (either in cash or by
certified or official bank check, payable to the order of the
Company) of the Exercise Price for the number of shares specified
in such form and instruments of transfer, if appropriate, duly
executed by the Holder or his or her duly authorized attorney;
provided, however, that, prior to the date which falls nine months
after the Base Date, this Warrant may not be exercised with
respect to in excess of 50% of the maximum amount of Warrant Stock
issuable under this Warrant and, prior to the first anniversary of
the Base Date, this Warrant may not be exercised with respect to
in excess of 75% of the maximum amount of Warrant Stock issuable
under this Warrant; and, provided, further, that, in the event the
entire Loan (as hereinafter defined), and all interest thereon,
advanced by the original Holder of this Warrant pursuant to the
Loan Agreement dated as of the date of this Warrant (the "Loan
Agreement") is satisfied on or prior to the date which falls nine
months after the Base Date, this Warrant may not thereafter be
exercised with respect to in excess of 50% of the maximum amount
of Warrant Stock issuable under this Warrant and, in the event
that the entire Loan, and all interest thereon, advanced by the
original Holder of this Warrant pursuant to the Loan Agreement is
satisfied on or prior to the date which falls on the first
anniversary of the Base Date, this Warrant may not thereafter be
exercised with respect to in excess of 75% of the maximum amount
of Warrant Stock issuable under this Warrant. For purposes hereof,
the "Loan" shall have the meaning set forth in the Loan Agreement.
If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute
and deliver a new Warrant evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable
hereunder. Upon receipt by the Company of this Warrant, together
with the Exercise Price, at its office, or by the stock transfer
agent of the Company at its office, in proper form for exercise,
the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder.
The Company shall pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock on exercise of this Warrant.
1.2 Cashless Exercise. This Warrant may be exchanged, in whole
or in part (subject to the limitations on exercise hereinabove set
forth in Section 1.1) (a "Warrant Exchange"), at any time, or from
time to time, during the period commencing on the date hereof and
ending on the Expiration Date, into the number of shares of Common
Stock determined in accordance with this Section 1.2, by
presentation and surrender of this Warrant to the Company at its
principal office, or at the office of its stock transfer agent, if
any, accompanied by a notice (a "Notice of Exchange") stating that
this Warrant is being exchanged and the number of shares of Common
Stock to be exchanged. In connection with any Warrant Exchange,
this Warrant shall represent the right to subscribe for and
acquire the number of shares of Common Stock (rounded to the
nearest whole number) equal to (i) the number of shares specified
by the Holder in its Notice of Exchange (the "Total Number") less
the number of shares equal to the quotient obtained by dividing
(A) the product of the Total Number and the then applicable
Exercise Price by (B) the then fair market value (determined in
accordance with Section 3 below) per share of Common Stock. If
this Warrant should be exchanged in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder. Upon
receipt by the Company of this Warrant, together with a duly
executed Notice of Exchange, at its office, or by the stock
transfer agent of the Company at its office, the Holder shall be
deemed to be the holder of record of the shares of Common Stock
issuable upon such exchange, notwithstanding that the stock
transfer books of the Company shall then be closed or that
certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder. The Company shall pay
any and all documentary stamp or similar issue or transfer taxes
payable in respect of the issue or delivery of shares of Common
Stock on exchange of this Warrant.
2. Reservation of Shares. The Company will at all times
reserve for issuance and delivery upon exercise of this Warrant
all shares of Common Stock or other shares of capital stock of
the Company (and Other Securities) from time to time receivable
upon exercise of this Warrant. All such shares (and Other
Securities) shall be duly authorized and, when issued upon such
exercise, shall be validly issued, fully paid and non-assessable
and free of all preemptive rights.
3. Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise
of this Warrant, but the Company shall pay the Holder an amount
equal to the fair market value of such fractional share of Common
Stock in lieu of each fraction of a share otherwise called for
upon any exercise of this Warrant. For purposes of this Warrant,
the fair market value of a share of Common Stock shall be
determined as follows:
(a) If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the NASDAQ system, the current
market value shall be the last reported sale price of the Common
Stock on such exchange or system on the last business day prior to
the date of exercise of this Warrant or if no such sale is made on
such day, the average of the closing bid and asked prices for such
day on such exchange or system; or
(b) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of
the last reported bid and asked prices reported by the National
Quotation Bureau, Inc. on the last business day prior to the date
of the exercise of this Warrant; or
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported,
the current market value shall be an amount, not less than book
value thereof as at the end of the most recent fiscal year of the
Company ending prior to the date of the exercise of the Warrant,
determined by the Board of Directors of the Company in good faith.
4. Exchange, Transfer, Assignment or Loss of Warrant.
This Warrant is exchangeable, without expense, at the option of
the Holder, upon presentation and surrender hereof to the Company
or at the office of its stock transfer agent, if any, for other
Warrants of different denominations, entitling the Holder or
Holders thereof to purchase in the aggregate the same number of
shares of Common Stock purchasable hereunder. Upon surrender of
this Warrant to the Company or at the office of its stock
transfer agent, if any, with the Assignment Form annexed hereto
duly executed and funds sufficient to pay any transfer tax,
subject to the provisions of Section 7 hereof, the Company shall,
without charge, execute and deliver a new Warrant in the name of
the assignee named in such instrument of assignment and this
Warrant shall promptly be canceled. This Warrant may be divided
or combined with other Warrants that carry the same rights upon
presentation hereof at the office of the Company or at the office
of its stock transfer agent, if any, together with a written
notice specifying the names and denominations in which new
Warrants are to be issued and signed by the Holder hereof.
5. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder in the
Company, either at law or in equity, and the rights of the Holder
are limited to those expressed in this Warrant.
6. Anti-Dilution Provisions.
6.1 Adjustment for Recapitalization. If the Company shall at any
time subdivide its outstanding shares of Common Stock (or Other
Securities at the time receivable upon the exercise of the
Warrant) by recapitalization, reclassification or split-up
thereof, or if the Company shall declare a stock dividend or
distribute shares of Common Stock to its shareholders, the number
of shares of Common Stock subject to this Warrant immediately
prior to such subdivision shall be proportionately increased and
the Exercise Price shall be proportionately decreased, and if the
Company shall at any time combine the outstanding shares of Common
Stock by recapitalization, reclassification or combination
thereof, the number of shares of Common Stock or Other Securities
subject to this Warrant immediately prior to such combination
shall be proportionately decreased and the Exercise Price shall be
proportionately increased. Any such adjustments pursuant to this
Section 6.1 shall be effective at the close of business on the
effective date of such subdivision or combination or if any
adjustment is the result of a stock dividend or distribution then
the effective date for such adjustment based thereon shall be the
record date therefor.
6.2 Adjustment for Reorganization, Consolidation, Merger, Etc.
In case of any reorganization of the Company (or any other entity,
the securities of which are at the time receivable on the exercise
of this Warrant) after the Base Date or in case after such date
the Company (or any such other entity) shall consolidate with or
merge into another entity or convey all or substantially all of
its assets to another entity, then, and in each such case, the
Holder of this Warrant upon the exercise thereof as provided in
Section 1 at any time after the consummation of such
reorganization, consolidation, merger or conveyance, shall be
entitled to receive, in lieu of the securities and property
receivable upon the exercise of this Warrant prior to such
consummation, the securities or property to which such Holder
would have been entitled upon such consummation if such Holder had
exercised this Warrant immediately prior thereto; in each such
case, the terms of this Warrant shall be applicable to the
securities or property receivable upon the exercise of this
Warrant after such consummation.
6.3 No Dilution.
(a) From the date of issuance of this Warrant
until the later of (1) the first anniversary date of such issuance
and (2) the date on which the Company first consummates a sale of
shares of its equity securities (within the meaning of Section
3(a)(11) of the Securities Exchange Act of 1934, as amended) or
debt securities convertible into equity securities for gross cash
proceeds to the Company of more than $2.0 million (such period
through such later date, hereinafter referred to as the "Reset
Period") other than Excluded Shares (as hereinafter defined), if
the Company shall issue or enter into any agreement to issue any
shares of Common Stock other than Excluded Shares for
consideration per share (the "Issuance Price") less than the
Exercise Price per share in effect immediately prior to such
issuance, the Exercise Price in effect immediately prior to such
issuance shall be reduced (but shall not be increased) to the
Issuance Price. For purposes hereof, the term "Excluded Shares"
shall mean (1) any shares of Common Stock issued in a transaction
described in Sections 6.1 and 6.2 of this Warrant; (2) issuances
of shares of Common Stock from time to time pursuant to employment
agreements, stock option or bonus plans authorized by the Board of
Directors of the Corporation as of the date hereof, (3) issuances
of Common Stock, or options to acquire shares of Common Stock, or
securities convertible into or exchangeable for Common Stock
pursuant to the terms of any acquisition by the Company of all or
substantially all of the operating assets, or more than fifty
percent (50%) of the voting capital stock or other controlling
interest of any business entity in a transaction negotiated on an
arms-length basis and expressly approved in advance by the Board
of Directors of the Company; (4) issuances of shares of Common
Stock from time to time upon the exercise, exchange or conversion
of warrants, options, convertible securities, the Company's
outstanding 8-1/4% Subordinated Convertible Notes Due 2003 or
other securities outstanding as of the date hereof and pursuant to
the written terms of such securities as they exist as of the date
hereof, and (5) issuances of shares of Common Stock from time to
time pursuant to the anti-dilution provisions of other securities
of the Company, including shares of the Company's outstanding
Series B, Series C and Series D Convertible Preferred Stock. For
purposes hereof, "voting capital stock" shall be deemed to be
capital stock of any class or classes, however designated having
ordinary voting power for the election of members of the board of
directors or other governing body and "controlling" shall mean the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a party,
whether through the ownership of voting capital stock, by contract
or otherwise.
(b) If, at any time from the date of issuance of
this Warrant, the Company shall issue or enter into any agreement
to issue any shares of Common Stock other than Excluded Shares for
consideration per share lower than the market price per share in
effect immediately prior to such issuance, the Exercise Price in
effect immediately prior to such issuance shall be reduced (but
shall not be increased) to the price (calculated to the nearest
cent) determined by multiplying the Exercise Price in effect
immediately prior to such issuance by the factor determined by
dividing (1) an amount equal to the sum of (A) the number of
shares of Common Stock outstanding on a fully diluted basis
immediately prior to such issuance multiplied by the market price
per share in effect immediately prior to such issuance and (B) the
consideration, if any, received by the Company upon such issuance
by (2) the number of shares of Common Stock outstanding on a fully
diluted basis immediately after such issuance multiplied by the
market price per share in effect immediately prior to such
issuance; provided, however, no adjustment shall be made to the
Exercise Price if (1) such issuance is in connection with a firm
commitment underwritten public offering or (2) the consideration
per share is equal to or greater than 85% of the market price per
share in effect immediately prior to such issuance. For purposes
hereof, the "market price" as of any measurement date shall be the
average of the closing prices of the Common Stock for each of the
10 consecutive trading days immediately preceding such measurement
date.
(c) The Company will not, by amendment of its
Articles of Incorporation or through reorganization,
consolidation, merger, dissolution, issue or sale of securities,
sale of assets or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the
rights of the Holder of this Warrant against dilution or other
impairment.
(d) For further clarity, any change to the
exercise price or other terms of the 8-1/4% Subordinated
Convertible Notes Due 2003 shall not count to determining the
Reset Period, but shall be taken into account in determining
whether any adjustment to the Exercise Price is due under this
Section 6.3.
(e) The Exercise Price shall be subject to
adjustment from time to time as previously provided in this
section 6.3. Upon each adjustment of the Exercise Price, the
holder of the Warrant evidenced hereby shall thereafter be
entitled to purchase, at the Exercise Price resulting from such
adjustment, the number of shares of Common Stock (calculated to
the nearest whole share pursuant to Section 3) obtained by
multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment and dividing the product by
the Exercise Price resulting from such adjustment.
6.4 Certificate as to Adjustments. In each case of an adjustment
in the number of shares of Warrant Stock or Other Securities
receivable on the exercise of this Warrant, or the Exercise Price,
the Company at its expense will promptly compute such adjustment
in accordance with the terms of this Warrant and prepare a
certificate executed by an executive officer of the Company
setting forth such adjustment and showing in detail the facts upon
which such adjustment is based. The Company will forthwith mail a
copy of each such certificate to the Holder.
6.5 Notices of Record Date, Etc. In case:
(a) the Company shall take a record of the holders of its Common
Stock (or Other Securities at the time receivable upon the
exercise of the Warrant) for the purpose of entitling them to
receive any dividend (other than a cash dividend at the same rate
as the rate of the last cash dividend theretofore paid) or other
distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities,
or to receive any other right; or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into another
entity, or any conveyance of all or substantially all of the
assets of the Company to another entity; or
(c) of any voluntary or involuntary dissolution, liquidation,
partial liquidation or winding up of the Company, or
(d) any event resulting in the expiration of the Reset Period,
then, and in each such case, the Company shall mail or cause to be
mailed to each Holder of the Warrant at the time outstanding a
notice specifying, as the case may be, (i) the date on which a
record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of
such dividend, distribution or right, or (ii) the date on which
such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding up is to take
place, and the time, if any, to be fixed, as to which the holders
of record of Common Stock (or such other securities at the time
receivable upon the exercise of the Warrant) shall be entitled to
exchange their shares of Common Stock (or such other securities)
for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding up. Such notice
shall be mailed at least 20 days prior to the date therein
specified.
7. Transfer to Comply with the Securities Act.
Notwithstanding any other provision contained herein, this
Warrant and any Warrant Stock or Other Securities may not be
sold, transferred, pledged, hypothecated or otherwise disposed of
except as follows: (a) to a person who, in the opinion of
counsel to the Company, is a person to whom this Warrant or the
Warrant Stock or Other Securities may legally be transferred
without registration and without the delivery of a current
prospectus under the Securities Act with respect thereto; or (b)
to any person upon delivery of a prospectus then meeting the
requirements of the Securities Act relating to such securities
and the offering thereof for such sale or disposition, and
thereafter to all successive assignees.
8. Legend. Unless the shares of Warrant Stock or Other
Securities have been registered under the Securities Act, upon
exercise of any of the Warrants and the issuance of any of the
shares of Warrant Stock or Other Securities, all certificates
representing such securities shall bear on the face thereof
substantially the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be sold, offered for sale, assigned, transferred or otherwise
disposed of, unless registered pursuant to the provisions of that
Act or unless an opinion of counsel is obtained stating that such
disposition is in compliance with an available exemption from such
registration.
9. Notices. All notices required hereunder shall be in
writing and shall be deemed given when telegraphed, delivered
personally or within two days after mailing when mailed by
certified or registered mail, return receipt requested, to the
Company at its principal office, or to the Holder at the address
set forth on the record books of the Company, or at such other
address of which the Company or the Holder has been advised by
notice hereunder.
10. Applicable Law. The Warrant is issued under and shall
for all purposes be governed by and construed in accordance with
the laws of the State of Florida, without giving effect to the
choice of law rules thereof.
IN WITNESS HEREOF, the Company has caused this Warrant to be
signed on its behalf, in its corporate name, by its duly
authorized officer, all as of the day and year first above
written.
SYSTEMONE TECHNOLOGIES INC.
By:
-------------------------
Name: Xxxx Xxxxxx
Title: Chief Executive Officer
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing ____________ shares of Common
Stock of SystemOne Technologies Inc., a Florida corporation, and
hereby makes payment of $____________ in payment therefor.
Signature
Signature, if jointly held
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered holder of the within Warrant)
Name
(Please typewrite or print in block letters)
Address
Social Security or
Taxpayer Identification Number
ASSIGNMENT FORM
FOR VALUE RECEIVED,
hereby sells, assigns and transfers unto
Name
(Please typewrite or print in block letters)
the right to purchase Common Stock of SystemOne Technologies Inc.,
a Florida corporation, represented by this Warrant to the extent
of shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint
___________________________________________ Attorney, to transfer
the same on the books of the Company with full power of
substitution in the premises.
DATED: ____________, 200_.
Signature
Signature, if jointly held
EXHIBIT C
SECURITY AGREEMENT
AGREEMENT dated as of August 7, 2000, by and among SYSTEMONE
TECHNOLOGIES INC., a corporation duly organized and validly
existing under the laws of the State of Florida (hereinafter
referred to as the "Borrower"), and the undersigned ENVIRONMENTAL
OPPORTUNITIES FUND II, L.P., ENVIRONMENTAL OPPORTUNITIES FUND II
(INSTITUTIONAL), L.P., and HANSEATIC AMERICAS LDC (hereinafter
referred to, collectively, as the "Lenders" and, individually, as
a "Lender").
W I T N E S S E T H:
WHEREAS, under the terms and conditions of a Loan Agreement
dated as of August 7, 2000 (hereinafter referred to as the "Loan
Agreement") among the Borrower and the Lenders, the Lenders have
agreed to advance to the Borrower the aggregate principal amount
of $2,500,000 (hereinafter referred to as the "Loan"), which Loan
is to be evidenced by certain Notes dated the date hereof
(hereinafter referred to, collectively, as the "Notes"), with
payment of the Notes and any other obligations of the Borrower to
the Lender to be secured as provided for in the Loan Agreement;
WHEREAS, pursuant to the Loan Agreement, the Borrower has
agreed to execute and deliver to the Lenders this Security
Agreement granting the Lenders, and each of them, a lien on and
security interest in the Collateral herein described to secure the
Borrower's payment and discharge of all of its obligations under
the Loan Agreement and the Notes;
NOW, THEREFORE, in consideration of the premises and
agreements hereinafter set forth, the parties hereto hereby agree
as follows:
1. Definitions. For purposes of this Agreement, the term
"Collateral" shall mean: all of the Borrower's accounts, contract
rights, chattel paper, deposit accounts, general intangibles,
goods, choses in action, documents and instruments; all
obligations owing to the Borrower; all tax refunds to which the
Borrower may be or become entitled; all of the Borrower's books of
account of every kind and nature, including, without limitation,
all electronically recorded data relating to the Borrower or its
business; all inventory, including raw materials, work in process
and other tangible personal property held for sale or lease or
furnished or to be furnished under contracts of service or used or
consumed in the Borrower's business, wherever located, whether now
existing or hereafter arising, now or hereafter received by or
belonging to the Borrower; and the proceeds of, products of,
repossessions and returns of, additions and accessions to, and
replacements for, all of the foregoing, including all rights to
insurance and the proceeds thereof concerning any of the
foregoing; provided, however, that general intangibles as
aforesaid shall not include goodwill, patents, trade names,
trademarks, blue prints, drawings and infringement claims. The
security interest hereby claimed relates to all of the foregoing
types of Collateral, whether now owned or hereafter acquired or
arising. The claim of proceeds shall not be construed to be a
consent to the disposition of any of the foregoing Collateral.
Non-capitalized terms used herein to describe the Collateral shall
have the definitions used in the Uniform Commercial Code as
enacted in the State of Florida.
2. Creation of Security Interest. As an inducement to the
Lenders, and each of them, to enter into the Loan Agreement, to
make the Loan, and to secure prompt payment, performance and
discharge in full of all the Borrower's obligations (hereinafter
referred to as the "Obligations") on the part of the Borrower to
be performed under the Loan Agreement and the Notes, the Borrower
hereby unconditionally and irrevocably grants to the Lenders, and
each of them, a continuing security interest in, a lien upon and a
right of set-off against all of the Collateral, which shall be
senior and first-in-right with respect to all other security
interests and liens other than the interest of Capital Business
Credit, a division of Capital Factors, Inc. (hereinafter referred
to as "Capital") pursuant to that certain Loan and Security
Agreement dated May 17, 1999, as amended December 21, 1999
(hereinafter referred to as the "Senior Credit Agreement") between
the Borrower and Capital and other Permitted Encumbrances (as
defined in the Loan Agreement). Upon the payment, performance and
discharge in full of all Obligations, the security interest
granted herein shall expire.
3. Financing Statements. The right is expressly granted to
the Lenders, or any of them, in their respective sole discretion,
to file one or more financing statements without the signature of
the Borrower under the Uniform Commercial Code, as enacted in any
jurisdiction in which perfection of the security interest granted
to the Lenders hereunder is required, naming the Borrower as
debtor under Section 2 hereof and the Lenders as secured parties
and indicating therein the items to be secured, or any of them,
herein specified, and such other documentation shall be reasonably
required by the Lenders, or any of them, so as to perfect the
security interest granted to the Lenders, and each of them,
hereunder pursuant to the laws of any jurisdiction in which such
perfection is required. The Borrower will, upon request by the
Lenders, execute such financing statements and other notices,
affidavits or other documents as the Lenders, or any of them, may
deem necessary to protect its security interest granted under
Section 2 hereof. Without the prior written consent of the
Required Lenders (as hereinafter defined), the Borrower will not
file or authorize or permit to be filed in any jurisdiction any
such financing or like statement, with respect to the Collateral
in which the Lenders, and each of them, are not named as the
secured parties or grant or permit the placing upon the Collateral
of any lien other than that granted hereby except as expressly
provided in this Agreement or in the Senior Credit Agreement. All
filing costs under this Section 3 shall be borne by the Borrower.
For purposes hereof, the term "Required Lenders" shall mean, at
any time, those Lenders holding Notes, evidencing two-thirds or
more of the aggregate principal amount then outstanding and
evidenced by all Notes.
4. Representations, Warranties and Covenants. The Borrower
hereby represents and warrants to, and covenants with, the Lenders
that:
(a) The Borrower (i) has, and shall have at all times
hereafter until all of the Obligations shall have been paid in
full, good and marketable title to the Collateral and (ii) owns,
and shall own at all times hereafter until all of the obligations
shall have been paid in full, the Collateral and each such item
free and clear of all liens, charges, encumbrances, taxes and
assessments of any kind or nature whatsoever subject only to the
Permitted Encumbrances and except as permitted under the Loan
Agreement and hereunder. Without limiting the generality of the
foregoing, the Factoring Agreement, License Agreement and Security
Agreement Supplement, each dated November 26, 1997, between
Capital Factors, Inc. and the Borrower are no longer in effect and
any and all security interests granted to Capital Factors, Inc.
thereunder have been or will be discharged (and the Borrower has
taken or will take all actions necessary to discharge such
security interests, including but not limited to filing one or
more termination statements under the Uniform Commercial Code, as
enacted in any jurisdiction where such security interest has been
perfected). The Borrower shall preserve the Collateral and
abstain from and not permit the commission of waste with regard
thereto; and shall not sell, lease or otherwise transfer or
dispose of any of the Collateral except sales of inventory or
dispositions of obsolete assets, each in the ordinary course of
business and except as permitted by Section 5. The Borrower shall
at all times maintain the liens and security interests provided
for hereunder as valid and perfected liens and security interests
in the Collateral, and each item thereof, hereby granted to the
Lenders, senior and first-in-right with respect to all other
security interests and liens other than the interest of Capital
under the Senior Loan Agreement and the other Permitted
Encumbrances, and shall safeguard and protect the Collateral, and
all items thereof, for the account of the Lenders, and each of
them.
(b) The Borrower shall comply in all material respects
with all applicable national, federal, county, municipal and other
laws, ordinances, rules, and regulations now in force or hereafter
enacted with respect to the ownership or use of the Collateral.
(c) Each account included in the Collateral shall be
evidenced by such invoices, shipping documents, or other
instruments ordinarily used in the trade as shall be reasonably
satisfactory to the Required Lenders; each such item shall be a
valid and legally binding obligation of the account debtor, not
subject to credit, allowance, offset, defense, counterclaim or
adjustment by the account debtor, except discounts allowed for
prompt payment or credits or allowances in the ordinary course of
business; and all representations made by the Borrower to the
Lenders with reference to the description, content or valuation of
any or all such items shall be true and correct.
(d) The Borrower shall from time to time execute and
deliver to the Lenders, and each of them, in such form and manner
required by the Required Lenders, such confirmatory schedules of
accounts included in the Collateral, and other appropriate reports
designating, identifying and describing the Collateral. The
Borrower shall furnish the Lenders, and each of them, with
schedules of agings of such accounts in such form and at such
intervals as the Required Lenders may from time to time specify.
The foregoing provisions of this paragraph (d) may be satisfied by
delivery to the Lenders all such information and reports as are
delivered to Capital under the Senior Credit Agreement with
respect to accounts receivable, contemporaneously with delivery
thereunder. In addition, the Borrower shall provide to the
Lenders, and each of them, copies of agreements with, or purchase
orders from the Borrower's customers and copies of invoices to
customers, proof of shipment or delivery and such other
documentation and information relating to the accounts as the
Required Lenders may require.
(e) The Borrower shall defend the Collateral against
all claims and demands of all other persons at any time claiming
the same or an interest therein and shall pay promptly when due
all taxes and assessments upon the Collateral. At their option in
their reasonable discretion, the Required Lenders may discharge
any or all taxes, liens or other encumbrances at any time levied
against or placed on the Collateral, all of which amounts shall
become part of the Obligations. The Borrower shall not, except in
the ordinary course of business, consistent with past practices,
compromise, discharge, extend the time for payment or otherwise
grant any indulgence or allowance with respect to any account
included in the Collateral without the prior written consent of
the Required Lenders, which consent shall not unreasonably be
withheld.
(f) The Borrower shall maintain insurance coverage in
accordance with good business practice against loss or damage to
the Collateral by fire and other hazards, with such insurance
carriers as are reasonably satisfactory to the Required Lenders.
In the event of loss or damage in any material respect to such
Collateral as shall constitute tangible property, the Borrower
shall give immediate written notice thereof to the Lenders, and
each of them. In such events, the Borrower shall promptly adjust
or compromise any loss claims under the insurance and replace such
Collateral or apply the proceeds to the outstanding obligations to
the Lenders, pro rata in accordance with the outstanding principal
amount of the Notes held by the Lenders, respectively. If the
Borrower fails to promptly adjust or compromise any loss claims
under the insurance (other than for valid business purposes), the
Required Lenders shall have the right at their reasonable
election, to adjust or compromise any such loss claims under such
insurance.
(g) The Borrower shall at all times keep accurate and
complete books and records of the Collateral in such detail, form
and scope as the Required Lenders shall reasonably require, and
shall maintain the same at its principal place of business. Such
books and records shall be maintained in accordance with
recognized, good accounting principles and practices and in a
manner reasonably satisfactory to the Required Lenders. The
Lenders, or any of them, or any of their respective agents shall
have the right to call at the Borrower's place or places of
business upon reasonable prior notice and at intervals to be
determined by such Lender or Lenders, respectively, and without
hindrance or delay, to inspect, audit, make verifications
(including those with account debtors) and otherwise check and
make extracts from such books and records (including, without
limitation, orders, receipts, correspondence and other data)
relating to the Collateral or to any other transactions among the
parties hereto. If requested by the Required Lenders, the Borrower
shall xxxx its records concerning accounts included in the
Collateral in a manner satisfactory to the Required Lenders to
show the security interest of the Lenders, and each of them,
therein.
(h) The Borrower's complete legal name is as first set
forth above, and the Borrower does not utilize or do business
under any tradename. The Borrower's principal place of business,
and the location of its records of accounts, is as set forth
hereinafter. The Borrower maintains such additional places of
business as are listed in the attached Schedule A to this
Agreement. The Borrower shall not without at least 30 days prior
written notice to the Lenders, and each of them, change its
principal place of business, change the location of its records of
the Collateral, nor open any new places of business or close any
existing places of business, or change its name or any tradename,
in any such case which would require the filing of an additional
financing statement or statements, or other documentation, then or
at any time in the future required to preserve the security
interest of the Lenders, and each of them, in any items of the
Collateral.
5. Establishment of Deposit Account.
(a) The Lenders, and each of them, hereby authorize
the Borrower to collect all of its accounts; provided, however,
that upon request by the Required Lenders (and provided that the
obligations owing to Capital pursuant to the Senior Credit
Agreement have been paid in full) at any time during the existence
of an Event of Default under the Loan Agreement, all proceeds of
the Collateral collected and received by the Borrower shall be
held in trust for the Lenders, and each of them, and delivered by
the Borrower as directed by the Required Lenders, within two
business days of receipt, in exactly the form in which received
(except for the addition thereto of the endorsement of the
Borrower when and where necessary to permit collection thereof,
which endorsement the Borrower agrees to make). Such proceeds so
delivered shall be deposited in and credited to a special account
(hereinafter referred to as the "Deposit Account") maintained by
the Lenders in a bank located in New York City which is a member
of the Federal Deposit Insurance Corporation, over which the
Required Lenders alone (or their nominee) shall have the power of
application and withdrawal. The Borrower shall not commingle any
such proceeds with any of its other funds or property, and shall
hold them separate and apart from any other funds or property in
trust for the Lenders, and each of them, until deposit thereof is
made in the Deposit Account. The Lenders shall promptly apply the
collected proceeds of the Collateral on deposit in the Deposit
Account to the payment in full or in part of the principal of and
interest on any of the Obligations, in such order and in such
manner as the Required Lenders shall determine consistent with
Section 7(b)(vi) hereof. Any portion of such collected proceeds
which the Required Lenders elect not to apply and which they deem
not required as security shall be paid over from time to time by
the Required Lenders to the Borrower.
(b) The authority given to the Borrower in Paragraph
(a) immediately preceding to collect its accounts shall (subject
to the provisions of the Senior Credit Agreement) terminate upon
the occurrence and during the continuation of an Event of Default
(as hereinafter defined). Upon the occurrence and during the
continuation of an Event of Default, if requested by the Required
Lenders in writing, the Borrower shall forthwith notify all of its
account debtors that its accounts have been assigned to and shall
be payable as directed by the Required Lenders, and shall indicate
on all xxxxxxxx therefor that all payments thereon shall be made
as directed by the Required Lenders. The Required Lenders may, at
any time upon the occurrence of an Event of Default and at any
time thereafter during the continuation of an Event of Default, in
the names of the Lenders: (i) notify any and all account debtors
that the Borrower's accounts have been assigned to the Lenders and
that any payment on account thereof shall be made as directed by
the Required Lenders; (ii) collect, compromise, endorse, sell,
assign, discharge, or extend the time for payment of, any such
account; (iii) institute legal action for the collection of any
such account, and (iv) do all acts and things incidental thereto,
all of which are hereby approved by the Borrower.
6. Action of the Required Lenders. Should any covenant,
duty, or agreement of the Borrower fail to be performed in
accordance with its terms hereunder, the Required Lenders may
perform or attempt to perform such covenant, duty or agreement on
behalf of the Borrower, and any amount expended by the Required
Lenders in such performance or attempted performance together with
interest thereon at the rate then provided for in the Loan
Agreement, shall become a part of the Obligations secured by this
Agreement, and, at the request of the Lenders, the Borrower
covenants and agrees to promptly pay such amount to the Lenders;
provided, that the Required Lenders, nor any of them, assume and
shall never have any liability for the performance of any duties
of the Borrower under or in connection with the Collateral, or any
part thereof, or under any transaction, agreement, or contract out
of which the Collateral, or any part thereof, may arise. If any
account debtor of an account fails or refuses to make payment
thereon when due, the Required Lenders are authorized, in their
discretion, either in their own names or in the name of the
Borrower, to take such action as the Required Lenders shall deem
appropriate for the collection of any proceeds of the Collateral
with respect to which a delinquency exists. Regardless of any
other provision hereof, however, neither the Lenders, nor any of
them, shall be liable for their failure to collect, or for their
failure to exercise diligence in the collection of any proceeds of
an account, nor shall they, or any of them, be under any duty
whatsoever to anyone except to account for the funds that it shall
actually receive hereunder.
7. Events of Default. (a) The following events shall be
"Events of Default":
(i) An Event of Default under the Loan Agreement; or
(ii) Any representation, warranty, certification or
statement made by the Borrower hereunder shall prove to have been
incorrect in any material respect when made.
(b) Upon occurrence of any of the above Events of
Default and at any time thereafter during the continuation of an
Event of Default the Required Lenders may accelerate all of the
Obligations secured hereby and the Lenders (acting through the
Required Lenders) shall have all the rights and remedies of
secured parties under the Uniform Commercial Code as in effect in
the State of Florida (whether or not in effect in the jurisdiction
where the rights and remedies are asserted) and/or any other
applicable law as to the Collateral, or any part thereof, of any
other jurisdiction as to the Collateral, or any part thereof,
therein located (whether or not such other law applies to the
affected Collateral) and shall further have, in addition to all
other rights and remedies provided herein, by the Loan Agreement
or by law, the following rights and powers:
(i) The Required Lenders are authorized to take
possession of the Collateral, and any and all items thereof, and,
for that purpose, may enter, with the aid and assistance of any
person or persons, any premises where records related to the
Collateral, or any part thereof, are, or may be, placed and remove
the same;
(ii) At the Required Lenders' request, the Borrower
shall assemble the records related to the Collateral and make it
available to the Required Lenders at places which the Required
Lenders shall select, whether at the Borrower's premises or
elsewhere;
(iii) The Required Lenders' obligation, if any, to give
additional credit of any kind to the Borrower shall immediately
terminate.
(iv) The Required Lenders shall have the right from
time to time to (A) sell, resell, assign and deliver all or any
part of the Collateral for cash, for credit or for other property,
for immediate or future delivery, and for such price or prices as
the Required Lenders shall reasonably determine, (B) adjourn any
such sale or cause the same to be adjourned from time to time to a
subsequent time and place announced at the time and place fixed
for the sale, and (C) carry out any agreement to sell the
Collateral, or any part thereof, in accordance with the terms of
such agreement, notwithstanding the fact that after the Required
Lenders shall have entered into such an agreement, the Notes and
other Obligations due under the Loan Agreement may have been paid
in full;
(v) Upon each such sale, the Lenders, or any of them,
may, unless prohibited by applicable statute which cannot be
waived, bid for and purchase all or any part of the Collateral
being sold, free from and discharged of all trusts, claims, right
of redemption and equities of the Borrower, which are hereby
waived and released;
(vi) The proceeds of any such sale or other disposition
of the Collateral, or any part thereof, shall be applied, first,
to the expenses of retaking, holding, processing and preparing for
sale, selling, and the like, and to the reasonable attorneys' fees
and legal expenses incurred by the Lenders, and each of them, and
then to satisfaction of the Obligations, pro rata on the basis of
the respective amounts thereof held by each Lender, and to the
payment of any other amounts required by applicable law, after
which the Lenders shall account to the Borrower for any surplus
proceeds. If, upon the sale or other disposition of the
obligations, or any part thereof, the proceeds thereof are
insufficient to pay all amounts to which the Lenders, and each of
them, are legally entitled, the Borrower will be liable for the
deficiency, together with interest thereon, at the rate prescribed
in the Loan Agreement, and the reasonable fees of any attorneys
employed by the Lenders, and each of them, to collect such
deficiency. To the extent permitted by applicable law, the
Borrower waives all claims, damages, and demands against the
Lenders, and each of them, arising out of the repossession,
removal, retention or sale of the Collateral, or any part thereof.
8. The Lenders as Attorneys-in-Fact. The Borrower hereby
constitutes and appoints the Lenders, and each of them, and their
respective successors and assigns, the true and lawful attorney or
attorneys of the Borrower, with full power of substitution, for it
and in its name and stead or otherwise during the existence of an
Event of Default:
(a) to institute and prosecute from time to time, any
proceedings at law, in equity or otherwise, that the Required
Lenders, their respective successors or assigns, may deem proper
in order to assert or enforce any claim, right or title of any
kind in and to the Collateral, or any part thereof, and to defend
and compromise any and all actions, suits or proceedings in
respect of the Collateral, or any part thereof;
(b) to receive, take, endorse, sign, assign and
deliver any and all checks, notes, drafts, and other documents or
instruments relating to the Collateral, or any part thereof;
(c) to transmit to account debtors notice of the
interest of the Lenders, and each of them, therein and to request
from such customers at any time, in the name of the Lenders or of
the Borrower, information concerning the Collateral, or any part
thereof, and the amounts owing thereon;
(d) to notify account debtors to make payment as
directed by the Required Lenders; and
(e) generally to do any and all such acts and things
in relation to the Collateral as the Required Lenders, their
respective successors or assigns, shall deem advisable, including,
but not limited, to, the execution of any and all financing
statements and instruments contemplated under Section 2 hereof.
The Borrower declares that the appointment hereby made and the
power hereby granted are coupled with an interest and shall be
irrevocable by the Borrower.
9. Term of Agreement. This Agreement shall terminate when
all payments under the Notes, and each of them, have been made in
full and all other Obligations have been paid or discharged. Upon
such termination, the Lenders, and each of them, at the request of
the Borrower, will join in executing any termination statement
with respect to any financing statement executed and filed
pursuant to Section 2 of this Agreement.
10. Modification of Agreement. No modification, amendment
or waiver of any provision of, nor any consent required by, this
Agreement, nor any consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Required Lenders and then such
modification, amendment, waiver or consent shall be effective only
in the specific instance and for the purpose which given;
provided, however, that, without the written consent of the
affected Lender, no such action shall: reduce the amount of
principal or required principal payments due to such Lender;
reduce the rate of interest payable to such Lender; postpone any
date fixed for payment of principal or interest to such Lender; or
amend the definition of "Required Lenders". No notice to or demand
on the Borrower in any case shall entitle the Borrower to any
other or further notice or demand in the same, similar or other
circumstances.
11. Remedies Cumulative, etc. No right, power or remedy
herein conferred upon or reserved to the Lenders, or any of them,
are intended to be exclusive of any other right, power or remedy
or remedies, and each and every right, power and remedy of the
Lenders, or any of them, pursuant to this Agreement, the Loan
Agreement, or the Notes or now or hereafter existing at law or in
equity or by statute or otherwise shall, to the extent permitted
by law, be cumulative and concurrent and shall be in addition to
every other right, power or remedy pursuant to this Agreement, or
the Notes or now or hereafter existing at law or in equity or by
statute or otherwise, and the exercise or beginning of the
exercise by the Lenders, or any of them, of any one or more of
such rights, powers or remedies shall not preclude the
simultaneous or later exercise by the Lenders, or any of them, of
any or all such other rights, powers or remedies.
12. No Waiver, etc. To the fullest extent permitted by law,
no failure or delay by the Lenders, or any of them, to insist upon
the strict performance of any term, condition, covenant or
agreement of this Agreement, the Loan Agreement, or of the Notes
or to exercise any right, power or remedy hereunder or thereunder
or consequent upon a breach hereof or thereof, shall constitute a
waiver of any such term, condition covenant, agreement, right,
power or remedy or of any such breach, or preclude the Lenders, or
any of them, from exercising any such right, power or remedy at
any later time or times.
13. Notices. All notices, requests or instructions
hereunder shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid, or by telecopy (or
like transmission), as follows:
(1) if to the Borrower:
0000 XX 00xx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Chief Executive Officer
Telecopy Number: (000) 000-0000
with a copy to:
Xxxx Xxxxxxx, Esq.
Xxxxxxxxx Xxxxxxx, P.A.
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Telecopy Number: (000) 000-0000
(2) if to the Lenders, at their respective addresses set
forth in the Loan Agreement,
with a copy to:
Xxxxxx Xxxxxx, Esq.
Krugman & Kailes LLP
Park 00 Xxxx - Xxxxx Xxx
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
Telecopy Number: (000) 000-0000
Any notice so addressed and mailed shall be deemed to be given
when so mailed. Any notices addressed and otherwise delivered
shall be deemed to be given when actually received by the
addressee. Any of the above addresses and telecopy numbers may be
changed at any time by notice given as provided above; provided,
however, that any such notice of change of address shall be
effective only upon receipt.
14. Survival of Agreement. Each representation, warranty,
covenant and agreement of the herein contained, shall survive the
making by the Lenders of all loans and advances under the Loan
Agreement and the execution and delivery to the Lenders of the
Notes, notwithstanding any investigation at any time made by or on
behalf of any party, and shall continue in full force and effect
so long as any obligation is outstanding and unpaid.
15. Entire Agreement. This Agreement contains the entire
agreement with respect to the transactions contemplated hereby,
and supersedes all prior understandings, arrangements and
agreements with respect to the subject matter hereof.
16. Benefit of Agreement. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and may be
assigned, without limitation, to the Lenders' respective
affiliates. Assignments of this Agreement to any non-affiliate of
the Lenders, respectively, shall not be made without the prior
written consent of the Borrower (which shall not be unreasonably
withheld or delayed). The foregoing shall not in any manner
restrict the grant of participation rights by the Lenders,
respectively, with respect to the Loan and any and all rights
hereunder.
17. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida
applicable in the case of agreements made and to be performed
entirely within such state.
18. Captions. The captions appearing herein are for the
convenience of the parties only and shall not be construed to
affect the meaning of the provisions of this Agreement.
19. Severability. In the event that one or more of the
provisions of this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other
provisions of this Agreement, but this Agreement shall be
construed as if such invalid, illegal or unenforceable provision
and never been contained herein.
20. SUBORDINATION. THE RIGHTS AND REMEDIES OF THE LENDERS
HEREUNDER ARE SUBJECT TO AND SUBORDINATED TO THE TERMS AND
PROVISIONS OF THOSE CERTAIN SUBORDINATION AGREEMENTS, EACH DATED
THE DATE HEREOF, ENTERED INTO BY THE LENDERS, RESPECTIVELY, WITH
CAPITAL BUSINESS CREDIT, A DIVISION OF CAPITAL FACTORS, INC.
21. Counterparts. This Agreement may be signed in one or
more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
SYSTEMONE TECHNOLOGIES INC.
By
------------------------
HANSEATIC AMERICAS LDC
By: Hansabel Partners LLC
By: Hanseatic Corporation
By
--------------------------
Xxxx X. Xxxxxxxxx, President
ENVIRONMENTAL OPPORTUNITIES
FUND II, L.P.
By: Fund II Mgt. Co., LLC
General Partner
By
--------------------------
Xxxxx X. XxXxxxx
Manager
ENVIRONMENTAL OPPORTUNITIES
FUND II (INSTITUTIONAL), L.P.
By: Fund II Mgt. Co., LLC
General Partner
By
----------------------------
Xxxxx X. XxXxxxx
Manager
EXHIBIT D
August ___, 2000
Hanseatic Americas LDC
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Environmental Opportunities
Fund II, L.P.
Environmental Opportunities Fund II
(Institutional), L.P.
c/o Sanders Xxxxxx Xxxxxx
3100 Xxxxx Tower
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Re: SystemOne Technologies Inc.
Ladies and Gentlemen:
We have acted as special counsel to SystemOne Technologies Inc., a
Florida corporation (the "Borrower"), in connection with the
execution and delivery of a Loan Agreement (the "Loan Agreement")
dated as of August __, 2000 by and among Hanseatic Americas LDC,
Environmental Opportunities Fund II, L.P., Environmental
Opportunities Fund II (Institutional), L.P. (hereinafter referred
to, collectively, as the "Lenders" and individually, as a
"Lender") and the Borrower with respect to a loan in the aggregate
principal amount of $2,500,000. Unless defined herein, all
capitalized terms used herein shall have the meanings ascribed to
them in the Loan Agreement.
Hanseatic Americas LDC
Environmental Opportunities Fund II L.P.
Environmental Opportunities Fund II
(Institutional) L.P.
August ___, 2000
Page 2
A. Basis of Opinion.
As the basis for the conclusions expressed in this opinion
letter, we have examined, considered and relied upon originals or
copies of the following documents (the documents referred to in
paragraphs 1 through 4 below being hereinafter collectively
referred to as the "Loan Documents"):
1. The Loan Agreement, including the exhibits, schedules and
annexes thereto;
2. The Notes;
3. The Initial Warrant Certificate issued to each Lender;
4. The Security Agreement;
5. The agreements set forth as exhibits to the SEC Documents
filed since December 31, 1999 or set forth on Schedule 4.8 to the
Loan Agreement (the "Material Agreements").
6. The articles of incorporation ("Charter"), bylaws and
authorizing resolutions of the Board of Directors of the Borrower.
7. A certificate or other evidence of good standing of the
Borrower issued as of a recent date by the Secretary of State of
the State of Florida; and
8. A certificate of an officer of the Borrower (the
"Certificate") in the form attached as Exhibit I hereto.
We have examined such matters of law as we have considered
necessary or appropriate for the expression of the opinions
contained herein.
For the purposes of this opinion letter, the documents and
information referred to in paragraphs 1 through 8 above are
herein collectively referred to as the "Documents" and the
information set forth in such Documents is referred to as the
"Information."
Hanseatic Americas LDC
Environmental Opportunities Fund II L.P.
Environmental Opportunities Fund II
(Institutional) L.P.
August ___, 2000
Page 3
B. Assumptions.
In rendering the opinions set forth below, we have assumed
without investigation the genuineness of all signatures (other
than signatures of the Borrower) and the authenticity of all
Documents submitted to us as originals, the conformity to
authentic original Documents of all Documents submitted to us as
copies and the veracity of all Information. We have also assumed
that the execution and delivery of all of the Documents are free
from any fraud, misrepresentation, mistake of fact, duress or
criminal activity.
As to questions of fact material to the opinions hereinafter
expressed, we have relied without independent investigation
(i) upon the representations and warranties made in the Loan
Documents and (ii) upon the Certificate. We have made no
examination or investigation to verify the accuracy or
completeness of any financial, accounting, statistical or other
factual information set forth in the Loan Documents or otherwise
furnished to any Lender or with respect to any other accounting,
financial or factual matters and, accordingly, express no opinion
with respect thereto.
We have also assumed for the purposes of the opinions
expressed herein that (i) the Loan Documents have been duly
executed and are the valid and binding obligations of the
Lenders, and (ii) each Lender has the power and the legal right
to execute, deliver and perform its obligations under the Loan
Documents to which it is a party.
C. Opinions.
Based solely upon our examination and consideration of the
foregoing Documents and Information, and in reliance thereon, and
subject to the comments, assumptions, exceptions, qualifications
and limitations set forth herein, we are of the opinion that:
1. The Borrower is duly organized, validly existing and in
good standing under the laws of the State of Florida and has full
corporate power and authority to own or hold under lease the
assets and properties material to the operation of the Business
Hanseatic Americas LDC
Environmental Opportunities Fund II L.P.
Environmental Opportunities Fund II
(Institutional) L.P.
August ___, 2000
Page 4
which it owns or holds under lease and to perform all its
obligations under the agreements material to the operation of the
Business to which it is a party. The Borrower is in good standing
in each other jurisdiction in which, to our knowledge, the failure
so to qualify would have a Material Adverse Effect.
2. The execution and delivery by the Borrower of the Loan
Documents to which it is a party, the performance by the Borrower
of its covenants and agreements under the Loan Documents to which
it is a party, and the consummation by the Borrower of the
transactions contemplated by the Loan Documents to which it is a
party, have been duly authorized by all necessary corporate
action. When executed and delivered by the Borrower, each of the
Loan Documents shall constitute the valid and legally binding
obligation of the Borrower enforceable against the Borrower in
accordance with its terms.
3. Neither the execution and delivery of the Loan Documents, nor
the consummation by the Borrower of the transactions contemplated
in the Loan Documents, will violate any provision of the Charter
or by-laws of the Borrower, or any applicable Florida, New York or
federal law, rule, regulation, or to our knowledge, any writ,
judgment, injunction, decree, determination, award or other order
of any court, government, or governmental agency or
instrumentality, domestic or foreign, binding upon the Borrower,
or conflict with or result in any breach of or event of
termination under any of the terms of, or the creation or
imposition of any mortgage, deed of trust, pledge, lien, security
interest or other charge or encumbrance of any nature pursuant to,
the terms of the Material Agreements (except for the liens created
by the Security Agreement), which violation, conflict, breach or
default would have a Material Adverse Effect.
4. Without limiting the generality of the opinion expressed in
Xxxxxxxxx 0 xxxxx, xxxx of the transactions contemplated in the
Loan Documents (including, without limitation, the use of proceeds
of the Loan) violates, shall violate or shall result in a
violation of Section 7 of the Securities Exchange Act of 1934, as
amended, or any regulations issued pursuant thereto, including,
without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System.
Hanseatic Americas LDC
Environmental Opportunities Fund II L.P.
Environmental Opportunities Fund II
(Institutional) L.P.
August ___, 2000
Page 5
5. The amounts to be received by the Lenders as interest under
their respective Notes and the Loan Agreement constitute lawful
interest under applicable law and are neither usurious nor
illegal.
6. The Security Agreement creates and grants to or for the
benefit of the Lenders, and each of them, a continuing security
interest in and lien upon every item of Collateral identified
therein. Such security interest and lien (i) constitutes and will
constitute a valid and enforceable security interest and lien
under applicable law and (ii) is and will be entitled to all of
the rights, benefits and privileges provided by applicable law.
Upon filing of appropriate financing statements (the "Financing
Statements") under the Uniform Commercial Code with the Secretary
of State of Florida and the Clerk of the Court of Miami-Dade
County, Florida, and except as otherwise required by Article 9 of
the Uniform Commercial Code, all such action as is necessary in
law has been taken to perfect the security interests of the
Lenders in, and their respective liens upon, the Collateral,
except as follows: (i) in the case of instruments (as such term is
defined in Article 9 of the Uniform Commercial Code) not
constituting part of chattel paper (as such term is defined in
Article 9 of the Uniform Commercial Code), the security interest
granted to the Lenders, and each of them, under the Security
Agreement may not be perfected by the filing of the Financing
Statements; (ii) in the case of non-identifiable cash proceeds,
continuation of perfection of each Lender's security interest is
limited to the extent set forth in Section 9-306 of the Uniform
Commercial Code; (iii) Article 9 of the Uniform Commercial Code
requires the filing of continuation statements within the period
of six months prior to the expiration of five years from the date
of the original filings, in order to maintain the effectiveness of
filings of the Financing Statements; and (iv) in the case of
property which becomes Collateral, Section 552 of the Federal
Bankruptcy Code limits the extent to which property acquired by a
debtor after the commencement of a case under the Federal
Bankruptcy Code may be subject to a security interest arising from
a security agreement entered into by the debtor before the
commencement of such case.
Hanseatic Americas LDC
Environmental Opportunities Fund II L.P.
Environmental Opportunities Fund II
(Institutional) L.P.
August ___, 2000
Page 6
7. To our knowledge, there is no material litigation or Florida
or federal governmental proceeding pending or threatened against,
or involving the Borrower or the properties or business of the
Borrower.
8. The shares of Common Stock issuable upon exercise of the
Warrants to be issued by the Borrower pursuant to the Loan
Agreement have been duly authorized and reserved for issuance and,
when issued and paid for in accordance with the Warrant
Certificates, such securities will be validly issued, fully paid
and non-assessable, to the best of our knowledge, free and clear
of any mortgage, deed of trust, pledge, lien or other charge or
encumbrance created by the Borrower; the holders thereof are not
and will not be subject to personal liability to third parties
solely by reason of being such holders; such securities are not
and will not be subject to the preemptive rights of any
shareholder of the Borrower; and all corporate action required to
be taken for the authorization, issuance and sale of such
securities has been duly and validly taken by the Borrower.
9. The Borrower has, to our knowledge, all authorizations,
approvals, orders, licenses, certificates and permits
(collectively, the "Permits") of and from all Florida and federal
governmental regulatory officials and bodies to own or lease its
properties and conduct its business, except where the failure to
have any Permit would not have a Material Adverse Effect.
10. To our knowledge, the Borrower is not in breach of, or in
default under, any term or provision of any indenture, mortgage,
deed of trust, lease, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed
money to which it is a party or by which it or any of these
properties may be bound or affected, which breach or default is
not the subject of a waiver, other than a breach or default that
would not have a Material Adverse Effect.
11. Assuming that each of the Lenders that acquires the Warrants
is an Accredited Investor (as such term is defined in Rule 502 of
Regulation D under the Securities Act), and that the
representations made by the Borrower and the Lenders in the Loan
Agreement were true on the date of such Loan Agreement and at the
Hanseatic Americas LDC
Environmental Opportunities Fund II L.P.
Environmental Opportunities Fund II
(Institutional) L.P.
August ___, 2000
Page 7
time of the Closing, no registration under the Securities Act is
required in connection with the issuance of any of the Warrants,
or the issuance of Warrant Shares upon exercise of the Warrants.
12. To our knowledge, the Borrower has timely filed all reports,
schedules, forms, statements and other documents required to be
filed by it with the Commission pursuant to the reporting
requirements of the Exchange Act and Securities Act, including
material filed pursuant to Sections 13(a) or 15(d), with the
Commission (all of the foregoing including filings incorporated by
reference therein being referred to herein as the "SEC
Documents").
13. As of their respective dates (but taking into account any
amendments filed prior to the date of the Loan Agreement and the
Closing Date), the SEC Documents complied in all material respects
with the requirements of the Exchange Act and Securities Act and
the rules and regulations of the Commission promulgated thereunder
and applicable to such SEC Documents.
D. Comments, Assumptions, Limitations, Qualifications and
Exceptions.
The opinions expressed above are based upon and subject to
the further comments, assumptions, limitations, qualifications
and exceptions set forth below:
1. As used in the opinions expressed herein, the phrase "to our
knowledge" refers only to the actual current knowledge of those
attorneys who have given substantive attention to the
representation of the Borrower in connection with the Loan
Documents and does not (a) include constructive notice of matters
or information, or (b) except for our conversations with certain
officers of the Borrower and our review of the Documents, imply
that we have undertaken any independent investigation (i) with any
persons outside of our firm, or (ii) as to the accuracy or
completeness of any factual representation, information or other
matter made or furnished in connection with the transactions
contemplated by the Loan Documents. Furthermore, such reference
means only that we do not know of any fact or circumstance
contradicting the statement that follows and does not imply that
Hanseatic Americas LDC
Environmental Opportunities Fund II L.P.
Environmental Opportunities Fund II
(Institutional) L.P.
August ___, 2000
Page 8
we know the statement to be correct or have any basis (other than
the Documents, the Information therein and such conversations) for
that statement.
2. We are licensed to practice law only in the States of Florida
and New York and do not hold ourselves out to be experts on the
laws of any jurisdiction other than the States of Florida, New
York and the federal law of the United States of America.
Accordingly, all of the opinions expressed herein are specifically
limited to the laws of the States of Florida and New York and the
federal law of the United States of America. In addition, the
opinions set forth in Section C are qualified in their entirety
regarding matters that would be controlled by the substantive laws
of any other state by our having assumed, with your permission,
that the internal laws of such other state conform in all respects
with the law of the State of New York.
3. No opinion is expressed as to the enforceability of the
obligations of the Borrower under the Loan Documents to the extent
that enforceability of the rights, obligations and agreements is
subject to, affected or limited by: (i) rights of the United
States of America under the Federal Tax Lien Act of 1966; (ii)
applicable liquidation, conservatorship, bankruptcy, insolvency,
moratorium, reorganization or other laws affecting creditors'
rights generally, (iii) general principles of equity (whether
considered in a proceeding in equity or at law); (iv) the exercise
of the discretionary powers of any court or other authority before
which may be brought any proceeding seeking equitable remedies,
including without limitation, specific performance and injunctive
relief; (v) limitations imposed under applicable provisions of the
Florida UCC or New York UCC, which also impose on a secured party
certain obligations to act in good faith and in a commercially
reasonable manner; (vi) any provision of any Loan Document that
provides for an absolute and unconditional obligation to perform
under such Loan Document even though such Loan Document is
invalid, terminated or such performance would be illegal; (vii)
any provision of any Loan Document to the extent it provides for
payment of a penalty; (viii) any provision of any Loan Document to
the extent it provides for a set-off of obligations in the absence
of mutuality; (ix) other applicable laws, court decisions and
matters of public policy that may limit or render unenforceable
Hanseatic Americas LDC
Environmental Opportunities Fund II L.P.
Environmental Opportunities Fund II
(Institutional) L.P.
August ___, 2000
Page 9
certain rights and remedies of the Lender provided in the Loan
Documents about which we opine, but that do not in our judgment,
make any Loan Document invalid as a whole or inadequate for the
ultimate practical realization of the benefits intended to be
provided thereby, though they may result in delays (and we express
no opinion as to the economic consequences, if any, of any such
delays); (x) the applicability of a standard of "good faith," such
as that defined in Section 671.201 of the Florida UCC; (xi)
applicable fraudulent conveyance laws or fraudulent transfer laws
from time to time in effect, which we understand you have
evaluated; (xii) except to the extent set forth in paragraph D.4
below, usury laws under which a waiver of rights may be
unenforceable; or (xii) the limitations on indemnification arising
under Federal or state securities laws.
Without limiting the generality of the foregoing, we express
no opinion as to the enforceability of the provisions of the Loan
Documents (a) restricting access to legal or equitable remedies,
(b) purporting to waive or affect any rights to notices to the
extent that such rights or notices cannot be waived under
applicable law, (c) allowing any party to declare indebtedness
due and payable without notice (as some courts have held that
acceleration may not be made except by an unequivocal act of the
holder evidencing acceleration, which may include notice to the
debtor), (d) covenanting to take action the taking of which is
discretionary with or subject to the approval of a third party or
which is otherwise subject to contingencies the fulfillment of
which are not within the control of the parties so covenanting,
(e) providing for nonjudicial foreclosure, (f) providing for
specific performance and appointment of a receiver, (g) providing
that a Lender's failure to exercise any right, remedy or option
under the documents shall not operate as a waiver, or (h)
purporting to establish evidentiary standards for suit or
proceedings to enforce said documents.
4. The Loan Documents contain provisions whereby the parties
have agreed that the laws of the State of New York, rather than
the laws of the State of Florida, will govern the Loan Documents.
Assuming that the Loan transaction has a "normal and reasonable
relationship" to the State of New York, then, except for
procedural matters, and except to the extent that the laws of
Hanseatic Americas LDC
Environmental Opportunities Fund II L.P.
Environmental Opportunities Fund II
(Institutional) L.P.
August ___, 2000
Page 10
the State of Florida shall govern the perfection or the effect of
perfection of the liens and security interests against the
collateral located or deemed located in Florida, a Florida court
(or a federal court applying Florida's choice-of-law rules) will
enforce the parties' choice of New York law to govern the Loan
Documents, including without limitation the usury laws of New
York, based upon applicable case law (including, inter alia,
Continental Mortgage Investors v. Sailboat Key, Inc., 395 So.2d
507 (Fla. 1981); and Xxxxxx Xxxxxx Properties, Inc. v.
International City Bank & Trust Co. 404 So.2d 1059 (Fla. 1981)).
These cases indicate that the standard which must be met under
Florida law in order for the parties to choose the laws of another
jurisdiction is that the transaction must have a normal and
reasonable relation to such other jurisdiction. It is our opinion
that a normal and reasonable relationship with the State of New
York exists for purposes of Florida's conflict-of-law rules, based
on the following assumptions regarding the contacts of this
transaction with the State of New York: (a) the Loan Documents
were executed and delivered in the State of New York and the
closing of the Loan occurred in the State of New York; and (b) the
Loan is payable at the office of a Lender in the State of New
York.
5. Our opinions herein regarding the creation or perfection of
security interests are limited to Article 9 of the Florida UCC and
the New York UCC, and therefore those opinions do not address:
(a) laws of jurisdictions other than Florida or New York, nor laws
of Florida or New York other than Article 9 of the Florida UCC and
the New York UCC; (b) collateral of a type that is not subject to
Article 9 of the Florida UCC and the New York UCC; and (c) the
question under Section 679.103 of the Florida UCC or Section 9-103 of the New
York UCC of which jurisdiction's laws will govern the perfection
of the security interests granted in the collateral covered by
this opinion letter.
6. We express no opinion herein as to (i) the title to any of
the Collateral, (ii) the relative priority of the Lender's lien(s)
and security interest(s) therein, (iii) the existence or effect of
any other security interests, liens, charges or encumbrances
thereon, (iv) the adequacy of the description of the Collateral in
any of the Loan Documents, or (v) interests of
Hanseatic Americas LDC
Environmental Opportunities Fund II L.P.
Environmental Opportunities Fund II
(Institutional) L.P.
August ___, 2000
Page 11
certain buyers under Sections 9-307 and 9-308 of the Florida UCC
and New York UCC. In addition, we express no opinion as to the
creation, perfection or enforceability of any security interests
which purport to secure obligations owed to any person other than
the Lenders.
7. The opinions expressed herein are limited to the laws and
regulations normally applicable to transactions of the type
contemplated in the Loan Documents. In addition, without limiting
the foregoing, we express no opinion herein with respect to any
matters governed by any land use, environmental or similar laws,
state or federal antitrust law, state and federal securities laws
or local law, or as to the effect, if any, of such laws on the
opinions expressed herein.
8. The opinions set forth herein are based in part upon federal
and applicable state authorities as they are currently compiled
and reported on by customary reporting services. It is possible
that legislation affecting the opinions expressed herein might
have been enacted into law that are not reflected in such
reporting services. We are not currently aware of the passage of
any such legislation. However, it is not possible for us to know
with certainty as of the date of this letter whether any such
legislation may have been passed into law.
9. Although we have acted as special counsel to the Borrowers in
connection with the Loan Documents, our engagement has been
limited to those matters about which we have been consulted.
Consequently, there may exist matters of a legal nature involving
the Borrowers in connection with which we have not been consulted
and have not represented such entities.
10. This opinion letter is limited to the matters stated herein
and no opinions may be implied or inferred beyond the matters
expressly stated herein.
11. The opinions expressed herein are as of the date hereof, and
we assume no obligation to update or supplement such opinions to
reflect any facts or circumstances that may hereafter come to our
attention or any changes in law that may hereafter occur.
Hanseatic Americas LDC
Environmental Opportunities Fund II L.P.
Environmental Opportunities Fund II
(Institutional) L.P.
August ___, 2000
Page 12
12. This opinion letter has been issued solely for the benefit of
the Lenders and no other party or entity shall be entitled to rely
hereon without the express written consent of this firm. Without
our prior written consent, this opinion letter may not be quoted
in whole or in part or otherwise referred to in any document or
report and may not be furnished to any other person or entity.
Respectfully submitted,
XXXXXXXXX TRAURIG, P.A.
XXXXXXXXX XXXXXXX, LLP
