21ST CENTURY HOLDING COMPANY
0000 XXXX XXXXXXX XXXX XXXXXXXXX
XXXXXXXXXX XXXXX, XX 00000
UNIT PURCHASE AGREEMENT
TO THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
21st Century Holding Company, a Florida corporation (the "Company"),
agrees with the Purchasers listed in the attached Schedule A (the "Purchasers")
to this Unit Purchase Agreement (this "Agreement") as follows:
SECTION 1. CERTAIN DEFINITIONS.
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
"Affiliate" means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of equity interests of the Company or
any Subsidiary or any corporation of which the Company and its Subsidiaries
beneficially own or hold, in the aggregate, directly or indirectly, 10% or more
of any class of equity interests. As used in this definition, "Control" means
the possession, directly or indirectly, 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.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which the Nasdaq National Market ("Nasdaq") is required or authorized to be
closed.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Capital Lease Obligation" means, with respect to any Person and a Capital
Lease, the amount of the obligation of such Person as the lessee under such
Capital Lease which would, in accordance with GAAP, appear as a liability on a
balance sheet of such Person.
"Change of Control" is defined in Section 7.2(h).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
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"Confidential Information" is defined in Section 20.
"Default" means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
"Eligible Subsidiary" means each of the Company's Subsidiaries, except
such Subsidiaries which are regulated by the Florida Department of Financial
Service or successor entity.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, at any time and with respect to any property,
the sale value of such property that would be realized in an arm's-length sale
at such time between an informed and willing buyer and an informed and willing
seller (neither being under a compulsion to buy or sell), as reasonably
determined in the good faith opinion of the Company's board of directors.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Guarantor" shall mean those certain Eligible Subsidiaries of the Company
which shall be a party to a Subsidiary Guarantee.
"Guaranty" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person: (a) to
purchase such Indebtedness or obligation or any property constituting security
therefor primarily for the purpose of assuring the owner of such Indebtedness or
obligation of the ability of any other Person to make payment of the
Indebtedness or obligation; (b) to advance or supply funds (i) for the purchase
or payment of such Indebtedness or obligation, or (ii) to maintain any working
capital or other balance sheet condition or any income statement condition of
any other Person or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation; (c) to lease properties
or to purchase properties or services primarily for the purpose of assuring the
owner of such Indebtedness or obligation of the ability of any other Person to
make payment of the Indebtedness or obligation; or (d) otherwise to assure the
owner of such Indebtedness or obligation against loss in respect thereof.
In any computation of the Indebtedness or other liabilities of the obligor
under any Guaranty, the Indebtedness or other obligations that are the subject
of such Guaranty shall be assumed to be direct obligations of such obligor,
provided that the amount of such Indebtedness outstanding for purposes of this
Agreement shall not be exceed the maximum amount of Indebtedness that is the
subject of such Guaranty.
"Holder" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
14.1.
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"Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities of such Person for borrowed money (including overdrafts) or for
the deferred purchase price of property or services, excluding any trade
payables and other accrued current liabilities incurred in the ordinary course
of business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit and
acceptances issued under letter of credit facilities, acceptance facilities or
other similar facilities, (b) all obligations of such Person evidenced by bonds,
notes, debentures or other similar instruments, (c) all indebtedness of such
Person created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even if the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), but excluding
trade payables arising in the ordinary course of business, (d) all Capitalized
Lease Obligations of such Person, (e) all Indebtedness referred to in (but not
excluded from) the preceding clauses of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the Fair Market Value of such
property or asset or the amount of the obligation so secured), and (f) all
guarantees by such Person of Indebtedness referred to in this definition of any
other Person.
"Interest Shares" is defined in Section 9.
"Investments" shall mean all investments, in cash or by delivery of
property made, directly or indirectly in any Person, whether by acquisition of
shares of capital stock, indebtedness or other obligations or securities or by
loan, advance, capital contribution or otherwise.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets or properties of the Company and its
Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the Company
to perform its obligations under this Agreement, the Notes and the Warrants, or
(c) the validity or enforceability of this Agreement, the Notes or the Warrants.
"Notes" is defined in Section 2.
"Offering Document" is defined in Section 6.3.
"Permitted Indebtedness" means any of the following:
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(a) Indebtedness of the Company or its Subsidiary outstanding as of
the date hereof;
(b) Indebtedness of the Company pursuant to the Notes issued at
Closing or of any Subsidiary pursuant to the Subsidiary Guarantee, and any
additional indebtedness in an aggregate amount (including the issuing of the
Notes) which does not exceed $15 million at any one time outstanding represented
by additional senior subordinated notes issued on a pari passu basis with the
Notes and guaranteed by guarantees of one or more of the Subsidiaries on a pari
passu basis with the Subsidiary Guarantee.
(c) Indebtedness of the Company owing to any Subsidiary; provided
that any Indebtedness of the Company owing to any such Subsidiary is unsecured
and is subordinated in right of payment from and after such time as the Notes
shall become due and payable to the payment and performance of the Company's
obligations under the Notes; provided further that any disposition, pledge or
transfer of any such Indebtedness to a Person (other than a disposition, pledge
or transfer to the Company or another Subsidiary) shall be deemed to be an
incurrence of such Indebtedness by the Company not permitted by this clause (c);
(d) Indebtedness of a Subsidiary owing to the Company or to another
Subsidiary; provided that any such Indebtedness of any Subsidiary is
subordinated in right of payment to the Guaranty of such Subsidiary; provided
further that any disposition, pledge or transfer of any such Indebtedness to a
Person (other than a disposition, pledge or transfer to the Company or a
Subsidiary) shall be deemed to be an incurrence of such Indebtedness by such
Subsidiary not permitted by this clause (d);
(e) Indebtedness of the Company or any Subsidiary in respect of
purchase money obligations, Capitalized Lease Obligations of the Company or any
Subsidiary and Subordinated Indebtedness of the Company or any Subsidiary in an
aggregate amount which does not exceed $5 million at any one time outstanding;
(f) Indebtedness of the Company or any Subsidiary consisting of
guarantees, indemnities or obligations in respect of purchase price adjustments
in connection with the acquisition or disposition of assets, including, without
limitation, shares of capital stock of Subsidiaries;
(g) Indebtedness of the Company or any Subsidiary represented by (x)
letters of credit for the account of the Company or any Subsidiary or (y) other
obligations to reimburse third parties pursuant to any surety bond or other
similar arrangements, which letters of credit or other obligations, as the case
may be, are intended to provide security for workers' compensation claims,
payment obligations in connection with self-insurance or other similar
requirements in the ordinary course of business;
(h) Any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of any
Indebtedness, referred to herein, including any successive refinancings, so long
as (i) any such new Indebtedness shall be in a principal amount that does not
exceed the principal amount (or, if such Indebtedness being refinanced provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration thereof, such lesser amount as of the date of
determination) so refinanced, plus the lesser of the amount of any premium
required to be paid in connection with such refinancing pursuant to the terms of
the Indebtedness refinanced or the amount of any premium reasonably determined
as necessary to accomplish such refinancing, (ii) in the case of any refinancing
by the Company of Subordinated Indebtedness, such new Indebtedness is made pari
passu with or subordinate to the Notes at least to the same extent as the
Indebtedness being refinanced, and (iii) in the case of any refinancing by any
Subsidiary of Subordinated Indebtedness, such new Indebtedness is made pari
passu with or subordinate to the Guaranty of such Guarantor at least to the same
extent as the Indebtedness being refinanced; and
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(i) Indebtedness of the Company not otherwise permitted herein
incurred in connection with a merger, acquisition, sales of assets or similar
business combinations, with the consent of the Holders of 50% of the principal
amount of Notes then outstanding.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
"Prepayment Shares" is defined in Section 7.2(d)
"Principal Shares" is defined in Section 7.1.
"Property" or "properties" means, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, xxxxxx or
inchoate.
"Purchasers" means the purchasers of the Units named in Schedule A hereto.
"Required Holders" means, at any time, the holders of at least 51% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).
"Responsible Officer" means any officer of the Company with responsibility
for the administration of the relevant portion of this Agreement.
"Sale and Leaseback Transaction" means any transaction or series of
related transactions pursuant to which the Company or a Subsidiary sells or
transfers any property or asset in connection with the leasing of such property
or asset to the seller or transferor.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Senior Indebtedness" means the principal of, premium, if any, and
interest on all other Indebtedness of the Company (other than the Notes),
whether outstanding on the date of Closing or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Notes. Notwithstanding the foregoing, "Senior Indebtedness" shall
not include (i) Indebtedness evidenced by the Notes, (ii) Indebtedness of the
Company that is expressly subordinated in right of payment to any Senior
Indebtedness of the Company or the Notes, (iii) Indebtedness of the Company that
by operation of law is subordinate to any general unsecured obligations of the
Company, (iv) Indebtedness of the Company to the extent incurred in violation of
any covenant of this Agreement, (v) any liability for federal, state or local
taxes or other taxes, owed or owing by the Company, (vi) Indebtedness for goods,
materials or services purchased in the ordinary course of business or
Indebtedness consisting of trade account payables or other current liabilities
(other than the current portion of long-term Indebtedness which would constitute
Senior Indebtedness but for the operation of this clause (vi)), (vii) amounts
owed by the Company for compensation to employees or for services rendered to
the Company, (viii) Indebtedness of the Company to any Subsidiary or any other
Affiliate of the Company or any such Affiliate's Subsidiaries, (ix) amounts
owing under leases and (x) Indebtedness which when incurred and without respect
to any election under Section 1111(b) of Title 11 of the United States Code is
without recourse to the Company or any Subsidiary.
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"Subordinated Indebtedness" means, as of the date of any determination
thereof, all unsecured Indebtedness of the Company which shall contain or have
applicable thereto subordination provisions providing for the subordination
thereof to other the Indebtedness of the Company (including, without limitation,
the Notes).
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
"Subsidiary Guarantee" is defined in Section 3.2.
"Transaction Shares" means collectively, the Principal Shares, the
Interest Shares, the Prepayment Shares and the Warrant Shares.
"Warrant Shares" means the shares of Common Stock issuable upon exercise
of the Warrants.
SECTION 2. AUTHORIZATION OF UNITS; PRIORITY
2.1 AUTHORIZATION OF UNITS. The Company will authorize the issue and sale
of up to 12,500 units (the "Units") at a price (the "Subscription Price") of
$1,000 per Unit. Each Unit consists of (i) a $1,000 6% Senior Subordinated Note
(the "Note"), and (ii) warrants to purchase shares of the Company's common
stock, par value $0.01 per share (the "Common Stock") for an exercise price per
share as set forth therein (the "Warrant"). The Note and Warrant shall be
substantially in the forms set out in Exhibits A and B, respectively.
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2.2 PRIORITY OF NOTES. The Notes shall rank pari passu in terms of payment
and shall be equal in priority to the 6% Senior Subordinated Notes dated July
31, 2003 in the original principal amount of $7,500,000.
SECTION 3. SALE AND PURCHASE OF UNITS.
3.1 UNITS. Subject to the terms and conditions of this Agreement, the
Company will issue and sell to each Purchaser and each Purchaser will purchase
from the Company, at the Closing provided for in Section 4, such number of Units
specified opposite such Purchaser's name in Schedule A at the aggregate
Subscription Price. The obligations of each Purchaser hereunder are several and
not joint obligations and each Purchaser shall have no obligation and no
liability to any Person for the performance or nonperformance by any other
Purchaser hereunder.
3.2 SUBSIDIARY GUARANTEE. The payment by the Company of all amounts due
with respect to the Notes and the performance by the Company of its obligations
under this Agreement will be unconditionally guaranteed by all Eligible
Subsidiaries of the Company (the "Guarantors") under the subsidiary guarantee
(the "Subsidiary Guarantee") which shall be in substantially the form attached
hereto as Exhibit C.
SECTION 4. CLOSING.
The sale and purchase of the Units to be purchased by each Purchaser shall
occur at 10:00 am Miami time, at a closing (the "Closing") on September 29, 2004
or on such other Business Day as may be agreed upon by the Company and the
Purchasers. At the Closing, the Company will deliver to X. Xxxxxxxx Securities,
LLC, as agent for each Purchaser, the Units to be purchased by such Purchaser
dated the date of the Closing and registered in such Purchaser's name, against
delivery by such Purchaser to the Company or its order of immediately available
funds in the amount of the Subscription Price therefor by wire transfer of
immediately available funds for the account of the Company to account number
9660323321, account name 21st Century Holding Company Operating, at Union
Planters Bank, ABA Number 000000000. If at the Closing the Company shall fail to
tender such Units to any Purchaser as provided above in this Section 4, such
Purchaser shall, at such Purchaser's election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights such
Purchaser may have by reason of such failure or such nonfulfillment.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
5.1 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of Florida with full power and
authority to own, lease, license and use its properties and assets and to carry
out the businesses in which it is engaged in. The Company is duly qualified to
transact the business in which it is engaged and is in good standing as a
foreign corporation in every jurisdiction in which its ownership, leasing,
licensing or use of property or assets or the conduct of its business make such
qualification necessary, except where the failure to be so qualified would not
individually or in the aggregate have a Material Adverse Effect.
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5.2 POWER AND AUTHORIZATION. The Company has all requisite power and
authority to (i) execute, deliver and perform its obligations under this
Agreement; and (ii) to issue and sell the Units. All necessary corporate
proceedings of the Company have been duly taken to authorize the execution,
delivery, and performance of this Agreement. This Agreement has been duly
authorized by the Company and, when executed and delivered by the Company, will
constitute the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting creditors' rights
generally; (ii) as enforceability of any indemnification, contribution or
exculpation provision may be limited under applicable federal and state
securities laws; and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
5.3 PUBLIC DISCLOSURE. As of their respective filing dates, none of the
Company's filings with the SEC (the "Public Filings") contained any untrue
statement of a material fact or omitted any material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent such
filings have been prior to the date hereof corrected, updated or superseded by a
document subsequently filed with the SEC.
SECTION 6. REPRESENTATIONS OF THE PURCHASER.
Each Purchaser hereby represents and warrants to, and agrees with, the
Company as follows:
6.1 It is an "accredited investor" as that term is defined in Rule 501(a)
of Regulation D promulgated under the Securities Act.
6.2 If a natural person, the Purchaser is: a bona fide resident of the
state contained in the address set forth on Schedule A as the Purchaser's home
address; at least 21 years of age; and legally competent to execute this
Agreement. If an entity, the Purchaser is duly authorized to execute this
Agreement and this Agreement constitutes the legal, valid and binding obligation
of the Purchaser enforceable against the Purchaser in accordance with its terms.
6.3 The Purchaser is familiar with the Company's business, plans and
financial condition, the terms of the offering of the Units (the "Offering"),
and any other matters relating to the Offering; the Purchaser has received all
materials that have been requested by the Purchaser; the Purchaser has had a
reasonable opportunity to ask questions of the Company and its representatives;
and the Company has answered all inquiries that the Purchaser or the Purchaser's
representatives have put to it. The Purchaser has had access to all additional
non-confidential information necessary to verify the accuracy of the information
set forth in this Agreement and any other materials furnished herewith, and has
taken all the steps necessary to evaluate the merits and risks of an investment
as proposed hereunder. Without limiting the foregoing, the Purchaser
acknowledges that it has reviewed certain information regarding the Company, its
business and the terms of this Offering, including but not limited to, the
information contained in the Offering Document dated September , 2004 (the
"Offering Document").
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6.4 The Purchaser has such knowledge and experience in finance,
securities, investments and other business matters so as to be able to protect
the interests of the Purchaser in connection with this transaction, and the
Purchaser's investment in the Company hereunder is not material when compared to
the Purchaser's total financial capacity.
6.5 The Purchaser understands the various risks of an investment in the
Company as proposed herein, including without limitation those set forth in the
Offering Document and in the Public Filings, and can afford to bear such risks,
including, without limitation, the risks of losing the entire investment.
6.6 The Purchaser acknowledges that no market for the Units currently
exists and none may develop in the future and that the Purchaser may find it
impossible to liquidate the investment at a time when it may be desirable to do
so, or at any other time.
6.7 The Purchaser has been advised by the Company that the Units have not
been registered under the Securities Act, that the Securities will be issued on
the basis of the statutory exemption provided by Section 4(2) of the Securities
Act or Regulation D promulgated thereunder, or both, relating to transactions by
an issuer not involving any public offering and under exemptions under certain
state securities laws, that this transaction has not been reviewed by, passed on
or submitted to any federal or state agency or self-regulatory organization
where an exemption is being relied upon, and that the Company's reliance thereon
is based in part upon the representations made by the Purchaser in this
Agreement. The Purchaser acknowledges that the Purchaser has been informed by
the Company of, or is otherwise familiar with, the nature of the limitations
imposed by the Securities Act and the rules and regulations thereunder on the
transfer of the Units. In particular, the Purchaser agrees that the Company
shall not be required to give any effect to sale, assignment or transfer, unless
(i) the sale, assignment or transfer of such Units is registered under the
Securities Act, it being understood that the Units are not currently registered
for sale and that the Company has no obligation or intention to so register the
Securities except as set forth herein, or (ii) such Units are sold, assigned or
transferred in accordance with all the requirements and limitations of Rule 144
under the Securities Act, or (iii) such sale, assignment or transfer is
otherwise exempt from registration under the Securities Act. The Purchaser
further understands that an opinion of counsel and other documents may be
required to transfer the Units. The Purchaser acknowledges that the Units shall
be subject to stop transfer orders and the certificate or certificates
evidencing any Units shall bear the following or a substantially similar legend
or such other legend as may appear on the forms of Units and such other legends
as may be required by state blue sky laws:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE OR FOREIGN SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY
INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE OR FOREIGN
SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE
STATE OR FOREIGN SECURITIES LAWS."
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6.8 The Purchaser will acquire the Units for the Purchaser's own account
(or for the joint account of the Purchaser and the Purchaser's spouse either in
joint tenancy, tenancy by the entirety or tenancy in common) for investment and
not with a view to the sale or distribution thereof or the granting of any
participation therein, and has no present intention of distributing or selling
to others any of such interest or granting any participation therein.
6.9 Neither the Company nor any of the officers, directors, shareholders,
partners, employees or agents of either, or any other Persons, whether expressly
or by implication, have represented, guaranteed or warranted that,
(a) The Company or the Purchaser will realize any given percentage
of profits and/or amount or type of consideration, profit or loss as a result of
the Company's activities or the Purchaser's investment in the Company; or
(b) the past performance or experience of the management of the
Company, or of any other person, will in any way indicate the predictable
results of the ownership of the Units or of the Company's activities.
6.10 No oral or written representations have been made other than as
stated in this Agreement, the Offering Document dated September , 2004, and the
Purchaser has not relied on any oral or written representation from the Company
other than as set forth in this Agreement and the Offering Document in making
its investment decision. The Purchaser hereby acknowledges that the information
and representations set forth in this Agreement and the Offering Document
supersede all prior information and representations provided to the Purchaser in
connection with the Offering.
6.11 The Purchaser is not purchasing the Units as a result of or
subsequent to any advertisement, press release, public announcement, 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.
6.12 The Purchaser is not relying on the Company with respect to the tax
and other economic considerations of an investment.
6.13 The Purchaser understands that the net proceeds from the Offering
(after deduction for expenses of the Offering) will be used in all material
respects for the purposes set forth in the Offering Document.
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6.14 The Purchaser acknowledges that the representations, warranties and
agreements made by the Purchaser herein shall survive the execution and delivery
of this Agreement and the purchase of the Units.
6.15 Blue Sky matters:
THE UNITS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR THE
SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
LAWS. THE UNITS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE
SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OTHER
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THE UNITS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. SUBSCRIBERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
6.16 The Purchaser agrees to use its reasonable best efforts to make all
warranties and representations required by the securities laws of Purchaser's
jurisdiction of domicile necessary to enable the Company to issue the
Transaction Shares in compliance with such securities laws.
6.17 The Purchaser acknowledges that as a result of its investment
hereunder it may become subject to the reporting requirements of Sections 13 and
16 of the Exchange Act. In the event that Purchaser becomes subject to the
reporting requirements of Sections 13 and 16, Purchaser agrees to file a
Schedule 13-D and a Form 3 no later than 10 days from the Closing and to keep
current such filings in accordance with the requirements of Sections 13 and 16.
6.18 The Purchaser has consulted his own financial, legal and tax advisors
with respect to the economic, legal and tax consequences of an investment in the
Units and has not relied on the Company, its officers, directors or professional
advisors for advice as to such consequences.
SECTION 7. PAYMENT OF THE NOTES.
7.1 REQUIRED PAYMENTS.
(a) PRINCIPAL. The principal amount of the Notes shall be due and
payable in equal quarterly installments commencing on January 31, 2005 with the
last installment due on September 29, 2007 (the date due of each quarterly
installment is referred to herein as a "Quarterly Payment Date" and the last
Quarterly Payment Date on September 29, 2007 is referred to as the "Maturity
Date"). Each principal payment shall be paid in United States dollars or, to the
extent legally permitted, in shares of Common Stock (the "Principal Shares"), at
the Company's option; provided, however, that the Company shall make principal
payments in Principal Shares only to the extent provided in Section 12 hereof.
If such principal payment is paid in Principal Shares, then the number of
Principal Shares to be issued on account of the principal payment shall be equal
to (i) the amount of the principal payment due divided by (ii) 95% of the
weighted-average volume price for the Common Stock on Nasdaq as reported by
Bloomberg Financial Markets ("Bloomberg") for the 20 consecutive trading days
prior to the Quarterly Payment Date (the "Calculation Price"). In the event the
Company elects to pay the principal amount due in Principal Shares, (a) it shall
notify the Holder of its election no later than 15 days prior to the
commencement of the 20 consecutive trading day period referenced above, (b) it
shall issue the applicable Principal Shares on the Quarterly Payment Date, and
(c) it shall file a registration statement covering resale of the applicable
Principal Shares (the "Registration Statement") no later than two Business Days
following the Quarterly Payment Date.
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(b) COMPENSATORY PAYMENT. If a principal payment is made in
Principal Shares and (i) the date of effectiveness (the "Effective Date") of the
applicable Registration Statement is more than 10 Business Days after the
relevant Quarterly Payment Date and (ii) the weighted-average volume price for
the Common Stock on Nasdaq as reported by Bloomberg for the three Business Day
period ending on (and including) the Effective Date (the "Post-Issuance Average
Price") is less than the Calculation Price, then the Company shall pay to each
holder of the Notes an amount equal to (i) the difference between the
Calculation Price and the Post-Issuance Average Price, multiplied by (ii) the
number of Principal Shares issued on the applicable Quarterly Payment Date. Such
amount shall be paid to each holder of the Notes in cash not later than 10
Business Days following the Effective Date of the applicable Registration
Statement."
7.2 CHANGE IN CONTROL.
(a) NOTICE OF CHANGE IN CONTROL OR CONTROL EVENT. The Company will,
within 15 Business Days after any Responsible Officer has knowledge of the
occurrence of any Change in Control or Control Event (subject in the case of any
Control Event to contractual limitations on disclosure and disclosure
limitations imposed by applicable securities laws), give written notice of such
Change in Control or Control Event to each holder of Notes unless notice in
respect of such Change in Control (or the Change in Control contemplated by such
Control Event) shall have been given pursuant to this Section 7.2. If a Change
in Control has occurred, such notice shall contain and constitute an offer to
prepay Notes as described in of this Section 7.2 and shall be accompanied by the
certificate described in this Section 7.2.
(b) OFFER TO PREPAY NOTES. The offer to prepay Notes contemplated by
this Section 7.2(b) shall be an offer to prepay, in accordance with and subject
to this Section 7.2, all, but not less than all, the Notes held by each holder
(in this case only, "holder" in respect of any Note registered in the name of a
nominee for a disclosed beneficial owner shall mean such beneficial owner) on a
date specified in such offer (the "Proposed Prepayment Date"). If such Proposed
Prepayment Date is in connection with an offer contemplated by this Section 7.2,
such date shall be not less than 30 days and not more than 60 days after the
date of such offer (if the Proposed Prepayment Date shall not be specified in
such offer, the Proposed Prepayment Date shall be the 30th day after the date of
such offer).
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(c) ACCEPTANCE. A holder of Notes may accept the offer to prepay
made pursuant to this Section 7.2 by causing a notice of such acceptance to be
delivered to the Company at least 15 days prior to the Proposed Prepayment Date.
A failure by a holder of Notes to respond to an offer to prepay made pursuant to
this Section 7.2 shall be deemed to constitute a rejection of such offer by such
holder.
(d) PREPAYMENT. Prepayment of the Notes to be prepaid pursuant to
this Section 7.2 shall be at 101% of the then-outstanding principal amount of
such Notes together with interest on such Notes accrued to the date of
prepayment (the "Change in Control Prepayment"). The prepayment shall be made on
the Proposed Prepayment Date except as provided in Section 7.2(e). The Company
may pay the Change in Control Prepayment in United States dollars or in shares
of Common Stock (the "Prepayment Shares"), at the Company's option. In the event
the Company pays the Change in Control Prepayment in Prepayment Shares, it shall
prepare and file with the Securities and Exchange Commission, a Registration
Statement on Form S-3 covering the resale of the Prepayment Shares within 5 days
of the issuance of the Prepayment Shares. The Company shall pay the Change in
Control Prepayment in Prepayment Shares only to the extent provided in Section
12 hereof. If the Change in Control Prepayment is paid in Prepayment Shares,
then the number of Prepayment Shares to be issued on account of the prepayment
shall be equal to the amount of the Change in Control Prepayment divided by 95%
of the weighted-average volume price for the Common Stock on Nasdaq as reported
by Bloomberg for the 20 consecutive trading days prior to the date of the
Proposed Prepayment Date. In the event the Company elects to pay the Change in
Control Prepayment in Prepayment Shares, it shall notify the Holder of its
election no later than 15 days prior to the commencement of the 20 consecutive
trading day period referenced above.
(e) DEFERRAL PENDING CHANGE IN CONTROL. The obligation of the
Company to prepay Notes pursuant to the offer required by this Section 7.2 is
subject to the occurrence of the Change in Control in respect of which such
offer and acceptance shall have been made. In the event that such Change in
Control does not occur on the Proposed Prepayment Date in respect thereof, the
prepayment shall be deferred until, and shall be made on the date on which, such
Change in Control occurs. The Company shall keep each holder of Notes reasonably
and timely informed of (i) any such deferral of the date of prepayment, (ii) the
date on which such Change in Control and the prepayment are expected to occur,
and (iii) any determination by the Company that efforts to effect such Change in
Control have ceased or been abandoned (in which case the offers and acceptances
made pursuant to this Section 7.2 in respect of such Change in Control shall be
deemed rescinded).
(f) CONTENT OF OFFER. Each offer to prepay the Notes pursuant to
this Section 7.2 shall, specify:
(i) the Proposed Prepayment Date;
(ii) that such offer is made pursuant to this Section 7.2;
(iii) the principal amount of each Note offered to be prepaid;
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(iv) the interest that would be due on each Note offered to be
prepaid, accrued to the Proposed Prepayment Date;
(v) that the conditions of this Section 7.2 have been
fulfilled; and
(vi) in reasonable detail, the nature and date or proposed
date of the Change in Control.
(g) "CHANGE IN CONTROL" DEFINED. "Change in Control" means each and
every issue, sale or other disposition of shares of stock of the Company which
results in any person (as such term is used in Section 13(d) and Section
14(d)(2) of the Exchange Act) or related persons constituting a group (as such
term is used in Rule 13d-5 under the Exchange Act) (herein, an "Acquiring
Person") becoming the "beneficial owners" (as such term is used in Rule 13d-3
under the Exchange Act as in effect on the date of the Closing), directly or
indirectly, of more than 50% (by total voting power) of the issued and
outstanding capital stock of the Company which is entitled to vote in the
election of the members of the Company's board of directors.
(h) "CONTROL EVENT" DEFINED. "Control Event" means:
(i) the execution by the Company or any of its Subsidiaries or
Affiliates of any agreement or letter of intent with respect to any proposed
transaction or event or series of transactions or events which, individually or
in the aggregate, may reasonably be expected to result in a Change in Control,
or
(ii) the execution of any written agreement which, when fully
performed by the parties thereto, would result in a Change in Control.
SECTION 8. SUBORDINATION OF NOTES AND GUARANTY.
8.1 NOTES SUBORDINATE TO SENIOR INDEBTEDNESS. The Company covenants and
agrees, and each Purchaser of a Note, by its acceptance thereof, likewise
covenants and agrees, for the benefit of the holders, from time to time, of
Senior Indebtedness that, to the extent and in the manner hereinafter set forth
in this Section, the Indebtedness represented by the Notes and the payment of
the principal of (and premium, if any) and interest on each and all of the Notes
are hereby expressly made subordinate and subject in right of payment as
provided in this Section to the prior payment in full in cash or cash
equivalents or in any other form acceptable to each holder of Senior
Indebtedness, of all Senior Indebtedness; provided, however, that the Notes, the
Indebtedness represented thereby and the payment of the principal of (and
premium, if any) and interest on the Notes in all respects shall rank equally
with, or prior to, all existing and future senior subordinated indebtedness
(including, without limitation, Indebtedness) of the Company that is
subordinated to Senior Indebtedness.
8.2 SUBORDINATION OF GUARANTY. The Guaranty issued by any Guarantor will
be unsecured senior subordinated obligations of such Guarantor, ranking pari
passu with all other existing and future senior subordinated indebtedness of
such Guarantor, if any. The Indebtedness evidenced by such Subsidiary Guarantee
will be subordinated on the same basis as the guaranty of any Senior
Indebtedness of such Guarantor as the Notes are subordinated to Senior
Indebtedness.
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SECTION 9. PAYMENT OF INTEREST.
9.1 INTEREST. The principal amount of the Notes outstanding shall bear
interest at the rate of 6% per annum beginning on the date of issuance. Interest
shall be payable quarterly beginning on January 31, 2005. Each interest payment
shall be paid in United States dollars or, to the extent legally permitted, in
shares of Common Stock (the "Interest Shares"), at the Company's option;
provided, however, that the Company shall make interest payments in Interest
Shares only to the extent provided in Section 12 hereof. If such interest
payment is paid in Interest Shares, then the number of Interest Shares to be
issued on account of the interest payment shall be equal to (i) the amount of
the interest payment due divided by (ii) the Calculation Price. In the event the
Company elects to pay the interest amount due in Interest Shares, (a) it shall
notify the Holder of its election no later than 15 days prior to the
commencement of the 20 consecutive trading day period referenced in Section 7.1
above, (b) it shall issue the applicable Interest Shares on the Quarterly
Payment Date, and (c) it shall file the Registration Statement covering resale
of the applicable Interest Shares no later than two Business Days following the
Quarterly Payment Date.
9.2 COMPENSATORY PAYMENT. If an interest payment is made in Interest
Shares and (i) the Effective Date of the applicable Registration Statement is
more than 10 Business Days after the relevant Quarterly Payment Date and (ii)
the Post-Issuance Average Price of the applicable Interest Shares is less than
the Calculation Price, then the Company shall pay to each holder of the Notes an
amount equal to (i) the difference between the Calculation Price and the
Post-Issuance Average Price, multiplied by (ii) the number of Interest Shares
issued on the applicable Quarterly Payment Date. Such amount shall be paid to
each holder of the Notes in cash not later than 10 Business Days following the
Effective Date of the applicable Registration Statement."
SECTION 10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
10.1 LIMITATION ON LIENS. The Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly create, incur, assume or permit to
exist (upon the happening of a contingency or otherwise), any Lien on or with
respect to any property or asset (including, without limitation, any document or
instrument in respect of goods or accounts receivable) of the Company or any
such Subsidiary, whether now owned or held or hereafter acquired, or any income
or profits therefrom, or assign or otherwise convey any right to receive income
or profits except:
(a) Liens for taxes, assessments or other governmental charges which
are not yet due and payable;
(b) Liens incidental to the conduct of business or the ownership of
properties and assets (including landlords', carriers', warehousemen's,
mechanics', materialmen's and other similar Liens) and Liens to secure the
performance of bids, tenders, leases, or trade contracts, or to secure statutory
obligations (including obligations under workers compensation, unemployment
insurance and other social security legislation), surety or appeal bonds or
other Liens incurred in the ordinary course of business and not in connection
with the borrowing of money;
15
(c) leases or subleases entered into by the Company or its
Subsidiaries as either lessors or sublessors, easements, rights-of-way,
restrictions and other similar charges or encumbrances (including zoning
restrictions), in each case incidental to the ownership of property or assets or
the ordinary conduct of the business of the Company or any of its Subsidiaries,
provided that such Liens do not, in the aggregate, detract from the value of
such property in any material way;
(d) Liens incidental to minor survey exceptions and similar Liens,
provided that such Liens do not, in the aggregate, materially detract from the
value of such property;
(e) Liens on property or assets of Subsidiaries securing
Indebtedness owing to the Company or to another Subsidiary;
(f) Liens existing on the date of Closing which secure outstanding
Indebtedness of the Company and its Subsidiaries;
(g) any Lien existing on property of a Person immediately prior to
its being consolidated with or merged into the Company or a Subsidiary or its
becoming a Subsidiary, or any Lien existing on any property acquired by the
Company or any Subsidiary at the time such property is so acquired (whether or
not the Indebtedness secured thereby shall have been assumed; and
(h) Liens pursuant to indebtedness created in connection with or
incidental to a merger, acquisition, purchase of assets or other business
combinations.
(i) any extensions, renewals or replacements of any Lien permitted
by the preceding subparagraphs of this Section 10.1, provided that (i) no
additional property shall be encumbered by such Liens, (ii) the unpaid principal
amount of the Indebtedness secured thereby shall not be increased prior to or on
or after the date of any extension, renewal or replacement, (iii) the weighted
average life to maturity of the Indebtedness secured by such Liens shall not be
reduced, and (iv) at such time and immediately after giving effect thereto, no
Default or Event of Default would exist.
10.2 MERGER, CONSOLIDATION. The Company will not, and will not permit any
Subsidiary to, consolidate with or be a party to a merger with any other Person;
provided, however, that:
(a) any Subsidiary may merge or consolidate with or into the
Company, so long as in any merger or consolidation involving the Company, the
Company shall be the surviving entity;
16
(b) any Subsidiary may merge or consolidate with or into any other
Person if either (x) the Subsidiary shall be the surviving entity, or (y) if the
Subsidiary is not the surviving entity, such transaction is permitted by Section
10.3; and
(c) the Company may consolidate or merge with any other Person if
(i) either (x) the Company shall be the surviving entity, or (y) if the
surviving entity is other than the Company, such entity expressly assumes, by
written agreement reasonably satisfactory in scope and form to the Required
Holders, all obligations of the Company under the Notes, the Warrants and this
Agreement, and (ii) at the time of such consolidation or merger and after giving
effect thereto, no Default or Event of Default shall have occurred and be
continuing.
10.3 SALES OF ASSETS. The Company will not, and will not permit any
Subsidiary to, sell, lease or otherwise dispose of substantially all of the
assets of the Company and its Subsidiaries unless the consideration received by
the Company or such Subsidiary for such sale is not less than the Fair Market
Value of the assets sold (as determined by the Board of Directors of the
Company, whose determination shall be conclusive and evidenced by a Board
Resolution).
10.4 TRANSACTIONS WITH AFFILIATES. The Company will not, and will not
permit any Subsidiary to enter into, directly or indirectly, any Material
transaction or Material group of related transactions (including without
limitation the purchase, lease, sale or exchange of properties of any kind or
the rendering of any service) with any Affiliate (other than the Company or
another Subsidiary), except upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate.
10.5 LIMITATION ON INDEBTEDNESS. The Company will not, and will not permit
any Subsidiary to, create, issue, assume, guarantee or in any manner become
directly or indirectly liable for the payment of, or otherwise incur
(collectively, "incur"), any Indebtedness (including any Acquired Indebtedness),
other than Permitted Indebtedness.
10.6 LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company will not, and will not permit any Subsidiary to,
directly or indirectly:
(i) declare or pay any dividend on, or make any distribution
to holders of, any shares of the Common Stock of the Company or any Subsidiary
(other than the declaration or payment of dividends or distributions to the
extent declared or paid to the Company or any Subsidiary or in accordance with
the Company's dividend payment policy);
(ii) purchase, redeem or otherwise acquire or retire for
value, directly or indirectly, any shares of Common Stock of the Company or any
Affiliate of the Company (other than as authorized by the Board of Directors or
Common Stock of any Subsidiary) or any options, warrants or other rights to
acquire such shares of Common Stock; or
(iii) make any principal payment on, or repurchase, redeem,
defease or otherwise acquire or retire for value, prior to any scheduled
principal payment, sinking fund payment or maturity, any Subordinated
Indebtedness of the Company or any Subsidiary.
17
10.7 LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Company shall not,
and shall not permit any Subsidiary to, directly or indirectly, enter into any
Sale and Leaseback Transaction with respect to any property or assets (whether
now owned or hereafter acquired), unless (i) the sale or transfer of such
property or assets to be leased is treated as a sale of assets and the Company
complies with Section 10.3, and (ii) the Company or such Subsidiary would be
permitted to incur Indebtedness under Section 10.5 in the amount of the
Capitalized Lease Obligations incurred in respect of such Sale and Leaseback
Transaction.
SECTION 11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal on any Note for
more than 10 Business Days after the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note for
more than five Business Days after the same becomes due and payable, whether at
a date fixed for payment or by declaration or otherwise; or
(c) the Company defaults in the performance of or compliance with any
Material terms contained herein and such default is not remedied within 30 days
after receipt of written notice from the Required Holders of such default; or
(d) any representation or warranty made in writing by or on behalf of the
Company or any Guarantor or by any officer of the Company or any Guarantor in
this Agreement, any or in any writing furnished in connection with the
transactions contemplated hereby or thereby proves to have been false or
incorrect in any Material respect on the date as of which made; or
(e) the Company defaults in the payment of any principal or interest on
any Indebtedness of the Company, in any case in an amount in excess of
$1,000,000, which default continues for more than the applicable cure period, if
any, and/or is not waived in writing by the other party thereto;
(f) the Company or any Guarantor (i) is generally not paying, or admits in
writing its inability to pay, its debts as they become due, (ii) files, or
consents by answer or otherwise to the filing against it of, a petition for
relief or reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an assignment
for the benefit of its creditors, (iv) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or
(g) a court or governmental authority of competent jurisdiction enters an
order appointing, without consent by the Company or any of the Guarantors, a
custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, or constituting
an order for relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Company or any of the Guarantors, or any such
petition shall be filed against the Company or any of the Guarantors and such
petition shall not be dismissed within 60 days.
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SECTION 12. LIMITATION ON ISSUANCE OF COMMON STOCK.
Notwithstanding anything to the contrary contained herein or in the
Offering Document, the Company shall not:
(a) (i) Issue any of the Transaction Shares, or (ii) adjust the
number of Warrant Shares in accordance with the terms of the Warrants, if such
issuance or adjustment would, either individually or together with other one or
more other issuances or adjustments, cause the issuance of shares of Common
Stock to exceed the number of shares that the Company could then issue in
compliance with Section 4350(i) of the rules and regulations of Nasdaq (the
"Nasdaq Rules") or any successor rule or regulation. Under Section 4350(i) of
the Nasdaq Rules, a company may not issue shares, and may not issue securities
convertible into shares, where the shares issued could in the aggregate equal
20% or more of the voting power of the shares outstanding, without obtaining
shareholder approval. The foregoing limitation shall only apply until such time
as the Company obtains the requisite approval of its shareholders for the
issuance of the Transaction Shares, as required by Section 4350(i) of the Nasdaq
Rules or any successor rule or regulation. The Company covenants and agrees that
it shall include a proposal for the approval of the issuance of the Transaction
Shares in the Company's proxy statement for its next annual meeting of
shareholders. If, due to the foregoing limitation, the Company cannot adjust the
Warrant Shares as provided in Section 8.3 of the Warrant, then, subject to NASD
approval, the Company agrees that the exercise price thereof shall be reduced to
equal the Issuance Price(s) of the shares of Common Stock that triggered the
adjustment pursuant to Section 8.3 of the Warrant.
(b) Issue any of the Transaction Shares, if such issuance would
violate the securities laws of the jurisdiction in which any Purchaser receiving
such shares is located.
SECTION 13. REMEDIES ON DEFAULT, ETC.
13.1 ACCELERATION.
(a) If an Event of Default with respect to the Company described in
Section 11 has occurred, all the Notes then outstanding may at any time
thereafter at the Holder's option, by notice or notices to the Company, be
declared immediately due and payable.
Upon any Note becoming due and payable under this Section 13.1, such Note
will forthwith mature and the entire unpaid principal amount of such Note, plus
(i) all accrued and unpaid interest thereon shall all be immediately due and
payable, in each and every case without presentment, demand, protest or further
notice, all of which are hereby waived.
13.2 OTHER REMEDIES. If any Default or Event of Default has occurred and
is continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 13.1, the Required Holders at
the time outstanding may proceed to protect and enforce the rights of the
holders by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.
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13.3 RESCISSION. At any time after any Notes have been declared due and
payable pursuant to Section 13.1, the holders of not less than 50% in principal
amount of the Notes, taken individually, then outstanding, by written notice to
the Company, may rescind and annul any such declaration and its consequences if
(a) the Company has paid all overdue interest on the Notes and, all principal if
any, on any Notes that are due and payable and are unpaid other than by reason
of such declaration, (b) all Events of Default and Defaults, other than
non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 18, and (c)
no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to any Notes. No rescission and annulment under this Section
13.3 will extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.
13.4 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC. No course of
dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers or remedies. No right, power or remedy conferred by
this Agreement or by any Note upon any holder thereof shall be exclusive of any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. The Company will pay to
the holder of each Note on demand such further amount as shall be sufficient to
cover all costs and expenses of such holder incurred in any enforcement or
collection under this Section 12, including, without limitation, the reasonable
attorneys' fees, expenses and disbursements for the holders.
SECTION 14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
14.1 REGISTRATION OF NOTES. The Company shall keep at its principal
executive office a register for the registration and registration of transfers
of Notes. The name and address of each holder of one or more Notes, each
transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary.
14.2 TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any Note at the
principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or its attorney duly authorized in writing and
accompanied by the address for notices of each transferee of such Note or part
thereof), the Company shall execute and deliver not more than five Business Days
following surrender of such Note, at the Company's expense (except as provided
below), one or more new Notes (as requested by the holder thereof) in exchange
therefor, in an aggregate principal amount equal to the unpaid principal amount
of the surrendered Note. Each such new Note shall be payable to such Person as
such holder may request and shall be substantially in the form of the Note
originally issued hereunder. Each such new Note shall be dated and bear interest
from the date to which interest shall have been paid on the surrendered Note or
dated the date of the surrendered Note if no interest shall have been paid
thereon. The Company may require payment of a sum sufficient to cover any stamp
tax or governmental charge imposed in respect of any such transfer of Notes.
Notes shall not be transferred in denominations of less than $100,000, provided
that if necessary to enable the registration of transfer by a holder of its
entire holding of Notes, one Note may be in a denomination of less than
$100,000. Any transferee, by its acceptance of a Note registered in its name (or
the name of its nominee), shall be deemed to have made the representation set
forth in Section 6.
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14.3 REPLACEMENT OF NOTES. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note, and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note is, or
is a nominee for, an original Purchaser or another holder of a Note with a
minimum net worth of at least $50,000,000, such Person's own unsecured agreement
of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof, the Company at its own expense shall execute and deliver not more than
five Business Days following satisfaction of such conditions, in lieu thereof, a
new Note, dated and bearing interest from the date to which interest shall have
been paid on such lost, stolen, destroyed or mutilated Note or dated the date of
such lost, stolen, destroyed or mutilated Note if no interest shall have been
paid thereon.
SECTION 15. PAYMENTS ON NOTES.
The Company will pay all sums becoming due on the Notes for principal, and
interest by the method and at the address specified for such purpose for such
Purchaser on Schedule A hereto or by such other method or at such other address
as such Purchaser shall have from time to time specified to the Company in
writing for such purpose, without the presentation or surrender of such Note or
the making of any notation thereon, except that upon written request of the
Company made concurrently with or reasonably promptly after payment or
prepayment in full of any Note, such Purchaser shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 19. Prior to any sale or other disposition of
any Note held by any Purchaser, such Person will, at its election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 14.2.
21
SECTION 16. REGISTRATION RIGHTS.
The Purchasers have entered into a registration rights agreement (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
grant Purchasers certain registration rights with respect to the resale of the
Transaction Shares and the Warrants.
SECTION 17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the related Units, the purchase or
transfer by any Purchaser of any such Units or portion thereof or interest
therein and may be relied upon by any subsequent holder of any such Units,
regardless of any investigation made at any time by or on behalf of any
Purchaser or any other holder of any such Units. This Agreement, the Subsidiary
Guarantee, the Notes, the Warrants, and the Registration Rights Agreement embody
the entire agreement and understanding between the Purchasers and the Company
and supersede all prior agreements and understandings relating to the subject
matter hereof.
SECTION 18. AMENDMENT AND WAIVER.
18.1 REQUIREMENTS.
(a) This Agreement and the Notes may be amended, and the observance
of any term hereof including subsection (i) of Section 1 hereof or of the Notes
may be waived (either retroactively or prospectively), with (and only with) the
written consent of the Company and the holders of Notes holding more than 50% in
aggregate principal amount of the Notes at the time outstanding, except that
unless otherwise provided herein (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, or 6 hereof or the corresponding provision
of any Supplement, or any defined term (as it is used in any such Section or
such corresponding provision of any Supplement), will be effective as to any
holder of Notes unless consented to by such holder of Notes in writing, and (b)
no such amendment or waiver may, without the written consent of all of the
holders of Notes at the time outstanding affected thereby, (i) subject to the
provisions of Section 10 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest on the Notes,
(ii) change the percentage of the principal amount of the Notes the holders of
which are required to consent to any such amendment or waiver, or (iii) amend
any of Sections 7, 10, 11.1, 14 or 16.
18.2 SOLICITATION OF HOLDERS OF NOTES.
(a) SOLICITATION. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof, or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 18 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
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(b) PAYMENT. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes of any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
18.3 BINDING EFFECT, ETC. Any amendment or waiver consented to as provided
in this Section 18 applies equally to all holders of Notes and is binding upon
them and upon each future holder of any Note and upon the Company without regard
to whether such Note has been marked to indicate such amendment or waiver. No
such amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right consequent thereon. No course of dealing between the Company and the
holder of any Note nor any delay in exercising any rights hereunder or under any
Note shall operate as a waiver of any rights of any holder of such Note. As used
herein, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
18.4 NOTES HELD BY COMPANY, ETC. Solely for the purpose of determining
whether the holders of the requisite percentage of the aggregate principal
amount of Notes then outstanding approved or consented to any amendment, waiver
or consent to be given under this Agreement or the Notes, or have directed the
taking of any action provided herein or in the Notes to be taken upon the
direction of the holders of a specified percentage of the aggregate principal
amount of Notes then outstanding, Notes directly or indirectly owned by the
Company or any of its Affiliates shall be deemed not to be outstanding.
SECTION 19. NOTICES.
All notices and communications provided for hereunder shall be in writing
and sent (a) by telefacsimile if the sender on the same day sends a confirming
copy of such notice by a recognized overnight delivery service (charges
prepaid), or (b) by registered or certified mail with return receipt requested
(postage prepaid), or (c) by a recognized overnight delivery service (with
charges prepaid). Any such notice must be sent:
(i) if to a Purchaser, to such Purchaser at the address specified for such
communications in Schedule A to this Agreement, or at such other address as such
Purchaser shall have specified to the Company in writing pursuant to this
Section 19, or
(ii) if to the Company, to the Company at its address set forth at the
beginning hereof to the attention of Chief Financial Officer, with a copy to the
General Counsel, or at such other address as the Company shall have specified to
the holder of each Note in writing.
Notices under this Section 19 will be deemed given only when actually
received.
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SECTION 20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information" means
information delivered to any Purchaser by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by such
Purchaser as being confidential information of the Company or such Subsidiary,
provided that such term does not include information that (a) was publicly known
or otherwise known to such Purchaser prior to the time of such disclosure, (b)
subsequently becomes publicly known through no act or omission by such Purchaser
or any Person acting on such Purchaser's behalf, or (c) otherwise becomes known
to such Purchaser other than through disclosure by the Company or any
Subsidiary. Each Purchaser will maintain the confidentiality of such
Confidential Information in accordance with procedures adopted by such Purchaser
in good faith to protect confidential information of third parties delivered to
such Purchaser, provided that such Purchaser may deliver or disclose
Confidential Information to (w)(i) such Purchaser's directors, trustees,
officers, employees, agents, attorneys and affiliates (to the extent such
disclosure reasonably relates to the administration of the investment
represented by such Purchaser's Notes), (ii) such Purchaser's financial advisors
and other professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this Section 20, or
(iii) any other holder of any Note (x) to effect compliance with any law, Rule,
regulation or order applicable to such Purchaser, (y) in response to any
subpoena or other legal process, provided that, to the extent permitted by law,
each holder will use reasonable efforts to notify the Company of any request to
disclose Confidential Information requested pursuant to any subpoena or other
legal process, provided further that the failure to notify the Company of any
such request shall not result in any liability to such holder, or (z) if an
Event of Default has occurred and is continuing, to the extent such Purchaser
may reasonably determine such delivery and disclosure to be necessary or
appropriate in the enforcement or for the protection of the rights and remedies
under such Purchaser's Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.
SECTION 21. MISCELLANEOUS.
21.1 SUCCESSORS AND ASSIGNS. All covenants and other agreements contained
in this Agreement by or on behalf of any of the parties hereto bind and inure to
the benefit of their respective successors and assigns (including, without
limitation, any subsequent holder of a Note) whether so expressed or not.
21.2 PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the
Notes to the contrary notwithstanding, any payment of principal of or interest
on any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business Day.
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21.3 SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
21.4 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.
21.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. 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.
21.6 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of Florida 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.
21.7 LEGAL RATE OF INTEREST. Regardless of any provision contained in this
Agreement or in any Guaranty, the rate of interest borne by the Notes shall not
exceed the maximum amount of nonusurious interest that may be contracted for,
taken, reserved, charged or received under any applicable law; any interest in
excess of that maximum amount shall be credited on the principal of the Notes
or, if that has been paid, refunded. On any acceleration or required or
permitted prepayment, any such excess shall be canceled automatically as of the
acceleration or prepayment or, if already paid, credited on the principal of the
Notes or, if the principal of the Notes has been paid, refunded. In determining
whether or not the interest paid or payable, under any specific contingency,
exceeds the maximum amount of nonusurious interest, the Company and holders of
the Notes shall, to the maximum extent permitted under applicable law, (a)
characterize any nonprincipal payment as an expense, fee or premium rather than
as interest, (b) exclude voluntary prepayments and the effects thereof, and (c)
spread the total amount of interest throughout the entire contemplated term of
the Notes.
21.8 SUBMISSION TO PROCESS. THE COMPANY AND THE PURCHASERS HEREBY AGREE
THAT ANY LEGAL ACTION OR PROCEEDING AGAINST THE COMPANY WITH RESPECT TO THIS
AGREEMENT, OR THE NOTES SHALL BE BROUGHT IN THE COURTS OF THE STATE OF FLORIDA
OR (TO THE EXTENT THEY HAVE SUBJECT MATTER JURISDICTION) OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF FLORIDA AS THE HOLDERS OF 51% IN PRINCIPAL
AMOUNT OF THE NOTES MAY ELECT, AND, BY EXECUTION AND DELIVERY HEREOF, THE
COMPANY ACCEPTS AND CONSENTS, FOR ITSELF AND IN RESPECT TO ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, TO THE JURISDICTION OF THE AFORESAID COURTS AND
AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE, UNLESS WAIVED BY THE COMPANY
AND THE HOLDERS OF 51% IN PRINCIPAL AMOUNT OF THE NOTES IN WRITING. THE COMPANY
WAIVES (TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT TO STAY OR TO
DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS ON THE BASIS OF
FORUM NON CONVENIENS.
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21.9 WAIVERS. THE COMPANY WAIVES (A) THE RIGHT TO TRIAL BY JURY (WHICH
EACH HOLDER OF NOTES HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY
SECURITY DOCUMENT OR THE NOTES; (B) PRESENTMENT, DEMAND AND PROTEST AND NOTICE
OF PRESENTMENT, PROTEST, DEFAULT, NON-PAYMENT, INTENT TO ACCELERATE,
ACCELERATION, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF
ANY OR ALL DOCUMENTS, INSTRUMENTS, AND GUARANTIES AT ANY TIME HELD BY THE
HOLDERS OF NOTES (OR ANY AGENT THEREFOR) ON WHICH THE COMPANY MAY IN ANY WAY BE
LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER THE HOLDERS OF NOTES MAY DO IN
THIS REGARD; AND (C) NOTICE OF ACCEPTANCE HEREOF. THE COMPANY ACKNOWLEDGES THAT
THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO THE HOLDERS' ENTERING INTO
THIS AGREEMENT AND THAT THE HOLDERS ARE RELYING UPON THE FOREGOING WAIVERS IN
THEIR FUTURE DEALINGS WITH THE COMPANY. THE COMPANY WARRANTS AND REPRESENTS THAT
IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY
AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS WRITTEN
CONSENT TO A TRIAL BY THE COURT.
21.10 EXCULPATION. Each party to this Agreement acknowledges that Xxxxx
Raysman Xxxxxxxxx Xxxxxx & Xxxxxxx, LLP represented X. Xxxxxxxx Securities, LLC
in the transactions contemplated by this Agreement and has not represented
either the Company or any Purchaser in connection with such transaction.
The execution hereof by the Purchasers shall constitute a contract among
the Company and the Purchasers for the uses and purposes hereinabove set forth.
Very truly yours,
21ST CENTURY HOLDING COMPANY
By
--------------------------------------
Xxxxxxx X. Xxxxxxxxxx,
Chief Executive Officer
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Accepted as of the first date written above.
PURCHASER:
By
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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EXHIBIT A
FORM OF NOTE
EXHIBIT B
FORM OF WARRANT
EXHIBIT C
FORM OF SUBSIDIARY GUARANTEE
SCHEDULE A
PURCHASERS
