SERIES B-2 AND WARRANT PURCHASE AGREEMENT among Geokinetics Inc., Avista Capital Partners, L.P. and Avista Capital Partners (Offshore), L.P. Dated as of July 28, 2008,
SERIES
B-2
AND
among
Avista
Capital Partners, L.P.
and
Avista
Capital Partners (Offshore), L.P.
Dated as
of July 28, 2008,
Exhibit
10.3
|
SECTION
1 DEFINITIONS AND ACCOUNTING TERMS
|
1
|
|
|
1.1
|
Definitions
|
1
|
|
1.2
|
Computation
of Time Periods
|
6
|
|
1.3
|
Terms
Generally
|
6
|
|
1.4
|
Accounting
Terms
|
6
|
|
SECTION
2. AUTHORIZATION AND ISSUANCE OF PREFERRED STOCK
|
6
|
|
|
2.1
|
Authorization
of Issue
|
6
|
|
2.2
|
Sale
and Purchase of the Preferred Stock and Warrants
|
6
|
|
2.3
|
Closing
|
7
|
|
2.4
|
Stock
Certificates
|
7
|
|
SECTION
3. CONDITIONS TO CLOSING
|
7
|
|
|
3.1
|
Representations
and Warranties
|
7
|
|
3.2
|
Performance;
No Default under Other Agreements
|
7
|
|
3.3
|
Officer
Certificate
|
7
|
|
3.4
|
Material
Adverse Effect
|
7
|
|
3.5
|
Consents,
Authorizations and Filings, Etc.
|
8
|
|
3.6
|
Payment
of Expenses
|
8
|
|
3.7
|
Legal
Opinion
|
8
|
|
3.8
|
Management
Rights Agreement
|
8
|
|
SECTION
4. REPRESENTATIONS AND WARRANTIES
|
8
|
|
|
4.1
|
Due
Organization; Power and Authority
|
8
|
|
4.2
|
Capitalization
|
9
|
|
4.3
|
Subsidiaries
|
9
|
|
4.4
|
Due
Authorization, Execution and Delivery
|
9
|
|
4.5
|
Non-Contravention;
Authorizations and Approvals
|
10
|
|
4.6
|
Financial
Statements; Securities Filings
|
11
|
|
4.7
|
Absence
of Undisclosed Liabilities or Events
|
12
|
|
4.8
|
No
Actions or Proceedings
|
12
|
|
4.9
|
Title
to Properties
|
13
|
|
4.10
|
Intellectual
Property Rights
|
13
|
|
4.11
|
Taxes
|
14
|
|
4.12
|
Employee
Benefit Plans
|
15
|
|
4.13
|
Investment
Company Act
|
16
|
|
4.14
|
Insurance
|
16
|
|
4.15
|
Compliance
with Laws; Permits; Environmental Liabilities
|
16
|
|
4.16
|
Labor
and Employment Matters
|
17
|
|
4.17
|
Brokerage
Fees
|
17
|
|
SECTION
5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE
PURCHASERS
|
18
|
|
|
5.1
|
Purchase
for Investment
|
18
|
|
5.2
|
Access
to Information
|
18
|
|
5.3
|
Corporate
Power; Authorization; Enforceability
|
19
|
|
5.4
|
No
Actions or Proceedings
|
19
|
|
SECTION
6. OTHER AFFIRMATIVE COVENANTS
|
19
|
|
|
6.1
|
Director
Representation
|
19
|
|
6.2
|
Allocation
of Purchase Price
|
19
|
|
SECTION
7. EXPENSES, INDEMNIFICATION AND CONTRIBUTION; TERMINATION
|
19
|
|
|
7.1
|
Expenses
|
19
|
|
7.2
|
Indemnification
|
20
|
|
7.3
|
Survival
|
20
|
|
7.4
|
Tax
Treatment of Indemnification Payments
|
20
|
|
SECTION
8. MISCELLANEOUS
|
20
|
|
|
8.1
|
Notices
|
20
|
|
8.2
|
Benefit
of Agreement and Assignments
|
21
|
|
8.3
|
No
Waiver; Remedies Cumulative
|
21
|
|
8.4
|
Amendments,
Waivers and Consents
|
21
|
|
8.5
|
Counterparts
|
21
|
|
8.6
|
Headings
|
22
|
|
8.7
|
Survival
of Covenants and Indemnities
|
22
|
|
8.8
|
Governing
Law; Submission to Jurisdiction; Venue
|
22
|
|
8.9
|
Severability
|
23
|
|
8.10
|
Entirety
|
23
|
|
8.11
|
Survival
of Representations and Warranties
|
23
|
|
8.12
|
Construction
|
23
|
|
8.13
|
Incorporation
|
23
|
|
8.14
|
Non-Recourse
|
23
|
|
8.15
|
Further
Assurances
|
23
|
|
EXHIBITS:
|
|
|
Exhibit
A
|
Form
of Certificate of Designation
|
|
Exhibit
B
|
Form
of 2008 Warrants
|
|
Exhibit
C
|
Form
of Registration Rights Agreement
|
|
Exhibit
D
|
Form
of Opinion
|
|
Exhibit
E
|
Form
of Management Rights Agreement
|
|
SCHEDULES:
|
|
|
Schedule
2.2
|
Information
relating to the Purchasers
|
|
Schedule
4.2
|
Primary
and fully diluted ownership of Capital Stock
|
|
Schedule
4.3
|
Company
and Subsidiaries
|
|
Schedule
4.8
|
Actions
or Proceedings
|
|
Schedule
4.10
|
Intellectual
Property
|
|
Schedule
4.12(a)
|
Employee
Benefit Plans
|
|
Schedule
4.12(b)
|
Multi
Employer Plans
|
|
Schedule
4.12(c)
|
Retiree
Health and Life Benefits
|
|
Schedule
4.16
|
Labor
Matters
|
Exhibit
10.3
SERIES
B-2 AND WARRANT PURCHASE AGREEMENT
This
SERIES B-2 AND WARRANT PURCHASE AGREEMENT (this “Agreement”),
dated as of July 28, 2008, among Geokinetics Inc., a Delaware corporation (the
“Company”),
Avista Capital Partners, L.P., a Delaware limited partnership (“Avista”),
and Avista Capital Partners (Offshore), L.P., a Bermuda limited partnership
(“Avista
Offshore” and together with Avista the “Purchasers”).
WHEREAS,
the Company desires to increase its capital for the purpose of providing funds
for additional equipment purchases and other general corporate
purposes;
WHEREAS,
in connection with the transactions contemplated hereby, the Company desires to
amend its Certificate of Incorporation, dated January 31, 1980, as amended (the
“Charter”),
in accordance with the General Corporation Law of the State of Delaware (the
“DGCL”), by
filing an Amended Certificate of Designation (the “Certificate of
Designation”), on the date hereof and in the form attached hereto as
Exhibit A, with the office of the Secretary of State of the State of Delaware,
to create a new series of preferred stock of the Company designated as
Series B-2 Senior Convertible Preferred Stock, par value $10.00 per share,
having a liquidation preference of $250.00 per share (the “Series B-2
Preferred Stock”), and to redesignate the
Company’s existing Series B Senior Convertible Preferred Stock, par value $10.00
per share, as “Series B-1
Preferred Stock” (together with the Series B-2 Preferred Stock, the “Series B Preferred
Stock”);
WHEREAS,
on the terms and subject to the conditions hereinafter set forth, the Company
desires to issue and sell (i) 120,000 shares of Series B-2 Preferred Stock and
(ii) warrants (the “2008 Warrants”) to purchase up to
an aggregate of 240,000 shares of the Company's Common Stock, par value $0.01
per share (the “Common
Stock”), to Purchasers, and Purchasers desire to purchase and acquire the
Series B-2 Preferred Stock and the 2008 Warrants from the Company;
and
WHEREAS,
the Purchasers and the Company intend to enter into that certain Amended and
Restated Registration Rights Agreement (as defined herein) which will set forth
certain registration rights with respect to the Series B-2 Preferred
Stock.
NOW,
THEREFORE, the parties hereto agree as follows:
SECTION
1. DEFINITIONS AND ACCOUNTING
TERMS
1.1 Definitions. As
used herein, defined terms used herein shall have the meanings specified herein
unless the context otherwise requires:
“Accredited
Investor” means any Person that is an “accredited investor” within the
meaning of Rule 501(a) under the Securities Act.
“Applicable
Law” means all laws, statutes, treaties, rules, codes (including building
codes), ordinances, regulations, certificates, orders and licenses of, and
interpretations by, any
Governmental Authority and judgments, decrees, injunctions, writs, permits,
orders or like governmental action of any Governmental Authority (including
environmental laws and those pertaining to health or safety) applicable to the
Company or any of its Subsidiaries or any of their property or
operations.
“Audit
Date” is defined in Section
4.6(a).
“Capital
Stock” means (i) in the case of a corporation, corporate or capital
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate or capital stock, (iii) in the case of a limited
liability company, membership units (whether common or preferred), (iv) in the
case of a partnership, partnership interests (whether general or limited) and
(v) any other equivalent ownership interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
“Certificate of
Designation” is defined in the recitals.
“Charter”
is defined in the recitals.
“Closing”
is defined in Section
2.3.
“Closing
Date” is defined in Section
2.3.
“Closing
Payment” shall mean 2% of the Purchase Price.
“Code”
means the Internal Revenue Code of 1986, as amended, and the Treasury
Regulations promulgated thereunder.
“Common
Stock” is defined in the recitals.
“Convert
Shares” means the shares of the Company’s Common Stock issuable upon
conversion of the Preferred Stock.
“DGCL” is
defined in the recitals.
“Enforceability
Exceptions” means, with respect to any specified obligation, any
limitations on the enforceability of such obligation due to applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, fraudulent
transfer, moratorium, and other similar laws of general applicability relating
to or affecting creditors’ rights or general equity principles (including public
policies) or except as rights to indemnification or contribution may be limited
by Federal, state, provincial or territorial securities laws.
“Environmental
Permits” is defined in Section 4.15(b)
(i).
“Exchange
Act” is defined in Section
4.6(b).
“ERISA
Affiliate” is defined in Section
4.12(b).
“Financial
Statements” is defined in Section
4.6(a).
Exhibit
10.3
“Financing
Documents” means collectively, this Agreement, the Certificate of
Designation, the Registration Rights Agreement, the 2008 Warrants, and all
certificates, instruments and other documents made or delivered in connection
herewith and therewith.
“GAAP”
means generally accepted accounting principles, as applied in the United
States.
“HSR Act”
is defined in Section
3.5.
“Indemnitees”
is defined in Section
7.2.
“Intellectual
Property” means (a) all inventions and discoveries (whether patentable or
unpatentable and whether or not reduced to practice), and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names,
corporate names and domain names, together with all translations, adaptations
and combinations thereof and including all goodwill associated therewith, (c)
all copyrights and all applications, registrations and renewals in connection
therewith, (d) all mask works and all applications, registrations and renewals
in connection therewith, (e) all know-how, trade secrets and confidential
business information, whether patentable or unpatentable and whether or not
reduced to practice (including ideas, research and development, know-how,
formulas, compositions and manufacturing and production process and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information and business and marketing plans and proposals),
(f) all computer software (including data and related documentation), (g) all
other proprietary rights, (h) all copies and tangible embodiments thereof (in
whatever form or medium) and (i) all licenses and agreements in connection
therewith.
“IRS” means
the Internal Revenue Service.
“Legal
Proceeding” means any judicial, administrative or arbitral actions,
suits, mediation, investigation, inquiry, proceedings or claims (including
counterclaims) by or before a Governmental Authority.
“Material”
means material in relation to the business, condition (financial or otherwise),
properties or results of operation of the Company and its Subsidiaries taken as
a whole.
“Material Adverse
Effect” shall mean (a) a material adverse effect on the business,
assets, liabilities, operations, prospects or condition (financial or otherwise)
or operating results of the Company and the Subsidiaries, taken as a whole,
(b) a material impairment of the ability of any party to perform any of its
obligations under any Financing Document to which it is or will be a party or
(c) a material impairment of any rights of or benefits available to the
Purchasers under any Financing Document.
“Order”
means any order, injunction, judgment, doctrine, decree, ruling, writ,
assessment or arbitration award of a Governmental Authority.
Exhibit
10.3
“Ordinary Course
of Business” means the ordinary and usual course of day-to-day operations
of the business of the Company and the Subsidiaries through the date hereof
consistent with past practice.
“Permits”
means any approvals, authorizations, consents, licenses, permits or certificates
of a Governmental Authority.
“Permitted
Exceptions” means (i) all defects, exceptions, restrictions, easements,
rights of way and encumbrances disclosed in policies of title insurance which
have been delivered to the Purchasers; (ii) statutory liens for current Taxes,
assessments or other governmental charges not yet delinquent or the amount or
validity of which is being diligently contested in good faith by appropriate
proceedings, provided an appropriate reserve has been established therefor in
the Financial Statements in accordance with GAAP; (iii) mechanics’, carriers’,
workers’, and repairers’ Liens arising or incurred in the Ordinary Course of
Business that are not material to the business, operations and financial
condition of the Company Property so encumbered and that are not resulting from
a breach, default or violation by the Company or any of the Subsidiaries of any
contract or law; (iv) zoning, entitlement and other land use and environmental
regulations by any Governmental Authority, provided that such regulations have
not been violated; and (v) liens and security interests created or permitted by
the senior most indebtedness of the Company or the Subsidiaries in existence as
of the Closing Date.
“Plan” is
defined in Section
4.12(a).
“Property”
is defined in Section
4.15(b)(iii).
“Purchase
Price” is defined in Section
2.2.
“Purchasers”
is defined in the preamble to this Agreement.
“Registration
Rights Agreement” means the Amended and Restated Registration Rights
Agreement, dated as of the date hereof, among Company and the Purchasers, in the
form attached hereto as Exhibit B as amended,
supplemented, restated or otherwise modified from time to time.
“Responsible
Officer” means (i) with respect to the Company, the chairman, the chief
executive officer, the president, the chief financial officer thereof, and (ii)
with respect to the Company or any Subsidiary (other than the Company), any duly
authorized officer thereof.
“Rule 144”
means Rule 144 under the Securities Act (or any successor provision), as it may
be amended from time to time.
“SEC” is
defined in Section
4.6(b).
“SEC
Documents” is defined in Section
4.6(b).
“Securities
Act” means the Securities Act of 1933, as amended.
Exhibit
10.3
“Software”
means any and all computer programs, whether in source code or object code;
databases and compilations, whether machine readable or otherwise; descriptions,
flow-charts and other work product used to design, plan, organize and develop
any of the foregoing; and all documentation including user manuals and other
training documentation related to any of the foregoing.
“Solvent”
means, with respect to any Person as of the date of any determination, that on
such date (a) such Person as of such date generally is able to pay its debts and
other liabilities, contingent obligations and other commitments as they become
absolute and mature in the normal course of business, (b) such Person does not
intend to, and does not believe that it will, incur debts or liabilities beyond
such Person’s ability to pay as such debts and liabilities mature and (c) such
Person is not engaged in a business or a transaction, and is not about to engage
in a business or a transaction, for which such Person’s property would
constitute unreasonably small capital with which to conduct the business in
which it is engaged as such business is now conducted and is proposed to be
conducted following the Closing Date. In computing the amount of
contingent liabilities at any time, such liabilities shall be computed as the
amount that, in light of the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
“Series B
Preferred Stock” is defined in the recitals.
“Series B-1
Preferred Stock” is defined in the recitals.
“Series B-2
Preferred Stock” is defined in the recitals.
“Subsidiary”
means any Person of which (i) a majority of the outstanding share capital,
voting securities or other equity interests are owned, directly or indirectly,
by the Company or (ii) the Company is entitled, directly or indirectly, to
appoint a majority of the board of directors, board of managers or comparable
body of such Person.
“Tax” or
“Taxes”
shall mean (i) any and all federal, state, local or foreign taxes, charges,
fees, imposts, levies or other assessments, including all net income, gross
receipts, capital, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation, property
and estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever; (ii) all interest, penalties, fines, additions to tax or
additional amounts imposed by any Taxing Authority in connection with any item
described in clause (i); and (iii) any liability in respect of any
items described in clauses (i) and/or (ii) payable by reason of Contract,
assumption, transferee liability, operation of law, Treasury Regulation section
1.1502-6(a) (or any predecessor or successor thereof or any analogous or similar
provision under law) or otherwise.
“Tax
Return” means any return, report or statement (whether federal, state,
local or foreign) required to be filed with respect to any Tax (including any
elections, declarations, schedules or attachments thereto, and any amendment
thereof) including any information return, claim for refund, amended return or
declaration of estimated Tax, and including, where permitted
Exhibit
10.3
or
required, combined, consolidated or unitary returns for any group of entities
that includes the Company, any of the Subsidiaries, or any of their
Affiliates.
“Taxing
Authority” means the IRS and any other governmental authority responsible
for the administration of any Tax.
“Technology”
means, collectively, designs, formulae, algorithms, procedures, methods,
techniques, ideas, know-how, results of research and development, Software,
tools, data, inventions, apparatus, creations, improvements, works of authorship
and other similar materials, and all recordings, graphs, drawings, reports,
analyses, and other writings, and any other embodiments of the above, in any
form whether or not specifically listed herein, and all related technology, that
are used, incorporated, or embodied in or displayed by any of the foregoing or
used in the design, development, reproduction, sale, marketing, maintenance or
modification of any of the foregoing
“2008
Warrants” is defined in the recitals.
1.2 Computation of Time
Periods. For purposes of computation of periods of time
hereunder, the word “from” means “from and including” and the words “to” and
“until” each mean “to but excluding.”
1.3 Terms
Generally. Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person’s successors and assigns, and (c) the word “including” shall mean
“including without limitation.”
1.4 Accounting
Terms. Accounting terms used but not otherwise defined herein
shall have the meanings provided, and be construed in accordance with,
GAAP.
SECTION
2. AUTHORIZATION AND ISSUANCE
OF PREFERRED STOCK
2.1 Authorization of
Issue. On or prior to the execution and delivery of this
Agreement: (i) the Company will authorize the issue and sale of the Series B-2
Preferred Stock and the 2008 Warrants; and (ii) adopt and file the Certificate
of Designation with the Secretary of State of Delaware.
2.2 Sale and Purchase of the
Preferred Stock and Warrants. Subject to the terms and
conditions of this Agreement, the Company will issue and sell to each of the
Purchasers, and each of the Purchasers will purchase from the Company, at the
Closing provided for in Section 2.3, the
Series B-2 Preferred Stock and 2008 Warrants, for an aggregate purchase price
equal to $30,000,000 (the “Purchase
Price”), in such proportions as set forth on Schedule
2.2. The Purchase Price shall be paid by the Purchasers by
wire transfer of immediately available funds to an account designated by the
Company. At the Closing the Company shall pay each
Purchaser
2.3 its
proportionate share of the Closing Payment as set forth on Schedule 2.2, via
wire transfer of immediately available funds pursuant to the instructions set
forth on Schedule
2.2.
2.4 Closing. The
sale and purchase of the Preferred Stock shall occur at the offices of
Chamberlain, Hrdlicka, White, Xxxxxxxx & Xxxxxx, 0000 Xxxxx Xxxxxx, 00xx
Xxxxx, Xxxxxxx, Xxxxx 00000, at 10:00 a.m. local time, at a closing
(the “Closing”)
on July ____, 2008. The date upon which the Closing occurs shall be
referred to herein as the “Closing
Date”.
2.5 Stock
Certificates. At the Closing, the Company shall deliver to the
Purchasers duly endorsed certificates representing the Series B-2 Preferred
Stock with such number of shares allocated to each Purchaser as set forth on
Schedule 2.2.
Exhibit
10.3
SECTION
3. CONDITIONS TO
CLOSING
Each Purchaser’s obligation to purchase
and pay for the Series B-2 Preferred Stock and 2008 Warrants to be purchased by
it at the Closing is subject to the reasonable satisfaction or waiver by it
prior to or at the Closing of each of the conditions specified below in this
Section
3:
3.1 Representations and
Warranties. Each of the representations and warranties of the
Company in this Agreement that are qualified as to materiality or Material
Adverse Effect shall be true and correct and each of the representations and
warranties of the Company in this Agreement that are not so qualified shall be
true and correct in all material respects on or as of the Closing Date as if
made on and as of the Closing Date (unless stated to relate to a specific
earlier date, in which case such representations and warranties qualified as to
materiality or Material Adverse Effect shall be true and correct and those not
qualified shall be true and correct in all material respects as of such earlier
date).
3.2 Performance; No Default
under Other Agreements. The Company shall have performed and
complied in all material respects with all agreements and covenants contained
herein required to be performed or complied with by it prior to or at the
Closing (or such compliance shall have been waived on terms and conditions
reasonably satisfactory to each Purchaser).
3.3 Officer
Certificate. The Company shall have delivered to each
Purchaser an Officers’ Certificate, dated as of the Closing Date, in a form
reasonably satisfactory to Avista, certifying as to Company’s certificate of
incorporation and bylaws, the incumbency and signatures of certain officers of
the Company and other corporate proceedings of the Company relating to the
authorization, execution, delivery and performance of this Agreement and the
other Financing Documents to which the Company is a party and that the
conditions specified in Section 3 (other than
Section 3.3)
have been fulfilled, except as to matters which require the approval or
satisfaction of the Purchasers.
3.4 Material Adverse
Effect. There shall not have occurred or become known to the
Purchasers any event, development or circumstance with respect to the Company or
its
Exhibit
10.3
3.5 Subsidiaries
since March 31, 2008 that has caused or could reasonably be expected to cause a
Material Adverse Effect.
3.6 Consents, Authorizations and
Filings, Etc. All material governmental and third party
approvals necessary in connection with the Financing Documents, and the
continuing operations of the Company and its Subsidiaries shall have been
obtained and be in full force and effect (including any required filings
pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 (the “HSR Act”)
made with the Federal Trade Commission and the United States Department of
Justice), and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority that would restrain,
prevent or otherwise impose material adverse conditions on the Series B-2
Preferred Stock.
(a) There
shall be no inquiry, injunction, restraining order, action, suit or proceeding
instituted or entered or any statute or rule proposed, enacted or promulgated by
any Governmental Authority or any other Person which, in the reasonable opinion
of the Purchasers, individually or in the aggregate, has or would reasonably be
expected to have a Material Adverse Effect or which seeks to enjoin or seek
substantial damages against the Company or its Subsidiaries or any of the
Purchasers as a result of the issuance and sale of the Preferred
Stock.
(b) The Board
of Directors of the Company shall have granted all necessary approvals to the
transactions contemplated by this Agreement and the conversion of the Series B-2
Preferred Stock into Convert Shares in order to satisfy DGCL Section 203 with
respect to such transactions.
3.7 Payment of
Expenses. At the Closing, each Purchaser and one counsel
for the Purchasers shall have received from the Company all other
fees required to be paid, and, in accordance with Section 7, all
reasonable costs and expenses for which invoices have been
presented.
3.8 Legal
Opinion. At the Closing, Chamberlain, Hrdlicka, White,
Xxxxxxxx & Xxxxxx shall have delivered to the Purchasers an opinion, dated
as of the Closing Date, in the form of Exhibit
3.7.
3.9 Management Rights
Agreement. At the Closing, the Company shall have delivered to
Avista a Management Rights Agreement dated as of the Closing Date, in the form
of Exhibit 3.8.
SECTION
4. REPRESENTATIONS AND
WARRANTIES
The
Company represents and warrants to the Purchasers that:
4.1 Due Organization; Power and
Authority. The Company and each domestic Subsidiary of the
Company (a) is a corporation or a limited partnership duly incorporated or
formed, as the case may be, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, (b) is duly qualified as a
foreign corporation or extra provincial partnership or a foreign partnership, as
the case may be, to transact business and
Exhibit
10.3
4.2 is in
good standing in each jurisdiction in which such qualification is required, (c)
has full corporate or partnership, as the case may be, power and authority to
own, lease and operate its properties and to conduct its businesses as they are
currently conducted, and (d) has full corporate or partnership, as the case may
be, power and authority to enter into and perform its obligations under each of
the Financing Documents to which it is a party.
4.3 Capitalization. After
giving effect to the sale of the Series B-2 Preferred Stock and the 2008
Warrants to the Purchasers, at the Closing, (i) the authorized number of shares
of Capital Stock of the Company will consist only of 100,000,000 common shares
(the “Common
Stock”), of which 10,396,018 shares have been issued and are outstanding,
(ii) 2,500,000 preferred shares, of which only (x) 257,526 shares of Series B-1
Preferred Stock and (y) the Series B-2 Preferred Stock sold to the Purchasers
pursuant to this Agreement will have been issued and outstanding as of the
Closing Date, and (iii) no shares of any class of the Capital Stock of the
Company will be held by the Company in its treasury or by the Company’s
Subsidiaries. Upon consummation of the sale of the Series B-2
Preferred Stock and the 2008 Warrants to the Purchasers, all of the issued and
outstanding shares of Capital Stock of the Company shall have been duly
authorized and validly issued, fully paid and nonassessable and shall be free of
preemptive rights except as set forth in the Certificate of
Designation. Upon consummation of the sale of the Series B-2
Preferred Stock and the 2008 Warrants to the Purchasers, except as set forth on
Schedule 4.2
and other than the Series B Preferred Stock, the 2008 Warrants and employee
stock options under the 2002 Stock Awards Plan and the 2007 Stock Awards Plan of
the Company, there shall be no securities of the Company or any of its
Subsidiaries that will be convertible into or exchangeable for shares of any
Capital Stock of the Company or any of its Subsidiaries, and no options, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which will obligate the Company or any of its Subsidiaries to issue,
transfer or sell any shares of Capital Stock of, or other interests in, the
Company or any of its Subsidiaries. Except as set forth on Schedule 4.2, upon
consummation of the sale of the Series B-2 Preferred Stock and the 2008 Warrants
to the Purchasers, there shall be no outstanding obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
Capital Stock of the Company or any of its Subsidiaries and none of the Company
or any of its Subsidiaries shall have any awards or options outstanding under
any stock option plans or agreements or any other outstanding stock-related
awards. As of the Closing Date and immediately after the Closing,
except as set forth on Schedule 4.2 and
other than the Series B Preferred Stock, none of the Company or any of its
Subsidiaries will have any obligation to issue, transfer or sell any shares of
Capital Stock of the Company or its Subsidiaries. Except as set forth
on Schedule 4.2, there are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party with
respect to the holding, voting or disposing of Capital Stock of the Company or
any of its Subsidiaries. Except as set forth on Schedule 4.2, none of
the Company or any of its Subsidiaries has any outstanding bonds, debentures,
notes or other obligations or other securities that entitle the holders thereof
to vote with the shareholders of the Company or any of its Subsidiaries on any
matter or which are convertible into or exercisable for securities having such a
right to vote.
4.4 Subsidiaries. Schedule 4.3
correctly states (a) the name of each of the Company’s direct and indirect
Subsidiaries, and (b) the name of each registered holder of each class of
outstanding Capital Stock or other securities of each of the Company’s
respective direct and indirect Subsidiaries and the nature and number of such
securities held by such holder. Each
Exhibit
10.3
4.5 issued
and outstanding share of Capital Stock of each direct and indirect Subsidiary of
the Company (a) has been duly authorized and validly issued and is fully paid
and nonassessable and free of preemptive rights and (b) except for any Equity
Interests not owned directly or indirectly by the Company as shown on Schedule 4.3 is
owned by the Company, directly or through its direct and indirect Subsidiaries,
free and clear of any Lien other than the liens established under the Financing
Documents and other Permitted Exceptions.
4.6 Due Authorization, Execution
and Delivery.
(a) Agreement. This
Agreement has been duly authorized, executed and delivered by the Company and,
when duly executed and delivered by the Purchasers in accordance with its terms,
will constitute a valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to the
Enforceability Exceptions.
(b) Series B-2 Preferred Stock
and the Convert Shares. The Series B-2 Preferred Stock has
been duly authorized and, when issued as provided herein, will be validly
issued, free of preemptive rights and free from all taxes, liens, charges and
security interests known to or created by the Company and no personal liability
will attach to the ownership thereof. When the Convert Shares are
issued pursuant to a conversion of the Series B-2 Preferred Stock, the Convert
Shares will be validly issued, fully paid and nonassessable, free of preemptive
rights and free from all taxes, liens, charges and security interests known to
or created by the Company and no personal liability will attach to the ownership
thereof.
(c) Financing
Documents. Each of the Financing Documents has been duly
authorized, executed and delivered by the Company and, when duly executed and
delivered by the other parties thereto in accordance with their terms, will
constitute a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to the Enforceability
Exceptions.
4.7 Non-Contravention;
Authorizations and Approvals. None of (a) the execution and
delivery by the Company or any Subsidiary of the Company of any of the Financing
Documents to which it is a party, (b) the performance by any of them of their
respective obligations thereunder, (c) the consummation of the transactions
contemplated thereby or (d) the issuance and delivery of the Series B-2
Preferred Stock and the 2008 Warrants under the Financing Documents will: (i)
violate, conflict with or result in a breach of any provisions of the articles
of incorporation or any amendment thereto or bylaws (or comparable constituent
or governing documents) of the Company or any Subsidiary of the Company; (ii)
violate, conflict with, result in a breach of any provision of, constitute a
default (or an event which, with notice, lapse of time or both, would constitute
a default) under, result in the termination or in a right of termination of,
accelerate the performance required by or benefit obtainable under, result in
the triggering of any payment or other obligations (including any repurchase or
repayment obligations) pursuant to, result in the creation of any Lien upon any
of the properties of the Company or any Subsidiary of the Company under, or
result in there being declared void, voidable, subject to withdrawal, or without
further binding effect, any of the terms, conditions or provisions of any
contract, except for any such violations, conflicts, breaches, defaults,
accelerations, terminations or other matters which, in the aggregate, could not
reasonably be
Exhibit
10.3
4.8 expected
to be Material to the Company; (iii) require any consent, approval or
authorization of, or declaration, filing or registration with, any Governmental
Authority, except for those consents, approvals, authorizations, declarations,
filings or registrations which have been obtained or made, or the failure of
which to obtain or make, in the aggregate, could not be reasonably expected to
have a Material Adverse Effect; or (iv) violate any Applicable Laws, except for
violations which, in the aggregate, could not reasonably be expected to be
Material to the Company.
4.9 Financial Statements;
Securities Filings.
(a) The
Company has heretofore furnished to the Purchasers its consolidated balance
sheets and related statements of income, stockholder’s equity and cash flows
(the “Financial
Statements”) (i) as of and for the fiscal year ended December 31, 2007
(the “Audit
Date”), audited by and accompanied by the report of UHY, LLP, independent
public accountants, and (ii) as of and for the fiscal quarter ended March 31,
2008, and each month ended after March 31, 2008 and at least 30 days before the
Closing Date, each certified by its chief financial officer. Such
Financial Statements present fairly in all material respects the financial
condition and results of operations and cash flows of the Company and its
Subsidiaries as of such dates and for such periods. Such balance
sheets and the notes thereto disclose all material liabilities, direct or
contingent, of the Company and its Subsidiaries as of the dates
thereof. Such Financial Statements were prepared in accordance with
GAAP consistently applied throughout the period covered thereby, except as
otherwise noted therein and, subject, in the case of unaudited financial
statements, to year-end audit adjustments and the absence of
footnotes.
(b) The
Company has filed with the Securities and Exchange Commission (the “SEC”) all
forms, reports, schedules, statements, exhibits and other documents required to
be filed under the Exchange Act of 1934, as amended (the “Exchange
Act”), or the Securities Act, (collectively, the “SEC
Documents”). As of its filing date or, if amended, as of the
date of the last such amendment, each SEC Document fully complied with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC
thereunder. As of its filing date, or, if amended, as of the date of
the last such amendment, each SEC Document filed pursuant to the Exchange Act
did not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. Each
SEC Document that is a registration statement, as amended or supplemented, if
applicable, filed pursuant to the Securities Act, as of the date such
registration statement or amendment became effective, did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading. None of the Subsidiaries is or has been required to file
any forms, reports or other documents with the SEC. All of the
audited consolidated financial statements and unaudited consolidated interim
financial statements included in the SEC Documents (i) have been prepared from,
are in accordance with and accurately reflect the books and records of the
Company and its consolidated Subsidiaries, (ii) fully comply with the applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto (including Regulation S-X), (iii) were prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto and
Exhibit
10.3
(c) except,
in the case of the unaudited interim statements, as may be permitted under the
Exchange Act with respect to Quarterly Reports on Form 10-Q and (iv) fairly
present, in all material respects, the consolidated financial position and the
consolidated results of operations and cash flows (subject, in the case of
unaudited interim financial statements, to normal year end adjustments) of the
Company and its consolidated Subsidiaries as of the dates and for the periods
referred to therein. The reports of the Company’s independent
auditors regarding the Company’s consolidated financial statements in the SEC
filings have not been withdrawn, supplemented or modified, and none of the
Company or any of the Subsidiaries has received any communication from its
independent auditors concerning any such withdrawal, supplement or
modification.
(d) The
Company’s principal executive officer and its principal financial officer have
disclosed, based on their most recent evaluation, to the Company’s auditors and
the audit committee of the Board of Directors of the Company (i) all significant
deficiencies in the design or operation of internal controls which could
adversely affect the Company’s ability to record, process, summarize and report
financial data and have identified for the Company’s auditors any material
weaknesses in internal controls and (ii) any fraud, whether or not material,
that involves management or other employees who have a significant role in the
Company’s internal controls.
(e) The
Company has established and maintains disclosure controls and procedures (as
such term is defined in Rule 13a-15 under the Exchange Act); such disclosure
controls and procedures are designed to ensure that material information
relating to the Company, including the Subsidiaries, is made known to the
Company’s principal executive officer and its principal financial officer by
others within those entities, and, to the knowledge of the Company, such
disclosure controls and procedures are effective in timely alerting the
Company’s principal executive officer and its principal financial officer to
material information.
4.10 Absence of Undisclosed
Liabilities or Events.
(a) Neither
the Company nor any Subsidiary has any Indebtedness or liabilities (whether or
not required under GAAP to be reflected on a balance sheet or the notes thereto)
other than those (i) specifically reflected on and fully reserved against in the
Financial Statements, (ii) incurred in the Ordinary Course of Business since the
Audit Date or (iii) that are immaterial to the Company or any
Subsidiary.
(b) The
Financing Documents, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made as
of the date the same were made, not materially misleading. Since the
Audit Date, there has been no event, development or circumstance that has caused
or could reasonably be expected to cause a Material Adverse Effect.
4.11 No Actions or
Proceedings. Except as set forth on Schedule 4.8, there are no
legal or governmental actions, suits or proceedings pending or, to the Company’s
knowledge, threatened against or affecting the Company or any Subsidiary of the
Company, or any of their respective properties or assets which, if adversely
determined, in the aggregate, could reasonably
Exhibit
10.3
4.12 be
expected to be Material to the Company. No Governmental Authority has
notified the Company or any Subsidiary of the Company in writing of an intention
to conduct any audit, investigation or other review with respect to the Company
or any Subsidiary of the Company.
4.13 Title to
Properties. Each of the Company and each Subsidiary of the
Company has (a) good title to, or a valid and subsisting leasehold interest in,
all of its material real property and (b) good title to, or a valid and
subsisting leasehold interest in, all of its material equipment and other
personal property, in each case free and clear of all Liens, except Permitted
Exceptions.
4.14 Intellectual Property
Rights.
(a) Except as
set forth on Schedule
4.10, the Company and its Subsidiaries own all right, title and interest
in and to, or have valid and continuing rights to use, sell and license, all
Intellectual Property, Software and other Technology used in the conduct of the
business and operations of the Company and its Subsidiaries as presently
conducted and as currently proposed to be conducted, free and clear of all Liens
or obligations to others. All such owned Intellectual Property is
subsisting, and all necessary registration, maintenance, renewal, and other
relevant filing fees due through the date hereof in connection therewith have
been timely paid and all necessary documents and certificates in connection
therewith have been timely filed with the relevant patent, copyright, trademark,
or other authorities in the United States or foreign jurisdictions, as the case
may be, for the purposes of maintaining such registered Intellectual Property in
full force and effect. The business and operations of the Company and
its Subsidiaries, their Technology, their products and services and the
designing, development, manufacturing, reproduction, use, marketing, sale,
distribution, maintenance and modification of any of the foregoing as presently
performed and as currently contemplated to be performed does not infringe upon,
misappropriate or otherwise violate any Intellectual Property of any third
party. All of the material Intellectual Property owned by the Company
or any of its Subsidiaries is valid and enforceable.
(b) Except as
set forth in Schedule
4.10, there is no action, suit, proceeding, hearing, investigation,
notice or complaint pending or, to the Company’s knowledge, threatened, by any
third party before any court or tribunal (including, without limitation, the
United States Patent and Trademark Office or equivalent authority anywhere in
the world) relating to any of Company’s or any of its Subsidiaries’ Intellectual
Property or Technology, nor has any claim or demand been made by any third party
that (i) challenges the validity, enforceability, use or exclusive ownership of
any Intellectual Property or Technology owned by the Company or any of its
Subsidiaries or (ii) alleges any infringement, misappropriation, violation, or
unfair competition or trade practices by the Company or any of its Subsidiaries
of any Intellectual Property or Technology of any third party, nor is the
Company aware of any basis for any such claim or demand.
(c) There are
no agreements between the Company or any of its Subsidiaries and any third party
relating to any Intellectual Property of the Company or any of its Subsidiaries
or any third party under which there is, as of the date of this Agreement, or,
to the Company’s
Exhibit
10.3
(d) knowledge,
is expected, as of the date of this Agreement, to be, any Material dispute
regarding the scope or performance of such agreement.
(e) None of
the Company’s or any of its Subsidiaries’ Technology or Intellectual Property
are subject to any outstanding injunction, decree, order, judgment, agreement or
stipulation that restricts in any manner the use, transfer or licensing thereof
by the Company or any of its Subsidiaries or affects the validity, use or
enforceability of any such Technology or Intellectual Property.
(f) The
Company and the Subsidiaries have taken reasonable measures to protect the
confidentiality of all Material trade secrets owned by the Company or any of its
Subsidiaries that are material to their businesses as currently conducted and as
proposed to be conducted. The Company and its Subsidiaries have
executed valid written agreements with certain of their past and present
employees who have contributed to the development of Material Technology and
Intellectual Property pursuant to which such employees have assigned to the
Company or its Subsidiaries all their rights in and to all Material Technology
and Intellectual Property they may develop in the course of their employment and
agreed to hold all trade secrets and confidential information of the Company and
its Subsidiaries in confidence both during and after their
employment. The Company and its Subsidiaries have executed valid
written agreements with certain past and present consultants and independent
contractors who have been retained in connection with the development of
Material Technology and Intellectual Property by which the consultants and
independent contractors have assigned to the Company or its
Subsidiaries all their rights in and to such Material Technology and
Intellectual Property and agreed to hold all trade secrets and confidential
information of the Company and its Subsidiaries in confidence both during and
after the term of their engagements. No Material trade secrets or
other Material confidential information owned by the Company or any of its
Subsidiaries that is material to their businesses as currently conducted and as
proposed to be conducted have been disclosed or authorized to be disclosed by
the Company or any of its Subsidiaries to any of their employees or any third
party other than pursuant to a written non-disclosure or confidentiality
agreement. To the knowledge of the Company and its Subsidiaries, no
employee, consultant or independent contractor of the Company or any Subsidiary
is, as a result of or in the course of such employee’s, consultant’s or
independent contractor’s engagement by the Company or any Subsidiary, in default
or breach of any Material term of any employment agreement, non-disclosure
agreement, assignment of invention agreement or similar agreement.
4.15 Taxes.
(a) (i) All
Tax Returns required to be filed by or on behalf of each of the Company, any
Subsidiary and any affiliated group of which the Company or any Subsidiary is or
was a member have been duly and timely filed with the appropriate Taxing
Authority in all jurisdictions in which such Tax Returns are required to be
filed (after giving effect to any valid extensions of time in which to make such
filings), and all such Tax Returns are true, complete and correct in all
material respects; and (ii) all Taxes payable by or on behalf of each of the
Company, any Subsidiary and any affiliated group of which the Company or any
Subsidiary is or was a member have been fully and timely paid. With
respect to any period for which Tax Returns have not yet been filed or for which
Taxes are not yet due or owing, the Company has made due and sufficient accruals
for such Taxes in the Financial Statements and its books and
Exhibit
10.3
(b) records. All
required estimated Tax payments sufficient to avoid any underpayment penalties
or interest have been made by or on behalf of the Company and each
Subsidiary.
(c) The
Company and each Subsidiary has complied in all material respects with all
applicable Laws relating to the payment and withholding of Taxes and has duly
and timely withheld and paid over to the appropriate Taxing Authority all
amounts required to be so withheld and paid under all applicable
Laws.
(d) All
deficiencies asserted or assessments made as a result of any examinations by any
Taxing Authority of the Tax Returns of, or including, the Company or any
Subsidiary have been fully paid, and there are no other audits or investigations
by any Taxing Authority in progress, nor has the Company or any of the
Subsidiaries received any written notice from any Taxing Authority that it
intends to conduct such an audit or investigation. No issue has been
raised by a Taxing Authority in any prior examination of the Company or any
Subsidiary which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency for any subsequent
taxable period.
(e) There are
no Liens for Taxes on any of the assets of the Company or any of its
Subsidiaries other than Liens for Taxes not yet due and payable or which are
being contested in good faith by appropriate proceedings and for which adequate
reserves have been provided to the extent required by GAAP.
(f) The
Company is not a “United States Real Property Holding Corporation” within the
meaning of Section 897 of the Code.
(g) The
Company and the Subsidiaries have disclosed on their federal income Tax Returns
all positions taken therein that could give rise to substantial understatement
of federal income tax within the meaning of Section 6662 of the
Code.
4.16 Employee Benefit
Plans.
(a) Schedule 4.12(a)
lists all “employee benefit plans”, within the meaning of Section 3(3) of ERISA,
and all other material employee benefit plans, arrangements and policies with
respect to employees or former employees maintained by or contributed to by the
Company or any of its Subsidiaries (each, a “Plan”). There
has been no failure by any Plan to comply with the applicable requirements of
ERISA and the Code. There is no pending or, to the knowledge of the
Company, threatened, litigation relating to the Plans. None of the
Company or any of its Subsidiaries has engaged in a transaction with respect to
any Plan that could subject the Company or any of its Subsidiaries to a tax or
penalty imposed by either Section 4975 of the Code or Section 502(i) of
ERISA. The Company is not aware, after due inquiry, of any item of
non-compliance which could reasonably be expected to result in the loss of Plan
qualification or tax-exempt status. To the knowledge of the Company,
all required contributions have been made in accordance with the provisions of
each Plan.
(b) Within
the past six years, no liability under Title IV of ERISA has been incurred by
the Company or any of its Subsidiaries with respect to any ongoing, frozen or
terminated “single-employer plan,” within the meaning of Section 4001(a)(15) of
ERISA, or
Exhibit
10.3
(c) “multi
employer plan,” within the meaning of Section 3(37) of ERISA, currently or
formerly maintained by any of them, or the single-employer plan or
multi-employer plan of any entity which is considered to be a single employer
with the Company or any of its Subsidiaries under Section 4001(b)(1) of ERISA or
Section 414(b) or (c) of the Code (an “ERISA
Affiliate”). Except as set forth on Schedule 4.12(b),
none of the Company or any of its Subsidiaries has contributed to a “multi
employer plan,” within the meaning of Section 3(37) of ERISA, at any time after
June 30, 1997.
(d) Except as
set forth on Schedule
4.12(c), neither the Company nor any of its Subsidiaries has any material
obligations for retiree health and life benefits under any Plan, except as
required by Applicable Law.
4.17 Investment Company
Act. Neither the Company nor any of its Subsidiaries is or,
immediately after receipt of payment for the Series B-2 Preferred Stock and the
2008 Warrants and the consummation of the other Transactions, will be (a) an
“investment company” registered or required to be registered under the
Investment Company Act of 1940, as amended.
4.18 Insurance. The
Company and the Subsidiaries of the Company are insured with policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate for their businesses including, but not limited to, policies
covering real and personal property owned or leased by the Company and the
Subsidiaries of the Company against theft, damage, destruction and acts of
vandalism.
4.19 Compliance with Laws;
Permits; Environmental Liabilities.
(a) Each of
the Company and the Subsidiaries of the Company is in compliance, in all
Material respects with all Applicable Laws and has all Permits Material to and
necessary in, the conduct of its business as currently conducted and all such
Permits are in full force and effect. No violations have been
recorded in respect of any such Permits, and no proceeding is pending or, to the
knowledge of the Company, threatened to revoke or limit any
Permit. Neither the Company nor any Subsidiary is subject to any
Order, and neither the Company nor any Subsidiary is in breach or violation of
any Order. Neither the Company nor any Subsidiary is engaged in any
legal action to recover monies due it or for damages sustained by
it. There are no Legal Proceedings pending or, to the knowledge of
the Company or the Subsidiaries, threatened against the Company or to which the
Company is otherwise a party relating to this Agreement or, any Financing
Document or the transactions contemplated hereby or thereby.
(b) With
regard to each of the following, except any matters that in the aggregate, could
not reasonably be expected to be Material to the Company:
(i) Each of
the Company and each Subsidiary of the Company is currently in Material
compliance with all Environmental Laws, has obtained and is currently in
Material compliance with all permits, licenses, registrations and consents which
are required with respect to any of its facilities or operations under any
applicable Environmental Laws (the “Environmental
Permits”), and all such Environmental Permits are in full force and
effect;
Exhibit
10.3
(ii) None of
the Company or any Subsidiaries of the Company has received any written notice
of any claims, civil, criminal or administrative actions, suits, hearings,
investigations, or proceedings which are pending or, to its knowledge,
threatened against it, in each case, on the basis of, any Environmental
Liability, or indicating that such Person is or may be a potentially responsible
party or otherwise liable under Environmental Laws in connection with any
location which has experienced the release or threatened release of any
Hazardous Materials;
(iii) To the
knowledge of the Company, Hazardous Materials have not been transported or
disposed of from any real property owned, leased or operated by the Company or
any Subsidiary of the Company (“Property”)
in violation of, or in a manner or to a location which could give rise to
liability under any Environmental Law, nor have any Hazardous Materials been
generated, treated, stored or disposed of at, on or under any Property in
violation of, or in a manner that could give rise to liability under, any
applicable Environmental Laws;
(iv) No
judicial proceeding or governmental or administrative action is pending or, to
the knowledge of the Company, threatened, under any Environmental Laws to which
the Company or any Subsidiary of the Company is or will be named as a party, nor
are there any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial requirements
outstanding under any Environmental Laws with respect to the Company and any
Subsidiary of the Company; and
(v) To the
knowledge of the Company, there has been no release or threat of release of
Hazardous Materials at or from the Properties, or arising from or related to the
operations of the Company or any Subsidiary of the Company, in violation of or
in amounts or in a manner that could give rise to liability under Environmental
Laws.
4.20 Labor and Employment
Matters. Except as set forth on Schedule 4.16, (i)
none of the Company or any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement or other contracts with a labor union or labor
organization; and (ii) there is no (A) Material unfair labor practice, labor
dispute (other than routine individual grievances) or labor arbitration
proceeding pending or, to the knowledge of the Company, threatened against the
Company or its Subsidiaries, (B) to the knowledge of the Company or its
Subsidiaries, activity or proceeding by a labor union or representative thereof
to organize any employees of the Company or any of its Subsidiaries, or (C)
lockout, strike, slowdown, work stoppage or, to the knowledge of the Company or
its Subsidiaries, written threat thereof by or with respect to any such
employees.
4.21 Brokerage
Fees. None of the Company or any Subsidiary of the Company has
paid, or is obligated to pay, to any Person any brokerage or finder’s fees in
connection with the transactions contemplated hereby or by any other Transaction
Documents.
Exhibit
10.3
4.22
REPRESENTATIONS,
WARRANTIES AND AGREEMENTS OF THE PURCHASERS
Each
Purchaser, severally and not jointly, represents and warrants to the Company as
of the date hereof as follows:
4.23 Purchase for
Investment.
(a) Such
Purchaser is acquiring the Series B-2 Preferred Stock and the 2008 Warrants for
its own account, for investment purposes only and not with a view to any
distribution thereof within the meaning of the Securities Act.
(b) Such
Purchaser understands that the Series B-2 Preferred Stock and the 2008 Warrants
have not been and, except as provided in the Registration Rights Agreement with
respect to the Convert Shares, will not be registered under the Securities Act
or any state or other securities law, that the Series B-2 Preferred Stock and
the 2008 Warrants are being issued by the Company in transactions exempt from
the registration requirements of the Securities Act, that it must hold the
Series B-2 Preferred Stock indefinitely and not offer or sell the Series B-2
Preferred Stock or the 2008 Warrants except pursuant to effective registration
statements under the Securities Act or pursuant to applicable exemptions from
registration under the Securities Act and in compliance with applicable State
laws.
(c) Such
Purchaser further understands that the exemption from registration afforded by
Rule 144 (the provisions of which are known to such Purchaser) promulgated under
the Securities Act depends on the satisfaction of various conditions, and that,
if applicable, Rule 144 may afford the basis for sales only in limited
amounts.
(d) Such
Purchaser did not employ any broker or finder in connection with the
transactions contemplated in this Agreement and no fees or commissions are
payable to the Purchasers except as otherwise provided for in this
Agreement.
(e) Such
Purchaser is an Accredited Investor.
(f) The
source of funds to be used by such Purchaser to pay the purchase price of the
Series B-2 Preferred Stock and the 2008 Warrants purchased by such Purchaser
hereunder does not include assets of any employee benefit plan (other than a
plan exempt from the coverage of ERISA) or plan or any other entity the assets
of which consist of “plan assets” of employee benefit plans or plans as defined
in Department of Labor regulation Section 2510.3-101. As used in this
Section 5.1(f),
the term “employee benefit plan” shall have the meaning assigned to such term in
Section 3 of ERISA, and the term “plan” shall have the meaning assigned thereto
in Section 4975(e)(1) of the Code.
4.24 Access to
Information. Such Purchaser has been furnished with or has had
access to the information it has requested from the Company and its Subsidiaries
and has had an opportunity to discuss with the management of the Company and its
Subsidiaries the business and financial affairs of the Company and its
Subsidiaries, and has generally such knowledge and experience in business and
financial matters and with respect to investments in securities of
Exhibit
10.3
4.25 privately
held companies so as to enable it to understand and evaluate the risks of such
investment and form an investment decision with respect thereto, and is capable
of bearing the economic risks of such investment.
4.26 Corporate Power;
Authorization; Enforceability. The execution, delivery and
performance of this Agreement and the other Financing Documents to which such
Purchaser is a party are within its corporate or limited partnership, as the
case may be, power and authority and have been duly authorized by all necessary
action of such Purchaser, do not conflict with or result in a breach of or
violate any of such Purchaser’s governing documents or any contract to which
such Purchaser is a party or by which its assets are bound or any Applicable
Laws and constitute legal, valid and binding agreements of such Purchaser
enforceable against it in accordance with their respective terms, subject to the
Enforceability Exceptions.
4.27 No Actions or
Proceedings. There are no legal or governmental actions, suits
or proceedings pending or, to any Purchaser’s knowledge, threatened against or
affecting such Purchaser, or any of their respective properties or assets which,
if adversely determined, in the aggregate, could reasonably be expected to
materially and adversely affect the ability of such Purchaser to consummate any
of the transactions contemplated by the Financing Documents.
SECTION
5. OTHER AFFIRMATIVE
COVENANTS
5.1 Director
Representation. At such time as the Avista Purchasers do not
hold of record a sufficient number of shares of Series B Preferred Stock
(without the vote of any other stockholder) to elect a director to the Board of
Directors of the Company to represent the holders of Series B Preferred Stock as
a separate class pursuant to the terms of the Certificate of Designation, the
Board of Directors shall nominate and slate for election at each of the
Company’s annual meetings of stockholders one director designated by Avista if
the Avista Purchasers hold a number of shares of Common Stock and/or Series B
Preferred Stock (calculated assuming the conversion of any Series B Preferred
Stock held by the Avista Purchasers into Common Stock) equal to or greater than
(i) 10% of the then outstanding Common Stock or (ii) 25% of the Common Stock the
Avista Purchasers are entitled to upon conversion of the Series B Preferred
Stock purchased by the Avista Purchasers.
5.2 Allocation of Purchase
Price. On or before December 31, 2008, the Company and the
Purchasers will mutually agree on an allocation of the purchase price between
the Series B-2 Preferred Stock and the 2008 Warrants issued to the Purchasers
pursuant to the terms of this Agreement.
SECTION
6. EXPENSES, INDEMNIFICATION
AND CONTRIBUTION; TERMINATION
6.1 Expenses. The
Company will, upon Closing, after presentation of a reasonable summary invoice
therefore, reimburse the Purchasers for all reasonable expense (including
reasonable and documented attorney’s and accountant’s fees and disbursements)
incurred by the
Exhibit
10.3
6.2 Purchasers
in connection with the transactions contemplated by this Agreement and the other
Financing Documents and in connection with any amendments, waivers or consents
under or in respect of this Agreement or the other Financing Documents (whether
or not such amendment, waiver or consent becomes effective), including, without
limitation: (a) the Purchaser’s reasonable and documented out-of-pocket expenses
in connection with the Purchaser’s examinations and appraisals of the Company’s
properties, books and records; (b) the reasonable and documented out-of-pocket
costs and expenses incurred in enforcing, defending or declaring (or determining
whether or how to enforce, defend or declare) any rights or remedies under this
Agreement or the other Financing Documents or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
this Agreement or the other Financing Documents; and any fees incurred by the
Purchasers in connection with any governmental consents or
filings (including any fees incurred in connection with any HSR Act
filing). The Company will pay, and will hold the Purchasers harmless
from, all claims in respect of any fees, costs or expenses if any, of brokers
and finders in relation to the Transactions.
6.3 Indemnification. The
Company shall indemnify and hold harmless the Purchasers and each of their
respective Affiliates, partners, stockholders, members, directors, agents,
employees and controlling persons (collectively, the “Indemnitees”)
from and against any and all actual losses, claims, damages or liabilities to
any such Indemnitee in connection with or as a result of any misrepresentation
or breach of warranty, covenant or agreement made or to be performed by the
Company pursuant to this Agreement.
6.4 Survival. The
obligations of the Company under this Section 7 will
survive the payment or transfer of any Series B-2 Preferred Stock or 2008
Warrants, the enforcement, amendment or waiver of any provision of this
Agreement and the termination of this Agreement.
6.5 Tax Treatment of
Indemnification Payments. Any indemnification payment pursuant
to this Agreement shall be treated for federal, state, local and foreign Tax
purposes as an adjustment to the Purchase Price.
SECTION
7. MISCELLANEOUS
7.1 Notices. Except
as otherwise expressly provided herein, all notices and other communications
shall have been duly given and shall be effective (a) when delivered, (b) when
transmitted via telecopy (or other facsimile device) to the number set out below
if the sender on the same day sends a confirming copy of such notice by a
recognized overnight delivery service (charges prepaid), (c) the day following
the day (except if not a Business Day then the next Business Day) on which the
same has been delivered prepaid to a reputable national overnight air courier
service or (d) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address set forth below, or at such other address as
such party may specify by written notice to the other party hereto:
(a) if to a
Purchaser or its nominee, to the Purchaser or its nominee at the address
specified for such communications in Schedule 2.2, with a
copy to King & Spalding
Exhibit
10.3
(b) LLP, 0000
Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, Attention: Xxxxx Xxxxx,
Esq., or at such other address as the Purchaser or its nominee shall have
specified to the Company in writing;
(c) if to the
Company, to Geokinetics Inc., 0000 Xxxx Xxxx Xxxx., Xxxxx 000, Xxxxxxx, Xxxxx
00000, Attention: Xxxxxxx X. Xxxxx, with a copy to Chamberlain, Hrdlicka, White,
Xxxxxxxx & Xxxxxx, 0000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxx
00000 Attention: Xxxxx X. Spring, III, Esq.
7.2 Benefit of Agreement and
Assignments.
(a) Nothing
in this Agreement or any other Financing Document, express or implied, shall
give to any Person other than the parties hereto or thereto (not including
successors or assigns) any benefit or any legal or equitable right, remedy or
claim under this Agreement.
(b) No party
hereto may assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of the other parties hereto;
provided, however, that the Purchasers may assign the rights to purchase all or
any portion of the Series B-2 Preferred Stock or the 2008 Warrants allocated to
such Purchaser pursuant to Schedule 2.2 to any,
direct or indirect, wholly owned subsidiary of such Purchaser, subject to the
ability of such subsidiary to make the representations and warranties set forth
in Section 5,
and each such Person shall be entitled to the full benefit of this Agreement as
if such Person were a Purchaser hereunder.
7.3 No Waiver; Remedies
Cumulative. No failure or delay on the part of any party
hereto in exercising any right, power or privilege hereunder and no course of
dealing between the Company and any other party shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under the Certificate of Designation preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder or thereunder. The rights and remedies provided
herein and in the Certificate of Designation are cumulative and not exclusive of
any rights or remedies that the parties would otherwise have. 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 or
constitute a waiver of the rights of the other parties hereto to any other or
further action in any circumstances without notice or demand.
7.4 Amendments, Waivers and
Consents. This Agreement may be amended, and the observance of
any term hereof may be waived (either retroactively or prospectively), with the
written consent of the Company and the other parties hereto. No
amendment or waiver of this Agreement will extend to or affect any obligation,
covenant, agreement not expressly amended or waived or thereby impair any right
consequent thereon. As used herein, the term this “Agreement” and
references thereto shall mean this Agreement as it may from time to time be
amended, supplemented or modified.
7.5 Counterparts. This
Agreement may be executed in any number of counterparts, each of which when so
executed and delivered shall be an original, but all of which shall constitute
one and the same instrument. It shall not be necessary in making
proof of this
Exhibit
10.3
7.6 Agreement
to produce or account for more than one such counterpart. Each
counterpart may consist of a number of copies hereof, each signed by less than
all, but together signed by all, of the parties hereto. For the
purposes of the Closing, signatures transmitted via telecopy (or other facsimile
device) will be accepted as original signatures if the sender on the same day
sends a manually executed signature page by a recognized overnight delivery
service (charges prepaid).
7.7 Headings. The
headings of the sections and subsections hereof are provided for convenience
only and shall not in any way affect the meaning or construction of any
provision of this Agreement.
7.8 Survival of Covenants and
Indemnities. All covenants and indemnities set forth herein
shall survive the execution and delivery of this Agreement, the issuance of the
Series B-2 Preferred Stock, the 2008 Warrants and the Convert Shares and, except
as otherwise expressly provided herein with respect to covenants and any other
obligations hereunder.
7.9 Governing Law; Submission to
Jurisdiction; Venue.
(a) THIS
AGREEMENT AND THE SECURITIES SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW
YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD
REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH
STATE.
(b) If any
action, proceeding or litigation shall be brought by any Purchaser in order to
enforce any right or remedy under this Agreement, the Series B-2 Preferred Stock
or the 2008 Warrants, the Company hereby consents and will submit, and will
cause its Subsidiaries to submit, to the jurisdiction of any state or federal
court of competent jurisdiction sitting within the area comprising the Southern
District of New York on the date of this Agreement. The Company
hereby irrevocably waives any objection, including, but not limited to, any
objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any such
action, proceeding or litigation in such jurisdiction. The Company
further agrees that it shall not, and shall cause its Subsidiaries not to, bring
any action, proceeding or litigation arising out of this Agreement, the Series
B-2 Preferred Stock or the 2008 Warrants in any state or federal court other
than any state or federal court of competent jurisdiction sitting within the
area comprising the Southern District of New York on the date of this
Agreement.
(c) The
Company irrevocably consents to the service of process of any of the
aforementioned courts in any such action, proceeding or litigation by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
the Company at its address set forth in Section 8.1, such
service to become effective thirty (30) days after such mailing.
(d) Nothing
herein shall affect the right of any Purchaser to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against the Company in any other jurisdiction. If service of process
is made on a designated
Exhibit
10.3
(e) agent it
should be made by either (i) personal delivery or (ii) mailing a copy of summons
and complaint to the agent via registered or certified mail, return receipt
requested.
(f) THE
COMPANY AND EACH PURCHASER HEREBY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT, THE
SERIES B-2 PREFERRED STOCK OR THE 2008 WARRANTS.
7.10 Severability. If
any provision of this Agreement is determined to be illegal, invalid or
unenforceable, such provision shall be fully severable to the extent of such
illegality, invalidity or unenforceability and the remaining provisions shall
remain in full force and effect and shall be construed without giving effect to
the illegal, invalid or unenforceable provisions.
7.11 Entirety. This
Agreement together with the other Financing Documents represents the entire
agreement of the parties hereto and thereto, and supersedes all prior agreements
and understandings, oral or written, if any, relating to the Financing Documents
or the transactions contemplated herein or therein.
7.12 Survival of Representations
and Warranties. All representations and warranties made by the
Company herein shall survive the execution and delivery of this Agreement, the
issuance and transfer of all or any portion of the Series B-2 Preferred Stock
and the issuance of the Convert Shares in accordance with the Certificate of
Designation, and any other obligations hereunder, regardless of any
investigation made at any time by or on behalf of the Purchasers.
7.13 Construction. Each
covenant contained herein shall be construed (absent express provision to the
contrary) as being independent of each other covenant contained herein, so that
compliance with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person, whether or not expressly specified in such provision.
7.14 Incorporation. All
Exhibits and Schedules attached hereto are incorporated as part of this
Agreement as if fully set forth herein.
7.15 Non-Recourse. Except as
explicitly provided in this Agreement, no past, present or future director,
officer, employee, incorporator, member, partner, stockholder, affiliate, agent,
attorney or representative of the Company or the Purchasers shall in such
capacity have any liability for any obligations or liabilities of the Company or
any Purchaser, respectively, under this Agreement or for any claim (under tort
or contract law) based on, in respective of, or by reason of, the transactions
contemplated hereby.
7.16 Further
Assurances. Each of the parties hereto shall, upon reasonable
request of any other party hereto, do, make and execute all such documents,
acts, matters and things as may be reasonably required in order to give effect
to the transactions contemplated hereby.
Exhibit
10.3
7.17 IN WITNESS WHEREOF, each of the parties
hereto has caused a counterpart of this Agreement to be duly executed and
delivered as of the date first above written.
By:
/s/ Xxxxxxx X.
Xxxxx
Name:
Xxxxxxx X. Xxxxx
Title:
President
Exhibit
10.3
AVISTA
CAPITAL PARTNERS, L.P.
By:
AVISTA CAPITAL PARTNERS GP, LLC, its general partner
By: /s/ Xxxx
Xxxxx
Xxxx Xxxxx,
Authorized Signatory
AVISTA
CAPITAL PARTNERS (OFFSHORE), L.P.
By:
AVISTA CAPITAL PARTNERS GP, LLC, its general partner
By: /s/ Xxxx
Xxxxx
Xxxx Xxxxx,
Authorized Signatory
0590068.5
940480-000000
Exhibit
10.3
EXHIBIT
A
FORM OF
CERTIFICATE OF DESIGNATION
Exhibit
10.3
EXHIBIT
B
FORM OF
2008 WARRANT
Exhibit
10.3
EXHIBIT
C
FORM OF
REGISTRATION RIGHTS AGREEMENT
Exhibit
10.3
EXHIBIT
D
FORM OF
OPINION
Exhibit
10.3
EXHIBIT
E
FORM OF
MANAGEMENT RIGHTS AGREEMENT
Geokinetics
Inc., a Delaware corporation (the “Portfolio Company”),
hereby agrees that as of the date hereof, Avista Capital Partners, L.P., a
Delaware limited partnership (the “Partnership”), shall
have the following rights so long as it owns any equity interests in the
Portfolio Company:
(i) the
right to receive prior notice of all material corporate actions of the Portfolio
Company and its subsidiaries and the right to consult with the Portfolio Company
and its subsidiaries with respect to such actions;
(ii) the
right to visit and inspect any of the offices and properties of the Portfolio
Company and its subsidiaries and inspect and copy the books and records of the
Portfolio Company and its subsidiaries, at such times as the Partnership or its
designated representatives shall reasonably request;
(iii) the
right to consult with appropriate officers and directors of the Portfolio
Company and each of its subsidiaries routinely and at such times as reasonably
requested by the Partnership with respect to matters relating to the business,
finances, accounts and affairs of the Portfolio Company and its subsidiaries;
and
(iv) such
information and consultation rights or other assistance as the Partnership may
require to preserve its qualification as a venture capital operating company (as
defined in the U.S. Department of Labor Plan Asset Regulation, 29 C.F.R. §
2510.3-101) including, but not limited to, by reason of the Partnership’s
interest in the Portfolio Company qualifying as a venture capital investment (as
defined in the U.S. Department of Labor Plan Asset Regulation, 29 C.F.R. §
2510.3-101).
The
Portfolio Company acknowledges and agrees that the Partnership may exercise its
rights under this agreement through its general partner or such other person
designated by the Partnership, in each case acting on behalf of the
Partnership.
Dated: July
____, 2008
By: Xxxxxxx X. Xxxxx,
President
Agreed
and Accepted:
Avista
Capital Partners, L.P.
By: Avista
Capital Partners GP, LLC,
its general partner
By:
Xxxx
Xxxxx, Authorized Signatory
