Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
DATED AS OF
AUGUST 25, 2000
BY AND BETWEEN
BOSTON BIOMEDICA, INC.
AS THE ISSUER,
AND
GCA STRATEGIC INVESTMENT FUND LIMITED
TABLE OF CONTENTS
PAGE
Article I. DEFINITIONS............................................................................................1
Section 1.1 Definitions.......................................................................................1
Article II. PURCHASE AND SALE OF SECURITIES.......................................................................9
Section 2.1 Purchase and Sale of Convertible Debentures.......................................................9
Section 2.2 Purchase Price....................................................................................9
Section 2.3 Closing and Mechanics of Payment..................................................................9
Article III. PAYMENT TERMS OF CONVERTIBLE DEBENTURES..............................................................9
Section 3.1 Payment of Principal and Interest; Payment Mechanics..............................................9
Section 3.2 Ranking; Payment of Interest.....................................................................10
Section 3.3 Voluntary Prepayment.............................................................................10
Section 3.4 Mandatory Prepayments............................................................................10
Section 3.5 Prepayment Procedures............................................................................11
Section 3.6 Payment of Additional Amounts....................................................................12
Article IV. REPRESENTATIONS AND WARRANTIES.......................................................................13
Section 4.1 Organization and Qualification...................................................................13
Section 4.2 Authorization and Execution......................................................................13
Section 4.3 Capitalization...................................................................................14
Section 4.4 Governmental Authorization.......................................................................14
Section 4.5 Issuance of Shares...............................................................................15
Section 4.6 No Conflicts.....................................................................................15
Section 4.7 Financial Information............................................................................15
Section 4.8 Litigation.......................................................................................16
Section 4.9 Compliance with ERISA and other Benefit Plans....................................................16
Section 4.10 Environmental Matters...........................................................................17
Section 4.11 Taxes...........................................................................................17
Section 4.12 Investments, Joint Ventures.....................................................................17
Section 4.13 Not an Investment Company.......................................................................17
Section 4.15 No Solicitation; No Integration with Other Offerings............................................17
Section 4.16 Permits.........................................................................................17
Section 4.17 Leases..........................................................................................18
Section 4.18 Absence of Any Undisclosed Liabilities or Capital Calls.........................................18
Section 4.19 Public Utility Holding Company..................................................................18
Section 4.20 Intellectual Property Rights....................................................................18
Section 4.21 Insurance.......................................................................................18
Section 4.22 Title to Properties.............................................................................18
Section 4.23 Internal Accounting Controls....................................................................19
Section 4.24 Foreign Practices...............................................................................19
i
Article V. REPRESENTATIONS AND WARRANTIES OF PURCHASER...........................................................19
Section 5.1 Purchaser........................................................................................19
Article VI. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES.......................................................20
Section 6.1 Conditions Precedent to Purchaser's Obligations to Purchase......................................20
Section 6.2 Conditions to the Company's Obligations..........................................................22
Article VII. AFFIRMATIVE COVENANTS...............................................................................22
Section 7.1 Information......................................................................................23
Section 7.2 Payment of Obligations...........................................................................23
Section 7.3 Maintenance of Property; Insurance...............................................................23
Section 7.4 Maintenance of Existence.........................................................................24
Section 7.5 Compliance with Laws.............................................................................24
Section 7.6 Inspection of Property, Books and Records........................................................24
Section 7.7 Investment Company Act...........................................................................24
Section 7.8 Use of Proceeds..................................................................................24
Section 7.9 Compliance with Terms and Conditions of Material Contracts.......................................24
Section 7.10 Reserved Shares and Listings....................................................................25
Section 7.11 Transfer Agent Instructions.....................................................................25
Section 7.12 Maintenance of Reporting Status; Supplemental Information.......................................26
Section 7.13 Form D; Blue Sky Laws...........................................................................26
Section 7.14 Sales By Purchaser..............................................................................26
Article VIII. NEGATIVE COVENANTS.................................................................................26
Section 8.1 Limitations on Debt or Other Liabilities.........................................................26
Section 8.2 Transactions with Affiliates.....................................................................27
Section 8.3 Merger or Consolidation..........................................................................27
Section 8.4 Limitation on Asset Sales........................................................................27
Section 8.5 Restrictions on Certain Amendments...............................................................27
Section 8.6 Restrictions on Issuances of Securities..........................................................28
Section 8.7 Limitation on Stock Repurchases..................................................................29
Section 8.8 Limitation on Sales By Officers and Employee Directors...........................................29
Article IX. RESTRICTIVE LEGENDS..................................................................................29
Section 9.1 Restrictions on Transfer.........................................................................29
Section 9.2 Notice of Proposed Transfers.....................................................................30
Article X. ADDITIONAL AGREEMENTS AMONG THE PARTIES...............................................................30
Section 10.1 Liquidated Damages..............................................................................30
Section 10.2 Conversion Notice...............................................................................31
Section 10.3 Conversion Limit................................................................................31
Section 10.4 Registration Rights.............................................................................31
Article XI. ADJUSTMENT OF FIXED PRICE............................................................................33
Section 11.1 Reorganization..................................................................................33
Section 11.2 Share Reorganization............................................................................33
Section 11.3 Rights Offering.................................................................................33
iii
Section 11.4 Special Distribution............................................................................34
Section 11.5 Capital Reorganization..........................................................................35
Section 11.6 Adjustment Rules................................................................................36
Section 11.7 Certificate as to Adjustment....................................................................36
Section 11.8 Notice to Holders...............................................................................36
Article XII. EVENTS OF DEFAULT...................................................................................37
Section 12.1 Events of Default...............................................................................37
Section 12.2 Powers and Remedies Cumulative..................................................................39
Article XIII. MISCELLANEOUS......................................................................................39
Section 13.1 Notices.........................................................................................39
Section 13.2 No Waivers; Amendments..........................................................................39
Section 13.3 Indemnification.................................................................................40
Section 13.4 Expenses: Documentary Taxes.....................................................................42
Section 13.5 Payment.........................................................................................42
Section 13.6 Successors and Assigns..........................................................................42
Section 13.7 Brokers.........................................................................................42
Section 13.8 Massachusetts Law; Submission to Jurisdiction; Waiver of Jury Trial; Appointment of Agent.......42
Section 13.9 Entire Agreement................................................................................43
Section 13.10 Survival; Severability.........................................................................43
Section 13.11 Title and Subtitles............................................................................43
Section 13.12 Reporting Entity for the Common Stock..........................................................43
Section 13.13 Publicity......................................................................................43
iv
LIST OF SCHEDULES
Schedule 4.3 Capitalization
Schedule 4.7 Final Information
Schedule 4.8 Litigation
Schedule 4.12 Investments, Joint Ventures
Schedule 4.15 Other Offerings
Schedule 4.22 Title to Property
Schedule 7.8 Use of Proceeds
Schedule 8.1 Debt and Other Liability
Schedule 8.2 Transactions with Affiliates
Schedule 8.4 Asset Sales
v
LIST OF EXHIBITS
Exhibit A Form of Convertible Debentures
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Officer's Certificate as to Certain Financial Matters
Exhibit D Form of Officer's Certificate
Exhibit E Form of Escrow Agreement
Exhibit F Form of Common Stock Purchase Warrant
vi
SECURITIES PURCHASE AGREEMENT
AGREEMENT, dated as of August 25, 2000, between Boston Biomedica, Inc.
(the "Company") a Massachusetts Corporation and GCA Strategic Investment Fund
Limited ("Purchaser"), a Bermuda Corporation.
R E C I T A L S:
WHEREAS, the Company desires to sell and issue to Purchaser, and
Purchaser desires to purchase from the Company, $2,250,000 aggregate principal
amount of the Company's 3% Senior Subordinated Convertible Debentures due August
25, 2003 (the "Convertible Debentures"), with terms and conditions as set forth
in the form of Senior Subordinated Convertible Debenture attached hereto as
EXHIBIT A;
WHEREAS, the Convertible Debentures will be convertible into shares of
the Company's common stock, $0.01 par value per share (the "Common Stock");
WHEREAS, in order to induce the Purchaser to enter into the
transactions described in this Agreement, the Company desires to issue to the
Purchaser a warrant to purchase 80,000 shares of Common Stock upon the Closing
(as defined herein) on the terms and conditions described in the form of the
common stock purchase warrant attached hereto as EXHIBIT F (the "Warrants"); and
WHEREAS, Purchaser will have certain registration rights with respect
to such shares of Common Stock issuable as interest under, and upon conversion
of, the Convertible Debentures (the "Debenture Shares") and upon exercise of the
Warrants (the "Warrant Shares," the Debenture Shares and the Warrant Shares
being collectively referred to herein as the "Conversion Shares") as set forth
in the Registration Rights Agreement in the form attached hereto as EXHIBIT B;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1 DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Additional Shares of Common Stock" has the meaning set forth in
Section 11.6.
"Affiliate" means, with respect to any Person (the "Subject Person"),
(i) any other Person (a "Controlling Person") that directly, or indirectly
through one or more intermediaries, Controls the Subject Person or (ii) any
other Person (other than the Subject Person or a Consolidated Subsidiary of the
Subject Person) which i[s Controlled by or is under common Control with a
Controlling Person.
1
"Agreement" means this Securities Purchase Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Asset Sale" has the meaning set forth in Section 8.4.
"Balance Sheet Date" has the meaning set forth in Section 4.7.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by the Company.
"Benefit Plans" has the meaning set forth in Section 4.9(b).
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"Capital Reorganization" has the meaning set forth in Section 11.5.
"Change in Control" means (i) after the date of this Agreement, any
person or group of persons (within the meaning of Sections 13 and 14 of the
Exchange Act and the rules and regulations of the Commission relating to such
sections) other than Purchaser shall have acquired beneficial ownership (within
the meaning of Rules 13d-3 and 13d-5 promulgated by the Commission pursuant to
the Exchange Act) of 33 1/3% or more of the outstanding shares of Common Stock
of the Company; (ii) individuals constituting the Board of Directors of the
Company on the date hereof (together with any new Directors whose election by
such Board of Directors or whose nomination for election by the shareholders of
the Company was approved by a vote of at least 50.1% of the Directors still in
office who are either Directors as of the date hereof or whose election or
nomination for election was previously so approved), cease for any reason to
constitute at least two-thirds of the Board of Directors of the Company then in
office.
"Closing Bid Price" shall mean for any security as of any date, the
lowest closing bid price as reported by Bloomberg, L.P. ("Bloomberg") on the
principal securities exchange or trading market where such security is listed or
traded or, if the foregoing does not apply, the lowest closing bid price of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no lowest trading price is
reported for such security by Bloomberg, then the average of the bid prices of
any market makers for such securities as reported in the "Pink Sheets" by the
National Quotation Bureau, Inc. If the lowest closing bid price cannot be
calculated for such security on such date on any of the foregoing bases, the
lowest closing bid price of such security on such date shall be the fair market
value as mutually determined by Purchaser and the Company for which the
calculation of the closing bid price requires, and in the absence of such mutual
determination, as determined by the Board of Directors of the Company in good
faith.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any entity
succeeding
2
to all of its material functions.
"Common Stock" means the common stock, $0.01 par value per share, of
the Company.
"Company" means Boston Biomedica, Inc,, a Massachusetts corporation,
and its successors.
"Company Corporate Documents" means the articles of organization and
bylaws of the Company.
"Consolidated Net Worth" means at any date the total shareholders'
equity which would appear on a consolidated balance sheet of the Company
prepared as of such date.
"Consolidated Subsidiary" means at any date with respect to any Person
or Subsidiary, any Person the accounts of which would be consolidated with those
of such Person or Subsidiary in its consolidated financial statements if such
statements were prepared as of such date.
"Control" (including, with correlative meanings, the terms
"Controlling," "Controlled by" and under "common Control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Conversion Date" shall mean the date of delivery of a Notice of
Conversion for all or a portion of a Convertible Debenture by the holder thereof
to the Company as specified in each Convertible Debenture.
"Conversion Price" has the meaning set forth in the Convertible
Debentures.
"Conversion Shares" has the meaning set forth in the Recitals.
"Convertible Debentures" means the Company's Senior Subordinated
Convertible Debentures substantially in the form set forth as Exhibit A hereto.
"Deadline" has the meaning set forth in Section 10.1.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments
issued by such Person, (iii) all obligations of such Person as lessee which (y)
are capitalized in accordance with GAAP or (z) arise pursuant to sale-leaseback
transactions, (iv) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments, (v) all Debt of others secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person and (vi) all Debt of others Guaranteed by such Person.
"Default" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
3
"Derivative Securities" has the meaning set forth in Section 8.6.
"Discounted Equity Offerings" has the meaning set forth in Section 8.6.
"Directors" means the individuals then serving on the Board of
Directors or similar such management council of the Company.
"Environmental Laws'" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the cleanup or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Company and each Subsidiary and all members of
a Controlled group of corporation and all trades or businesses (whether or not
incorporated) under common Control which, together with the Company or any
Subsidiary, are treated as a single employer under the Code.
"Event of Default" has the meaning set forth in Article XII hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expense Reimbursement Fee" has the meaning set forth in Section 13.4.
"Financing" means a public or private financing consummated (meaning
closing and funding) through the issuance of debt or equity securities (or
securities convertible into or exchangeable for debt or equity securities) of
the Company, other than Permitted Financings.
"Fixed Price" has the meaning set forth in Section 11.1.
"Formula Price" has the meaning set forth in Section 3.4.
"GAAP" has the meaning set forth in Section 1.2.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing (whether by virtue
of partnership arrangements, by agreement to purchase assets, goods, securities
or services, to take-or-pay, or to maintain a minimum net worth, financial ratio
or similar requirements, or otherwise) any Debt of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or (ii) entered into for
the purpose of assuring in any other
4
manner the holder of such Debt of the payment thereof or to protect such holder
against loss in respect thereof (in whole or in part); PROVIDED that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term Guarantee used as a verb has a
corresponding meaning.
"Hazardous Materials" means any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances or petroleum products
(including crude oil or any derivative or fraction thereof), defined or
regulated as such in or under any Environmental Laws.
"Intellectual Property" has the meaning set forth in Section 4.20.
"Investment" means any investment in any Person, whether by means of
share purchase, partnership interest, capital contribution, loan, time deposit
or otherwise.
"Lien" means any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell or convey, option, claim, title
imperfection, encroachment or other survey defect, pledge, restriction, security
interest or other adverse claim, whether arising by contract or under law or
otherwise (including, without limitation, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction in respect of any of the foregoing).
"Listing Applications" has the meaning set forth in Section 4.4.
"Majority Holders" means (i) as of the Closing Date, Purchaser and (ii)
at anytime thereafter, the holders of more than 50% in aggregate principal
amount of the 3% Senior Subordinated Convertible Debentures dated August 25,
2000 outstanding at such time.
"Market Price" shall mean the Closing Bid Price of the Common Stock
preceding the date of determination.
"Material Adverse Effect" has the meaning set forth in Section 4.1.
"Maturity Date" shall mean the date of maturity of the Convertible
Debentures.
"Maximum Number of Shares" shall mean that number of shares of Common
Stock equal to the percentage that the Company may issue without shareholder
approval under the applicable rules of the National Market or the applicable OTC
Bulletin Board or equivalent entity, of the then issued and outstanding shares
of Common Stock of the Company as of the applicable date of determination, or
such greater number of shares as the shareholders of the Company may have
previously approved.
"NASD" has the meaning set forth in Section 7.10.
"Nasdaq Market" means the Nasdaq Stock Market's National Market System.
"National Market" means the Nasdaq Market, the Nasdaq Small Cap Market,
the New
5
York Stock Exchange, Inc. or the American Stock Exchange, Inc..
"Net Cash Proceeds" means, with respect to any transaction, the total
amount of cash proceeds received by the Company or any Subsidiary less (i)
reasonable underwriters' fees, brokerage commissions, reasonable professional
fees and other customary out-of-pocket expenses payable in connection with such
transaction, and (ii) in the case of dispositions of assets, (A) actual transfer
taxes (but not income taxes) payable with respect to such dispositions, and (B)
the amount of Debt, if any, secured by a Lien on the asset or assets disposed of
and required to be, and actually repaid by the Company or any Subsidiary in
connection therewith, and any trade payables specifically relating to such asset
or assets sold by the Company or any Subsidiary that are not assumed by the
purchaser of such asset or assets.
"Notice of Conversion" means the form to be delivered by a holder of a
Convertible Debenture upon conversion of all or a portion thereof to the Company
substantially in the form of EXHIBIT A to the form of Convertible Debenture.
"Notice of Exercise" means the form to be delivered by a holder of a
Warrant upon exercise of all or a portion thereof to the Company substantially
in the form of Exhibit A to the Warrant.
"Officer's Certificate" shall mean a certificate executed by the
president, chief executive officer or chief financial officer of the Company in
the form of EXHIBIT D attached hereto.
"Officer's Certificate as to Financial Matters" shall mean a
certificate executed by the president of the Company on the Closing Date as to
certain financial matters of the Company, which such Officer's Certificate shall
be in the form of Exhibit C attached hereto.
"OTC Bulletin Board" means the over-the-counter bulletin board operated
by the NASD.
"Other Taxes" has the meaning set forth in Section 3.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permits" means all domestic and foreign licenses, franchises, grants,
authorizations, permits, easements, variances, exemptions, consents,
certificates, orders and approvals necessary to own, lease and operate the
properties of, and to carry on the business of the Company and the Subsidiaries.
"Permitted Financings" has the meaning set forth in Section 8.6.
"Person" means an individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards trader the Code and
either (i) is maintained, or contributed to, by any member of the EP, ISA Group
for employees of any member of the
6
ERISA Group or (ii) has at any time within the preceding five years been
maintained, or contributed to, by any Person which was at such time a member of
the ERISA Group for employees of the Person which was at such time a member of
the ERISA Group.
"Purchase Price" means the purchase price for the Securities set forth
in Section 2.2 hereof.
"Purchaser" means the entity listed on the signature page hereto and
its successors and assigns, including holders from time to time of the
Convertible Debentures.
"Qualified Assignee" has the meaning set forth in Section 3.6(a).
"Recourse Financing" means Debt of the Company or any Subsidiary which,
by its terms, does not bar the lender thereof from action against the Company or
any Subsidiary, as borrower or guarantor, if the security value of the project
or asset pledged in respect thereof falls below the amount required to repay
such Debt.
"Redemption Event" has the meaning set forth in Section 3.4.
"Registrable Securities" has the meaning set forth in Section 10.4(a).
"Registration Default" has the meaning set forth in Section 10.4(e).
"Registration Maintenance Period" has the meaning set forth in Section
10.4(c).
"Registration Statement" has the meaning set forth in Section 10.4(b).
"Registration Rights Agreement" means the agreement between the Company
and Purchaser dated the date hereof substantially in the form set forth in
EXHIBIT B attached hereto.
"Required Effectiveness Date" has the meaning set forth in Section
10.4(b).
"Reserved Amount" has the meaning set forth in Section 7.10(a).
"Restricted Payment" means, with respect to any Person, (i) any
dividend or other distribution on any shares of capital stock of such Person
(except dividends payable solely in shares of capital stock of the same or
junior class of such Person and dividends from a wholly-owned direct or indirect
Subsidiary of the Company to its parent corporation), (ii) any payment on
account of the purchase, redemption, retirement or acquisition of (a) any shares
of such Person's capital stock or (b) any option, warrant or other right to
acquire shares of such Person's capital stock or (iii) any loan, or advance or
capital contribution to any Person (a "Shareholder") owning any capital stock of
such Person other than relocation, travel or like advances to officers and
employees in the ordinary course of business, and other than reasonable
compensation as determined by the Board of Directors.
"Rights Offering" has the meaning set forth in Section 11.3.
"Sale Event" has the meaning set forth in Section 3.4.
7
"SEC Reports" has the meaning set forth in Section 7.l(a).
"Securities" means the Convertible Debentures, the Warrants and, the
Conversion Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Share Reorganization" has the meaning set forth in Section 11.2.
"Special Distribution" has the meaning set forth in Section 11.4.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which (x) a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person or (y) the results of operations, the assets
and the liabilities of which are consolidated with such Person under GAAP.
"Subsidiary Corporate Documents" means the certificates of
incorporation and bylaws of each Subsidiary.
"Taxes" has the meaning set forth in Section 3.6.
"Trading Day" shall mean any Business Day in which the OTC Bulletin
Board, National Market or other automated quotation system or exchange on which
the Common Stock is then traded is open for trading for at least four (4) hours.
"Transaction Agreements" means this Agreement, the Convertible
Debentures, the Warrant, the Registration Rights Agreement, and the Escrow
Agreement.
"Transfer" means any disposition of Securities whether or not such
disposition would constitute a sale thereof under the Securities Act.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the present value of all benefits under the Plan
exceeds (ii) the fair market value of all Plan assets allocable to such benefits
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"Warrant" means the Common Stock Purchase Warrant substantially in the
form set forth in EXHIBIT F hereto.
SECTION 1.2 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a consistent basis with the Company's prior practice (except for interim
financial statements and for changes concurred in by the Company's independent
public accountants)
8
("GAAP"). All references to "dollars," "Dollars" or "$" are to United States
dollars unless otherwise indicated.
ARTICLE II. PURCHASE AND SALE OF SECURITIES
SECTION 2.1 PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
(a) Subject to the terms and conditions set forth herein, the
Company agrees to issue and sell to Purchaser, and Purchaser agrees to purchase
from the Company, Convertible Debentures in the aggregate principal amount of
Two Million Two Hundred Fifty Thousand Dollars ($2,250,000.00).
(b) In connection with the Purchaser's agreement to purchase
the Convertible Debentures specified in this Article II, the Company shall issue
and deliver to the Purchaser on the Closing Date a Warrant to purchase an
aggregate of 80,000 shares of Common Stock.
SECTION 2.2 PURCHASE PRICE. The purchase price for the Convertible
Debentures on the Closing Date (as defined herein) shall be 95% of the principal
amount thereof. No part of the purchase price of the Convertible Debentures
shall be allocated to the Warrant. Therefore, the aggregate consideration
payable by Purchaser to the Company for the Convertible Debentures and Warrants
on the Closing Date shall be Two Million One Hundred Thirty Seven Thousand Five
Hundred Dollars ($2,137,500.00) (the "Purchase Price").
SECTION 2.3 CLOSING AND MECHANICS OF PAYMENT.
(a) The Purchase Price shall be paid on the Closing Date by
wire transfer of immediately available funds.
(b) The Convertible Debentures and Warrants issued on the
Closing Date shall be dated the date hereof and interest shall accrue on the
Convertible Debentures as of the Closing Date.
ARTICLE III. PAYMENT TERMS OF CONVERTIBLE DEBENTURES
SECTION 3.1 PAYMENT OF PRINCIPAL AND INTEREST; PAYMENT MECHANICS.
The Company will pay all amounts due on each Convertible Debenture by wire
transfer and at the address specified for such purpose by Purchaser in writing,
without the presentation or surrender of any Convertible Debenture or the making
of any notation thereon, except that upon written request of the Company made
concurrently with or reasonably promptly after payment or prepayment in full of
this Convertible Debenture, the holder shall surrender the Convertible Debenture
for cancellation, reasonably promptly after any such request, to the Company at
its principal executive office. Prior to any sale or other disposition of any
Convertible Debenture, the holder thereof will either submit the Convertible
Debenture to the Company for endorsement thereon of the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
the Convertible Debenture to the Company in exchange for a new Convertible
Debenture or Convertible Debentures. The Company will afford the benefits of
this Section 3.1 to any direct or indirect transferee of the Convertible
Debenture purchased in accordance with the terms of this Agreement.
9
SECTION 3.2 RANKING; PAYMENT OF INTEREST. The Convertible
Debentures shall be senior to all indebtedness of the Company except (a) the
Company's outstanding credit facility with Fleet Bank and any successor thereof,
including increases of such credit facility; (b) the .Company's mortgage loan
with Commerce Bank; and (c) any future sale and lease back transaction in
connection with the Company's headquarters building in West Bridgewater, MA, to
which it shall be junior in ranking. Interest shall accrue on the outstanding
principal amount of each Convertible Debenture and shall be payable as specified
t]herein.
SECTION 3.3 VOLUNTARY PREPAYMENT. For so long as no Event of
Default shall have occurred and is continuing, the Company may, at its option,
repay, in whole or in part, the Convertible Debentures, per the redemption price
set forth in Section 5.1 of the Convertible Debentures, following at least five
(5) Business Days prior written notice to Purchaser (the date of expiration of
such five (5) Business Day period being referred to as the "prepayment date");
provided, HOWEVER, -that if such date is not a Business Day, the prepayment date
shall be the next Business Day thereafter; and further provided that such
repayment is not otherwise prohibited by Section 5.1 of the Convertible
Debenture.
SECTION 3.4 MANDATORY PREPAYMENTS.
(a) Upon (i) the occurrence of a Change in Control of the
Company, (ii) a transfer of all or substantially all of the assets of the
Company to any Person in a single transaction or series of related transactions,
(iii) a consolidation or merger of the Company with or into another Person in
which the Company is not the surviving entity (other than a merger which is
effected solely to change the jurisdiction of incorporation of the Company and
results in a reclassification, conversion or exchange of outstanding shares of
Common Stock solely into shares of Common Stock) (each of items (i), (ii) and
(iii) being referred to as a "Sale Event"), or (iv) the occurrence of a
Registration Default which continues uncured for a period of twenty (20) days,
then, in each case, the Company shall, upon request of the Majority Holders,
redeem the Convertible Debentures and Warrants. The redemption price payable
upon any such redemption shall be the redemption price in SECTION 5 of the
Convertible Debentures and SECTION 13 of the Warrants, respectively (referred to
herein as the "Formula Price").
(b) At the option of Purchaser, upon the consummation of one
or more Financings, the Company shall use 25% of the Net Cash Proceeds
therefrom (unless such Net Cash Proceeds from each such Financing is less than
$250,000) to redeem the Convertible Debentures.
(c) Upon the issuance of the Maximum Number of Shares, the
receipt by the Company of Notice of Conversion requiting the issuance of shares
of Common Stock in excess of the Maximum Number of Shares, and the failure
within 40 days of such issuance to obtain shareholder approval to issue
additional shares of Common Stock required to be issued in connection with such
Notices of Conversion (the "Redemption Event"), the Company shall redeem, the
outstanding balance of each Convertible Debenture and Warrant for the Formula
Price.
(d) In the event that there is an insufficient number of
authorized, issuable, shares of Common Stock registered under the Registration
Statement filed by the Company to
10
allow Purchaser to fully convert the Convertible Debentures and exercise all
Warrants held by Purchaser and sell such shares issued thereon, then the Company
shall immediately file an amendment to the then current Registration Statement
to register a sufficient number of such shares to convert said Convertible
Debentures and Warrants. Upon the failure within twenty (20) Trading Days
measured from the date of filing the Registration Statement to register a
sufficient number of such shares, the Company shall redeem the outstanding
balance of each Convertible Debenture and Warrant for the Formula Price. In
addition, failure of the Company to register a sufficient number of such shares
to fully convert said Convertible Debentures and exercise such Warrants shall be
a Registration Default under Section 10.4(e) from the date of the Notice of
Conversion to the date of the earlier of (i) the redemption of the outstanding
balance of the Convertible Debentures and exercise of all such Warrants or (ii)
full conversion of the Convertible Debentures and exercise of all such Warrants.
SECTION 3.5 PREPAYMENT PROCEDURES.
(a) Any permitted prepayment or redemption of the Convertible
Debentures and Warrants, as applicable pursuant to Sections 3.3 or 3.4 above
shall be deemed to be effective and consummated (for purposes of determining the
Formula Price and the time at which Purchaser shall thereafter not be entitled
to deliver a Notice of Conversion for the Convertible Debentures) as follows:
(i) A prepayment pursuant to Section 3.3, the "prepayment
date" specified therein;
(ii) A redemption pursuant to Section 3.4(a), the later to
occur of (x) one (1) Business Day following the Company's receipt of notice to
redeem from the Majority Holders or (y) the date of occurrence or consummation,
as the case may be, of the applicable Sale Event or in the case of a
Registration Default the date on which such 20-day period expires;
(iii) A redemption pursuant to Section 3.4(b), three (3)
Business Days following the date of consummation of the applicable Financing
(meaning closing and funding); and
(iv) A redemption pursuant to Section 3.4(c), the date on
which such 40-day period expires.
(b) On or before the Maturity Date and on the effective date
of a repayment or redemption of the Convertible Debentures and Warrants as
specified in Section 3.5(a) above, the Company shall deliver by wire transfer of
funds the repayment/redemption price to Purchaser of the Convertible Debentures
and Warrants subject to repayment/redemption. Should Purchaser not receive
payment of any amounts due on redemption of its Convertible Debentures and
Warrants by reason of the Company's failure to make payment at the times
prescribed above for any reason, the Company shall pay to the applicable holder
on demand (x) interest on the sums not paid when due at an annual rate equal to
the lesser of (i) 18% or (ii) the maximum lawful rate, compounded at the end of
each thirty (30) days, until the applicable holder is paid in full and (y) all
costs of collection, including, but not limited to, reasonable attorneys' fees
and costs, whether or not suit or other formal proceedings are instituted.
11
(c) The Company shall select the Convertible Debentures and
Warrants to be redeemed in any redemption in which not all of the Convertible
Debentures and Warrants are to be redeemed so that the ratio of the Convertible
Debentures and Warrants of each holder selected for redemption to the total
Convertible Debentures and Warrants owned by that holder shall be the same as
the ratio of all such Convertible Debentures and Warrants selected for
redemption bears to the total of all then outstanding Convertible Debentures and
Warrants. Should any Convertible Debentures and Warrants required to be redeemed
under the terms hereof not be redeemed solely by reason of limitations imposed
by law, the applicable Convertible Debentures and Warrants shall be redeemed on
the earliest possible dates thereafter to the maximum extent permitted by law.
(d) Any Notice of Conversion delivered by Purchaser (including
delivery via telecopy) to the Company prior to the (x) Maturity Date or (y)
effective date of a voluntary prepayment pursuant to Section 3.3 or a mandatory
prepayment pursuant to Section 3.4 as specified in Section 3.5(a) above), shall
be honored by the Company and the conversion of the Convertible Debentures shall
be deemed effected on the Conversion Date, subject to the Company's rights
pursuant to Sections 5.1 and 5.2 of the Convertible Debentures. In addition,
between the effective date of a voluntary prepayment pursuant to Section 3.3 or
a mandatory prepayment pursuant to Section 3.4 as specified in Section 3.5(a)
above and the date the Company is required to deliver the redemption proceeds in
full to Purchaser, Purchaser may deliver a Notice of Conversion to the Company.
Such Notice of Conversion will be (x) of no force or effect if the Company
timely pays the redemption proceeds to Purchaser when due or (y) honored on or
as of the date of the Notice of Conversion if the Company fails to timely pay
the redemption proceeds to Purchaser when due.
SECTION 3.6 PAYMENT OF ADDITIONAL AMOUNTS.
(a) Any and all payments by the Company hereunder or under the
Convertible Debentures to Purchaser and each "qualified assignee" thereof shall
be made free and clear of and without deduction or withholding for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto (all such taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes") unless such Taxes are required by law or the administration thereof
to be deducted or withheld. If the Company shall be required by law or the
administration thereof to deduct or withhold any Taxes from or in respect of any
sum payable under the Convertible Debentures (i) the holders of the Convertible
Debentures subject to such Taxes shall have the right, but not the obligation,
for a period of thirty (30) days commencing upon the day it shall have received
written notice from the Company that it is required to withhold Taxes, subject
to the other provisions of this Agreement and the Convertible Debentures
relating to assignment or transfer of the Convertible Debentures, to transfer
all or any portion of the Convertible Debentures to a qualified assignee to the
extent such transfer can be effected in accordance with the other provisions of
this Agreement and applicable law; (ii) the Company shall make such deductions
or withholdings; and (iii) the Company shall forthwith pay the full amount
deducted or withheld to the relevant taxation or other authority in accordance
with applicable. A "qualified assignee" of a Purchaser is a Person that is
organized under the laws of(i) the United States or (ii) any jurisdiction other
than the United States or any political, subdivision thereof and that (y)
represents and warrants to the Company that payments of the Company to such
assignee under
12
the laws in existence on the date of this Agreement would not be subject to any
Taxes and (z) from time to time, as and when requested by the Company, executes
and delivers to the Company and the Internal Revenue Service forms, and provides
the Company with any information necessary for the Company to establish such
assignee's exemption or continued exemption from Taxes under applicable law.
(b) The Company shall forthwith pay any present or future
stamp or documentary taxes or any other similar charges or similar levies which
arise from any payment made under any of the Transaction Agreements or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement other than Taxes relating to income and Taxes payable solely as a
result of the transfer from Purchaser to a Person of any Security (all such
taxes, charges and levies hereinafter referred to as "Other Taxes").
(c) The Company shall indemnify Purchaser, or qualified
assignee, for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 3.6) required to be paid by the Company under this
Section 3.6, but not so paid by the Company and actually paid by Purchaser, or
qualified assignee. Payment under this indemnification shall be made within 30
days from the date Purchaser or qualified assignee makes written demand
therefor.
(d) Within 30 days after the date of any payment of Taxes,
required by the Company to be paid under this Section 3.6, the Company will
furnish to Purchaser the original or a certified copy of a receipt evidencing
payment thereof.
(e) Purchaser and each qualified assignee shall provide to the
Company a form W-8, stating that it is a non-U.S., person, together with any
additional tax forms which may be required under the Code, as amended after the
date hereof, to allow interest payments to be made to it without deduction.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to Purchaser, as of the Closing
Date, the following:
SECTION 4.1 ORGANIZATION AND QUALIFICATION. The Company and each
Subsidiary is A corporation (or other legal entity) duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, with full power and authority to own, lease, use and operate its
properties and to carry on its business as and where now owned, leased, used,
operated and conducted. The Company is qualified to conduct business as a
foreign corporation and is in good standing in every jurisdiction in which the
nature of the business conducted by it makes such qualification necessary,
except where such failure would not have a Material Adverse Effect. A "Material
Adverse Effect" means any material adverse effect on the operations, results of
operations, properties, assets or condition (financial or otherwise) of the
Company and its Subsidiaries, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be entered into in
connection herewith.
SECTION 4.2 AUTHORIZATION AND EXECUTION.
13
(a) The Company has all requisite corporate power and
authority to enter into and perform each Transaction Agreement and to
consummate the transactions contemplated hereby and thereby and to issue the
Securities in accordance with the terms hereof and thereof.
(b) The execution, delivery and performance by the Company of
each Transaction Agreement and the issuance by the Company of the Securities
have been duly and validly authorized by the Board of Directors of the Company
and no further consent or authorization of the Company, its Board of Directors
or its shareholders is required.
(c) This Agreement has been duly executed and delivered by the
Company.
(d) This Agreement constitutes, and upon execution and
delivery thereof by the Company, each of the Transaction Agreements will
constitute, a valid and binding agreement of the Company, in each case
enforceable against the Company in accordance with its respective terms subject
to (i) applicable bankruptcy, insolvency or similar laws affecting the
enforceability of creditors rights generally, and (ii) equitable principals of
general applicability.
SECTION 4.3 CAPITALIZATION. As of August 25, 2000, the authorized,
issued and outstanding capital stock of the Company is as set forth on SCHEDULE
4.3 hereto and except as set forth on SCHEDULE 4.3 and excluding any stock
options offered under any Company Benefit Plan (as herein defined) no other
shares of capital stock of the Company will be outstanding other than stock
options offered under any Company Benefit Plan as of the Closing Date. Except as
set forth on Schedule 4.3, all of such outstanding shares of capital stock are,
or upon issuance will be, duly authorized, validly issued, fully paid and
nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or similar rights of the shareholders of the Company or any
liens or encumbrances imposed through the actions or failure to act of the
Company. Other than as set forth on SCHEDULE 4.3 hereto, as of the date hereof,
(i) there are no outstanding options, warrants, scrip, rights to subscribe for,
puts, calls, rights of first refusal, agreements, understandings, claims or
other commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of capital
stock of the Company or any of its Subsidiaries, or arrangements by which the
Company or any of its Subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its Subsidiaries, and (ii)
there are no agreements or arrangements under which the Company or any of its
Subsidiaries are obligated to register the sale of any of its or their
securities under the Securities Act (except pursuant to the Registration Rights
Agreement) and (iii) there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) that will be triggered by the issuance of the
Convertible Debentures or Conversion Shares. The Company has furnished to
Purchaser true and correct copies of the Company's Corporate Documents, and the
terms of all securities convertible into or exercisable for Common Stock.
SECTION 4.4 GOVERNMENTAL AUTHORIZATION. The execution and delivery by
the Company of the Transaction Agreements does not and will not, the issuance
and sale by the Company of the Securities does not and will not, and the
consummation of the transactions contemplated hereby and by the other
Transaction Agreements will not, require any action by or in respect of, or
filing with, any governmental body, agency or governmental official except (a)
such actions or filings that have been undertaken or made prior to the date
hereof and that will be
14
in full force and effect (or as to which all applicable waiting periods have
expired) on and as of the date hereof or which are not required to be filed on
or prior to the Closing Date, (b) such actions or filings that, if not obtained,
would not result in a Material Adverse Effect, (c) listing applications
("Listing Applications") to be filed with the OTC Bulletin Board or the National
Market relating to the Conversion Shares, if applicable, and (d) the filing of a
"Form D" as described in Section 7.13 below and the filing of any requisite
documents under state securities ("blue sky") laws.
SECTION 4.5 ISSUANCE OF SHARES. Upon conversion in accordance
with the terms of the Convertible Debentures and exercise of the Warrants, the
Conversion Shares shall be duly and validly issued and outstanding, fully paid
and nonassessable, free and clear of any Liens and charges and shall not be
subject to preemptive rights or similar rights of any other shareholders of the
Company. Assuming the representations and warranties of Purchaser herein are
true and correct in all material respects, each of the Securities will have been
issued in material compliance with all applicable U.S. federal and state
securities laws. The Company understands and acknowledges that the issuance of
Conversion Shares will dilute the ownership interests of other shareholders of
the Company. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Convertible Debentures and exercise of
the Warrants is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other shareholders of
the Company.
SECTION 4.6 NO CONFLICTS. The execution and delivery by the
Company of the Transaction Agreements to which it is a party did not and will
not, the issuance and sale by the Company of the Securities did not and will not
and the consummation of the transactions contemplated hereby and by the other
Transaction Agreements will not, contravene or constitute a default under or
violation of (i) any provision of applicable law or regulation known by the
Company to be applicable to it, (ii) the Company Corporate Documents, (iii) any
material agreement, judgment, injunction, order, decree or other instrument
binding upon the Company or any Subsidiary or any of their respective assets, or
result in the creation or imposition of any material Lien on any asset of the
Company or any Subsidiary, To its knowledge, the Company and each Subsidiary is
in compliance with and conforms to all statutes, laws, ,ordinances, rules,
regulations, orders, restrictions and all other legal requirements of any
domestic or foreign government or any instrumentality thereof having
jurisdiction over the conduct of its businesses or the ownership of its
properties, except where such failure would not have a Material Adverse Effect.
SECTION 4.7 FINANCIAL INFORMATION. Since June 30, 2000 (the "Balance
Sheet Date"), except as disclosed in Schedule 4.7, there has been (x) no
material adverse change in the assets or liabilities, or in the business or
condition, financial or otherwise, or in the results of operations or prospects,
of the Company and its Subsidiaries taken as a whole, whether as a result of any
legislative or regulatory change, revocation of any license or rights to do
business, fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation, act of God, public force or otherwise and (y) no
material, adverse change in the assets or liabilities, or in the business or
condition, financial or otherwise, or in the results of operations or prospects,
of the Company and its Subsidiaries except in the ordinary course of business;
and to the knowledge of the Company no fact or condition exists which might
cause such a change in the future. The audited and unaudited consolidated
balance sheets of the Company and its
15
Subsidiaries for the periods ending December 31, 1999, and June 30, 2000,
respectively, and the related consolidated statements of income, changes in
shareholders' equity and changes in cash flows for the periods then ended,
including the footnotes thereto, except as indicated therein, (i) complied in
all material respects with applicable accounting requirements and (ii) have been
prepared in accordance with GAAP consistently applied throughout the periods
indicated, except that the unaudited financial statements do not contain notes
and may be subject to normal audit adjustments and normal annual adjustments.
Such financial statements fairly present the financial condition of the Company
and its Subsidiaries at the dates indicated and the consolidated results of
their operations and cash flows for the periods then ended and, except as
indicated therein, reflect all claims against and all Debts and liabilities of
the Company and its Subsidiaries, fixed or contingency required to be reflected
therein in accordance with GAAP.
SECTION 4.8 LITIGATION. Except as set forth on SCHEDULE 4.8, there is
no action, suit or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary, before any court or arbitrator
or any governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could be reasonably expected to have a
Material Adverse Effect or which challenges the validity of any Transaction
Agreements.
SECTION 4.9 COMPLIANCE WITH ERISA AND OTHER BENEFIT PLANS.
(a) Each member of the ERISA Group has fulfilled its
obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and is in compliance in all material respects with the
presently applicable provisions of ERISA and the Code with respect to each Plan
. No member of the ERISA Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any Plan, (ii) failed to
make any required contribution or payment to :any Plan or Multiemployer Plan or
in respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which as resulted or could result in the imposition ,of a
Lien or the posting of a bond or other security under ERISA or the Code or
(iii) incurred any liability under Title IV of ERISA other than a liability to
the PBGC for premiums under Section 4007 of ERISA.
(b) The benefit plans not covered under clause (a) above
(including profit sharing, deferred compensation, stock option, employee stock
purchase, bonus, retirement, health or insurance plans, collectively the
"Benefit Plans") relating to the employees of the Company are duly registered
where required by, and are in good standing in all material respects under, all
applicable laws. All required employer and employee contributions and premiums
under the Benefit Plans to the date hereof have been made, the respective fund
or funds established under the Benefit Plans are funded in accordance with
applicable laws, and no past service funding liabilities exist thereunder.
(c) No Benefit Plans have any unfunded liabilities, either on
a "going concern" or "winding up" basis and determined in accordance with all
applicable laws and actuarial practices and using actuarial assumptions and
methods that are reasonable in the circumstances. No event has occurred and no
condition exists with respect to any Benefit Plans that has resulted or to the
knowledge of the Company could reasonably be expected to result in any Benefit
Plan having its registration revoked or wound up (in whole or in part) or
refused for
16
the purposes of any applicable laws or being placed under the administration of
any relevant pension benefits regulatory authority or being required to pay any
taxes or penalties (in any material amounts) under any applicable laws.
SECTION 4.10 ENVIRONMENTAL MATTERS. Each of the Company and the
Subsidiaries conducts its businesses in compliance in all material respects with
all applicable Environmental Laws.
SECTION 4.11 TAXES. All United States federal, state, county,
municipality, local or foreign income tax returns and all other material tax
returns (including foreign tax returns) which are required to be filed by or on
behalf of the Company and each Subsidiary have been filed and all material taxes
due and payable pursuant to such returns or pursuant to any assessment received
by the Company and each Subsidiary have been paid except those being disputed in
good faith and for which adequate reserves have been established. The charges,
accruals and reserves on the books of the Company and each Subsidiary in respect
of taxes and other governmental charges have been established in accordance with
GAAP.
SECTION 4.12 INVESTMENTS, JOINT VENTURES. Other than as set forth in
SCHEDULE 4.12, the Company has no Subsidiaries or other direct or indirect
Investment in any Person, and the Company is not a party to any
partnership, management, shareholders' or joint venture or similar agreement.
SECTION 4.13 NOT AN INVESTMENT COMPANY. Neither the Company nor any
Subsidiary is an "Investment Company" within the meaning of Investment Company
Act of 1940, as amended.
SECTION 4.14 FULL DISCLOSURE. The information heretofore furnished
by the Company to Purchaser for purposes of or in connection with this Agreement
or any transaction contemplated hereby does not contain any untrue statement of
a material fact.
SECTION 4.15 NO SOLICITATION; NO INTEGRATION WITH OTHER OFFERINGS. No
form of general solicitation or general advertising was used by the Company or,
to its knowledge, any other Person acting on behalf of the Company, in
connection with the offer and sale of the Securities. Except as set forth in
Schedule 4.15, neither the Company, nor, to its knowledge, any Person acting on
behalf of the Company, has, either directly or indirectly, sold or offered for
sale to any Person (other than Purchaser) any of the Securities or, within the
six months prior to the date hereof, any other similar security of the Company
except as contemplated by this Agreement, and the Company represents that
neither itself nor any Person authorized to act on its behalf (except that the
Company makes no representation as to Purchaser and their Affiliates) will sell
or offer for sale any such security to, or solicit any offers to buy any such
security from, or otherwise approach or negotiate in respect thereof with, any
Person or Persons so as thereby to cause the issuance or sale of any of the
Securities to be in violation of any of the provisions of Section 5 of the
Securities Act. The issuance of the Securities to Purchaser will not be
integrated with any other issuance of the Company's securities (past, current or
future).
SECTION 4.16 PERMITS. (a) Each of the Company and its Subsidiaries
has all material Permits; (b) to the Company's knowledge all such Permits are in
full force and effect, and each
17
of the Company and its Subsidiaries has fulfilled and performed all material
obligations with respect to such Permits; (c) no event has occurred which
allows, or after notice of lapse of time would allow, revocation or termination
by the issuer thereof or which results in any other material impairment of the
rights of the holder of any such Permit; and (d) the Company has no reason to
believe that any governmental body or agency is considering limiting, suspending
or revoking any such Permit, except in each case or in the aggregate that could
not be reasonably expected to have a Material Adverse Effect.
SECTION 4.17 LEASES. Except as set forth in Schedule 4.17, neither
the Company nor any Subsidiary is a party to any capital lease obligation with a
value greater than $250,000 or to any operating lease with an aggregate annual
rental greater than $250,000 during the life of such lease.
SECTION 4.18 ABSENCE OF ANY UNDISCLOSED LIABILITIES OR CAPITAL
CALLS. There are no liabilities of the Company or any Subsidiary of any kind
whatsoever, whether accrued,, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of circumstances
which would reasonably be expected to result in such a liability, other than (i)
those liabilities provided for in the financial statements delivered pursuant to
Section 4.7 and (ii) other undisclosed liabilities which, individually or in the
aggregate, would not have a Material Adverse Effect.
SECTION 4.19 PUBLIC UTILITY HOLDING COMPANY. Neither the Company
nor any Subsidiary is, or will be upon issuance and sale of the Securities and
the use of the proceeds described herein, subject to regulation under the Public
Utility Holding Company Act of 1935, as amended, the Federal Power Act, the
Interstate Commerce Act or to any federal or state statute or regulation
limiting its ability to issue and perform its obligations under any Transaction
Agreement.
SECTION 4.20 INTELLECTUAL PROPERTY RIGHTS. Each of the Company and
its Subsidiaries owns, or is licensed under, and has the rights to use, all
material to the knowledge of the Company, patents, trademarks, trade names,
copyrights, technology, know-how and processes (collectively, "Intellectual
Property") used in, or necessary for the conduct of its business; no claims have
been asserted by any Person to the use of any such Intellectual Property or
challenging or questioning the validity or effectiveness of any license or
agreement related thereto. To the Company's and its Subsidiaries' knowledge,
there is no valid basis for any such claim and the use of such Intellectual
Property by the Company and its Subsidiaries will not infringe upon the rights
of any Person.
SECTION 4.21 INSURANCE. The Company and its Subsidiaries maintain,
with financially sound and reputable insurance companies, insurance in at least
such amounts as is customary for businesses similar to the Company. All
insurance coverages of the Company and its Subsidiaries are in full force and
effect and there are no past due premiums in respect of any such insurance.
SECTION 4.22 TITLE TO PROPERTIES. Except as set forth on Exhibit
4.22, the Company and its Subsidiaries have good and marketable title to all
their respective properties reflected on the financial statements referred to in
Section 4.7, free and clear of all Liens.
18
SECTION 4.23 INTERNAL ACCOUNTING CONTROLS. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's Board of Directors, to provide reasonable
assurance that (i) transactions are executed in accordance with managements'
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
SECTION 4.24 FOREIGN PRACTICES. Neither the Company nor any of its
Subsidiaries nor, to the Company's knowledge, any employee or agent of the
Company or any Subsidiary has made any payments of funds of the Company or
Subsidiary, or received or retained any funds, in each case in violation of the
Foreign Corrupt Practices Act.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PURCHASER
SECTION 5.1 PURCHASER. Purchaser hereby represents and warrants
to the Company that:
(a) Purchaser is an "accredited investor" within the meaning
of Rule 501(a) under the Securities Act and the Securities to be acquired by it
pursuant to this Agreement are being acquired for its own account and, as of the
date hereof, not with a view toward, or for sale in connection with, any
distribution thereof except in compliance with applicable United States federal
and state securities law; provided that, subject to such securities laws, the
disposition of Purchaser's property shall at all times be and remain within its
control;
(b) the execution, delivery and performance of this Agreement
and the purchase of the Securities pursuant thereto are within Purchaser's
corporate or partnership powers, as applicable, and have been duly and validly
authorized by all requisite corporate or partnership action;
(c) this Agreement has been duly executed and delivered by
Purchaser;
(d) the execution and delivery by Purchaser of the Transaction
Agreements to which it is a party does :not, and the consummation of the
transactions contemplated hereby and thereby will not, contravene or constitute
a default under or violation of(i) any provision of applicable law or
regulation, or (ii) any agreement, judgment, injunction, order, decree or other
instrument binding upon Purchaser;
(e) Purchaser understands that the Securities have not been
registered under the Securities Act and blue sky laws and may not be transferred
or sold except as specified in this Agreement or the remaining Transaction
Agreements;
(f) this Agreement constitutes a valid and binding agreement of
Purchaser enforceable in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency or similar laws affecting the enforceability of creditors
rights generally and (ii) equitable principles of general applicability;
19
(g) Purchaser has such knowledge and experience in financial
and business matters so as to be capable of evaluating the merits and risks of
its investment in the Securities and Purchaser is capable of bearing the
economic risks of such investment;
(h) Purchaser is knowledgeable, sophisticated and experienced
in business and financial matters; Purchaser has previously invested in
securities similar to the Securities and fully understands the limitations on
transfer described herein; Purchaser has been afforded access to information
about the Company and the financial condition, results of operations, property,
management and prospects of the Company sufficient to enable it to evaluate its
investment in the Securities; Purchaser has been afforded the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and the risks of investing in the
Securities; and Purchaser has been afforded the opportunity to obtain such
additional information which the Company possesses or can acquire that is
necessary to verify the accuracy and completeness of the information given to
Purchaser concerning the Company. The foregoing does not in any way relieve the
Company of its representations and other undertakings hereunder, and shall not
limit Purchaser's ability to rely thereon;
(i) no part of the source of funds used by Purchaser to
acquire the Securities constitutes assets allocated to any separate account
maintained by Purchaser in which any employee benefit plan (or its related
trust) has any interest; and
(j) Purchaser is a corporation organized under the laws of
Bermuda; its principal office is located at 00 Xxxxxx Xxxxxx, Xxxxxxxxx
Xxxxxxxx, Xxxxxxxx XX XX, Xxxxxxx. All contacts and communications between the
Purchaser and the Company relating to this Agreement and the transactions
contemplated hereby have taken place at the Company's offices in Massachusetts
and the Purchaser's investment advisor's offices in Georgia.
ARTICLE VI. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES
SECTION 6.1 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS TO
PURCHASE. The obligation of Purchaser hereunder to purchase the Convertible
Debentures at the Closing is subject to the satisfaction, on or before the
Closing Date, of each of the following conditions, provided that these
conditions are for Purchaser's sole benefit and may be waived by Purchaser at
any time in its sole discretion:
(a) The Company shall have duly executed this Agreement, the
Warrant and the Registration Rights Agreement, and delivered the same to
Purchaser;
(b) The Company shall have delivered to Purchaser duly
executed certificates representing the Convertible Debentures in accordance
with Section 2.3 hereof;
(c) The Company shall have delivered the Officer's Certificate
as to Financial Matters;
(d) The representations and warranties of the Company
contained in each Transaction Agreement shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at such time (except for representations and
20
warranties that speak as of a specified date) and the Company shall have
performed, satisfied and complied with all covenants, agreements and conditions
required by such Transaction Agreements to be performed, satisfied or complied
with by it at or prior to the Closing Date. Purchaser shall have received an
Officer's Certificate executed by the chief executive officer of the Company,
dated as of the Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by Purchaser, including but not limited
to certificates with respect to the Company Corporate Documents, resolutions
relating to the transactions contemplated hereby and the incumbencies of certain
officers and Directors of the Company. The form of such certificate is attached
hereto as EXHIBIT D;
(e) The Company shall have received all governmental, Board of
Directors, shareholders and third party consents and approvals necessary or
desirable in connection with the issuance and sale of the Securities and the
consummation of the transactions contemplated by the Transaction Agreements;
(f) All applicable waiting periods in respect to the issuance
and sale of the Securities shall have expired without any action having been
taken by any competent authority that could restrain, prevent or impose any
materially adverse conditions thereon or that could seek or threaten any of the
foregoing;
(g) No law or regulation shall have been imposed or enacted
that, in the judgment of Purchaser, could adversely affect the transactions set
forth herein or in the other Transaction Agreements, and no law or regulation
shall have been proposed that in the reasonable judgment of Purchaser could
reasonably have any such effect;
(h) Purchaser shall have received an opinion, dated the
Closing Date, of counsel to the Company, in form and substance satisfactory to
Purchaser;
(i) All fees and expenses in connection with the transactions
contemplated by the Transaction Agreements due and payable by the Company on or
prior to the Closing Date shall have been paid;
(j) The Company Corporate Documents and the Subsidiary
Corporate Documents, if any, shall be in full force and effect and no term or
condition thereof shall have been amended, waived or otherwise modified without
the prior written consent of Purchaser;
(k) There shall have occurred no material adverse change in
the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company or any Subsidiary since June 30, 2000;
(l) There shall exist no action, suit, investigation,
litigation or proceeding pending or threatened in any court or before any
arbitrator or governmental instrumentality that challenges the validity of or
purports to affect this Agreement or any other Transaction Agreement, or other
transaction contemplated hereby or thereby or that could reasonably be expected
to have a Material Adverse Effect, or any material adverse effect on the
enforceability of the Transaction Agreements or the Securities or the rights of
the holders of the Securities or Purchaser hereunder;
21
(m) Purchaser shall have confirmed the receipt of the
Convertible Debentures and the Warrants to be issued, duly executed by the
Company and registered in the name of Purchaser;
(n) There shall not have occurred any disruption or adverse
change in the financial or capital markets generally, or in the market for the
Common Stock (including but not limited to any suspension or delisting), which
Purchaser reasonably deems material in connection with the purchase of the
Securities;
(o) Immediately before and as of the Closing Date, no Default
or Event of Default shall have occurred and be continuing;
(p) An Escrow Agreement, substantially in the form of EXHIBIT
E, by and between the Company and Purchaser, and accepted by the Law Offices of
Xxx X. Xxxxxxxx as escrow agent (the "Escrow Agent"), shall have been duly
executed by the said parties.
SECTION 6.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of
the Company to issue and sell the Securities to Purchaser pursuant to this
Agreement are subject to the satisfaction, at or prior to the Closing Date,. of
the following conditions:
(a) The representations and warranties of Purchaser contained
herein shall be true and correct in all material respects on the Closing Date
and Purchaser shall have performed - and complied in all material respects with
all agreements required by this Agreement to be performed or complied with by
Purchaser at or prior to the Closing Date;
(b) The issue and sale of the Securities by the Company shall
not be prohibited by any applicable law, court order or governmental regulation;
(c) Receipt by the Company of duly executed counterparts of
this Agreement and the Registration Rights Agreement signed by Purchaser;
(d) The Company shall have received payment of the Purchase
Price, less the Expense Reimbursement Fee;
(e) There shall exist no action, suit, investigation,
litigation or proceeding pending or threatened m any court or before any
arbitrator or governmental instrumentality that challenges the validity of or
purports to effect this Agreement or any other Transaction Agreement, or other
transaction contemplated hereby or thereby or that could reasonably be expected
to have a Material Adverse Effect, or any material adverse effect on the
enforceability of the Transaction Agreements, or the Securities, or the rights
of the holders of the Securities or Purchaser hereunder.
ARTICLE VII AFFIRMATIVE COVENANTS
The Company and Purchaser hereby agree that, from and after the date
hereof for so long as any Convertible Debentures remain outstanding and for the
benefit of each other:
22
SECTION 7.1 INFORMATION. The Company will deliver to each holder of the
Convertible Debentures:
(a) promptly upon the filing thereof, copies of(i) all
registration statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent), and (ii) all reports on Forms 10-K,
10-Q and 8-K (or other equivalents) which the Company or any Subsidiary has
filed with the Commission after the Closing Date (collectively, "SEC Reports");
(b) simultaneously with the delivery of each item referred to
in clause (a) above, a certificate from the chief financial officer of the
Company stating that no Default or Event of Default has occurred and is
continuing, or, if as of the date of such delivery a Default shall have occurred
and be continuing, a certificate from the Company setting forth the details of
such Default or Event of Default and the action which the Company is taking or
proposes to take with respect thereto;
(c) within two (2) Business Days after any officer of the
Company obtains knowledge of a Default or Event of Default, or that any Person
has given any notice or taken any action with respect to a claimed Default
hereunder, a certificate of the chief financial officer of the Company setting
forth the details thereof and the action which the Company is taking or proposed
to take with respect thereto;
(d) promptly upon the mailing thereof to the shareholders of
the Company generally, copies of all financial statements, reports and proxy
statements so mailed and any other document generally distributed to
shareholders;
(e) at least two (2) Business Days prior to the consummation of
any Financing or other event requiring a repayment of the Convertible Debentures
under Section 3.4, notice thereof together with a summary of all material terms
thereof;
(f) notice promptly upon the occurrence of any event by which
the Reserved Amount becomes less than the sum of (i) 1.5 times the maximum
number of Conversion Shares issuable pursuant to the Transaction Agreements; and
(g) promptly following the commencement thereof, notice and a
description in reasonable detail of any litigation or proceeding to which the
Company or any Subsidiary is a party in which the amount involved is $250,000 or
more and not covered by insurance or in which injunctive or similar relief is
sought.
SECTION 7.2 PAYMENT OF OBLIGATIONS. The Company will, and will cause
each Subsidiary to, pay and discharge, at or before maturity, all their
respective material obligations, including, without limitation, tax liabilities,
except where the same may be contested in good faith by appropriate proceedings
and will maintain, in accordance with GAAP, appropriate reserves for the accrual
of any of the same.
SECTION 7.3 MAINTENANCE OF PROPERTY; INSURANCE. The Company will, and
will cause each Subsidiary to, keep all property necessary in its business in
good working order and condition, ordinary wear and tear excepted. In addition,
the Company and each Subsidiary will
23
maintain insurance in at least such amounts and against such risks as it has
insured against as of the Closing Date,
SECTION 7.4 MAINTENANCE OF EXISTENCE. The Company will, and will cause
each Subsidiary to, continue to engage in business of the same general type as
now conducted by the Company and such Subsidiaries, and will preserve, renew and
keep in full force and effect its respective corporate existence and their
respective material rights, privileges and franchises necessary or desirable in
the normal conduct of business.
SECTION 7.5 COMPLIANCE WITH LAWS. The Company will, and will cause each
Subsidiary to, comply, in all material respects, with all federal, state,
municipal, local or foreign applicable laws, ordinances, rules, regulations,
municipal by-laws, codes and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder) except (i) where compliance therewith is contested in
good faith by appropriate proceedings or (it) where non-compliance therewith
could not reasonably be expected, in the aggregate, to have a Material Adverse
Effect on the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Company or such Subsidiary.
SECTION 7.6 INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Company
will, and will cause each Subsidiary to, keep proper books of record and account
in which full, true and correct entries shall be made of all dealings and
transactions in relation to their respective businesses and activities; and will
permit, during normal business hours, Purchaser's representative or an affiliate
thereof, as representatives of Purchaser, to visit and inspect any of their
respective properties, upon reasonable prior notice, to examine and make
abstracts from any of their respective books and records and to discuss their
respective affairs, finances and accounts with their respective executive
officers and independent public accountants (and by this provision the Company
authorizes its independent public accountants to disclose and discuss with
Purchaser the affairs, finances and accounts of the Company and its Subsidiaries
in the presence of a representative of the Company; provided, however, that such
discussions will not result in any unreasonable expense to the Company, without
Company consent), all at such reasonable times.
SECTION 7.7 INVESTMENT COMPANY ACT. The Company will not be or become
an open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended.
SECTION 7.8 USE OF PROCEEDS. The proceeds from the issuance and sale of
the Convertible Debentures by the Company shall be used in accordance with
SCHEDULE 7.8 attached hereto. None of the proceeds from the issuance and sale of
the Convertible Debentures by the Company pursuant to this Agreement will be
used directly or indirectly for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any "margin stock" within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System.
SECTION 7.9 COMPLIANCE WITH TERMS AND CONDITIONS OF MATERIAL CONTRACTS.
The Company will, and will cause each Subsidiary to, comply, in all material
respects, with all terms
24
and conditions of all material contracts to which it is subject except in
particular circumstances in which the Company determines it to 'be in the best
interests of the Company not to comply.
SECTION 7.10 RESERVED SHARES AND LISTINGS.
(a) The Company shall at all times have authorized, and
reserved for the purpose of issuance, a sufficient number of shares of Common
Stock to provide for the full conversion of the outstanding Convertible
Debentures and exercise of the Warrants and issuance of the Conversion Shares
(based on the conversion price of the Convertible Debentures in effect from time
to time and the exercise price of the Warrants, respectively) (the "Reserved
Amount"). The Company shall not reduce the Reserved Amount without the prior
written consent of Purchaser. With respect to all Securities which-contain an
indeterminate number of shares of Common Stock issuable in connection therewith
(such as the Convertible Debentures), the Company shall include in the Reserve
Amount, no less than two (2) times the number of shares that is then actually
issuable upon conversion or exercise of such Securities. If at any time the
number of shares of Common Stock authorized and reserved for issuance is below
the number of Conversion Shares issued or issuable upon conversion of the
Convertible Debentures and exercise of the Warrants, the Company will promptly
take all corporate action necessary to authorize and reserve a sufficient
number of shares, including, without limitation, either (x) calling a special
meeting of shareholders to authorize additional shares, in the case of an
insufficient number of authorized shares or (y) in lieu thereof, consummating
the immediate repurchase of the Convertible Debentures and the Warrants
contemplated in Sections 3.4(c) and 10.3 hereof, respectively.
(b) If required, the Company shall promptly file the Listing
Applications and secure the listing of the Conversion Shares upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all Conversion Shares from time to time issuable upon conversion or
exercise of the Convertible Debentures and Warrants, respectively. The Company
will maintain the listing and trading of its Common Stock on the Nasdaq Market.
The Company will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the National Association of
Securities Dealers, Inc. (the "NASD") and such exchanges, as applicable. The
Company shall promptly provide to Purchaser copies of any notices it receives
regarding the continued eligibility of the Common Stock for listing on the
Nasdaq Market.
SECTION 7.11 TRANSFER AGENT INSTRUCTIONS. Upon receipt of a Notice of
Conversion or Notice of Exercise, as applicable, the Company shall immediately
direct the Company's transfer agent to issue certificates, registered in the
name of Purchaser or its nominee, for the Conversion Shares, in such amounts as
specified from time to time by Purchaser to the Company upon proper conversion
of the Convertible Debentures or exercise of the Warrants. Upon conversion of
any Convertible Debentures in accordance with their terms and/or exercise of any
Warrants in accordance with their terms, 'the Company will, and will use its
best lawful efforts to cause its transfer agent to, issue one or more
certificates representing shares of Common Stock in such name or names and in
such denominations specified by a Purchaser in a Notice of Conversion or Notice
of Exercise, as the case may be. As long as the Registration Statement
contemplated by
25
the Registration Rights Agreement shall remain effective, the shares of Common
Stock issuable upon conversion of any Convertible Debentures or exercise of the
Warrants shall be issued to any transferee of such shares from Purchaser without
any restrictive legend upon appropriate evidence of transfer in compliance with
the Securities Act and the rules and regulations of the Commission; provided
that for so long as the Registration Statement is effective, no opinion of
counsel will be required to effect any such transfer. The Company further
warrants and agrees that no instructions other than these instructions have been
or will be given to its transfer agent. Nothing in this Section 7.11 shall
affect in any way a Purchaser's obligation to comply with all securities laws
applicable to Purchaser upon resale of such shares of Common Stock, including
any prospectus delivery requirements.
SECTION 7.12 MAINTENANCE OF REPORTING STATUS; SUPPLEMENTAL INFORMATION.
So long as any of the Securities are outstanding, the Company shall timely file
all reports required to be filed with the Commission pursuant to the Exchange
Act. The Company shall not terminate its status as an issuer required to file
reports under the Exchange Act, even if the Exchange Act or the rules and
regulations thereunder would permit such termination. If at anytime the Company
is not subject to the requirements of Section 13 or 15(d) of the Exchange Act,
the Company will promptly furnish at its expense, upon request, for the benefit
of the holders from time to time of Securities, and prospective purchasers of
Securities, information satisfying the information requirements of Rule 144
under the Securities Act.
SECTION 7.13 FORM D; BLUE SKY LAWS. The Company agrees to file a "Form
D" with respect to the Securities as required under Regulation D of the
Securities Act and to provide a copy thereof to Purchaser promptly after such
filing. The Company shall, on or before the Closing Date, take such action as
the Company shall reasonably determine is necessary to qualify the Securities
for sale to Purchaser at the Closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to Purchaser on or prior to the Closing Date.
SECTION 7.14 SALES BY PURCHASER. Purchaser agrees that it will not
effect or cause any of its affiliates to effect a short sale of Common Stock for
so long as any of the Convertible Debentures remain outstanding or the Purchaser
or its affiliates hold any Securities.
ARTICLE VIII. NEGATIVE COVENANTS
The Company hereby agrees that after the date hereof for so long as any
Convertible Debentures remain outstanding and for the benefit of Purchaser:
SECTION 8.1 LIMITATIONS ON DEBT OR OTHER LIABILITIES. Neither the
Company nor any Subsidiary will create, incur, assume or suffer to exist (at any
time after the Closing Date, after giving effect to the application, of the
proceeds of the issuance of the Securities), except as set forth in Schedule
8.1, (i) any Debt except (x) Debt incurred in a Permitted Financing, (y) Debt
incurred in connection with equipment leases to which the Company or its
Subsidiaries are a party incurred in the ordinary course of business; or (z)
Debt incurred in connection with trade accounts payable, imbalances and refunds
arising in the ordinary course of business and (ii) any equity securities
(including Derivative Securities) (other than those securities that are issuable
(x)
26
under or pursuant to stock option plans, warrants or other rights programs
that exist as of the date hereof, or (y) in connection with the acquisition
(including by merger) of a business or of assets otherwise permitted under this
Agreement), unless the Company complies with the mandatory prepayment terms of
Section 3.4(b) hereof.
SECTION 8.2 TRANSACTIONS WITH AFFILIATES. The Company and each
Subsidiary will not, directly or indirectly, pay any funds to or for the account
of, make any investment (whether by acquisition or stock or indebtedness, by
loan, advance, transfer of property, guarantee or other agreement to pay,
purchase or service, directly or indirectly, and Debt, or otherwise) in, lease,
sell, transfer or otherwise dispose of any assets, tangible or intangible, to,
or participate in, or effect any transaction in connection with any joint
enterprise or other joint arrangement with, any Affiliate, except, (1) pursuant
to those agreements specifically identified on SCHEDULE 8.2 attached hereto
(with a copy of such agreements annexed to such. SCHEDULE 8.2.) or (2) on terms
to the Company or such Subsidiary no less favorable than terms that could be
obtained by the Company or such Subsidiary from a Person that is not art
Affiliate of the Company upon negotiation at arms' length, as determined in good
faith by the Board of Directors of the Company; PROVIDED that no determination
of the Board of Directors shall be required with respect to any such
transactions entered into in the ordinary course of business.
SECTION 8.3 MERGER OR CONSOLIDATION. The Company will not, in a single
transaction or a series of related transactions (i) consolidate with or merge
with or into any other Person, or (ii) permit any other Person to consolidate
with or merge into it, unless the Company shall be the survivor of such merger
or consolidation and (x) immediately before and immediately after given effect
to such transaction (including any indebtedness incurred or anticipated to be
incurred in connection with the transaction), no Default or Event of Default
shall have occurred and be continuing; and (y) the Company has delivered to
Purchaser an Officer's Certificate stating that such consolidation, merger or
transfer complies with this Agreement, and that all conditions precedent in this
Agreement relating to such transaction have been satisfied.
SECTION 8.4 LIMITATION ON ASSET SALES. Except as set forth on SCHEDULE
8.4, neither the Company nor any Subsidiary will consummate an Asset Sale of
material assets of the Company or any Subsidiary without the prior written
consent of Purchaser, which consent shall not be unreasonably withheld. As used
herein, "Asset Sale" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) or sales of capital
stock of a Subsidiary (other than directors' qualifying shares), property or
other assets (each referred to for the purpose of this definition as a
"disposition"), including any disposition by means of a merger, consolidation or
similar transaction other than a disposition of property or assets in arm's
length transactions in the ordinary course of business.
SECTION 8.5 RESTRICTIONS ON CERTAIN AMENDMENTS. Neither the Company nor
any Subsidiary will waive any provision of, amend, or suffer to be amended, any
provision of such entity's existing Debt, any material contract or agreement
previously or hereafter filed by the Company with the Commission as part of its
SEC Reports, any Company Corporate Document or Subsidiary Corporate Document if
such amendment, in the Company's reasonable judgment, would materially adversely
affect Purchaser or the holders of the Securities without the prior written
consent of Purchaser.
27
SECTION 8.6 RESTRICTIONS ON ISSUANCES OF SECURITIES.
(a) In addition to and not in lieu of the covenant specified
in Section 8.1 above:
(1) From the Closing Date and continuing until 180
days following the date on which the Registration Statement
becomes effective, the Company agrees that it will not issue
any of its equity securities (or securities convertible into
or exchangeable or exercisable for equity securities (the
"Derivative Securities")) on terms that allow a holder thereof
to acquire such equity securities (or Derivative Securities)
at a discount to the Market Price of the Common Stock at the
time of issuance or, in the case of Derivative Securities, at
a conversion price based on any formula (other than standard
anti-dilution provisions) based on the Market Price on a date
later than the date of issuance which is below the Market
Price on the date of issuance (each such event, a "Discounted
Equity Offering") other than (i) borrowings trader
conventional credit facilities existing as of the date hereof,
(ii) stock issued or credit facilities to be established in
connection with acquisitions, (iii) equity securities or
Derivative Securities in connection with employee and director
stock option and stock purchase plans, (iv) securities issued
under the Convertible Debentures or Warrants and (v) any
security issued to the Shoreline Fund or its Affiliates on
substantially similar terms to those contemplated by this
Agreement and the Transaction Agreements; provided that, any
such security and any shares of Common Stock into which such
security is convertible shall not be transferable for the
lesser of(x) one year from the date of issuance of such
security or (y) the date on which Purchaser no longer holds
any Convertible Debentures. In addition, the Company shall not
issue any equity securities in connection with a strategic
alliance entered into by the Company unless such securities
are the subject of a one year statutory or contractual hold
period or, if not subject to such a hold period, unless the
Purchaser has fully converted all outstanding Convertible
Debentures and exercised all Warrants. As used herein,
"discount" shall include, but not be limited to, (i) any
warrant, right or other security granted or offered in
connection with such issuance which, on the applicable date of
grant, is offered with an exercise or conversion price, as the
case may be, at less than the then current Market Price of the
Common Stock or, if such security has an exercise or
conversion price based on any formula (other than standard
anti-dilution provisions) based on the Market Price on a date
later than the date of issuance, then at a price below the
Market Price on such date of exercise or conversion, as the
case may be, or (ii) any commissions, fees or other allowances
paid in connection with such issuances (other than customary
underwriter or placement agent commissions, fees or
allowances). For the purposes of determining the Market Price
at which Common Stock is acquired under this Section, normal
underwriting commissions and placement fees (including
underwriters' warrants) shall be excluded. Notwithstanding the
foregoing, the Company may enter into the following types of
transactions (collectively referred to as "Permitted
Financings"): (1) "permanent financing" transactions, which
would include any form of debt or equity financing (other than
an underwritten offering), which is followed by a reduction of
the said
28
financing commitment to zero and payment of all related fees
and expenses; (2) "project financing" which provide for the
issuance of recourse debt instruments in connection with the
operation of the Company's business as presently conducted or
as proposed to be conducted; (3) an underwritten offering of
Common Stock, provided that such offering provides for the
registration of the Conversion Shares if the Registration
Statement has not been declared effective; and (4) other
financing transactions specifically consented to in writing by
the Purchaser.
(2) The restrictions set forth in paragraph (1) of
this Section 8.6(a) shall terminate in the event the average
Closing Bid Price for the Common Stock is equal to or greater
than $10.00 for ten Trading Days of any twelve consecutive
Trading Day period and the Registration Statement is
continuously effective during such period. The 180-day
restrictive period set forth in paragraph (1) of this Section
8.6(a) shall be increased by one day for each day a
Registration Default has occurred and not been cured by the
Company.
(b) Until such time as all of the Convertible Debentures have
been either redeemed or converted into Conversion Shares in full, the Company
agrees it will not issue any of its equity securities (or Derivative
Securities), unless any shares of Common Stock issued or issuable in connection
therewith are "restricted securities." As used herein "restricted securities"
shall mean securities which may not be sold prior to twelve (12) months
following the date of issuance of such securities by virtue of contractual
restrictions imposed by the Company or otherwise.
(c) Notwithstanding the foregoing, the restrictions contained
in this Section 8.6 shall not apply to the issuance by the Company of(or the
agreement to issue) Common Stock or securities convertible into Common Stock in
connection with (i) the acquisition (including by merger) of a business or of
assets otherwise permitted under this Agreement, or (ii) Company or Subsidiary
stock option or other compensatory or employee benefit plans.
SECTION 8.7 LIMITATION ON STOCK REPURCHASES. Except as otherwise set
forth in the Convertible Debentures and the Warrants, the Company shall not,
without the written consent of the Majority Holders, redeem, repurchase or
otherwise acquire (whether for cash or in exchange for property or other
securities or otherwise) any shares of capital stock of the Company or any
warrants, rights or options to purchase or acquire any such shares.
SECTION 8.8 LIMITATION ON SALES BY OFFICERS AND EMPLOYEE DIRECTORS. For
a period of 180 days following the date the Registration Statement is declared
effective by the Commission, no executive officer or a employee director of the
Company shall, individually, sell or otherwise dispose of (other than by reason
of death or disability) to any Person an amount of Common stock greater than
that allowed by Rule 144, promulgated under the Securities Act.
ARTICLE IX. RESTRICTIVE LEGENDS
SECTION 9.1 RESTRICTIONS ON TRANSFER. From and after their respective
dates of issuance, none of the Securities shall be transferable except upon the
conditions specified in this Article IX, which conditions are intended to ensure
compliance with the provisions of the
29
Securities Act in respect of the Transfer of any of such Securities or any
interest therein. Purchaser will cause any proposed transferee of any Securities
held by it to agree to take and hold such Securities subject to the provisions
and upon the conditions specified in this Article IX.
SECTION 9.2 NOTICE OF PROPOSED TRANSFERS. Prior to any proposed
Transfer of the Securities the holder thereof shall give written notice to the
Company of such holder's intention to effect such Transfer, setting forth the
manner and circumstances of the proposed Transfer, which shall be accompanied by
(A) an opinion of counsel reasonably acceptable to the Company, confirming that
such transfer does not give rise to a violation of the Securities Act, (B)
representation letters in form and substance reasonably satisfactory to the
Company to ensure compliance with the provisions of the Securities Act and (C)
letters in form and substance reasonably satisfactory to the Company from each
such transferee stating such transferee's agreement to be bound by the terms of
this Agreement and the Registration Rights Agreement. Such proposed Transfer may
be effected only if the Company shall have received such notice of transfer,
opinion of counsel, representation letters and other letters referred to in the
immediately preceding sentence, whereupon the holder of such Securities shall be
entitled to Transfer such Securities in accordance with the terms of the notice
delivered by the holder to the Company.
ARTICLE X. ADDITIONAL AGREEMENTS AMONG THE PARTIES
SECTION 10.1 LIQUIDATED DAMAGES.
(a) The Company shall cause its transfer agent to, issue and
deliver shares of Common Stock consistent with Section 7.11 hereof within three
(3) New York Stock Exchange Trading Days of delivery of a Notice of Conversion
or Notice of Exercise, as applicable (the "Deadline") to Purchaser (or any party
receiving Securities by transfer from Purchaser) at the address of Purchaser set
forth in the Notice of Conversion or Notice of Exercise, as the case may be. The
Company understands that a delay in the issuance of such certificates after the
Deadline could result in economic loss to Purchaser.
(b) Without in any way limiting Purchaser's right to pursue
other remedies, including actual damages and/or equitable relief, the Company
agrees that if delivery of the Conversion Shares is more than one (1) Business
Day after the Deadline (other than a failure due to the circumstances described
in Section 4.3 of the Convertible Debentures, which failure shall be governed by
such Section) the Company shall pay to Purchaser, as liquidated damages and not
as a penalty, $500 in cash for each $100,000 principal of Convertible Debentures
then outstanding for each of the first ten days that the Company fails to
deliver such Conversion Shares and $1,000 in cash for each $100,000 amount of
Convertible Debentures then outstanding per each day thereafter. Such cash
amount shall be paid in cash to Purchaser upon demand or, at the option of the
Company (by written notice to the Purchaser by the first day of the week
following the week in which it has accrued), shall be added to the principal
amount of the Convertible Debenture (if then outstanding) payable to Purchaser,
in which event interest shall accrue thereon in accordance with the terms of the
Convertible Debentures and such additional principal amount shall be convertible
into Conversion Shares in accordance with the terms of the Convertible
Debentures.
30
SECTION 10.2 CONVERSION NOTICE. The Company agrees that, in addition to
any other remedies which may be available to Purchaser, including, but not
limited to, the remedies available under Section 10.1, in the event the Company
fails for any reason (other than as a result of actions taken by Purchaser in
breach of this Agreement) to effect delivery to Purchaser of certificates with
or without restrictive legends as contemplated by Article IX representing the
shares of Common Stock on or prior to the Deadline after conversion of any
Convertible Debentures or exercise of the Warrants, Purchaser will be entitled,
if prior to the delivery of such certificates, to revoke the Notice of
Conversion or Notice of Exercise, as applicable, by delivering a notice to such
effect to the Company whereupon the Company and Purchaser shall each be restored
to their respective positions immediately prior to delivery of such Notice of
Conversion or Notice of Exercise, as the case may be.
SECTION 10.3 CONVERSION LIMIT. Notwithstanding the conversion rights
under the Convertible Debentures, unless Purchaser delivers a waiver in
accordance with the immediately following sentence, in no event shall Purchaser
be entitled to convert any portion of the Convertible Debentures, in excess of
that portion of the Convertible Debentures, as applicable, of which the sum of
(i) the number of shares of ,Common Stock beneficially owned by Purchaser and
its Affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Convertible Debenture or other Derivative Securities convertible into or
exchangeable for shares of Common Stock which contain a limitation similar to
that set forth in this Section 10.3), and (ii) the number of shares of Common
Stock issuable upon the conversion of the portion of the Convertible Debenture
with respect to which this determination is being made, would result in
beneficial ownership by Purchaser and its Affiliates of more than 4.99% of the
outstanding shares of Common Stock. For purposes of Section 10.3(i) beneficial
ownership shall be determined in accordance with Rule 13d-3 of the Exchange Act
and Regulations 13 D-G thereunder, except as otherwise provided in this Section
10.3. The foregoing limitation shall not apply and shall be of no further force
or effect (i) immediately preceding and upon the occurrence of any voluntary or
mandatory redemption or repayment transaction described herein or in the
Convertible Debentures, (ii) immediately preceding and upon any Sale Event,
(iii) on the Maturity Date or (iv) following the occurrence of any Event of
Default which is not cured for a period often (10) calendar days.
SECTION 10.4 REGISTRATION RIGHTS.
(a) The Company shall grant Purchaser registration rights
covering the Conversion Shares (the: "Registrable Securities") on the terms set
forth in the Registration Rights Agreement and herein.
(b) The Company shall prepare and file on or before the 30th
day following the Closing Date (the "Filing Date"), a registration statement or
amendment thereto (the "Registration Statement") covering the resale of the
Registrable Securities with the Commission. In the event the Company fails to
file the Registration Statement by the Filing Date for any reason other than
Purchaser's failure to provide information requested by the Company for the
completion and filing of the Registration Statement, the Company shall pay to
Purchaser as liquidated damages (and not as a penalty) one percent (1%) of the
then outstanding principal amount of Convertible Debentures per day until the
Registration Statement is filed with the Commission. The Company shall use its
best efforts to cause the Registration Statement to be
31
declared effective by the Commission or the earlier of (i) 90 days following the
Closing Date, (ii) ten days following the receipt of a "No Review" Letter from
the Commission or (iii) the first Business Day following the day the Commission
determines the Registration Statement eligible to be declared effective (the
"Required Effectiveness Date"). The Company shall pay all expenses of
registration (other than underwriting fees and discounts, if any, in respect of
Registrable Securities offered and sold under the registration statement by
Purchaser). The Company agrees to file an initial written response to the
Commission within ten calendar days of receipt of any comments by the Commission
relating to the Registration Statement.
(c) If the Registration Statement is not declared effective by the
Commission by the Required Effectiveness Date, the Company shall pay to
Purchaser, as liquidated damages (and not as a penalty), an amount equal to 2%
of the outstanding principal amount of the Convertible Debentures, prorated, for
each 30 day period the Registration Statement is not declared effective by the
Commission, which amount will be increased to 3% of the outstanding principal
amount of the Convertible Debentures in the event that the Registration
Statement is not declared effective by the Commission within 120 days of the
Closing Date. In the event the Company fails to obtain a valid registration
statement by the 180th day following the Closing ]Date, the Company will redeem
the Convertible Debentures and the Warrants as set forth :in Section 5 of the
Convertible Debentures and Section 13 of the Warrants, respectively.
Additionally, the Company will grant to Purchaser certain piggyback registration
rights in the event the Company proposes to effect a registered offering of
Common Stock or warrants or both prior to the filing of the Registration
Statement referenced above.
(d) Any such liquidated damages shall be paid in cash by the Company
to Purchaser by wire transfer in immediately available funds on the last day of
each calendar week following the event requiring its payment.
(e) If, following the declaration of effectiveness of the
Registration Statement, such registration statement (or any prospectus or
supplemental prospectus contained therein) shall cease to be effective for any
reason (including but not limited to the occurrence of any event that results
in any prospectus or supplemental prospectus containing an untrue statement of
a material fact or omitting a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading), the Company fails to file required
amendments to the Registration Statement in order to allow the Purchaser to
resell the Conversion Shares pursuant to the Registration Statement as
unrestricted, unlegended, freely tradeable shares of Common Stock, or if for any
reason there are insufficient shares of such shares of Common Stock registered
under the then current Registration Statement to effect full conversion of the
Convertible Debentures or exercise of the Warrants (a "Registration Default"),
the Company shall immediately take all necessary steps to cause the Registration
Statement to be amended or supplemented so as to cure such Registration Default.
Failure to cure a Registration Default within ten (10) Business Days shall
result in the Company paying to Purchaser liquidated damages at the rate of
$1,000 per day from the date of such Registration Default until the Registration
Default is cured.
32
ARTICLE XI. ADJUSTMENT OF FIXED PRICE
SECTION 11.1 REORGANIZATION. The Conversion Price and the exercise
price of the Warrants (collectively, the "Fixed Price") shall be adjusted, as
applicable, as hereafter provided.
SECTION 11.2 SHARE REORGANIZATION. If and whenever the Company shall:
(i) subdivide the outstanding shares of Common Stock into a
greater number of shares;
(ii) consolidate the outstanding shares of Common Stock into
a smaller number of shares;
(iii) issue Common Stock or securities convertible into or
exchangeable for shares of Common Stock as it stock dividend to all or
substantially all the holders of Common Stock; or
(iv) make a distribution on the outstanding Common Stock to
all or substantially all the holders of Common Stock payable in Common Stock or
securities convertible into or exchangeable for Common Stock; any of such events
being herein called a "Share Reorganization," then in each such case the
applicable Fixed Price shall be adjusted, effective immediately after the record
date at which the holders of Common Stock are,, determined for the purposes of
the Share Reorganization or, if no record date is fixed, the effective date of
the Share Reorganization, by multiplying the applicable Fixed Price in effect on
such record or effective date, as the case may be, by a fraction of which:
(I) the numerator shall be the number of shares of Common Stock
outstanding on such record or effective date (without giving effect to
the Share Reorganization); and
(II) the denominator shall be the number of shares of Common
Stock outstanding after giving effect to such Share Reorganization,
including, in the case of a distribution of securities convertible into
or exchangeable for shares of Common Stock, the number of shares of
Common Stock that would have been outstanding if such securities had
been converted into or exchanged for Common Stock on such record or
effective date.
SECTION 11.3 RIGHTS OFFERING. If and whenever the Company shall issue
to all or substantially all the holders of Common Stock, rights, options or
warrants under which such holders are entitled, during a period expiring not
more than 45 days after the record date of such issue, to subscribe for or
purchase Common Stock (or Derivative Securities), at a price per share (or, in
the case of securities convertible into or exchangeable for Common Stock, at an
exchange or conversion price per share at the date of issue of such securities)
of less than 95% of the Market Price of the Common Stock on such record date
(any such event being herein called a "Rights Offering"), then in each such case
the applicable Fixed Price shall be adjusted, effective immediately after the
record date at which holders of Common Stock are determined for the purposes of
the Rights Offering, by multiplying the applicable Fixed Price in effect on such
record date by a fraction of which:
33
(i) the numerator Shall be the sum of:
(I) the number of shares of Common Stock outstanding
on such record date; and
(II) a number obtained by dividing:
(A) either,
(x) the product of the total number of
shares of Common Stock so offered for subscription or purchase and the price at
which such shares are so offered, or
(y) the product of the maximum number of
shares of Common Stock into or for which the convertible or exchangeable
securities so offered for subscription or purchase may be converted or
exchanged and the conversion or exchange price of such securities, or, as the
case may be, by
(B) the Market Price of the Common Stock on such
record date; and
(ii) the denominator shall be the sum of:
(I) the number of shares of Common Stock outstanding
on such record date; and
(II) the number of shares of Common Stock so offered
for subscription or purchase (or, in the case of Derivative
Securities, the maximum number of shares of Common Stock for or
into which the securities so offered for subscription or
purchase may be converted or exchanged).
To the extent that such rights, options or warrants are not exercised prior to
the expiry time thereof, the applicable Fixed Price shall be readjusted
effective immediately after such expiry time to the applicable Fixed Price which
would then have been in effect upon the number of shares of Common Stock (or
Derivative Securities) actually delivered upon the exercise of such rights,,
options or warrants.
SECTION 11.4 SPECIAL DISTRIBUTION. If and whenever the Company shall
issue or distribute to all or substantially all the holders of Common Stock:
(i) shares of the Company of any class, other than Common
Stock;
(ii) rights, options or warrants; or
(iii) any other assets (excluding cash dividends and
equivalent dividends in shares paid in lieu of cash dividends in the ordinary
course);
34
and if such issuance or distribution does not constitute a Share Reorganization
or a Rights Offering (any such event being herein called a "Special
Distribution"), then in each such case the applicable Fixed Price shall be
adjusted, effective immediately after the record date at which the holders of
Common Stock are determined for purposes of the Special Distribution, by
multiplying the applicable Fixed Price in effect on such record date by a
fraction of which:
(i) the numerator shall be the difference between:
(A) the product of the number of shares of Common
Stock outstanding on such record date and the Market Price of
the Common Stock on such date; and
(B) the fair market value, as determined by the
Directors (whose determination shall be conclusive), to the
holders of Common Stock of the shares, rights, options,
warrants, evidences of indebtedness or other assets issued or
distributed in the Special Distribution (net of any
consideration paid therefor by the holders of Common Stock),
and
(ii) the denominator shall be the product of the number of
shares of Common Stock outstanding on such record date and the Market Price of
the Common Stock on such date.
SECTION 11.5 CAPITAL REORGANIZATION: If and whenever there shall occur:
(i) a reclassification or redesignation of the shares of
Common Stock or any change of the shares of Common Stock into other shares,
other than in a Share Reorganization;
(ii) a consolidation, merger or amalgamation of the Company
with, or into another body corporate; or
(iii) the transfer of all or substantially all of the assets
of the Company to another body corporate;
(any such event being herein called a "Capital Reorganization"), then in each
such case the holder who exercises the right to convert Convertible Debentures
after the effective date of such Capital Reorganization shall be entitled to
receive and shall accept, upon the exercise of such right, in lieu of the number
of shares of Common Stock to which such holder was theretofore entitled upon the
exercise of the conversion privilege, the aggregate number of shares or other
securities or property of the Company or of the body corporate resulting from
such Capital Reorganization that such holder would have been entitled to receive
as a result of such Capital Reorganization if, on the effective date thereof,
such holders had been the holder of the number of shares of Common Stock to
which such holder was theretofore entitled upon conversion; provided, however,
that no such Capital Reorganization shall be consummated in effect unless all
necessary steps shall have been taken so that such holders shall thereafter be
entitled to receive such number of shares or other securities of the Company or
of the body corporate resulting from such Capital Reorganization, subject to
adjustment thereafter in accordance with
35
provisions the same, as nearly as maybe possible, as those contained above.
SECTION 11.6 ADJUSTMENT RULES. The following rules and procedures
shall be applicable to adjustments made in this Article XI:
(a) no adjustment in the applicable Fixed Price shall be
required unless such adjustment would result in a change of at least 1% in the
applicable Fixed Price then in effect, provided, however, that any adjustments
which, but for the provisions of this clause would otherwise have been required
to be made, shall be carded forward and taken into account in any subsequent
adjustment;
(b) if any event occurs of the type contemplated by the
adjustment provisions of this Article XI but not expressly provided for by such
provisions, the Company will give notice of such event as provided herein, and
the Directors will make an appropriate adjustment in the Fixed Price so that the
rights of the holders of the applicable Security shall not be diminished by such
event; and
(c) if a dispute shall at any time arise with respect to any
adjustment of the applicable Fixed Price, such dispute shall be conclusively
determined by the auditors of the Company or, if they are unable or unwilling to
act, by a firm of independent chartered accountants selected by the Directors
and any such determination shall be binding upon the Company and Purchaser.
SECTION 11.7 CERTIFICATE AS TO ADJUSTMENT. The Company shall from time
to time promptly after the occurrence of any event which requires an adjustment
in the applicable Fixed Price deliver to Purchaser a certificate specifying the
nature of the event requiring the adjustment, the amount of the adjustment
necessitated thereby, the applicable Fixed Price after giving effect to such
adjustment and setting forth, in reasonable detail, the method of calculation
and the facts upon which such calculation is based.
SECTION 11.8 NOTICE TO HOLDERS. If the Company shall fix a record date
for:
(a) any Share Reorganization (other than the subdivision of
outstanding Common Stock into a greater number of shares or the consolidation of
outstanding Common Stock into a smaller number of shares),
(b) any Rights Offering,
(c) any Special Distribution,
(d) any Capital Reorganization (other than a reclassification
or redesignation of the Common Stock into other shares),
(e) Sale Event; or
(f) any cash dividend,
the Company shall, not less than 10 days prior to such record date or, if no
record date is fixed,
36
prior to the effective date of such event, give to Purchaser notice of the
particulars of the proposed event or the extent that such particulars have been
determined at the time of giving the notice.
ARTICLE XII. EVENTS OF DEFAULT
SECTION 12.1 EVENTS OF DEFAULT. If one or more of the following events
(each an "Event of Default") shall have occurred and be continuing:
(a) failure by the Company to pay or repay when due, all or
any part of the principal on any of the Convertible Debentures (whether by
virtue of the agreements specified in this Agreement or the Convertible
Debentures);
(b) failure by the Company to pay (i) within five (5) Business
Days of the due date thereof any interest on any Convertible Debentures or (ii)
within five (5) Business Days following the delivery of notice to the Company of
any fees or any other amount payable (not otherwise referred to in (a) above or
this clause (b)) by the Company under this Agreement or any other Transaction
Agreement;
(c) failure by the Company to timely comply with the
requirements of Section 7.11 or 10.1 hereof, which failure is not cured within
five (5) Business Days of such failure;
(d) failure on the part of the Company to observe or perform
any covenant contained in Section 7.10 or Article VIII of this Agreement;
(e) failure on the part of the Company to observe or perform
any covenant or agreement contained in any Transaction Agreement (other than
those covered by clauses (a), (b), (c), or (d) above) for 30 days from the date
of such occurrence;
(f) the trading in the Common Stock shall have been suspended
by the Commission or any National Market (except for any suspension of trading
of limited duration solely to permit dissemination of material information
regarding the Company and except if, at the time there is any suspension on any
National Market, the Common Stock is then listed and approved for trading on
another National Market within ten (10) Trading Days thereof);
(g) failure of the Company to file the Listing Applications
when the Company is eligible within twenty 1120) Business Days of the Closing
Date, which failure is not cured within five (5) Business Days of such failure;
(h) the Company shall have its Common Stock delisted from a
National Market for at least ten (10) consecutive Trading Days and is unable to
obtain a listing on a National Market within such ten (10) Trading Days;
(i) the Registration Statement shall not have been declared
effective by the Commission by the Required Effectiveness Date, or such
effectiveness shall not be maintained for the Registration Maintenance Period,
in each case which results in the Company incurring the Registration Default fee
for a period in excess of 10 days;
37
(j) the Company or any Subsidiary has commenced a voluntary
case or other proceeding seeking liquidation, winding-up, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency, moratorium or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or has
consented to any such relief or to the appointment of or taking possession by
any such official in an involuntary case or other proceeding commenced against
it, or has made a general assignment for the benefit of creditors, or has
failed generally to pay its debts as they become due, or has taken any
corporate action to authorize any of the foregoing;
(k) an involuntary case or other proceeding has been commenced
against the Company or any Subsidiary seeking liquidation, winding-up,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency, moratorium or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 60 days, or an order for relief has been entered against the
Company or any Subsidiary under the federal bankruptcy laws as now or hereafter
in effect;
(l) except for the Company's current default in its credit
facility as disclosed in footnote 8 to its financial statements for the quarter
ended June 30, 2000, default in any provision (including payment) or any
agreement governing the terms of any Debt of the Company or any Subsidiary in
excess of $500,000, which has not been cured within any applicable period of
grace associated therewith;
(m) judgments or orders for the payment of money which in the
aggregate at any one time exceed $1,000,000 and are not covered by insurance
have been rendered against the Company or any Subsidiary by a court of competent
jurisdiction and such judgments or orders shall continue unsatisfied and
unstayed for a period of 60 days; or
(n) any representation, warranty, certification or statement
made by the Company in any Transaction Agreement or which is contained in any
certificate, document or financial or other statement furnished at any time
under or in connection with any Transaction Agreement shall prove to have been
untrue in any material respect when made.
then, and in every such occurrence, Purchaser may, with respect to an Event of
Default specified in paragraphs (a) or (b), and the Majority Holders may, with
respect to any other Event of Default, by notice to the Company, declare the
Convertible Debentures to be, and the Convertible Debentures shall thereon
become immediately due and payable; provided that in the case of any of the
Events of Default specified in paragraph (j) or (k) above with respect to the
Company or any Subsidiary, then, without any notice to the Company or any other
act by Purchaser, the entire amount of the Convertible Debentures shall become
immediately due and payable, PROVIDED, FURTHER, if any Event of Default has
occurred and is continuing, and irrespective of whether any Convertible
Debenture has been declared immediately due and payable hereunder, any Purchaser
of Convertible Debentures may proceed to protect and enforce the rights of
Purchaser by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Convertible
38
Debenture, or for an injunction against a violation of any of the terms hereof
or thereof, or in aid of the exercise of any power granted hereby or thereby or
by law or otherwise, and PROVIDED FURTHER, in the case of any Event of Default,
the amount declared due and payable on the Convertible Debentures shall be the
redemption price set forth therein.
SECTION 12.2 POWERS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to Purchaser is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy. Every power and remedy given by the Convertible Debentures or
by law may be exercised from time to time, and as often as shall be deemed
expedient, by Purchaser.
ARTICLE XIII. MISCELLANEOUS
SECTION 13.1 NOTICES. All notices, demands and other communications to
any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party at its address set forth on the
signature pages hereof, or such other address as such party may hereafter
specify for the purpose to the other parties. Each such notice, demand or other
communication shall be effective (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified on the signature page hereof, the
sender has received electronic confirmation of the transmission thereof and the
sender has provided contemporaneous telephonic notice to the recipient of such
transmission, (ii) if given by mail, four days after such communication is
deposited in the United States mail with first class postage prepaid, addressed
as aforesaid or (iii) if given by any other means, when delivered at the address
specified in or pursuant to this Section. For purposes of telephonic notice to
the company in clause (i) above, such telephonic notice shall be to Xxxxxxx X.
Xxxxxxxxxx, Xxxxx Xxxxxxx or Xxxxx Xxxxxxxx unless the Company notifies the
Purchaser of other individuals to whom telephone notice may be directed.
SECTION 13.2 NO WAIVERS; AMENDMENTS.
(a) No failure or delay on the part of any party in exercising
any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or remedy preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy.
(b) Any provision of this Agreement may be amended,
supplemented or waived if, but only if, such amendment, supplement or waiver is
in writing and is signed by the Company and the Majority Holders; provided, that
without the consent of each holder of any Convertible Debenture affected
thereby, an amendment or waiver may not (a) reduce the aggregate principal
amount of Convertible Debentures whose holders must consent to an amendment or
waiver, (b) reduce the rate or extend the time for payment of interest on any
Convertible Debenture, (c) reduce the principal amount of or extend the stated
maturity of any Convertible Debenture or (d) make any Convertible Debenture
payable in money or property other than as stated in such Convertible Debenture.
In determining whether the holders of the
39
requisite principal amount of Convertible Debentures have concurred in any
direction, consent, or waiver as provided in any Transaction Agreement,
Convertible Debentures which are owned by the Company or any other obligor on or
guarantor of the convertible Debentures, or by any Person Controlling,
Controlled by, or under common Control with any of the foregoing, shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; and PROVIDED FURTHER that no such amendment, supplement or waiver
which affects the rights of Purchaser and their affiliates otherwise than solely
in their capacities as holders of Convertible Debentures shall be effective with
respect to them without their prior written consent.
SECTION 13.3 INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless
Purchaser, its Affiliates, and each Person, if any, who controls Purchaser,
or any of its Affiliates, within the meaning of the Securities Act or the
Exchange Act (each, a "Controlling Person"), and the respective partners,
agents, employees, officers and Directors of Purchaser, their Affiliates and any
such Controlling Person (each a "Purchaser Indemnified Party") and collectively,
the "Purchaser Indemnified Parties"), from and against any and all losses,
claims, damages, liabilities and expenses (including, without limitation and as
incurred, reasonable costs of investigating, preparing or defending any such
claim or action, whether or not such Purchaser Indemnified Party is a party
thereto, provided that the Company shall not be obligated to advance such costs
to any Purchaser Indemnified Party other than Purchaser unless it has received
from such Purchaser Indemnified Party an undertaking to repay to the Company the
costs so advanced if it should be determined by final judgment of a court of
competent jurisdiction that such Purchaser Indemnified Party was not entitled to
indemnification hereunder with respect to such costs) which may be incurred by
such Purchaser Indemnified Party in connection with any investigative,
administrative or judicial proceeding brought or threatened that relates to or
arises out of, or is in connection with any activities contemplated by any
Transaction Agreement or any other services rendered in connection herewith;
provided that the Company will not be responsible for any claims, liabilities,
losses, damages or expenses that are determined by final judgment of a court of
competent jurisdiction to result from such Purchaser Indemnified Party's gross
negligence, willful misconduct or bad faith.
(b) The Purchaser agrees to indemnify and hold harmless the
Company, its Affiliates, and each Person, if any, who controls the Company,
or any of its Affiliates, within the meaning of the Securities Act or the
Exchange Act (each, a "Controlling Person"), and the respective employees,
officers and Directors of the Company (each a "Company Indemnified Party")
and collectively, the "Company Indemnified Parties"), from and against any
and all losses, claims, damages, liabilities and expenses (including, without
limitation and as incurred, reasonable costs of investigating, preparing or
defending any such claim or action, whether or not such Company Indemnified
Party is a party thereto, provided that the Purchaser shall not be obligated
to advance such costs to any Company Indemnified Party other than the Company
unless it has received from such Company Indemnified Party an undertaking to
repay to the Purchaser the costs so advanced if it should be determined by
final judgment of a court of competent jurisdiction that such Company
Indemnified Party was not entitled to indemnification hereunder with respect
to such costs) which may be incurred by such Company Indemnified Party in
connection with any investigative, administrative or judicial proceeding
brought or threatened that relates to or arises out of, or is in connection
with any activities contemplated by
40
any Transaction Agreement or any other services rendered in connection herewith;
provided that the Purchaser will not be responsible for any claims, liabilities,
losses, damages or expenses that are determined by final judgment of a court of
competent jurisdiction to result from such Company Indemnified Party's gross
negligence, willful misconduct or bad faith.
(c) If any action shall be brought against a Purchaser
Indemnified Party or a Company Indemnified Party (each an "Indemnified Party")
with respect to which indemnity may be sought against a party under this
Agreement, such Indemnified Party shall promptly notify the party or parties
from whom indemnification is being claimed (the "Indemnifying Party") in writing
and the Indemnifying Party, at its option, may, assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Party and payment of all reasonable fees and expenses. The failure to so notify
the Indemnifying Party shall not affect any obligations the Indemnifying Party
may have to such Indemnified Party under this Agreement or otherwise unless the
Indemnifying Party is materially adversely affected by such failure.. Such
Indemnified Party shall have 'the right to employ separate counsel in such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party, unless (i) the
Indemnifying Party has failed to assume the defense and employ counsel or (ii)
the named parties to any such action (including any impleaded parties) include
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that there may be one or more legal defenses
available to it which conflict with those available to the Indemnifying Party,
in which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense of such action or proceeding on behalf of such Indemnified Party,
PROVIDED, HOWEVER, that the Indemnifying Party shall not, in connection with any
one such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be responsible hereunder for the reasonable fees
and expenses of more than one such firm of separate counsel, in addition to any
local counsel, which counsel shall be designated by the Indemnified Party. The
Indemnifying Party shall not be liable for any settlement of any such action
effected without the written consent of the Indemnifying Party (which shall not
be unreasonably withheld) and the Indemnifying Party agrees to indemnify and
hold harmless each Indemnified Party from and against any loss or liability by
reason of settlement of any action effected with the consent of the Indemnifying
Party. In addition, the Indemnifying Party will not, without the prior written
consent of the Indemnified Party, settle or compromise or consent to the entry
of any judgment in or otherwise seek to terminate any pending or threatened
action, claim, suit or proceeding in respect to which indemnification may be
sought hereunder (whether or not any Indemnified Party is a party thereto)
unless such settlement, compromise, consent or termination includes an express
unconditional release of the Indemnified Party and the other Indemnified
Parties, satisfactory in form and substance to the Indemnified Party, from all
liability arising out of such action, claim, suit or proceeding.
(d) The indemnification and expense reimbursement obligations
set forth in this Section 13.3 shall be in addition to any liability any
Indemnifying Party may have to any Indemnified Party at common law or otherwise;
(ii) shall survive the termination of this Agreement and the other Transaction
Agreements and the payment in full of the Convertible
41
Debentures and (iii) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of Purchaser or the Company
or any other Indemnified Party.
SECTION 13.4 EXPENSES: DOCUMENTARY TAXES. The Company agrees to pay to
Purchaser a fee of $25,000.00 (the "Expense Reimbursement Fee") in full
satisfaction of all obligations of the Company to Purchaser and its agents in
connection with the negotiation and preparation of the Transaction Agreements,
relevant due diligence, and fees and disbursements of legal counsel. In
addition, the Company agrees to pay any and all stamp, transfer and other
similar taxes, assessments or charges payable in connection with the execution
and delivery of any Transaction Agreement or the issuance of the Securities to
Purchaser, excluding their assigns.
SECTION 13.5 PAYMENT. The Company agrees that, so long as Purchaser
shall own any Convertible Debentures purchased by it from the Company hereunder,
the Company will make payments to Purchaser of all amounts due thereon by wire
transfer by 4:00 P.M. (E.S.T.).
SECTION 13.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Company and upon Purchaser and its respective successors and assigns.
So long as the Convertible Debentures remain outstanding, the Company shall not
assign or otherwise transfer its rights or obligations under this Agreement to
any other Person without the prior written consent of the Majority Holders. All
provisions hereunder purporting to give rights to Purchaser and its affiliates
or to holders of Securities are for the express benefit of such Persons and
their successors and assigns.
SECTION 13.7 BROKERS. Except for a fee payable to Xxxxxxx Capital
Markets, LLC, and DP Securities, Inc., each a registered broker-dealer, in the
form of (i) a cash fee of 6% of the principal amount of the Convertible
Debentures issued on the Closing Date; and (ii) warrants to purchase 20,000
shares of Company Common Stock, the Company represents and warrants that it has
not employed any broker, finder, financial advisor or investment banker who
would be entitled to any brokerage, finder's or other fee or commission payable
by the Company or Purchaser in connection with the sale of the Securities.
Purchaser represents and warrants that it has not employed any other broker,
finder, financial advisor or investment banker who would be entitled to any
brokerage, finder's or other fee or commission payable by the Company in
connection with the sale of the Securities.
SECTION 13.8 MASSACHUSETTS LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL; APPOINTMENT OF AGENT. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF MASSACHUSETTS. EACH
PARTY HERETO HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE STATE OF MASSACHUSETTS AND OF ANY FEDERAL DISTRICT COURT
SITTING IN BOSTON, MASSACHUSETTS FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH PROCEEDING
42
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY TO THIS AGREEMENT
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
SUCH PARTY AT ITS ADDRESS SET FORTH HEREIN. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, EACH
PARTY WAIVES ITS RIGHT TO A TRIAL BY JURY.
SECTION 13.9 ENTIRE AGREEMENT. This Agreement, the Exhibits or
Schedules hereto, which include, but are not limited to the Convertible
Debenture, the Warrant and the Registration Rights Agreement, set forth the
entire agreement and understanding of the parties relating to the subject matter
hereof and supercedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits and Schedules to
this Agreement are incorporated herein by this reference and shall constitute
part of this Agreement as is fully set forth herein.
SECTION 13.10 SURVIVAL; SEVERABILITY. The representations, warranties,
covenants and agreements of the parties hereto shall survive the Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
SECTION 13.11 TITLE AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
SECTION 13.12 REPORTING ENTITY FOR THE COMMON STOCK. The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
and all Exhibits shall be Bloomberg, L.P. or any successor thereto. The written
mutual consent of the Purchaser and the Company shall be required to employ any
other reporting entity.
SECTION 13.13 PUBLICITY. The Company and the Purchaser shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and no party
shall issue any such press release or otherwise make any such public statement
without the prior written consent of the other parties, which consent shall not
be unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other parties with prior notice of such
public statement. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of Purchaser without the prior written consent of Purchaser,
except to the extent required by law, in which case the Company shall provide
Purchaser with prior written notice of such public disclosure.
[SIGNATURE PAGE FOLLOWS]
43
SIGNATURE PAGE FOR SECURITIES PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
above written.
BOSTON BIOMEDICA, INC.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
Address: Boston Biomedica, Inc.
000 Xxxx Xxxxxx
Xxxx Xxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Tel.: (000) 000-0000
GCA STRATEGIC INVESTMENT FUND LIMITED
By: /s/ Xxxxx X. Xxxxxx
------------------------------
Name: Xxxxx X. Xxxxxx
Title: Director
Address: c/o Prime Management Limited
Mechanics Xxxxxxxx
00 Xxxxxx Xxxxxx
Xxxxxxxx XX XX, Xxxxxxx
Fax: 000-000-0000
Tel.: 000-000-0000
44
