EXHIBIT 1
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EXCHANGE AND PURCHASE AGREEMENT
By and Among
TRINSIC, INC.
And
THE 1818 FUND III, L.P.
And
the Additional Investors party hereto
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Dated July 15, 2005
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TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS..........................................................1
1.1 DEFINITIONS................................................1
1.2 ADDITIONAL DEFINITIONS.....................................5
1.3 ACCOUNTING TERMS; FINANCIAL COVENANTS......................6
ARTICLE 2 PURCHASE AND ISSUANCE OF PREFERRED SHARES............................6
2.1 ISSUANCE OF SERIES H PREFERRED STOCK.......................6
2.2 SERIES H CERTIFICATE OF DESIGNATION........................6
2.3 CLOSING....................................................6
2.4 ADDITIONAL PURCHASE AND SALE OF SERIES H PREFERRED STOCK...6
ARTICLE 3 CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO CLOSE................7
3.1 REPRESENTATIONS AND WARRANTIES TRUE........................7
3.2 COMPLIANCE WITH THIS AGREEMENT.............................7
3.3 OFFICER'S CERTIFICATE......................................7
3.4 SECRETARY'S CERTIFICATE....................................7
3.5 PURCHASE PERMITTED BY APPLICABLE LAWS......................8
3.6 FILING OF SERIES H CERTIFICATE OF DESIGNATION..............8
3.7 OPINION OF COUNSEL.........................................8
3.8 CONSENTS AND APPROVALS.....................................8
3.9 NO MATERIAL ADVERSE CHANGE.................................8
3.10 NO LITIGATION..............................................8
3.11 NASDAQ.....................................................8
ARTICLE 4 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE.................9
4.1 REPRESENTATIONS AND WARRANTIES TRUE........................9
4.2 COMPLIANCE WITH THIS AGREEMENT.............................9
4.3 ISSUANCE PERMITTED BY APPLICABLE LAWS......................9
4.4 CONSENTS AND APPROVALS.....................................9
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................9
5.1 CORPORATE EXISTENCE AND POWER..............................9
5.2 CORPORATE AUTHORIZATION; NO CONTRAVENTION.................10
5.3 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS..........10
5.4 BINDING EFFECT............................................10
5.5 NO LEGAL BAR..............................................11
5.6 LITIGATION................................................11
5.7 NO DEFAULT OR BREACH......................................11
5.8 NO MATERIAL ADVERSE CHANGE................................11
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5.9 COMMISSION DOCUMENTS......................................11
5.10 SUBSIDIARIES..............................................11
5.11 CAPITALIZATION............................................12
5.12 PRIVATE OFFERING..........................................12
5.13 BROKER'S, FINDER'S OR SIMILAR FEES........................12
5.14 REGISTRATION RIGHTS AGREEMENT.............................12
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR......................13
6.1 EXISTENCE AND POWER.......................................13
6.2 AUTHORIZATION; NO CONTRAVENTION...........................13
6.3 BINDING EFFECT............................................13
6.4 NO LEGAL BAR..............................................13
6.5 PURCHASE FOR OWN ACCOUNT..................................13
6.6 BROKER'S, FINDER'S OR SIMILAR FEES........................14
6.7 INVESTMENT KNOWLEDGE......................................14
6.8 TITLE TO NOTE.............................................15
ARTICLE 7 INDEMNIFICATION.....................................................15
7.1 INDEMNIFICATION BY THE COMPANY............................15
7.2 NOTIFICATION..............................................16
7.3 REGISTRATION RIGHTS AGREEMENT.............................16
ARTICLE 8 AFFIRMATIVE COVENANTS...............................................17
8.1 FINANCIAL STATEMENTS......................................17
8.2 NOTICES...................................................18
8.3 ISSUE TAXES...............................................18
8.4 RESERVATION OF SHARES.....................................18
8.5 REGISTRATION AND LISTING..................................19
8.6 PRIVATE OFFERING..........................................19
8.7 RIGHTS OFFERING...........................................19
8.8 BEST EFFORTS..............................................20
8.9 REGISTRATION RIGHTS.......................................21
8.10 CONSENTS..................................................21
8.11 RIGHTS OFFERING ISSUANCE..................................21
ARTICLE 9 NEGATIVE COVENANTS..................................................21
9.1 PROHIBITIONS ON A CHANGE OF CONTROL.......................21
9.2 NO INCONSISTENT AGREEMENTS................................21
9.3 ISSUANCE OF PREFERRED STOCK...............................22
9.4 TAXABLE DIVIDENDS.........................................22
ARTICLE 10 ..........................................................22
10.1 STOCKHOLDER VOTE..........................................22
10.2 RIGHTS OFFERING...........................................22
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ARTICLE 11 MISCELLANEOUS......................................................22
11.1 SURVIVAL OF PROVISIONS....................................22
11.2 NOTICES...................................................23
11.3 SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFICIARIES......24
11.4 AMENDMENT AND WAIVER......................................24
11.5 COUNTERPARTS..............................................24
11.6 HEADINGS..................................................24
11.7 DETERMINATIONS............................................24
11.8 GOVERNING LAW.............................................25
11.9 JURISDICTION..............................................25
11.10 SEVERABILITY..............................................25
11.11 RULES OF CONSTRUCTION.....................................25
11.12 REMEDIES..................................................25
11.13 ENTIRE AGREEMENT..........................................25
11.14 ATTORNEYS' FEES...........................................25
11.15 PUBLICITY.................................................26
11.16 EXPENSES..................................................26
EXHIBITS
Exhibit A Certificate of Incorporation
Exhibit B Form of Certificate of Designation
SCHEDULES
Schedule 5.3 Governmental Authorization
Schedule 5.6 Litigation
Schedule 5.10 Subsidiaries
Schedule 5.11 Capitalization
Schedule 5.14 Registration Rights Agreements
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EXCHANGE AND PURCHASE AGREEMENT (this "Agreement"), dated July 15, 2005
(the "Effective Date"), by and among Trinsic, Inc., a corporation organized
under the laws of Delaware (the "Company"), and The 1818 Fund III, L.P., a
limited partnership organized under the laws of Delaware (the "Investor") and
the additional investors listed on Exhibit A attached hereto (the "Additional
Investors").
WHEREAS, pursuant to the Standby Credit Facility Agreement, dated as of
August 24, 2004, as amended on May 24, 2005, between the Company and the
Investor, the Company issued and delivered to the Investor and the Investor
purchased from the Company, a 9.95% Amended and Restated Senior Unsecured
Promissory Note due March 31, 2006 (the "Note") in the aggregate principal
amount of up to $20,000,000;
WHEREAS, the Company and the Investor have determined that it is in
each of their best interests to exchange the Note and all accrued and unpaid
interest thereon into 21,584.769 shares (the "Note Preferred Shares") of Series
H Cumulative Preferred Stock, par value $0.01 per share (the "Series H Preferred
Stock"), of the Company having an aggregate Liquidation Preference of
$21,584,769;
WHEREAS, the Company has agreed to issue, and the Investor has agreed
to purchase an additional 2,500 shares (the "Additional Fund Shares," and
together with the Note Preferred Shares, the "Preferred Shares") of Series H
Preferred Stock having an aggregate liquidation preference of $2,500,000; and
WHEREAS, on or before September 15, 2005, the Company may issue and
sell to the Additional Investors up to 12,500 shares of the Series H Preferred
Stock (the "Additional Shares").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Affiliate" has the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act; provided, that for
purposes of this Agreement, the Investor shall not be deemed an Affiliate of the
Company.
"Agreement" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.
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"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York, New York are
authorized or required by law or executive order to close.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Company together with all amendments and restatements
thereof, in the form attached hereto as Exhibit A to this Agreement.
"Change of Control" of the Company shall mean such times as:
(i) Any Person or "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) (other than the Investor and its
Affiliates) is or becomes the beneficial owner, directly or indirectly, of
outstanding shares of stock of the Company entitling such Person or Persons to
exercise 50% or more of the total votes entitled to be cast at a regular or
special meeting, or by action by written consent, of shareholders of the Company
(the term "beneficial owner" shall be determined in accordance with Rule 13d-3,
promulgated by the Commission under the Exchange Act);
(ii) A majority of the Board of Directors of the
Company shall consist of Persons other than Continuing Directors. The term
"Continuing Director" shall mean any member of the Board of Directors on the
Closing Date and any other member of the Board of Directors who shall be
recommended or elected to succeed or become a Continuing Director by a majority
of Continuing Directors who are then members of the Board of Directors.
(iii) The shareholders of the Company shall have
approved a recapitalization, reorganization, merger, consolidation or similar
transaction, in each case with respect to which all or substantially all the
Persons who were the respective beneficial owners, directly or indirectly, of
the outstanding shares of capital stock of the Company immediately prior to such
recapitalization, reorganization, merger, consolidation or similar transaction,
will own less than 50% of the combined voting power of the then outstanding
shares of capital stock of the Company resulting from such recapitalization,
reorganization, merger, consolidation or similar transaction.
(iv) The shareholders of the Company shall have
approved of the sale or other disposition of all or substantially all the assets
of the Company in one transaction or in a series of related transactions; or
(v) Any transaction occurs, the result of which is
that the Common Stock is not required to be registered under Section 12 of the
Exchange Act and that the holders of Common Stock do not receive common stock of
the Person surviving such transaction which is required to be registered under
Section 12 of the Exchange Act.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
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"Commission Documents" means all registration statements, proxy
statements, reports and other documents (and all amendments thereto), required
to be filed by the Company since January 1, 2004 under the Securities Act or the
Exchange Act.
"Common Stock" means the common stock, par value $.01 per share,
and each other class of capital stock of the Company into which such stock is
reclassified or reconstituted.
"Condition of the Company" means the assets, business,
properties or financial condition of the Company and its Subsidiaries taken as a
whole.
"Contractual Obligations" means as to any Person, any provision
of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument to which such
Person is a party or by which it or any of its property is bound.
"Conversion Price" shall have the meaning assigned in the Series
H Certificate of Designation.
"Conversion Price Determination Date" shall have the meaning
assigned in the Series H Certificate of Designation.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Fund Registration Rights Agreement" means the Registration
Rights Agreement, dated November 10, 2000, by and between the Company and the
Investor.
"GAAP" means generally accepted accounting principles in the
United States in effect from time to time.
"Governmental Authority" means the government of any nation,
state or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Holder," with respect to Preferred Shares, Additional Shares or
Common Stock issued upon conversion of the Preferred Shares or Additional
Shares, means the Investor, the Additional Investors and any subsequent direct
or indirect transferee of such security; provided, that the term Holder shall
not include any Person who owns such security if it has been registered under
the Securities Act or if it has been transferred to such Person after such
security has been the subject of a distribution to the public pursuant to Rule
144 (or any successor provision) under the Securities Act or otherwise
distributed under circumstances not requiring a legend.
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"Knowledge" means knowledge after due inquiry. References to the
Knowledge of the Company include the Knowledge of all of the Company's
Subsidiaries.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority or
other security interest or preferential arrangement of any kind or nature
whatsoever (including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capitalized lease obligation, or any financing
lease having substantially the same economic effect as any of the foregoing).
"Liquidation Preference" shall have the meaning assigned in the
Series H Certificate of Designation.
"NASDAQ" means the National Market System of the Nasdaq Stock
Market.
"Order" means any judgment, injunction, writ, award, decree or
order of any nature of any Governmental Authority against, or binding upon, the
Company.
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, Governmental Authority or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.
"Requirements of Law" means as to any Person, the Certificate of
Incorporation and By-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"Series H Certificate of Designation" means the Certificate of
Designation with respect to the Series H Preferred Stock (the form of which is
attached hereto as Exhibit B) to be adopted by the Board of Directors of the
Company and filed with the Secretary of State of the State of Delaware.
"Stockholder Approval" shall have the meaning assigned in the
Series H Certificate of Designation.
"Stockholder Approval Certification Date" shall have the meaning
assigned in the Series H Certificate of Designation.
"Stockholder Meeting" shall have the meaning assigned in the
Series H Certificate of Designation.
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"Stockholder Vote" shall have the meaning assigned in the Series
H Certificate of Designation.
"Subsidiary" means, with respect to any Person, another Person
of which 50% or more of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such first-mentioned
Person. Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.
"Transaction Documents" means the Series H Certificate of
Designation, the Preferred Shares and the Additional Shares.
1.2 Additional Definitions. The following terms are defined in the
section of this Agreement set forth opposite such term:
TERM SECTION
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Additional Closing 2.4
Additional Closing Date 2.4
Additional Fund Shares Recitals
Additional Investors Preamble
Additional Shares Recitals
Agreement Preamble
Closing 2.3
Closing Date 2.4
Company Preamble
Effective Date Preamble
Indemnified Party 7.1
Initial Closing 2.3
Initial Closing Date 2.3
Investor Preamble
Liabilities 7.1
Note Recitals
Note Preferred Shares Recitals
Preferred Shares Recitals
PWRW&G 2.3
Purchase Price 2.1
Rights Offering 8.8(a)
Rights Offering Documents 8.8(b)
Rights Shares 8.8(a)
Series H Preferred Stock Recitals
Stockholders 8.8(a)
Subscription Price 8.8(a)
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1.3 Accounting Terms; Financial Covenants. All accounting terms used
herein not expressly defined in this Agreement shall have the respective
meanings given to them in accordance with sound accounting practice. The term
"sound accounting practice" shall mean such accounting practice as, in the
opinion of the independent accountants regularly retained by the Company,
conforms at the time to GAAP applied on a consistent basis except for changes
with which such accountants concur. If any changes in accounting principles are
hereafter occasioned by promulgation of rules, regulations, pronouncements or
opinions by or are otherwise required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions), and any of such changes results in
a change in the method of calculation of, or affects the results of such
calculation of, any of the financial covenants, standards or terms found herein,
then the parties hereto agree to enter into and diligently pursue negotiations
in order to amend such financial covenants, standards or terms so as to reflect
fairly and equitably such changes, with the desired result that the criteria for
evaluating the Company's financial condition and results of operations shall be
the same after such changes as if such changes had not been made.
ARTICLE 2
PURCHASE AND ISSUANCE OF PREFERRED SHARES
2.1 Issuance of Series H Preferred Stock. Subject to the terms and
conditions set forth herein, (i) the Company agrees that it will issue to the
Investor, at the Closing, the Preferred Shares and (ii) the Investor agrees that
it will deliver to the Company (i) for cancellation the Note and (ii) $2,500,000
(the "Purchase Price") by wire transfer of immediately available funds as
consideration for the Preferred Shares.
2.2 Series H Certificate of Designation. The Series H Preferred
Stock shall have the rights and preferences set forth in the Series H
Certificate of Designation.
2.3 Closing. The purchase, sale and issuance of the Preferred Shares
shall take place at the closing (the "Initial Closing") to be held at the
offices of Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx LLP ("PWRW&G") on July 15,
2005 (the "Initial Closing Date"), at 10:00 a.m., New York City time, or on such
other date and at such other time as the Investor and the Company may mutually
agree. At the Initial Closing, subject to the terms and conditions set forth
herein, the Company shall issue the Preferred Shares to the Investor by
delivering to such Investor the Preferred Share stock certificates in the name
of the Investor, with appropriate issue stamps, if any, affixed at the expense
of the Company, free and clear of any Lien, and the Investor shall deliver to
the Company for cancellation the Note and the Purchase Price.
2.4 Additional Purchase and Sale of Series H Preferred Stock. The
purchase and sale of the Additional Shares shall take place at the closing (the
"Additional Closing") to be held at the offices of the Company on or before
September 15, 2005 (the "Additional Closing Date") and shall be substantially in
accordance with the terms and conditions set forth in this Agreement. Any such
sale shall be made on the same terms and conditions as those contained herein
and the Additional Investors shall become a party to this Agreement. At the
Additional Closing, the Company and any Additional Investors shall execute and
deliver a supplemental
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signature page to this Agreement and shall cause Exhibit A to this Agreement to
be updated to reflect the purchases made by such Additional Investors. At the
Additional Closing, each such Additional Investor shall make the
representations, warranties and covenants contained in Article 6 hereof with
respect to such Additional Investor's purchase of Additional Shares. From and
after any issuance and sale of Additional Shares to an Additional Investor in
accordance with this Section 2.4, such Additional Shares and the shares of
Common Stock issuable upon conversion thereof shall be deemed to be "Preferred
Shares," for all purposes of this Agreement. As a condition of the closing of
the issuance and sale of any Additional Shares, the Additional Purchasers shall
be entitled to receive an opinion of the General Counsel of the Company,
substantially similar in form and substance to the opinion rendered by the
General Counsel of the Company on the Initial Closing. The Initial Closing and
the Additional Closing may sometimes be referred to hereinafter, each as a
"Closing," and collectively as "Closings," and the Initial Closing Date and the
Additional Closing Date may sometimes be referred to hereinafter, each as a
"Closing Date" and collectively as "Closing Dates."
ARTICLE 3
CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO CLOSE
The obligation of the Investor to acquire the Preferred Shares in
exchange for cancellation of the Note and to perform its obligations hereunder,
and the obligation of each of the Additional Investors to purchase the
Additional Shares and to perform its obligations hereunder shall be subject to
the satisfaction or waiver of the following conditions on or before the Initial
Closing Date, in the case of the Investor, and the Additional Closing Date, in
the case of each Additional Investor (except as set forth below):
3.1 Representations and Warranties True. The representations and
warranties of the Company contained in Article 5 hereof shall be true and
correct in all material respects at and as of such Closing Date as if made at
and as of such date; provided, that any representation and warranty qualified in
any respect by materiality shall be true and correct at and as of such Closing
Date as if made at and as of such date.
3.2 Compliance with this Agreement. The Company shall have performed
and complied with all of its agreements and conditions set forth or contemplated
herein that are required to be performed or complied with by the Company on or
before such Closing Date.
3.3 Officer's Certificate. The Investor and each of the Additional
Investors, as the case may be, shall have received a certificate, dated as of
such Closing Date and signed by the Chief Executive Officer of the Company,
certifying that the conditions set forth in Sections 3.1 and 3.2 hereof have
been satisfied on and as of such date.
3.4 Secretary's Certificate. The Investor and each of the Additional
Investors, as the case may be, shall have received a certificate, dated as of
such Closing Date, and signed by the Secretary or an Assistant Secretary of the
Company, certifying the truth and correctness of (a) the attached copies of the
Certificate of Incorporation and By-laws of the Company and (b) the resolutions
of the Board of Directors of the Company approving this Agreement, the
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Transaction Documents and the transactions contemplated hereby and thereby,
including, without limitation, approval for the purposes of Section 203(a)(1) of
the DGCL.
3.5 Purchase Permitted by Applicable Laws. The acquisition of the
Preferred Shares and the Additional Shares to be acquired by the Investor and
the Additional Investors, as the case may be, hereunder and the consummation of
the transactions contemplated hereby (a) shall not be prohibited by any
applicable law or governmental regulation and (b) shall not subject the Investor
or any of the Additional Investors to any penalty or, in its reasonable
judgment, other onerous condition under or pursuant to any applicable law or
governmental regulation.
3.6 Filing of Series H Certificate of Designation. On or prior to
the Initial Closing Date, the Series H Certificate of Designation shall have
been duly filed by the Company with the Secretary of State of the State of
Delaware.
3.7 Opinion of Counsel. The Investor and the Additional Investors,
as the case may be, shall have received the opinion of the General Counsel of
the Company, dated as of such Closing Date, in a form reasonably satisfactory to
the Investor or the Additional Investors, as the case may be.
3.8 Consents and Approvals. All consents, exemptions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons, necessary or required in connection
with the execution, delivery or performance (other than Stockholder Approval) by
the Company or enforcement against the Company of this Agreement and the
Transaction Documents shall have been obtained and be in full force and effect,
and the Investor and the Additional Investors shall have been furnished with
appropriate evidence thereof.
3.9 No Material Adverse Change. Since December 31, 2004, and except
as disclosed in the Commission Documents, there shall have been no material
adverse change, nor shall any such change be threatened, in the Condition of the
Company since that date.
3.10 No Litigation. No action, suit, proceeding, claim or dispute
shall have been brought or otherwise arisen at law, in equity, in arbitration or
before any Governmental Authority against the Company or any of its Subsidiaries
which would, if adversely determined, have a material adverse effect on the
condition of the Company or the ability of the Company to perform its
obligations under this Agreement or any of the Transaction Documents.
3.11 NASDAQ. As of the Effective Date, the Company shall reasonably
believe, based on telephone conversations with representatives of NASDAQ, and
the Investor shall have no reasonable basis for disbelief, that the consummation
of the transactions contemplated by this Agreement and the Transaction Documents
will not result in any action by NASDAQ against the Company. As of each Closing
Date, the Company shall continue to believe, and the Investor shall continue to
have no reasonable basis for disbelief, that the consummation of the
transactions contemplated by this Agreement and the Transaction Documents will
not result in any action by NASDAQ against the Company.
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ARTICLE 4
CONDITIONS TO THE
OBLIGATION OF THE COMPANY TO CLOSE
The obligations of the Company to issue and sell the Preferred Shares
and the Additional Shares, and to consummate the transactions contemplated
herein on the Initial Closing Date or the Additional Closing Date, as the case
may be, shall be subject to the satisfaction or waiver of the following
conditions on or before such Closing Date:
4.1 Representations and Warranties True. The representations and
warranties of the Investor or each of the Additional Investors, as the case may
be, contained in Article 6 hereof shall be true and correct in all material
respects at and as of such Closing Date as if made at and as of such date.
4.2 Compliance with this Agreement. The Investor and each of the
Additional Investors, as the case may be, shall have performed and complied with
all of its agreements and conditions set forth or contemplated herein that are
required to be performed or complied with by the Investor and each of the
Additional Investors on or before such Closing Date.
4.3 Issuance Permitted by Applicable Laws. The issuance of the
Preferred Shares or the Additional Shares, as the case may be, and the
consummation of the transactions contemplated hereby by the Company (a) shall
not be prohibited by any applicable law or governmental regulation and (b) shall
not subject the Company to any penalty or, in its reasonable judgment, other
onerous condition under or pursuant to any applicable law or governmental
regulation.
4.4 Consents and Approvals. All consents, exemptions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons necessary or required in connection
with the execution, delivery or performance by the Investor or each of the
Additional Investors, as the case may be, or enforcement against the Investor or
any of the Additional Investors, as the case may be, of this Agreement shall
have been obtained and be in full force and effect, and the Company shall have
been furnished with appropriate evidence thereof.
ARTICLE 5
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investor and each of
the Additional Investors as follows:
5.1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
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(a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization;
(b) has (i) full corporate (or other organizational) power
and authority and (ii) all governmental licenses, authorizations, consents and
approvals to own and operate its property, to lease the property it operates as
lessee and to conduct the business in which it is currently, or is currently
proposed to be, engaged;
(c) is duly qualified as a foreign person, licensed and in
good standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification; and
(d) is in compliance with all Requirements of Law; except,
in the case of (b)(ii), (c) or (d) of this Section 5.1, to the extent that the
failure to so comply would not have a material adverse effect on the Condition
of the Company.
5.2 Corporate Authorization; No Contravention. Except for the
receipt of Stockholder Approval which may be required to permit conversion of
the Preferred Shares and the Additional Shares, the execution, delivery and
performance by the Company of this Agreement and the transactions contemplated
hereby, including without limitation the issuance of the Preferred Shares, the
Additional Shares and the Common Stock issuable upon the conversion of the
Preferred Shares and the Additional Shares:
(a) are within the Company's corporate power and authority
and have been duly authorized by all necessary corporate action; and
(b) will not violate, conflict with or result in any breach
or contravention of or the creation of any Lien under, any Contractual
Obligation of the Company or any of its Subsidiaries or any Order directly
relating to the Company or any of its Subsidiaries.
5.3 Governmental Authorization; Third Party Consents. Except for the
filing of the Series H Certificate of Designation with the Secretary of State of
the State of Delaware, or as set forth on Schedule 5.3, or as contemplated by
Section 4.4 or for the receipt of Stockholder Approval which may be required to
permit conversion of the Preferred Shares and the Additional Shares, no
approval, consent, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person, is necessary or
required in connection with the execution, delivery or performance by the
Company or enforcement against the Company of this Agreement and the Transaction
Documents or the transactions contemplated hereby or thereby.
5.4 Binding Effect. This Agreement and each of the Transaction
Documents to which the Company is a party have been duly executed and delivered
by the Company. This Agreement and each of the Transaction Documents constitute
the legal, valid and binding obligation of the Company enforceable against the
Company in accordance with their terms, subject, as to enforcement of remedies,
to bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, or
similar laws affecting creditors' rights generally from time to time in effect
and general equitable principles, except that any rights to indemnification set
forth in this
11
Agreement and the Fund Registration Rights Agreement may be limited by federal
and state securities laws and public policy considerations.
5.5 No Legal Bar. Except for the receipt of Stockholder Approval
which may be required to permit conversion of the Preferred Shares and the
Additional Shares, neither the execution, delivery nor performance of this
Agreement and the Transaction Documents nor the issuance or performance of the
terms of the Preferred Shares will violate any Requirement of Law.
5.6 Litigation.
(a) Except as set forth on Schedule 5.6 or as disclosed in
the Commission Documents, there are no actions, suits, proceedings, claims or
disputes pending, or to the Knowledge of the Company, threatened, at law, in
equity, in arbitration or before any Governmental Authority against the Company
or any of its Subsidiaries:
(i) with respect to this Agreement, the Preferred
Shares, the Additional Shares or any of the transactions contemplated hereby; or
(ii) which would, if adversely determined, (A) have a
material adverse effect on the Condition of the Company or (B) have a material
adverse effect on the ability of the Company to perform its obligations under
this Agreement or any Transaction Document.
(b) No injunction, writ, temporary restraining order, or any
Order of any nature has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery and performance of this
Agreement or any Transaction Document.
5.7 No Default or Breach. Neither the Company nor any of its
Subsidiaries is in default under or with respect to any Contractual Obligation
in any respect, which, individually or together with all such defaults, would
have a material adverse effect on the Condition of the Company or on the ability
of the Company to perform its obligations under this Agreement or the
Transaction Documents.
5.8 No Material Adverse Change. Since December 31, 2004, except as
disclosed in the Commission Documents, there has not been any material adverse
change, nor to the Knowledge of the Company is any such change threatened, in
the Condition of the Company.
5.9 Commission Documents. The Company has filed all registration
statements, proxy statements, reports and other documents required to be filed
by it under the Securities Act or the Exchange Act, and all amendments thereto.
Each Commission Document, as amended, when filed with the Commission or as so
amended was true and accurate in all material respects and in compliance in all
material respects with the requirements of its respective report form.
5.10 Subsidiaries. The Commission Documents include a complete and
accurate list of all of the Subsidiaries of the Company together with their
respective jurisdictions
12
of incorporation or organization. Each such Subsidiary is directly or indirectly
wholly owned by the Company.
5.11 Capitalization. As of the Effective Date, without giving effect
to the execution of this Agreement or the Closing: (i) the authorized capital
stock of the Company consists of 150,000,000 shares of Common Stock and
50,000,000 shares of preferred stock, par value $.01 per share, of which as of
the date hereof, 55,790,602 shares of Common Stock and no shares of preferred
stock are issued and outstanding; (ii) except as set forth on Schedule 5.11 or
as disclosed in the Commission Documents, there are no shares of capital stock
of the Company reserved for issuance; and (iii) except for this Agreement, the
Preferred Shares, the Additional Shares or as set forth on Schedule 5.11 or as
disclosed in the Commission Documents, there are no options, warrants or other
rights to any Person to purchase shares of capital stock or other securities of
the Company, and the Company is not obligated in any manner to issue shares of
its capital stock or other securities. Except as contemplated hereby and for
relevant state and federal securities laws, there are no restrictions on the
transfer of shares of capital stock of the Company issued or issuable to the
Investor or the Additional Investors. All of the outstanding shares of capital
stock of the Company have been duly authorized and are fully paid and
non-assessable. The Preferred Shares and the Additional Shares when issued under
the terms of this Agreement, and the shares of Common Stock when issued upon
conversion of the Preferred Shares and the Additional Shares, will be duly
authorized, validly issued, fully paid and non-assessable.
5.12 Private Offering. No form of general solicitation or general
advertising was used by the Company or, to its Knowledge, its representatives in
connection with the offer or sale of the Preferred Shares or the Additional
Shares. Assuming the truth and accuracy of the Investor's and the Additional
Investors' representation in Section 6.5, no registration of the Preferred
Shares or the Additional Shares pursuant to the provisions of the Securities Act
or any state securities or "blue sky" laws will be required by the offer, sale
or issuance of the Preferred Shares or the Additional Shares pursuant to this
Agreement. The Company agrees that neither it, nor anyone acting on its behalf,
will offer or sell the Preferred Shares, the Additional Shares or any other
security so as to require the registration of the Preferred Shares or the
Additional Shares pursuant to the provisions of the Securities Act or any state
securities or "blue sky" laws, unless such Preferred Shares and the Additional
Shares are so registered.
5.13 Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby based on any agreement, arrangement or
understanding with the Company or any of its Subsidiaries, or any action taken
by any such entity.
5.14 Registration Rights Agreement. The Commission Documents disclose
all agreements to which the Company or any Subsidiary is a party or by which it
is bound relating to the registration of its securities or, in the case of a
Subsidiary, the securities of the Company. Schedule 5.14 sets forth all
agreements to which the Company has Knowledge relating to the voting of Common
Stock or restricting the transfer of Common Stock.
13
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE INVESTOR
The Investor and each of the Additional Investors severally and not
jointly represents and warrants to the Company as to it only as follows:
6.1 Existence and Power. It:
(a) is duly organized and validly existing under the laws of
the jurisdiction of its organization; and
(b) has full power and authority to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently, or is currently proposed to be, engaged.
6.2 Authorization; No Contravention. The execution, delivery and
performance by it of this Agreement, the Transaction Documents to which it is a
party and the transactions contemplated hereby and thereby, including without
limitation the acquisition of the Preferred Shares, the Additional Shares and
the Common Stock issuable upon the conversion of the Preferred Shares and the
Additional Shares:
(a) is within its power and authority and has been duly
authorized by all necessary action;
(b) does not contravene the terms of its governing
documents, or any amendment thereof;
(c) will not violate, conflict with or result in any breach
or contravention of or the creation of any Lien under, any of its Contractual
Obligations, or any order or decree directly relating to it, and
(d) does not require approval, consent, exemption,
authorization or other action by, or notice to, or filing with, any Governmental
Authority or any other Person.
6.3 Binding Effect. This Agreement and each Transaction Document to
which it is a party have been duly executed and delivered by it, constitute its
legal, valid and binding obligation enforceable against it in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability.
6.4 No Legal Bar. The execution, delivery and performance of this
Agreement and the Transaction Documents will not violate any Requirement of Law
or any of its Contractual Obligations.
6.5 Purchase for Own Account. The Preferred Shares and the
Additional Shares (including, for purposes of this Section 6.5, the Common
Shares issuable upon conversion of the
14
Preferred Shares and the Additional Shares) to be acquired by it pursuant to
this Agreement are being acquired for its own account for investment purposes
and with no view toward any "distribution" thereof within the meaning of the
Securities Act, without prejudice, however, to its rights at all times to sell
or otherwise dispose of all or any part of the Preferred Shares or the
Additional Shares under an effective registration statement under the Securities
Act, or under an exemption from such registration available under the Securities
Act, and subject, nevertheless, to the disposition of its property being at all
times within its control. If it should in the future decide to dispose of any of
the Preferred Shares, the Additional Shares or the shares of Common Stock
issuable upon conversion of the Preferred Shares and the Additional Shares, it
understands and agrees that it may do so only in compliance with the Securities
Act and applicable state securities laws, as then in effect, and that
stop-transfer instructions to that effect, where applicable, will be in effect
with respect to the such shares. If it should decide to dispose of the Preferred
Shares or the Additional Shares, other than, in the case of the Investor,
pursuant to the provisions of the Fund Registration Rights Agreement, it, if
requested by the Company, will have the obligation in connection with such
disposition, at its expense, of delivering to the Company an opinion of counsel
of recognized standing in securities law, to the effect that the proposed
disposition of the Preferred Shares or the Additional Shares would not be in
violation of the Securities Act or any applicable state securities laws and,
assuming such opinion is required and is otherwise appropriate in form and
substance under the circumstances, the Company will accept, and will recommend
to any applicable transfer agent or trustee for any such securities that it
accept, such opinion. It agrees to the imprinting, so long as required by
applicable law, rule or regulation, of a legend on certificates representing all
of the Preferred Shares, Additional Shares and the shares of Common Stock issued
on conversion thereof to the following effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS
OF SUCH ACT OR SUCH LAWS."
6.6 Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby based on any agreement, arrangement or
understanding with it or any action taken by it.
6.7 Investment Knowledge. It has sufficient knowledge and experience
in financial and business matters and the business in which the Company is
engaged so as to be capable of evaluating the merits and risks of its investment
in the Preferred Shares or the Additional Shares and the shares of Common Stock
issuable upon conversion of the Preferred Shares or the Additional Shares, and
is able to bear the economic risk of the loss of its investment in the Company.
It is an "accredited investor" within the meaning of Rule 501 promulgated under
the Securities Act.
15
6.8 Title to Note. The Investor owns beneficially and of record, and
has good and valid title to, free and clear of any Lien or other defect in title
(other than restrictions imposed by federal and state securities laws), the
Note.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by the Company. In addition to all other sums
due hereunder or provided for in this Agreement, the Company agrees to indemnify
and hold harmless the Investor, each of the Additional Investors and their
Affiliates (including, without limitation, Xxxxx Brothers Xxxxxxxx & Co.) and
their respective officers, directors, agents, employees, subsidiaries, partners
and controlling persons (each, an "Indemnified Party") to the fullest extent
permitted by law from and against any and all losses, claims, damages, expenses
(including reasonable fees, disbursements and other charges of counsel) or other
liabilities ("Liabilities") resulting from any breach of any covenant,
agreement, representation or warranty of the Company in this Agreement or any
legal, administrative or other actions (including actions brought by the Company
or any equity holders of the Company or derivative actions brought by any Person
claiming through the Company or in the Company's name), proceedings or
investigations (whether formal or informal), or written threats thereof, based
upon, relating to or arising out of this Agreement, the Transaction Documents,
the transactions contemplated hereby or thereby, or any indemnified person's
role therein or in the transactions contemplated hereby or thereby; provided,
however, that the Company shall not be liable under this Section 7.1 to an
Indemnified Party: (a) for any amount paid in settlement of claims by such
Indemnified Party without the Company's consent (which consent shall not be
unreasonably withheld), (b) with respect to Liabilities arising solely out of
actions brought by the partners or members of such Indemnified Party against
another, (c) to the extent that it is finally judicially determined that such
Liabilities resulted primarily from (i) the willful misconduct, bad faith or
gross negligence of such Indemnified Party or (ii) a breach of such Indemnified
Party's (or its Affiliate's) representations in Article 6 or any breach such
Indemnified Party's (or its Affiliate's) obligations under this Agreement, or
(d) any Liabilities arising solely from the transfer of the Preferred Shares or
the Additional Shares by such Indemnified Party to any Person; provided further,
that if and to the extent that such indemnification is unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of such indemnified liability which shall be permissible under
applicable laws. In connection with the obligation of the Company to indemnify
for expenses as set forth above, the Company further agrees to reimburse each
Indemnified Party for all such expenses (including reasonable fees,
disbursements and other charges of counsel) as they are incurred by such
Indemnified Party; provided, however, that if an Indemnified Party is reimbursed
hereunder for any expenses, such reimbursement of expenses shall be refunded to
the extent it is finally judicially determined that the Liabilities in question
resulted primarily from the willful misconduct, bad faith or gross negligence of
such Indemnified Party. The maximum aggregate amount the Company shall be
required to pay the Investor or any of the Additional Investors under this
section 7.1 with respect to Liabilities resulting from any breach of any
covenant, agreement, representation or warranty of the Company in this
16
Agreement shall not exceed the aggregate Liquidation Preference of the Preferred
Shares or Additional Shares purchased by it hereunder.
7.2 Notification. Each Indemnified Party under this Article 7 will,
promptly after the receipt of notice of the commencement of any action or other
proceeding against such Indemnified Party in respect of which indemnity may be
sought from the Company under this Article 7, notify the Company in writing of
the commencement thereof. The omission of any Indemnified Party so to notify the
Company of any such action shall not relieve the Company from any liability
which it may have to such Indemnified Party (i) other than pursuant to this
Article 7 or (ii) under this Article 7 unless, and only to the extent that, such
omission results in the Company's forfeiture of substantive rights or defenses.
In case any such action or other proceeding shall be brought against any
Indemnified Party and it shall promptly notify the Company of the commencement
thereof, the Company shall be entitled to participate therein and, to the extent
that it may wish, to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party; provided, however, that any Indemnified
Party may, at its own expense, retain separate counsel to participate in such
defense. Notwithstanding the foregoing, in any action or proceeding in which
both the Company and an Indemnified Party is, or is reasonably likely to become,
a party, such Indemnified Party shall have the right to employ separate counsel
at the Company's expense and to control its own defense of such action or
proceeding if, in the reasonable opinion of counsel to such Indemnified Party,
(a) there are or may be legal defenses available to such Indemnified Party or to
other indemnified parties that are different from or additional to those
available to the Company or (b) any conflict or potential conflict exists
between the Company and such Indemnified Party that would make such separate
representation advisable; provided, however, that in no event shall the Company
be required to pay unreasonable fees or expenses or fees and expenses under this
Article 7 for more than one firm of attorneys in any jurisdiction in any one
legal action or group of related legal actions. The Company agrees that the
Company will not, without the prior written consent of the Investor and each
Additional Investor, settle, compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding relating to the matters
contemplated hereby (if any Indemnified Party is a party thereto or has been
actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of the Investor and each
other Indemnified Party from all liability arising or that may arise out of such
claim, action or proceeding. The rights accorded to each Indemnified Party
hereunder shall be in addition to any rights that any Indemnified Party may have
at common law, by separate agreement or otherwise.
7.3 Registration Rights Agreement. Notwithstanding anything to the
contrary in this Article 7, the indemnification and contribution provisions of
the Fund Registration Rights Agreement shall govern any claim made with respect
to registration statements filed pursuant thereto or sales made thereunder.
17
ARTICLE 8
AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees (a) with the Investor, each of
the Additional Investors and any Affiliate of the Investor or the Additional
Investors that are Holders with respect to all of this Article 8, and (b) with
any other Holder, with respect to all of this Article 8 except Sections 8.1(c)
and 8.8, so long as such Investor, such Additional Investor, such Affiliate or
such Holder holds any Preferred Shares or Additional Shares and with respect to
Sections 8.6 and 8.7, so long as such Investor, such Additional Investor, such
Affiliate or such Holder holds any shares of Common Stock issued upon conversion
of the Preferred Shares or the Additional Shares:
8.1 Financial Statements. The Company shall deliver to the Investor,
each of the Additional Investors and any of their Affiliates that are Holders:
(a) as soon as available, but not later than one hundred
twenty (120) days after the end of each fiscal year of the Company, a copy of
the audited consolidated balance sheet of the Company and its Subsidiaries as of
the end of such year and the related consolidated statements of income and cash
flows for such fiscal year, setting forth in each case in comparative form the
figures for the previous year, all in reasonable detail and accompanied by a
management discussion and analysis of the operations of the Company and its
Subsidiaries for such fiscal year and by the opinion of Xxxx, Xxxxx & Xxxxxx,
LLC (or any successor thereto) or another nationally recognized independent
public accounting firm which report shall state that such consolidated financial
statements present fairly in all material respects the financial position for
the periods indicated in conformity with GAAP applied on a basis consistent with
prior years (except for changes with respect to which such accounting firm
concurs); provided, however, that the delivery of a copy of the Company's Annual
Report on Form 10-K shall satisfy the requirements of this Section 8.1(a);
(b) commencing with the fiscal period ending on June 30,
2005, as soon as available, but in any event not later than forty-five (45) days
(or fifty (50) days if the Company avails itself of the time extension provided
by Rule 12b-25 promulgated under the Exchange Act) after the end of each of the
first three fiscal quarters of each year, the unaudited consolidated balance
sheet of the Company and its Subsidiaries, and the related consolidated
statements of income and cash flow for quarter and for the period commencing on
the first day of the fiscal year and ending on the last day of such quarter, all
certified by an appropriate officer of the Company; provided, however, that the
delivery of a copy of the Company's Quarterly Report on Form 10-Q shall satisfy
the requirements of this Section 8.1(b);
(c) annual budgets and such other financial and operating
data of the Company and its Subsidiaries, as the Investor or any Additional
Investor reasonably may request, to the extent that such information is formally
prepared for the Company's Chairman, President, Board of Directors and/or banks
or other lenders, such materials to held confidential by the recipient thereof;
18
(d) at any time when it is not subject to Section 13 or
15(d) of the Exchange Act, upon request, to the Investor, any of the Additional
Investors and prospective investors of the Preferred Shares or the Additional
Shares, information of the type that would satisfy the requirement of subsection
(d)(4)(i) of Rule 144A (or any similar successor provision) under the Securities
Act; and
(e) except as otherwise provided in Sections 8.1(a) and (b),
and unless made publicly available promptly after filing on the Company's
website, promptly after the same are filed, copies of all Commission Documents.
8.2 Notices. Upon Knowledge of the Chief Executive Officer, the
President or the Chief Financial Officer of the Company of the events described
below, the Company shall give written notice within 10 days to the Investor and
each of the Additional Investors of:
(a) the occurrence of any default under, or breach of, any
provision of Article 8 or 9 accompanied by a certificate specifying the nature
of such default or breach, the period of existence thereof and the action that
the Company has taken or proposes to take with respect thereto; and
(b) any (i) material default or event of default under any
material Contractual Obligation, of the Company or any of its Subsidiaries, or
(ii) material dispute, litigation, investigation, proceeding or suspension which
may exist at any time between the Company or any of its Subsidiaries and any
Governmental Authority; each accompanied by a statement setting forth details of
the occurrence referred to therein and stating what action the Company proposes
to take with respect thereto.
8.3 Issue Taxes. The Company shall pay, or cause to be paid, all
documentary and similar taxes levied under the laws of any applicable
jurisdiction in connection with the issuance of the Preferred Shares and the
Additional Shares and the shares of Common Stock issuable or issued upon
conversion thereof and the execution and delivery of the Transaction Documents
and any modification of the Preferred Shares or the Additional Shares or such
other agreements and documents and will hold the Investor and each of the
Additional Investors harmless, without limitation as to time, against any and
all Liabilities with respect to all such taxes.
8.4 Reservation of Shares. Immediately prior to the date of
conversion of the Preferred Shares and the Additional Shares into shares of
Common Stock, the Company shall reserve and keep available out of its authorized
Common Stock, solely for the purpose of issue or delivery upon conversion of the
Preferred Shares and the Additional Shares as provided in the Series H
Certificate of Designation, such number of shares of Common Stock as shall then
be issuable or deliverable upon the conversion of all outstanding Preferred
Shares and Additional Shares. Such shares of Common Stock shall, when issued or
delivered in accordance with the Series H Certificate of Designation, be duly
and validly issued and fully paid and non-assessable. The Company shall issue
the Common Stock into which the Preferred Shares and the Additional Shares are
convertible upon the proper surrender of the Preferred Shares and the Additional
Shares in accordance with the provisions of the Series H Certificate of
Designation and shall otherwise comply with the terms thereof.
19
8.5 Registration and Listing. If any shares of Common Stock required
to be reserved for purposes of conversion of the Preferred Shares and the
Additional Shares as provided in the Series H Certificate of Designation require
registration with or approval of any Governmental Authority under any Federal or
state or other applicable law before such Common Stock may be issued or
delivered upon such conversion or exercise, the Company will endeavor in good
faith and as expeditiously as possible to cause such Common Stock to be duly
registered or approved, as the case may be, unless such registration or approval
is required solely because of a breach of the Investor's, in the case of
Preferred Shares, or any Additional Investor's, in the case of such Additional
Investor's Additional Shares, representation contained in Section 6.5. So long
as the Common Stock is quoted on the NASDAQ or listed on any national securities
exchange, the Company, if permitted by the rules of such system or exchange,
will quote or list and keep quoted or listed on such system or exchange, upon
official notice of issuance, all Common Stock issuable or deliverable upon
conversion of the Preferred Shares and the Additional Shares.
8.6 Private Offering. In the event the Company proposes to sell
Common Stock in an offering not required to be registered under the Securities
Act, it will give the Investor and each of the Additional Investors at least 20
Business Days prior notice. If the Investor or any of the Additional Investors
elects by written notice to the Company within 15 Business Days after receipt of
such notice, it may participate in the sale (under the same terms and conditions
as set out in such offering), by including in such sale in place of an equal
number of shares of Common Stock to be sold by the Company, such aggregate
number of shares of Common Stock as is equal to the product obtained by
multiplying (i) the number of shares of Common Stock proposed to be sold by the
Company by (ii) a fraction (A) the numerator of which is the number of shares of
Common Stock into which the Preferred Shares or Additional Shares held by such
Investor or Additional Investor, as the case may be, have heretofore been or may
be converted and (B) the denominator of which is the sum of (x) the amount of
such numerator and (y) the total number of shares of Common Stock outstanding at
such time. The provisions of this Section 8.7 shall not apply to issuances of
Common Stock in connection with: (1) acquisitions by the Company, (2) the
exercise of options or conversion of convertible securities and (3) services
rendered to the Company.
8.7 Rights Offering.
(a) The Company shall use its best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable to file with the Commission as soon as practicable, and
cause to become effective no sooner than the Conversion Price Determination
Date, a registration statement in connection with an offer (the "Rights
Offering"), on a pro rata basis, to each holder of record of Common Stock (each
a "Stockholder" and collectively, the "Stockholders"), as of a record date to be
set by the Board of Directors, the right to purchase shares ("Rights Shares") of
Common Stock to allow existing holders of the Common Stock to purchase
additional shares of Common Stock in proportion to the number of shares of
Common Stock held by such Stockholder prior to the Rights Offering (excluding
the Preferred Shares and the Additional Shares), at a price per Rights Share
(the "Subscription Price"), such that the aggregate number of Rights Shares to
be offered in the Rights Offering multiplied by the Subscription Price will
equal approximately $30.6 million;
20
provided that, such number may be adjusted in an equitable manner to avoid
fractional Rights and/or Rights Shares and to ensure that the gross proceeds
from the Rights Offering equals $30.6 million;
(b) The Company shall prepare the Rights Offering documents
pursuant to which the Rights Offering will be made (the "Rights Offering
Documents"), and such Rights Offering Documents shall be in forms and on terms
and conditions reasonably acceptable to the Investor and the Additional
Investors. The Company will take all steps necessary to cause the Rights
Offering Documents to be disseminated to the Stockholders, as and to the extent
required by applicable federal, state and foreign securities laws. The Company
covenants and agrees that no Rights Offering Documents filed with the Commission
shall contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made, in
the light of the circumstances in which made, not materially false or
misleading. The Company covenants and agrees that it will promptly correct any
information in the Rights Offering Documents if, and to the extent, that such
information becomes false or misleading in any material respect, and the Company
will take all steps necessary to cause the Rights Offering Documents, as so
corrected, to be filed with the Commission and/or disseminated to the
Stockholders, as and to the extent required by applicable federal, state and
foreign securities laws. The Investor and its counsel will be given an
opportunity to review and comment upon each amendment or supplement to the
Rights Offering Documents in each instance before any such amendment or
supplement is filed with the Commission or mailed to the Stockholders.
8.8 Best Efforts.
In the event that the Company's counsel reasonably determines on
or prior to September 30, 2005, that it is unable to deliver a written opinion
to the Investor and each of the Additional Investors, in form and substance
reasonably acceptable to the Investor, that prior to the conversion of the
Preferred Shares and the Additional Shares into shares of Common Stock a
Stockholder Vote obtained at a Stockholder Meeting is not required by the
Certificate of Incorporation, the rules and regulations of NASDAQ or applicable
law, the Company shall promptly use its best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to obtain the Stockholder Approval, including, without limitation,
(a) calling and holding a Stockholder Meeting as promptly as practicable
thereafter to the sole purpose of adoption of the terms of the amendment of the
Certificate of Incorporation contemplated by the Stockholder Vote, (b)
recommending to the Company's stockholders the approval of the amendment of the
Certificate of Incorporation contemplated by the Stockholder Vote, (c) using its
best efforts to solicit or cause to be solicited from its stockholders proxies
in favor of adoption of terms of the amendment of the Certificate of
Incorporation contemplated by the Stockholder Vote and (d) voting all shares for
which the Company holds proxies or is otherwise entitled to vote (but excluding
any such share held by any other Person as to which the Company has received or
is subject to other voting instructions) in favor of the amendment of the
Certificate of Incorporation contemplated by the Stockholder Vote.
21
8.9 Registration Rights. The Company acknowledges and agrees that
the shares of Common Stock issuable upon the conversion of the Preferred Shares
shall be deemed to be "Registrable Securities" as such term is defined in the
Fund Registration Rights Agreement.
8.10 Consents. As soon as practicable after the date hereof, the
Company shall use its best efforts to obtain any consents or to provide any
notice required by applicable law in connection with the transactions
contemplated hereunder, including, without limitation, any such filings with the
Federal Communications Commission and/or any state public utility commissions.
8.11 Rights Offering Issuance. In the event that the Preferred Shares
are converted prior to the consummation of the Rights Offering, and the
Subscription Price in the Rights Offering is less than the Conversion Price at
which the Preferred Shares were converted into Common Stock, then the Company
shall, simultaneously with the consummation of the Rights Offering, issue and
sell to the Investor and each Additional Investor that number of shares of
Common Stock equal to the difference between (i) the number of shares of Common
Stock that the Investor or such Additional Investor, as the case may be, would
have received had its Preferred Shares or Additional Shares, as the case may be,
been converted at the Subscription Price in the Rights Offering minus (ii) the
number of shares of Common Stock that the Investor or such Additional Investor,
as the case may be, received upon conversion of its Preferred Shares or
Additional Shares, as the case may be, at a purchase price per share equal to
$0.01, against delivery by the Investor by wire transfer of immediately
available funds of the purchase price therefor.
ARTICLE 9
NEGATIVE COVENANTS
The Company hereby covenants and agrees with the Investor, each of the
Additional Investors any Affiliate of the Investor or the Additional Investors,
and any Holder so long as such Person holds any Preferred Shares or Additional
Shares, that without the prior consent of such Person in accordance with Section
11.4:
9.1 Prohibitions on a Change of Control. The Company shall not take,
approve, consent to or otherwise ratify a Change of Control prior to the
conversion of the Preferred Shares and the Additional Shares whether at a
stockholders meeting or by action of the board of directors or otherwise, unless
the holders of the Preferred Shares and the Additional Shares are entitled to
participate in such Change of Control transaction on the same terms and
conditions, on an as-if converted basis, as stockholders holding shares of
Common Stock.
9.2 No Inconsistent Agreements. Neither the Company nor any of its
Subsidiaries shall enter into any loan or other agreement, or enter into any
amendment or other modification to any currently existing agreement, which by
its terms restricts or prohibits the ability of the Company to accrue dividends
on the Preferred Shares or the Additional Shares or to issue Common Stock upon
conversion of the Preferred Shares or the Additional Shares in accordance with
the Series H Certificate of Designation and this Agreement.
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9.3 Issuance of Preferred Stock. The Company shall not issue any
Preferred Shares except on the Initial Closing Date and the Additional Closing
Date pursuant to this Agreement.
9.4 Taxable Dividends. The Company shall use commercially reasonable
efforts to not take any action that would require the reporting of any taxable
stock dividends to the holders of the Preferred Shares and the Additional Shares
under Section 305 of the Code.
ARTICLE 10
The Investor and each Additional Investor hereby covenants and
agrees with the Company:
10.1 Stockholder Vote(a) . At any Stockholder Meeting in connection
with such Stockholder Vote, it will vote all Preferred Shares, all Additional
Shares and all outstanding shares of Common Stock beneficially owned as of such
date by it and entitled to vote thereon in favor of the amendment of the
Certificate of Incorporation contemplated by the Stockholder Vote.
10.2 Rights Offering. It will not purchase any Rights Shares in the
Rights Offering. It agrees that the Company may offer, without its prior
consent, to the Additional Investors or other Persons who are not Stockholders,
the opportunity to subscribe for additional Rights Shares provided the aggregate
purchase price for such shares does not exceed (i) $12.5 million minus (ii) the
Aggregate Liquidation Preference of all Preferred Shares sold to the Additional
Investors hereunder.
ARTICLE 11
MISCELLANEOUS
11.1 Survival of Provisions. All warranties, representations and
covenants made by the Company in or under this Agreement shall be considered to
have been relied upon by the Investor and each of the Additional Investors and
shall survive the execution and delivery of this Agreement and the issuance to
the Investor and the Additional Investors of the Preferred Shares and the
Additional Shares, regardless of any investigation made by the Investor, any of
the Additional Investors or any Affiliate thereof or on its behalf. All
warranties, representations and covenants made by the Investor or any of the
Additional Investors shall survive the execution and delivery of this Agreement
and the issuance to the Investor and the Additional Investors of the Preferred
Shares and the Additional Shares. Except as otherwise set forth in Article 8,
all of the representations and warranties made herein and each of the provisions
of Articles 5, 6, 7, 9, 10 and 11 shall survive the execution and delivery of
this Agreement, any investigation by or on behalf of the Investor, any of the
Additional Investors or any Affiliate, acceptance of the Preferred Shares and
the Additional Shares, conversion of the Preferred Shares and the Additional
Shares or termination of this Agreement; provided, that the representations and
warranties set forth in Articles 5 and 6 shall expire and terminate upon the
earlier of
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(i) conversion of all of the Preferred Shares and the Additional Shares into
Common Stock and (ii) the second anniversary of the Closing.
11.2 Notices. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
(a) if to the Investor at the following address:
The 1818 Fund III, L.P.
c/o Brown Brothers Xxxxxxxx & Co.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
(b) if to any of the Additional Investors at the addresses
set forth on the signature page pursuant to which it
became a party hereto
(c) if to the Company at the following address:
Trinsic, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxx, Xxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: General Counsel
with a copy to:
Xxxxxx, Xxxxxx & Xxxxxxx LLP
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; when delivered
by courier, if delivered by
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commercial overnight courier service; five Business Days after being deposited
in the mail, postage prepaid, if mailed; and when receipt is acknowledged, if
telecopied.
11.3 Successors and Assigns; No Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto. The Investor and each of the Additional
Investors may assign any of its rights under this Agreement only to any of its
Affiliates; provided, that any such Affiliate (including any limited partner)
agrees to be bound by the provisions of this Agreement. The Company may not
assign any of its rights under this Agreement without the written consent of the
Investor. Except as provided in Article 7, no Person other than the parties
hereto is intended to be a beneficiary of this Agreement or the Transaction
Documents. Nothing in this Section 11.3 shall prohibit the Investor or any of
the Additional Investors from transferring Common Stock, Preferred Shares or
Additional Shares to any Person.
11.4 Amendment and Waiver. No failure or delay on the part of the
Company, the Investor or any of the Additional Investors in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies provided for herein are cumulative and are not exclusive of
any remedies that may be available to the Company, the Investor or any of the
Additional Investors at law, in equity or otherwise. Any amendment, supplement,
modification or termination of or to any provision of this Agreement, any waiver
of any provision of this Agreement, and any consent to any departure by the
Company from the terms of any provision of this Agreement, shall be effective
only in the specific instance and for the specific purpose for which made or
given and shall be effective only when signed in writing by or on behalf of
holders of at least 50% of the Common Stock issued and issuable upon conversion
of the Preferred Shares and the Additional Shares (whether or not converted) (it
being understood that the terms of this Agreement may be waived or amended with
the written consent of holders of at least 50% of the Common Stock issued and
issuable upon conversion of the Preferred Shares and the Additional Shares
(whether or not converted)). Except where notice is specifically required by
this Agreement, no notice to or demand on the Company in any case shall entitle
the Company to any other or further notice or demand in similar or other
circumstances.
11.5 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
11.6 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
11.7 Determinations. Except where any provision expressly requires
that a determination be reasonable or a consent not be unreasonably withheld, or
be subject to qualifications to similar effect, all determinations to be made by
the Company, the Investor, any of the Additional Investors or any Holder
hereunder in its opinion or judgment or with its approval or otherwise shall be
made by it in its sole discretion.
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11.8 Governing Law. This Agreement has been negotiated, executed and
delivered in the State of New York and shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
11.9 Jurisdiction. Each party to this Agreement hereby irrevocably
agrees that any legal action or proceeding arising out of or relating to this
Agreement or any agreements or transactions contemplated hereby shall be brought
only in the courts of the State of New York located in New York City or of the
United States of America for the Southern District of New York and hereby
expressly submits to the personal jurisdiction and venue of such courts for the
purposes thereof and expressly waives any claim of improper venue and any claim
that such courts are an inconvenient forum. Each party hereby irrevocably
consents to the service of process of any of the aforementioned courts in any
such suit, action or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, to the address set forth in Section 11.2,
such service to become effective 10 days after such mailing.
11.10 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired,
unless the provisions held invalid, illegal or unenforceable shall substantially
impair the benefits of the remaining provisions hereof.
11.11 Rules of Construction. Unless the context otherwise requires,
"or" is not exclusive, and references to sections or subsections refer to
sections or subsections of this Agreement.
11.12 Remedies. If a breach of this Agreement or the Series H
Certificate of Designation by the Company occurs and is continuing, any Holder
may pursue any available remedy by proceeding at law or in equity to enforce the
performance (including, without limitation, the specific performance) of any
provision of this Agreement or the Series H Certificate of Designation. Except
as otherwise provided by law, a delay or omission by any Holder in exercising
any right or remedy accruing upon any such breach shall not impair the right or
remedy or constitute a waiver of or acquiescence in any such breach. No remedy
is exclusive of any other remedy. All available remedies are cumulative.
11.13 Entire Agreement. This Agreement, together with the exhibits and
schedules hereto, the Transaction Documents and the Fund Registration Rights
Agreement, is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement, together with the exhibits and schedules hereto, and the Transaction
Documents supersede all prior agreements and understandings between the parties
with respect to such subject matter.
11.14 Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement (including, without limitation, the
representations and warranties of the Investor and any of the Additional
Investors), the Transaction Documents or any other
26
document or instrument contemplated hereby or thereby, or where any provision
hereof or thereof is validly asserted as a defense, the successful party shall
be entitled to recover reasonable attorneys' fees, charges and disbursements in
addition to any other available remedy.
11.15 Publicity. Except as may be required by applicable law or NASDAQ
rules, neither party hereto shall issue a publicity release or announcement or
otherwise make any public disclosure concerning this Agreement or the
transactions contemplated hereby, without prior approval by the other party
hereto. If any announcement is required by law to be made by either party
hereto, prior to making such announcement such party will deliver a draft of
such announcement to the other party and shall give the other party an
opportunity to comment thereon.
11.16 Expenses. The Company acknowledges and agrees that whether or
not the transactions contemplated hereby are consummated, the Company shall
reimburse the Investor and the Additional Investors for all reasonable legal
fees and expenses and other charges of Xxxx, Weiss, Rifkind, Xxxxxxx &Garrison
LLP and one law firm representing the Additional Investors in connection with
the negotiation, execution and delivery of this Agreement and the Transaction
Documents and the purchase of the Preferred Shares. The Company agrees that it
will make such reimbursements as such fees and expenses are incurred, upon
request from the Investor or any Additional Investor.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and delivered by their respective representatives hereunto duly
authorized as of the date first above written.
TRINSIC, INC.
By: /s/ Xxxxxx X. Xxxxx, III
-------------------------------------
Name: Xxxxxx X. Xxxxx, III
Title: Chief Executive Officer
THE 1818 FUND III, L.P.
By: Xxxxx Brothers Xxxxxxxx & Co.,
General Partner
By: /s/ Xxxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Partner
