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SECURITIES PURCHASE AGREEMENT
between
HMG WORLDWIDE CORPORATION
and
SOCIETE GENERALE
dated as of
March 15, 2000
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of March 15,
2000, between HMG WORLDWIDE CORPORATION, a Delaware corporation (the "Company"),
and Societe Generale, a bank organized under the laws of France (the
"Purchaser").
W I T N E S S E T H :
WHEREAS, the Company proposes to issue and sell U.S. $1,500,000
aggregate principal amount of the Company's 7% Convertible Notes Due March 15,
2003 (the "Notes")on a private placement basis pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), and the Purchaser desires to purchase the Notes from the
Company, on the terms and subject to the conditions set forth herein.
WHEREAS, the Notes will be convertible into shares of common stock, par
value $.01 per share, of the Company (the "Common Stock"), pursuant to the terms
of the Notes, and the holders of the Notes will have registration rights with
respect to such shares of Common Stock issuable upon conversion of the Notes
(the "Conversion Shares") pursuant to the terms of the Registration Rights
Agreement dated as of the date hereof, between the Company and the Purchaser
(the "Registration Rights Agreement").
NOW THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
"Affiliate" of a Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first mentioned Person. The term "control"
(including the terms "controlling," "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock, including each class of common stock and preferred stock of such Person.
"Closing" has the meaning set forth in Section 2.02.
"Commission" means the United States Securities and Exchange
Commission.
"Current 10-K" means the Company's Annual Report on Form 10-K for the
year ended December 31, 1999.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Governmental Authority" means any federal, state or other political
subdivision thereof and any agency or other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Material Adverse Effect" has the meaning set forth in Section 3.01.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
Governmental Authority or other entity of any kind.
"SEC Reports" means the Company's Annual Report on Form 10-K for the
year ended December 31, 1998.
"Securities Act" means the Securities Exchange Act of 1933, as amended.
"Transaction Documents" means, collectively, this Agreement, the
Registration Rights Agreement and the Notes.
"United States" has the meaning ascribed to such term in Rule 902(p) of
Regulation S under the Securities Act.
"U.S. Person" has the meaning ascribed to such term in Rule 902(o) of
Regulation S under the Securities Act.
"Year 2000 Compliant" means, with respect to a Person's information
technology, the information technology is designed to be used prior to, during,
and after the calendar Year 2000 A.D., and the information technology used
during each such time period will accurately receive, provide and process
date/time data (including, but not limited to, calculating, comparing and
sequencing) from, into and between the twentieth and twenty-first centuries,
including the years 1999 and 2000, and leap year calculations and will not
malfunction, cease to function, or provide invalid or incorrect results as a
result of date/time data, to the extent that other information technology, used
in combination with the information technology being acquired, properly
exchanges date/time data with it.
ARTICLE II
SALE AND PURCHASE
SECTION 2.01. Agreement to Sell and to Purchase; Purchase Price. On the
terms and subject to the conditions set forth in this Agreement, the Company
hereby agrees to issue and sell to the Purchaser, and the Purchaser hereby
agrees to purchase from the Company, U.S. $1,500,000 aggregate principal amount
of Notes at an aggregate purchase price of $1,500,000,
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payable in immediately available funds (the "Purchase Price"). A copy of the
form of the Notes is attached as Exhibit A hereto, and the terms thereof are
hereby expressly incorporated by reference herein.
SECTION 2.02. Closing. The closing of the sale and purchase of the
Notes (the "Closing") shall be deemed to take place on March 15, 2000, on which
date the Purchaser paid the Purchase Price for the Notes and as of which date
the Company executed, issued and delivered the Notes to the Purchaser in
denominations as requested by the Purchaser. As soon as reasonably practicable
subsequent to the Closing, the following additional closing transactions shall
take place in connection with the Closing: (i) the Company shall pay the
expenses set forth in Section 6.02 hereof by wire transfer to the account
designated by the Purchaser; (ii) the Company and the Purchaser shall execute
and deliver this Agreement and the Registration Rights Agreement; (iii) the
Company shall deliver to the Purchaser a certificate executed by the Secretary
of the Company, signing in such capacity, dated the date of the Closing (A)
certifying that attached thereto are true and complete copies of the resolutions
duly adopted by the Board of Directors of the Company authorizing the execution
and delivery of the Transaction Documents and the consummation of the
transactions contemplated thereby (including, without limitation, the issuance
and sale of the Notes and the reservation and issuance of the Conversion Shares
upon conversion of the Notes), which authorization shall be in full force and
effect on and as of the date of such certificate, and (B) certifying and
attesting to the office, incumbency, due authority and specimen signatures of
each Person who executed any Transaction Document for or on behalf of the
Company; and (iv) Xxxxxx Xxxxxx Xxxxxx & Xxxx, a professional corporation,
counsel to the Company, shall deliver to the Purchaser an opinion, dated the
date of the Closing and addressed to the Purchaser, in form and substance
acceptable to the Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to the Purchaser to purchase the Notes, the
Company hereby represents and warrants to the Purchaser that on and as of the
date hereof:
SECTION 3.01. Organization and Standing. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority, and all authorizations, licenses,
permits and certifications necessary for it to own its properties and assets and
to carry on its business as it is now being conducted (and as described in the
SEC Reports) and proposed to be conducted. The Company and each of its
subsidiaries is duly qualified to transact business and is in good standing in
each jurisdiction in which the character of the properties owned or leased by it
or the nature of its businesses makes such qualification necessary, except where
the failure to so qualify or be in good standing would not have a material
adverse effect on the business, assets, operations, properties, condition
(financial or otherwise) or prospects of the Company and its subsidiaries, taken
as a whole, or any material adverse effect on the Company's ability to
consummate the transactions contemplated by, and to execute, deliver and perform
its obligations under, each of the Transaction Documents (a "Material Adverse
Effect").
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SECTION 3.02. Securities of the Company. The authorized Capital Stock
of the Company consists 50,000,000 shares of Common Stock, of which 12,992,586
shares were issued and outstanding as of March 15, 2000. Except as set forth in
the SEC Reports, the Company has no other authorized, issued or outstanding
equity securities or securities containing any equity features, or any other
securities convertible into, exchangeable for or entitling any person to
otherwise acquire any other securities of the Company containing any equity
features. All of the outstanding shares of Capital Stock of the Company have
been duly and validly authorized and issued, and are fully paid and
nonassessable. The Notes and all of the Conversion Shares have been duly and
validly authorized. When issued against payment therefor as provided in this
Agreement, the Notes will be validly issued and will constitute valid and
enforceable obligations of the Company, enforceable against the Company in
accordance with their terms (subject to the effects of applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity). When issued
upon conversion of the Notes, the Conversion Shares will be validly issued,
fully paid and nonassessable, free and clear of all preemptive rights, claims,
liens, charges, encumbrances and security interests of any nature whatsoever
(unless created by the Purchaser). A sufficient number of shares of Common Stock
has been duly reserved and will remain available for issuance upon conversion of
the Notes. Except as set forth in the SEC Reports, there are no outstanding
options, warrants, agreements, conversion rights, subscription rights,
preemptive rights, rights of first refusal or other rights or agreements of any
nature outstanding to subscribe for or to purchase any shares of Capital Stock
of the Company or any other securities of the Company of any kind. Neither the
issuance of the Notes nor the Conversion Shares is subject to any preemptive
rights, rights of first refusal or other similar limitation. Except as otherwise
required by law, there are no restrictions upon the voting or transfer of any
shares of the Company's Capital Stock pursuant to the Company's organizational
and other governing documents. There are no agreements or other obligations
(contingent or otherwise) that may require the Company to repurchase or
otherwise acquire any shares of its Capital Stock.
SECTION 3.03. Authorization; Enforceability. The Company has the
corporate power and authority to execute, deliver and perform the terms and
provisions of each of the Transaction Documents, and has taken all necessary
corporate action to authorize the execution, delivery and performance by it of
each of the Transaction Documents and to consummate the transactions
contemplated thereby to be performed by it. No other corporate proceedings on
the part of the Company are necessary, and no consent of the shareholders of the
Company is required, for the valid execution and delivery by the Company of the
Transaction Documents and the performance and consummation by the Company of the
transactions contemplated thereby to be performed by it. The Company has duly
executed and delivered each of the Transaction Documents. Assuming the due
execution and delivery of this Agreement and the Registration Rights Agreement
by the Purchaser, the Transaction Documents constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
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SECTION 3.04. No Violation; Consents.
(a) The execution, delivery and performance by the Company of
the Transaction Documents and the consummation of the transactions contemplated
thereby to be performed by it do not and will not (i) contravene the applicable
provisions of any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or Governmental Authority to or by which the
Company or any of its subsidiaries or any of its respective property or assets
is bound, (ii) violate, result in a breach of or constitute (with due notice or
lapse of time or both) a default or give rise to an event of acceleration under
any contract, lease, loan or credit agreement, mortgage, security agreement,
trust indenture or other agreement or instrument to which the Company is a party
or by which it or any of its subsidiaries is bound or to which any of its
respective properties or assets is subject, nor result in the creation or
imposition of any lien, security interest, charge or encumbrance of any kind
upon any of the properties, assets or Capital Stock of the Company or any of its
subsidiaries, or (iii) violate any provision of the organizational and other
governing documents of the Company or any of its subsidiaries.
(b) No consent, approval, authorization or order of, or filing or
registration with, any court or Governmental Authority or other Person is
required to be obtained or made by the Company for the execution, delivery and
performance of the Transaction Documents or the consummation of any of the
transactions contemplated thereby (other than the registration of the resale of
the Conversion Shares with the SEC and pursuant to any state "blue sky" laws as
contemplated by the Registration Rights Agreement), except for those consents or
authorizations previously obtained and those filings previously made.
SECTION 3.05. Securities Act Representations. The Company has not
offered or sold and will not offer or sell any Notes in this offering other than
the Notes. Assuming the accuracy of the Purchaser's representations pursuant to
Section 4.02 hereof, the sale of the Notes hereunder is, and the issuance of the
Conversion Shares upon conversion of the Notes will be, exempt from the
registration requirements of the Securities Act. Neither the Company, nor any of
its Affiliates, or, to its knowledge, any Person acting on its or their behalf
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the Securities Act) in connection with the
offer or sale of the Notes or Conversion Shares. Neither the Company, nor any of
its Affiliates, nor to its knowledge, any Person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security other than pursuant to this Agreement,
under circumstances that would require registration under the Securities Act of
the Notes to be issued under this Agreement. The Company is eligible to use Form
S-3 under the Securities Act to file the Registration Statement as defined in
the Registration Rights Agreement. The Company has not provided the Purchaser
with any material non-public information or any information that, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company prior to engaging in the transactions contemplated by the Transaction
Documents but that has not been so disclosed.
SECTION 3.06. Solvency; No Default. (a) The Company is, and upon giving
effect to the transactions contemplated hereby to be performed by it will be,
Solvent (as defined below). "Solvent" means that, as of the date of
determination, (i) the then fair saleable value of the assets of the Company
exceeds the then total amount of its debts and other liabilities (including any
guarantees and other contingent, subordinated, unmatured or unliquidated
liabilities whether or
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not reduced to judgment, disputed or undisputed, secured or unsecured), (ii) the
Company has sufficient funds and cash flow to pay its liability on its existing
and anticipated debts as they become absolute and matured, (iii) final judgments
against the Company in pending or threatened actions for money damages will not
be rendered at a time when, or in an amount such that, the Company will be
unable to satisfy any such judgments promptly in accordance with their terms
(taking into account the maximum reasonable amount of such judgments in any such
actions (other than amounts that would be remote) and the earliest reasonable
time at which such judgments would be rendered), and (iv) the Company does not
have unreasonably small capital with which to engage in its present or
anticipated business.
(b) The Company is not, and immediately after the consummation of the
transactions contemplated hereby to be performed by it will not be, in default
under or in violation of (whether upon the passage of time, the giving of notice
or both), its organizational and other governing documents, or any provision of
any security issued by the Company, or of any agreement, instrument or other
undertaking to which the Company is a party or by which it or any of its
property or assets is bound, or the applicable provisions of any law, statute,
rule, regulation, order, writ, injunction, judgment or decree of any court or
Governmental Authority to or by which the Company or any of its property or
assets is bound) which default or violation, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
SECTION 3.07. No Brokers. No broker, finder, agent or similar
intermediary is entitled to any broker's, finder's, placement or similar fee or
other commission in connection with the transactions contemplated hereby based
on any agreement, arrangement or understanding with the Company.
SECTION 3.08. SEC Reports; Financial Condition; No Adverse Changes. (a)
The audited financial statements of the Company and the related notes thereto as
at December 31, 1999 (the "Financial Statements") reported on by Xxxxxxxx Alpren
& Green LLP, independent accountants, to be included in the Current 10-K, will
present fairly the financial condition, results of operations and cash flows of
the Company at such date and for the periods set forth therein. The Financial
Statements, including the related schedules and notes thereto (if any), will
have been prepared in accordance with generally accepted accounting principles
as set forth in the opinions and pronouncements of the Accounting Principles
Board of American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board as in effect on the
date of filing of such documents with the Commission, applied on a consistent
basis (except for changes concurred in by the Company's independent public
accountants) unless otherwise expressly stated therein. During the period from
January 1, 2000 to and including the date hereof, there has been no sale,
transfer or other disposition by the Company of any material part of the
business, property or securities of the Company and no purchase or other
acquisition of any business, property or securities by the Company material in
relation to the financial condition of the Company.
(b) Except as are fully reflected or reserved against in the Financial
Statements and the notes thereto, there are no liabilities or obligations with
respect to the Company or any of its subsidiaries of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and
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whether or not due) that, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(c) Since December 31, 1999, there has been no development or event,
nor any prospective development or event known to the Company or any of its
subsidiaries, or any litigation, proceeding or other action seeking an
injunction or other restraining order, damages or other relief from a court or
administrative agency of competent jurisdiction pending, threatened or, to the
best knowledge of the Company, contemplated, or any action of any Governmental
Authority, that has had or could reasonably be expected to have a Material
Adverse Effect.
SECTION 3.09. Use of Proceeds; Federal Regulations. No part of the net
proceeds from the sale of the Notes will be used for any purposes in violation
of the provisions of Regulation T, U or X of the Board of Governors of the
Federal Reserve System.
SECTION 3.10. Subsidiaries. As of the date hereof, the Company has the
subsidiaries listed on Exhibit 21 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
SECTION 3.11. Year 2000 Compliance. The Company and its subsidiaries
are Year 2000 Compliant. To the best knowledge of the Company, each of the
suppliers, vendors and customers material to the operations of the Company and
its subsidiaries is Year 2000 Compliant.
SECTION 3.12 No Integrated Offering. Neither the Company, nor any of
its Affiliates, nor to its knowledge any Person acting on its or their behalf,
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security under circumstances that would require
registration under the Securities Act of the offer and sale of the Notes.
SECTION 3.13 No Litigation. No litigation or claim (including those for
unpaid taxes), or environmental proceeding against the Company or any of its
subsidiaries is pending, threatened or, to the Company's best knowledge,
contemplated and no other event has occurred, that if determined adversely would
have a Material Adverse Effect on the Company.
SECTION 3.14. Environmental Matters. The Company and each of its
subsidiaries are in compliance in all material respects with all applicable
state and federal environmental laws, and no event or condition has occurred
that may interfere with the compliance by the Company or any of its subsidiaries
with any environmental law or that may give rise to any liability under any
environmental law that, individually or in the aggregate, would have a Material
Adverse Effect.
SECTION 3.15. Intellectual Property. The Company (and/or its
subsidiaries) owns or has licenses to use certain patents, copyrights and
trademarks ("intellectual property") associated with its business. The Company
and its subsidiaries have all intellectual property rights that are needed to
conduct the business of the Company and its subsidiaries as it is now being
conducted or as proposed to be conducted as disclosed in the SEC Reports. The
Company has no reason to believe that the intellectual property rights that it
(and/or its subsidiaries) owns are invalid or
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unenforceable or that the use of such intellectual property by the Company
(and/or its subsidiaries) infringes upon or conflicts with any right of any
third party, and neither the Company nor any of its subsidiaries has received
notice of any such infringement or conflict. The Company has no knowledge of any
infringement of its (and/or its subsidiaries) intellectual property by any third
party.
SECTION 3.16 Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. The Company has no reason to believe that it and its
subsidiaries will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.
SECTION 3.17. Disclosure. The representations and warranties of the
Company in this Agreement and the statements contained in the SEC Reports and
the schedules, certificates and exhibits furnished to the Purchaser by or on
behalf of the Company in connection herewith do not contain any untrue statement
of a material fact and do not omit to state any material fact necessary to make
the statements herein or therein not misleading. The SEC Reports contain all
material information concerning the Company required to be set forth therein,
and no event or circumstance has occurred or exists since December 31, 1999 that
would require the Company to disclose such event or circumstance in order to
make the statements in the SEC Reports not misleading as of the date of the
Closing but that has not been so disclosed. The Company hereby acknowledges that
the Purchaser is and will be relying on the SEC Reports and the Company's
representations, warranties and covenants contained herein in making an
investment decision with respect to the Notes and Conversion Shares and will be
relying thereon (together with future reports filed with the Commission) in
connection with any transfer of the Notes and the Conversion Shares.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
The Purchaser hereby acknowledges, represents, warrants and covenants
to the Company as follows:
SECTION 4.01. Authorization; Enforceability; No Violations.
(a) The Purchaser is a bank, duly organized, validly existing
and in good standing under the laws of France, and has all requisite corporate
power and authority to execute, deliver and perform the terms and provisions of
this Agreement and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of this Agreement and to consummate
the transactions contemplated hereby.
(b) The execution, delivery and performance by the Purchaser of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby do not and will not violate any provision of (i) the Purchaser's
organizational documents or (ii) any law, statute, rule,
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regulation, order, writ, injunction, judgment or decree to which the Purchaser
is subject. The Purchaser has duly executed and delivered this Agreement.
Assuming the due execution hereof by the Company, this Agreement constitutes the
legal, valid and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
SECTION 4.02. Securities Act Representations; Legends.
(a) The Purchaser understands that: (i) the offering and sale of the
Notes to be issued and sold hereunder is intended to be exempt from the
registration requirements of the Securities Act; (ii) neither the Notes nor the
Conversion Shares have been registered under the Securities Act or any other
applicable securities laws and such securities may be resold only if registered
under the Securities Act or if an exemption from such registration requirements
is available; and (iii) the Company is required to register any resale of the
Notes or the Conversion Shares under the Securities Act and any other applicable
securities laws only to the extent provided in the Registration Rights
Agreement.
(b) The Notes to be acquired by the Purchaser pursuant to this
Agreement are being acquired for its own account, for investment purposes, and
not with a view to, or for sale in connection with, any distribution thereof or
of Conversion Shares issuable upon conversion of the Notes in violation of the
Securities Act or any other securities laws that may be applicable.
(c) The Purchaser is not an affiliate of the Company (as such term is
defined in the Securities Act).
(d) The Purchaser is not a U.S. Person and, at the time the buy order
for the Notes being purchased hereunder was originated, the Purchaser was
outside of the United States.
(e) The Purchaser (i) has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of its investment in the Notes and is capable of bearing the economic
risks of such investment, including a complete loss of its investment in the
Notes; (ii) believes that its investment in the Notes is suitable for it based
upon its objectives and financial needs, and the Purchaser has adequate means
for providing for its current financial needs and business contingencies and has
no present need for liquidity of investment with respect to the Notes; (iii) has
no present plan, intention or understanding and has made no arrangement to sell
the Notes or the Conversion Shares at any predetermined time or for any
predetermined price; (iv) has not purchased, sold or entered into, any put
option, short position or similar arrangement with respect to the Common Stock,
and will not, for so long as it owns any Notes or Conversion Shares, purchase,
sell or enter into, any such put option, short position or similar arrangement
with respect to any Conversion Shares in any manner that violates the provisions
of the Securities Act or the Exchange Act.
(f) No oral or written statements or representations have been made to
the Purchaser by or on behalf of the Company in connection with the offering and
sale of the Notes hereunder other than those set forth in the SEC Reports, the
Notes or as set forth herein, and the Purchaser
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is not subscribing for the Notes as a result of, or in response to, any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
presented at any seminar or meeting.
(g) The Purchaser acknowledges that the Securities Act restricts the
transferability of securities, such as the Notes and Conversion Shares, issued
in reliance upon the exemption from the registration requirements of the
Securities Act provided by Section 4(2) thereunder, and that, subject to Section
5.02 hereof, the certificates representing the Notes and the Conversion Shares
will bear a legend in substantially the form included in the form of the Notes
attached as Exhibit A hereto by which the Purchaser and each subsequent holder
of such securities will be bound.
(h) The Purchaser acknowledges that as the Common Stock is currently
quoted on a U.S. automated interdealer quotation system, Rule 144A under the
Securities Act may not be available with respect to resales of the Notes or the
Conversion Shares.
SECTION 4.03. No Brokers. No broker, finder, agent or similar
intermediary is entitled to any broker's, finder's, placement or similar fee or
other commission in connection with the transactions contemplated hereby based
on any agreement, arrangement or understanding with the Purchaser.
SECTION 4.04. No Influence on Business. The Purchaser (whether in its
capacity as holder of the Notes and/or any of the Conversion Shares or
otherwise) covenants and agrees with the Company that it will not: (a) in any
manner exercise or attempt to exercise a controlling influence over the
management or policies of the Company or attempt to influence the business
activities or decisions or the Company; (b) propose a director or slate of
directors to serve on the board of directors of the Company; (c) have or seek to
have a representative of the Purchaser be appointed to serve as a director of
the Company or participate as an observer at meetings of the board of directors
(or committees thereof) or have or seek to have any employee or representative
of the Purchaser serve as an officer, agent or employee of the Company; (d)
attempt to influence the dividend policies or practices of the Company; (e)
solicit or participate in soliciting proxies with respect to any matter
presented to the shareholders of the Company; (f) dispose or threaten to dispose
of the Notes or Conversion Shares to any third party in any manner as a
condition to specific action or non-action by the Company; or (g) enter into any
joint venture, enterprise or undertaking of any kind with the Company.
Section 4.05. Limitations on Resales. The Purchaser covenants and
agrees that it (together with its Affiliates) will not transfer the Notes to any
Person (together with such Person's Affiliates), other than the Company or
Affiliates of the Purchaser, in a transaction or series of transactions, in an
aggregate principal amount in excess of such principal amount as would be
convertible at the date of transfer into in excess of 2% of the issued and
outstanding shares of Common Stock of the Company (based upon the applicable
Conversion Price (as defined in the Notes) and number of shares of Common Stock
of the Company issued and outstanding on the applicable date of transfer and
without giving effect to any limitations on conversion set forth in the Notes).
The Purchaser further covenants and agrees that it will not knowingly transfer
to any Person (together with such Person's Affiliates), other than the Company
or Affiliates of the Purchaser, in a transaction or series of transactions,
Conversion Shares in an aggregate amount in excess of 2% of the issued and
outstanding shares of Common Stock of the Company (based upon the number of
shares of
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Common Stock of the Company issued and outstanding on the applicable date of
transfer); in furtherance thereof, the Purchaser covenants and agrees that it
shall not during any five consecutive trading days transfer Conversion Shares in
secondary market transactions in which the identity of the acquiror is not known
to the Purchaser in an amount in excess of 2% of the issued and outstanding
shares of Common Stock of the Company (based upon the number of shares of Common
Stock of the Company issued and outstanding on the applicable date of transfer).
The Purchaser covenants and agrees that the foregoing transfers to third parties
shall be made in bona fide, arms-length transactions and that upon any such
transfer, it will not retain the power to control the disposition of the
securities transferred or, in the case of Conversion Shares, to direct the
voting with respect thereto.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Exemption from Registration.
The Company will not make any offer to sell, solicit any offer to
buy, agree to sell or sell any security or right to acquire any security, except
at such time and in such manner so as not to cause the loss of any of the
exemptions for the offer and sale of the Notes hereunder and for the issuance of
the Conversion Shares upon conversion of the Notes from the registration
requirements under the Securities Act or under the securities or "blue sky" laws
of any jurisdiction in which such offer, sale or issuance is made. Without
limiting the generality of the foregoing, the Company will not make any offer to
sell, solicit any offer to buy, agree to sell or sell any securities similar in
tenor to the Notes or right to acquire any securities similar in tenor to the
Notes during the period commencing on the date of the Closing and ending one
hundred and eighty (180) days thereafter.
SECTION 5.02 Transfer Restrictions. (a) The Purchaser acknowledges that
any proposed offer, sale, pledge or other transfer of the Notes or the
Conversion Shares prior to the date that is two (2) years from the Closing (or
such other date as may be required pursuant to Rule 144 under the Securities Act
(or similar successor provision) as in effect from time to time), in the absence
of registration under the Securities Act, is limited. Accordingly, prior to such
passage of time or such registration, the Notes or the Conversion Shares may be
offered, sold, pledged or otherwise transferred only to (i) the Company, (ii) in
an offshore transaction in accordance with Rule 904 under the Securities Act,
(iii) pursuant to any other exemption from registration provided by the
Securities Act, or (iv) pursuant to Rule 144 under the Securities Act, to the
extent such rule is available; in the case of any transfer pursuant to clause
(ii), (iii) or (iv), the Company shall be entitled to receive an opinion of
counsel, in form and substance reasonably satisfactory to the Company, to the
effect that registration is not required in connection with such disposition.
Any Notes or Conversion Shares sold to the Company may not be reissued or
resold.
(b) The Company agrees to issue certificates representing the Notes or
Conversion Shares without the legend referenced in Section 4.02(g) above at such
time as (i) the holder thereof is permitted to dispose of such Notes or
Conversion Shares pursuant to Rule 144 (k) under the Securities Act, (ii) such
Notes or Conversion Shares are sold to a purchaser or
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purchasers who (in the opinion of counsel to the seller or such purchaser(s), in
form and substance reasonably satisfactory to the Company) are able to dispose
of such securities publicly without registration under the Act and such legend
is no longer required to be included on the certificates representing the Notes
or Conversion Shares or (iii) the Notes or Conversion Shares are sold pursuant
to an effective registration statement under the Securities Act.
(c) In the alternative to physical delivery of certificates for
Conversion Shares, if delivery of the Conversion Shares pursuant to any
conversion thereunder may be effectuated by electronic book-entry through The
Depositary Trust Company ("DTC"), delivery of Conversion Shares pursuant to such
conversion shall, if requested by the Purchaser (or the registered holder of
Conversion Shares), settle by book-entry transfer through DTC by the third
trading day following the Date of Conversion (as defined in the Notes). The
parties agree to coordinate with DTC to accomplish this objective.
SECTION 5.03. Rules 144; Current Information. For so long as any Notes
or Conversion Shares are outstanding, the Company will (i) cause its Common
Stock to continue to be registered under Section 12 of the Exchange Act, file
all reports required to be filed by it under the Securities Act and the Exchange
Act and will take such further actions as the Purchaser may reasonably request,
all to the extent required from time to time to enable the Purchaser to sell the
Notes and Conversion Shares without registration under the Securities Act
pursuant to the safe harbors and exemptions provided by Rule 144 under the
Securities Act (to the extent such rule is applicable), as such rules may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission, and (ii) furnish the Purchaser with all reports, proxy
statements and registration statements that the Company files with the
Commission or distributes to its securityholders pursuant to the Securities Act
and the Exchange Act at the times of such filings and distributions. Upon the
request of the Purchaser, the Company will deliver to the Purchaser a written
statement as to whether it has complied with the foregoing requirements.
SECTION 5.04. Reservation of Conversion Shares. The Company shall
initially reserve and keep available, free from preemptive rights, out of its
authorized but unissued shares of Common Stock or its issued shares of Common
Stock held in its treasury, or both, a number of shares of Common Stock equal to
Maximum Share Issuance (as defined in the Notes) to provide for the issuances of
the Conversion Shares and shall at all times maintain as so reserved and
available, sufficient shares of Common Stock to provide for the issuance of the
Conversion Shares in an amount equal to the maximum number of Conversion Shares
which may be issued.
SECTION 5.05. Stock Listing. The Company shall have the Conversion
Shares in an amount equal to a number of shares of Common Stock equal to the
Maximum Share Issuance approved for quotation or listing, prior to issuance,
upon the Approved Market (as defined in the Note) upon which the Common Stock is
listed or traded at the time of issuance of the Conversion Shares.
ARTICLE VI
MISCELLANEOUS
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SECTION 6.01. Press Releases and Disclosure. No party hereto shall
issue any press release or make any other public disclosure related to this
Agreement or any of the transactions contemplated hereby without the prior
written approval of the other party hereto, except as may be necessary or
appropriate in the opinion of the party seeking to make disclosure to comply
with the requirements of applicable law or stock exchange rules. If any such
press release or public disclosure is so required, the party making such
disclosure shall consult with the other party prior to making such disclosure,
and the parties shall use all reasonable efforts, acting in good faith, to agree
upon a text for such disclosure that is satisfactory to all parties.
SECTION 6.02. Expenses. Except as otherwise expressly provided for
herein, the Company will pay all of its and all of the Purchaser's expenses
(including reasonable attorneys' fees and expenses) in connection with the
negotiation of the Transaction Documents, the performance of due diligence of
the Purchaser thereunder, and the consummation of the transactions contemplated
thereby (whether the transactions contemplated hereby are consummated or not).
Such expenses of the Purchaser shall be payable at the Closing and may be netted
against the Purchase Price otherwise payable by the Purchaser. In addition to
the foregoing, as provided in the Registration Rights Agreement, the Company
will also pay all of its and all of the Purchaser's expenses (including
reasonable attorneys' fees and expenses) in connection with the review of the
Registration Statement contemplated by the Registration Rights Agreement, the
conduct of due diligence in connection therewith (including the review of
opinions of counsel and comfort letters), and all matters related thereto; the
Company agrees to promptly pay such expenses, as incurred by the Purchaser.
SECTION 6.03. Notices. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder or
that are given with respect to this Agreement shall be in writing and shall be
personally served or deposited in the mail, registered or certified, return
receipt requested, postage prepaid, or delivered by reputable air courier
service with charges prepaid, or transmitted by hand delivery, telegram, telex
or facsimile, addressed as set forth below, or to such other address as such
party shall have specified most recently by written notice: (i) if to the
Company, to: HMG Worldwide Corporation, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000-0000, Attention: Chief Financial Officer, Facsimile No.: (000) 000-0000;
with copies (which shall not constitute notice) to: Xxxxxx Xxxxxx Xxxxxx & Xxxx,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx Xxxxxx, Esq.,
Facsimile No.: (000) 000-0000; and (ii) if to the Purchaser: c/o XX Xxxxx
Securities Corporation, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxxxxx Xxxxxx, Facsimile No.: (000) 000-0000 with copies (which
shall not constitute notice) to: Xxxxx, Day, Xxxxxx & Xxxxx, 000 Xxxxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: J. Xxxx Xxxx, Esq., Facsimile No.
(000) 000-0000. Notice shall be deemed given on the date of service or
transmission if personally served or transmitted by telegram, telex or
facsimile. Notice otherwise sent as provided herein shall be deemed given on the
third business day following the date mailed or on the next business day
following delivery of such notice to a reputable air courier service.
SECTION 6.04. Entire Agreement. This Agreement (together with the other
Transaction Documents and all other documents delivered pursuant hereto and
thereto) constitutes the entire agreement of the parties with respect to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
representations, understandings,
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negotiations and discussions between the parties, whether oral or written, with
respect to the subject matter hereof.
SECTION 6.05. Amendment and Waiver. This Agreement may not be amended,
modified, supplemented, restated or waived except by a writing executed by the
party against which such amendment, modification or waiver is sought to been
enforced. Waivers may be made in advance or after the right waived has arisen or
the breach or default waived has occurred. Any waiver may be conditional. No
waiver of any breach of any agreement or provision herein contained shall be
deemed a waiver of any preceding or succeeding breach thereof nor of any other
agreement or provision herein contained. No waiver or extension of time for
performance of any obligations or acts shall be deemed a waiver or extension of
the time for performance of any other obligations or acts.
SECTION 6.06. Assignment; No Third Party Beneficiaries. This Agreement
and the rights, duties and obligations hereunder may not be assigned or
delegated by either the Company, on the one hand, or the Purchaser, on the other
hand, without the prior written consent of the other party hereto; provided that
the Purchaser may assign or delegate its rights, duties and obligations
hereunder to any Affiliate of the Purchaser. Except as provided in the preceding
sentence, any purported assignment or delegation of rights, duties or
obligations hereunder made without the prior written consent of the other party
hereto shall be void and of no effect. This Agreement and the provisions hereof
shall be binding upon and shall inure to the benefit of each of the parties and
their respective successors and permitted assigns. This Agreement is not
intended to confer any rights or benefits on any Persons other than as set forth
above.
SECTION 6.07. Severability. This Agreement shall be deemed severable,
and the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
SECTION 6.08. Further Assurances. Each party hereto, upon the request
of any other party hereto, shall do all such further acts and execute,
acknowledge and deliver all such further instruments and documents as may be
necessary or desirable to carry out the transactions contemplated by this
Agreement.
SECTION 6.09. Titles and Headings. Titles, captions and headings of the
sections of this Agreement are for convenience of reference only and shall not
affect the construction of any provision of this Agreement.
SECTION 6.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
INTERPRETED UNDER, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WITHIN THE
STATE OF NEW
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YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
SECTION 6.11. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, all of which taken
together shall constitute one and the same instrument.
SECTION 6.12. Cure Of Breaches; Subsequent Events. (a) This Agreement
is being executed and delivered subsequent to the date hereof and subsequent to
the filing by the Company of its Current 10-K. Notwithstanding anything
contained herein to the contrary, the Company shall not be deemed in breach of
any representation or warranty contained herein on account of any representation
or warranty that may have been erroneous, inaccurate or incomplete as of the
date of this Agreement but that was not erroneous, inaccurate or incomplete as
of the date this Agreement is being executed and delivered and assuming, for
those purposes, that the definition of "SEC Reports" includes the Current 10-K.
(b) Subsequent to the date hereof and subsequent to the date of
original issuance of the Notes, the Company and the Purchaser agreed to amend
and restate the Notes. Attached as Exhibit A hereto is the form of Note as so
amended and restated and all references in this Agreement and the other
transaction documents to the Notes shall, unless the context otherwise requires,
refer to the Notes as so amended and restated.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by the undersigned, thereunto duly authorized, as of the date first
set forth above.
HMG WORLDWIDE CORPORATION
By:
---------------------------------
Name: Xxxxxx X. Xxxxxxx, Xx.
Title: Chief Operating Officer and
Chief Financial Officer
SOCIETE GENERALE
By:
---------------------------------
Name: Xxxxxxxxx Xxxxxx
Title: Authorized Signatory
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