Langer, Inc., a Delaware corporation with the Purchasers Listed on Exhibit A Hereto Convertible Subordinated Note Purchase Agreement Dated as of December 7, 2006
Xxxxxx,
Inc., a Delaware corporation
with
the
Purchasers Listed on
Exhibit
A
Hereto
Convertible
Subordinated Note Purchase Agreement
Dated
as of
December 7, 2006
TABLE
OF
CONTENTS
Page
|
I.
|
AUTHORIZATION
OF NOTES
|
1
|
|
II.
|
SALE
AND
PURCHASE OF NOTES
|
1
|
|
III.
|
CLOSING
|
1
|
|
3.1
|
Closing
|
1
|
|
3.2
|
Deliveries
|
1
|
|
IV.
|
REPRESENTATIONS
AND WARRANTIES BY THE COMPANY
|
2
|
|
4.1
|
Organization
and Existence, Authority, etc
|
2
|
|
4.2
|
Litigation
|
2
|
|
4.3
|
Charter
Documents
|
2
|
|
4.4
|
Authorized
and Outstanding Capital Stock
|
2
|
|
4.5
|
Broker's
and
Finder's Fees
|
2
|
|
4.6
|
Commission
Filings and Financial Statements
|
2
|
|
4.7
|
Tax
Returns
and Payments
|
3
|
|
4.8
|
Indebtedness
|
3
|
|
4.9
|
Title
to
Properties
|
3
|
|
4.10
|
Compliance
with Other Instruments, Etc
|
4
|
|
4.11
|
Governmental
Consent
|
4
|
|
4.12
|
Use
of
Proceeds
|
4
|
|
4.13
|
Solvency
|
4
|
|
4.14
|
Disclosure
|
4
|
|
V.
|
SUBORDINATION
|
4
|
|
5.1
|
Agreement
to
Be Bound
|
4
|
|
5.2
|
Priority
of
Senior Indebtedness
|
5
|
|
5.3
|
Acceleration
of Notes; Insolvency
|
5
|
|
5.4
|
Subrogation,
Etc
|
6
|
|
5.5
|
Enforcement
|
6
|
|
5.6
|
Obligations
Unimpaired
|
7
|
|
5.7
|
Definition
of
Senior Indebtedness
|
7
|
|
5.8
|
Amendment
|
7
|
|
VI.
|
REPRESENTATIONS
OF THE PURCHASERS
|
7
|
|
6.1
|
Resale
Restrictions.
|
7
|
|
6.2
|
Accreditor
Investor
|
8
|
|
6.3
|
Review
of
Information.
|
8
|
|
6.4
|
Due
Authority
|
9
|
|
VII.
|
CERTAIN
CONSIDERATIONS
|
9
|
|
VIII.
|
CONDITIONS
TO
OBLIGATIONS
|
9
|
|
8.1
|
Accuracy
of
Representations and Warranties
|
9
|
|
8.2
|
Performance;
No Default
|
9
|
|
8.3
|
Officers'
Certificate
|
9
|
|
8.4
|
Proceedings
|
9
|
|
8.5
|
Legal
Investment
|
10
|
|
8.6
|
No
Litigation
|
10
|
Page
|
8.7
|
Sales
to
Other Purchasers
|
10
|
|
8.8
|
Purchase
Permitted by Applicable Laws
|
10
|
|
8.9
|
Compliance
with Securities Laws
|
10
|
|
IX.
|
AFFIRMATIVE
COVENANTS.
|
10
|
|
9.1
|
Financial
Information
|
10
|
|
9.2
|
Office
for
Payment, Exchange and Registration
|
11
|
|
9.3
|
Notices
|
11
|
|
9.4
|
Corporate
Existence, Etc
|
11
|
|
9.5
|
Payment
of
Taxes
|
11
|
|
9.6
|
Maintenance
of Properties; Insurance
|
11
|
|
9.7
|
Compliance
with Laws
|
11
|
|
X.
|
NEGATIVE
COVENANTS.
|
12
|
|
10.1
|
Transactions
with Affiliates
|
12
|
|
10.2
|
Restricted
Indebtedness
|
12
|
|
10.3
|
Guaranties
by
Subsidiaries
|
12
|
|
XI.
|
DEFAULTS.
|
12
|
|
XII.
|
CONVERSION.
|
14
|
|
12.1
|
Conversion
|
14
|
|
12.2
|
Delivery
of
Stock Certificates; Time Conversion Effective; No Adjustment for
Interest
or Dividends
|
14
|
|
12.3
|
Notice
to
Holders of Election
|
15
|
|
12.4
|
Adjustment
of
Conversion Price
|
15
|
|
12.5
|
Company's
Consolidation or Merger
|
17
|
|
12.6
|
Reserve
of
Sufficient Shares
|
18
|
|
12.7
|
Taxes
on
Conversion
|
18
|
|
12.8
|
Cancellation
of Converted Notes
|
18
|
|
12.9
|
Notice
to
Holders of Notes
|
18
|
|
XIII.
|
CALL
OF NOTES
BY THE COMPANY
|
19
|
|
13.1
|
Optional
Conversion or Redemption Upon Call by the Company
|
19
|
|
13.2
|
Notice
of
Call
|
20
|
|
13.3
|
Partial
Call
|
20
|
|
13.4
|
Surrender
of
Notes Upon Call
|
20
|
|
XIV.
|
REGISTRATION
RIGHTS; RESTRICTIONS ON TRANSFER
|
20
|
|
14.1
|
Notification
of Proposed Sale
|
20
|
|
14.2
|
Obligation
to
Register
|
22
|
|
14.3
|
"Piggyback"
and Demand Registration Rights
|
22
|
|
14.4
|
Terms
and
Conditions of Registration
|
23
|
|
14.5
|
Indemnification
|
26
|
|
14.6
|
Contribution
|
27
|
|
14.7
|
Survival
|
28
|
|
XV.
|
REPLACEMENT
OF NOTES
|
28
|
|
XVI.
|
AMENDMENT
AND
WAIVER
|
28
|
|
XVII.
|
HOME
OFFICE
PAYMENT
|
28
|
|
XVIII.
|
NOTICES
|
29
|
|
XIX.
|
ENTIRE
AGREEMENT
|
29
|
|
XX.
|
SUCCESSORS
AND ASSIGNS
|
29
|
Page
|
XXI.
|
HEADINGS
|
29
|
|
XXII.
|
GOVERNING
LAW
|
29
|
|
XXIII.
|
COUNTERPARTS
|
29
|
|
XXIV.
|
SEVERABILITY
|
29
|
|
XXV.
|
DEFINITIONS
|
30
|
Exhibit
A -
Purchasers
Exhibit
B - Form of
Note
XXXXXX,
INC.
000
Xxxxxxx
Xxxx
Xxxx
Xxxx,
X.X. 00000
As
of December 7,
2006
To
the Purchasers
set forth
on
Exhibit
A
to this
Agreement
Dear
Sirs/Madams:
XXXXXX,
INC., a
Delaware corporation (the "Company"), agrees with each Purchaser as
follows:
I. AUTHORIZATION
OF
NOTES.
The Company has authorized the issuance and sale of an aggregate of up to
$28,880,000 principal amount of its 5% Convertible Subordinated Notes due
December 7, 2011 (the "Notes"). The Notes are convertible into shares of the
Company's common stock, par value $.02 per share
(such shares
to be issued upon conversion of the Notes
being
hereinafter referred to herein as the "Shares"), at the Conversion Price defined
in Article XXV of this Agreement. The Notes are to be sold pursuant to this
Agreement to the purchasers listed on Exhibit
A
to this Agreement
(the "Purchasers"). Interest on the Notes is payable semi-annually on the last
day of December and June in each year, commencing on June 30, 2007 (which first
interest payment shall be for the period from and including the
Closing Date
specified in Article III
through June
30, 2007), at the interest rate specified in the form of Note attached hereto
as
Exhibit "B".
II. SALE
AND PURCHASE
OF NOTES.
Subject to the
terms and conditions hereof, the Company will sell to each Purchaser, and each
Purchaser will purchase from the Company, on the Closing Date specified in
Article III, a Note or Notes in the aggregate principal amount set forth
opposite such Purchaser's name on Exhibit
A
hereto, at a
purchase price of 100% of such principal amount.
III. CLOSING.
3.1 Closing.
The closing (the
"Closing") of the purchase and sale of the Notes will take place at the offices
of Xxxx Xxxxxxx, P.C., 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000,
at 10:00 a.m., New York City time, on
or about
December 7, 2006. Such time and date of the Closing is herein called the
"Closing Date."
3.2 Deliveries.
On the Closing
Date, in the case of Purchasers that are present at the Closing, or within
one
(1)
Business Day after the Closing, in the case of all other Purchasers, the Company
shall deliver to each Purchaser a Note
or Notes,
dated the Closing Date, in the aggregate principal amount set forth opposite
such Purchaser's name on Exhibit
A
hereto, each such
Note to be registered in the name of the Purchaser or its nominee, against
delivery by the Purchaser to the Company of a certified or official bank
check(s) or wire transfer(s) in an aggregate amount equal to the aggregate
purchase price for such Notes, payable to the order of the Company in
immediately available funds.
IV. REPRESENTATIONS
AND
WARRANTIES BY THE COMPANY.
The Company
represents and warrants that:
4.1 Organization
and
Existence, Authority, etc.
The Company is a
corporation duly organized and validly existing and in good standing under
the
laws of the State of Delaware, and has all requisite corporate power and
authority to carry on its business as now conducted and proposed to be
conducted; the Company has all requisite
corporate
power and authority to enter into this Agreement, to issue the Notes
as
contemplated herein and to carry out the provisions and conditions of this
Agreement and of the Notes, including the issuance of the Shares in accordance
with the terms of this Agreement and the Notes. Except as set forth on Schedule
4.1, the Company has no Subsidiaries as of the date hereof. This Agreement
and
the Notes have been duly executed and delivered by, and constitute the valid
and
binding obligations of, the Company, enforceable in accordance with their
respective terms, subject to the effect of any applicable bankruptcy,
moratorium, insolvency, reorganization or other similar law affecting the
enforceability of creditors' rights generally and to the effect of general
principles of equity which may limit the availability of remedies
(whether in a
proceeding at law or in equity). The Company is duly qualified and is authorized
to do business and is in good standing as a foreign corporation in each
jurisdiction in which the conduct of its business or ownership of its properties
would so require, except where the failure to be so qualified would not have
a
material adverse effect on its business and financial condition, taken as a
whole.
4.2 Litigation.
Except as
disclosed in the Company Commission Filings (as hereinafter defined), to the
knowledge of the Company, there
is no action,
suit or proceeding pending, or threatened, against the Company before any court,
administrative agency or arbitrator which could reasonably be expected to result
in any material adverse change in the business, properties, or
condition
(financial or otherwise) of the Company, taken as a whole, or which challenges
the validity of any action taken or to be taken pursuant to or in connection
with this Agreement or the Notes.
4.3 Charter
Documents.
Neither the
execution nor the delivery of this Agreement and the Notes, nor the consummation
of the transactions contemplated hereby and thereby, nor compliance with the
terms and provisions hereof and thereof, will conflict with, or result in a
breach of or creation of a lien under, the terms, conditions
or provisions
of, or constitute a default under, the charter or by-laws of the Company, as
amended, copies of which have been provided to the Purchasers.
4.4 Authorized
and
Outstanding Capital Stock.
The Company has
authorized 50,000,000 shares of Common Stock, par value $.02 per share (the
"Common Stock"), of which 10,146,673 shares are issued and outstanding as of
the
date of this Agreement. All of such outstanding shares of Common Stock have
been
validly issued and are fully paid and non-assessable.
The
Company has authorized (i) the issuance and sale to the Purchasers
of an aggregate
of up to $35,000,000 principal amount of the Notes, and (ii) the issuance upon
conversion of the Notes of the Shares into which the Notes are convertible
in
accordance with Article XII or XIII, as applicable, of this Agreement. The
Shares, when issued in accordance with the terms of this Agreement, and the
Notes will be validly issued, fully paid and non-assessable.
4.5 Broker's
and
Finder's Fees.
The Company will
pay all broker's and finder's fees incurred by the Company in connection with
the sale of the Notes.
4.6 Commission
Filings and Financial Statements.
The Company has
heretofore made available to the Purchasers true and complete copies of all
reports, registration statements,
2
definitive
proxy
statements and other documents (in each case together with all amendments and
supplements
thereto)
filed by the Company with the Commission since January
1, 2006
(such reports, registration statements, definitive proxy statements and other
documents, together with any amendments and supplements thereto, are sometimes
collectively referred to as the "Company Commission Filings").
The
Company Commission Filings constitute all of the documents (other than
preliminary materials) that the Company was required to file with the Commission
since such date. As of their respective dates, each of the Company Commission
Filings complied in all material respects with the applicable requirements
of
the Securities Act and the Exchange Act, as applicable, and the rules and
regulations under each such Act, and none of the Company Commission Filings
contained as of such date any untrue statement of a material fact or omitted
to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. When filed with the Commission the financial statements
(other
than those financial statements which were subsequently amended or restated)
included in the Company Commission Filings complied as to form in all material
respects with the applicable rules and regulations of the Commission and were
prepared
in
accordance with generally accepted accounting principles (as in effect from
time
to time) applied on a consistent basis (except as may be indicated therein
or in
the notes or schedules thereto), and such financial statements fairly present
in
accordance with generally accepted accounting principles in all material
respects the financial position of the Company as at the dates thereof and
the
results of its operations and its cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal,
recurring year-end audit adjustments and the absence of footnotes. Since
January
1, 2006,
except as disclosed in (i) the Company Commission Filings filed with the
Commission prior to the date hereof and (ii) the Private Placement
Memorandum with respect to the Twincraft Acquisition, the Company has not
incurred any liability or obligation of any kind outside of the ordinary course
of business, and no other event has occurred which, in any case or in the
aggregate, would have a material adverse effect on the business, assets, results
of operations or financial condition of the Company.
4.7 Tax
Returns and
Payments.
The Company has
filed all tax returns required by law to be filed by it and has paid all
material
taxes, assessments
and other governmental charges levied upon the Company and any of its
properties, assets, income or franchises which are due and payable, other than
those presently payable without penalty or interest or those that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which adequate reserves have been established
on
the books of the Company in accordance with generally accepted accounting
principles. The charges, accruals and reserves on the books of the Company
in
respect of Federal, state and foreign income taxes for all fiscal periods are
adequate in the opinion of the Company, and the Company has not been notified
of
any material unpaid assessment for additional Federal, state or foreign income
taxes for any period or any basis for any such assessment for which adequate
provision has not been made in its accounts in accordance with generally
accepted accounting principles.
4.8 Indebtedness.
Except for the
Senior Secured Credit Facility (as defined in Article XXV), the Company
Commission Filings correctly describe all material secured and unsecured
Indebtedness of the Company outstanding, or for which the Company has
commitments, on the date of this Agreement, and identify in all material
respects the collateral
securing
any such secured Indebtedness. The Company is not in material default with
respect to the payment of any material Indebtedness or with respect to any
instrument or agreement relating thereto.
4.9 Title
to
Properties.
The Company has
good and sufficient title to its material properties and assets, including
the
properties and assets reflected in the financial statements as of and for the
quarter ended September 30, 2006 (except properties and assets disposed of
since
3
such
date in the
ordinary course of business and properties and assets held under Capital
Leases). The Company enjoys peaceful and undisturbed possession under all
material leases necessary in any material
respect for the
operation of its material properties and assets, and all such leases are valid
and subsisting and are in full force and effect.
4.10 Compliance
with
Other Instruments, Etc.
The Company is not
in violation of any term of its certificate or articles of incorporation or
by-laws, and the Company is not in material
violation of
any material term of any material agreement or instrument to which it is a
party
or by which it is bound or any material term of any applicable law, ordinance,
rule or regulation of any governmental authority or any material term of any
applicable order, judgment or decree of any court, arbitrator or governmental
authority, the consequences of which violation could
reasonably be
expected to have a materially adverse effect on the business, condition
(financial or other), operations, assets
or properties of
the Company; the execution, delivery and performance of this Agreement and
the
Notes will not result in any material violation of or be in material conflict
with or constitute a material default under any such term; and there is no
such
term which materially adversely affects the business, condition (financial
or
other), operations, assets, or properties of the Company, taken as a
whole.
4.11 Governmental
Consent.
No material
consent, approval or authorization of, or declaration or filing
with, any
governmental authority on the part of the Company or any of its Subsidiaries
is
required for the valid execution and delivery of this Agreement or the valid
offer, issue, sale and delivery of the Notes pursuant to this Agreement, except
where the failure to obtain such consent or make such filing would not have
a
material adverse effect on the business, operations or assets of the Company,
and except for appropriate filings (i) with the Commission and the NASDAQ of
an
SEC
Form D, (ii) with the NASDAQ of an additional listing application for the
Shares, and (iii) with such state securities commissions in respect of "blue
sky" laws as may be appropriate.
4.12 Use
of
Proceeds.
The Company will
apply the net proceeds of the sale of the Notes principally for funding the
Company's acquisition program, for working capital, and for general corporate
purposes, including capital expenditures.
4.13 Solvency.
On the Closing
date and after giving effect to the application of the proceeds of the Notes
as
specified in Section 4.12, the Company will be Solvent.
4.14 Disclosure.
To the best of
the Company's knowledge, there is no fact (other than matters of a general
economic or political nature which does not affect the Company uniquely) known
to the Company
which materially
adversely affects the business, condition (financial or other), operations,
assets or properties of the Company which has not been set forth either in
the
Company Commission Filings,
the Private
Placement Memorandum dated as of December 5, 2006, or in this Agreement or
in
the other documents, certificates and instruments delivered to the Purchasers
by
or on behalf of the Company specifically for use in connection with the
transactions contemplated by this Agreement.
V. SUBORDINATION.
5.1 Agreement
to Be
Bound.
(a) The Company
covenants and agrees, and each holder of Notes by such holder's acceptance
thereof, likewise covenants and agrees, that the Notes shall be issued subject
to the provisions contained in this Article V; and each person holding any
Notes, whether upon original issue or upon transfer or assignment thereof,
accepts and agrees to be bound by such provisions.
4
(b) All
Notes shall, to
the extent and in the manner hereinafter set forth, be subordinated and subject
in right of payment to the prior payment in full of all Senior Indebtedness
(as
defined in Section 5.7).
5.2 Priority
of
Senior Indebtedness.
(a) No payment on
account of principal or interest on the Notes shall be made, nor shall any
assets be applied to the purchase or other acquisition or retirement of the
Notes, if, at the time of such payment or application or immediately after
giving effect thereto, there shall exist a default in the
payment of any
amount due on any Senior Indebtedness. Within ten (10) Business Days after
knowledge of any such default referred to in this Section 5.2(a), the Company
shall furnish a copy thereof to each holder of the Notes,
in the
manner and at the address specified pursuant to Article XVIII
hereof.
(b) If
there shall have
occurred an event of default (other than a default in the payment of any amount
due) with respect to any issue of Senior Indebtedness, as defined herein, or
in
the instrument under which the same has been issued, permitting the holders
thereof, after notice or lapse of time, or both, to accelerate the maturity
thereof, then, unless and until such event of default shall have been cured
or
waived or shall have ceased to exist, no payment on account of principal or
interest on the Notes shall be made, nor shall any assets be applied to the
conversion, redemption or other acquisition or retirement of the Notes until
the
earlier to occur of (i) the date on which the Senior Indebtedness to which
such
event of default related is discharged in accordance with its terms, or (ii)
the
date such event of default is waived by the holders of such Senior Indebtedness
or otherwise cured. Within ten (10) Business Days after knowledge of any such
default referred to in this Section 5.2(b), the Company shall furnish a copy
thereof to each holder of the Notes, in the manner and at the address specified
pursuant to Article XVIII hereof.
(c) Upon
the occurrence
and during the continuance of any Event of Default under this Agreement or
the
Notes, or upon the occurrence of an event described in Sections 5.2(a) or (b)
which gives rise to the non-payment of principal or interest due on the Notes,
and notwithstanding any other provision contained herein or in the Notes to
the
contrary, each Purchaser hereby agrees, for the benefit of the holders of Senior
Indebtedness, not to ask for, demand, xxx for, take or receive any amount owing
under the Notes or exercise any remedy (whether pursuant hereto, including,
without limitation, acceleration of the Notes, at law, in equity or otherwise)
with respect thereto until the earliest of (i) the date on which all Senior
Indebtedness is accelerated, (ii) if applicable, the date on which the Senior
Indebtedness to which such event of default related is discharged in accordance
with its terms or such event of default is waived by the holders of such Senior
Indebtedness or otherwise cured or (iii) any voluntary or involuntary petition
in bankruptcy filed by or against the Company. Within ten (10) Business Days
after knowledge of any Event of Default under this Agreement or the Notes,
the
Company shall furnish a copy thereof to the holders of Senior Indebtedness
in
the manner and at the addresses specified in the documents and/or agreements
evidencing the applicable Senior Indebtedness.
5.3 Acceleration
of
Notes; Insolvency.
(a) Upon (i) any
acceleration of the principal amount due on the Notes or Senior Indebtedness
or
(ii) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
dissolution or winding up or total or partial liquidation or reorganization
of the
Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full, or payment thereof duly
provided for, to the full satisfaction of the holders of Senior Indebtedness
before the holders of the Notes
shall be
entitled to receive or retain any assets so paid or distributed in respect
thereof; and upon any such dissolution or winding up or liquidation or
reorganization, any payment
5
or
distribution
of assets
of the Company of any kind or character, whether in cash, property or
securities, to which the holders of the Notes
would be
entitled, except for these provisions, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution,
or by the
holders of the Notes
if received
by them or it, as the case may be, directly to the holders of Senior
Indebtedness, to the extent necessary to pay all such Senior Indebtedness in
full, after giving effect to any concurrent payment or distribution
to or for
the holders of Senior Indebtedness before any payment or distribution is made
to
the holders of the Notes,
except that
the holders of Senior Indebtedness of the type described in clause (i) of the
definition of Senior Indebtedness shall be
entitled to
receive payment in full of such Senior Indebtedness (or provisions satisfactory
to the holders of such Senior Indebtedness shall be made for such payment)
before the holders of other types of Senior Indebtedness shall be entitled
to
receive payment on such other Senior Indebtedness.
(b) In
the event that,
notwithstanding the provision of the preceding paragraph or of Section 5.2
hereof, any payment or distribution of assets of the Company prohibited by
the
preceding paragraph or by Section 5.2 hereof shall be received by the holders
of
the Notes before all Senior Indebtedness is paid in full, or provision made
for
such payment, to the full satisfaction of the holders of Senior Indebtedness,
in
accordance with its terms, such payment or distribution shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all Senior Indebtedness in
full
in accordance with its terms, after giving effect to any concurrent payment
or
distribution to or for the holders of such Senior Indebtedness. All payments
applied to Senior Indebtedness pursuant to this paragraph of Section 5.3 shall
be allocated among the holders of Senior Indebtedness in accordance with the
provisions of the preceding paragraph of this Section 5.3.
5.4 Subrogation,
Etc.
Upon payment in
full of all Senior Indebtedness, the holders of Notes shall be subrogated to
the
rights of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company pro rata
in proportion to
the respective amounts then owing to the holders of Notes; and for purposes
of
such subrogation, no payments or distributions to the holders of Senior
Indebtedness of
any cash,
property or securities to which the holders of Notes
would be
entitled except for the provisions of this Article V, and no payment over
pursuant to such provisions to the holders of Senior Indebtedness, shall, as
between the Company and its creditors
(other than
the holders of Notes
and the
holders of the Senior Indebtedness), be deemed to be a payment by the Company
to
or on account of Senior Indebtedness, it being understood that the provisions
of
this Article V are and are intended solely for the purpose of defining the
relative rights of the holders of Notes on the one hand and the holders of
Senior Indebtedness on the other hand. The holders of Senior Indebtedness may
amend, modify and otherwise deal with Senior Indebtedness without any
notice
to or approval of any holder of Indebtedness ranking junior to Senior
Indebtedness.
5.5 Enforcement.
(a) The foregoing
subordination provisions shall be for the benefit of the holders of Senior
Indebtedness and may be enforced directly by such holders
against the
holders of the Notes.
Each holder
of Notes by his (or its) acceptance thereof shall be deemed to acknowledge
and
agree that the subordination provisions of this Article V are, and are intended
to be, an inducement and a consideration to each holder of any Senior
Indebtedness, whether such Senior Indebtedness was created or acquired before
or
after the issuance of the Notes, to acquire and continue to hold, or to continue
to hold, such Senior Indebtedness and each holder of Senior
6
Indebtedness
shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior
Indebtedness.
(b) Upon
any payment or
distribution of assets of the Company, the holders of the Notes shall be
entitled to rely upon a certificate of the receiver, trustee in bankruptcy,
liquidation trustee, Company, agent or other person making such payment or
distribution, delivered to the holders of the Notes, for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertaining thereto or to the provisions of this
Article V.
5.6 Obligations
Unimpaired.
Nothing contained
in this Article V, or elsewhere in this Agreement, or in the Notes, is intended
to or shall impair as between the Company, its creditors other than the holders
of Senior
Indebtedness, and
the holders of the Notes,
the
obligation of the Company, which shall be absolute and unconditional, to pay
the
holders of the Notes the principal of and interest on the Notes as and when
the
same shall become due and payable in accordance with the terms thereof, or
affect the relative rights of the holders of the Notes and other creditors
of
the Company other than the holders of Senior Indebtedness, nor shall anything
herein or therein prevent the holder of any Notes from exercising all remedies
otherwise permitted by applicable law upon default under this Agreement, subject
to the rights, if any, under this Article V of the holders of Senior
Indebtedness in respect to cash, property or securities of the Company received
upon the exercise
of any such
remedy. Nothing contained in this Article V
or elsewhere in
this Agreement, or in any of the Notes, shall prevent the Company from making
payment of the principal of or interest on the Notes at any time except under
the conditions described in Section 5.2 or 5.3 or during the pendency of any
dissolution, winding up, liquidation or reorganization of the
Company.
5.7 Definition
of
Senior Indebtedness.
The term "Senior
Indebtedness" shall mean the principal and interest on (i) all Indebtedness
of
the Company and its Subsidiaries for money borrowed from time to time, including
that owing to banks or other financial institutions, an agency or
agencies
of the federal
government or other institutions engaged in the business of lending money,
(ii)
all Capital Leases of the Company and its Subsidiaries, (iii) obligations of
the
Company for the reimbursement of any obligor on any Letter of Credit, banker's
acceptance or similar credit transaction, and (iv) any deferrals, renewals
and
extensions of any indebtedness described in clauses (i) through (iii) above,
unless under the express provisions of the instrument creating or evidencing
any
such indebtedness, or pursuant to which the same is outstanding, such
indebtedness is not superior in right of payment to the Notes;
provided,
however,
that Senior
Indebtedness shall not include Indebtedness owed or owing to any Subsidiary
or
any officer, director or employee of the Company or any Subsidiary. For purposes
hereof, the Senior Indebtedness includes any and all Indebtedness under the
Senior Secured Credit Facility, including without limitation Indebtedness
arising under letters of credit.
5.8 Amendment.
Subject to
Article XVI, it is understood and agreed that the terms of this Article V may
be
subject to change in accordance with the terms that a senior lender that
provides Senior Indebtedness to the Company may request.
VI. REPRESENTATIONS
OF
THE PURCHASERS.
6.1 Resale
Restrictions.
Each Purchaser
hereby represents that it is capable of evaluating the risk of its investment
in
the Notes and is able to bear the economic risk of such investment, that it
is
purchasing the Notes for its own account (or as trustee for one or more trust
or
pension funds) and that in each such case the Notes are being purchased by
such
Purchaser (or
7
such
funds) for
investment and not with a view to any resale or distribution thereof in
violation of securities laws or of the Shares issuable upon conversion thereof.
If any Purchaser should in the future decide to dispose of
the Notes
or the Shares
(which it does not now contemplate), it is understood that it may do so only
in
complete compliance with the Securities Act and any applicable state Blue Sky
or
securities laws. If Purchaser is purchasing the Notes as trustee for one or
more
trust or pension funds, it represents that it is acting as sole trustee and
has
sole investment discretion and that the determination and decision on its behalf
to purchase the
Notes
for all such
funds is being made by the same individual or group of individuals who
customarily approves such investments.
6.2 Accredited
Investor.
Each Purchaser
hereby represents that it is an "accredited investor" within the meaning of
Regulation D of the General Rules and Regulations promulgated under the
Securities
Act
("Regulation D") and hereby agrees to provide the Company and its counsel with
such information (including, but not limited to, a completed and signed
Confidential Purchaser Questionnaire in the form of Exhibit
"C"
attached hereto)
as is reasonably necessary to enable the Company to file a Form D with the
Commission with respect to the transactions contemplated hereby. In furtherance
of the foregoing, each Purchaser acknowledges
that a purchase
of the Notes
is only
available to a Purchaser who is an "accredited investor." In connection
therewith, each Purchaser represents and warrants to the Company that it
qualifies as an "accredited investor" within the meaning of
Regulation
D, since
it
meets one of the following standards for determination of "accredited investor"
status of Regulation D set forth below:
|
(a)
|
Any
broker or
dealer registered pursuant to Section 15 of the Exchange
Act;
|
|
(b)
|
Any
natural
person whose individual net worth, or joint net worth with that person's
spouse, at the time of his purchase ex-ceeds
$1,000,000;
|
|
(c)
|
Any
natural
person who had an individual income in excess of $200,000 in each
of the
two most recent years or joint in-come with that person's spouse
in excess
of $300,000 in each of those years and has a reasonable expectation
of
reaching the same income level in the current
year;
|
|
(d)
|
Any
trust,
with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the securities offered, whose purchase is directed
by
a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation
D;
|
|
(e)
|
Any
organization described in Section 501(c)(3) of the Internal Revenue
Code
of 1986, as amended, corporation, Massa-chusetts or similar business
trust, or partnership, not formed for the specific purpose of acquiring
the securities offered, with total assets in excess of $5,000,000;
or
|
|
(f)
|
Any
entity in
which all of the equity owners are "accredited
investors".
|
6.3 Review
of
Information.
Each Purchaser
hereby represents that it (i) has received and carefully reviewed (A) the
Company Commission Filings and (B) the Private Placement Memorandum, and
(ii) has had the opportunity to ask questions and receive answers from
the
8
Company
concerning
the Company Commission Filings, the Private Placement Memorandum, and the terms
and conditions of the offering of the Notes, and to obtain any documents
relating to the Company which are publicly available and any additional
information or documents relating to the Company which the Company possesses
or
can acquire without
unreasonable
effort or expense.
6.4 Due
Authority.
Each Purchaser
hereby represents that the execution, delivery and performance by it of this
Agreement and the purchase by it of the Notes (i) has been duly authorized
by
all requisite action on the part of such Purchaser, (ii) does not violate any
charter, bylaws, partnership agreement, trust instrument or other organizational
document applicable to such Purchaser, and (iii) does not
violate any
material term of any law, rule, regulation, court order, judgment or contractual
or other obligation applicable to such Purchaser, the consequences of which
violation might have a materially adverse effect on the business, condition
(financial or other), operations, assets or properties of such
Purchaser.
VII. CERTAIN
CONSIDERATIONS.
The Purchasers
acknowledge that they are aware of the risks inherent in an investment in the
Company and specifically the risks of an investment in the Notes, and that
they
are capable of bearing a complete loss of such investment. In connection with
and in furtherance of the foregoing, each Purchaser further acknowledges that
it
has received and carefully reviewed the Private Placement Memorandum (including
the Risk Factors contained therein) relating to the Notes, and that it is aware
that (i) the Company currently contemplates growth through an acquisition
strategy, and that there can be no assurance that such acquisition strategy
will
be successfully implemented, (ii) the Company will incur costs in
connection
with pursuing
such acquisition strategy, whether or not any such acquisitions are completed,
(iii) dilution may result in the event that acquisitions are completed by
issuing stock in the Company as consideration, in whole or in part, for such
acquisitions, and (iv) there can be no assurance of the future viability or
profitability of the Company, nor can there be any assurance relating to the
current or future price
of the Company's
Common Stock.
VIII. CONDITIONS
TO
OBLIGATIONS.
The Purchasers'
obligation to purchase the Notes hereunder is subject to satisfaction of the
following conditions at the Closing:
8.1 Accuracy
of
Representations and Warranties.
The
representations and warranties of the Company herein or in any certificate
or
document delivered pursuant hereto shall be true and
correct on and
as of the Closing Date with the same effect as though made on and as of the
Closing Date.
8.2 Performance;
No
Default.
The Company shall
have performed and complied, in each case in all material respects, with all
material agreements and conditions contained in this Agreement required to
be
performed or complied with by it prior to or at the Closing and at the
time
of the Closing, no Event of Default shall have occurred and be
continuing.
8.3 Officers'
Certificate.
The Purchasers
shall have received a certificate dated the Closing Date and signed by the
President, a Vice President or Chairman or Vice Chairman of the Company and
by
the Secretary, the Treasurer, an Assistant Secretary or
an Assistant
Treasurer of the Company, to the effect that the conditions of Sections
8.1
and 8.2 hereof have been satisfied.
8.4 Proceedings.
All corporate and
other proceedings in connection with the transactions contemplated by this
Agreement and all documents incident thereto shall be in form and substance
reasonably
satisfactory to you, and your counsel shall have received all such originals
or
certified or other copies of such documents as you and they may reasonably
request.
9
8.5 Legal
Investment.
On the Closing
Date, there shall have been no change in applicable law or material facts in
respect of the Company or any Purchaser, making the purchase of the Notes no
longer a legal investment for any Purchaser.
8.6
No
Litigation.
No action, suit
or proceeding before any court or any governmental or regulatory authority
shall
have been commenced and still be pending, and no investigation by any
governmental or regulatory authority
shall have been
commenced and still be pending, against the Company seeking to restrain, prevent
or change the transactions contemplated hereby or questioning the validity
or
legality of any of such transactions.
8.7 Sales
to Other
Purchasers.
The Company shall
have concurrently sold to the other Purchasers the Notes to be purchased by
each
of them at the Closing and shall have received payment in full therefor and
shall have delivered or caused to be delivered to each of the other Purchasers
such Notes in accordance with the terms hereof.
8.8 Purchase
Permitted by Applicable Laws.
The offering,
issuance, purchase and sale of, and payment for, the Notes to be purchased
by
the Purchasers on the Closing date on the terms and conditions herein provided
(including the use of the proceeds of such Notes by the Company) shall not
violate any law or governmental regulation applicable to the
Purchasers.
8.9 Compliance
with
Securities Laws.
The offering and
sale of the Notes at or prior to the Closing under this Agreement shall have
complied in all material respects with all applicable requirements of federal
and state securities
laws.
IX. AFFIRMATIVE
COVENANTS.
9.1 Financial
Information.
The Company and
each Subsidiary will maintain its books and records in accordance with generally
accepted accounting principles. So long as any of the Notes shall remain
outstanding, the Company will deliver to each holder of the Notes:
(a) as
soon as
practicable, and in any event within 105 days after the close of each fiscal
year of the Company, (i) a consolidated balance sheet of the Company and its
Subsidiaries as of the
end of such
fiscal year-end, and (ii) consolidated statements of income, cash flow and
common stock and other stockholders' equity of the Company and its Subsidiaries
for such fiscal year, in each case setting forth in comparative form the
corresponding figures for the preceding fiscal year and to be in reasonable
detail and certified without material exception by BDO
Xxxxxxx LLP or
other nationally recognized independent public accountants selected by the
Company; provided,
however,
that the timely
filing of the Annual Report on Form 10-K of the Company for such fiscal year
with the Commission (together with copies of the financial statements required
to be included therein) shall be deemed to satisfy the requirements of this
clause (a);
(b) as
soon as
practicable, and in any event within 50 days after the close of each of the
first three fiscal quarters of the Company during such fiscal year, (i) a
consolidated balance sheet of the Company and its Subsidiaries
as of the
end of such fiscal quarter, and (ii) consolidated statements of income, cash
flow and common stock and other stockholders' equity of the Company and its
Subsidiaries for the portion of the fiscal year ended with the end of such
quarter, in each case setting forth in comparative form the corresponding
figures for the comparable period of the preceding fiscal year; provided,
10
however,
that the timely
filing of the Quarterly Report on Form 10-Q of the Company for such quarterly
period timely with the Commission shall be deemed to satisfy the requirements
of this
clause (b);
(c) as
soon as
practicable, copies of all financial statements, proxy materials or reports
sent
to the Company's stockholders and of all final registration statements filed
with the Commission pursuant to the Securities Act or the Exchange Act;
and
(d) with
reasonable
promptness, such other information and data with respect to the Company or
any
of its Subsidiaries as from time to time may be reasonably
requested.
9.2 Office
for
Payment, Exchange and Registration.
So long as any of
the Notes are outstanding, the Company will maintain an office or agency in
the
United States where the Notes may be presented for payment, conversion, exchange
or registration of transfer as provided in this Agreement. Such office or agency
initially
shall be
the office of the Company set forth in Article
XVIII
hereof, which place may thereafter from time to time be changed by notice to
the
holders of all Notes then outstanding.
9.3 Notices.
The Company will
give notice to all holders of Notes within five Business Days after it learns
of
the existence of any Event of Default or any event which, with the giving of
notice or the lapse of time or both, would become an Event of Default,
describing the same and the period of existence thereof, and what
action the
Company has taken, is taking or proposes to take with respect
thereto.
9.4 Corporate
Existence, Etc.
The Company will
at all times preserve and keep in full force and effect its corporate existence,
and rights and franchises deemed material
to its business,
and those of each of its material Subsidiaries, except
that the
corporate existence of any Subsidiary of the Company may be terminated if,
in
the good faith judgment of the Board
of Directors,
such termination is in the best interest of the Company.
9.5 Payment
of
Taxes.
The Company will,
and will cause each of its Subsidiaries to, pay all taxes, assessments and
other
governmental charges imposed upon it or any of its properties or assets
or in respect
of any of its franchises, business, income or profits before any penalty or
interest accrues thereon, provided
that no such tax,
assessment, charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly
initiated and
diligently conducted and if such reserve or other appropriate provision, if
any,
as shall be required by generally accepted accounting principles shall have
been
made therefor.
9.6 Maintenance
of
Properties; Insurance.
The Company will
maintain or cause to be maintained in reasonably good repair, working order
and
condition, normal wear and tear excepted, all material properties used in the
business of the Company and its
Subsidiaries.
The Company will maintain or cause to be maintained, with financially sound
and
reputable insurers, insurance with respect to its properties and business and
the properties and business of its Subsidiaries against loss or damage of the
kinds customarily insured against by corporations of established reputation
engaged in the same or similar business and similarly situated, of such types
and in such amounts as are customarily carried under similar circumstances
by
such other corporations.
11
9.7 Compliance
with
Laws.
The Company will,
and will cause each Subsidiary to, comply in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities except where (i) noncompliance could not reasonably
be
expected to have a material adverse effect on the business, operations or
condition (financial or otherwise) of the Company and its Subsidiaries, taken
as
a whole, or (ii) the necessity of compliance therewith is contested in good
faith by appropriate proceedings.
X. NEGATIVE
COVENANTS. The
Company
covenants and agrees as follows:
10.1 Transactions
with Affiliates.
The Company will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
engage in any transaction, including, without limitation, the purchase, sale
or
exchange of assets or the rendering of any service,
with any Affiliate
of the Company, except in the ordinary course of and pursuant to the reasonable
requirements of the Company's or such Subsidiary's business and upon fair and
reasonable terms that are no less favorable to the Company or such Subsidiary,
as the case may be, than those which might be obtained in an arm's length
transaction at the time from persons which are not Affiliates, provided
that the foregoing
restrictions shall not apply to any transaction between the Company and a
wholly-owned Subsidiary of the Company or between one wholly-owned Subsidiary
of
the Company and another wholly-owned Subsidiary
of the
Company.
10.2 Restricted
Indebtedness.
The Company will
not, directly or indirectly, incur any Indebtedness the proceeds of which will
be used to pay dividends upon shares of the Company's Common Stock or any other
capital stock of the Company
that may from
time to time be outstanding.
10.3 Guaranties
by
Subsidiaries.
Other than in the
ordinary course of business or to the holders of Senior Indebtedness, or unless
the holders of a majority in principal amount of the Notes shall approve, the
Company shall cause its Subsidiaries not to guaranty the Indebtedness of the
Company or of any other party.
XI. DEFAULTS.
If
any
of the following events (herein called an "Event of Default") shall occur and
be
continuing:
(a) If
the Company
shall default in the payment (whether or not such payment is prohibited under
Article V hereof) of (i) any part of the principal on any Note, when the same
shall become due and payable, whether at maturity or by acceleration or
otherwise, or (ii) the interest on any Note, when the same shall become due
and
payable, and such default in the payment of interest shall have continued for
five (5) days;
(b) If
the Company
shall default in the performance of any agreement or covenant contained in
this
Agreement or the Notes and such default shall continue for thirty (30) days
after notice thereof from any holder of a Note; or
(c) If
any
representation or warranty by the Company herein or any certificate delivered
by
the Company pursuant hereto shall prove to have been incorrect in any material
respect when made; or
(d) If
(i) the Company
shall fail to make any payment in respect of any Indebtedness when due or within
any applicable grace period; or (ii) any other event of
12
default,
as defined
in any
material indenture or material instrument evidencing or under which there is
at
the time outstanding any Indebtedness of the Company, shall occur which (1)
results in the acceleration of the maturity of such Indebtedness or (2) enables
(or, with the giving of notice, would enable) the holder of such Indebtedness
or
any person acting on such holder's behalf to accelerate the maturity thereof
if,
in the case of subclause (2)
hereof, such
event or condition has been in existence for 180 days without being cured or
waived; provided,
that,
the aggregate
principal amount of the Indebtedness referred to in clause (i) or (ii)
(together with any other defaulted Indebtedness) exceeds $5,000,000; or
(e) If
a final judgment
which, either alone or together with other outstanding final judgments against
the Company and its Subsidiaries, exceeds an aggregate of $5,000,000 shall
be
rendered against the Company or any Subsidiary and such judgment shall have
continued undischarged or unstayed for sixty (60) days after entry thereof;
or
(f) If
the Company or
any Subsidiary shall make an assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts; or if the Company or any
Subsidiary shall suffer the appointment of a receiver or trustee for it or
substantially all of its assets and, if appointed without its consent, not
to be
discharged or stayed within sixty (60) days; or if the Company or any Subsidiary
shall suffer proceedings under any law relating to bankruptcy, insolvency or
the
reorganization or relief of debtors to be instituted by or against it, and,
if
contested by it, not to be dismissed or stayed within sixty (60) days; or if
the
Company or any Subsidiary shall fail generally to pay its debts as they become
due; or if the Company or any Subsidiary shall suffer any writ of attachment
or
execution or any similar process to be issued or levied against it or any
significant part of its property with respect to claims in excess of $5,000,000,
which is not released, stayed, bonded or vacated within sixty (60) days after
its issue or levy; or if the Company or any Subsidiary takes corporate action
in
furtherance of any of the aforesaid purposes or conditions; or
(g) If
a Change in
Control shall occur;
then
and in each
such event the holders of forty percent (40%) or more in aggregate principal
amount of the Notes then outstanding may at any time (unless all defaults shall
theretofore have been remedied) at its or their option, by written notice or
notices to the Company, declare all the Notes to be due and payable, whereupon
the same shall forthwith mature and become due and payable, together with all
interest accrued thereon, without presentment, demand, protest or notice, all
of
which are hereby waived; provided,
however,
that this
provision is subject to the condition that if, at any time after the principal
of the Notes shall so become due and payable, any arrears of principal and
interest on the Notes (with interest at the rate specified in the Notes on
any
overdue principal and, to the extent legally enforceable, on any interest
overdue) shall be paid by or for the account of the Company, then the holder
or
holders of at least
fifty-one percent
(51%) in aggregate principal amount of the Notes
then
outstanding, by written notice or notices to the Company, may waive such Event
of Default and its consequences and rescind or annul such declaration, but
no
such waiver shall extend to
or affect any
subsequent Event of Default or impair any right resulting therefrom;
provided,
further,
that
notwithstanding the foregoing, if there shall occur an Event of Default under
clause (f) above, or a breach of the covenants contained in Section 10.3 hereof,
then the Notes, together with all interest accrued thereon, shall immediately
mature and become due and payable, without the necessity of any action by the
Purchasers or notice to the Company. If any holder of a Note shall give any
notice or take any other action with respect to a claimed default, the Company,
forthwith upon receipt of such notice or obtaining knowledge of such other
action, will give written notice thereof to
all other
holders of the Notes
then
outstanding, describing such notice or other action and the nature of the
claimed default.
13
XII. CONVERSION.
12.1 Conversion.
Prior to the
maturity of the Notes or, if sooner, the Call Date (as hereinafter defined),
the
holder of a Note shall have the right, at the option of such holder (whether
or
not payment upon the Notes is prohibited by the subordination provisions of
Article V) to convert, subject to the terms and provisions of this Article
XII,
all or, subject to the proviso contained in this Section 12.1, any portion
of
the Notes held by such holder into the number of fully paid and nonassessable
Shares as shall be equal to the aggregate principal amount of Notes then being
converted divided by the Conversion Price then in effect, by delivery of the
Notes to the Company at the office of the Company provided for in Article XVIII
herein; provided,
however,
that no holder of
a Note shall be permitted to exercise its rights with respect to partial
conversions as herein described unless each such holder of a Note elects to
convert a minimum of at least $500,000 principal amount of its Note or any
additional amounts in multiples of $250,000 principal amount of Notes;
provided,
further,
that the Company
shall not be required to issue any fractional shares in connection with any
conversion pursuant to this Article XII. In the event that any Purchaser shall
convert the Notes held by it, the Company shall, or shall direct its transfer
agent to, issue to such Purchaser certificates for the Shares of Common Stock
for which such Note is being converted in such denominations as are required
for
delivery to such Purchaser, and the Company shall, or shall direct its transfer
agent to, thereupon deliver such certificates to or in accordance with the
instructions of such Purchaser, in exchange for the Note held by such Purchaser,
and, in the event the Purchaser is exercising less than the entire aggregate
principal amount of Notes held by such Purchaser, the Company shall issue to
such Purchaser a new Note, duly executed by the Company, in form and substance
identical to the Note surrendered by such Purchaser, for the balance of the
aggregate principal amount of Notes that have not been so
converted.
12.2 Delivery
of
Stock Certificates; Time Conversion Effective; No Adjustment for Interest or
Dividends.
(a) Within ten
(10) Business Days after the surrender (as herein provided) of a Note for
conversion, the Company shall deliver or cause to be delivered to or upon the
written order of the holder of the Note so surrendered, certificates
representing the number of fully paid and nonassessable Shares into which the
Note may be converted. Subject to the following provisions of this Section
12.2,
such conversion shall be deemed to have been made at the close of business
on
the date that such Note shall have been surrendered for conversion at the office
of the Company provided for in Section 9.2 (the "Conversion Date"), so that
the
rights of the holder of such Note as a holder thereof, shall cease at such
time
and the person or persons entitled to receive any of the Shares upon conversion
of the Notes shall be treated for all purposes as having become the record
holder or holders of such Shares at such time; provided,
however,
that no such
surrender on any date when the stock transfer books of the Company shall be
closed, shall be effective to constitute the person or persons entitled to
receive Shares upon such conversion as the record holder or holders of such
Shares on such
date, but such
surrender shall be effective to constitute the person or persons entitled to
receive such Shares as the record holder or holders thereof for all purposes
at
the close of business on the next succeeding day on which such stock transfer
books are open or the Company is required to convert Notes.
The Company
will, at the time of such conversion, upon request of the holder of the Note,
acknowledge in writing its continuing obligation to such holder in respect
of
any rights (including, without limitation, any right of registration of the
Shares issued upon such conversion) to which such holder shall continue to
be
entitled under this
Agreement after
such conversion, provided,
that,
the failure of
such holder to make any such requests shall not affect the continuing obligation
of the Company to such holder in respect of such rights. If the Company shall
fail for any reason or for no reason to issue to the Holder within ten (10)
Business Days of receipt of the Note for conversion, a certificate for the
number of shares of Common Stock to which the Holder
14
is
entitled, and if
on or after such tenth Business Day the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction
of a
sale by the Holder of shares of Common Stock issuable upon such conversion
that
the Holder anticipated receiving from the Company (a "Buy-In"), then the Company
shall, within ten (10) Business Days after the Holder's request and in the
Holder's discretion, either (i) pay cash to the Holder in an amount equal to
the
Holder's total purchase price (including brokerage commissions, if any) for
the
shares of Common Stock so purchased (the "Buy-In Price"), at which point the
Company's obligation to deliver such certificate (and to issue such shares
of
Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver
to the Holder a certificate or certificates representing such shares of Common
Stock and pay cash to the Holder in an amount equal to the excess (if any)
of
the Buy-In Price over the product of (A) such number of shares of Common Stock,
times (B) the closing sales price on the date of conversion.
(b) If
the day for the
exercise of the conversion right shall not be a Business Day, then such
conversion right will automatically be deemed to be exercised on the next
succeeding day which is a Business Day.
(c) No
adjustments in
respect of interest or cash dividends shall be made upon conversion of any
Note.
The Company shall pay all unpaid interest on any Note so converted which has
accrued to (but not including) the date upon which such conversion is deemed
to
have been effected in accordance with this Section 12.2.
12.3 Notice
to
Holders of Election.
Upon receipt of
an election to convert by a holder of Notes pursuant to this Article XII, the
Company shall, as soon as practicable, notify the holders of the remaining
Notes
of such election.
12.4 Adjustment
of
Conversion Price.
The Conversion
Price shall be subject to adjustment as of the Closing Date as
follows:
(a) In
case the Company
shall, after the date hereof, (i) pay a stock dividend or make a distribution
in
shares of its capital stock (whether shares of its Common Stock or of capital
stock of any other class), (ii) subdivide its outstanding shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares, or (iv) issue by reclassification of its shares of Common
Stock any shares of capital stock of the Company, the Conversion Price in effect
immediately prior to such action shall be adjusted so that the holder of a
Note
thereafter surrendered for conversion shall be entitled to receive an equivalent
number of shares of capital stock of the Company which he would have owned
immediately following such action had such Note been converted immediately
prior
thereto. Any adjustment made pursuant to this subsection (a) shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date
in
the case of a subdivision, combination or reclassification.
(b) In
case the
Company, after the date of this Agreement, shall issue rights, warrants or
options entitling the recipients thereof to subscribe for or purchase shares
of
Common Stock (or securities convertible into Common Stock) at a price per share
less than the Conversion Price then in effect, the Conversion Price in effect
immediately prior thereto shall be adjusted so that it shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to
the date of issuance of such rights, warrants or options by a fraction of which
the numerator shall be the number of shares of Common Stock outstanding on
the
date of issuance of such rights, warrants or options (immediately
15
prior
to such
issuance), plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so offered for
subscription or purchase (or the aggregate conversion price of the convertible
securities so offered to subscription or purchase) would purchase at the
Conversion Price then in effect, and of which the denominator shall be the
number of shares of Common Stock outstanding on the date of issuance of such
rights, warrants or options (immediately prior to such issuance) plus the number
of additional shares of Common Stock so offered for subscription or purchase
(or
into which the convertible securities so offered for subscription or purchase
are convertible). Such adjustment shall be made successively whenever any such
rights, warrants or options are issued. In determining whether any rights,
warrants or options entitle the holders thereof to subscribe for or purchase
shares of Common Stock (or securities convertible into Common Stock) at less
than the Conversion Price then in effect and in determining the aggregate
offering price of such shares of Common Stock (or conversion price of such
convertible securities), there shall be taken into account any consideration
received by the Company for such rights, warrants or options (and for such
convertible securities), the value of such consideration, if other than cash,
to
be determined in good faith by the Board of Directors of the Company (which
determination shall be conclusive). If at the end of the period during which
such warrants, rights or options are exercisable not all such warrants, rights
or options shall have been exercised, the adjusted Conversion Price shall be
immediately readjusted to what it would have been based on the number of
additional shares of Common Stock actually issued (or the number of shares
of
Common Stock issuable upon conversion of convertible securities actually
issued).
(c)
In case the
Company, after the date of this Agreement, shall distribute to all holders
of
its outstanding Common Stock any shares of capital stock (other than Common
Stock), evidences of its Indebtedness or assets (including securities and cash,
but excluding any cash dividend paid out of current or retained earnings of
the
Company and dividends or distributions payable in stock for which adjustment
is
made pursuant to subsection (a) of this Section 12.4) or rights, warrants or
options to subscribe for or purchase securities of the Company (excluding those
referred to in subsection (b) of this Section 12.4), then in each such case
the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to
the record date of such distribution by a fraction of which the numerator shall
be the Conversion Price then in effect less the fair market value on such record
date (as determined in good faith by the Board of Directors of the Company,
which determination shall be conclusive) of the portion of the capital stock
or
the evidences of Indebtedness or the assets so distributed to the holder of
one
share of Common Stock or of such subscription rights, warrants or options
applicable to one share of Common Stock and of which the denominator shall
be
the Conversion Price then in effect. Such adjustment shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such distribution. If at the end of the period during which warrants,
rights or options described in this subsection (c) are exercisable not all
such
warrants, rights or options shall have been exercised, the adjusted Conversion
Price shall be immediately readjusted to what it would have been based on the
number of warrants, rights or options actually exercised.
(d) Notwithstanding
anything in subsection (b) or (c) of this Section 12.4 to the contrary, with
respect to any rights, warrants or options covered by subsection (b) or (c)
of
this Section 12.4, if such rights, warrants or options are only exercisable
upon
the occurrence of certain triggering events (including the occurrence of any
date of vesting), then for purposes of this Section 12.4 such rights, warrants
or options shall not be deemed
16
issued
or
distributed, and any adjustment to the Conversion Price required by subsection
(b) or (c) of this Section 12.4 shall not be made until such triggering events
occur and/or such rights, warrants or options become exercisable.
(e) In
case the
Company, after the date of this Agreement, shall issue shares of its Common
Stock (excluding those rights, warrants, options, shares of capital stock or
evidences of its Indebtedness or assets referred to in subsection (b) or (c)
to
this Section 12.4) at a net price per share less than the Conversion Price
in
effect on the date the Company fixes the offering price of such additional
shares, the Conversion Price shall be reduced immediately thereafter so that
it
shall equal the price determined by multiplying such Conversion Price in effect
immediately prior thereto by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding immediately prior to the issuance
of such additional shares plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock so
offered would purchase at the Conversion Price then in effect and the
denominator shall be the number of shares of Common Stock that would be
outstanding immediately after the issuance of such additional shares. Such
adjustment shall be made successively whenever such an issuance is made. This
subsection (e) shall not apply to Common Stock issued to any employee, officer
or director of the Company under a bona fide employee or director benefit plan
adopted by the Company or any Subsidiary thereof and approved by the
stockholders of the Company or such Subsidiary, as appropriate.
(f) In
any case in
which this Section 12.4 shall require that an adjustment be made immediately
following a record date or an effective date, the Company may elect to defer
(but only until five Business Days following the mailing by the Company to
the
holders of Notes of the certificate required by subsection (h) of this Section
12.4) issuing to the holder of any Note converted after such record date or
effective date the shares of Common Stock issuable upon such conversion over
and
above the shares of Common Stock issuable upon such conversion on the basis
of
the Conversion Price prior to adjustment, and paying to such holder any amount
of cash in lieu of a fractional share.
(g) No
adjustment in
the Conversion Price shall be required to be made unless such adjustment would
require an increase or decrease of at least one percent (1%) in such price;
provided,
however,
that any
adjustments which by reason of this subsection (g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 12.4 shall be made to the nearest
cent.
(h) Whenever
the
Conversion Price is adjusted as provided in Section 12.4 herein, the Company
will promptly mail to the holders of the Notes, a certificate of the Company's
Treasurer or Chief Financial Officer setting forth the Conversion Price as
so
adjusted and a brief statement of facts accounting for such
adjustment.
(i) Irrespective
of any
adjustment or change in the Conversion Price and the number of Shares actually
purchasable under the Notes, the Notes theretofore and thereafter issued may
continue to express the Conversion Price per Share and the number of Shares
purchasable thereunder as the Conversion Price per Share and the number of
Shares purchasable as expressed upon the Notes when initially
issued.
12.5 Company's
Consolidation or Merger.
If the Company
shall at any time consolidate or merge with or into another corporation, (a)
the
Company shall give at least five (5)
17
days
prior written
notice to the holders of the Notes of such consolidation or merger and the
terms
thereof, and (b) the holder of a Note shall thereafter be entitled to receive,
upon the conversion thereof, the securities or property to which a holder of
the
number of Shares then deliverable upon the conversion thereof would have been
entitled upon such consolidation
or merger, and
the Company shall take such steps in connection with such consolidation or
merger as may be necessary to assure such holder that the provisions of this
Agreement shall thereafter be applicable, as nearly as reasonably may be in
relation to any securities or property thereafter deliverable upon the
conversion of the Note
including, but
not limited to, obtaining a written acknowledgment from the continuing
corporation or other appropriate corporation of its obligation to supply such
securities or property upon such conversion. A sale of all or substantially
all
the assets of the Company shall be deemed a consolidation or merger for the
foregoing purposes.
12.6 Reserve
of
Sufficient Shares.
The Company will
reserve and keep available a sufficient number of shares of its Common Stock
to
satisfy the conversion requirements of all outstanding Notes. The Company will
take all such action as may be necessary to insure that all Shares issued upon
conversion of the Notes will be duly and validly authorized and issued and
fully
paid and nonassessable.
12.7 Taxes
on
Conversion.
The issuance of
certificates for Shares upon the conversion of Notes shall be made without
charge to the holders of Notes converting such Notes for any issue or stamp
tax
in respect of the issuance of such certificates, and such certificates shall
be
issued in the respective names of, or in such names as may be directed by,
the
holders
of the
Notes
converted; provided,
however,
that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate in a
name
other than that of the holder of the
Note
converted, and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction
of the
Company that such tax has been paid.
12.8 Cancellation
of
Converted Notes.
All Notes which
have been converted shall be cancelled by the Company and no Notes shall be
issued in lieu thereof.
12.9 Notice
to
Holders of Notes.
In case at any
time:
(a) the
Company shall
take any action which would require an adjustment in the Conversion Price
pursuant to Section 12.4; or
(b) there
shall be any
capital reorganization or reclassification of the Common Stock (other than
a
change in par value or from par value to no par value or from no par value
to
par value of the Common Stock), whether or not such reorganization or
reclassification results in an adjustment in the Conversion Price, or any
consolidation or merger to which the Company and its Subsidiaries is a party
and
for which approval of any stockholders of the Company is required, or any sale
or transfer of all or substantially all of the assets of the Company and its
Subsidiaries; or
(c) there
shall be a
voluntary or involuntary dissolution, liquidation or winding-up of the
Company;
then,
in any one or
more of said cases, the Company shall give written notice to the holders of
the
Notes, not less than thirty (30) days before any record date or other date
set
for definitive action, of
18
the
date on which
such adjustment, distribution, reorganization, reclassification, sale,
consolidation, merger, dissolution, liquidation or winding up shall take place,
as the case may be. Such notice shall also set forth such facts as shall
indicate the effect of such action (to the extent such effect may be known
at
the date of such notice) on the current Conversion Price and the kind and amount
of the Shares and other securities and property deliverable upon conversion
of
the Notes. Such notice shall also specify the date as of which the holders
of
the Common Stock of record shall be entitled to exchange their Common Stock
for
securities or other property deliverable upon such adjustment, distribution,
reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be (on which date, in the event
of
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the right to convert the Notes into Shares shall terminate).
Without
limiting
the obligation of the Company to provide notice to the holders of Notes or
Shares of corporate action hereunder, it is agreed that failure of the Company
to give such notice shall not invalidate such corporate action of the
Company.
XIII. CALL
OF NOTES BY
THE COMPANY.
The Company shall
not, directly or indirectly, call, prepay, redeem, repurchase, convert or
otherwise acquire (any such event referred to herein as a “call”) any Notes or
any portion thereof except as set forth in this Article XIII.
13.1 Optional
Conversion or Redemption Upon Call by the Company.
(a) The Company
may, at its option, call the Notes, either in whole or in part on a pro-rata
basis as follows:
|
(i)
|
the
Company
shall not be permitted to make any such call from the date hereof
through
the first anniversary of the date
hereof;
|
|
(ii)
|
from
the
first anniversary to the third anniversary of the date hereof, any
call by
the Company that results in a redemption or repurchase by the Company
of
the Notes for cash (as opposed to a conversion of the Notes to Common
Stock at the Conversion Price, in which case the provisions of this
Section 13.1(a)(ii) shall not apply), shall be at 105% of the original
principal amount of the Notes that are the subject of such call;
provided,
however,
that in the
event that the Holder’s Election is exercised under such circumstance, the
conversion shall be based upon 100% of the original principal amount
of
Notes to be so converted;
|
|
(iii)
|
after
the
third anniversary of the date hereof, any call by the Company that
results
in a redemption or repurchase by the Company of the Notes for cash
(as
opposed to a conversion of the Notes to Common Stock at the Conversion
Price, in which case the provisions of this Section 13.1(a)(iii)
shall not
apply), shall be at 100% of the original principal amount of the
Notes
that are the subject of such call;
and
|
|
(iv)
|
at
any time
after the first anniversary of the date hereof, the Company may call
the
Notes by requiring the Holders to convert the Notes to the Company’s
Common Stock at the Conversion Price, in which case the Notes shall
be
valued at 100% of the original principal amount of Notes to be so
converted; provided, however, with respect to this clause (iv) only,
that
the Company may call the Notes only if:
|
19
(A)
the Closing
Price of the Company's Common Stock shall be equal to or in excess of $7.00
per
share for at least 20 trading days during the 30-trading-day period immediately
preceding the Call Notice (as hereinafter defined);
and
(B) upon a
conversion pursuant to such call, the holders of the Notes shall receive
registered shares of the Company's Common Stock.
(b) In
the event of a
call by the Company to redeem or repurchase the Notes pursuant to this Section
13.1, the Holders, at their election, may require the Company to convert their
Notes into fully paid and nonassessable shares of the Company's Common Stock
at
the Conversion Price (the "Holder's Election").
13.2 Notice
of
Call.
The right of the
Company to call any Notes pursuant to Section 13.1 shall be conditioned upon
its
giving notice of such call (the "Call Notice"), by personal delivery, overnight
courier, certified mail or by facsimile, signed by an authorized officer, to
the
holders of Notes, not less than fifteen (15) Business Days prior to the date
upon which the call is to be made (the "Call Date").
The Call Notice
shall specify (i) the aggregate principal amount of the Notes
to be called
and the manner in which such Notes are called (i.e., repurchase and redemption,
or conversion into Shares), (ii) Call Date, and (iii) the accrued and unpaid
interest thereon (to, but not including, the Call Date). Within ten (10)
Business Days after receipt of the Call Notice by the Holder of a Note, such
Holder shall notify the Company, by personal delivery, overnight courier,
certified mail or by facsimile, signed
by the
Holder,
if it opts
to exercise the Holder's Election, (in the event that a Holder fails to respond
to the Call Notice or fails to respond within the time period or via the means
set forth herein, the Holder's Election shall become void and of no further
effect and the Company shall be entitled to call the Notes as set forth in
the
Call Notice).
13.3 Partial
Call.
In the event of a
partial call by the Company pursuant to this Article XIII, the aggregate
principal amount of each call of Notes pursuant to Section 13.1 hereof, shall
be
allocated among the Notes at the time outstanding, in proportion, as nearly
as
practicable, to the respective unpaid principal amounts of such
Notes.
13.4 Surrender
of
Notes Upon Call.
In the event that
any Notes shall be surrendered to the Company upon conversion as provided in
this Article XIII, interest shall cease to accrue upon such Notes so
surrendered.
13.5 Section
12
Applicable.
For purposes of
conversion of the Notes by the Company pursuant to this Article XIII, the
provisions of Sections 12.1 through 12.4 herein, shall be controlling, as if
the
same shall have been contained in this Article XIII (except that with respect
to
Section 12.2, in the event that a holder shall choose redemption as the Holder's
Election (pursuant to Section 13.2 herein), the Company shall make payment
to
the holder within five (5) days after the Conversion Date, by bank or certified
check or by wire transfer).
XIV. REGISTRATION
RIGHTS; RESTRICTIONS ON TRANSFER.
14.1 Notification
of
Proposed Sale.
(a) Unless
paragraph (b) of this Section 14.1 is applicable, each holder of a Note by
acceptance thereof agrees that it will notify the Company in writing before
offering for sale or selling or otherwise disposing
(provided,
that,
conversion will
not be deemed to be a disposition) of any Note or the Shares, describing briefly
the nature of such sale or other disposition, and no such sale or other
disposition shall be made unless and until (i) the holder has supplied
to the Company,
if requested by the Company within five (5) Business Days after receipt of
such
notice, an opinion of counsel for the holder (in-house counsel of a
Purchaser
20
shall
be deemed to
be satisfactory counsel) which counsel shall be reasonably satisfactory to
the
Company, to the effect that no registration under the Securities Act is required
with respect to such sale or other disposition (which opinion may be conditioned
upon the transferee's assuming the obligations of a holder of Notes
or Shares
under this Section 14.1) or (ii) an appropriate registration statement with
respect to such sale or other disposition of such Notes or Shares shall have
been filed by the Company with the Commission and declared effective by the
Commission.
(b) If
the holder of
Notes or Shares has obtained an opinion of its own counsel that the sale of
such
Notes or Shares may be made without registration under the Securities Act
pursuant to Rule 144, the notification provided in paragraph (a) need not be
given to the Company prior to the proposed sale, provided,
that,
the Company shall
not be obliged to register on its registry or transfer books any transfer
pursuant to this subsection (b) unless it is satisfied that the requirements
of
Rule 144 or any successor thereto
have been
satisfied.
(c) The
Company may
endorse on all Notes and on all certificates evidencing Shares (issued upon
conversion of the Notes) an appropriate legend restricting their transfer except
upon compliance with the provisions of paragraph (a) above,
which in the
case of the Notes
shall be in
the terms set out in Exhibit "B" hereto and in the case of the Shares shall
read
as follows - "THE
SHARES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, ASSIGNED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE
SHARES UNDER THE ACT OR AN OPINION, IF REQUESTED, OF COUNSEL SATISFACTORY TO
THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT";
provided,
that,
no such legend
shall be endorsed on any Note or Share certificates which, when issued, are
no
longer subject to the restrictions of this Section 14.1, and provided,
further,
that if an
opinion of satisfactory counsel (in-house counsel of a Purchaser shall be deemed
satisfactory counsel) which opinion shall be reasonably satisfactory to counsel
for the Company concludes that the legend is no longer necessary, the
Company will
deliver upon transfer or exchange Notes
or Share
certificates without such legends. The legend set forth in this Section 14.1(c)
shall be removed and the Company shall issue a certificate without such legend
or any other legend to a Holder if (i) in connection with any sale of such
Shares made pursuant to a registration statement and in accordance with the
prospectus delivery requirements under the Securities Act, (ii) in connection
with a sale, assignment or other transfer, such Holder provides the Company
with
an opinion of counsel, in form reasonably acceptable to the Company, to the
effect that such sale, assignment or transfer of such Shares may be made without
registration under the applicable requirements of the Securities Act and the
legend may be removed from such certificate in connection with such sale,
assignment or other transfer, or (iii) such Holder provides the Company with
reasonable assurance that such Shares can be sold, assigned or transferred
pursuant to Rule 144.
The Company shall
cause its counsel to issue a legal opinion in customary form to its transfer
agent to affect such legend removal under the circumstances herein described.
Following the effective date of any such registration statement, or at such
earlier time as a legend is no longer required for certain Shares, the Company
will no later than ten (10) Business Days following the delivery by a Purchaser
to the Company or the Company’s transfer agent of a legended certificate
representing such Shares, deliver or cause to be delivered to such Purchaser
a
certificate representing such shares that is free from all restrictive and
other
legends. Following the effective date and upon the delivery to any Purchaser
of
any certificate representing Shares that are free from all restrictive and
other
legends, such Purchaser agrees that any sale of such Shares shall be made
pursuant to the registration statement and in accordance with the plan of
distribution described therein or pursuant to an available exemption from the
registration requirements of the Securities
Act.
21
14.2 Obligation
to
Register.
The Company
agrees to use commercially reasonable efforts to file with the Commission no
later than September 30, 2007, a registration statement for an offering to
be
made on a continuous or delayed basis pursuant to Rule 415 under the Securities
Act covering all of the Shares. Such registration statement shall be on Form
S-3
under
the Securities Act, if such Form is then available for use by the Company,
or
another appropriate form that is available to the Company permitting
registration of such Shares for resale by the holders of Notes
or Shares
("Holders") in the manner or manners reasonably designated by them (including,
without
limitation,
one or more underwritten offerings). The Company shall not permit any securities
to be offered for sale by the Company to be included in such registration
statement. The Company shall use commercially
reasonable efforts to cause such registration statement to be declared effective
pursuant to the Securities Act as promptly as practicable following the filing
thereof, and, subject to applicable laws, rules and orders, to keep such
registration
statement
continuously effective under the Securities Act for five years after the Closing
date, or such shorter period ending when there cease to be outstanding any
Shares or Notes
held by the
Holders. Notwithstanding the foregoing, the Holders acknowledge that in
connection with the Company's contemplated
acquisition strategy, the Company may file a registration statement relating
to
shares of Common Stock to be issued in connection with such acquisition. In
such
event, if the Board of Directors of the Company reasonably determines that
the
Company will be filing a registration statement under the Securities Act in
connection with an acquisition, then any registration statement required to
be
filed by this Section 14.2
or Section
14.3 hereof may be temporarily delayed at the discretion of the Company's Board
of Directors, and the Shares which would have been otherwise included in such
registration statement shall be included in the Company's registration statement
to be filed in connection
with the
contemplated acquisition, so that the Company would not be required to file
more
than one registration statement in any consecutive six-month period;
provided,
however,
that the
provisions of this sentence shall not be applicable, and the Company shall
not
be permitted to delay the filing of a registration
statement
registering the Shares, in the event that the Company proposes, in connection
with any such acquisition, to use a registration statement on Form S-4 or any
successor form thereto.
14.3 "Piggyback"
and
Demand Registration Rights.
(a)
“Piggyback”
Registration Rights.
If at any time
after September 30, 2007 and prior to the maturity of the Notes during which
there is no effective registration statement relating to the Shares, the Company
shall, at least thirty (30) days prior to the filing of any registration
statement under the Securities
Act (other than
a registration statement on Form S-8 or Form S-4 or any successor forms)
relating to the public offering of its Common Stock by the Company or any of
its
security holders, give written notice of such proposed filing and of the
proposed date thereof to the Holders, and if, on or before the twentieth (20th)
day following the date on which such notice is given, the Company shall receive
a written request from the Holders requesting that the Company include among
the
securities covered by such registration statement some or all of the Shares
held
by or to be held after conversion by such Holder or Holders, the Company shall
include such Shares in such registration statement, if filed, so as to permit
such Shares to be sold or disposed of in the manner and on the terms of the
offering thereof set forth in such request.
(b)
Demand
Registration Rights.
If at any time
after January 1, 2008 during which there is no effective registration statement
relating to the Shares, the Company shall be requested
in writing
by the Holders holding at least a majority of the Shares to effect the
registration under the Securities Act of the Shares, the Company shall, as
expeditiously as possible,
22
use
commercially
reasonable efforts to effect the registration, on a form of general use under
the Securities Act, of all Shares which the Company has been requested to
register. The Company shall not be obligated to cause to become effective more
than one registration
statement pursuant
to which Shares are registered under this Section 14.3(b).
Notwithstanding the foregoing, if the Company shall furnish to the Holders
requesting a registration under this Section 14.3(b) a certificate signed by
the
Chief Executive Officer of the Company stating that in the good
faith
judgment of the Board of Directors of the Company it would be detrimental to
the
Company and its shareholders for such registration statement to be filed and
it
is therefore essential to defer the filing of such registration statement,
the
Company shall have the right to defer taking action with respect to such filing
for a period of not more than 90 days after receipt of the request by the
Holders; provided, however, that the Company may not utilize this right more
than once in any 12-month period. In addition, the Company shall not be
obligated to effect, or to take any action to effect, any registration pursuant
to this Section 14.3(b):
(i) During
the period
starting with the date 30 days prior to the Company’s good faith estimate of the
date of filing of, and ending on a date 120 days after the effective date of,
a
registration subject to Section 14.3(a) hereto; provided that the Company is
actively employing in good faith commercially reasonable efforts to cause such
registration statement to be filed and thereafter to become effective;
or
(ii) If
the Holders
propose to dispose of Shares in the registration statement that may be
immediately registered or that are registered on Form S-3 pursuant to a request
made pursuant to Section 14.2 above.
14.4 Terms
and
Conditions of Registration.
Except as
otherwise provided herein, in connection with any registration statement filed
pursuant to Sections 14.2 or 14.3 herein, the following provisions shall
apply:
(a) If
such
registration statement shall be filed pursuant to Section 14.3(a) hereof and
if
the managing underwriter advises the Company in writing that the inclusion
in
such registration of some or all of the Shares sought to be registered by the
Holder(s) creates a substantial risk that the proceeds or price per share that
will be derived from such registration will be reduced or that the number of
shares to be registered at the insistence of the Holder(s), plus the number
of
shares of Common Stock sought to be registered by the Company and any other
stockholders of the Company is too large a number to be reasonably sold, then,
in such event, the number of shares sought to be registered for the stockholders
of the Company shall be reduced, pro rata
in proportion to
the number of shares sought to be registered to the number of shares recommended
be sold by the managing underwriter.
(b) If
requested by the
Holder(s) in connection with a registration statement filed pursuant to Sections
14.2 or 14.3(b), the Company will enter into an underwriting agreement with
the
underwriters for such offering, such agreement to be reasonably satisfactory
in
form and substance to the Company, the Holder(s) and the underwriters, and
to
contain such representations, warranties and covenants by the Company and such
other terms as are customarily contained in such agreements used by the managing
underwriter, including, without limitation, restrictions of sales of Common
Stock or other securities by the Company as may be reasonably agreed to between
the Company and such underwriters, and indemnities and rights to contributions
to the effect and to the extent provided in Sections 14.5 and 14.6 hereof.
The
Holders shall be a party to any underwriting agreement relating to an
underwritten sale of their Shares and may, at their option, require that any
or
all of the representations, warranties and covenants of the Company to
or
23
for
the benefit of
such underwriters, shall also be made to and for the benefit of the Holders.
All
representations and warranties of the Holders shall be made to or for the
benefit of the Company.
(c) The
Company shall
provide a transfer agent and registrar (which may be the same entity) for the
Shares, not later than the effective date of such registration.
(d) All
expenses in
connection with the preparation and filing of a registration statement filed
pursuant to Sections 14.2 or 14.3 shall be borne solely by the Company, except
for any transfer taxes payable with respect to the disposition of such Shares,
and any underwriting discounts and selling commissions applicable solely to
such
sales of Shares, which shall be paid by the Holders of the Shares being
registered.
(e) The
Company shall
use commercially reasonable efforts to cause all of the shares covered by such
registration statement to be listed on NASDAQ or such other exchange as the
Shares may then be listed on, on which similar shares are listed for trading,
if
the listing of such registered shares is permitted by such
exchange.
(f) Following
the
effective date of such registration statement, the Company shall, upon the
request of the Holders, forthwith supply such number of prospectuses (including
exhibits thereto and preliminary prospectuses and amendments and supplements
thereto) meeting the requirements of the Securities Act and such other documents
as are referred to in the prospectus as shall be reasonably requested by the
Holders to permit the Holders to make a public distribution of their
Shares.
(g) The
Company shall
prepare, if necessary, and file such amendments and supplements to such
registration statement filed pursuant to Section 14.2 hereof, as may be
necessary to keep such registration statement effective, subject to applicable
laws, rules and orders, for a period of five years after the Closing date,
or
such shorter period ending when there cease to be outstanding any Shares or
Notes held by the Holders, and to comply with the provisions of the Securities
Act with respect to the offer and sale or other disposition of the shares
covered by such registration statement during the period required for
distribution of the shares.
(h) The
Holders may
select the underwriter or under-writers (which shall be of nationally recognized
standing), if any, who are to undertake any offering and distribution of the
Shares to be included in a registration statement filed under the provisions
of
Subsection 14.2 or 14.3(b) hereof, subject to the Company's prior approval
of
the underwriter, which approval shall not be unreasonably withheld.
(i) The
Company shall
use commercially reasonable efforts to register the Shares covered by any such
registration statements filed pursuant to Section 14.2 or 14.3(b) under such
securities or Blue Sky laws in addition to those in which the Company would
otherwise sell shares, as the Holders reasonably request, except that neither
the Company nor the Holders shall for any such purpose be required to execute
a
general consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction where it is not so qualified. The fees and
expenses incurred in connection with such registration shall be borne by the
Company.
(j) The
Holders shall
cooperate fully with the Company and provide the Company with all information
reasonably requested by the Company for inclusion in the registration statement
or as necessary to comply with the Securities Act. The Company shall cooperate
fully with any underwriters selected by the Holders and counsel to such
underwriters, and shall provide
24
reasonable
and
customary access to the Company's books and records (upon receipt from such
underwriters of customary confidentiality agreements) in order to facilitate
such underwriters' review and examination of the Company in connection with
such
underwriting.
(k) The
Company shall
notify the Holders, at any time after effectiveness when a prospectus relating
thereto is required to be delivered under the Securities Act within the period
mentioned in subdivision (vii) of this Section 14.4, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or
omits to state any material fact required to be stated therein or necessary
to
make the statements therein not misleading in light of circumstances then
existing (and upon receipt of such notice and until a supplemented or amended
prospectus as set forth below is available, the Holders shall not offer or
sell
any securities covered by such registration statement and shall return all
copies of such prospectus to the Company if requested to do so by it), and
at
the request of the Holders prepare and furnish the Holders promptly a reasonable
number of copies of a supplement to or an amendment of such prospectus as may
be
necessary so that, as thereafter delivered to the purchasers of such shares,
such prospectus shall not include an untrue statement of a material fact or
omit
to state a material fact required to be stated therein or necessary to make
the
statements therein not misleading in light of the circumstances then
existing.
(l) The
Company shall
furnish to the Holders at the time of the disposition of the Shares, a signed
copy of an opinion of the Company's regular in-house or outside general counsel,
or other counsel of the Company's selection reasonably acceptable to, and which
opinion shall be reasonably satisfactory in form and substance to, the Holders
to the effect that: (a) a registration statement covering such Shares has been
filed with the Commission under the Securities Act and has been made effective
by order of the Commission, (b) said registration statement and prospectus
contained therein comply as to form in all material respects with the
requirements of the Securities Act, and nothing has come to such counsel's
attention (after due inquiry) which would cause such counsel to believe that
either said registration statement or such prospectus contains any untrue
statement of a material fact or omits to state a material fact required to
be
stated therein or necessary to make the statements therein (in the case of
such
prospectus, in light of the circumstances under which they were made) not
misleading, (c) after due inquiry such counsel knows of no legal or governmental
proceedings required to be described in such registration statement or
prospectus which are not described as required, or of any contracts or documents
of a character required to be described in such registration statement or such
prospectus to be filed as an exhibit to such registration statement or to be
incorporated by reference therein which are not described and filed as required
and (d) to such counsel's knowledge, no stop order has been issued by the
Commission suspending the effectiveness of such registration statement; it
being
understood that such opinion may contain such qualifications and assumptions
as
are customary in the rendering of similar opinions, and that such counsel may
rely, as to all factual matters treated therein, on certificates of the Company
(copies of which shall be delivered to the Holders).
(m) The
Company will
use its commercially reasonable efforts to comply with the reporting
requirements of Sections 13 and 15(d) of the Exchange Act, to the extent it
shall be required to do so pursuant to such sections, and at all times while
so
required shall use its commercially reasonable efforts to comply with all other
public information reporting requirements of the Commission (including reporting
requirements which serve as a condition to utilization of Rule 144 promulgated
by the Commission under the Securities Act) from time to time in effect and
relating to the availability of an exemption from the Securities Act for the
sale of any of the Company's Common Stock held by the Holders. The Company
will
also cooperate with the Holders in supplying such information and documentation
as may be necessary for the Holders to complete
25
and
file any
information reporting forms presently or hereafter required by the Commission
as
a condition to the availability of an exemption from the Securities Act for
the
sale of any Company Common Stock held by the Holders.
14.5 Indemnification.
(i) In
the event of the
registration of any shares of the Company under the Securities Act pursuant
to
the provisions of Sections 14.2 or 14.3, the Company agrees to indemnify and
hold harmless the Holders, each underwriter, broker or dealer, if any, and
their
directors, officers and employees, of such Shares, and each other person, if
any, who controls the holders
of the
Notes
or the Shares (or a permitted assignee thereof), such underwriter, broker or
dealer within the meaning of the Securities Act, from and against any and all
losses, claims, damages or liabilities (or actions in respect thereof), joint
or
several,
to which the
Holders (and as applicable) its directors, officers or employees, or such
underwriter, broker or dealer or controlling person may become subject under
the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any
untrue statement or alleged untrue statement of any material fact contained
in
any registration statement under which such shares were registered under the
Securities Act, any preliminary prospectus or final prospectus relating to
such
Shares, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of any rule or regulation under the Securities
Act applicable to the Company or relating to any action or inaction required
by
the Company in connection with any such registration and will reimburse the
Holders, each such underwriter, broker or dealer and controlling person, and
their directors, officers or employees, for any legal or other expenses
reasonably incurred by the Holders or such underwriter, broker or dealer or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided,
however,
that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement
or omission or
alleged omission made in such registration statement, such preliminary
prospectus, such final prospectus or such amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by the Holders and as applicable, such Holders' directors, officers
or
employees, or such underwriter, broker, dealer or controlling person for use
in
the preparation thereof. Such indemnity shall remain in full effect irrespective
of any investigation by any person indemnified above.
(ii) In
the event of the
registration of any Shares of the Holders under the Securities Act for sale
pursuant to the provisions of this Agreement, the Holders agree to indemnify
and
hold harmless the Company, its directors, officers and employees, from and
against any losses, claims, damages or liabilities, joint or several, to which
the Company, its directors, officers or employees, may become subject under
the
Securities Act or other-wise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any
untrue statement or alleged untrue statement of any material fact contained
in
any registration statement under which such Shares were registered under the
Securities Act, any preliminary pros-pectus or final prospectus relating to
such
Shares, or any amend-ment or supplement thereto, or arise out of or are based
upon omission or alleged omission to state therein a material fact required
to
be stated therein or necessary to make the statements therein not misleading,
which untrue statement or alleged untrue statement or omission or alleged
omission was made therein in reliance upon and in conformity with written
information furnished to the Company by the Holders for use in the preparation
thereof. Such indemnity shall remain in full effect irrespective of any
investigation by any person indemnified above.
26
(iii) Promptly
after
receipt by a person entitled to indemnification under this Section
14.5
(for purposes
of this Section 14.5, an "Indemnified Party") of notice of the commencement
of
any action or claim relating to any registration statement filed under Sections
14.2 or 14.3 or as to which indemnity may be sought hereunder, such Indemnified
Party will, if a claim for indemnification hereunder in respect thereof is
to be
made against any other party hereto (for purposes of this Section 14.5, an
"Indemnifying Party"), give written notice to such Indemnifying Party of the
commencement of such
action or claim,
but the failure to so notify the Indemnifying Party will not relieve it from
any
liability which it may have to any Indemnified Party otherwise than pursuant
to
the provisions of this Section 14.5
and shall also
not relieve the Indemnifying Party of its obligations under this Section 14.5,
except to the extent that the Indemnified Party is damaged solely as a result
of
the failure to give timely notice. In case any such action is brought against
an
Indemnified Party, and it notifies an Indemnifying
Party
of the commencement thereof, the Indemnifying Party will be entitled (at its
own
expense) to participate in and, to the extent that it may wish, jointly with
any
other Indemnifying Party similarly notified, to assume the defense with counsel
satisfactory to such Indemnified Party, of such action and/or to settle such
action and, after notice from the Indemnifying Party to such Indemnified Party
of its election so to assume the defense thereof, the Indemnifying Party will
not be liable to such Indemnified Party for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof, other than the reasonable cost of investigation; provided,
however,
that no
Indemnifying Party and no Indemnified Party shall enter into any settlement
agreement which would impose any liability on such other party or parties
without the prior written consent of such other party or parties.
14.6 Contribution.
(a) If the
indemnification provided for in Section 14.5 hereof is unavailable to the
Indemnified Party in respect of any losses, claims, damages or liabilities
referred to herein, then each such Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall
contribute to
the amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities (i) as between the Company and the Holders on
the
one hand and the underwriters on the other, in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Holders on
the
one hand and the underwriters on the other from the offering of the Shares,
or
if such allocation is not permitted by applicable law, in such proportion as
is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Holders on the one hand and of the underwriters
on
the other in connection with the statements or omissions which resulted in
such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations and (ii) as between the Company on the one hand and each Holder
on the other, in such proportion as is appropriate to reflect the relative
fault
of the Company and of each Holder in connection with such statements or
omissions, as well as any other relevant equitable considerations.
(b) In
no event shall
the obligation of any Indemnifying Party to contribute under this Section 14.6
exceed the amount that such Indemnifying Party would have been obligated to
pay
by way of indemnification if the indemnification provided for under Section
14.5
hereof had been available under the circumstances.
(c) The
amount paid or
payable by an Indemnified Party as a result of the losses, claims, damages
and
liabilities referred to in the next preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this Section 14.6,
no Holder or underwriter shall be required to contribute any amount in excess
of
the amount by which (i) in the case of a Holder, the net proceeds received
by
such Holder from the sale of Shares or (ii) in the case of an underwriter,
the
total price at
27
which
the Shares
purchased by it and distributed to the public were offered to the public
exceeds, in any such case, the amount of any damages that such Holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
14.7 Survival.
The indemnity and
contribution agreements contained in this Article XIV shall remain
operative and in full force and effect regardless of (i) any termination of
this
Agreement or any underwriting agreement, (ii) any investigation made
by or on
behalf of any Indemnified Party or by or on behalf of the Company and (iii)
the
consummation of the sale or successive resales of the Shares.
XV. REPLACEMENT
OF
NOTES.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of any Note and, in the case of any such loss, theft,
or destruction, upon delivery of a bond of indemnity satisfactory to the Company
(provided that,
in the case of
any Purchaser, the written undertaking of such Purchaser to indemnify the
Company shall be satisfactory to the Company) or in the case of any such
mutilation, upon surrender and cancellation of such Note, the Company will
issue
a new Note of like tenor as if the lost, stolen, destroyed or mutilated Note
were then surrendered for exchange in lieu of such lost, stolen, destroyed
or
mutilated Note.
XVI. AMENDMENT
AND
WAIVER.
Except as set
forth in Article V, this Agreement may be amended (or any provision thereof
waived) with the consent
of the
Company and the Holders of a
majority in
aggregate principal amount of the Notes then outstanding; provided,
however,
that no such
amendment or waiver shall (i) change the fixed maturity of any Note, the rate
or
the time of payment of interest thereon, the principal amount thereof or the
circumstances under which such Note may be called, converted or redeemed without
the consent of the holders of all the Notes then outstanding, (ii) reduce the
aforesaid percentage of Notes, the holders of which are required to consent
to
any such amendment or waiver, without the consent of the holders of all the
Notes then outstanding or (iii) increase the percentage of the aggregate
principal amount of the Notes that the holders of which may declare the Notes
to
be due and payable under Article XI herein, without the consent of the holders
of all of the Notes then outstanding or (iv) modify the conversion rights or
the
Conversion Price and adjustments thereto (as outlined in Articles XII and XIII
herein) in any material respect, without the consent of the holders of all
of
the Notes then outstanding or (v) alter the registration rights under Article
XIV herein in any material respect, without the consent of the holders of all
of
the Notes then outstanding and all of the Shares outstanding other than Shares
which have been sold in registered public offerings; and provided,
further,
that no amendment
or waiver of any provision of Article V shall be effective against any holder
of
Senior Indebtedness who has not consented
thereto. The
Company and each holder of a Note
then or
thereafter outstanding shall be bound by any amendment or waiver effected in
accordance with the provisions of this Article, whether or not such Note shall
have been marked to indicate such modification, but any Note issued thereafter
shall bear a notation as to any such modification. Promptly after obtaining
the
written consent of the holders herein provided, the Company shall transmit
a
copy of such modification to all of the holders of the Notes then
outstanding.
XVII. HOME
OFFICE
PAYMENT.
The Company will
make payments of principal and interest by check payable to the order of the
holder of any such Notes duly mailed or delivered to such holder at the address
of such holder specified in Exhibit
A,
or at such other
address as such holder may designate in writing, or , if requested by any holder
of the Notes, by wire transfer to its (or its nominee's) account at any bank
or
trust company in the United States of America,
28
notwithstanding
any
contrary provisions herein or in any Note
with respect
to the place of payment. All such payments shall be made in immediately
available funds. The Purchasers agree that, before any such Note is assigned
or
transferred, the Purchasers will make or cause to be made a notation thereon
of
principal payments previously made thereon and of the date to which interest
thereon has been paid and will notify the Company of the name and address of
the
transferee
of such
Note
if such name and address are known to such Purchaser.
XVIII. NOTICES.
All notices,
requests, consents and other communications hereunder shall be in writing and
shall be deemed to have been made when delivered by courier or mailed express
mail or transmitted by facsimile,
e-mail
or other means of electronic transmission:
(a) if
to a Purchaser
or its nominee, at such Purchaser's address as set forth in Exhibit
A
hereto, or at such
other address as may have been furnished to the Company by a Purchaser in
writing; or
(b) if
to any other
holder of a Note, at such address as the payee thereof shall have designated
to
the Company by a written notice stating that such holder has acquired such
Note
and designating such an address, or at such other address as may have been
furnished to the Company by such holder in writing; or
(c) if
to the Company,
at 000 Xxxxxxx Xxxx, Xxxx Xxxx, Xxx Xxxx 00000 (fax number (000) 000-0000);
Attention: W. Xxxx Xxxxxxx, President and Chief Executive Officer, or at such
other address as may have been furnished to the Purchasers or other holders
of
Notes in writing by the Company, with a copy to Xxxxxx X. Xxxxxxxx, Esq., Xxxx
Xxxxxxx, P.C., 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (fax number
(000) 000-0000).
XIX. ENTIRE
AGREEMENT.
This Agreement
and the Notes 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.
XX. SUCCESSORS
AND
ASSIGNS.
All covenants and
agreements in this Agreement contained by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not.
XXI. HEADINGS.
The headings of
the articles and sections of this Agreement have been inserted for convenience
of reference only and shall in no way restrict or otherwise modify any of the
terms or provisions hereof.
XXII. GOVERNING
LAW.
This Agreement shall be construed and enforced in accordance with and governed
by the laws of the State of New York, without giving effect to its conflict
of
laws rules.
XXIII. COUNTERPARTS.
This Agreement
may be signed in any number of counterparts with the same effect as if the
signatures thereto and hereto were upon the same instrument. Facsimile
signatures shall be deemed acceptable and binding.
XXIV. SEVERABILITY.
Any provision
hereof or of the Notes which 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 or
thereof, and
29
any
such
prohibition
or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
XXV. DEFINITIONS.
The following
terms, when used in this Agreement, shall have the following
meanings:
"Affiliate"
shall
mean any person that controls, is controlled by or is under common control
with
the person in question. For purposes hereof, "control" and the correlative
definitions "controlled by" and "under common control with" shall mean the
power
and ability to direct the management and affairs of the person in question,
whether through the ownership of voting securities, by contract or
otherwise.
"Agreement"
has the
meaning set forth in Article I.
"Board"
or "Board
of Directors" means, with respect to any person which is a corporation, a joint
stock company or a business trust, the board of directors or other group,
however designated, which is charged with legal responsibility for the
management of such person, or any committee of such board of directors or group,
however designated, which is authorized to exercise the power of such board
or
group in respect of the matter in question.
"Business
Day"
means any day other than a Saturday, Sunday or other day on which banks in
the
State of New York are legally authorized to close.
"Capital
Lease"
shall mean a lease of property which is capitalized on the financial statements
of the lessee in accordance with generally accepted accounting
principles.
“Change
in Control"
of the Company shall be deemed to have occurred in the event that: (i)
individuals who, as of the date hereof, constitute the Board cease for any
reason to constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company’s shareholders, was approved by a vote
of at least a majority of the directors then comprising the Board shall be
considered as though such individual was a member of the Board as of the date
hereof; (ii) the Company shall have been sold by either (A) a sale of all or
substantially all its assets, or (B) a merger or consolidation, other than
any
merger or consolidation pursuant to which the Company acquires another entity,
or (C) a tender offer, whether solicited or unsolicited; or (iii) any party,
other than the Company, is or becomes the “beneficial owner” (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended), directly or
indirectly, of voting securities of the Company representing more than 50%
of
the total voting power of all the then-outstanding voting securities of the
Company.
"Closing"
has the
meaning set forth in Article III.
"Closing
Date" has
the meaning set forth in Article III.
"Closing
Price"
means (i) the last reported sale price as reported on the NASDAQ Small Cap
market or other exchange on which the Common Stock is listed for trading (or,
in
case no such sale takes place on such day, the average of the closing bid and
asked prices on the NASDAQ Small Cap market or such exchange), or (ii) in the
absence of any of the foregoing, the fair market value as determined in good
faith by the Board of Directors of the Company (which determination shall be
conclusive).
30
"Commission"
means
the Securities and Exchange Commission and any other similar or successor agency
of the federal government administering the Securities Act or the Exchange
Act.
"Company"
means
Xxxxxx, Inc., a Delaware, and its successors and assigns.
"Consolidated"
or
"consolidated", when used with reference to any financial term in this
Agreement, means the aggregate for the Company and its Subsidiaries of the
amounts signified by such term, with intercompany items eliminated and, with
respect to earnings, after eliminating the portion of earnings properly
attributable to minority interests, if any, in the capital of any such person,
other than the parent of such group.
"Conversion
Date"
has the meaning set forth in Section 12.2.
"Conversion
Price"
means $4.75 per share, as the same may be adjusted from time to time in
accordance with the terms of this Agreement.
"Notes"
has the
meaning set forth in Article I.
"Event
of Default"
has the meaning set forth in Article XI.
"Exchange
Act"
means the Securities Exchange Act of 1934, as amended.
"generally
accepted
accounting principles" means, unless otherwise stated, generally accepted
accounting principles in effect from time to time.
"Holders"
has the
meaning set forth in Section 14.2.
"Holder's
Election"
has the meaning set forth in Section 13.1.
"Indebtedness"
of
any person means and includes, without duplication, as of any date as of which
the amount thereof is to be determined, (i) all obligations of such person
to
repay money borrowed (including, without limitation, all debentures payable
and
drafts accepted representing extensions of credit, all obligations evidenced
by
bonds, debentures or other similar instruments and all obligations upon which
interest charges are customarily paid), (ii) the value of all Capital Leases
(as
such term is defined in accordance with generally accepted accounting principles
in effect on the date of this Agreement) in respect of which such person is
liable as lessee or as the guarantor of the lessee, (iii) the principal amount
of all monetary obligations which are secured by any lien or security interest
existing on property owned by such person whether or not the obligations secured
thereby shall have been assumed by such person, (iv) all guaranties of the
Indebtedness of any other person and (v) all amounts from time to time owing
to
trade creditors arising in the ordinary course of such person's
business.
"NASDAQ"
means the
National Association of Securities Dealers Automated Quotation
System.
"Notes"
has the
meaning set forth in Article I.
"Private
Placement
Memorandum" means that certain private placement memorandum dated as of December
5, 2006, which is being distributed to selected investors (including the
purchasers under this Note Purchase Agreement) which sets forth certain
information
31
about
the Twincraft
Acquisition and the offering of the Notes; any reference to the Private
Placement Memorandum includes the attachments thereto.
"Purchaser"
has the
meaning set forth in Article I.
"Securities
Act"
means the Securities Act of 1933, as amended.
"Senior
Indebtedness" has the meaning set forth in Section 5.7.
"Senior
Secured
Credit Facility" means the secured credit facility provided or to be provided
to
the Company by a senior lender.
"Share"
or "Shares"
has the meaning set forth in Article I.
"Solvent"
shall
mean when used with respect to any person that as of the date as to which the
person's solvency is to be measured:
|
(i)
|
the
fair
saleable value of its assets is in excess of the total amount of
its
liabilities (including contingent liabilities as valued in accordance
with
applicable law) as they become absolute and
matured;
|
|
(ii)
|
it
has
sufficient capital to conduct its business;
and
|
|
(iii)
|
it
is able to
meet its debts as they mature.
|
"Subsidiary"
means
any corporation organized under the laws of the United States or of any state
or
of the District of Columbia or any foreign jurisdiction of which (other than
directors' qualifying shares required by law) at least a majority of the shares
of each class of the capital stock entitled to vote at the time as of which
any
determination is being made, is owned, beneficially and of record, by the
Company or one or more of its Subsidiaries, or both.
"Twincraft
Acquisition" means the acquisition of the outstanding capital stock (the
"Twincraft Stock") of Twincraft, Inc., a Vermont corporation ("Twincraft"),
by
the Company, pursuant to that certain stock purchase agreement between the
Company and the holders of the Twincraft Stock dated as of November 14,
2006.
[Signature
page follows:]
32
If
the foregoing
correctly sets forth our understanding, please (i) sign below on the
enclosed counterpart of this Convertible Subordinated Note Purchase Agreement,
(ii) fill in your name and address, including your facsimile and e-mail
address, on Exhibit
A,
and
(iii) and return the same to the Company along with your payment for the
amount of the Convertible Note you have agreed to purchase.
|
Very
truly
yours,
XXXXXX,
INC.
By:
_________________________________
W.
Xxxx
Xxxxxxx,
President
and
Chief Executive Officer
|
|
|
The
foregoing
Agreement is hereby accepted and agreed to as of the date first above
written:
Print
Name of Purchaser:
____________________________________
Jurisdiction
of Formation (if not a natural person:
____________________________________
Authorized
Signature:
____________________________________
Print
Name and Title of Authorized Signatory:
____________________________________
|
|
33
XXXXXX,
INC.
000
Xxxxxxx
Xxxx
Xxxx
Xxxx, Xxx Xxxx
00000
as
of December 7,
2006
To
the Purchasers
set forth on Exhibit A
to
the Convertible
Subordinated Note Purchase Agreement
Dear
Sirs/Madams:
Reference
is hereby made to that certain
Convertible Subordinated Note Purchase Agreement, dated as of December 7,
2006,
between the Company and the Purchaser parties thereto (the “Note Purchase
Agreement”). This letter shall serve to amend the provisions of Section 14.5(ii)
as follows: notwithstanding any provision of Section 14.5(ii) of the Note
Purchase Agreement to the contrary, the Company agrees that the liability
of the
Holders pursuant to Section 14.5(ii) shall be several and not joint, and
that
any liability of a Holder pursuant to Section 14.5(ii) shall be limited to
the
amount of the net proceeds received by such Holder upon sale of the Shares
of
such Holder.
In
addition, the reference to “(vii)” contained
in Section 14.4(k) of the Note Purchase Agreement shall be revised to be
a
reference to “(g)”.
Except
as hereby amended, the provisions of the
Note Purchase Agreement are hereby ratified, approved and confirmed in all
respects.
Very
truly
yours,
XXXXXX,
INC.
By:____________________________________
W.
Xxxx
Xxxxxxx
President
and Chief
Executive Officer
