EXHIBIT 4.2
-----------
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement is entered into and dated as of
March 11, 2004 (together with the Disclosure Schedules, this "AGREEMENT"),
among Xxxxxx Companies, Inc., a Missouri corporation (the "COMPANY"), and
the Investors identified on the signature pages hereto (each, a "INVESTOR"
and collectively, the "INVESTORS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to borrow certain sums from each of the
Investors (each, a "LOAN" and, collectively, the "LOANS") and sell certain
securities to each of the Investors, and each Investor, severally and not
jointly, desires to make a Loan to the Company and purchase from the
Company, certain securities of the Company.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained
in this Agreement, and for other good and valuable consideration the receipt
and adequacy of which are hereby acknowledged, the Company and the Investors
agree as follows:
ARTICLE I.
DEFINITIONS
1.1. Definitions. In addition to the terms defined elsewhere in
-----------
this Agreement, the following terms shall have the meanings set forth in this
Section 1.1:
"ACTION" means any action, suit, inquiry, notice of
violation, proceeding (including any partial proceeding such as a
deposition) or investigation pending or threatened in writing
against or affecting the Company, any Subsidiary or any of their
respective Subsidiaries or properties before or by any court,
arbitrator, governmental or administrative agency, regulatory
authority (federal, state, county, local or foreign), stock market,
stock exchange or trading facility.
"AFFILIATE" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or
is under common control with a Person, as such terms are used in
and construed under Rule 144 under the Securities Act.
"BANKRUPTCY EVENT" means any of the following events: (a)
the Company or any Subsidiary commences a case or other proceeding
under any bankruptcy, reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction relating to the Company or any
Subsidiary thereof; (b) there is commenced against the Company or
any Subsidiary any such case or proceeding that is not dismissed
within 60 days after commencement; (c) the Company or any
Subsidiary is adjudicated by a court of competent jurisdiction
insolvent or bankrupt or any order of relief or other order
approving any such case or proceeding is entered; (d) the Company
or any Subsidiary suffers any appointment of any custodian or the
like for it or any substantial part of its property that is not
discharged or stayed within 60 days; (e) under applicable
bankruptcy law the Company or any Subsidiary makes a
general assignment for the benefit of creditors; (f) the Company or
any Subsidiary fails to pay, or states that it is unable to pay or
is unable to pay, its debts generally as they become due; (g) the
Company or any Subsidiary calls a meeting of its creditors with a
view to arranging a composition, adjustment or restructuring of its
debts; or (h) the Company or any Subsidiary, by any act or failure
to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or
other action for the purpose of effecting any of the foregoing.
"BUSINESS DAY" means any day except Saturday, Sunday and
any day that is a federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
"COMPANY COUNSEL" means Xxxxxxxx Xxxxxx LLP.
"CAPITAL LEASE OBLIGATIONS" of any Person shall mean the
obligations of such Person to pay rent or other amounts under any
lease of (or other arrangement conveying the right to use) real or
personal property, or a combination thereof, which obligations are
required to be classified and accounted for as capital leases on a
balance sheet of such Person under GAAP and, for the purposes of
this Agreement, the amount of such obligations at any time shall be
the capitalized amount thereof at such time determined in
accordance with GAAP.
"CASH EQUIVALENTS" means:
(a) debt obligations and maturing within one year
from the date of acquisition thereof to the extent the principal thereof and
interest thereon is backed by the full faith and credit of the United States
of America;
(b) investments in commercial paper and maturing
within 180 days from the date of acquisition thereof and having, at such
date of acquisition, the highest credit rating obtainable from Standard &
Poor's Ratings Services, a division of The McGraw Hill Companies, or any
successor thereto, or from Xxxxx'x Investors Service, Inc. or any successor
thereto;
(c) investments in certificates of deposit,
bankers' acceptances and time deposits maturing within 180 days from the
date of acquisition thereof issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by, any domestic office of
any commercial bank organized under the laws of the United States of America
or any State thereof that has a combined capital and surplus and undivided
profits of not less than $500,000,000, in each case denominated in dollars;
and
(d) money market mutual funds, at least 90% of
the investments of which are in cash or investments contemplated by clauses
(a), (b) and (c) of this definition.
"CLOSING" means the closing of the Loans and purchases and
sale of Securities pursuant to Section 2.1.
2
"CLOSING DATE" means the Business Day immediately
following the date on which all the conditions set forth in
Sections 6.1 and 6.2 hereof are satisfied or waived by the
appropriate party.
"CODE" means the Internal Revenue Code of 1986, as from
time to time amended and any successor thereto and the rules and
regulations promulgated from time to time thereunder.
"COMMISSION" means the U.S. Securities and Exchange
Commission.
"COMMON STOCK" means the common stock of the Company,
$0.01 par value per share, and any securities into which such
common stock may hereafter be reclassified.
"COMMON STOCK EQUIVALENTS" means any securities of the
Company or any Subsidiary which entitle the holder thereof to
acquire Common Stock at any time, including without limitation, any
debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exchangeable
for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive,
directly or indirectly, Common Stock.
"DEBENTURES" means the convertible debentures due on the
30th month anniversary of the Closing Date issuable by the Company
to the Investors pursuant to terms hereof, in the form of Exhibit A
---------
hereto.
"EFFECTIVE DATE" means the date that a Registration
Statement is first declared effective by the Commission.
"ELIGIBLE MARKET" means any of the New York Stock
Exchange, the American Stock Exchange, the Nasdaq National Market
or the Nasdaq SmallCap Market.
"EQUITY INTEREST" means (i) shares of corporate stock,
partnership interests, membership interests and any other interest
that confers on a Person the right to receive a share of the
profits and losses of, or a distribution of the assets of, the
issuing Person and (ii) all warrants, options or other rights to
acquire any Equity Interest set forth in clause (i) of this defined
term.
"EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
"EVENT OF DEFAULT" has the meaning assigned to such term
in the Debentures.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time applied on a consistent
basis during the periods involved.
"GUARANTEE" of or by any Person shall mean any obligation,
contingent or otherwise, of such Person guaranteeing or having the
economic effect of guaranteeing any Indebtedness of any other
Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of such Person, direct or
indirect, (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such
3
Indebtedness or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Indebtedness, (b)
to purchase property, securities or services for the purpose of
assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or
other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such
Indebtedness, provided, that the term Guarantee shall not include
--------
endorsements for collection or deposit, in either case in the
ordinary course of business.
"INDEBTEDNESS" of any Person shall mean, without
duplication, (a) all obligations of such Person for borrowed money
or with respect to deposits or advances of any kind, (b) all
obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, (c) all obligations of such Person upon which
interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements
relating to property or assets purchased by such Person, (e) all
obligations of such Person issued or assumed as the deferred
purchase price of property or services, (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any
Lien on property owned or acquired by such Person, whether or not
the obligations secured thereby have been assumed, (g) all
Guarantees by such Person of Indebtedness of others, (h) all
Capital Lease Obligations of such Person, (i) all obligations of
such Person in respect of interest rate protection agreements,
foreign currency exchange agreements or other interest or exchange
rate hedging arrangements that exceed amounts necessary to hedge
the Company's cross-currency exposure and (j) all obligations of
such Person as an account party in respect of letters of credit and
bankers' acceptances. The Indebtedness of any Person shall include
the Indebtedness of any partnership in which such Person is a
general partner.
"INVESTOR PERCENTAGE" means, with respect to an Investor,
the percentage equal to the product of (x) a fraction, the
numerator of which shall be the Loan Amount loaned by such Investor
on the Closing Date and the denominator of which shall be the
aggregate Loan Amounts loaned by all Investors on the Closing Date
times (y) 100.
"LIEN" means any lien, charge, claim, security interest,
encumbrance, right of first refusal or other restriction.
"LOAN AMOUNT" means, with respect to each Investor, the
loan amount indicated below such Investor's name on its signature
page of this Agreement.
"LOSSES" means any and all losses, claims, damages,
liabilities, settlement costs and expenses, including without
limitation costs of preparation of legal action, investigation and
reasonable attorneys' fees.
"PERSON" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
4
"PROCEEDING" means an action, claim, suit, investigation
or proceeding (including, without limitation, an investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
"REGISTRATION STATEMENT" means one or more registration
statements meeting the requirements of the Registration Rights
Agreement and covering the resale of Underlying Shares by the
Investors who shall be named "selling shareholders" thereunder.
"REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreement, dated as of the date of this Agreement, among the
Company and the Investors, in the form of Exhibit B hereto.
---------
"REQUIRED MINIMUM" means, as of any date, the maximum
aggregate number of shares of Common Stock then issued or
potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon conversion
in full of all Debentures and issuable on account of interest
thereunder, and upon exercise of the Warrants, ignoring for all
such purposes any conversion or exercise caps contained in the
Warrants or Debentures assuming that: (a) any previously
unconverted Debentures and unexercised Warrants are held until the
maturity or expiration date thereof, and all interest on the
Debentures is paid in shares of Common Stock and (b) the Conversion
Price and Exercise Price at all times on and after the date of
determination equals 50% of the actual Conversion Price or Exercise
on the Trading Day immediately prior to the date of determination.
"RESTRICTED PAYMENT" means, as to any Person, (a) any
dividend or other distribution by such Person (whether in cash,
securities or other property) with respect to any Equity Interests
of such Person, (b) any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such Equity Interest, (c) any
payment of principal or interest or any purchase, redemption,
retirement, acquisition or defeasance with respect to any
Indebtedness of such Person which is subordinated to the payment of
the Obligations, (d) the acquisition for value by such Person of
any Equity Interests issued by such Person or any other Person that
controls such Person and (e) any payment by such Person to its
officers or directors other than in compliance with existing
Company stock option plans and salaries in the ordinary course of
business.
"RULE 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same effect as such
Rule.
"SECURITIES" means the Debentures, the Warrants and the
Underlying Shares issuable under the Debentures and the Warrants.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
5
"STRATEGIC TRANSACTION" means a transaction or
relationship in which (1) the Company issues shares of Common Stock
to a Person which the Board of Directors of the Company determines
in good faith is, itself or through its Subsidiaries, an operating
company in a business synergistic with the business of the Company
and (2) the Company expects to receive benefits in addition to the
investment of funds, but shall not include a transaction in which
the Company issues securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in
securities.
"SUBSIDIARY" means any "significant subsidiary" of the
Company as defined in Rule 1-02(w) of Regulation S-X promulgated
under the Exchange Act.
"TRADING DAY" means (i) a day on which the Common Stock is
traded on an Eligible Market (other than the OTC Bulletin Board),
or (ii) if the Common Stock is not listed on an Eligible Market, a
day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board or the National
Quotation Bureau Incorporated, or (iii) if the Common Stock is not
quoted on the OTC Bulletin Board, a day on which the Common Stock
is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization
or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or
quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.
"TRADING MARKET" means Nasdaq National Market or any other
Eligible Market on which the Common Stock is then listed or quoted.
"TRANSACTION DOCUMENTS" means this Agreement, the
Debentures, the Warrants, the Registration Rights Agreement, and
any other documents or agreements executed or delivered in
connection with the transactions contemplated hereunder.
"UNDERLYING SHARES" means the shares of Common Stock
issuable upon conversion of the Debentures, as payment of interest
thereunder, exercise of the Warrants, and in satisfaction of any
other obligation of the Company to issue shares of Common Stock
pursuant to the Transaction Documents.
"WARRANTS" means the Common Stock purchase warrants in the
form of Exhibit C, issuable pursuant to Section 2.2(a)(iii).
---------
ARTICLE II.
PURCHASE AND SALE
2.1. Closings. Subject to the terms and conditions set forth in
--------
this Agreement, at the Closings the Company shall issue and sell to the
Investors, and the Investors shall, severally and not jointly, purchase from
the Company, the Debentures and Warrants. The Company shall be allowed to
hold multiple Closings so long as each issuance and sale of the Debentures
and Warrants are under the identical terms and conditions. The Company shall
not be allowed to hold any additional Closings pursuant to the terms of this
Agreement after April 2, 2004, provided, however, that the failure to hold a
Closing after April 2, 2004 will not be considered a
6
breach under this Agreement. The Closings shall take place at the offices of
Xxxxx Xxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000 on the date
this Agreement is executed and delivered by the parties or at such other
location or time as the parties may agree.
2.2. Closing Deliveries.
------------------
(a) At each Closing, the Company shall deliver or
cause to be delivered to each Investor purchasing Debentures and Warrants at
that Closing the following (the "COMPANY DELIVERABLES"):
(i) this Agreement duly executed by the Company;
(ii) Debentures in the aggregate principal amount
of the Loan Amount indicated below such Investor's name on its
signature page of this Agreement, registered in the name of such
Investor;
(iii) a Warrant, registered in the name of such
Investor, pursuant to which such Investor shall have the right to
acquire 25% of the number of shares of Common Stock issuable upon an
assumed conversion in full of the Debenture issuable to the Investor
in accordance with Section 2.2(a)(ii) (assuming for such purpose that
the conversion price equals the closing sales price of the Common
Stock on the Trading Day immediately prior to the Closing Date);
(iv) the Registration Rights Agreement, duly
executed by the Company;
(v) the legal opinion of Company Counsel, in
agreed form, addressed to such Investor; and
(vi) any other document reasonably requested by
such Investor.
(b) At each Closing, each Investor that is purchasing
Debentures and Warrants at that Closing shall deliver or cause to be
delivered to the Company the following:
(i) the Loan Amount indicated below such
Investor's name on the signature page of this Agreement, in United
States dollars and in immediately available funds, by wire transfer
to an account designated in writing by the Company for such
purpose;
(ii) the Registration Rights Agreement, duly
executed by such Investor; and
(iii) this Agreement duly executed by such Investor.
7
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company. Subject to the
---------------------------------------------
qualifications and disclosures set forth beside the specific reference to
this Agreement in the Disclosure Schedule (the parties hereto agreeing that
a reference in the Disclosure Schedule to a particular Section shall only
apply to the representation in such section), the Company hereby makes the
following representations and warranties to each Investor:
(a) Subsidiaries. The Company does not directly or
------------
indirectly control or own any interest in any Subsidiary, other than as
listed in Section 3.1(a) of the Disclosure Schedule. Except as disclosed in
Section 3.1(a) of the Disclosure Schedule, the Company owns, directly or
indirectly, all of the capital stock of each Subsidiary free and clear of
any Lien, and all the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights.
(b) Organization and Qualification. Each of the
------------------------------
Company and each Subsidiary is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and
to carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and each Subsidiary is duly qualified
to conduct business and is in good standing as a foreign corporation or
other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may
be, could not, individually or in the aggregate, have or reasonably be
expected to result in (i) an adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material and adverse
effect on the results of operations, assets, prospects, business or
condition (financial or otherwise) of the Company and the Subsidiaries,
taken as a whole, or (iii) an adverse impairment to the Company ability to
perform on a timely basis its obligations under any Transaction Document
(any of (i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT").
(c) Authorization; Enforcement. The Company has the
--------------------------
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise
to carry out its obligations thereunder. The execution and delivery of each
of the Transaction Documents by the Company and the consummation by it of
the transactions contemplated thereunder have been duly authorized by all
necessary action on the part of the Company and no further consent or action
is required by the Company, its Board of Directors or its shareholders. Each
of the Transaction Documents has been (or upon delivery will be) duly
executed by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
(d) No Conflicts. The execution, delivery and
------------
performance of the Transaction Documents by the Company and the consummation
by the Company of the transactions
8
contemplated thereby do not and will not (i) conflict with or violate any
provision of the Company's or any Subsidiary's certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any Subsidiary is
a party or by which any property or asset of the Company or any Subsidiary
is bound or affected, or (iii) result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations) and
the rules and regulations of any self-regulatory organization to which the
Company or its securities are subject, or by which any property or asset of
the Company or a Subsidiary is bound or affected; except in the case of each
of clauses (ii) and (iii), such as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect. Payments of cash on account of interest under the Debentures, upon
any Event of Default under the Debentures, as a result of liquidated damages
under any Transaction Document or upon a Buy-In under a Warrant will not
require the consent of any lender to or creditor of the Company or any
Subsidiary (under a credit facility, loan agreement or otherwise) and will
not result in a default under any such credit facilities, loan or other
agreements.
(e) Filings, Consents and Approvals. The Company is
-------------------------------
not required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of
the Transaction Documents, other than (i) the filing with the Commission of
one or more Registration Statements in accordance with the requirements
Registration Rights Agreement and (ii) the application(s) to the Trading
Market on which the Common Stock is listed for trading for the listing of
the Underlying Shares for trading thereon in the time and manner required
thereby which have been made and obtained prior to the Closing Date.
(f) Issuance of the Securities. The Securities have
--------------------------
been duly authorized and, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens. The Company has reserved from
its duly authorized capital stock a number of shares of Common Stock
issuable upon conversion of the Debentures (as may be issued on account of
interest thereunder) and exercise of the Warrants, which number of reserved
shares is not less than the Required Minimum calculated as of the date
hereof.
(g) Capitalization. The number of shares and type of
--------------
all authorized, issued and outstanding capital stock of the Company, and all
shares of Common Stock reserved for issuance under the Company's various
option and incentive plans, is set forth in Section 3.1(g) of the Disclosure
Schedule. No securities of the Company are entitled to preemptive or similar
rights, and no Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as a result
of the purchase and sale of the Securities and except as set forth in
Schedule 3.1(g) of the Disclosure Schedule, there are no outstanding
---------------
options, warrants, scrip rights to
9
subscribe to, calls or commitments of any character whatsoever relating to,
or securities, rights or obligations convertible into or exchangeable for,
or giving any Person any right to subscribe for or acquire, any shares of
Common Stock, or contract, commitment, understanding or arrangement by which
the Company or any Subsidiary is or may become bound to issue additional
shares of Common Stock, or securities or rights convertible or exchangeable
into shares of Common Stock. The issue and sale of the Securities will not,
immediately or with the passage of time, obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Investors) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities.
(h) SEC Reports; Financial Statements. The Company
---------------------------------
has filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was
required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC REPORTS" and, together with this
Agreement and Section 3.1(h) of the Disclosure Schedule to this Agreement,
the "DISCLOSURE MATERIALS") on a timely basis or has timely filed a valid
extension of such time of filing and has filed any such SEC Reports prior to
the expiration of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state 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 financial statements of the Company included in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have
been prepared in accordance GAAP, except as may be otherwise specified in
such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated
Subsidiaries as of and for the dates thereof and the results of operations
and cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments. All material
agreements to which the Company or any Subsidiary is a party or to which the
property or assets of the Company or any Subsidiary are subject are included
as part of or specifically identified in the SEC Reports.
(i) Press Releases. The press releases disseminated
--------------
by the Company during the two (2) years preceding the date of this Agreement
taken as a whole do not contain any untrue statement of a material fact or
omit to state 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.
(j) Material Changes. Since the date of the latest
----------------
audited financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, (i) there has been no event,
occurrence or development that has had or that could reasonably be expected
to result in a Material Adverse Effect, (ii) the Company has not incurred
any liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the
Company's financial statements pursuant to GAAP or required to be disclosed
in
10
filings made with the Commission, (iii) the Company has not altered its
method of accounting or the identity of its auditors, (iv) the Company has
not declared or made any dividend or distribution of cash or other property
to its shareholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) the Company has
not issued any equity securities to any officer, director or Affiliate,
except pursuant to existing Company stock incentive plans. Except as noted
in the Company's SEC Reports, the Company does not have pending before the
Commission any request for confidential treatment of information.
(k) Litigation. There is no Action which (i) adversely
----------
affects or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) except as otherwise set
forth in the SEC Reports, could, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor
any director or officer thereof, is or has been the subject of any Action
involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been,
and to the knowledge of the Company, there is not pending or contemplated,
any investigation by the Commission involving the Company or any current or
former director or officer of the Company. The Commission has not issued any
stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange Act or
the Securities Act.
(l) Labor Relations. No material labor dispute exists or,
----------------
to the knowledge of the Company, is imminent with respect to any of the
employees of the Company.
(m) Compliance. Neither the Company nor any Subsidiary
----------
(i) is in default under or in violation of (and no event has occurred that has
not been waived that, with notice or lapse of time or both, would result in
a default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has
been waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule
or regulation of any governmental authority, including without limitation
all foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not, individually
or in the aggregate, have or could reasonably be expected to result in a
Material Adverse Effect. The Company is in compliance with the applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules
and regulations thereunder promulgated by the Commission, except where such
noncompliance could not have or reasonably be expected to result in a
Material Adverse Effect. The Company is not, to the best of its knowledge
(after due inquiry), in default in any material respect with the terms,
conditions or covenants set forth in the Securities Purchase Agreement, or
the Debentures or Warrants issued pursuant thereto, among the Company and
the Investors, dated as of December 19, 2003 (the "2003 SECURITIES PURCHASE
AGREEMENT").
11
(n) Regulatory Permits. The Company and the Subsidiaries
------------------
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the SEC
Reports, except where the failure to possess such permits could not,
individually or in the aggregate, have or could reasonably be expected to
result in a Material Adverse Effect ("MATERIAL PERMITS"), and neither the
Company nor any Subsidiary has received any notice of proceedings relating
to the revocation or modification of any Material Permit.
(o) Title to Assets. The Company and the Subsidiaries
---------------
have good and marketable title in fee simple to all real property owned by
them that is material to the business of the Company and the Subsidiaries
and good and marketable title in all personal property owned by them that is
material to the business of the Company and the Subsidiaries, in each case
free and clear of all Liens, except for Liens as do not materially affect
the value of such property and do not materially interfere with the use made
and proposed to be made of such property by the Company and the
Subsidiaries. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in
compliance.
(p) Patents and Trademarks. The Company and the
----------------------
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or material for use in
connection with their respective businesses as described in the SEC Reports
and which the failure to so have could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect (collectively, the "INTELLECTUAL PROPERTY RIGHTS"). Neither the
Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary violates
or infringes upon the rights of any Person. Except as set forth in the SEC
Reports, to the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights.
(q) Insurance. The Company and the Subsidiaries are
---------
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and customary in the
businesses in which the Company and the Subsidiaries are engaged. Neither
the Company nor any Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost.
(r) Transactions With Affiliates and Employees. Except
------------------------------------------
as set forth in SEC Reports, none of the officers or directors of the Company
and, to the knowledge of the Company, none of the employees of the Company
is presently a party to any transaction with the Company or any Subsidiary
(other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
12
(s) Internal Accounting Controls. The Company and the
----------------------------
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles 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. The Company has established disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and
designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its Subsidiaries, is made
known to the certifying officers by others within those entities,
particularly during the period in which the Company's Form 10-K or 10-Q, as
the case may be, is being prepared. The Company's certifying officers have
evaluated the effectiveness of the Company's controls and procedures as of a
date within 90 days prior to the filing date of the Form 10-Q for the
quarter ended June 30, 2003 (such date, the "EVALUATION DATE"). The Company
presented in its most recently filed Form 10-K or Form 10-Q the conclusions
of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation
Date. Since the Evaluation Date, there have been no significant changes in
the Company's internal controls (as such term is defined in Item 307(b) of
Regulation S-K under the Exchange Act) or, to the Company's knowledge, in
other factors that could significantly affect the Company's internal
controls.
(t) Solvency. Based on the financial condition of the
--------
Company as of the Closing Date (and assuming that the Closing shall have
occurred), (i) the Company's fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal
year as now conducted and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof; and (iii) the current cash flow of the
Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses
of the cash, would be sufficient to pay all amounts on or in respect of its
debt when such amounts are required to be paid. The Company does not intend
to incur debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be payable on or in respect
of its debt).
(u) Certain Fees. Except as set forth in Section 3.1(u)
------------ --------------
of the Disclosure Schedule, no brokerage or finder's fees or commissions are
or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by this Agreement. The
Investors shall have no obligation with respect to any fees or with respect
to any claims (other than such fees or commissions owed by a Investor
pursuant to written agreements executed by such Investor which fees or
commissions shall be the sole responsibility of such Investor) made by or on
behalf of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by this
Agreement.
13
(v) Certain Registration Matters. Assuming the
----------------------------
accuracy of the Investors' representations and warranties set forth in Sections
3.2(b)-(e), no registration under the Securities Act is required for the
offer and sale of the Securities by the Company to the Investors under the
Transaction Documents. The Company is eligible to register the resale of its
Common Stock for resale by the Investors under Form S-3 promulgated under
the Securities Act. The Company has not granted or agreed to grant to any
Person any rights (including "piggy-back" registration rights) to have any
securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied.
(w) Listing and Maintenance Requirements. Except as
------------------------------------
specified in the SEC Reports, the Company has not, in the two years
preceding the date hereof, received notice from any Eligible Market to the
effect that the Company is not in compliance with the listing or maintenance
requirements thereof. The Company is, and has no reason to believe that it
will not in the foreseeable future continue to be, in compliance with the
listing and maintenance requirements for continued listing of the Common
Stock on the Trading Market. The issuance and sale of the Securities under
the Transaction Documents does not contravene the rules and regulations of
the Trading Market, and no approval of the shareholders of the Company
thereunder is required for the Company to issue and deliver to the Investors
the maximum number of Securities contemplated by Transaction Documents,
including as may be required pursuant to Nasdaq Rule Filing SR-NASD-2003-40
(March 14, 2003) concerning shareholder approval requirements when officers
and directors participate in discounted private placements and Nasdaq Rule
Filing SR-NASD-2003-61 (March 28, 2003) concerning shareholder approval
requirements in connection with a change of control.
(x) Investment Company. The Company is not, and is not
------------------
an Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(y) Application of Takeover Protections. The Company and
-----------------------------------
its Board of Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company's Articles of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Investors as a
result of the Investors and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company's issuance of the Securities and the Investors'
ownership of the Securities.
(z) No Additional Agreements. The Company that does not
------------------------
have any agreement or understanding with any Investor with respect to the
transactions contemplated by the Transaction Documents other than as
specified in this Agreement, except that any officer or director who
participates in this transaction as a Investor shall not be entitled to any
anti-dilution protection (other than on account of stock splits, stock
combinations and similar events) under the Debentures or the Warrants
acquired by them or their Affiliates so as not to violate Nasdaq Rule Filing
SR-NASD-2003-40 (March 14, 2003).
14
(aa) Disclosure. The Company confirms that neither it nor
----------
any Person acting on its behalf has provided any of the Investors or their
agents or counsel with any information that the Company believes constitutes
material, non-public information. The Company understands and confirms that
the Investors will rely on the foregoing representations and covenants in
effecting transactions in securities of the Company. All disclosure provided
to the Investors regarding the Company, its business and the transactions
contemplated hereby, furnished by or on behalf of the Company (including the
Company's representations and warranties set forth in this Agreement and the
Disclosure Schedule) are true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
(bb) Acknowledgment Regarding Investors' Purchase of
-----------------------------------------------
Securities. The Company acknowledges and agrees that each of the Investors
----------
is acting solely in the capacity of an arm's length Investor with respect to
the Transaction Documents and the transactions contemplated hereby. The
Company further acknowledges that no Investor is acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated
hereby and any advice given by any Investor or any of their respective
representatives or agents in connection with the Transaction Documents and
the transactions contemplated hereby is merely incidental to the Investors'
purchase of the Securities. The Company further represents to each Investor
that the Company's decision to enter into this Agreement has been based
solely on the independent evaluation by the Company and its representatives.
3.2. Representations and Warranties of the Investors. Each
-----------------------------------------------
Investor, for itself and for no other Investor, hereby represents and warrants
to the Company as follows:
(a) Organization; Authority. Such Investor that is not a
-----------------------
natural Person is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with the
requisite corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by the applicable Transaction
Documents and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by such Investor of the transactions
contemplated by this Agreement has been duly authorized by all necessary
corporate or, if such Investor is not a corporation, such partnership,
limited liability Company or other applicable like action, on the part of
such Investor. Each of this Agreement and the Registration Rights Agreement
has been duly executed by such Investor, and when delivered by such Investor
in accordance with terms hereof, will constitute the valid and legally
binding obligation of such Investor, enforceable against it in accordance
with its terms.
(b) Investment Intent. Such Investor is acquiring the
-----------------
Securities as principal for its own account for investment purposes only and
not with a view to or for distributing or reselling such Securities or any
part thereof, without prejudice, however, to such Investor's right at all
times to sell or otherwise dispose of all or any part of such Securities in
compliance with applicable federal and state securities laws. Subject to the
immediately preceding sentence, nothing contained herein shall be deemed a
representation or warranty by such Investor to hold the Securities for any
period of time. Such Investor is acquiring the Securities hereunder in the
15
ordinary course of its business. Such Investor does not have any agreement
or understanding, directly or indirectly, with any Person to distribute any
of the Securities.
(c) Investor Status. At the time such Investor was
---------------
offered the Securities, it was, and at the date hereof, it is, an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Such Investor
is not a registered broker-dealer under Section 15 of the Exchange Act.
(d) General Solicitation. Such Investor is not purchasing
--------------------
the Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine
or similar media or broadcast over television or radio or presented at any
seminar or any other general solicitation or general advertisement.
(e) Access to Information. Such Investor acknowledges
---------------------
that it has reviewed the Disclosure Materials and has been afforded (i) 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 risks of
investing in the Securities; (ii) access to information about the Company
and the Subsidiaries and their respective financial condition, results of
operations, business, properties, management and prospects sufficient to
enable it to evaluate its investment; and (iii) the opportunity to obtain
such additional information that the Company possesses or can acquire
without unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment. Neither such inquiries
nor any other investigation conducted by or on behalf of such Investor or
its representatives or counsel shall modify, amend or affect such Investor's
right to rely on the truth, accuracy and completeness of the Disclosure
Materials and the Company's representations and warranties contained in the
Transaction Documents.
(f) Limited Ownership. The purchase by such Investor of
-----------------
the Securities issuable to it at the Closing (including the Underlying
Shares that would be issuable upon the conversion and exercise of such
Securities) will not result in such Investor (individually or together with
other Person with whom such Investor has identified, or will have
identified, itself as part of a "group" in a public filing made with the
Commission involving the Company's securities) acquiring, or obtaining the
right to acquire, in excess of 19.999% of the Common Stock or the voting
power of the Company on a post transaction basis that assumes that the
Closing shall have occurred. Such Investor does not presently intend to,
alone or together with others, make a public filing with the Commission to
disclose that it has (or that it together with such other Persons have)
acquired, or obtained the right to acquire, as a result of the Closing (when
added to any other securities of the Company that it or they then own or
have the right to acquire), in excess of 19.999% of the Common Stock or the
voting power of the Company on a post transaction basis that assumes that
the Closing shall have occurred.
(g) Independent Investment Decision. Such Investor has
-------------------------------
independently evaluated the merits of its decision to purchase Securities
pursuant to this Agreement, such decision has been independently made by
such Investor and such Investor confirms that it has only relied on the
advice of its own business and/or legal counsel and not on the advice of any
other Investor's business and/or legal counsel in making such decision.
16
The Company acknowledges and agrees that no Investor makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1. (a) Securities may only be disposed of in compliance
with state and federal securities laws. In connection with any transfer of
the Securities other than pursuant to an effective registration statement,
to the Company, to an Affiliate of a Investor or in connection with a pledge
as contemplated in Section 4.1(b), the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the Securities
Act.
(b) Certificates evidencing the Securities will contain
the following legend, so long as is required by this Section 4.1(b) or
Section 4.1(c):
[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION/
EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE SECURITIES
HAVE NOT BEEN REGISTERED] WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
[THESE SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION/EXERCISE
OF THESE SECURITIES] [THESE SECURITIES] MAY BE PLEDGED IN A MANNER
CONSISTENT WITH THE SECURITIES ACT IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that a Investor may
from time to time pledge, and/or grant a security interest in some or all of
the Securities pursuant to a bona fide margin agreement in connection with a
bona fide margin account in accordance with the Securities Act and, if
required under the terms of such agreement or account, such Investor may
transfer pledged or secured Securities to the pledgees or secured parties.
Such a pledge or transfer would not be subject to approval or consent of the
Company and no legal opinion of legal counsel to the pledgee, secured party
or pledgor shall be required in connection with the pledge, but such legal
opinion may be required in connection with a subsequent transfer following
default by the Investor transferee of the pledge. No notice shall be
required of such
17
pledge. At the appropriate Investor's expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of
the Securities including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.
(c) Certificates evidencing Underlying Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)): (i)
following a sale of such Securities under a registration statement
(including the Registration Statement), or (ii) following any sale of such
Securities pursuant to Rule 144, or (iii) while such Securities are eligible
for sale under Rule 144(k), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission).
Company may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section.
4.2. Furnishing of Information. As long as any Investor owns the
-------------------------
Securities issued or issuable to it, the Company covenants to timely file
(or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act. Upon the request of any such Person,
the Company shall deliver to such Person a written certification of a duly
authorized officer as to whether it has complied with the preceding
sentence. As long as any Investor owns Securities, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish
to the Investors and make publicly available in accordance with Rule 144(c)
such information as is required for the Investors to sell the Underlying
Shares under Rule 144. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to
the extent required from time to time to enable such Person to sell such
Underlying Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
4.3. Acknowledgment of Dilution. The Company acknowledges that
--------------------------
the issuance of the Securities (including the Underlying Shares) will result
in dilution of the outstanding shares of Common Stock, which dilution may be
substantial. The Company further acknowledges that its obligations under the
Transaction Documents, including without limitation its obligation to issue
the Securities (including the Underlying Shares) pursuant to the Transaction
Documents, are unconditional and absolute and not subject to any right of
set off, counterclaim, delay or reduction, regardless of the effect of any
such dilution or any claim that the Company may have against any Investor.
4.4. Integration. The Company shall not, and shall use its best
-----------
efforts to ensure that no Affiliate of the Company shall, sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the
Securities to the Investors, or that would be integrated with the offer or
sale of the Securities for purposes of the rules and regulations of any
Trading Market.
18
4.5. Listing of Common Stock. From the date hereof through the
-----------------------
Effectiveness Period (as such term is defined in the Registration Rights
Agreement) the Company agrees (i) if the Company applies to have the Common
Stock traded on any Trading Market other than the Trading Market which the
Common Stock is currently listed for trading, it will include in such
application the Underlying Shares, and will take such other action as is
necessary or desirable to cause such securities to be listed on such other
Trading Market as promptly as possible and (ii) it will take all action
reasonably necessary to continue the listing and trading of its Common Stock
on a Trading Market and will comply in all material respects with the
Company's reporting, filing and other obligations under the bylaws or rules
of the Trading Market.
4.6. Reservation of Shares. The Company shall maintain a reserve
---------------------
from its duly authorized shares of Common Stock to comply with its
conversion obligations under the Debentures and its exercise obligations
under the Warrants. If on any date the Company would be, if notice of
exercise or conversion were to be delivered on such date, precluded from
issuing the number of Underlying Shares, as the case may be, issuable upon
conversion in full of the Debentures or exercise in full under the Warrants
due to the unavailability of a sufficient number of authorized but unissued
or reserved shares of Common Stock, then the Board of Directors of the
Company shall promptly prepare and mail to the shareholders of the Company
proxy materials or other applicable materials requesting authorization to
amend the Company's articles of incorporation or other organizational
document to increase the number of shares of Common Stock which the Company
is authorized to issue so as to provide enough shares for issuance of the
Underlying Shares. In connection therewith, the Board of Directors shall (a)
adopt proper resolutions authorizing such increase, (b) recommend to and
otherwise use its best efforts to promptly and duly obtain shareholder
approval to carry out such resolutions (and hold a special meeting of the
shareholders as soon as practicable, but in any event not later than the
60th day after delivery of the proxy or other applicable materials relating
to such meeting) and (c) within five Business Days of obtaining such
shareholder authorization, file an appropriate amendment to the Company's
articles of incorporation or other organizational document to evidence such
increase.
4.7. Conversion and Exercise Procedures. The form of Exercise
----------------------------------
Notice included in the Warrants and the form of Conversion Notice included
in the Debentures set forth the totality of the procedures required by the
Investors in order to exercise the Warrants and convert the Debentures. No
additional legal opinion or other information or instructions shall be
necessary to enable the Investors exercise Warrants or convert Debentures.
The Company shall honor exercises of the Warrants and conversions of the
Debentures and shall deliver Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Transaction Documents.
4.8. Subsequent Registrations; Subsequent Placements.
-----------------------------------------------
(a) From the Closing Date through and including the
Effective Date, the Company will not file a registration statement (other
than on a Form S-8 and pursuant to the Registration Rights Agreement) with
the Commission with respect to any securities of the Company.
19
(b) Prior to the first year anniversary of the Closing
Date, in the event the Company, directly or indirectly, determines to offer,
sell, grant any option to purchase, or otherwise dispose of (or announces
any offer, sale, grant or any option to purchase or otherwise dispose of any
of Common Stock or Common Stock Equivalents or any of its Subsidiaries'
equity or Common Stock Equivalents, including without limitation, pursuant
to a private placement, an equity line of credit or a shelf registration
statement in accordance with Rule 415 under the Securities Act, (such offer,
sale, grant, disposition or announcement being referred to as "SUBSEQUENT
PLACEMENT"), the Company shall deliver to each Investor a written notice
(the "SUBSEQUENT PLACEMENT NOTICE") of its intention to effect such
Subsequent Placement, which specifies in reasonable detail all of the
material terms of such Subsequent Placement, the amount of proceeds intended
to be raised thereunder, the names of the investors (including the
investment manager of such investors, if any) and the investment bankers
with whom such Subsequent Placement is proposed to be effected, and attached
to which shall be a term sheet or similar document. The Investor shall have
until 6:30 p.m. (New York City time) on the fifth Trading Day after their
respective receipt of the Subsequent Placement Notice to notify Company of
its intention to participate, subject to completion of mutually acceptable
documentation, in such financing on the same terms as set forth in the
Subsequent Placement Notice. The Company shall not be required to permit a
Investor to participate in a Subsequent Placement hereunder in an amount
(whether in terms of a purchase price or shares of Common Stock) in excess
of the greater of: (i) its pro rata portion (calculated by reference to its
Investor Percentage) of 25% of the aggregate amount of such Subsequent
Placement and (ii) its pro rata portion (calculated by reference to its
Investor Percentage) of that proportion of the Subsequent Financing equal to
the outstanding principal balance of the Debentures held by such Investor
divided by the aggregate dollar amount of the Subsequent Placement.
(c) The period set forth in the first sentence of
Section 4.8(b) shall be extended for the number of Trading Days during such
period in which (i) trading in the Common Stock is suspended by any Trading
Market or the Commission, or (ii) following the Effective Date, the
Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Investors for the resale of
the Underlying Shares.
(d) The Company's obligations under Section 4.8(b)
shall not apply to any grant or issuance by the Company of any of the
following: (i) the issuance of securities upon the exercise or conversion of
any Common Stock Equivalents issued by the Company prior to the date of this
Agreement (but will apply to any amendments, modifications and reissuances
thereof), and (ii) the grant of options or warrants, or the issuance of
additional securities, under any duly authorized company stock option,
restricted stock plan or stock purchase plan in existence on the Closing
Date, (iii) the issuance of Common Stock in payment of interest on the
Debentures, or (iv) the issuance of Common Stock Equivalents pursuant to a
Strategic Transaction.
4.9. Securities Laws Disclosure; Publicity. By 8:30 a.m. (New York
-------------------------------------
City time) on the day this Agreement is executed and on the Closing Date,
the Company shall issue a press release reasonably acceptable to the
Investors disclosing the transactions contemplated hereby on the date of
this Agreement and file a Current Report on Form 8-K disclosing the material
terms of the transactions contemplated hereby. The Company will file an
additional Current Report on Form 8-K on the Closing Date to disclose the
Closing. In addition, the Company will make such
20
other filings and notices in the manner and time required by the Commission
and the Trading Market on which the Common Stock is listed. Notwithstanding
the foregoing, the Company shall not publicly disclose the name of any
Investor, or include the name of any Investor in any filing with the
Commission (other than the Registration Statement and any exhibits to
filings made in respect of this transaction in accordance with periodic
filing requirements under the Exchange Act) or any regulatory agency or
Trading Market, without the prior written consent of such Investor, except
to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Investors with
prior notice of such disclosure.
4.10. Limitation on Issuance of Future Priced Securities. Following
--------------------------------------------------
the Closing and for so long as Debentures remain outstanding, the Company
shall not issue or agree to issue any "Future Priced Securities" as such
term is described by NASD IM-4350-1.
4.11. Indemnification of Investors. In addition to the indemnity
----------------------------
provided in the Registration Rights Agreement, the Company will indemnify
and hold the Investors and their directors, officers, shareholders,
partners, employees and agents (each, a "INVESTOR PARTY") harmless from any
and all losses, liabilities, obligations, claims, contingencies, damages,
costs and expenses, including all judgments, amounts paid in settlements,
court costs and reasonable attorneys' fees and costs of investigation
(collectively, "LOSSES") that any such Investor Party may suffer or incur as
a result of or relating to any misrepresentation, breach or inaccuracy of
any representation, warranty, covenant or agreement made by the Company in
any Transaction Document. In addition to the indemnity contained herein, the
Company will reimburse each Investor Party for its reasonable legal and
other expenses (including the cost of any investigation, preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred.
4.12. Non-Public Information. The Company covenants and agrees that
----------------------
neither it nor any other Person acting on its behalf will provide any
Investor or its agents or counsel with any information that the Company
believes constitutes material non-public information. The Company
understands and confirms that each Investor shall be relying on the
foregoing representations in effecting transactions in securities of the
Company.
4.13. Certain Trading Restrictions. Each Investor agrees that
----------------------------
neither it nor its Affiliates will enter into or maintain a net short
position with respect to the Common Stock. Accordingly, each Investor agrees
that neither it nor its Affiliates will enter into or maintain any short
sale of the Common Stock at a time when there is no equivalent offsetting
long position in the Common Stock held by such Investor. For purposes of
determining whether there is an equivalent offsetting long position in the
Common Stock held by such Investor, the Underlying Shares issuable upon
exercise of the Warrants and conversion of the Debentures (including any
shares issuable on account of interest thereunder) held by such Investor
(without regard to any exercise or conversion caps contained therein, and
whether or not any exercise or conversion notice shall have been tendered by
such Investor) shall be deemed held long by such Investor for purposes of
this Section.
4.14. Existence; Conduct of Business. The Company will, and will
------------------------------
cause each of the Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full
21
force and effect its legal existence and the rights, licenses, permits,
privileges and franchises material to the conduct of its business, provided
--------
that the foregoing shall not prohibit any sale, lease, transfer or other
disposition permitted by Section 5.1.
4.15. Maintenance of Cash and Cash Equivalents. While any
----------------------------------------
Debentures are outstanding, the Company will, at all times, maintain
unrestricted cash and Cash Equivalents, together with availability under the
Company's revolving line of credit, in an aggregate amount not less than
$500,000, free and clear of all Liens (other than any right of offset of the
Company's bank lenders). In the event that such unrestricted cash and Cash
Equivalents maintained by the Company hereunder shall at the end of any
fiscal quarter (as reflected in Company's Quarterly Report on Form 10-Q
under the Exchange Act for such fiscal quarter be in an aggregate amount
less than such amount, the Company shall deliver to each Investor at the
Company's expense, a letter of credit (in form and substance acceptable to
such Investor) and issued by a bank acceptable to such Investor in a face
amount equal to the sum of 100% of the then outstanding principal amount of
such Investor's Debenture plus interest payable thereon until the maturity
date thereof. Such letters of credit shall provide, among other things, that
the beneficiary thereof shall have the right to draw thereunder upon
presentation of a draft together with a certificate signed by such Investor
referring to this Agreement and the Debentures held by such Investor and
certifying that an Event of Default has occurred and is continuing under the
Transaction Documents.
4.16. Use of Proceeds. Except as set forth in Schedule 4.16 of the
--------------- -------------
Disclosure Schedule, the Company shall use the net proceeds from the sale of
the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of the
Company's existing line of credit and trade payables and accrued expenses in
the ordinary course of the Company's business and prior practices), to
redeem any Common Stock or Common Stock Equivalents or to settle any
outstanding Action.
ARTICLE V.
NEGATIVE COVENANTS
The Company covenants and agrees that from and after the
Closing Date and so long as any there remains any outstanding principal
amount under the Debentures, the Company shall not, and shall not permit its
Subsidiaries to:
5.1. Dispositions of Assets or Subsidiaries. Sell, convey, assign,
--------------------------------------
lease, abandon or otherwise transfer or dispose of, voluntarily or
involuntarily, any material properties or assets, tangible or intangible
(including any spin-offs of any divisions, lines of business or subsidiaries
and also including sale, assignment, discount or other disposition of
accounts, contract rights, chattel paper, equipment or general intangibles
with or without recourse or of capital stock, shares of beneficial interest,
partnership interests or limited liability Company interests of a Subsidiary
of the Company), except:
(a) transactions involving the sale of inventory or
upgrade or exchange of machinery, in either case, in the ordinary course of
business and for usual and ordinary prices;
22
(b) any sale, transfer or lease of assets by any wholly
owned Subsidiary to the Company or another Subsidiary;
(c) any sale, transfer or lease of assets in the ordinary
course of business which are replaced by substitute assets acquired or
leased; or
(d) any sale, transfer or lease of assets, other than
those specifically excepted pursuant to clauses (i) through (iii) above, the
fair market value of which does not exceed $5,000,000 in the aggregate
during the term of this Agreement.
5.2. Dividends and other Payments. Declare or distribute any
----------------------------
dividends or any other payments or distributions of cash or other property
to its shareholders or officers or directors (other than payable solely in
Common Stock or in compliance with existing Company stock incentive plans
and salaries in the ordinary course of business) with respect to its capital
stock.
5.3. Restricted Payments. Declare or make, or agree to pay for
-------------------
or make, directly or indirectly, any Restricted Payment, provided that (a) the
--------
Company may declare and pay, and agree to pay, dividends with respect to its
Equity Interests payable solely Common Stock, (b) any wholly-owned
Subsidiary of the Company may declare and pay dividends with respect to its
Equity Interests to the Company or any other wholly-owned Subsidiary of the
Company, (c) provided that no default under the Transaction Documents which
--------
may (with notice or lapse of time or both) become an Event of Default shall
have occurred and shall be continuing, the Company or any Subsidiary may
make payments of Indebtedness and (d) the Company may pay bonuses to its
officers, directors and employees, (e) the Company may pay director's fees
to its directors, (f) the Company may pay fees to its directors for bona
fide consulting services, and (g) the Company may make certain payments with
respect to the matters set forth in Section 5.3 of the Disclosure Schedule.
ARTICLE VI.
CONDITIONS PRECEDENT
6.1. Conditions Precedent to the Obligations of the
----------------------------------------------
Investors to Purchase Securities. The obligation of each Investor to acquire
--------------------------------
Securities is subject to the satisfaction or waiver by such Investor of each
of the following conditions:
(a) Representations and Warranties. The
------------------------------
representations and warranties of the Company contained herein shall be true
and correct in all material respects as of the date when made and as of the
Closing as though made on and as of such date;
(b) Performance. The Company shall have performed,
-----------
satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by it at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation,
-------------
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
23
(d) Adverse Changes. Since the date of execution of
---------------
this Agreement, no event or series of events shall have occurred that
reasonably would be expected to have or result in a (i) an adverse effect on
the legality, validity or enforceability of any Transaction Document, or
(ii) a material and adverse effect on the results of operations, assets,
business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole;
(e) No Suspensions of Trading in Common Stock; Listing.
--------------------------------------------------
Trading in the Common Stock shall not have been suspended by the Commission
or any Trading Market (except for any suspensions of trading of not more
than one Trading Day solely to permit dissemination of material information
regarding the Company) at any time since the date of execution of this
Agreement, and the Common Stock shall have been at all times since such date
listed for trading on a Trading Market;
(f) Nasdaq Listing. The Nasdaq Stock Market shall have
--------------
waived application of the 15 day prior notice contained in NASD Marketplace
Rule 4310(17)(D) or such timeframe shall have expired without objection;
(g) Bank Consent. The Company shall have received the
------------
consent of its senior lender, Southwest Bank of St. Louis, with respect to
the transactions contemplated by the Transaction Documents as well as an
estoppel certificate indicating the absence of any event of default or any
default which could with or without the passage of time result in an event
of default under the Credit Facility;
(h) Company Deliverables. The Investors shall have
--------------------
received the Company Deliverables;
(i) Registration Statement on Form S-3 (File No.
--------------------------------------------
333-112766). The Investors shall have received from the Company the written
-----------
confirmation from the SEC stating that the registration statement on Form
S-3 (File No. 333-112766) has been declared effective; and
(j) Timing. The conditions to closing set forth herein
------
shall have occurred no later than April 2, 2004.
6.2. Conditions Precedent to the Obligations of the Company to
---------------------------------------------------------
sell Securities. The obligation of the Company to sell Securities is subject to
---------------
the satisfaction or waiver by the Company hereunder of each of the following
conditions:
(a) Representations and Warranties. The representations
------------------------------
and warranties of each Investor contained herein shall be true and correct
in all material respects as of the date when made and as of the Closing Date
as though made on and as of such date;
(b) Performance. Each Investor shall have performed,
-----------
satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by such Investor at or prior to the
Closing;
(c) No Injunction. No statute, rule, regulation,
-------------
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or
24
governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents;
(d) Nasdaq Listing. The Nasdaq Stock Market shall have
--------------
waived application of the 15 day prior notice contained in NASD Marketplace
Rule 4310(17)(D) or such timeframe shall have expired without objection;
(e) Bank Consent. The Company shall have received the
------------
consent of its senior lender, Southwest Bank of St. Louis, with respect to
the transactions contemplated by the Transaction Documents as well as an
estoppel certificate indicating the absence of any event of default or any
default which could with or without the passage of time result in an event
of default under the Credit Facility;
(f) Amendment to Debentures dated December 19, 2003.
-----------------------------------------------
The Investors shall have amended the Debentures issued to such Investor on
December 19, 2003 to be consistent with the terms set forth in Sections
5(ii) and 13 of the Debentures to be issued in connection with this
transaction;
(g) Waivers. The Investors shall have waived the
-------
provisions of Section 4.8(b) of the 2003 Securities Purchase Agreement,
Section 11(d) in the Debenture and Section 9(d) in the Warrant issued to
such Investor on December 19, 2003; and
(h) Timing. The conditions to closing set forth herein
------
shall have occurred no later than April 2, 2004.
ARTICLE VII.
MISCELLANEOUS
7.1. Fees and Expenses. The Company shall be responsible for the
-----------------
reasonable legal fees and expenses of each Investor in the event that the
Company requests any waiver or amendment of the provisions of any
Transaction Document following the Closing. Except as specified in the
immediately preceding sentence, and except that Company shall reimburse the
initial Investor for its legal fees and expenses incurred in connection with
its entering into the Transaction Documents in an aggregate amount not to
exceed $15,000, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of the Transaction Documents. The Company shall pay
all stamp and other taxes and duties levied in connection with the sale of
the Securities.
7.2. Entire Agreement. The Transaction Documents, together with
----------------
the Exhibits and Schedules thereto, contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such
matters, which the parties acknowledge have been merged into such documents,
exhibits and schedules. At or after the Closing, and without further
consideration, each party will execute and deliver to the other party hereto
such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction
Documents.
25
7.3. Notices. All notices or other communications or deliveries
-------
required or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile number specified in this Section prior to 6:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile number specified in this Section on a day that is not a
Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day,
(c) the Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt
by the party to whom such notice is required to be given. The address for
such notices and communications shall be as follows:
If to the Company: Xxxxxx Companies, Inc.
0000 XxXxxxxx Xx.
Xx. Xxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Chief Financial Officer
With a copy to: Xxxxxxxx Xxxxxx LLP
Xxx X.X. Xxxx Xxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxx, Esq.
If to any Investor: To the address set forth under such
Investor's name on the signature pages
attached hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
7.4. Amendments; Waivers. No provision of this Agreement may be
-------------------
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and the Investor or Investors holding no less than
66 2/3% of the outstanding principal amount of Debentures or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission
of either party to exercise any right hereunder in any manner impair the
exercise of any such right.
7.5. Construction. The headings herein are for convenience only,
------------
do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied against
any party. This Agreement shall be construed as if drafted jointly by the
parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement or any of the Transaction Documents.
26
7.6. Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Investors.
Any Investor may assign its rights under this Agreement to any Person to
whom such Investor assigns or transfers any Securities.
7.7. No Third-Party Beneficiaries. This Agreement is intended for
----------------------------
the benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other Person, except that each Related Person is
an intended third party beneficiary of Section 4.11 and may enforce the
provisions of such Section directly against the Company.
7.8. Governing Law. All questions concerning the construction,
-------------
validity, enforcement and interpretation of this Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the
State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against
a party hereto or its respective Affiliates, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of
New York, Borough of Manhattan (the "NEW YORK COURTS"). Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the New York
Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
Proceeding, any claim that it is not personally subject to the jurisdiction
of any such New York Court, or that such Proceeding has been commenced in an
improper or inconvenient forum. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address
in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby. If
either party shall commence a Proceeding to enforce any provisions of a
Transaction Document, then the prevailing party in such Proceeding shall be
reimbursed by the other party for its attorney's fees and other costs and
expenses incurred with the investigation, preparation and prosecution of
such Proceeding.
7.9. Survival. The representations, warranties, agreements and
--------
covenants contained herein shall survive the Closing and the delivery,
exercise and conversion of the Securities.
7.10. Execution. This Agreement may be executed in two or more
---------
counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall
create a valid and binding
27
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature page were an original thereof.
7.11. Severability. If any provision of this Agreement is held to
------------
be invalid or unenforceable in any respect, the validity and enforceability
of the remaining terms and provisions of this Agreement shall not in any way
be affected or impaired thereby and the parties will attempt to agree upon a
valid and enforceable provision that is a reasonable substitute therefor,
and upon so agreeing, shall incorporate such substitute provision in this
Agreement.
7.12. Rescission and Withdrawal Right. Notwithstanding anything to
-------------------------------
the contrary contained in (and without limiting any similar provisions of)
the Transaction Documents, whenever any Investor exercises a right,
election, demand or option under a Transaction Document and the Company does
not timely perform its related obligations within the periods therein
provided, then such Investor may rescind or withdraw, in its sole discretion
from time to time upon written notice to the Company, any relevant notice,
demand or election in whole or in part without prejudice to its future
actions and rights.
7.13. Replacement of Securities. If any certificate or instrument
-------------------------
evidencing any Securities is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof, or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary
and reasonable indemnity, if requested. The applicants for a new certificate
or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement
Securities.
7.14. Remedies. In addition to being entitled to exercise all
--------
rights provided herein or granted by law, including recovery of damages,
each of the Investors and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of
any breach of obligations described in the foregoing sentence and hereby
agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
7.15. Payment Set Aside. To the extent that the Company makes a
-----------------
payment or payments to any Investor pursuant to any Transaction Document or
a Investor enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other
person under any law (including, without limitation, any bankruptcy law,
state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff
had not occurred.
7.16. Independent Nature of Investors. The obligations of each
-------------------------------
Investor under any Transaction Document are several and not joint with the
obligations of any other Investor, and no
28
Investor shall be responsible in any way for the performance of the
obligations of any other Investor under any Transaction Document. The
decision of each Investor to purchase Securities pursuant to this Agreement
has been made by such Investor and each Investor confirms that it has only
relied on the advice of its own business and/or legal counsel and not on the
advice of any other Investor's business and/or legal counsel. Nothing
contained herein, or in any Transaction Document, and no action taken by any
Investor pursuant hereto or thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Investors are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. Each Investor shall
be entitled to independently protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
other Transaction Documents, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such
purpose.
7.17. Limitation of Liability. Notwithstanding anything herein to
-----------------------
the contrary, the Company acknowledges and agrees that the liability of any
Investor arising directly or indirectly, under any Transaction Document, of
any and every nature whatsoever, shall be satisfied solely out of the assets
of such Investor, and that no trustee, officer, other investment vehicle
affiliated with such Investor or any investor, shareholder or holder of
shares of beneficial interest of such a Investor shall be personally liable
for any liabilities of such Investor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
29
IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
XXXXXX COMPANIES, INC.
By:
--------------------------------------------
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF INVESTORS FOLLOW]
30
IN WITNESS WHEREOF, the parties have executed this
Securities Purchase Agreement as of the date first written above.
[INVESTOR]
By:
--------------------------------------------
Name:
Title:
Loan Amount: $[ ]
Address for Notice:
31
