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SECURITIES PURCHASE AGREEMENT
BY
AND
AMONG
XXXXX INC.
AND
THE INVESTORS PARTY HERETO
DATED: NOVEMBER 14, 2001
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TABLE OF CONTENTS
Page
ARTICLE I Defined Terms.....................................................2
Section 1.1 Definitions...............................................2
ARTICLE II Purchase and Sale................................................5
Section 2.1 Purchase and Sale of the Notes............................5
Section 2.2 Closing...................................................5
ARTICLE III Company Representations and Warranties..........................6
Section 3.1 Organization, Good Standing and Qualification.............6
Section 3.2 Authorization.............................................6
Section 3.3 Capitalization............................................6
Section 3.4 Valid Issuance............................................7
Section 3.5 Consents..................................................7
Section 3.6 Delivery of SEC Filings; Business.........................8
Section 3.7 Use of Proceeds...........................................8
Section 3.8 No Material Adverse Change................................8
Section 3.9 SEC Filings...............................................9
Section 3.10 No Conflict, Breach, Violation or Default................9
Section 3.11 Tax Matters.............................................10
Section 3.12 Title to Properties.....................................10
Section 3.13 Certificates, Authorities and Permits...................10
Section 3.14 No Labor Disputes.......................................10
Section 3.15 Intellectual Property...................................11
Section 3.16 Environmental Matters...................................12
Section 3.17 Litigation..............................................12
Section 3.18 Financial Statements....................................13
Section 3.19 Insurance Coverage......................................13
Section 3.20 Compliance with Nasdaq Continued Listing Requirements...14
Section 3.21 Brokers and Finders.....................................14
Section 3.22 No Directed Selling Efforts or General Solicitation.....14
Section 3.23 Private Offering........................................14
Section 3.24 Investment Company......................................14
Section 3.25 Questionable Payments...................................14
Section 3.26 Internal Accounting Controls............................15
Section 3.27 Transactions With Affiliates............................15
Section 3.28 Application to Takeover Protection......................15
Section 3.29 Acknowledgment of Dilution..............................15
Section 3.30 Acknowledgment Regarding Investors' Purchase of Notes...15
Section 3.31 Seniority; Exclusivity..................................16
Section 3.32 Disclosures.............................................16
(i)
ARTICLE IV INVESTOR'S REPRESENTATIONS AND WARRANTIES.......................16
Section 4.1 Organization and Existence...............................16
Section 4.2 Authorization............................................16
Section 4.3 Purchase Entirely for Own Account........................16
Section 4.4 Investment Experience....................................17
Section 4.5 Disclosure of Information................................17
Section 4.6 Restricted Securities....................................17
Section 4.7 Legends..................................................17
Section 4.8 Accredited Investor......................................18
Section 4.9 No General Solicitation..................................18
Section 4.10 Brokers and Finders.....................................18
Section 4.11 State of Residence......................................18
ARTICLE V CONDITIONS TO THE CLOSING........................................18
Section 5.1 Conditions to the Investors' Obligations.................18
Section 5.2 Conditions to Obligations of the Company.................19
ARTICLE VI COVENANTS AND AGREEMENTS OF THE COMPANY.........................20
Section 6.1 Observer.................................................20
Section 6.2 No Conflicting Agreements................................20
Section 6.3 Insurance................................................20
Section 6.4 Compliance with Laws.....................................20
Section 6.5 Stop Transfer Instruction................................21
Section 6.6 Furnishing of Information................................21
Section 6.7 Integration..............................................21
Section 6.8 Listing and Reservation of Shares........................22
Section 6.9 Additional Collateral....................................22
Section 6.10 Use of Proceeds.........................................23
Section 6.11 Transactions with Affiliates............................23
Section 6.12 Transfer Agent Instructions.............................23
Section 6.13 Press Release; Filing of Form 8-K.......................24
Section 6.14 Ordinary Course Brokerage and Trading...................24
Section 6.15 Additional Affirmative Covenants........................24
Section 6.16 Additional Negative Covenants...........................25
Section 6.17 Line of Credit..........................................26
ARTICLE VII Survival and Indemnification...................................26
Section 7.1 Survival.................................................26
Section 7.2 Indemnification..........................................26
Section 7.3 Conduct of Indemnification Proceedings...................26
(ii)
ARTICLE VIII Miscellaneous.................................................27
Section 8.1 Successors and Assigns...................................27
Section 8.2 Counterparts; Faxes......................................27
Section 8.3 Titles and Subtitles.....................................28
Section 8.4 Notices..................................................28
Section 8.5 Expenses.................................................28
Section 8.6 Amendments and Waivers...................................29
Section 8.7 Publicity................................................29
Section 8.8 Severability.............................................29
Section 8.9 Entire Agreement.........................................29
Section 8.10 Further Assurances......................................29
Section 8.11 Governing Law; Consent to Jurisdiction..................29
(iii)
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is made, as of
the 14th day of November, 2001, by and among Kroll Inc., an Ohio corporation
(the "Company"), formerly known as The Kroll X'Xxxx Company, and the Investors
set forth on the signature pages affixed hereto (each an "Investor" and
collectively the "Investors").
W I T N E S S E T H:
WHEREAS, the Company and the Investors are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Regulation D ("Regulation D"), as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the 1933 Act (as
defined below); and
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Investors, and the
Investors desire to acquire from the Company, an aggregate of $30,000,000
principal amount of the Company's 6% Senior Secured Subordinated Convertible
Notes due 2006 (collectively, the "Notes", each of which is a "Note"), in the
form of Exhibit A annexed hereto, convertible into shares of the Company's
common stock, par value $.01 per share (the "Common Stock"); and
WHEREAS, contemporaneous with the sale of the Notes, the parties
hereto will execute and deliver a Registration Rights Agreement, in the form
attached hereto as Exhibit B (the "Registration Rights Agreement"), pursuant to
which the Company will agree, among other things, to provide certain
registration rights under the 1933 Act, and applicable state securities laws;
and
WHEREAS, contemporaneous with the sale of the Notes, and as a
material inducement to the Investors to purchase the Notes, the Company is
granting to the Investors a security interest in all of the Company's personal
properties, as better set forth in the Security Agreement in the form of Exhibit
C attached hereto (the "Security Agreement") and pledging certain shares of
stock in several of the Company's Subsidiaries, as better set forth in a Pledge
Agreement in the form of Exhibit D attached hereto (the "Pledge Agreement"); and
WHEREAS, an additional inducement to the Investors to purchase the
Notes, the Company has agreed to cause all of its Subsidiaries to grant to the
Investors following the Closing in accordance with the terms contained herein a
security interest in their respective assets, to guarantee the obligations of
the Company under the Notes and to pledge to the Investors the shares of stock
of the Subsidiaries not pledged pursuant to the Pledge Agreement.
NOW, THEREFORE, in consideration of the mutual promises made herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Defined Terms
Section 1.1 Definitions. For the purposes of this Agreement, the following
terms shall have the meanings herein set forth:
"Affiliate" means, with respect to any Person, any other Person
which directly or indirectly Controls, is controlled by, or is under common
control with, such Person.
"Agreement" has the meaning ascribed thereto in the preamble hereof.
"Agreements" means this Agreement, the Registration Rights
Agreement, the Security Agreement, the Pledge Agreement and the Notes.
"Business Day" means a day, other than a Saturday or Sunday, or
other day on which banks in the State of New York are closed or authorized by
law to close.
"By-Laws" has the meaning ascribed thereto in Section 3.1 hereof.
"Certificate of Incorporation" has the meaning ascribed thereto in
Section 3.1 hereof.
"Change in control" means any of:
(a) any Person or group (within the meaning of Rule 13d-5
promulgated under the 0000 Xxx) becoming, directly or indirectly, the beneficial
owner of shares of voting stock of the Company representing more than 50% of the
total voting power of all outstanding classes of voting stock of the Company, or
having the power, directly or indirectly, to elect a majority of the board of
directors of the Company;
(b) the sale, lease, assignment, transfer or other conveyance of all
or substantially all of the assets of the Company or any of its Material
Subsidiaries where the stockholders of the Company before such sale, lease,
assignment, transfer or other conveyance do not control, directly or indirectly,
at least a majority of the voting interests of the surviving entity after giving
effect to such transaction;
(c) the liquidation or dissolution of the Company or any Material
Subsidiary;
(d) any reclassification or other change of any stock or
recapitalization of the Company which materially adversely changes the terms or
conditions of the Notes or the Shares;
(e) the consummation of a merger or consolidation by the Company or
any Material Subsidiary (other than the merger or consolidation of a Material
Subsidiary with or into any other subsidiary) with or into any other entity
where the stockholders of the Company before such merger or consolidation do not
control, directly or indirectly, at least a majority of the voting interests of
the surviving entity after giving effect to such merger or consolidation; or
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(f) the sale, transfer or other disposition by Xxxxx Xxxxx of 40% or
more of his holdings of the capital stock of the Company, other than upon his
death.
"Closing" has the meaning ascribed thereto in Section 2.2 hereof.
"Closing Date" has the meaning ascribed thereto in Section 2.2
hereof.
"Common Stock" has the meaning ascribed thereto in the recitals
hereof.
"Company" has the meaning ascribed thereto in the preamble hereof.
"Company's Knowledge" means the actual knowledge of the executive
officers of the Company, after due inquiry.
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Environmental Laws" has the meaning ascribed thereto in Section
3.16 hereof.
"Indemnified Person" has the meaning ascribed thereto in Section 7.3
hereof.
"Infringe" has the meaning ascribed thereto in Section 3.15(e)
hereof.
"Intellectual Property" means all of the following: (a) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (b) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(c) copyrights and copyrightable works; (d) registrations, applications and
renewals for any of the foregoing; (e) trade secrets and know-how (including,
but not limited to, ideas, formulae, compositions, manufacturing and production
processes and techniques, research and development information, drawings,
specifications and designs); and (f) proprietary computer software (including,
but not limited to, data, data bases and documentation).
"Investor(s)" has the meaning ascribed thereto in the preamble
hereof.
"Investor Observer" has the meaning ascribed thereto in Section 6.1
hereof.
"License Agreement" has the meaning ascribed thereto in Section
3.15(b) hereof.
"Line of Credit" has the meaning ascribed thereto in Section 6.17.
"Losses" has the meaning ascribed thereto in Section 7.2 hereof.
"Material Adverse Effect" means a material adverse effect on the
assets, liabilities, results of operations, condition (financial or otherwise)
or business of the Company and its Subsidiaries taken as a whole.
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"Material Subsidiary" means any of the Subsidiaries identified on
Schedule 3.1 hereto as a material subsidiary.
"Nasdaq" means the NASDAQ Stock Market, Inc. National Market
System.
"Notes" has the meaning ascribed thereto in the recitals hereof.
"PCEP" has the meaning ascribed thereto in Section 8.7 hereof.
"Person" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
"Pledge Agreement" has the meaning ascribed thereto in the recitals
hereof.
"PP" has the meaning ascribed thereto in Section 8.7 hereof.
"Purchase Price" means Thirty Million Dollars ($30,000,000).
"Registration Rights Agreement" has the meaning ascribed thereto in
the recitals hereof.
"Regulation D" has the meaning ascribed thereto in the recitals
hereof.
"Required Investors" means Investors who hold a majority in
principal amount of the Notes and/or a majority of the Shares.
"SEC" has the meaning ascribed thereto in the recitals hereof.
"SEC Filings" has the meaning ascribed thereto in Section 3.6
hereof.
"Security Agreement" has the meaning ascribed thereto in the
recitals hereof.
"Shares" means the shares of Common Stock issuable upon conversion
of the Notes.
"Subsidiary" has the meaning ascribed thereto in Section 3.1 hereof.
"1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"2000 10-K" has the meaning ascribed thereto in Section 3.6 hereof.
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ARTICLE II
Purchase and Sale
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Section 2.1 Purchase and Sale of the Notes. Subject to the terms and
conditions of this Agreement, on the Closing Date (except as contemplated by
Section 2.2(c) hereof), each of the Investors shall severally, and not jointly,
purchase, and the Company shall sell and issue to the Investors, the Notes in
the respective principal amounts set forth next to the Investor's name on the
signature pages attached hereto in exchange for the portion of the Purchase
Price to be paid by such Investor. The aggregate principal amount of Notes
purchased by the Investors is $30,000,000.
Section 2.2 Closing.
(a) The closing of the purchase and sale of the Notes (the
"Closing") shall take place at the offices of Xxxxxxxxxx Xxxxxxx PC, 00
Xxxxxxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxxxx 00000, or by transmission by facsimile
and overnight courier, immediately following the execution hereof or on such
later date or at such different location as the parties shall mutually agree,
but not prior to the date that the conditions set forth in Article V hereof have
been satisfied or waived by the appropriate party (the "Closing Date"). At the
Closing (except as contemplated by Section 2.2(c) hereof):
(i) Each Investor shall deliver, as directed by the Company,
its portion of the Purchase Price as set forth next to its name on the signature
pages hereto in United States dollars in immediately available funds to an
account or accounts designated in writing by the Company or paid to a
third-party at the direction of the Company;
(ii) The Company shall deliver to each Investor a Note, in the
form of Exhibit A hereto, representing the principal amount purchased by such
Investor as set forth on the signature pages hereto; and
(iii) The parties shall execute (except for the opinion
referred to in Section 5.1(g) hereof) and deliver each of the documents and take
such other actions referred to in Article V hereof to be delivered by such
party.
(b) Registration. The Notes and the Shares shall be deemed
Registrable Securities (as defined in the Registration Rights Agreement) and the
Registration Rights Agreement shall apply to such Registrable Securities.
(c) PP Funding. Notwithstanding any other provision contained herein
to the contrary, the Company and PP have agreed that PP is purchasing
$10,000,000 in principal amount of the Notes and that PP shall be obligated to
purchase only $5,000,000 in principal amount of the Notes on the Closing Date,
with the remaining $5,000,000 in principal amount being due by PP to the Company
not later than November 21, 2001. The Company shall delivery to PP on the
Closing Date only Notes in respect of the amount paid by PP as of such date,
with the Company delivering an additional Note to PP upon its payment of the
amounts due on or before November 21, 2001.
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ARTICLE III
Company Representations and Warranties
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Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Investors, it being
understood by the Company that these representations and warranties are a
material inducement to the Investors to enter into this Agreement and to
consummate the transactions hereunder:
Section 3.1 Organization, Good Standing and Qualification. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to carry on its business as now
conducted and to own its properties. Each of the Company and its Subsidiaries is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification or leasing necessary unless the
failure to so qualify has not and is not reasonably expected to have a Material
Adverse Effect. The Company's subsidiaries are reflected on Schedule 3.1 hereto
(each a "Subsidiary" and collectively the "Subsidiaries") as well as the
Material Subsidiaries identified thereon as such (each a "Material Subsidiary"
and collectively the "Material Subsidiaries"). The Company has furnished to each
of the Investors, true and correct copies of the Company's Articles of
Incorporation, as amended and as in effect on the date hereof (the "Certificate
of Incorporation"), and the Company's Code of Regulations, as in effect on the
date hereof (the "By-Laws"). Neither the Company nor any Subsidiary is in any
material violation of any of the provisions of its respective certificate of
incorporation, by-laws or other charter documents such that any right of a
holder of the Notes would be materially adversely affected thereby.
Section 3.2 Authorization. The Company has the requisite corporate power
and authority and has taken all requisite corporate action necessary for the:
(a) authorization, execution and delivery of the Agreements; (b) authorization
of the performance of all obligations of the Company hereunder or thereunder,
and (c) authorization, issuance and delivery of the Notes and the Shares. The
Agreements constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally, and to the exercise of judicial discretion as to
the availability of equitable remedies such as specific performance and subject,
as to enforcement of indemnification provisions, to limitations under applicable
securities laws.
Section 3.3 Capitalization. As of the date hereof, the authorized capital
stock of the Company is as set forth on Schedule 3.3 hereto. All of such
outstanding shares of capital stock have been, or upon issuance will be, validly
authorized and issued, fully paid and non-assessable, and issued in accordance
with the registration provisions of the 1933 Act, or pursuant to valid
exemptions therefrom. Except as disclosed in Schedule 3.3 hereto: (a) no shares
of the Company's capital stock are subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the
Company, nor is any Person entitled to preemptive or similar rights arising out
of any agreement or understanding with the Company by virtue of
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any of the Agreements; (b) there are no outstanding options, warrants, scrip
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of capital
stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries; (c) there are no outstanding debt securities
of the Company or any of its Subsidiaries; (d) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act (except pursuant
to the Registration Rights Agreement); (e) there are no outstanding equity
securities of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem an equity security of the Company or any of its
Subsidiaries; (f) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Notes and/or the Shares; (g) the Company does not have any stock
appreciation rights or "phantom stock" plans or agreements or any similar plan
or agreement; and (h) except as specifically disclosed in the SEC Filings, no
Person or group of related Persons, to the Company's Knowledge, beneficially
owns (as determined pursuant to Rule 13d-3 promulgated under the 0000 Xxx) or
has the right to acquire by agreement with or by obligation binding upon the
Company beneficial ownership of in excess of 5% of the Common Stock.
Schedule 3.3 contains a true and complete table setting forth as of
November 14, 2001, the pro forma capitalization of the Company on a fully
diluted basis giving effect to: (a) the issuance of the Shares; (b) any
adjustments in other securities resulting from such issuance; and (c) the
exercise or conversion of all outstanding securities.
Section 3.4 Valid Issuance. The Shares are, and will at all times
hereafter continue to be, duly authorized and reserved for issuance and upon
issuance upon conversion of the Notes in accordance with the terms thereof will
be validly issued, fully paid and non-assessable, free and clear of all liens,
encumbrances and Company rights of first refusal, other than liens and
encumbrances created by the Investors and will not be subject to any preemptive
or similar rights. The issuance by the Company of the Notes and the Shares is
exempt from registration under the 1933 Act, assuming the accuracy of the
Investors' representations and warranties contained herein.
Section 3.5 Consents. The execution, delivery and performance by the
Company of the Agreements and the offer, issuance and sale of the Notes and the
Shares require no consent of, action by or in respect of, or filing with, any
Person or governmental official other than filings that have been made pursuant
to applicable state securities laws and post-sale filings pursuant to applicable
state and federal securities laws which the Company undertakes to file within
the applicable time periods (including, without limitation, the filing of a
registration statement with the SEC as contemplated by the Registration Rights
Agreement, and the filing of an application to list the Shares with Nasdaq as
contemplated by Section 6.8 hereof), and the filing of UCC-1 financing
statements in accordance with the Security Agreement. The Company
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has taken all action necessary to exempt: the sale of the Notes and the issuance
of the Shares pursuant to the Notes from the provisions of any anti-takeover or
business combination law or statute binding on the Company or to which the
Company or any of its assets and properties may be subject.
Section 3.6 Delivery of SEC Filings; Business. The Company has provided
the Investors with copies of the Company's most recent Annual Report on Form
10-K for the fiscal year ended December 31, 2000 (the "2000 10-K"), and all
other reports filed by the Company pursuant to the 1934 Act since the filing of
the 2000 10-K and prior to the date hereof (collectively, the "SEC Filings").
The SEC Filings are the only filings required of the Company pursuant to the
1934 Act for such period. The Company and its Subsidiaries are engaged only in
the business described in the SEC Filings.
Section 3.7 Use of Proceeds. The proceeds of the sale of the Notes
hereunder shall be used by the Company (a) to repay Key Bank, N.A. and the
holders of the Company's senior notes due 2003 under that certain Second Amended
and Restated Loan Agreement, dated as of March 30, 2001, and that certain
Amended and Restated Note Purchase Agreement, dated as of March 30, 2001, and
(b) for working capital and other general corporate purposes.
Section 3.8 No Material Adverse Change. Except as set forth on Schedule
3.8 hereto, since December 31, 2000, except as identified and described in the
SEC Filings, there has not been:
(a) any change in the consolidated assets, liabilities, financial
condition or operating results of the Company from that reflected in the
financial statements included in the 2000 10-K, except for changes in the
ordinary course of business which have not or are not reasonably expected to
have a Material Adverse Effect, individually or in the aggregate;
(b) any declaration or payment of any dividend, or any authorization
or payment of any distribution, on any of the capital stock of the Company, or
any redemption or repurchase of any securities of the Company;
(c) any material damage, destruction or loss, whether or not covered
by insurance to any material assets or properties of the Company or its Material
Subsidiaries;
(d) any waiver, not in the ordinary course of business, by the
Company or any Material Subsidiary of a material right or of a material debt
owed to it;
(e) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company or a Subsidiary, except in the
ordinary course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company and its
Subsidiaries taken as a whole (as such business is presently conducted);
(f) any change or amendment to the Company's Certificate of
Incorporation or Bylaws, or material change to any material contract or
arrangement by which the Company or any Subsidiary is bound or to which any of
their respective assets or properties is subject;
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(g) any material labor difficulties or labor union organizing
activities with respect to employees of the Company or any Subsidiary;
(h) the loss of the services of any key employee, or material change
in the composition or duties of the senior management of the Company or any
Subsidiary;
(i) the loss or, to the Company's Knowledge, threatened loss of any
customer which has had or is reasonably expected to have a Material Adverse
Effect; or
(j) any other event, transaction or condition of any character that
has had or is reasonably expected to have a Material Adverse Effect.
Section 3.9 SEC Filings.
(a) At the time of filing thereof, the SEC Filings complied as to
form in all material respects with the requirements of the 1934 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) During the preceding two (2) years, each registration statement
and any amendment thereto filed by the Company pursuant to the 1933 Act and the
rules and regulations thereunder, as of the date such statement or amendment
became effective, complied as to form in all material respects with the 1933 Act
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading; and each prospectus filed pursuant to Rule 424(b) under
the 1933 Act, as of its issue date and as of the closing of any sale of
securities pursuant thereto, did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
Section 3.10 No Conflict, Breach, Violation or Default.
(a) The execution, delivery and performance of the Agreements by the
Company and the issuance and sale of the Notes and the Shares do not conflict
with or result in a breach or violation of any of the terms and provisions of,
or constitute a default under: (i) the Company's Certificate of Incorporation or
the Company's Bylaws, both as in effect on the date hereof (copies of which have
been provided to the Investors before the date hereof); or (ii) except where it
would not have a Material Adverse Effect: (A) any statute, rule, regulation or
order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company, any Subsidiary or any of their respective
assets or properties; or (B) any agreement or instrument to which the Company or
any Subsidiary is a party or by which the Company or a Subsidiary is bound or to
which any of their respective assets or properties is subject.
(b) Neither the Company nor any Subsidiary: (i) is in default under
or in violation of any indenture, loan or other credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties or assets is bound and which is required to be included as an exhibit
to any SEC Filing or will be required to be included as an
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exhibit to the Company's next filing under either the 1933 Act or 1934 Act; (ii)
is in violation of any order of any court, arbitration or governmental body
applicable to it; or (iii) is in violation of any statute, rule or regulation of
any governmental authority to which it is subject, except in each case referred
to in the preceding clauses (i) through (iii) where such violations have not
resulted or are not reasonably expected to result, individually or in the
aggregate, in a Material Adverse Effect. The business of the Company and its
Subsidiaries is not being conducted in violation of any law, ordinance, rule or
regulation of any governmental authority, except where such violations have not
resulted or would not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is in breach of any agreement where such breach, individually or in
the aggregate, is reasonably expected to have a Material Adverse Effect.
Section 3.11 Tax Matters. Each of the Company and each Subsidiary has
timely prepared and filed all tax returns required to have been filed by the
Company or such Subsidiary with all appropriate governmental agencies and timely
paid all taxes shown thereon or otherwise owed by it. The charges, accruals and
reserves on the books of the Company in respect of taxes for all fiscal periods
are adequate in all material respects, and, except as set forth on Schedule 3.11
hereof, there are no material unpaid assessments against the Company or any
Subsidiary nor, to the Company's Knowledge, any basis for the assessment of any
additional taxes, penalties or interest for any fiscal period or audits by any
federal, state or local taxing authority except for any assessment which is not
material to the Company and its Subsidiaries, taken as a whole. All taxes and
other assessments and levies that the Company or any Subsidiary is required to
withhold or to collect for payment have been duly withheld and collected and
paid to the proper governmental authority or third party when due. There are no
tax liens or claims pending or, to the Company's Knowledge, threatened against
the Company or any Subsidiary or any of their respective assets or property.
Except as described on Schedule 3.11, there are no outstanding tax sharing
agreements or other such arrangements between the Company and any Subsidiary or
other corporation or entity.
Section 3.12 Title to Properties. Except as disclosed on Schedule 3.12
hereof, the Company and each Subsidiary has good and marketable title to all
real properties and all other properties and assets owned by it, in each case
free from liens, encumbrances and defects of any kind (other than Permitted
Liens as defined in the Security Agreement). Except as disclosed in the SEC
Filings, the Company and each Subsidiary holds any leased real or personal
property under valid and enforceable leases with no exceptions that would
materially interfere with the use currently made thereof by them.
Section 3.13 Certificates, Authorities and Permits. The Company and each
Subsidiary possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by it, and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
such Subsidiary, would have a Material Adverse Effect, individually or in the
aggregate.
Section 3.14 No Labor Disputes. No material labor dispute with the
employees of the Company or any Subsidiary exists or, to the Company's
Knowledge, is threatened.
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Section 3.15 Intellectual Property.
(a) Each patent, trademark, service xxxx, copyright, registered
trade name and Internet domain name, and all applications therefor, included
within the Intellectual Property of the Company and its Subsidiaries is
currently valid and enforceable and in compliance with all legal requirements
(including timely filings, proofs and payments of fees), except where the
failure to be in such compliance is not reasonably expected to have a Material
Adverse Effect. No material patent of the Company or its Subsidiaries has been
or is now involved in any interference, reissue, re-examination or opposition
proceeding.
(b) All of the licenses and sublicenses and consent, royalty or
other agreements concerning Intellectual Property which are necessary for the
conduct of the Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted to which the
Company or any Subsidiary is a party or by which any of their assets are bound
(other than generally commercially available, non-custom, off-the-shelf software
application programs having a retail acquisition price of less than $10,000 per
license) (collectively, "License Agreements") are valid and binding obligations
of the Company or its Subsidiaries that are parties thereto and, to the
Company's Knowledge, the other parties thereto, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally and
to the exercise of judicial discretion as to the enforceability of remedies such
as specific performance.
(c) The Company and its Subsidiaries own or have the valid right to
use all of the Intellectual Property necessary for the conduct of the Company's
and each of its Subsidiaries' businesses substantially as currently conducted
and for the ownership, maintenance and operation of the Company's and its
Subsidiaries' properties and assets.
(d) The Intellectual Property owned by the Company or its
Subsidiaries and that is necessary for the conduct of the Company's and each of
its Subsidiaries' respective businesses as currently conducted, is owned free
and clear of all liens, encumbrances, adverse claims or obligations to license
all such owned Intellectual Property, other than licenses entered into in the
ordinary course of the Company's and its Subsidiaries' businesses, except for
liens, encumbrances, adverse claims and obligations that are not reasonably
expected to have a Material Adverse Effect.
(e) The Company and each of its Subsidiaries have taken reasonable
steps to maintain, police and protect the Intellectual Property which it owns
and which is necessary for the conduct of the Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted and the business and marketing plans and customer and
supplier lists and related information of the Company, including the execution
of confidentiality agreements and intellectual property and work product
assignments and releases. To the Company's Knowledge, the conduct of the
Company's and its Subsidiaries' businesses as currently conducted does not
infringe or otherwise impair or conflict with (collectively, "Infringe") any
Intellectual Property rights of any third party, and, to the Company's
Knowledge, the Intellectual Property rights of the Company and its Subsidiaries
which are
-11-
necessary for the conduct of the Company's and each of its Subsidiaries'
respective businesses as currently conducted are not being Infringed by any
third party. There is no litigation or order pending or outstanding or, to the
Company's Knowledge, threatened against the Company, that seeks to limit or
challenge or that concerns the ownership, use, validity or enforceability of any
Intellectual Property of the Company and its Subsidiaries and the Company's and
its Subsidiaries' use of any Intellectual Property owned by a third party.
(f) The consummation of the transactions contemplated hereby do not
result in the alteration, loss, impairment of or restriction on the Company's or
any of its Subsidiaries' ownership or right to use any of the Intellectual
Property which is necessary for the conduct of the Company's and each of its
Subsidiaries' respective businesses as currently conducted.
(g) All software that has been developed by the Company or any of
its Subsidiaries, and, to the Company's Knowledge, all software that has been
developed by third-parties, that the Company or any of its Subsidiaries sells or
licenses to third parties is free from any material defect, bug, virus, or
programming, design or documentation error (other than media defects) and
conforms in all material respects to the specifications and purposes thereof.
(h) The Company and its Subsidiaries have taken reasonable steps to
protect the Company's and its Subsidiaries' rights in their confidential
information and trade secrets. Each employee, consultant and contractor who has
had access to proprietary Intellectual Property which is necessary for the
conduct of the Company's and each of its Subsidiaries' respective businesses as
currently conducted or the business and marketing plans and customer and
supplier lists and related information of the Company has executed an agreement
to maintain the confidentiality of such Intellectual Property and such other
materials and has executed appropriate agreements that are substantially
consistent with the Company's standard forms thereof. Except under
confidentiality obligations, there has been no material disclosure of any of the
Company's or its Subsidiaries' confidential information or trade secrets to any
third party.
Section 3.16 Environmental Matters. Neither the Company nor any Subsidiary
is in violation of any statute, rule, regulation, decision or order of any
governmental authority or body or any court, domestic or foreign, relating to
the use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "Environmental Laws"), owns or operates any real
property contaminated with any substance that is subject to any Environmental
Laws, is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, or is subject to any claim relating to any Environmental
Laws, which violation, contamination, liability or claim has had or is
reasonably expected to have a Material Adverse Effect, individually or in the
aggregate; and there is no pending or, to the Company's Knowledge, threatened
investigation of any claim relating to any Environmental Laws.
Section 3.17 Litigation. Except as described on Schedule 3.17, there are
no pending actions, suits or proceedings against the Company, its Subsidiaries
or any of its or their properties that are reasonably expected to have a
Material Adverse Effect; and to the Company's Knowledge, no such actions, suits
or proceedings are threatened. There are no pending actions, charges,
indictments, information or, to the Company's Knowledge, investigations or
threatened investigations of the Company, any Subsidiary or any of their
respective directors, officers,
-12-
employees or agents as such, which involve allegations of criminal violations of
any Federal, state or local law by the Company, any Subsidiary or any of their
respective directors, officers, employees or agents acting on behalf of the
Company or any Subsidiary.
Section 3.18 Financial Statements.
(a) The financial statements included in each SEC Filing present
fairly (as required by United States generally accepted accounting principles),
in all material respects, the consolidated financial position of the Company as
of the dates shown and its consolidated results of operations and cash flows for
the periods shown, and such financial statements have been prepared in
conformity with United States generally accepted accounting principles applied
on a consistent basis (except as may be disclosed therein or in the notes
thereto, and, in the case of quarterly financial statements, as permitted by
Form 10-Q under the 1934 Act and subject to year-end adjustments). Except as set
forth in the financial statements of the Company included in the SEC Filings
filed prior to the date hereof or as described on Schedule 3.18, neither the
Company nor any of its Subsidiaries has incurred any liabilities, contingent or
otherwise, except those incurred in the ordinary course of business, consistent
(as to amount and nature) with past practices since the date of such financial
statements, none of which, individually or in the aggregate, have had or is
reasonably expected to have a Material Adverse Effect.
(b) The financial information attached hereto as part of Schedule
3.18 relating to the Company and its Subsidiaries was prepared in good faith
based upon assumptions the Company reasonably believes are reasonable and the
historical results of the Company and its Subsidiaries. As of the date hereof
and immediately prior to the Closing, no facts have come to the attention of the
Company that would require the Company to revise in any material respect the
assumptions (taken as a whole) underlying such projections or pro forma
financial statements.
(c) Attached hereto as part of Schedule 3.18 is a list of each
Subsidiary together with its approximate revenues for the nine month period
ended September 30, 2001 and its approximate gross assets as at September 30,
2001, which list was prepared by the Company in good faith based upon the books
and records of the Company and each Subsidiary and which list reflects in all
material respects the revenues of each Subsidiary for the period then ended and
its assets as of the end of such period.
Section 3.19 Insurance Coverage. The Company and each Subsidiary maintain
in full force and effect insurance coverage, including directors and officers
insurance, that is customary for comparably situated companies for the business
being conducted and properties owned or leased by the Company and each
Subsidiary, and the Company reasonably believes such insurance coverage to be
adequate against all liabilities, claims and risks against which it is customary
for comparably situated companies to insure. Schedule 3.19 hereto sets forth a
complete list of all insurance policies and fidelity bonds relating to the
assets, business, operations, employees, officers or directors of the Company
and its Subsidiaries, as of the date
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hereof and immediately prior to the Closing and setting forth the type of
coverage, insurance limits, deductibles and insurance carriers.
Section 3.20 Compliance with Nasdaq Continued Listing Requirements. Except
as described on Schedule 3.20, the Company is in compliance with applicable
Nasdaq continued listing requirements as currently enforced by Nasdaq. Except as
described on Schedule 3.20, there are no proceedings pending or, to the
Company's Knowledge, threatened against the Company relating to the continued
listing of the Company's Common Stock on Nasdaq and the Company has not received
any notice of, nor to the Company's Knowledge is there any basis for, the
delisting of the Common Stock from Nasdaq.
Section 3.21 Brokers and Finders. No Person has, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company.
Section 3.22 No Directed Selling Efforts or General Solicitation. Neither
the Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Notes.
Section 3.23 Private Offering. Subject to the accuracy and completeness of
the representations and warranties of the respective Investors contained in
Article IV hereof, the Company and all Persons acting on its behalf have not
made, directly or indirectly, and will not make, offers or sales of any
securities or solicited any offers to buy any security under circumstances that
would require registration of the Notes or the Shares or the issuance of such
securities under the 1933 Act. The offer, sale and issuance of the Notes and the
Shares to the Investors will not be integrated with any other offer, sale and
issuance of the Company's securities (past, current or future) under the 1933
Act or any regulations of any exchange or automated quotation system on which
any of the securities of the Company are listed or designated or for purposes of
any stockholder approval provision applicable to the Company or its securities.
Subject to the accuracy and completeness of the representations and warranties
of the respective Investors contained in Article IV hereof, the offer, sale and
issuance by the Company to the Investors of the Notes and the Shares are exempt
from the registration requirements of the 1933 Act.
Section 3.24 Investment Company. The Company is not, and is not controlled
by or under common control with an Affiliate of an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
Section 3.25 Questionable Payments. Except as set forth on Schedule 3.25,
neither the Company nor any of its Subsidiaries nor, to the Company's Knowledge,
any of their respective current or former stockholders, directors, officers,
employees, agents or other Persons acting on behalf of the Company or any
Subsidiary, has on behalf of the Company or any Subsidiary or in connection with
their respective businesses: (a) used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) made any direct or indirect unlawful payments to any
governmental officials or employees from corporate funds; (c) established or
maintained any unlawful or unrecorded fund of corporate
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monies or other assets; (d) made any intentionally false or fictitious entries
on the books and records of the Company or any Subsidiary; or (e) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment of any nature.
Section 3.26 Internal Accounting Controls. The Company and each of the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that: (a) transactions are executed in accordance
with management's general or specific authorizations; and (b) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with United States generally accepted accounting principles and to
maintain asset accountability.
Section 3.27 Transactions With Affiliates. The Company has reported, in
accordance with law, any transactions with officers, directors or employees of
the Company who are parties to any transaction with the Company or any of its
Subsidiaries (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 Company's Knowledge, any corporation,
partnership, trust or entity in which any officer, director or any such employee
has a substantial interest or is an officer, director, trustee or partner.
Section 3.28 Application to Takeover Protection. 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 or other
similar anti-takeover provision under the Certificate of Incorporation, By-Laws
or the laws of the Company's state of incorporation which is or could become
applicable to the Investors or the Agreements as a result of the transactions
contemplated by the Agreement. None of the transactions contemplated by the
Agreements, including the conversion of the Notes into Shares, will trigger any
poison pill provisions of any of the Company's stockholders' rights or similar
agreements.
Section 3.29 Acknowledgment of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Shares upon conversion of the Notes. The Company further
acknowledges that its obligation to issue Shares upon conversion of the Notes in
accordance with this Agreement and the Notes is absolute and unconditional (but
subject to the terms and conditions of the Notes and this Agreement) regardless
of the dilutive effect that such issuance may have on the ownership interests of
other stockholders of the Company.
Section 3.30 Acknowledgment Regarding Investors' Purchase of Notes. The
Company acknowledges and agrees the Investors are acting solely in the capacity
of arm's length purchasers with respect to this Agreement 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 this Agreement and the transactions contemplated hereby and any
statement made by any Investor or any of their respective representatives or
agents in connection with this Agreement and the transactions contemplated
hereby is not advice or a recommendation and is merely incidental to each
Investors' purchase of the securities. The Company further represents to each
Investor that the Company's decision to
-15-
enter into this Agreement has been based solely on the independent evaluation of
the Company and its representatives.
Section 3.31 Seniority; Exclusivity. No class of equity securities of the
Company will be senior to the Notes in right of payment, whether upon
liquidation, dissolution or otherwise.
Section 3.32 Disclosures. No representation or warranty contained in the
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading. There is
no fact known to the Company that the Company has not disclosed to the Investors
which has had or which could be expected to have a Material Adverse Effect on
the Company other than with regard to general economic conditions or world
events outside the control of the Company.
ARTICLE IV
INVESTOR'S REPRESENTATIONS AND WARRANTIES
-----------------------------------------
Representations and Warranties of the Investors. Each of the
Investors hereby severally, and not jointly, makes the following representations
and warranties to the Company, it being understood by each Investor that the
representations and warranties are material inducements to the Company to enter
into this Agreement and to consummate the transactions hereunder:
Section 4.1 Organization and Existence. The Investor is a validly existing
corporation, limited partnership or limited liability company and has all
requisite corporate, partnership or limited liability company power and
authority to execute and deliver the Agreements to which it is a party to and to
invest in the Notes pursuant to this Agreement.
Section 4.2 Authorization. The execution, delivery and performance by the
Investor of the Agreements have been duly authorized and the Agreements each
constitute the valid and legally binding obligation of the Investor, enforceable
against the Investor in accordance with their respective terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally, and to the exercise of judicial discretion as to the availability of
equitable remedies such as specific performance and subject, as to enforcement
of indemnification provisions, to limitations under applicable securities laws.
Section 4.3 Purchase Entirely for Own Account. The Note to be received by
the Investor hereunder will be acquired for the Investor's own account, not as
nominee or agent, and not with a view to the resale or other transfer or
distribution of the Note or any portion thereof or interest therein in violation
of the 1933 Act, and the Investor will not sell, grant any participation in, or
otherwise transfer or distribute the Note or any portion thereof or interest
therein in violation of the 1933 Act. The Investor is not a registered broker
dealer or an entity engaged in the business of being a broker dealer. The Shares
to be received by the Investor upon a conversion of Notes in accordance
therewith will be acquired for the Investor's own account, not as nominee or
agent, and not with a view to the resale or other transfer or distribution of
the
-16-
Shares or any portion thereof or interest therein in violation of the 1933 Act,
and the Investor will not sell, grant any participation in, or otherwise
transfer or distribute the Shares or any portion thereof or interest therein in
violation of the 1933 Act.
Section 4.4 Investment Experience. The Investor acknowledges that it can
bear the economic risk and complete loss of its investment in the Notes, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby.
Section 4.5 Disclosure of Information. The Investor has had an opportunity
to receive all additional information related to the Company requested by it and
to ask questions of and receive answers from the Company regarding the Company,
its business and the terms and conditions of the offering of the Notes. The
Investor acknowledges receipt of copies of the SEC Filings. Neither such
inquiries nor any other due diligence investigation conducted by the Investor
shall modify, amend or affect the Investor's right to rely on the Company's
representations and warranties contained in this Agreement. The Investor, in
making its investment decision, has relied for advice on its own legal,
accounting and tax advisors. Except for the representations and warranties of
the Company contained in this Agreement, the Company has made no representation
or warranty to the Investor on which the Investor has relied in executing and
delivering this Agreement.
Section 4.6 Restricted Securities. The Investor understands that the Notes
and the Shares are characterized as "restricted securities" under the U.S.
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.
Section 4.7 Legends.
(a) It is understood that, until the earlier of: (a) registration
for resale pursuant to the Registration Rights Agreement or (b) the time when
the Notes and/or Shares, as the case may be, may be sold pursuant to Rule
144(k), certificates evidencing such Notes and/or Shares, as the case may be,
may bear the following or any substantially similar legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION FROM REGISTRATION UNDER THE
FOREGOING LAWS".
(b) Upon the earlier of: (i) registration for resale pursuant to the
Registration Rights Agreement and receipt by the Company of the Investor's
written confirmation that such securities will not be disposed of except in
compliance with the prospectus delivery requirements of the 1933 Act; and (ii)
Rule 144(k) becoming available, the Company shall, upon an Investor's written
request, promptly cause certificates evidencing the Notes and/or the Shares to
be replaced with certificates which do not bear such restrictive legends.
-17-
Section 4.8 Accredited Investor. The Investor is an accredited investor as
defined in Rule 501(a) of Regulation D.
Section 4.9 No General Solicitation. The Investor did not learn of the
investment in the Notes as a result of any public advertising or general
solicitation.
Section 4.10 Brokers and Finders. No Person has, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Investor.
Section 4.11 State of Residence. The state in which the Investor's
principal office is located is the state set forth in the Investor's address as
set forth on the signature pages hereto.
ARTICLE V
CONDITIONS TO THE CLOSING
-------------------------
Section 5.1 Conditions to the Investors' Obligations. The obligation of
the Investors to purchase the Notes at the Closing is subject to the fulfillment
to the Investors' satisfaction, on or prior to the Closing Date, of the
following conditions, any of which may be waived by the Investors agreeing
hereunder to purchase a majority in principal amount of the Notes:
(a) The representations and warranties made by the Company in
Article III hereof shall be true and correct in all material respects on the
Closing Date. The Company shall have performed in all material respects all
obligations and conditions herein required to be performed or observed by it on
or prior to the Closing Date.
(b) The Company shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary for
consummation of the purchase and sale of the Notes and the issuance of the
Shares.
(c) The Company shall have executed and delivered to the Investors
the Registration Rights Agreement.
(d) The Company shall have executed and delivered to the Investors
the Security Agreement. (e) The Company shall have executed and delivered to the
Investors the Pledge Agreement.
(f) No judgment, writ, order, injunction, award or decree of or by
any court, or judge, justice or magistrate, including any bankruptcy court or
judge, or any order of or by any governmental authority, shall have been issued,
and no action or proceeding shall have been instituted by any governmental
authority, enjoining or preventing the consummation of the transactions
contemplated hereby or in the other Agreements.
-18-
(g) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Chief Executive Officer or its Chief Financial
Officer, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in subsections (a), (b) and (f) of this Section 5.1.
(h) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Secretary, dated as of the Closing Date, certifying
the resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Agreements and the
issuance of the Notes and the reservation of the Shares, certifying the current
versions of the Certificate of Incorporation and Bylaws of the Company and
certifying as to the signatures and authority of persons signing the Agreements
and related documents on behalf of the Company.
(i) The Investors shall have received an opinion from Xxxxxx Xxxxx
Xxxxxxxx & Xxxxxxx LLP, the Company's counsel, dated as of the Closing Date, in
form and substance reasonably acceptable to the Investors and addressing such
legal matters as the Investors may reasonably request.
(j) The Company shall have executed and delivered such other
documents as the Investors may reasonably request.
Section 5.2 Conditions to Obligations of the Company. The Company's
obligation to sell and issue the Notes at the Closing is subject to the
fulfillment to the satisfaction of the Company on or prior to the Closing Date
of the following conditions, any of which may be waived by the Company:
(a) The representations and warranties made by the Investors in
Article IV hereof, shall be true and correct in all material respects as of the
Closing Date. All of the Investors shall have performed in all material respects
all obligations and conditions herein required to be performed or observed by
them on or prior to the Closing Date.
(b) The Investors shall have executed and delivered to the Company
the Registration Rights Agreement.
(c) The Investors shall have executed and delivered to the Investors
the Security Agreement.
(d) The Investors shall have executed and delivered to the Investors
the Pledge Agreement.
(e) The Company shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary for
consummation of the purchase and sale of the Notes and the issuance of the
Shares.
(f) No judgment, writ, order, injunction, award or decree of or by
any court, or judge, justice or magistrate, including any bankruptcy court or
judge, or any order of or by any governmental authority, shall have been issued,
and no action or proceeding shall have been
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instituted by any governmental authority, enjoining or preventing the
consummation of the transactions contemplated hereby or in the other Agreements.
(g) The Investors shall have executed and delivered such other
documents as the Company may reasonably request.
ARTICLE VI
COVENANTS AND AGREEMENTS OF THE COMPANY
---------------------------------------
Section 6.1 Observer.
(a) Effective upon the Closing Date and for so long as the Investors
continue to hold at least 20% in principal amount of the Notes or Shares into
which Notes were converted, the Required Investors shall have the right, but not
the obligation, to designate, upon written notice to the Company, one (1)
individual (such designee, the "Investor Observer") who shall be entitled to
notice of, to attend, and to any materials distributed to the directors of the
Company before, during or after, all meetings (including any action to be taken
by written consent) of the Company's Board of Directors and all committees
thereof; provided, however, that the Company reserves the right to withhold any
materials and to exclude such Investor Observer from any meeting or portion
thereof if access to such materials or attendance at such meeting could, in the
good faith judgment of the Company's outside counsel, adversely affect the
attorney-client privilege between the Company and its counsel or cause the
Company's Board of Directors to breach its fiduciary duties. As a condition of
the Company providing confidential information to the Investor Observer, at the
request of the Company, the Investor Observer shall sign and deliver to the
Company a confidentiality agreement in form and substance reasonably acceptable
to the Company and the Investor Observer.
(b) The Investor Observer shall not be permitted to vote at any
meeting of the Company's Board of Directors or be counted for purposes of
determining whether there is sufficient quorum for the Company's Board of
Directors to conduct its business. The parties hereto hereby acknowledge and
agree that the Initial Observer shall not owe any fiduciary or other duties to
the stockholders of the Company or otherwise have any directorial or other
duties or liabilities to the Company or its stockholders. The Required Investors
shall designate, and may replace, the Investor Observer with or without cause in
its sole discretion by providing written notice to the Company at least five (5)
Business Days prior to the taking of any such action.
Section 6.2 No Conflicting Agreements. The Company will not enter into any
agreement or make any commitment that would conflict or interfere in any
material respect with the obligations to the Investors under the Agreements.
Section 6.3 Insurance. During such time as any of the Notes remains
outstanding, the Company shall not materially reduce the insurance coverages
described in Section 3.19 hereof.
Section 6.4 Compliance with Laws. During such time as any of the Notes
remains outstanding, the Company will comply in all material respects with all
applicable laws, rules,
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regulations, orders and decrees of all governmental authorities, except where
the failure to comply is not reasonably likely to have a Material Adverse
Effect.
Section 6.5 Stop Transfer Instruction. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions on transfer set forth in Section 4.7.
Section 6.6 Furnishing of Information. As long as any Investor owns the
Notes or the Shares, the Company will (i) cause the Common Stock to continue at
all times to be registered under Xxxxxxx 00 xx xxx 0000 Xxx, (xx) use reasonable
commercial efforts 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 Section 13, 14 or 15(d) of the 1934
Act and, (iii) unless filed by XXXXX, promptly furnish, but in no event later
than five (5) days after the filing thereof with the SEC, such Investor with
true and complete copies of all such filings, and will not take any action or
file any document (whether or not permitted by the 0000 Xxx) to terminate or
suspend such reporting and filing obligations. As long as any Investor owns
Notes or Shares: (a) if the Company is not required to file reports pursuant to
Section 13(a) or 15(d) of the 1934 Act other than because the Company has been
acquired by a Person that does file such reports, it will prepare and furnish to
the Investors and make publicly available in accordance with Rule 144(c)
promulgated under the 1933 Act annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the 1934 Act, as well
as any other information required thereby, in the time period that such filings
would have been required to have been made under the 1934 Act; and (b) the
Company will send the following to each Investor: (i) promptly following the
release thereof, facsimile copies of all press releases issued by the Company or
any of its Subsidiaries; and (ii) copies of any notices and other information
sent to the stockholders of the Company generally, contemporaneously with the
making available or giving thereof to the stockholders. The Company further
covenants that it will use reasonable commercial efforts to take such further
action as any holder of the Notes or the Shares may reasonably request, all to
the extent required from time to time to enable such Person to sell the Notes or
the Shares without registration under the 1933 Act within the limitation of the
exemptions provided by Rule 144 promulgated under the 1933 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
such requirements. In addition to the foregoing, the Company shall supply to an
Investor such other information relating to the Company, as from time to time
may reasonably be requested by such Investor, provided the Company produces such
information in its ordinary course of business. As a condition of the Company
providing confidential information to an Investor as provided in the prior
sentence, at the request of the Company, such Investor shall sign and deliver to
the Company a confidentiality agreement in form and substance reasonably
acceptable to the Company and such Investor.
Section 6.7 Integration. The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the 0000 Xxx) that would be integrated with the offer or
sale of the Notes or the Shares in a manner that would require the registration
under the 1933 Act of the sale of the Notes or the Shares to any Investor
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or cause the offering of such securities to be integrated with any other
offering of securities by the Company.
Section 6.8 Listing and Reservation of Shares.
(a) The Company shall: (i) promptly following the Closing, but not
later than five (5) Business Days thereafter, prepare and file with Nasdaq (as
well as any other national securities exchange or market on which the Common
Stock is then listed) additional shares listing applications or letters
acceptable to Nasdaq covering and listing a number of shares of Common Stock
which is at least equal to the maximum number of Shares then issuable; (ii) take
all steps necessary to cause the Shares to be approved for listing on Nasdaq (as
well as on any other national securities exchange or market on which the Common
Stock is then listed) as soon as possible thereafter; (iii) maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all such
Shares; and (iv) provide to the Investors evidence of such listing. Neither the
Company nor any of its Subsidiaries shall take any action that would result in
the delisting or suspension of the Common Stock on Nasdaq except in connection
with a merger or consolidation of the Company where the Company is not the
survivor thereof. The Company shall promptly provide to each Investor copies of
any notices it receives from Nasdaq regarding the continued eligibility of the
Common Stock for listing on such automated quotation system, so long as such
notice does not include material, nonpublic information. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 6.8.
(b) The Company at all times shall reserve a sufficient number of
shares of its authorized but unissued Common Stock to provide for the full
conversion of the outstanding Notes. Shares of Common Stock reserved for
issuance upon conversion of the Notes shall be allocated pro rata to each of the
Investors in accordance with the principal amount of Notes issued and delivered
to such Investors at the Closing. If at any time the number of shares of Common
Stock authorized and reserved for issuance is insufficient to cover the number
of Shares issued and issuable upon conversion of the Notes (based on the
Conversion Price (as defined in the Notes)) in effect from time to time without
regard to any limitation on conversions or exercises, the Company will promptly
take all corporate action necessary to authorize and reserve such number of
shares of Common Stock, including, without limitation, calling a special meeting
of stockholders to authorize additional shares to meet the Company's obligations
under this Section 6.8, in the case of an insufficient number of authorized
shares, and use its best efforts to obtain stockholder approval of an increase
in such authorized number of shares. In addition, if on the actual date of an
adjustment of the Conversion Price pursuant to the Notes, the registration
statements are insufficient to register such number of shares of Common Stock,
the Company shall file a registration statement sufficient to register such
additional shares of Common Stock in accordance with the Registration Rights
Agreement. All calculations of the above amounts shall be made without regard to
any limitation on conversions of Notes.
Section 6.9 Additional Collateral. As an additional inducement to the
Investors to purchase the Notes, the Company shall (a) cause its lenders
associated with the Line of Credit to permit the Investors to have a security
interest in the assets of the Company and the Subsidiaries, a pledge of the
shares of stock in the Subsidiaries and a guarantee from the Subsidiaries on the
same terms and conditions as the lenders associated with the Line of Credit,
provided that the Investors shall be subordinated to the security interest and
other rights therein provided to such
-22-
lenders pursuant to a subordination and inter-creditor agreement on terms and
conditions reasonably satisfactory to the Investors and such lenders, and (b) in
the event that a written commitment letter has not been received and accepted in
writing by the Company with regard to the Line of Credit by December 14, 2001 or
the Line of Credit has not been closed and consummated by January 31, 2002, the
Company shall cause all of its Material Subsidiaries to grant to the Investors a
security interest in all of their respective assets, to guarantee the
obligations of the Company under the Notes and to pledge to the Investors the
shares of stock of the Material Subsidiaries not pledged pursuant to the Pledge
Agreement, all on terms and conditions reasonably acceptable to the Company and
the Investors and their respective counsel, which security interests, pledges
and guarantees to be provided pursuant to this Section 6.9(b) shall be executed
and delivered within thirty (30) days from the date on which the Investors'
rights under this Section 6.9(b) arise with regard to the foreign Material
Subsidiaries and fifteen (15) days from the date on which the Investors' rights
under this Section 6.9(b) arise with regard to the domestic Material
Subsidiaries. It is understand that no more than 2/3 of the shares of the
foreign Material Subsidiaries will be pledged.
Section 6.10 Use of Proceeds. The Company shall use the proceeds from the
sale of the Notes to the Investor (a) to repay Key Bank, N.A. and the holders of
the Company's senior notes due 2003 under that certain Second Amended and
Restated Loan Agreement, dated as of March 30, 2001, and that certain Amended
and Restated Note Purchase Agreement, dated as of March 30, 2001, and (b) for
working capital and other general corporate purposes.
Section 6.11 Transactions with Affiliates. Except as set forth on Schedule
6.11 hereto, so long as any Notes are outstanding, the Company shall not, and
shall cause each of its Subsidiaries not to, enter into, amend, modify or
supplement, or permit any Subsidiary to enter into, amend, modify or supplement,
any agreement, transaction, commitment or arrangement with any of its or any
Subsidiary's officers, directors or persons who were officers or directors at
any time during the previous two (2) years, or any individual related by blood,
marriage or adoption to any such individual or with any entity in which any such
entity or individual owns a 5% or more beneficial interest (each a "Related
Party"), except for: (a) customary employment arrangements and benefit programs
on reasonable terms; (b) any agreement, transaction, commitment or arrangement
on an arms-length basis on terms no less favorable to the Company than terms
which the Company would have obtained from a Person other than such Related
Party; or (c) any agreement, transaction, commitment or arrangement which is
approved by a majority of the disinterested directors of the Company. For
purposes hereof, any director who is also an officer of the Company or any
Subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment or arrangement.
Section 6.12 Transfer Agent Instructions. At the Closing the Company shall
issue irrevocable instructions to its transfer agent (and shall issue to any
subsequent transfer agent as required), to issue certificates, registered in the
name of each such Investor or its respective nominee(s), for the Shares in such
amounts, in accordance with the terms of the Notes and this Agreement, as
specified from time to time by each Investor to the Company in a form acceptable
to such Investor (the "Irrevocable Transfer Agent Instructions"). The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 6.12, and stop transfer instructions to
give effect to Section 4.7 hereof (in the case of the Shares, prior to
registration of the Shares under the 0000 Xxx) will be given by the Company to
its
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transfer agent and that the Notes and the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in the Agreements. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Investors by violating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 6.12 will be inadequate and agrees, in the event of a breach
or threatened breach by the Company of the provisions of this Section 6.12, that
the Investors, shall be entitled, in addition to all other available remedies,
to an order and/or injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.
Section 6.13 Press Release; Filing of Form 8-K. Subject to the provisions
of Section 8.7 hereof, on or before the fifth (5th) Business Day following the
Closing Date, the Company shall: (a) issue a press release in form and substance
reasonably acceptable to the Investors (except as otherwise required by law);
and (b) file a Current Report on Form 8-K with the SEC describing the terms of
the transaction contemplated by the Agreements in the form required by the 1934
Act.
Section 6.14 Ordinary Course Brokerage and Trading. Subject to compliance
with applicable securities laws and Nasdaq regulations, no Investor shall be
prohibited from engaging in its ordinary course brokerage and trading activities
in respect of the Company's Common Stock; provided that the personnel engaged in
such activities have not been involved with the transactions contemplated hereby
and have not been provided with confidential information with respect to the
Company.
Section 6.15 Additional Affirmative Covenants. During such time as any of
the Notes remains outstanding, the Company shall:
(a) promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, property or business of the Company or
any Subsidiary; provided, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Company or such Subsidiary shall
have set aside on its books adequate reserves with respect thereto;
(b) preserve and maintain, and cause each of its Material
Subsidiaries to maintain, its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified, as a foreign corporation in each jurisdiction in which such
qualification is necessary or desirable in view of its business and operations
or the ownership of its properties; and
(c) keep, and shall cause each of its Subsidiaries to keep, proper
books of record and account in which entries that are complete and correct in
all material respects shall be made with respect to all financial transactions
and the assets and business of the Company and each such Subsidiary in
accordance with U.S. generally accepted accounting principles to the extent
applicable.
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Section 6.16 Additional Negative Covenants. During such time as any of the
Notes remains outstanding, the Company shall not without the prior written
consent of the Required Investors:
(a) exchange, redeem or convert any of the Company's capital stock
for indebtedness, including convertible debt, of the Company. Except as
expressly permitted in this Agreement, the Company shall not issue and sell any
Notes, other than to the Investors pursuant to this Agreement, without the prior
written consent of each of the Investors;
(b) declare or pay any dividend, in cash or in kind, to the holders
of the Common Stock, except in shares of Common Stock;
(c) amend the Certificate of Incorporation or Bylaws of the Company
or any of its Subsidiaries, if such amendment would change any of the rights,
preferences or privileges provided for in the Notes;
(d) redeem, purchase or otherwise acquire (or pay into or set aside
for a sinking fund for such purpose) any of the capital stock of the Company,
except for repurchases of capital stock of the Company from employees of the
Company in connection with the termination of such employees employment;
(e) create or authorize the creation of any additional indebtedness
that is senior to or pari passu with the Notes, other than the Line of Credit;
(f) consent to or permit any dissolution, winding up, commencement
of bankruptcy, insolvency, liquidation or similar proceedings with respect to
the Company or any Material Subsidiary;
(g) create, incur, assume or suffer to exist any liability for
borrowed money for itself or any subsidiary, directly or indirectly, of the
Company other than those borrowings by Subsidiaries identified on Schedule 6.16
hereto, except: (A) indebtedness represented by the Notes; (B) indebtedness
under the Line of Credit; or (C) additional indebtedness incurred by
Subsidiaries after the date hereof of not more than $1,000,000 in the aggregate
outstanding at any time;
(h) create, incur, assume or suffer to exist, any mortgage, pledge,
lien, or encumbrance of or upon or security interest in, any of its properties
or assets now owned or hereafter acquired, or permit any Material Subsidiary to
do any of the foregoing with regard to its own assets, except: (A) mortgages,
pledges, liens and security interests securing the Line of Credit; (B) liens,
charges and encumbrances incidental to the conduct of its business or the
ownership of its properties and assets which are not incurred in connection with
the borrowing of money or the obtaining of advances or credit and which do not
materially impair the use thereof in the operation of its business; (C)
Permitted Liens (as defined in the Security Agreement); and (D) liens pursuant
to the Security Agreement and the Pledge Agreement;
(i) assume, endorse, be or become liable for or guarantee the
obligations of any other Person for borrowed money, or permit any subsidiary of
the Company to do any of the
-25-
foregoing, except for such assumptions, endorsements, or guarantees that do not
exceed $1,000,000 in the aggregate at any time;
(j) enter into any significant new line of business;
(k) enter into any agreement for the consummation of, or consummate
any transaction, involving a Change in control, provided, that the provisions of
this Section 6.16(k) shall continue only for a period of two (2) years from the
Closing Date.
Section 6.17 Line of Credit. The Company and the Investors have agreed
that the Company may obtain from a commercial bank or a group of commercial
banks a revolving line of credit in an amount not to exceed $15,000,000, to
provide the Company with additional working capital (the "Line of Credit") on
terms generally provided by commercial banks located in the City of New York,
provided that the Required Investors have approved the terms of the Line of
Credit in writing prior to the Company entering into or agreeing to be bound by
any terms of the Line of Credit (such approval not to be unreasonably withheld).
ARTICLE VII
Survival and Indemnification
----------------------------
Section 7.1 Survival. All representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to be representations,
warranties, covenants and agreements as of the date hereof and shall survive the
execution and delivery of this Agreement for the longer of (a) the period that
any of the Notes are outstanding, and (b) three (3) years from the date of this
Agreement; provided, however, that the provisions contained in Article VI hereof
shall survive in accordance therewith.
Section 7.2 Indemnification. Except as otherwise expressly provided in
Section 1(c) of the Notes or in Section 2(c) of the Registration Rights
Agreement, the Company agrees to indemnify and hold harmless each Investor and
its Affiliates and their respective directors, officers, employees and agents
from and against any and all losses, claims, damages, liabilities and reasonable
expenses (including without limitation reasonable attorney fees and
disbursements and other expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, pending or threatened
and the costs of enforcement hereof) (collectively, "Losses") to which such
Person may become subject as a result of any breach of representation, warranty,
covenant or agreement made by or to be performed on the part of the Company
under the Agreements, and will reimburse any such Person for all such amounts as
they are incurred by such Person.
Section 7.3 Conduct of Indemnification Proceedings. Promptly after receipt
by any Person (the "Indemnified Person") of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 7.2 hereof, such Indemnified Person shall promptly
notify the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses to the extent such
-26-
fees and expenses constitute Losses; provided, however, that the failure of any
Indemnified Person so to notify the Company shall not relieve the Company of its
obligations hereunder except to the extent that the Company is materially
prejudiced by such failure to notify. In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Person unless: (a)
the Company and the Indemnified Person shall have mutually agreed to the
retention of such counsel; or (b) in the reasonable judgment of counsel to such
Indemnified Person representation of both parties by the same counsel would be
inappropriate due to actual or potential material differing interests between
them. The Company shall not be liable for any settlement of any action,
proceeding or investigation effected without its written consent, but if settled
with such consent, or if there be a final judgment for the plaintiff, the
Company shall indemnify and hold harmless such Indemnified Person from and
against any loss or liability (to the extent stated above) by reason of such
settlement or judgment. Without the prior written consent of the Indemnified
Person, which consent shall not be unreasonably withheld, the Company shall not
effect any settlement of any pending or threatened action, proceeding or
investigation in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Party,
unless such settlement includes an unconditional release of such Indemnified
Person from all liability arising out of such action, proceeding or
investigation.
ARTICLE VIII
Miscellaneous
-------------
Section 8.1 Successors and Assigns. This Agreement may not be assigned by
a party hereto without the prior written consent of the Company or the Required
Investors, as applicable, provided, however: (a) an Investor may assign its
rights and delegate its duties hereunder in whole or in part to an Affiliate or
to a third party that is an accredited investor (as defined in Regulation D)
acquiring some portion or all of its Notes and/or Shares, as the case may be, in
a private transaction without the prior written consent of the Company or the
other Investors, after notice duly given by such Investor to the Company and the
other Investors, provided, that no such assignment or obligation shall affect
the obligations of such Investor hereunder and provided further that the right
to participate in the selection of the Investor Observer and the rights of the
Investors under Section 6.16(k) may not be assigned, but may only be determined
by the Investors in accordance herewith. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
Section 8.2 Counterparts; Faxes. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed via facsimile, which shall be deemed an original.
-27-
Section 8.3 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 8.4 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described: (a) if given by personal delivery,
then such notice shall be deemed given upon such delivery; (b) if given by telex
or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal; (c) if given by mail, then such notice
shall be deemed given upon the earlier of: (i) receipt of such notice by the
recipient; or (ii) three (3) Business Days after such notice is deposited in
certified mail, return receipt requested, postage prepaid, and; (d) if given by
an internationally recognized overnight air courier, then such notice shall be
deemed given one (1) Business Day after delivery to such carrier. All notices
shall be addressed to the party to be notified at the address as follows, or at
such other address as such party may designate by ten days' advance written
notice to the other party:
If to the Company:
Xxxxx Inc.
000 Xxxxx Xxxxxx
Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, President and Chief
Executive Officer
Fax: 000-000-0000
With a copy to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Fax: 000-000-0000
If to the Investors, to the addresses set forth on the
signature pages hereto.
Section 8.5 Expenses. The parties hereto shall pay their own costs and
expenses in connection herewith, except that at the Closing the Company shall
pay the reasonable fees and expenses of Xxxxxxxxxx Xxxxxxx PC, and Akin, Gump,
Strauss, Xxxxx & Xxxx, L.L.P., the attorneys for the Investors, as well as the
accountants for the Investors and the reasonable costs of the Investors in
conducting due diligence on the Company up to a maximum of $200,000. The Company
shall reimburse the Investors upon demand for all reasonable out-of-pocket
expenses incurred by the Investors, including without limitation reimbursement
of reasonable attorneys' fees and disbursements, in connection with any
amendment, modification or waiver of this Agreement or the other Agreements and
the completion of the matters contemplated by Section 6.9 hereof.
-28-
Section 8.6 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Required
Investors. Any amendment or waiver effected in accordance with this section
shall be binding upon each holder of any Notes and/or Shares issued under this
Agreement at the time outstanding, each future holder of all such securities,
and the Company.
Section 8.7 Publicity. No public release or announcement concerning the
transactions contemplated hereby shall be issued by the Company or the Investors
without the prior consent of the Company (in the case of a release or
announcement by the Investors) or Palisade Concentrated Equity Partnership, L.P.
("PCEP") and Pegasus Partners II, L.P. ("PP") (in the case of a release or
announcement by the Company) (which consents shall not be unreasonably
withheld), except as such release or announcement may be required by law or the
applicable rules or regulations of any securities exchange or securities market,
in which case the Company or the Investors, as the case may be, shall allow
PCEP, PP or the Company, as applicable, to the extent reasonably practicable in
the circumstances, reasonable time to comment on such release or announcement in
advance of such issuance.
Section 8.8 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
Section 8.9 Entire Agreement. This Agreement, including the Exhibits and
the Schedules, and the other Agreements, and amendments thereto, constitute the
entire agreement among the parties hereof with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof
and thereof.
Section 8.10 Further Assurances. The parties shall execute and deliver all
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
Section 8.11 Governing Law; Consent to Jurisdiction. This Agreement shall
be governed by, and construed in accordance with, the internal laws of the State
of New York without regard to the choice of law principles thereof. Each of the
parties hereto irrevocably submits to the co-exclusive jurisdiction of the
courts of the State of New York located in New York County and the United States
District Court for the Southern District of New York for the purpose of any
suit, action, proceeding or judgment relating to or arising out of the
Agreements and the transactions contemplated thereby. Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same methods as are specified for the giving
of notices under this Agreement. Each of the parties
-29-
hereto irrevocably consents to the jurisdiction of any such court in any such
suit, action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum.
[SIGNATURES BEGIN ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
or caused their duly authorized officers to execute this Agreement as of the
date first above written.
The Company: XXXXX INC.
By: /s/
---------------------------------
Name:
Title:
The Investors: PALISADE CONCENTRATED EQUITY PARTNERSHIP, L.P.
By: Palisade Concentrated Holdings, L.L.C.
as General Partner
By: /s/
---------------------------------
Name: Xxxx Xxxxxxx
Title: Member
Aggregate Principal Amount: $20,000,000
Address for Notice: Palisade Concentrated Equity Partnership, L.P.
Xxx Xxxxxx Xxxxx
Xxxx Xxx, Xxx Xxxxxx 00000
Attn: Xxxx Xxxxxxx
Telephone: 201.585-7733
Facsimile: 201.585-7552
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
The Investors: PEGASUS PARTNERS II, L.P.
By: Pegasus Investors II, L.P.,
as General Partner
By: Pegasus Investors II GP, LLC, as
General Partner
By: /s/
---------------------------------
Name:
Title:
Aggregate Principal Amount: $10,000,000
Address for Notice: Pegasus Partners II, L.P.
00 Xxxxx Xxxx
Xxx Xxx, Xxxxxxxxxxx 00000
Attn: Xxxxxxxx Xxxxxx
Telephone: 000.000.0000
Facsimile: 203.869.6940
with a copy to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
0000 Xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxx X. Xxxxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 202.887.4588
