Exhibit 4.1
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NOTE AND WARRANT PURCHASE AGREEMENT
DATED AS OF
SEPTEMBER 30, 2004
BY AND BETWEEN
XXXXXX, INC.
AND
THE PURCHASERS LISTED ON SCHEDULE I HERETO
WITH RESPECT TO
7% SENIOR SUBORDINATED NOTES
AND WARRANTS TO PURCHASE COMMON STOCK
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NOTE AND WARRANT PURCHASE AGREEMENT
7% SENIOR SUBORDINATED NOTES
WARRANTS TO PURCHASE COMMON STOCK
NOTE AND WARRANT PURCHASE AGREEMENT (the "Agreement") dated as of September
30, 2004, by and between XXXXXX, INC., a Delaware corporation (the "Seller"),
and the Purchasers set forth on the signature pages affixed hereto (each a
"Purchaser" and collectively the "Purchasers").
WITNESSETH:
WHEREAS, the Purchasers are willing to purchase from the Seller, and the
Seller desires to sell to the Purchasers, an aggregate of $5,500,000 principal
amount of 7% Senior Subordinated Notes due September 30, 2007 (the "Notes") and
Common Stock Purchase Warrants (the "Warrants") entitling the holders thereof to
purchase an aggregate of 110,000 shares of the Seller's common stock, $0.02 par
value (the "Common Stock"), at an exercise price of $0.02 per share (subject to
adjustment as more fully set forth herein and in the Warrants).
NOW, THEREFORE, in consideration of the mutual promises and
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 PURCHASE AND SALE. On the terms and subject to the conditions set forth
in this Agreement, at the Closing (as defined in Section 2.2), the Seller will
sell and each of the Purchasers will purchase (i) the Notes in the principal
amounts set forth on Schedule 1 hereto, and (ii) the numbers of Warrants set
forth on Schedule 1 hereto. The shares of Common Stock issuable upon exercise of
the Warrants are referred to herein as the "Warrant Shares."
1.2 TERMS OF THE NOTES AND THE WARRANTS. The terms and provisions of the
Notes are more fully set forth in the Form of Senior Subordinated Note, in the
form attached hereto as Exhibit A. The terms and provisions of the Warrants are
more fully set forth in the Form of Common Stock Purchase Warrant, in the form
attached hereto as Exhibit B.
1.3 TRANSFERS; LEGENDS.
(a) The Notes may be transferred, in whole or in part, by any of the
Purchasers at any time by delivering written transfer instructions to the
Seller, and the Seller shall reflect such transfer
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on its books and records and reissue appropriate Notes upon surrender of Notes
evidencing the Notes being transferred, provided that if the Seller determines
in good faith that under applicable securities laws an opinion of counsel should
be obtained in connection with such transfer or assignment, then it may
condition its reflecting such transfer or assignment on its books and records on
receipt of such opinion. Any such transfer shall be made by a Purchaser in
accordance with applicable law.
(b) The certificates representing the Notes, the Warrants and the
Warrant Shares, until such time as such securities are sold pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
shall contain a legend substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, ASSIGNED OR TRANSFERRED, IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR UNLESS THE ISSUER HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER
THAT REGISTRATION UNDER SAID ACT IS NOT REQUIRED."
ARTICLE II
PURCHASE PRICE AND CLOSING
2.1 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price") to
be paid by the Purchasers to the Seller to acquire the Notes and the Warrants
shall be $5,500,000.
2.2 THE CLOSING. The closing of the transactions contemplated under this
Agreement (the "Closing") shall take place at the offices of Xxxx Xxxxxxx, P.C.,
1350 Avenue of the Americas, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx. The Closing shall
take place on the date hereof.
2.3 DELIVERIES.
(A) DELIVERIES BY THE SELLER. At Closing, the Seller shall deliver or
cause to be delivered to the Purchasers the following:
1. (i) The Notes duly executed by the Seller; and
(ii) Certificates evidencing the Warrants.
2. A legal opinion of Xxxx Xxxxxxx, P.C. counsel to the Seller
("Seller's Counsel"), in form and substance satisfactory to the
Purchasers.
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3. The Secretary's certificate and other documents, as contemplated by
Section 8.1.
(B) DELIVERIES BY THE PURCHASERS. At the Closing, each Purchaser shall
deliver or cause to be delivered to the Seller the such Purchaser's pro rata
portion of the Purchase Price as set forth opposite such Purchaser's name on
Schedule 1 hereto, in cash by either wire transfer of immediately available
funds or certified or cashier's check or in accordance with the Seller's
instructions (which instructions shall be given to the Purchasers in writing no
later than three (3) Business Days prior to the Closing). For purposes of this
Agreement, "Business Day" means any day other than a Saturday, Sunday or other
day on which banks in the State of New York are legally authorized to close.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Purchasers as follows:
3.1 CORPORATE EXISTENCE AND POWER. The Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has all corporate powers required to carry on its business as
now conducted. The Seller is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not have a Material Adverse Effect on the Seller. For
purposes of this Agreement, the term "Material Adverse Effect" means, with
respect to any Person or entity, a material adverse effect on its condition
(financial or otherwise), business, properties, assets, liabilities (including
contingent liabilities), or results of operations. For purposes of this
Agreement, the term "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. Each of the Seller's Subsidiaries is a corporation or limited company
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its formation, and has all corporate powers required to carry on
its business as now conducted. For purposes of this Agreement, the term
"Subsidiary" means, with respect to any entity, any corporation or other
organization of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are directly or indirectly owned by such entity or
of which such entity is a partner or is, directly or indirectly, the beneficial
owner of 50% or more of any class of equity securities or equivalent profit
participation interests.
3.2 CORPORATE AUTHORIZATION. Except for the approval of the authorization
and issuance of the Warrant Shares by the shareholders of the Company, the
execution, delivery and performance by the Seller of this Agreement, the Notes
and the Warrants, and the consummation of the transactions contemplated hereby
(including, but not limited to, the sale and delivery of the Notes
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and the Warrants, and the subsequent issuance of the Warrant Shares upon
exercise of the Warrants) have been duly authorized, and no additional corporate
action is required for the approval of this Agreement. The Warrant Shares have
been duly authorized and reserved for issuance by the Seller in an amount
sufficient to cover all exercises of the Warrants. This Agreement, the Notes and
the Warrants have been or, to the extent contemplated hereby, will be duly
executed and delivered and constitute, or will constitute, the legal, valid and
binding agreements of the Seller enforceable against it in accordance with their
respective terms, except as may be limited by bankruptcy, reorganization,
insolvency, moratorium and similar laws of general application relating to or
affecting the enforcement of rights of creditors, and except as enforceability
of its obligations hereunder are subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3.3 CAPITALIZATION. The authorized capital stock of the Seller on the date
hereof consists of 50,000,000 shares of Common Stock, of which 4,380,851 shares
were issued and outstanding as of August 12, 2004, and 250,000 shares of
preferred stock, no par value, no shares of which have been issued. All of the
issued and outstanding shares of the Seller's Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
pre-emptive rights and were issued in full compliance with applicable state and
federal securities law and any rights of third parties.
3.4 GOVERNMENTAL AUTHORIZATION. No material consent, approval or
authorization of, or declaration or filing with, any governmental authority on
the part of the Seller or any of its Subsidiaries is required for the valid
execution and delivery of this Agreement, the Notes and the Warrants and the
consummation of the transactions contemplated hereby (including, but not limited
to, the sale and delivery of the Notes and the Warrants and the subsequent
issuance of the Warrant Shares upon exercise of the Warrants), except where the
failure to obtain such consent or make such filing would not have a Material
Adverse Effect on the Seller, and except for appropriate filings (i) with the
Securities and Exchange Commission ("SEC") and the NASDAQ of a Form D, (ii) with
the NASDAQ of an additional listing application for the Warrant Shares, and
(iii) with such state securities commissions in respect of "blue sky" laws as
may be appropriate.
3.5 NO CONFLICT, BREACH, VIOLATION OR DEFAULT. The execution, delivery and
performance of this Agreement, the Notes and the Warrants by the Seller, and the
consummation by the Seller of the transactions contemplated hereby (including
the issuance of the Warrant Shares) do not and will not conflict with or result
in a breach or violation of any of the terms and provisions of, or constitute a
default under (a) the Seller's Certificate of Incorporation or the Seller's
Bylaws, both as in effect on the date hereof (true and complete copies of which
have been made available to the Purchasers through the SEC's XXXXX system), (b)
any statute, rule, regulation or order of any governmental agency or body or any
court, domestic or foreign, having jurisdiction over the Seller or any of its
Subsidiaries, or any of their respective material assets or properties, or (c)
any material agreement or instrument to which the Seller or any of its
Subsidiaries is a party or by which the Seller or any of its Subsidiaries is
bound or to which any of their respective assets or properties are
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subject, except, in the case of clauses (b) and (c) only, for such conflicts,
breaches or violations as have not and could not reasonably be expected to
result in, individually or in the aggregate, a Material Adverse Effect on the
Seller and its Subsidiaries taken as a whole.
3.6 DELIVERY OF SEC FILINGS; BUSINESS. The Seller has made available to the
Purchasers through the XXXXX system, true and complete copies of the Seller's
most recent Annual Report on Form 10-K for the fiscal year ended December 31,
2003 (the "10-K"), and all other reports filed by the Seller pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act") since the
filing of the 10-K and prior to the date hereof (collectively, the "SEC
Filings). The SEC Filings are the only filings required of the Seller pursuant
to the Exchange Act for such period. The Seller is engaged in all material
respects only in the business described in the SEC Filings and the SEC Filings
contain a complete and accurate description in all material respects of the
business of the Seller.
3.7 SEC FILINGS. At the time of filing thereof, the SEC Filings complied as
to form in all material respects with the requirements of the Exchange 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.
3.8 FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. The financial
statements included in each SEC Filing present fairly, in all material respects,
the consolidated financial position of the Seller 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 Exchange
Act). Except (i) for liabilities incurred in connection with the Silipos
Acquisition (as defined below) or (ii) as set forth in the financial statements
of the Seller included in the SEC Filings filed prior to the date hereof, the
Seller has not 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 could reasonably be
expected to have a Material Adverse Effect on the Seller. For purposes of this
Agreement, "Silipos Acquisition" shall refer to proposed acquisition by the
Seller of all of the capital stock of Silipos, Inc., a Delaware corporation
("Silipos").
3.9 COMPLIANCE WITH LAW. The Seller is in compliance in all respects and
has conducted its business so as to comply in all respects with all laws, rules
and regulations, judgments, decrees or orders of any court, administrative
agency, commission, regulatory authority or other governmental authority or
instrumentality, domestic or foreign, applicable to its operations except where
such non-compliance would not have a Material Adverse Effect on the Seller.
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3.10 NO DEFAULTS. The Seller and its Subsidiaries are not, nor have they
received notice that they would be with the passage of time, giving of notice,
or both, in breach or violation of any of the terms and provisions of, or in
default under (a) their charters and bylaws, (b) any statute, rule, regulation
or order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over them, or any of their material assets or properties, or
(c) any material agreement or instrument to which they are a party or by which
they are bound or to which any of their assets or properties are subject,
except, in the case of clauses (b) and (c) only, for such conflicts, breaches or
violations as have not and could not reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect on the Seller and
its Subsidiaries taken as a whole.
3.11 LITIGATION. Except as disclosed in the SEC Filings, there is no
action, suit, proceeding, judgment, claim or investigation pending or, to the
best knowledge of the Seller, threatened against the Seller, which could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Seller or which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
hereby.
3.12 TITLE TO PROPERTIES. Except as disclosed in the SEC Filings, the
Seller and its Subsidiaries have good and marketable title to all real
properties and all other properties and assets owned by them, in each case free
from liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or currently planned to be
made thereof by them; and except as disclosed in the SEC Filings, the Seller and
its Subsidiaries hold any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.
3.13 TAX RETURN AND PAYMENTS. The Seller has filed all tax returns required
by law to be filed by it and has paid all material taxes, assessments and other
governmental charges levied upon the Seller and any of its properties, assets,
income or franchises which are due and payable, other than those presently
payable without penalty or interest or those that are being contested in good
faith by appropriate proceedings promptly instituted and diligently conducted
and for which adequate reserves have been established on the books of the Seller
in accordance with generally accepted accounting principles. The charges,
accruals and reserves on the books of the Seller in respect of Federal, state
and foreign income taxes for all fiscal periods are adequate in the opinion of
the Seller, and the Seller has not been notified of any material unpaid
assessment for additional Federal, state or foreign income taxes for any period
or any basis for any such assessment for which adequate provision has not been
made in its accounts in accordance with generally accepted accounting
principles.
3.14 BROKERS. Except for Xxxxxxx Xxxxx & Co., no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement,
based upon any arrangement made by or on behalf of the Seller.
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3.15 SECURITIES LAWS. Neither the Seller nor any agent acting on behalf of
the Seller has taken or will taken any action which might cause this Agreement,
the Notes, the Warrants or the Warrant Shares to violate the Securities Act of
1933, as amended, (the "Securities Act") or the Exchange Act or any rules or
regulations promulgated thereunder, as in effect on the Closing Date. All offers
and sales of capital stock, securities, Notes and Warrants of the Seller were
conducted and completed in compliance with the Securities Act and all shares of
capital stock and other securities issued by the Seller prior to the date hereof
have been issued in transactions exempt from the registration requirements under
the Securities Act and all applicable state securities or "blue sky" laws and in
compliance with all applicable corporate laws.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, for itself, hereby severally represents and warrants to
the Seller as follows:
4.1 EXISTENCE AND POWER. The Purchaser is duly organized, validly existing
and in good standing under the laws of the jurisdiction of such Purchaser's
organization. The Purchaser has all powers required to carry on such Purchaser's
business as now conducted.
4.2 AUTHORIZATION. The execution, delivery and performance by the Purchaser
of this Agreement and the consummation by the Purchaser of the transactions
contemplated hereby have been duly authorized, and no additional action is
required for the approval of this Agreement. This Agreement has been duly
executed and delivered and constitutes the valid and binding agreement of the
Purchaser, enforceable against such Purchaser in accordance with its terms,
except as may be limited by bankruptcy, reorganization, insolvency, moratorium
and similar laws of general application relating to or affecting the enforcement
of rights of creditors and except that enforceability of their obligations
thereunder are subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
4.3 INVESTMENT. The Purchaser is acquiring the Notes, the Warrants and,
upon exercise of the Warrants, the Warrant Shares for its own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof, nor with the intention of distribution or selling the
same; provided, however, that the Purchaser may transfer the Notes, the Warrants
and the Warrant Shares among one or more of its affiliates. The Purchaser is
aware neither the Notes, the Warrants not the Warrant Shares have been
registered under the Securities Act or under applicable state securities or
`blue sky' laws. The Purchaser is an "Accredited Investor" as such term is
defined in Rule 501 of Regulation D, as promulgated under the Securities Act.
4.4 RELIANCE ON EXEMPTIONS. The Purchaser understands that the Notes, the
Warrants and the Warrant Shares are being offered and sold to such Purchaser in
reliance upon specific exemptions from the registration requirements of United
States federal and state securities laws and
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that the Seller is relying upon the truth and accuracy of, and such Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of such Purchaser to acquire
the Notes, the Warrants, and the Warrant Shares.
4.5 INVESTMENT EXPERIENCE. The Purchaser acknowledges that it can bear the
economic risk and complete loss of its investment in the Notes, the Warrants and
the Warrant Shares 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. The Purchaser understands that the purchase of
the Notes, the Warrants and the Warrant Shares involves substantial risk.
4.6 DISCLOSURE OF INFORMATION. The Purchaser has had an opportunity to
receive all additional information related to the Seller requested by it and to
ask questions of and receive answers from the Seller regarding the terms and
conditions of the issuance and sale of the Notes, the Warrants and the Warrant
Shares, the terms and conditions of the Silipos Acquisition and the business,
properties, prospects and financial condition of each of the Seller and Silipos,
and to obtain any additional information requested. The Purchaser has received
and considered all information such Purchaser deems relevant to make an informed
decision to purchase the Notes, the Warrants and the Warrant Shares. The
Purchaser acknowledges receipt of copies of the SEC Filings, the summary of the
Silipos Acquisition prepared by the Seller, and definitive copies of the
principal agreements and documents relating to the Silipos Acquisition. Neither
such inquiries nor any other due diligence investigation conducted by the
Purchaser shall modify, amend or affect the Purchaser's right to rely on the
Seller's representations and warranties contained in this Agreement.
4.7 NO GENERAL SOLICITATION. The Purchaser did not learn of the investment
in the Notes, the Warrants and the Warrant Shares by means of any form of
general or public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio, or (ii) any seminar or meeting to
which the Purchaser was invited by any of the foregoing means of communications.
4.8 BROKERS AND FINDERS. Except for Xxxxxxx Xxxxx & Co., no Person will
have, as a result of the transactions contemplated by this Agreement, any valid
right, interest or claim against or upon the Seller or the Purchaser for any
commission, fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Purchaser.
ARTICLE V
COVENANTS OF THE SELLER
5.1 RESERVATION OF COMMON STOCK. The Seller shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of providing for the exercise of the Warrants, such number of
shares of Common Stock as shall from
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time to time equal the number of shares sufficient to permit the exercise of the
Warrants issued pursuant to this Agreement in accordance with their respective
terms.
5.2 NO CONFLICTING AGREEMENTS. The Seller shall not take any action, enter
into any agreement or make any commitment that would conflict or interfere in
any material respect with the Seller's obligations to the Purchasers under this
Agreement, the Notes or the Warrants.
5.3 COMPLIANCE WITH LAWS. The Seller shall comply in all material respects
with all applicable laws, rules, regulations, orders and decrees of all
governmental authorities.
5.4 LISTING OF UNDERLYING SHARES AND RELATED MATTERS. If the Seller applies
to have its Common Stock or other securities traded on any stock exchange or
market, it shall include in such application the Warrant Shares and will take
such other action as is necessary to cause such shares of Common Stock to be so
listed.
5.5 REPORTING OBLIGATIONS. (a) So long as any interest or principal of the
Notes is outstanding, and so long as any Warrant has not been exercised and has
not expired by its terms, the Seller shall furnish to the Purchasers, or any
other persons who hold any of the Notes or the Warrants (provided that such
holders give notice to the Seller that they hold Notes or the Warrants and
furnish their addresses) promptly upon their becoming available one copy of each
report, notice or proxy statement sent by the Seller to its stockholders
generally, and of each regular or periodic report (pursuant to the Exchange Act)
and any registration statement, prospectus or written communication (other than
transmittal letters) (pursuant to the Securities Act), filed by the Seller with
(i) the SEC or (ii) any securities exchange on which shares of Common Stock are
listed. The Purchasers are hereby authorized to deliver a copy of any financial
statement or any other information relating to the business, operations or
financial condition of the Seller which may have been furnished to the
Purchasers hereunder or otherwise, to any regulatory body or agency having
jurisdiction over the Purchasers or to any Person which has succeeded, or shall
have right or obligation to succeed, to all or any part of the Purchasers'
interest in the Seller or this Agreement.
(b) The Seller agrees to maintain its registration pursuant to Section
12(g) of the Exchange Act and its listing on the Nasdaq Small Cap Market.
5.6 INVESTIGATION. The representations, warranties, covenants and
agreements set forth in this Agreement shall not be affected or diminished in
any way by any investigation (or failure to investigate) at any time by or on
behalf of the party for whose benefit such representations, warranties,
covenants and agreements were made. Without limiting the generality of the
foregoing, the inability or failure of the Purchasers to discover any breach,
default or misrepresentation by the Seller under this Agreement, notwithstanding
the exercise by the Purchasers or other holders of the Notes of their rights
under this Agreement, shall not in any way diminish any liability hereunder.
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5.7 USE OF PROCEEDS. The Seller covenants and agrees that the proceeds from
the sale of the Notes and the Warrants shall be used by the Seller to fund the
cash portion of the Silipos Acquisition by the Seller and for other general
working capital purposes, including the costs and expenses associated with the
Silipos Acquisition.
5.8 CORPORATE EXISTENCE. The Seller shall preserve and maintain its
corporate existence and good standing in the jurisdiction of its incorporation
and the rights, privileges and franchises of the Seller except where such
failure to so preserve or maintain would not have a Material Adverse Effect on
the Seller.
5.9 LICENSES. The Seller shall, maintain at all times all licenses or
permits necessary to the conduct of its business or as may be required by any
governmental agency or instrumentality thereof except where the failure to so
maintain would not have a Material Adverse Effect on the Seller.
5.10 STOCKHOLDER APPROVAL. The Seller shall submit to its stockholders for
consideration no later than the 2005 Annual Meeting of Stockholders a proposal
to obtain stockholder approval to permit the issuance of Common Stock in an
amount exceeding twenty percent (20%) of the outstanding Common Stock on the
date of this Agreement (which amount shall include the Warrant Shares) in
satisfaction of Nasdaq Marketplace Rule 4350(i)(1)(D).
5.11 PERFORM COVENANTS. The Seller shall (a) make full and timely payment
of any and all payments on the Notes, and all other indebtedness of the Seller
to the Purchasers, whether now existing or hereafter arising and (b) duly comply
with all the terms and covenants contained herein and in each of the instruments
and documents given to the Purchasers in connection with or pursuant to this
Agreement, all at the times and places and in the manner set forth herein or
therein.
5.12 FURTHER ASSURANCES. The Seller shall, at its cost and expense, upon
written request of the Purchasers, duly execute and deliver, or cause to be duly
executed and delivered, to the Purchasers such further instruments and do and
cause to be done such further acts as may be necessary, advisable or proper, in
the absolute discretion of the Purchasers, to carry out more effectually the
provisions and purposes of this Agreement.
ARTICLE VI
SUBORDINATION OF NOTES
6.1 AGREEMENT TO BE BOUND. (a) The Seller covenants and agrees, and each
Purchaser and subsequent holder of Notes by his (its) acceptance thereof,
likewise covenants and agrees, that the Notes shall be issued subject to the
provisions contained in this Article VI; and each person holding any Notes,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions.
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(b) All Notes shall, to the extent and in the manner hereinafter set
forth, be subordinated and subject in right of payment to the prior payment in
full of all Senior Indebtedness (as defined in Section 6.7 herein).
6.2 PRIORITY OF SENIOR INDEBTEDNESS. (a) No payment on account of principal
or interest on the Notes shall be made, nor shall any assets be applied to the
purchase or other acquisition or retirement of the Notes, if, at the time of
such payment or application or immediately after giving effect thereto, there
shall exist a default in the payment of any amount due on any Senior
Indebtedness. Within ten (10) Business Days after knowledge of any such default
referred to in this Section 6.2(a), the Seller shall furnish a copy thereof to
each holder of the Notes, in the manner and at the address specified pursuant to
Section 10.2 hereof.
(b) If there shall have occurred an event of default (other than a
default in the payment of any amount due) with respect to any issue of Senior
Indebtedness or in the instrument under which the same has been issued,
permitting the holders thereof, after notice or lapse of time, or both, to
accelerate the maturity thereof, then, unless and until such event of default
shall have been cured or waived or shall have ceased to exist, no payment on
account of principal or interest on the Notes shall be made, nor shall any
assets be applied to the retirement of the Notes until the earliest to occur of
(i) 30 days after the date that notice of such default is given to the holders
of the Notes pursuant to the last sentence of this Section 6.2(b), or (ii) the
date on which the Senior Indebtedness to which such event of default related is
discharged in accordance with its terms, or (iii) the date such event of default
is waived by the holders of such Senior Indebtedness or otherwise cured. Within
ten (10) Business Days after knowledge of any such default referred to in this
Section 6.2(b), the Seller shall furnish a copy thereof to each holder of the
Notes, in the manner and at the address specified pursuant to Section 10.2
hereof.
(c) Upon the occurrence and during the continuance of any Event of
Default under the Notes (as such term is defined in the Notes), or upon the
occurrence of an event described in Sections 6.2(a) or (b) which gives rise to
the non-payment of principal or interest due on the Notes, and notwithstanding
any other provision contained herein or in the Notes to the contrary, each
Purchaser hereby agrees, for the benefit of the holders of Senior Indebtedness,
not to ask for, demand, xxx for, take or receive any amount owing under the
Notes or exercise any remedy (whether pursuant hereto, including, without
limitation, acceleration of the Notes, at law, in equity or otherwise) with
respect thereto until the earliest of (i) 30 days after (x) the occurrence of
such Event of Default or (y) the date that notice of such default is given to
the holders of the Notes pursuant to Sections 6.2(a) or (b), (ii) the date on
which all Senior Indebtedness is accelerated, (iii) if applicable, the date on
which the Senior Indebtedness to which such event of default related is
discharged in accordance with its terms or such event of default is waived by
the holders of such Senior Indebtedness or otherwise cured or (iv) any voluntary
or involuntary petition in bankruptcy filed by or against the Seller. Within ten
(10) Business Days after knowledge of any Event of Default under the Notes, the
Seller shall furnish a copy thereof to the
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holders of Senior Indebtedness in the manner and at the addresses specified in
the documents and/or agreements evidencing the applicable Senior Indebtedness.
6.3 ACCELERATION OF NOTES; INSOLVENCY. (a) Upon (i) any acceleration of the
principal amount due on the Notes or Senior Indebtedness or (ii) any payment or
distribution of assets of the Seller of any kind or character, whether in cash,
property or securities, to creditors upon any dissolution or winding up or total
or partial liquidation or reorganization of the Seller, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
amounts due or to become due upon all Senior Indebtedness shall first be paid in
full, or payment thereof duly provided for, to the full satisfaction of the
holders of Senior Indebtedness before the holders of the Notes shall be entitled
to receive or retain any assets so paid or distributed in respect thereof; and
upon any such dissolution or winding up or liquidation or reorganization, any
payment or distribution of assets of the Seller of any kind or character,
whether in cash, property or securities, to which the holders of the Notes would
be entitled, except for these provisions, shall be paid by the Seller or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the holders of the Notes if received
by them or it, as the case may be, directly to the holders of Senior
Indebtedness, to the extent necessary to pay all such Senior Indebtedness in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness before any payment or distribution is made to
the holders of the Notes, except that the holders of Senior Indebtedness of the
type described in clause (i) of the definition of Senior Indebtedness shall be
entitled to receive payment in full of such Senior Indebtedness (or provisions
satisfactory to the holders of such Senior Indebtedness shall be made for such
payment) before the holders of other types of Senior Indebtedness shall be
entitled to receive payment on such other Senior Indebtedness.
(b) In the event that, notwithstanding the provision of the preceding
paragraph or of Section 6.2 hereof, any payment or distribution of assets of the
Seller prohibited by the preceding paragraph or by Section 6.2 hereof shall be
received by the holders of the Notes before all Senior Indebtedness is paid in
full, or provision made for such payment, to the full satisfaction of the
holders of Senior Indebtedness, in accordance with its terms, such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, for application to the payment of all
Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of such Senior
Indebtedness. All payments applied to Senior Indebtedness pursuant to this
Section 6.3(b) shall be allocated among the holders of Senior Indebtedness in
accordance with the provisions of Section 6.3(a).
6.4 SUBROGATION, ETC. Upon payment in full of all Senior Indebtedness, the
holders of the Notes shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments
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or distributions of assets of the Seller pro rata in proportion to the
respective amounts then owing to the holders of the Notes; and for purposes of
such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the holders of Notes
would be entitled except for the provisions of this Article VI, and no payment
over pursuant to such provisions to the holders of Senior Indebtedness, shall,
as between the Seller and its creditors (other than the holders of the Notes and
the holders of the Senior Indebtedness), be deemed to be a payment by the Seller
to or on account of Senior Indebtedness, it being understood that the provisions
of this Article VI are, and are intended to be, solely for the purpose of
defining the relative rights of the holders of the Notes on the one hand and the
holders of Senior Indebtedness on the other hand. The holders of Senior
Indebtedness may amend, modify and otherwise deal with Senior Indebtedness
without any notice to or approval of any holder of Indebtedness ranking junior
to Senior Indebtedness.
6.5 ENFORCEMENT. (a) The foregoing subordination provisions shall be for
the benefit of the holders of Senior Indebtedness and may be enforced directly
by such holders against the holders of the Notes. Each holder of Notes by his
(or its) acceptance thereof shall be deemed to acknowledge and agree that the
subordination provisions of this Article VI are, and are intended to be, an
inducement and a consideration to each holder of any Senior Indebtedness,
whether such Senior Indebtedness was created or acquired before or after the
issuance of the Notes, to acquire and continue to hold, or to continue to hold,
such Senior Indebtedness and each holder of Senior Indebtedness shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior Indebtedness.
(b) Upon any payment or distribution of assets of the Seller, the
holders of the Notes shall be entitled to rely upon a certificate of the
receiver, trustee in bankruptcy, liquidation trustee, Seller, agent or other
person making such payment or distribution, delivered to the holders of the
Notes, for the purpose of ascertaining the persons entitled to participate in
such distribution, the holders of the Senior Indebtedness and other indebtedness
of the Seller, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertaining thereto or to the
provisions of this Article VI.
6.6 OBLIGATIONS UNIMPAIRED. Nothing contained in this Article VI, or
elsewhere in this Agreement, or in the Notes, is intended to or shall impair as
between the Seller, its creditors other than the holders of Senior Indebtedness,
and the holders of the Notes, the obligation of the Seller, which shall be
absolute and unconditional, to pay the holders of the Notes the principal of and
interest on the Notes as and when the same shall become due and payable in
accordance with the terms thereof, or affect the relative rights of the holders
of the Notes and other creditors of the Seller other than the holders of Senior
Indebtedness, nor shall anything herein or therein prevent the holder of any
Notes from exercising all remedies otherwise permitted by applicable law upon
default under this Agreement, subject to the rights, if any, under this Article
VI of the holders of Senior Indebtedness in respect to cash, property or
securities of the Seller received upon the
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exercise of any such remedy. Nothing contained in this Article VI or elsewhere
in this Agreement, or in any of the Notes, shall prevent the Seller from making
payment of the principal of or interest on the Notes at any time except under
the conditions described in Section 6.2 or 6.3 or during the pendency of any
dissolution, winding up, liquidation or reorganization of the Seller.
6.7 DEFINITION OF SENIOR INDEBTEDNESS. The term "Senior Indebtedness" shall
mean the principal and interest on (i) all Indebtedness of the Seller and its
Subsidiaries for money borrowed from time to time, including that owing to banks
or other financial institutions, an agency or agencies of the federal government
or other institutions engaged in the business of lending money, (ii) obligations
of the Seller for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (iii) any future senior
secured Indebtedness of the Seller (such senior secured Indebtedness to be
limited to asset-based working capital facilities or term loans for purposes of
funding ongoing working capital and liquidity requirements of the Seller) and
(iv) any deferrals, renewals and extensions of any indebtedness described in
clauses (i) through (iii) above, unless under the express provisions of the
instrument creating or evidencing any such indebtedness, or pursuant to which
the same is outstanding, such indebtedness is not superior in right of payment
to the Notes; provided, however, that Senior Indebtedness shall not include
Indebtedness owed or owing to any Subsidiary or any officer, director or
employee of the Seller or any Subsidiary. For purposes of this Agreement,
"Indebtedness" of any person means and includes, without duplication, as of any
date as of which the amount thereof is to be determined, (i) all obligations of
such person to repay money borrowed (including, without limitation, all
debentures payable and drafts accepted representing extensions of credit, all
obligations evidenced by bonds, debentures or other similar instruments and all
obligations upon which interest charges are customarily paid), (ii) the value of
all capital leases (as such term is defined in accordance with generally
accepted accounting principles in effect on the date of this Agreement) in
respect of which such person is liable as lessee or as the guarantor of the
lessee, (iii) the principal amount of all monetary obligations which are secured
by any lien or security interest existing on property owned by such person
whether or not the obligations secured thereby shall have been assumed by such
person, (iv) all guaranties of the Indebtedness of any other person and (v) all
amounts from time to time owing to trade creditors arising in the ordinary
course of such person's business.
ARTICLE VII
REGISTRATION RIGHTS
7.1 OBLIGATIONS TO REGISTER. The Seller agrees to use its best efforts to
file with the SEC no later than December 31, 2005, a registration statement for
an offering to be made on a continuous or delayed basis pursuant to Rule 415
under the Securities Act covering all of the Warrant Shares. Such registration
statement shall be on Form S-3 under the Securities Act, if such Form is then
available for use by the Seller, or another appropriate form that is available
to the Seller permitting registration of such Warrant Shares for resale by the
holders of the Warrant Shares ("Holders") in the manner or manners reasonably
designated by them (including, without
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limitation, one or more underwritten offerings). The Seller shall use its best
efforts to cause such registration statement to be declared effective pursuant
to the Securities Act as promptly as practicable following the filing thereof,
and, subject to applicable laws, rules and orders, to keep such registration
statement continuously effective under the Securities Act until the Holders are
permitted to sell the Warrant Shares pursuant to Rule 144(k) of the Securities
Act, or such shorter period ending when there cease to be outstanding any
Warrants or Warrant Shares held by the Holders. Notwithstanding the foregoing,
the Holders acknowledge that in connection with the Seller's contemplated
acquisition strategy, the Seller may file a registration statement relating to
shares of Common Stock to be issued in connection with such acquisition. In such
event, if the Board of Directors of the Seller reasonably determines that the
Seller will be filing a registration statement under the Securities Act in
connection with an acquisition, then any registration statement required to be
filed by this Section 7.1 may be temporarily delayed at the discretion of the
Seller's Board of Directors, and the Warant Shares which would have been
otherwise included in such registration statement shall be included in the
Seller's registration statement to be filed in connection with the contemplated
acquisition, so that the Seller would not be required to file more than one
registration statement in any consecutive six-month period; provided, however,
that the provisions of this sentence shall not be applicable, and the Seller
shall not be permitted to delay the filing of a registration statement
registering the Warrant Shares, in the event that the Seller proposes, in
connection with any such acquisition, to use a registration statement on Form
S-4 or any successor form thereto.
7.2 TERMS AND CONDITIONS OF REGISTRATION. Except as otherwise provided
herein, in connection with any registration statement filed pursuant to Sections
7.1, the following provisions shall apply:
(a) If requested by the Holder(s) in connection with a registration
statement filed pursuant to Sections 7.1, the Seller will enter into an
underwriting agreement with the underwriters for such offering, such agreement
to be reasonably satisfactory in form and substance to the Seller, the Holder(s)
and the underwriters, and to contain such representations, warranties and
covenants by the Seller and such other terms as are customarily contained in
such agreements used by the managing underwriter, including, without limitation,
restrictions of sales of Common Stock or other securities by the Seller as may
be reasonably agreed to between the Seller and such underwriters. The Holders
shall be a party to any underwriting agreement relating to an underwritten sale
of their Warrant Shares and may, at their option, require that any or all of the
representations, warranties and covenants of the Seller to or for the benefit of
such underwriters, shall also be made to and for the benefit of the Holders. All
representations and warranties of the Holders shall be made to or for the
benefit of the Seller.
(b) The Seller shall provide a transfer agent and registrar (which may
be the same entity) for the Warrant Shares, not later than the effective date of
such registration.
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(c) All expenses in connection with the preparation and filing of a
registration statement filed pursuant to Section 7.1 shall be borne solely by
the Seller, except for any transfer taxes payable with respect to the
disposition of such Warrant Shares, and any underwriting discounts and selling
commissions applicable solely to such sales of Warrant Shares, which shall be
paid by the Holders of the Warrant Shares being registered.
(d) The Seller shall use its best efforts to cause all of the shares
covered by such registration statement to be listed on NASDAQ or such other
exchange as the Warrant Shares may then be listed on, on which similar shares
are listed for trading, if the listing of such registered shares is permitted by
such exchange.
(e) Following the effective date of such registration statement, the
Seller shall, upon the request of the Holders, forthwith supply such number of
prospectuses (including exhibits thereto and preliminary prospectuses and
amendments and supplements thereto) meeting the requirements of the Securities
Act and such other documents as are referred to in the prospectus as shall be
reasonably requested by the Holders to permit the Holders to make a public
distribution of their Warrant Shares.
(f) The Seller shall prepare, if necessary, and file such amendments
and supplements to such registration statement filed pursuant to Section 7.1
hereof, as may be necessary to keep such registration statement effective,
subject to applicable laws, rules and orders, until the Holders are permitted to
sell the Warrant Shares pursuant to Rule 144(k) of the Securities Act, or such
shorter period ending when there cease to be outstanding any Warrants or Warrant
Shares held by the Holders, and to comply with the provisions of the Securities
Act with respect to the offer and sale or other disposition of the shares
covered by such registration statement during the period required for
distribution of the shares.
(g) The Holders may select the underwriter or underwriters, if any, who
are to undertake any offering and distribution of the Shares to be included in a
registration statement filed under the provisions of Section 7.1, subject to the
Seller's prior approval of the underwriter or underwriters.
(h) The Seller shall use its best efforts to register the Warrant
Shares covered by any such registration statements filed pursuant to Section 7.1
under such securities or "blue sky" laws in addition to those in which the
Seller would otherwise sell shares, as the Holders reasonably request, except
that neither the Seller nor the Holders shall for any such purpose be required
to execute a general consent to service of process or to qualify to do business
as a foreign corporation in any jurisdiction where it is not so qualified. The
fees and expenses incurred in connection with such registration shall be borne
by the Sellers.
(i) The Holders shall cooperate fully with the Seller and provide the
Seller with all information reasonably requested by the Seller for inclusion in
the registration statement or as
16
necessary to comply with the Securities Act. The Seller shall cooperate fully
with any underwriters selected by the Holders and counsel to such underwriters,
and shall provide reasonable and customary access to the Seller's books and
records (upon receipt from such underwriters of customary confidentiality
agreements) in order to facilitate such underwriters' review and examination of
the Seller in connection with such underwriting.
(j) The Seller shall notify the Holders, at any time after
effectiveness when a prospectus relating thereto is required to be delivered
under the Securities Act within the period mentioned in subdivision (f) of this
Section 7.2, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of circumstances then existing (and upon receipt of such notice and until
a supplemented or amended prospectus as set forth below is available, the
Holders shall not offer or sell any securities covered by such registration
statement and shall return all copies of such prospectus to the Seller if
requested to do so by it), and at the request of the Holders prepare and furnish
the Holders promptly a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.
(k) The Seller shall furnish to the Holders at the time of the
disposition of the Warrant Shares, a signed copy of an opinion of the Seller's
regular in-house or outside general counsel, or other counsel of the Seller's
selection reasonably acceptable to, and which opinion shall be reasonably
satisfactory in form and substance to, the Holders to the effect that: (a) a
registration statement covering such Warrant Shares has been filed with the SEC
under the Securities Act and has been made effective by order of the SEC, (b)
said registration statement and prospectus contained therein comply as to form
in all material respects with the requirements of the Securities Act, and
nothing has come to such counsel's attention (after due inquiry) which would
cause such counsel to believe that either said registration statement or such
prospectus contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein (in the case of such prospectus, in light of the circumstances under
which they were made) not misleading, (c) after due inquiry such counsel knows
of no legal or governmental proceedings required to be described in such
registration statement or prospectus which are not described as required, or of
any contracts or documents of a character required to be described in such
registration statement or such prospectus to be filed as an exhibit to such
registration statement or to be incorporated by reference therein which are not
described and filed as required and (d) to such counsel's knowledge, no stop
order has been issued by the SEC suspending the effectiveness of such
registration statement; it being understood that such opinion may contain such
qualifications and assumptions as are customary in the rendering of similar
opinions, and that such counsel may
17
rely, as to all factual matters treated therein, on certificates of the Seller
(copies of which shall be delivered to the Holders).
(l) The Seller will use its best efforts to comply with the reporting
requirements of Sections 13 and 15(d) of the Exchange Act, to the extent it
shall be required to do so pursuant to such sections, and at all times while so
required shall use its best efforts to comply with all other public information
reporting requirements of the SEC (including reporting requirements which serve
as a condition to utilization of Rule 144 promulgated by the SEC under the
Securities Act) from time to time in effect and relating to the availability of
an exemption from the Securities Act for the sale of any shares of Common Stock
held by the Holders. The Seller will also cooperate with the Holders in
supplying such information and documentation as may be necessary for the Holders
to complete and file any information reporting forms presently or hereafter
required by the SEC as a condition to the availability of an exemption from the
Securities Act for the sale of any Common Stock held by the Holders.
ARTICLE VIII
CONDITIONS TO THE CLOSING
8.1 CONDITIONS TO OBLIGATIONS OF THE PURCHASERS. The obligations of the
Purchasers are subject to the fulfillment or satisfaction, on and as of the date
of the Closing (the "Closing Date") except as otherwise expressly indicated
below or in Section 1.3 hereof, of each of the following conditions (any one or
more of which may be waived by the Purchasers in their sole discretion, but only
in a writing signed by the Purchasers):
(A) OPINION. The Purchasers shall have received the opinion of Seller's
Counsel, in form and substance satisfactory to the Purchasers.
(B) SECRETARY'S CERTIFICATE. The Purchasers shall have received a
certificate of the Secretary of the Seller dated as of the Closing Date,
certifying the resolutions adopted by the Board of Directors of the Seller
approving the transactions contemplated by this Agreement and the issuance of
the Notes and the Warrants, certifying the current versions of the Certificate
of Incorporation and Bylaws of the Seller and certifying as to the signatures
and authority of persons signing this Agreement, the Notes and the Warrants on
behalf of the Seller.
(C) OFFICER'S CERTIFICATE. The Purchasers shall have received a
Certificate, executed on behalf of the Seller by its Chief Executive Officer or
its Chief Financial Officer, dated as of the Closing Date, certifying to the
fulfillment of the condition specified in Section 8.1(e).
(D) NOTES, WARRANTS. The Seller shall have executed and delivered the
Notes in the form of Exhibit A attached hereto, and certificates evidencing the
Warrants in the form of Exhibit B attached hereto, to the Purchasers, in the
amounts as provided in Section 2.3.
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(E) PERFORMANCE; REPRESENTATION AND WARRANTIES. The Seller shall have
performed and complied in all respects with all agreements and conditions
contained in this Agreement which are required to be performed or complied with
by the Seller prior to or at the Closing, the representation and warranties of
the Seller contained herein shall be true and correct on and as of the Closing
Date as though made on such date, and the Seller shall have delivered to the
Purchasers a certificate of a duly authorized officer of the Seller to such
effect.
(F) APPROVALS, ETC. Approval and consent of all appropriate
governmental regulatory agencies and the receipt of approval and/or consent from
all other appropriate parties, and all consents which may be required under any
of the Seller's agreements (or otherwise), with respect to the transactions
contemplated hereby shall have been obtained.
(G) NO LITIGATION. No litigation, arbitration or other legal or
administrative proceeding against the Seller shall have been commenced or be
pending by or before any court, arbitration panel or governmental authority or
official, and no statute, rule or regulation of any foreign or domestic,
national or local government or agency thereof shall have been enacted after the
date of this Agreement, and no judicial or administrative decision shall have
been rendered which enjoins or prohibits, or seeks to enjoin or prohibit, the
consummation of all or any of the transactions contemplated by this Agreement.
8.2 CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations of the Seller
hereunder are subject to the fulfillment or satisfaction, on and as of the
Closing Date, of the following condition (which may be waived by the Seller, in
its sole discretion, but only in a writing signed by the Seller):
(A) PERFORMANCE; REPRESENTATION AND WARRANTIES. The Purchasers shall
have performed and complied in all respects with all agreements and conditions
contained in this Agreement which are required to be performed or complied with
by the Purchasers prior to or at the Closing, the representation and warranties
of the Purchasers contained herein shall be true and correct on and as of the
Closing Date as though made on such date, and the Purchasers shall have
delivered to the Seller a certificate of a duly authorized officer of the
Purchasers to such effect.
(B) NO LITIGATION. No litigation, arbitration or other legal or
administrative proceeding against the Purchasers shall have been commenced or be
pending by or before any court, arbitration panel or governmental authority or
official, and no statute, rule or regulation of any foreign or domestic,
national or local government or agency thereof shall have been enacted after the
date of this Agreement, and no judicial or administrative decision shall have
been rendered which enjoins or prohibits, or seeks to enjoin or prohibit, the
consummation of all or any of the transactions contemplated by this Agreement.
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ARTICLE IX
INDEMNIFICATION AND TERMINATION
9.1 SURVIVAL OF REPRESENTATIONS; INDEMNITY; PURCHASERS' LIABILITY.
(A) SURVIVAL OF REPRESENTATIONS. Except as otherwise provided herein,
the representations, warranties, covenants and agreements of the Seller and the
Purchasers contained in or made pursuant to this Agreement shall survive the
Closing of the transactions contemplated by this Agreement for a period of three
(3) months after the Closing.
(B) INDEMNIFICATION. (i) The Seller agrees to indemnify and hold
harmless the Purchasers, their affiliates, each of their officers, directors,
employees and agents and their respective successors and assigns, from and
against any losses, damages, or expenses which are caused by or arise out of (A)
any breach or default in the performance by the Seller of any covenant or
agreement made by the Seller in this Agreement, the Notes or the Warrants; (B)
any breach of warranty or representation made by the Seller in this Agreement or
in any of the agreements or documents referred to in this Agreement and (C) any
and all actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal fees and expenses) incident to any of the
foregoing.
(ii) The Purchasers, severally and not jointly, agree to indemnify
and hold harmless the Seller, its affiliates, and its respective successors and
assigns, from and against any losses, damages, or expenses which are caused by
or arise out of (A) any breach or default in the performance by the Purchasers
of any covenant or agreement made by the Purchasers in this Agreement; (B) any
breach of warranty or representation made by the Purchasers in this Agreement;
and (C) any and all actions, suits, proceedings, claims, demands, judgments,
costs and expenses (including reasonable legal fees and expenses) incident to
any of the foregoing.
(C) INDEMNITY PROCEDURE. A party or parties hereto agreeing to be
responsible for or to indemnify against any matter pursuant to this Agreement is
referred to herein as the "Indemnifying Party" and the other party or parties
claiming indemnity is referred to as the "Indemnified Party".
An Indemnified Party under this Agreement shall, with respect to
claims asserted against such party by any third party, give written notice to
the Indemnifying party of any liability which might give rise to a claim for
indemnity under this Agreement within sixty (60) business days of the receipt of
any written claim from any such third party, but not later than twenty (20) days
prior to the date any answer or responsive pleading is due, and with respect to
other matters for which the Indemnified Party may seek indemnification, give
prompt written notice to the Indemnifying party of any liability which might
give rise to a claim for indemnity; provided, however, that any failure to give
such notice will not waive any rights of the Indemnified Party except to the
extent the rights of the Indemnifying Party are materially prejudiced.
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The Indemnifying Party shall have the right, at its election, to
take over the defense or settlement of such claim by giving written notice to
the Indemnified Party at least fifteen (15) days prior to the time when an
answer or other responsive pleading or notice with respect thereto is required.
If the Indemnifying Party makes such election, it may conduct the defense of
such claim through counsel of its choosing (subject to the Indemnified Party's
approval of such counsel, which approval shall not be unreasonably withheld),
shall be solely responsible for the expenses of such defense and shall be bound
by the results of its defense or settlement of the claim. The Indemnifying Party
shall not settle any such claim without prior notice to and consultation with
the Indemnified Party, and no such settlement involving any equitable relief or
which might have an adverse effect on the Indemnified Party may be agreed to
without the written consent of the Indemnified Party (which consent shall not be
unreasonably withheld). So long as the Indemnifying Party is diligently
contesting any such claim in good faith, the Indemnified Party may pay or settle
such claim only at its own expense and the Indemnifying Party will not be
responsible for the fees of separate legal counsel to the Indemnified Party,
unless the named parties to any proceeding include both parties and
representation of both parties by the same counsel would be inappropriate. If
the Indemnifying Party does not make such election, or having made such election
does not, in the reasonable opinion of the Indemnified Party proceed diligently
to defend such claim, then the Indemnified Party may (after written notice to
the Indemnifying Party), at the expense of the Indemnifying Party, elect to take
over the defense of and proceed to handle such claim in its discretion and the
Indemnifying Party shall be bound by any defense or settlement that the
Indemnified Party may make in good faith with respect to such claim. In
connection therewith, the Indemnifying Party will fully cooperate with the
Indemnified Party should the Indemnified Party elect to take over the defense of
any such claim.
The parties agree to cooperate in defending such third party claims
and the Indemnified Party shall provide such cooperation and such access to its
books, records and properties as the Indemnifying Party shall reasonably request
with respect to any matter for which indemnification is sought hereunder; and
the parties hereto agree to cooperate with each other in order to ensure the
proper and adequate defense thereof.
With regard to claims of third parties for which indemnification is
payable hereunder, such indemnification shall be paid by the Indemnifying Party
upon the earlier to occur of: (i) the entry of a judgment against the
Indemnified Party and the expiration of any applicable appeal period, or if
earlier, five (5) days prior to the date that the judgment creditor has the
right to execute the judgment; (ii) the entry of an unappealable judgment or
final appellate decision against the Indemnified Party; or (iii) a settlement of
the claim. Notwithstanding the foregoing, the reasonable expenses of counsel to
the Indemnified Party shall be reimbursed on a current basis by the Indemnifying
Party if such expenses are a liability of the Indemnifying Party. With regard to
other claims for which indemnification is payable hereunder, such
indemnification shall be paid promptly by the Indemnifying Party upon demand by
the Indemnified Party.
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ARTICLE X
MISCELLANEOUS
10.1 FURTHER ASSURANCES. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to better evidence and reflect the transactions described herein
and contemplated hereby and to carry into effect the intents and purposes of
this Agreement.
10.2 NOTICES. Whenever any party hereto desires or is required to give any
notice, demand, or request with respect to this Agreement, each such
communication shall be in writing and shall be effective only if it is delivered
by personal service or mailed, United States registered or certified mail,
postage prepaid, return receipt requested (and shall be deemed to have been
received three(3) days after deposit into the United States mail), or sent by
prepaid overnight courier, facsimile or confirmed telecopier, addressed as
follows:
--------------------------------------------------------------------------------
If to the Purchasers: If to the Seller:
to the addresses set forth opposite Xxxxxx, Inc.
the respective Purchasers names on 000 Xxxxxxx Xxxx
the signature pages hereto Xxxx Xxxx, XX 00000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
--------------------------------------------------------------------------------
With a copy in each case to:
Xxxx Xxxxxxx, P.C.
1350 Avenue of the Americas - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Fax No.: (000) 000-0000
--------------------------------------------------------------------------------
Unless otherwise stated above, such communications shall be effective when they
are received by the addressee thereof in conformity with this Section. Any party
may change its address for such communications by giving notice thereof to the
other parties in conformity with this Section.
10.3 GOVERNING LAW. This Agreement has been entered into and shall be
construed and enforced in accordance with the laws of the State of New York
without reference to the choice of law principles thereof.
10.4 JURISDICTION AND VENUE. This Agreement shall be subject to the
exclusive jurisdiction of the Xxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx Xxxxxxxx of New
York and if such court does not have proper jurisdiction, the State Courts of
New York County, New York. The parties to this Agreement
22
agree that any breach of any term or condition of this Agreement shall be deemed
to be a breach occurring in the State of New York by virtue of a failure to
perform an act required to be performed in the State of New York and irrevocably
and expressly agree to submit to the jurisdiction of the Xxxxxxx Xxxxxxxx Xxxxx,
Xxxxxxxx Xxxxxxxx of New York and if such court does not have proper
jurisdiction, the State Courts of New York County, New York for the purpose of
resolving any disputes among the parties relating to this Agreement or the
transactions contemplated hereby. The parties irrevocably waive, to the fullest
extent permitted by law, any objection which they may now or hereafter have to
the laying of venue of any suit, action or proceeding arising out of or relating
to this Agreement, or any judgment entered by any court in respect hereof
brought in New York County, New York, and further irrevocably waive any claim
that any suit, action or proceeding brought in Xxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx
Xxxxxxxx of New York and if such court does not have proper jurisdiction, the
State Courts of New York County, New York has been brought in an inconvenient
forum.
10.5 SUCCESSORS AND ASSIGNS. This Agreement is personal to each of the
parties and may not be assigned without the written consent of the other
parties; provided, however, that any of the Purchasers shall be permitted to
assign their rights under this Agreement to any affiliate of such Purchaser.
10.6 SEVERABILITY. If any provision of this Agreement, or the application
thereof, shall for any reason or to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other persons
or circumstances shall continue in full force and effect and in no way be
affected, impaired or invalidated.
10.7 ENTIRE AGREEMENT. This Agreement and the other agreements and
instruments referenced herein constitute the entire understanding and agreement
of the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings.
10.8 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party shall be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law, or in equity
on such party, and the exercise of any one remedy shall not preclude the
exercise of any other.
10.9 AMENDMENT AND WAIVERS. Any term or provision of this Agreement or the
Notes may be amended, and the observance of any term of this Agreement or the
Notes may be waived (either generally or in a particular instance and either
retroactively or prospectively) only by a writing signed by the Seller and the
holders of a majority of the outstanding principal amount of the Notes;
provided, however, that without the consent of each holder of a Note affected,
an amendment, waiver or supplement may not (i) extend the final maturity of this
Note; (ii) reduce the principal amount of this Note; (iii) reduce the rate or
extend the time of payment of any interest on this Note; (iv) impair or affect
the right of any Holder of any Note to institute suit for the payment of a Note;
or (v) change the currency for payment of principal of, premium, if any, or
interest on, this Note; and further,
23
provided, however, that an amendment, waiver or supplement may not reduce the
percentage of Notes, the consent of the Holders of which is required for any
such amendment or waiver, without the consent of the holders of all Notes then
outstanding.. The waiver by a party of any breach hereof or default in the
performance hereof shall not be deemed to constitute a waiver of any other
default or any succeeding breach or default.
10.10 NO WAIVER. The failure of any party to enforce any of the provisions
hereof shall not be construed to be a waiver of the right of such party
thereafter to enforce such provisions.
10.11 CONSTRUCTION OF AGREEMENT; KNOWLEDGE. For purposes of this Agreement,
the term "knowledge," when used in reference to a corporation means the
knowledge of the officers of such corporation assuming such officers shall have
made inquiry that is customary and appropriate under the circumstances to which
reference is made, and when used in reference to an individual means the
knowledge of such individual assuming the individual shall have made inquiry
that is customary and appropriate under the circumstances to which reference is
made.
10.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears thereon and all of which together shall constitute one and the
same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as signatories.
10.13 NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and permitted assigns, any
rights or remedies under or by reason of this Agreement.
24
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
their duly authorized officers to execute this Agreement as of the date first
above written.
The Seller: XXXXXX, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: President and Chief Executive
Officer
The Purchasers:
WYNNEFIELD PARTNERS SMALL CAP VALUE, LP I
By:
By: /s/ Xxxxxx Xxxx
---------------
Name: Xxxxxx Xxxx
Title: Managing Member
Xxxxxx Xxxx
000 0xx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax:
Email:
Xxxxx Xxxxx
000 0xx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax:
Email: xxxxxx@xxxxxxxxxxxxxxxxx.xxx
with a copy to:
------------------------
------------------------
Attn: , Esq.
-----------------
Telephone:
-----------------
Facsimile:
-----------------
Email:
WYNNEFIELD PARNTERS SMALL CAP VALUE, LP
By:
By: /s/ Xxxxxx Xxxx
---------------
Name: Xxxxxx Xxxx
Title: Managing Member
Xxxxxx Xxxx
000 0xx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax:
Email:
Xxxxx Xxxxx
000 0xx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax:
Email: xxxxxx@xxxxxxxxxxxxxxxxx.xxx
with a copy to:
------------------------
------------------------
Attn: , Esq.
-----------------
Telephone:
-----------------
Facsimile:
-----------------
Email:
WYNNEFIELD PARTNERS SMALL CAP VALUE
OFFSHORE FUND, LTD.
By:
By: /s/ Xxxxxx Xxxx
---------------
Name: Xxxxxx Xxxx
Title: President
Xxxxxx Xxxx
000 0xx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax:
Email:
Xxxxx Xxxxx
000 0xx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax:
Email: xxxxxx@xxxxxxxxxxxxxxxxx.xxx
with a copy to:
------------------------
------------------------
Attn: , Esq.
-----------------
Telephone:
-----------------
Facsimile:
-----------------
Email:
AMGUARD INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: Treasurer
Xxxxxxx X. Xxxxxx
00 X. Xxxxx Xxxxxx
Xxxxxx-Xxxxx, XX 00000
Phone: (000) 000-0000 x0000
Fax:
-----------------
Email: xxxxxxx@xxxxx.xxx
with a copy to:
------------------------
------------------------
Attn: , Esq.
-----------------
Telephone:
-----------------
Facsimile:
-----------------
Email:
NORGUARD INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: Treasurer
Xxxxxxx X. Xxxxxx
00 X. Xxxxx Xxxxxx
Xxxxxx-Xxxxx, XX 00000
Phone: (000) 000-0000 x0000
Fax:
-----------------
Email: xxxxxxx@xxxxx.xxx
with a copy to:
------------------------
------------------------
Attn: , Esq.
-----------------
Telephone:
-----------------
Facsimile:
-----------------
Email:
GLOBIS CAPITAL PARNTERS, L.P
By: /s/ Xxxx Xxxxxx
-------------------
Name: Xxxx Xxxxxx
Title: Managing Member
Xxxx Xxxxxx
00 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax:
-----------------
Email: xxxx@xxxxxxxxxxxxx.xxx
with a copy to:
------------------------
------------------------
Attn: , Esq.
-----------------
Telephone:
-----------------
Facsimile:
-----------------
Email:
GLOBIS OVERSEAS FUND, LTD.
By: /s/ Xxxx Xxxxxx
---------------
Name: Xxxx Xxxxxx
Title: Director
Xxxx Xxxxxx
00 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax:
-----------------
Email: xxxx@xxxxxxxxxxxxx.xxx
with a copy to:
------------------------
------------------------
Attn: , Esq.
-----------------
Telephone:
-----------------
Facsimile:
-----------------
Email:
DAVOS PARTNERS, L.P.
/s/ Xxxxx Xxxxx
---------------
Name: Xxxxx Xxxxx
Xxxxx Xxxxx
000 Xxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax:
-----------------
Email: xxxxxx@xxx.xxx
with a copy to:
------------------------
------------------------
Attn: , Esq.
-----------------
Telephone:
-----------------
Facsimile:
-----------------
Email:
XXXXXXX X. XXXXX
/s/ Xxxxxxx X. Xxxxx
--------------------
Xxxxxxx X. Xxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax:
-----------------
Email: xxxxxx@xxxxxxxxxxxxxx.xxx
with a copy to:
------------------------
------------------------
Attn: , Esq.
-----------------
Telephone:
-----------------
Facsimile:
-----------------
Email:
XXXXXX PARTNERS, LLC
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Name: Xxxxxx X. Xxxxxxx
Title: Member
Xxxxxx Partners, LLC
c/o Kanders & Company, Inc.
0 Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax:
-----------------
Email: xxxxxxxxx@xxxxxxxxx.xxx
with a copy to:
------------------------
------------------------
Attn: , Esq.
-----------------
Telephone:
-----------------
Facsimile:
-----------------
Email:
SCHEDULE 1
TO
NOTE AND WARRANT PURCHASE AGREEMENT
SENIOR SUBORDINATED NOTES DUE 9/30/2007,
WARRANTS TO PURCHASE COMMON STOCK
PURCHASERS, PRINCIPAL AMOUNTS OF NOTES AND NUMBER OF WARRANTS PURCHASED,
AND PURCHASE PRICE
-----------------------------------------------------------------------------------------------------------------------
Principal Number of
Name of Purchaser Amount of Note Warrants Purchase Price
-----------------------------------------------------------------------------------------------------------------------
Wynnefield Partners Small Cap Value, LP I $700,000 14,000 $700,000
-----------------------------------------------------------------------------------------------------------------------
Wynnefield Partners Small Cap Value, LP $850,000 17,000 $850,000
-----------------------------------------------------------------------------------------------------------------------
Wynnefield Partners Small Cap Value Offshore Fund, Ltd. $700,000 14,000 $700,000
-----------------------------------------------------------------------------------------------------------------------
AmGUARD Insurance Company $375,000 7,500 $375,000
-----------------------------------------------------------------------------------------------------------------------
NorGUARD Insurance Company $375,000 7,500 $375,000
-----------------------------------------------------------------------------------------------------------------------
Globis Capital Partners, L.P. $500,000 10,000 $500,000
-----------------------------------------------------------------------------------------------------------------------
Globis Overseas Fund, Ltd $250,000 5,000 $250,000
-----------------------------------------------------------------------------------------------------------------------
Davos Partners, L.P. $500,000 10,000 $500,000
-----------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx $500,000 10,000 $500,000
-----------------------------------------------------------------------------------------------------------------------
Xxxxxx Partners, LLC $750,000 15,000 $750,000
-----------------------------------------------------------------------------------------------------------------------
Totals $5,500,000 110,000 $5,500,000
-----------------------------------------------------------------------------------------------------------------------
EXHIBIT A
FORM OF SENIOR SUBORDINATED NOTE
EXHIBIT B
FORM OF WARRANT
