Exhibit 2
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BOLLE INC.
WITH
THE PURCHASERS LISTED
ON
EXHIBIT "A" HERETO
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CONVERTIBLE SUBORDINATED NOTE PURCHASE AGREEMENT
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DATED AS OF MAY 29, 1998
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BOLLE INC.
As of May 29, 1998
To the Purchasers listed
on Exhibit "A" to this Agreement
Dear Sirs:
BOLLE Inc., a Delaware corporation (the "Company"), agrees with each
Purchaser as follows:
I.A.1. AUTHORIZATION OF CONVERTIBLE NOTES.
The Company has authorized the issuance and sale of an aggregate of
$7,000,000 principal amount of its 0% Convertible Subordinated Notes due May
29, 2002 (the "Convertible Notes"). The Convertible Notes are convertible into
shares of the Company's common stock ("Common Stock"), par value $.01 per
share (such shares to be issued upon conversion of the Convertible Notes being
hereinafter referred to herein as the "Shares"), at the Conversion Price
defined in Article 24 of this Agreement. The Convertible Notes do not bear
interest. The Convertible Notes are to be sold pursuant to this Agreement to
the purchasers listed on Exhibit "A" to this Agreement (the "Purchasers"). The
Form of Convertible Note is attached hereto as Exhibit "B".
I.A.2. SALE AND PURCHASE OF CONVERTIBLE NOTES.
Subject to the terms and conditions hereof, the Company will sell to
each Purchaser, and each Purchaser will purchase from the Company, on the
Closing Date specified in Article 3, a Convertible Note or Convertible Notes
in the aggregate principal amount set forth opposite such Purchaser's name on
Exhibit "A" hereto, at a purchase price of 100% of such principal amount.
I.A.3. CLOSING.
The closing (the "Closing") of the purchase and sale of the
Convertible Notes will take place at the offices of Xxxx Xxxxxxx, P.C., 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m., New York City
time, on May 29, 1998 or such other time and date as shall be mutually agreed
upon by the Purchasers and the Company. Such time and date is herein called
the "Closing Date."
On the Closing Date, the Company shall deliver to each Purchaser a
Convertible Note, dated the Closing Date, in the aggregate principal amount
set forth opposite such Purchaser's name on Exhibit "A" hereto, each such
Convertible Note to be registered in the name of the Purchaser or its nominee,
against delivery by the Purchaser to the Company of a certified or official
bank check(s) or wire transfer(s) in an aggregate amount equal to the
aggregate purchase
price for such Convertible Notes, payable to the order of the Company in
immediately available funds.
I.A.4. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.
The Company represents and warrants that:
I.A.4.1. Corporate Existence and Power. The Company 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 Company 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, individually or in the
aggregate, have a Material Adverse Effect on the Company and its Subsidiaries
taken as a whole. For purposes of this Agreement, the term "Material Adverse
Effect" means, with respect to any person or entity, a material adverse effect
on the condition (financial or otherwise), business, properties, assets,
liabilities (including contingent liabilities), results of operations of the
Company or its Subsidiaries (as defined below). 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.
I.A.4.2. Corporate Authorization. The execution, delivery and
performance by the Company of this Agreement, and the consummation of the
transactions contemplated hereby (including, but not limited to, the sale,
issuance and delivery of the Convertible Notes, the subsequent issuance of the
Shares upon conversion of the Convertible Notes and the Additional Shares)
have been duly authorized by all required corporate action and no additional
corporate action is required for the approval of this Agreement. This
Agreement constitutes the legal, valid and binding agreement of the Company
enforceable against it 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 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).
I.A.4.3. Disclosure. The Company's filings and submissions with the
Commission (the "SEC Reports") comply in all material respects with all
applicable securities laws and no statement, report, or certificate filed with
the Commission contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein not misleading. Since December 31, 1997, the Company has conducted its
business in the ordinary and usual course consistent with past practices and
there has not occurred any Material Adverse Effect.
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A.I.4.4. Capitalization. Except as disclosed below, the authorized
capital of the Company is as set out in its most recently filed Annual Report
on Form 10-K for the year ended December 31, 1997 (the "1997 Form 10-K"),
which discloses all outstanding options or warrants for the purchase of, or
other rights to purchase or subscribe for, or securities convertible into or
exchangeable for, Common Stock or other capital stock of the Company, or any
contracts or commitments to issue or sell Common Stock or other capital stock
of the Company or any such options, warrants, rights or other securities; and
from such date to the date hereof there has been no material change in the
amount or terms of any of the foregoing except for the grant of shares of
Common Stock pursuant to the Company's stock option plan. In connection with
the closing of the Bolle Australia Acquisition, the Company has issued 248,388
shares of Common Stock. In addition, in connection with the Bolle UK
Acquisition, the Company has agreed to issue shares of Common Stock having a
value of approximately $375,000. The outstanding Shares of Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable
and all of such options, warrants and other rights have been duly authorized
by the Company. None of the outstanding Shares of Common Stock and options,
warrants and other rights to acquire Common Stock has been issued in violation
of the preemptive rights of any securityholder of the Company. The offers and
sales of the outstanding Shares of Common Stock and options, warrants and
other rights to acquire Common Stock were at all relevant times either
registered under the Securities Act and applicable state securities laws or
exempt from such requirements.
I.A.4.5. Concerning the Shares and the Common Stock. The Shares and
the Additional Shares have been duly authorized and, when the Shares are
issued upon conversion of the Convertible Note, or the Additional Shares are
issued in accordance with the terms of this Agreement, as the case may be,
such shares will be duly and validly issued, fully paid and non-assessable and
will not subject the holder thereof to personal liability by reason of being
such holder. The holders of outstanding shares of capital stock of the Company
are not entitled to preemptive or other rights to subscribe for the Shares or
the Convertible Note. The Shares have been duly reserved by the Company for
issuance upon conversion of the Convertible Note, and shall remain so reserved
as long as the Convertible Note may be converted. The Additional Shares have
been duly reserved by the Company for issuance pursuant to the terms of this
Agreement, and shall remain so reserved as long as such Additional Shares may
be required to be issued in connection with this Agreement. The Common Stock
is listed for trading on the NASDAQ National Market System and (1) the Company
and the Common Stock meet the criteria for continued listing and trading on
NASDAQ; (2) the Company has not been notified by the National Association of
Securities Dealers, Inc. (the "NASD") of any failure or potential failure to
meet the criteria for continued listing and trading on NASDAQ National Market
and (3) no suspension of trading in the Common Stock is in effect.
I.A.4.6. Non-contravention. The execution and delivery of this
Agreement, and the consummation by the Company of the issuance of the Shares
and the Additional Shares, do not and will not, with or without the giving of
notice or the lapse of time, or both, (i) result in any violation of any term
of the certificate of incorporation or by-laws of the Company, (ii) conflict
with or result in a breach by the Company of any of the
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terms or provisions of, or constitute a default under, or result in the
modification of, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company pursuant to, any indenture, mortgage, deed of trust or other agreement
or instrument to which the Company is a party or by which the Company or any
of its properties or assets are bound or affected, (except as to any such
agreement for which the Company has obtained a written waiver in form, scope
and substance reasonably acceptable to the Purchaser), or (iii) violate or
contravene any applicable law, rule or regulation or any applicable decree,
judgment or order of any court, United States federal or state regulatory
body, administrative agency or other governmental body having jurisdiction
over the Company or any of its properties or assets, except as disclosed in
Section 4.7 below, or (iv) have any Material Adverse Effect on any permit,
certification, registration, approval, consent, license or franchise necessary
for the Company to own or lease and operate its properties and to conduct any
its business or the ability of the Company to make use thereof.
I.A.4.7. Approvals. No authorization, approval or consent of, or
filing with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company
is required to be obtained or made by the Company in connection with the
execution, delivery and performance of this Agreement or the issuance of the
Shares or the Additional Shares as contemplated by this Agreement and the
terms of the Convertible Note, other than (1) listing of the Shares and the
Additional Shares on NASDAQ, (2) registration of the Shares and the Additional
Shares under the Securities Act as contemplated by Section 13, and (3) as may
be required under applicable state securities or "blue sky" laws.
I.A.4.8. SEC Reports. The Company has filed in a timely manner all reports
required to be filed under the Exchange Act and any other material reports or
documents required to be filed with the Commission and to the extent that the
Company used Rule 12b-25(b) under the Exchange Act with respect to a report,
that report has actually been filed within the time prescribed by such Rule.
All of such reports and documents complied, when filed, in all material
respects, with all applicable requirements of the Securities Act and the
Exchange Act.
I.A.4.9. Private Offering. Neither the Company nor any Person acting
on its behalf has taken or will take any action which might subject the
offering, issuance or sale of the Convertible Notes, the Shares and the
Additional Shares hereunder to the registration requirements of the Securities
Act; provided, that the representations hereunder made by each of the
Purchasers is true, correct and complete. I.A.4.10. Registration
Rights; Rights of Participation. Except as described on Schedule 4.10 hereto,
(A) the Company has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority
which has not been satisfied and (B) no Person, including, but not limited to,
current or former shareholders of the Company, underwriters, brokers or
agents, has any right of first refusal, preemptive right, right of
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participation, or any similar right to participate in the transactions
contemplated by this Agreement, which has not been waived.
I.A.4.11. No Brokers. The Company has not employed any financial
advisor, broker or finder and has not incurred (and will not incur) any
broker's, finder's, investment banking or similar fees, commissions or
expenses in connection with the transactions contemplated by this Agreement.
I.A.4.12. Absence of Litigation. Except as described in the SEC
Reports, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
business, properties, operations, condition (financial or other), results of
operations of the Company or the transactions contemplated by this Agreement,
or which would materially adversely effect the validity or enforceability of,
or the authority or ability of the Company to perform its obligations under
this Agreement.
I.A.4.13. No Default or Violation. The Company (i) is not in default
under or in violation of any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, (ii) in violation of any order of any court, arbitrator
or governmental body applicable to its property or assets, or (iii) in
violation of any statute, rule or regulation of any governmental authority to
which it is subject, except those that would result in a Material Adverse
Effect.
I.A.5. SUBORDINATION.
I.A.5.1. Agreement to Be Bound. The Company covenants and agrees,
and each holder of Convertible Notes by his (its) acceptance thereof, likewise
covenants and agrees, that the Convertible Notes shall be issued subject to
the provisions contained in this Article 5; and each person holding any
Convertible Notes, whether upon original issue or upon transfer or assignment
thereof, accepts and agrees to be bound by such provisions. All Convertible
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 herein). Notwithstanding any other
provisions of this Article 5, conversions of the Convertible Notes and the
issuance of Additional Shares shall not be considered redemptions,
acquisitions or retirements thereof for purposes of this Article 5.
I.A.5.2. Priority of Senior Indebtedness. (a) No payment on account
of principal or interest on the Convertible Notes or any amount due or payable
pursuant to this Agreement shall be made, nor shall any assets be applied to
the purchase or other acquisition or retirement of the Convertible Notes or
any amount due or payable pursuant to this Agreement, nor shall the Purchaser
enforce any judgment or otherwise attach or seek remedy directly against any
property of the Company (whether before or after judgment), if, at the time of
such payment or application or immediately after giving effect thereto, there
shall exist a default (other than a default in the payment of any amount due)
in the payment of any amount due on any Senior Indebtedness or if there shall
have occurred an event of default with respect to any Senior Indebtedness, or
in the
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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, until the earliest to occur of (i) the date on which the Senior
Indebtedness to which such event of default related is discharged in
accordance with its terms, or (ii) the date such event of default is waived by
the holders of such Senior Indebtedness or otherwise cured; provided, that the
Convertible Notes shall not be considered "equity securities" for the purposes
of determining whether a default has occurred, or would occur, under Company
covenants pertaining to Senior Indebtedness which prohibit the redemption of
equity securities or require the maintenance of minimum equity ratios, until
such time as and to the extent that the Convertible Notes are actually
converted to Common Stock; and provided, further, that notwithstanding the
partial restriction of a redemption or other payment hereunder, payment shall
be made, if required by the terms hereof, to the extent possible without
causing an event of default under Senior Indebtedness, and the balance thereof
shall be paid as soon as such event of default is no longer continuing. Within
ten (10) Business Days after knowledge of any such default referred to in this
Section 5.2(a), the Company shall furnish a copy thereof to each holder of the
Convertible Notes, in the manner and at the address specified pursuant to
Article 17 hereof.
(b) Upon the occurrence and during the continuance of any Event of
Default under this Agreement or the Convertible Notes, or upon the occurrence
of an event requiring any amount to be due and payable pursuant to this
Agreement and notwithstanding any other provision contained herein or in the
Convertible Notes to the contrary, each Purchaser hereby agrees, for the
benefit of the holders of Senior Indebtedness, not to take or receive any
amount owing under the Convertible Notes or any amount due or payable pursuant
to this Agreement with respect thereto, or enforce any judgment or otherwise
attach or seek remedy directly against any property of the Company (whether
before or after judgment), until the earliest of, (i) if applicable, the date
on which the Senior Indebtedness to which such event of default related is
discharged in accordance with its terms or after the date that such event of
default is waived by the holders of such Senior Indebtedness or otherwise
cured or (ii) any voluntary or involuntary petition in bankruptcy filed by or
against the Company. Within ten (10) Business Days after knowledge of any
Event of Default under this Agreement or the Convertible Notes, the Company
shall furnish a copy thereof to the holders of Senior Indebtedness in the
manner and at the addresses specified in the documents and/or agreements
evidencing the applicable Senior Indebtedness.
I.A.5.3. Acceleration of Convertible Notes; Insolvency. Upon (i) any
acceleration of the principal amount due on the Convertible Notes or Senior
Indebtedness or (ii) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or
to become due upon all Senior Indebtedness shall first be paid in full, or
payment thereof duly provided for, to the full satisfaction of the holders of
Senior Indebtedness before the holders of the Convertible 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 Company of any
kind or character, whether in cash, property or securities, to which the
holders of the Convertible Notes would be entitled, except for these
provisions, shall be paid by the Company or by any receiver, trustee in
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bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, or by the holders of the Convertible 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 Convertible Notes.
I.A.5.4. Subrogation, Etc. Upon payment in full of all Senior
Indebtedness, the holders of Convertible Notes shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company pro rata in proportion to the
respective amounts then owing to the holders of Convertible 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 Convertible Notes would be entitled except for the provisions of this
Section 5, and no payment pursuant to such provisions to the holders of Senior
Indebtedness, shall, as between the Company and its creditors (other than the
holders of Convertible Notes and the holders of the Senior Indebtedness), be
deemed to be a payment by the Company to or on account of Senior Indebtedness,
it being understood that the provisions of this Section 5 are and are intended
solely for the purpose of defining the relative rights of the holders of
Convertible 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.
I.A.5.5. Enforcement. 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 Convertible Notes. Each
holder of Convertible Notes by his (or its) acceptance thereof shall be deemed
to acknowledge and agree that the subordination provisions of this Article 5
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 Convertible 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.
Upon any payment or distribution of assets of the Company, the
holders of the Convertible Notes shall be entitled to rely upon a certificate
of the receiver, trustee in bankruptcy, liquidation trustee, Company, agent or
other person making such payment or distribution, delivered to the holders of
the Convertible Notes, for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertaining
thereto or to the provisions of this Article 5.
I.A.5.6. Obligations Unimpaired. Nothing contained in this Article
5, or elsewhere in this Agreement, or in the Convertible Notes, is intended to
or shall impair as between the Company, its creditors other than the holders
of Senior Indebtedness, and the holders of the
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Convertible Notes, the obligation of the Company, which shall be absolute and
unconditional, to pay the holders of the Convertible Notes the principal of
and interest on the Convertible 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 Convertible Notes and other creditors of the
Company other than the holders of Senior Indebtedness, nor shall anything
herein or therein prevent the holder of any Convertible Notes from exercising
all remedies otherwise permitted by applicable law upon default under this
Agreement, subject to the rights, if any, under this Article 5 of the holders
of Senior Indebtedness in respect to cash, property or securities of the
Company received upon the exercise of any such remedy. Nothing contained in
this Article 5, shall prevent the Company from making payment of the principal
of or interest, if applicable, on the Convertible Notes at any time except
under the conditions described in Section 5.2 or 5.3 or during the pendency of
any dissolution, winding up, liquidation or reorganization of the Company.
I.A.5.7. Definition of Senior Indebtedness. The term "Senior
Indebtedness" shall mean the principal, interest and other amounts due under
the terms of the instruments creating or evidencing all Consolidated Funded
Indebtedness of the Company permitted by Section 9.1 hereof from time to time,
including that owing to banks or other financial institutions (including, but
not limited to, under the terms of the Second Amended and Restated Credit
Agreement among the Company, the lenders executing a signature thereto and
NationsBank, National Association, as Agent, dated as of March 11, 1998, as
may be amended from time to time (the "Credit Facility")), an agency or
agencies of the federal government or other institutions engaged in the
business of lending money, unless expressly stated not to be superior in right
of payment to the Convertible Notes; provided that "Senior Indebtedness" shall
in any case include all amounts owing under or pursuant to the Credit Facility
to the extent of the current available credit facilities in the maximum
principal amount at anytime outstanding of $28,000,000.00 which shall include
a Term Loan Facility (as defined in the Credit Facility) and a Revolving
Credit Facility (as defined in the Credit Facility), including a letter of
credit subfacility of up to $5,000,000 together with all interest and other
amounts due or payable thereunder, notwithstanding the Company's compliance or
non-compliance with Section 9.1; and provided, further, that "Senior
Indebtedness" shall in any case not include any amounts owing to Lumen
Technologies, Inc. or to a Subsidiary or an Affiliate of the Company or Lumen
Technologies, Inc. (other than holders of the Convertible Notes),
notwithstanding the Company's compliance or non-compliance with Section 9.1
hereof.
I.A.6. REPRESENTATIONS OF THE PURCHASERS.
I.A.6.1. Binding Agreement. Each Purchaser has full power, authority
and legal capacity to (i) execute, deliver and perform this Agreement and (ii)
consummate the transactions contemplated hereby. This Agreement has been duly
authorized, approved, executed and delivered by each Purchaser. This Agreement
constitutes the legal, valid and binding obligation of each Purchaser
enforceable against it in accordance with its terms.
I.A.6.2. Acquisition of Shares for Own Account; Restrictions on
Transfer. Each Purchaser is acquiring the Convertible Notes, and to the extent
acquired, the Shares and the Additional Shares, for investment and not with a
view to the sale or distribution thereof, and is acquiring such Convertible
Notes for its own account and not on behalf of others and has not
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granted any other person any right or option or any participation or
beneficial interest in any of the Convertible Notes and the Shares and the
Additional Shares. Each Purchaser acknowledges its understanding that the
Convertible Notes, the Shares and the Additional Shares constitute restricted
securities within the meaning of Rule 144 of the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), and that none of
such Convertible Notes, the Shares and the Additional Shares may be sold
except pursuant to an effective registration statement under the Securities
Act or in a transaction exempt from registration under the Securities Act, and
acknowledges that it understands the meaning and effect of such restriction.
Each Purchaser has sufficient knowledge and experience in financial and
business matters so that it is capable of evaluating the risks and merits of
the acquisition of the Convertible Notes. Each Purchaser is aware of and has
investigated the Company's business, management and financial condition, has
had a satisfactory opportunity to ask questions of, and receive answers from,
agents and employees of the Company concerning the business of the Company and
the terms and conditions of this transaction and has had access to such other
information about the Company as each Purchaser deemed necessary or desirable
to reach an informed and knowledgeable decision to purchase the Convertible
Notes, the Shares and the Additional Shares.
I.A.6.3. Accreditation. Each Purchaser is an "accredited investor"
within the meaning of Rule 501 of the rules and regulations of the Commission
promulgated under the Securities Act, and has the financial ability to bear
the economic risk of its acquisition of the Convertible Notes, the Shares and
the Additional Shares. The principal place of business of each of the
Purchasers is New York. Each Purchaser hereby agrees to provide the Company
and its counsel with such information as is reasonably necessary to enable the
Company to file a Form D with the Commission with respect to the transactions
contemplated hereby. In furtherance of the foregoing, each Purchaser
acknowledges that a purchase of the Convertible Notes is only available to a
Purchaser who is an "accredited investor."
I.A.6.4. No Brokers. The Purchaser has not employed any financial
advisor, broker or finder and has not incurred (and will not incur) any
broker's, finder's, investment banking or similar fees, commissions or
expenses in connection with the transactions contemplated by this Agreement.
I.A.6.5. Compliance with Securities Laws. Each of the Purchasers
shall comply in all material respects with all applicable requirements of
federal and state securities laws.
I.A.7. CONDITIONS TO OBLIGATIONS.
I.A.7.1. The Purchasers' obligation to purchase the Convertible
Notes hereunder is subject to satisfaction of the following conditions at the
Closing: (a) Accuracy of Representations and Warranties. The
representations and warranties of the Company herein or in any certificate or
document delivered pursuant hereto shall be true and correct on and as of the
Closing Date with the same effect as though made on and as of the Closing
Date.
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(b) Performance; No Default. The Company shall have performed and
complied, in each case in all material respects, with all material agreements
and conditions contained in this Agreement required to be performed or
complied with by it prior to or at the Closing and at the time of the Closing,
no Event of Default shall have occurred and be continuing.
(c) Compliance with Securities Laws. The offering and sale of the
Convertible Notes at or prior to the Closing under this Agreement shall have
complied in all material respects with all applicable requirements of federal
and state securities laws.
(d) Consents. The Company shall receive the consent of the lenders
under the Credit Facility.
(e) Legal Opinion. Each Purchaser shall have received from counsel
for the Company an opinion with respect to the matters set forth in Exhibit D,
which opinion shall be addressed to the Purchasers, dated the date of the
Closing, and in form and substance reasonably satisfactory to the Purchasers.
(f) Officer's Certificate. The Purchasers shall have received a
certificate of an officer of the Company, dated the date of the Closing,
stating that the conditions specified in this Section 7.1 have been fully
satisfied.
(g) Expenses. At the Closing, the Company shall have paid, or
reimbursed the Purchasers for, the Purchasers' fees and expenses to the extent
provided in Section 25 hereof.
(h) Convertible Notes. The Company shall have delivered to each
Purchaser a Convertible Note in the aggregate principal amount set forth
opposite such Purchaser's name on Exhibit A hereto.
(i) Secretary's Certificate. Each of the Purchasers shall have
received a certificate of the Secretary of the Company (in form and substance
satisfactory to the Purchasers) certifying (i) that attached thereto are true
and complete copies of the certificate of incorporation and by-laws of the
Company, (ii) that attached thereto are true and complete copies of the
resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance of this Agreement and any other documents,
instruments and certificates required to be executed by it in connection
herewith and approving the consummation of the transactions in the manner
contemplated hereby including, but not limited to, the authorization and
issuance of the Convertible Notes and the Common Stock issuable on conversion
thereof and the reservation thereof, (iii) the names and true signatures of
the officers of the Company signing this Agreement and all other documents to
be delivered in connection with this Agreement, and (iv) such other matters as
the Purchasers may reasonably request.
(j) Other Documents. The Purchasers shall have received such other
documents as the Purchaser may reasonably require.
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Any condition specified in this Section 7.1 may be waived if
consented to by each Purchaser.
I.A.7.2. The Company's obligation to issue the Convertible Notes
hereunder is subject to satisfaction of the following conditions at the
Closing:
(a) Accuracy of Representations and Warranties. The representations
and warranties of each of the Purchasers herein or in any certificate or
document delivered pursuant hereto shall be true and correct on and as of the
Closing Date with the same effect as though made on and as of the Closing
Date.
(b) Performance; No Default. Each Purchaser shall have performed and
complied, in each case in all material respects, with all material agreements
and conditions contained in this Agreement required to be performed or
complied with by it prior to or at the Closing and at the time of the Closing,
no Event of Default shall have occurred and be continuing.
(c) Consents. The Company shall have received the consent of the
lenders under the Credit Facility.
(d) Loan Proceeds. At the Closing, the Purchasers shall have
delivered to the Company a certified or official bank check(s) or wire
transfer(s) in an aggregate amount of $7,000,000 payable to the order of the
Company in immediately available funds.
(e) Other Documents. The Company shall have received such other
documents as the Company may reasonably require.
Any condition specified in this Section 7.2 may be waived if
consented to by the Company.
I.A.8.2 AFFIRMATIVE COVENANTS.
I.A.8.1. Office for Payment, Exchange and Registration. So long as
any of the Convertible Notes are outstanding, the Company will maintain an
office or agency in the United States where the Convertible Notes may be
presented for payment, conversion, exchange or registration of transfer as
provided in this Agreement. Such office or agency initially shall be the
office of the Company set forth in Article 17 hereof, which place may
thereafter from time to time be changed by notice to the holders of all
Convertible Notes then outstanding.
I.A.8.2. Notices. The Company will give notice to all holders of
Convertible Notes within 10 Business Days after it learns of the existence of
any Event of Default or any event which, with the giving of notice or the
lapse of time or both, would become an Event of Default, describing the same
and the period of existence thereof, and what action the Company has taken, is
taking or proposes to take with respect thereto.
11
I.A.8.3. Corporate Existence, Etc. The Company will at all times
preserve and keep in full force and effect its corporate existence, and rights
and franchises deemed material to its business, and those of each of its
material Subsidiaries.
I.A.8.4. Payment of Taxes. The Company will, and will cause each of
its Subsidiaries to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
franchises, business, income or profits before any penalty or interest accrues
thereon, provided that no such tax, assessment, charge or claim need be paid
if being contested in good faith by appropriate proceedings promptly initiated
and diligently conducted and if such reserve or other appropriate provision,
if any, as shall be required by generally accepted accounting principles shall
have been made therefor.
I.A.8.5. Maintenance of Properties; Insurance. The Company will
maintain or cause to be maintained in reasonably good repair, working order
and condition, normal wear and tear excepted, all material properties used in
the business of the Company and its Subsidiaries. The Company will maintain or
cause to be maintained, with financially sound and reputable insurers,
insurance with respect to its properties and business and the properties and
business of its Subsidiaries against loss or damage of the kinds customarily
insured against by corporations of established reputation engaged in the same
or similar business and similarly situated, of such types and in such amounts
as are customarily carried under similar circumstances by such other
corporations.
I.A.8.6. Compliance with Laws. The Company will, and will cause each
Subsidiary to, comply in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
except where (i) noncompliance could not reasonably be expected to have a
material adverse effect on the business, operations or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, or (ii) the
necessity of compliance therewith is contested in good faith by appropriate
proceedings.
I.A.8.7. Listing and Reservation of Shares. The Company shall (i)
with reasonable promptness following the Closing Date prepare and file with
the NASDAQ National Market (as well as any other national securities exchange
or market on which the Common Stock is then listed) an additional shares
listing application or a letter acceptable to the NASDAQ Market System
covering and listing all Shares and the Additional Shares, (ii) take all
reasonable steps necessary to cause the Shares and the Additional Shares to be
approved for listing in the NASDAQ Market System (as well as on any other
national securities exchange or market on which the Common Stock is then
listed) as soon as possible thereafter, and (iii) provide to the Purchasers
evidence of such listing, and the Company shall take all steps reasonably
necessary to maintain the listing of its Common Stock on such market or
exchange.
I.A.8.8. Conversion Procedures. Exhibit C attached hereto sets forth
the procedures with respect to the conversion of the Convertible Notes,
including the form of conversion notice to be provided upon conversion and
instructions as to the procedures for conversion.
12
I.A.8.9. No Violation of Applicable Law. Notwithstanding any
provision of this Agreement to the contrary, if the redemption of Convertible
Notes or Shares otherwise required under this Agreement would be prohibited by
law or contractual restrictions, such redemption shall be effected as soon as
it is permitted under such law or such contractual restriction; provided, that
interest payable by the Company with respect to any such redemption shall
continue to accrue in accordance with Section 12, to the extent applicable.
I.A.8.10. Press Releases. The press release or other public
announcement concerning this Agreement or the transactions contemplated hereby
will be mutually satisfactory to the Company and the Purchaser, except that
the Company may issue such press release or make public statements as they
reasonably believe to be required by law.
I.A.9. NEGATIVE COVENANTS.
The Company covenants and agrees that it shall not without the
written consent of 50% in principal amount of the Convertible Notes, take any
of the following actions:
I.A.9.1. The Company shall not create, incur or assume any
Consolidated Funded Indebtedness, unless following the creation, incurrence or
assumption of such Consolidated Funded Indebtedness, the Company's
Consolidated Leverage Ratio (as defined in Section 24 hereof) is less than or
equal to 3.50 to 1.00.
I.A.9.2. The Company shall not: (a) declare any dividends (other
than dividends payable in capital stock of the Company) on any shares of its
capital stock (other than the Company's Series A Preferred Stock and Series B
Preferred Stock); (b) except in connection with the Company's Series A
Preferred Stock and Series B Preferred Stock, apply its property or assets to
the purchase, redemption or other retirement of, or set apart any sum for the
payment of any dividends on, or for the purchase, redemption or other
retirement of, or make any other distribution by reduction of capital or
otherwise in respect of, any shares of any class of capital stock of the
Company.
I.A.9.3. The Company shall not consummate a Merger (as defined in
Section 24 hereof) with and into any other Person or permit any other Person
to effect a Merger into it; provided, that the Company may effect any such
Merger if in connection therewith the holders of the Convertible Notes are
given the option, exercisable within twenty days after written notice of such
proposed Merger, to have their Convertible Notes redeemed in full in
connection with and upon consummation of such Merger or (B) to have their
Convertible Notes assumed by the successor entity in connection with and upon
consummation of such Merger.
I.A.9.4. The Company shall not, and shall use its best efforts to
ensure that any Affiliate of the Company shall not, sell, offer for sale or
solicit offers to buy any security (as defined in Section 2 of the Securities
Act) that is integrated with the offer or sale of the Convertible Notes or the
Shares in a manner that would require registration under the Securities Act of
the sale of the Convertible Notes.
13
I.A.9.5. The Company shall not (i) register any shares of Common
Stock, except as described in Schedule 4.10, or (ii) issue securities in
reliance upon an exemption from registration under Regulation S of the
Securities Act, in each case for the earlier of (x) 75 days following the date
that the Registration Statement has been declared effective by the Commission
or (y) 225 days from the Closing Date.
I.A.10. DEFAULTS.
I.A.10.1. If any of the following events (herein called a "default"
or "defaults") shall occur and be continuing:
(a) The Company fails (i) to pay the principal amount of the
Convertible Notes when due, whether at maturity, upon redemption, upon
acceleration or otherwise, as applicable, or (ii) to pay any
installment of interest hereon or Conversion Penalty, if any, when due
and, in the case of this clause (ii) of this paragraph only, such
failure continues for a period of ten (10) days after the due date
therefor;
(b) The Company fails to issue shares of Common Stock to a
Purchaser upon exercise by such Purchaser of the conversion rights of
the Purchaser in accordance with the terms of this Agreement and after
the Deadline Day;
(c) The Company fails to comply with the provisions of Section 9
of this Agreement in any material respect;
(d) Any material representation or warranty of the Company made
herein or in any agreement, statement or certificate given in writing
pursuant hereto shall be false or misleading in any material respect
when made; provided that any purported failure of the Company to
comply with the 20% Rule shall not be deemed to breach any such
representation, warranty, statement or certificate of the Company, so
long as Section 11.12 hereof is complied with by the Company;
(e) The Company or any Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due or shall admit in writing its inability generally
to pay its debts as the become due;
(f) An involuntary case or other proceeding shall be commenced
against the Company or any Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law
14
now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of sixty
(60) consecutive days;
then, or at any time thereafter, and as long as such default is continuing
for fourteen (14) days after written notice of such default has been delivered
to the Company by the majority in interest of the Purchasers, (except for the
events described in Section 10(e) and (f) for which no notice shall be given
and no grace period shall be provided) or unless such default shall have been
waived in writing by the majority in interest of the Purchasers (which waiver
shall not be deemed to be a waiver of any subsequent default) the majority in
interest of the Purchasers may declare an event of default (an "Event of
Default") and the Company shall pay (subject to the provisions of Article 5
hereof) to the Purchasers (A) an amount equal to the sum of (1) the principal
amount of the Convertible Notes then outstanding and (2) all other amounts
payable hereunder, together with (B) the Additional Shares (as defined in
Section 24 hereof) applicable to such principal amount (except with respect to
any principal amount to which the Redemption Price is applicable), all of
which shall immediately become due and payable, without demand, presentment or
notice, all of which hereby are expressly waived, together with all costs,
including, without limitation, reasonable legal fees and expenses of
collection, and the Purchasers shall be entited to exercise all other rights
and remedies available at law or in equity, subject, however, to the
provisions of Article 5 hereof.
I.A.11. CONVERSION.
I.A.11.1. Conversion. On or after the date hereof, and prior to the
maturity of the Convertible Notes or, if sooner, the Redemption Date (as
hereinafter defined), the holder of a Convertible Note shall have the right,
at the option of such holder (whether or not payment upon the Convertible
Notes is prohibited by the subordination provisions of Article 5) to convert,
subject to the terms and provisions of this Article 11, all or, subject to the
provision contained in this Section 11.1, any portion of the Convertible Notes
held by such holder into the number of fully paid and nonassessable Shares as
shall be equal to the aggregate principal amount of Convertible Notes then
being converted divided by the Conversion Price then in effect, by delivery of
the Convertible Notes to the Company at the office of the Company provided for
in Section 8.2 herein; provided, however, that no holder of a Convertible Note
shall be permitted to exercise its rights with respect to partial conversions
as herein described unless each such holder of a Convertible Note elects to
convert a minimum of at least $100,000 principal amount of its Convertible
Note or any additional amounts in multiples thereof; provided, further, that
the Company shall not be required to issue any fractional shares in connection
with any conversion pursuant to this Article 11. Each such conversion shall be
made as specified hereunder and in accordance with the procedures and form of
conversion notice ("Conversion Notice") set out in Exhibit C.
I.A.11.2. Delivery of Stock Certificates; Time Conversion Effective;
No Adjustment for Interest or Dividends. As promptly as practicable after the
receipt of a Conversion Notice from a holder of Convertible Notes (and in any
case within three Trading Days after the Conversion Date (as defined below)),
the Company shall deliver or cause to be delivered to or upon
15
the written order of the holder of the Convertible Note so surrendered,
certificates representing the number of fully paid and nonassessable Shares
into which the Convertible Note is being converted. Subject to the following
provisions of this Section 11.2, such conversion shall be deemed to have been
made at the close of business on the date of the Company's receipt of a
properly completed and duly executed Conversion Notice (the "Conversion
Date"), so that the rights of the holder of such Convertible Note as a holder
thereof, shall cease at such time and the person or persons entitled to
receive any of the Shares upon conversion of the Convertible Notes shall be
treated for all purposes as having become the record holder or holders of such
Shares at such time; provided, however, that no such surrender on any date
when the stock transfer books of the Company shall be closed, shall be
effective to constitute the person or persons entitled to receive Shares upon
such conversion as the record holder or holders of such Shares on such date,
but such surrender shall be effective to constitute the person or persons
entitled to receive such Shares as the record holder or holders thereof for
all purposes at the close of business on the next succeeding day on which such
stock transfer books are open or the Company is required to convert
Convertible Notes. If such certificate or certificates are not delivered to or
as directed by the applicable holder or before the fourth (4th) Trading Day
after the Conversion Date, the Company shall pay to such holder, in cash, as
liquidated damages and not as a penalty, $1,500 for each Trading Day after
such fourth Trading Day until the eleventh (11th) Trading Day (which day is
referred to herein as the "Deadline Day") after the Conversion Date (being a
maximum of 8 Trading Days). If the Company fails to deliver to the holder such
certificate or certificates pursuant to this Section on or prior to the
Deadline Day, the Company shall pay to such holder the Conversion Penalty
within Seven (7) Business Days of the Company's receipt of documents, invoices
or other reasonable evidence prepared by such holder supporting the
calculation of the Conversion Penalty.
If the day for the exercise of the conversion right shall not be a
Trading Day, then such conversion right will automatically be deemed to be
exercised on the next succeeding day which is a Trading Day.
I.A.11.3. [INTENTIONALLY OMITTED].
I.A.11.4. Adjustment of Conversion Price. The Conversion Price shall
be subject to adjustment as of the Closing Date as follows:
(a) In case the Company shall, after the date hereof, (i) pay a
stock dividend or make a distribution in shares of its capital stock
(whether shares of its Common Stock or of capital stock of any other
class), (ii) subdivide its outstanding shares of Common Stock, (iii)
combine its outstanding shares of Common Stock into a smaller number
of shares, or (iv) issue by reclassification of its shares of Common
Stock any shares of capital stock of the Company, the Conversion Price
in effect immediately prior to such action shall be adjusted so that
the holder of a Convertible Note thereafter surrendered for conversion
shall be entitled to receive an equivalent number of shares of capital
stock of the Company which he would have owned immediately following
such action had such Convertible Note been converted immediately prior
thereto. Any adjustment made pursuant to this subsection (a) shall
become effective immediately after the record date in the case of a
dividend or
16
distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
reclassification.
(b) In any case in which this Section 11.4 shall require that an
adjustment be made immediately following a record date or an effective
date, the Company may elect to defer (but only until five Business
Days following the mailing by the Company to the holders of
Convertible Notes of the certificate required by subsection (h) of
this Section 11.4) issuing to the holder of any Convertible Note
converted after such record date or effective date the shares of
Common Stock issuable upon such conversion over and above the shares
of Common Stock issuable upon such conversion on the basis of the
Conversion Price prior to adjustment, and paying to such holder any
amount of cash in lieu of a fractional share.
(c) No adjustment in the Conversion Price shall be required to be
made unless such adjustment would require an increase or decrease of
at least one percent (1%) in such price; provided, however, that any
adjustments which by reason of this subsection (g) are not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11.4 shall
be made to the nearest cent.
(d) Whenever the Conversion Price is adjusted as provided in
Section 11.4(a) herein, the Company will promptly mail to the holders
of the Convertible Notes, a certificate of the Company's Treasurer or
Chief Financial Officer setting forth the Conversion Price as so
adjusted and a brief statement of facts accounting for such
adjustment.
(e) Irrespective of any adjustment or change in the Conversion
Price and the number of Shares actually purchasable under the
Convertible Notes, the Convertible Notes theretofore and thereafter
issued may continue to express the Conversion Price per Share and the
number of Shares purchasable thereunder as the Conversion Price per
Share and the number of Shares purchasable as expressed upon the
Convertible Notes when initially issued.
I.A.11.5. Company's Consolidation or Merger. If the Company shall at
any time consolidate or merge with and into another corporation, (a) the
Company shall give at least twenty (20) days prior written notice to the
holders of the Convertible Notes of such consolidation or merger and the terms
thereof, and (b) the holder of a Convertible Note shall thereafter be entitled
to receive, upon the conversion thereof, the securities or property to which a
holder of the number of Shares then deliverable upon the conversion thereof
would have been entitled upon such consolidation or merger, and the Company
shall take such steps in connection with such consolidation or merger as may
be necessary to assure such holder that the provisions of this Agreement shall
thereafter be applicable, as nearly as reasonably may be in relation to any
securities or property thereafter deliverable upon the conversion of the
Convertible Note including, but not limited to, obtaining a written
acknowledgement from the continuing corporation or other appropriate
corporation of its obligation to supply such securities or property upon such
conversion and to honor the obligations under this Agreement
17
and the Convertible Notes. A sale of all or substantially all the assets of
the Company shall be deemed a consolidation or merger for the foregoing
purposes as well as Section 9.3 hereof.
I.A.11.6. Reserve of Sufficient Shares. The Company will reserve and
keep available a sufficient number of shares of its Common Stock to satisfy
the conversion requirements of all outstanding Convertible Notes and the
Additional Shares. The Company will take all such action as may be necessary
to insure that all Shares issued upon conversion of the Convertible Notes and
the Additional Shares will be duly and validly authorized and issued and fully
paid and nonassessable.
I.A.11.7. Taxes on Conversion. The issuance of certificates for
Shares upon the conversion of Convertible Notes shall be made without charge
to the holders of Convertible Notes converting such Convertible Notes for any
issue or stamp tax in respect of the issuance of such certificates, and such
certificates shall be issued in the respective names of, or in such names as
may be directed by, the holders of the Convertible Notes converted; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of
any such certificate in a name other than that of the holder of the
Convertible Note converted, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has
been paid.
I.A.11.8. Cancellation of Converted Convertible Notes. All
Convertible Notes which have been converted in full shall be cancelled by the
Company and no Convertible Notes shall be issued in lieu thereof.
I.A.11.9. Notice to Holders of Convertible Notes. In case at any
time:
(a) the Company shall take any action which would require an
adjustment in the Conversion Price pursuant to Section 11.4(a); or
(b) there shall be any capital reorganization or reclassification
of the Common Stock (other than a change in par value or from par
value to no par value or from no par value to par value of the Common
Stock), whether or not such reorganization or reclassification results
in an adjustment in the Conversion Price, or any consolidation or
merger to which the Company is a party and for which approval of any
stockholders of the Company is required, or any sale or transfer of
all or substantially all of the assets of the Company; or (c) there
shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then, in any one or more of said cases, the Company shall give written notice
to the holders of the Convertible Notes, not less than twenty (20) days before
any record date or other date set for definitive action, of the date on which
such adjustment, distribution, reorganization, reclassification, sale,
consolidation, merger, dissolution, liquidation or winding up shall take
place,
18
as the case may be. Such notice shall also set forth such facts as shall
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the current Conversion Price and the kind and
amount of the Shares and other securities and property deliverable upon
conversion of the Convertible Notes. Such notice shall also specify the date
as of which the holders of the Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such adjustment, distribution, reorganization, reclassification, sale,
consolidation, merger, dissolution, liquidation or winding up, as the case may
be (on which date, in the event of voluntary or involuntary dissolution,
liquidation or winding up of the Company, the right to convert the Convertible
Notes into Shares shall terminate).
Without limiting the obligation of the Company to provide notice to
the holders of Convertible Notes or Shares of corporate action hereunder, it
is agreed that failure of the Company to give such notice shall not invalidate
such corporate action of the Company.
I.A.11.10. Certain Transactions. Notwithstanding anything to the
contrary contained in this Agreement or in the Convertible Notes, in the event
that a Purchaser of Convertible Notes or any of such Purchaser's Associates or
Affiliates have initiated, engaged in, or completed any Arbitrage Transaction,
then the Purchaser shall promptly give notice to the Company ("Arbitrage
Notice") to convert that principal amount of Convertible Notes which when
converted into Shares of Common Stock shall equal the same number of Shares of
Common Stock that is subject to the Arbitrage Transaction. In the event that a
Purchaser does not provide the Company with the Arbitrage Notice within 90
days of an Arbitrage Transaction such holder shall be deemed to automatically
and immediately have elected on the date of such Arbitration Transaction to
convert that principal amount of Convertible Notes which when converted into
Shares of Common Stock shall equal the same number of Shares of Common Stock
that is subject to such Arbitrage Transaction.
I.A.11.11. Optional Company Conversion.
(a) In the event that at any time following the sixtieth (60th) day
after the effectiveness of the Registration Statement, the Closing Price of
the Common Stock, as reported on NASDAQ, or if not listed on NASDAQ, on any
securities exchange on which Common Stock is then listed, for 20 consecutive
Trading Days (at any time after the effectiveness of the Registration
Statement) is in excess of $7.0875 per share, following notice pursuant to
Section 11.11(b) given at any time thereafter to all holders of Convertible
Notes, as provided below, the Company may at its option, require the holders
of the Convertible Notes to convert in whole or in part the Convertible Notes
into Shares of Common Stock, as herein described; provided, that in the event
of a conversion pursuant to the provisions of this Section 11.11, the holders
of the Convertible Notes shall be entitled to receive registered Shares of the
Common Stock. The holder of any Convertible Notes shall be required to convert
such Convertible Notes held by such holder into the number of fully paid and
nonassessable Shares as shall be equal to the aggregate principal amount of
Convertible Notes then being converted divided by the Conversion Price then in
effect, by delivery of the Convertible Notes to the Company at the office of
the Company provided for in Section 8.1 herein. The Company shall not be
required to issue any fractional shares in connection with
19
any conversion pursuant to this Article 11. In the event that any Purchaser
shall be required to convert the Convertible Notes held by it in an amount
less than the entire aggregate principal amount outstanding of such
Convertible Notes held by such Purchaser, the Company shall, or shall direct
its transfer agent to, issue to such Purchaser certificates for the Shares of
Common Stock for which such Convertible Note is being converted in such
denominations as are required for delivery to such Purchaser, and the Company
shall, or shall direct its transfer agent to, thereupon deliver such
certificates to or in accordance with the instructions of such Purchaser, and
the Company shall issue to such Purchaser a new Convertible Note, duly
executed by the Company, in form and substance identical to the Convertible
Note surrendered by such Purchaser, for the balance of the aggregate principal
amount of Convertible Notes that have not been so converted.
(b) Company Conversion Procedures. At least 10 days prior to the
date fixed for any conversion of Convertible Notes pursuant to Section 11.11
above (the "Company Conversion Date"), written notice shall be sent to each
holder of Convertible Notes, notifying such holder of the conversion to be
effected, specifying the Company Conversion Date, and calling upon such holder
to surrender to the Company, in the manner and at the place designated, his
Convertible Notes to be converted (the "Company Conversion Notice"). On or
after the Company Conversion Date, each holder of Convertible Notes to be
converted shall surrender to the Company the Convertible Notes, in the manner
and at the place designated in the Company Conversion Notice, and thereupon
the Shares of Common Stock shall be delivered to the person whose name appears
on such Convertible Notes as the owner thereof and each surrendered
Convertible Notes shall be cancelled.
I.A.11.12. Shares Issuance Limitation. If, on any date of requested
conversion, redemption or repayment, as the case may be, (A) the Common Stock
is then listed for trading on the NASDAQ National Market, NASDAQ Small Cap
Market, the American Stock Exchange, or the New York Stock Exchange, or if
rules similar to Rule 4460(i) of the NASDAQ Stock Market, Inc. (or any
successor or replacement provision thereof, the "20% Rule") are applicable to
the over-the-counter market or an exchange or market to which the Common Stock
is then trading and the Company's Common Stock is listed for trading on such
market or exchange, (B) the 20% Rule is applicable on that date, (C) the
Conversion Price then in effect is such that the aggregate number of shares of
Common Stock that would then be issuable upon conversion of all outstanding
Convertible Notes or through the issuance of Additional Shares, together with
any shares of Common Stock previously issued upon conversion of the
Convertible Notes or through the issuance of Additional Shares, would equal or
exceed 20% of the number of shares of Common Stock outstanding on the Closing
Date (the "Issuable Maximum"), and (D) the Company has not previously obtained
Shareholder Approval (as defined below), then the Company shall issue to any
holder so requesting conversion of Convertible Notes its pro rata portion of
the Issuable Maximum in the same ratio that the principal amount of
Convertible Notes held by any such holder bears to the aggregate outstanding
principal amount of all of the Convertible Notes then outstanding and, with
respect to any shares of Common Stock that otherwise would have been issuable
to such holder in respect of the conversion notice at issue hereunder in
excess of such holder's pro rata portion of the Issuable Maximum (the "Surplus
Amount"), the Company shall
20
have the option to either (1) as promptly as possible, but in no event later
than 90 days after such requested Conversion Date, convene a meeting of the
holders of the Common Stock and use its reasonable efforts (which may include,
among other things, hiring a proxy solicitor) to obtain the Shareholder
Approval and the approval of the Company's Board of Directors or (2) in lieu
of issuing such Surplus Amount, redeem in cash that outstanding principal
amount of the Convertible Notes, which relates to such Surplus Amount, at a
redemption price equal 108% of the principal amount then being repaid or
redeemed; provided, that if the Company has elected to obtain Shareholder
Approval under clause (1) above, the holders of a majority of the outstanding
principal amount of Convertible Notes may request, in lieu of such meeting,
that the Company redeem each holder's Surplus Amount as set forth herein and
provided, further that if the Company fails for any reason to obtain such
Shareholder Approval within the time period set forth in (1) above, the
Company shall be obligated to redeem the principal amount of Convertible Notes
not converted as a result of the provisions of this Section in accordance with
the provisions of clause (2) above. "Shareholder Approval" means the approval
by a majority of the total votes cast on the proposal, in person or by proxy,
at a meeting of the shareholders of the Company held in accordance with the
Company's Certificate of Incorporation and by-laws, of the issuance by the
Company of shares of Common Stock exceeding the Issuable Maximum as a
consequence of the conversion of Convertible Notes into Common Stock at a
price less than the greater of the book or market value on the Closing Date as
and to the extent required pursuant to Rule 4460(i) of the NASDAQ Stock Market
or Rule 713 of the American Stock Exchange (or any successor or replacement
provision thereof), as applicable. Notwithstanding anything to the contrary
contained herein, in the event that the Company redeems any such holder's
Surplus Amount of the Convertible Notes pursuant to this Section 11.2, no
Additional Shares will be issued by the Company in respect of such amount
being redeemed or repaid.
I.A.12. MANDATORY REDEMPTION OF CONVERTIBLE NOTES BY THE COMPANY.
The Company shall not directly or indirectly, call, prepay, redeem,
or repurchase, any Convertible Notes or any portion thereof except as set
forth in this Article 12 or in Article 11 or in Section 9.3.
I.A.12.1. Mandatory Redemption by the Company. (a) The Company shall
redeem, subject to the provisions contained in Article 5 hereof, the
Convertible Notes (if not previously converted) at the Redemption Price
therefor pursuant to the terms of this Section 12 on the one hundred ninetieth
(190th) day following the date of issuance of the Convertible Notes in the
event that the Registration Statement has not been declared effective by the
SEC within one hundred and eighty (180) days after the Closing Date in
accordance with the provisions of Article 13 hereof.
(b) The Company shall redeem, subject to the provisions contained in
Article 5 hereof, the Convertible Notes (if not previously converted) pursuant
to the terms of this Section 12 within twenty days after the date that the
Company's Common Stock shall
21
cease to be listed on the NASDAQ National Market, the NASDAQ Small Cap
Market, the NYSE or the AMEX.
I.A.12.2. Notice of Redemption. The Company shall redeem any
Convertible Notes pursuant to Section 12.1 by giving notice of such redemption
(the "Redemption Notice"), by personal delivery, overnight courier, certified
mail or by facsimile, signed by an authorized officer, to the holders of
Convertible Notes, not less than three (3) days prior to the date upon which
the redemption is to be made (the "Redemption Date"). The Redemption Notice
shall specify (i) the aggregate principal amount of the Convertible Notes to
be redeemed, (ii) the date of such redemption, and (iii) the Redemption Price,
if applicable.
I.A.12.3. Partial Redemption. In the event of a partial redemption
by the Company pursuant to this Article 12, the aggregate principal amount of
each redemption of Convertible Notes pursuant to Section 12.1 hereof, shall be
allocated among the Convertible Notes at the time outstanding, in proportion,
as nearly as practicable, to the respective unpaid principal amounts of such
Convertible Notes. Any redemption required to be made hereunder which cannot
be made in full, or which can be made only in part, shall be made on such date
to the extent possible, and the balance thereof shall be made as soon as
permitted thereafter.
I.A.12.4. Surrender of Convertible Notes Upon Redemption. In the
event that any Convertible Notes shall be surrendered to the Company as
provided in this Article 12, interest shall cease to accrue upon such
Convertible Notes so surrendered.
I.A.13. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
I.A.13.1. Transferability. The holders of the Convertible Notes are
only entitled to transfer the Convertible Notes, subject to strict compliance
with all applicable laws, with the prior written consent of the Company, which
consent shall not be unreasonably withheld.
I.A.13.2. Legend. The Company may endorse on all Convertible Notes
and on all certificates evidencing Shares (issued upon conversion of the
Convertible Notes) and the Additional Shares an appropriate legend restricting
their transfer, which in the case of the Convertible Notes shall be in the
terms set out in Exhibit "B" hereto and in the case of the Shares and the
Additional Shares shall read as follows "THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, TRANSFERRED, PLEDGED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE ACT
OR AN OPINION, IF REQUESTED, OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER THE ACT"; provided, that, no such legend
shall be endorsed on any Convertible Note, Shares or Additional Shares
certificates which, when issued, are no longer subject to the restrictions of
this Article 13, and provided, further, that if an opinion of satisfactory
counsel (in-house counsel of a Purchaser shall be deemed satisfactory counsel)
which opinion shall be reasonably satisfactory to counsel for the
22
Company concludes that the legend is no longer necessary, the Company will
deliver upon transfer or exchange Convertible Notes or otherwise in connection
with this Agreement, stock certificates without such legends.
I.A.13.3. Covenant to Register. The Company shall use its best
efforts to promptly file a registration statement ("Registration Statement")
within sixty (60) days of the Closing Date, with the Commission to register
the Registrable Securities (as defined in Section 24 hereof) for an offering
to be made on a continuous or delayed basis pursuant to Rule 415 under the
Securities Act, if available to the Company, covering all of the Registrable
Securities. Such registration statement shall be on Form S-1 or Form S-3 under
the Securities Act, if such Forms are then available for use by the Company,
or another appropriate form that is available to the Company permitting
registration of such Registrable Securities for resale by the holders of
Convertible Notes, Shares or Additional Shares ("Holders") in the manner or
manners reasonably designated by them (including, without limitation, one or
more underwritten offerings). The Registration Statement shall state, to the
extent permitted by Rule 416 under the Securities Act, that it also covers
such indeterminate number of shares of Common Stock as may be required to
effect conversion of the Convertible Note to prevent dilution resulting from
stock splits, stock dividends or similar events. Except for the parties
described on Schedule 4.10 hereto, the Company shall not permit any securities
other than the Registrable Securities issuable in connection with the
transactions contemplated by this Agreement to be included in the Registration
Statement. The Company shall use its best efforts to cause the Registration
Statement to be declared effective by the Commission as soon as practicable
after the filing of the Registration Statement relating to such Shares. The
Holder shall cooperate with the Company to provide all such necessary
information as shall be required by the Company to file the Registration
Statement. The Company shall maintain the prospectus relating to the
Registrable Securities effective for so long as the Holder desires to dispose
of the Shares, not to exceed a period of four years from the date hereof. In
the event that the Registration Statement is not declared effective by the
Commission within one hundred and eighty (180) days after the Closing Date,
then the Convertible Notes shall be redeemed by the Company in accordance with
the terms and conditions set forth in Article Twelve.
I.A.13.4. Terms and Conditions of Registration. Except as otherwise
provided herein, in connection with any Registration Statement filed pursuant
to Sections 13.3 herein, the following provisions shall apply:
(i) All expenses in connection with the preparation and filing of a
Registration Statement filed pursuant to Sections 13.3 shall be borne solely
by the Company, except for any transfer taxes payable with respect to the
disposition of such Registrable Securities.
(ii) The Company shall use its reasonable efforts to cause all of
the Registrable Securities covered by such Registration Statement to be listed
on NASDAQ or on such other securities exchange as such shares may then be
listed, on which similar shares are listed for trading, if the listing of such
registered shares is permitted by such exchange.
23
(iii) Following the effective date of such Registration Statement,
the Company shall, upon the request of the Holders, forthwith supply such
number of prospectuses (including exhibits thereto and preliminary
prospectuses and amendments and supplements thereto) meeting the requirements
of the Securities Act and such other documents as are referred to in the
prospectus as shall be reasonably requested by the Holders to permit the
Holders to make a public distribution of their Shares.
(iv) The Company shall use its reasonable efforts to register the
Registrable Securities covered by any such registration statements filed
pursuant to Section 13.3 under such securities or Blue Sky laws in addition to
those in which the Company would otherwise sell shares, as the Holders shall
request, except that neither the Company nor the Holders shall for any such
purpose be required to execute a general consent to service of process or to
qualify to do business as a foreign corporation in any jurisdiction where it
is not so qualified. The fees and expenses incurred in connection with such
registration shall be borne by the Company.
(v) The Holders shall cooperate fully with the Company and provide
the Company with all information reasonably requested by the Company for
inclusion in the registration statement or as necessary to comply with the
Securities Act.
(vi) The Company shall notify the Holders, at any time after
effectiveness when a prospectus relating thereto is required to be delivered
under the Securities Act of the happening of any event as a result of which
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of circumstances then existing (and upon receipt of
such notice and until a supplemented or amended prospectus as set forth below
is available, the Holders shall not offer or sell any securities covered by
such registration statement and shall return all copies of such prospectus to
the Company if requested to do so by it), and at the request of the Holders
prepare and furnish the Holders as promptly as practicable, 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.
13.5.Indemnification.
(i) In the event of the registration of any Registrable Securities
of the Company under the Securities Act pursuant to the provisions of Sections
13.3, the Company agrees to indemnify and hold harmless the Holders, each
underwriter, broker or dealer, if any, and their respective directors,
officers and employees, of such Shares, and each other person, if any, who
controls the holders of the Convertible Notes, the Shares or the Additional
Shares (or a permitted assignee thereof), such underwriter, broker or dealer
within the meaning of the Securities Act, from and against any and all losses,
claims, damages or liabilities (or actions in respect thereof), joint or
several, to which the Holders (and as applicable) its directors, officers or
employees, or such underwriter, broker or dealer or controlling person may
become subject under
24
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Registrable Securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus relating to such Registrable Securities, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation under the Securities Act applicable to
the Company or relating to any action or inaction required by the Company in
connection with any such registration and will reimburse the Holders, each
such underwriter, broker or dealer and controlling person, and their
respective directors, officers or employees, for any legal or other expenses
reasonably incurred by the Holders or such underwriter, broker or dealer or
controlling person in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, such preliminary prospectus, such final prospectus or
such amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by the Holders and as applicable,
such Holders' directors, officers or employees, or such underwriter, broker,
dealer or controlling person for use in the preparation thereof. Such
indemnity shall remain in full effect irrespective of any investigation by any
person indemnified above.
(ii) In the event of the registration of any Registrable Securities
of the Holders under the Securities Act for sale pursuant to the provisions of
this Agreement, the Holders, jointly and severally, agree to indemnify and
hold harmless the Company, its directors, officers and employees, from and
against any losses, claims, damages or liabilities, joint or several, to which
the Company, its directors, officers or employees, may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Registrable Securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus relating to such Registrable Securities, or any amendment or
supplement thereto, or arise out of or are based upon omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which untrue
statement or alleged untrue statement or omission or alleged omission was made
therein in reliance upon and in conformity with written information furnished
to the Company by the Holders for use in the preparation thereof. Such
indemnity shall remain in full effect irrespective of any investigation by any
person indemnified above.
(iii) Promptly after receipt by a person entitled to indemnification
under this Section 13.5 (for purposes of this Section 13.5, an "Indemnified
Party") of notice of the commencement of any action or claim relating to any
registration statement filed under Sections 13.3 or as to which indemnity may
be sought hereunder, such Indemnified Party will, if a claim for
indemnification hereunder in respect thereof is to be made against any other
party hereto (for purposes of this Section 13.5, an "Indemnifying Party"),
give written notice to
25
such Indemnifying Party of the commencement of such action or claim, but the
failure to so notify the Indemnifying Party will not relieve it from any
liability which it may have to any Indemnifying Party otherwise than pursuant
to the provisions of this Section 13.5 and shall also not relieve the
Indemnifying Party of its obligations under this Section 13.5, except to the
extent that the Indemnifying Party is damaged solely as a result of the
failure to give timely notice. In case any such action is brought against an
Indemnified Party, and it notifies an Indemnifying Party of the commencement
thereof, the Indemnifying Party will be entitled (at its own expense) to
participate in and, to the extent that it may wish, jointly with any other
Indemnifying Party similarly notified, to assume the defense with counsel
satisfactory to such Indemnified Party, of such action and/or to settle such
action and, after notice from the Indemnifying Party to such Indemnified Party
of its election so to assume the defense thereof, the Indemnifying Party will
not be liable to such Indemnified Party for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof, other than the reasonable cost of investigation; provided, however,
that no Indemnifying Party and no Indemnified Party shall enter into any
settlement agreement which would impose any liability on such other party or
parties without the prior written consent of such other party or parties.
(iv) Contribution. To the extent any indemnification by an
Indemnifying Party as set forth in this Section is applicable by its terms but
is prohibited or limited by law, the Indemnifying Party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise
be liable under this Section to the fullest extent permitted by law. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the relative fault of each party, the
parties' relative knowledge of and access to information concerning the matter
with respect to which the claim was asserted, the opportunity to correct and
prevent any statement or omission and any other equitable considerations
appropriate under the circumstances; provided, that (a) no contribution shall
be made under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in this Section 13.5, (b)
no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any other person who was not guilty of such fraudulent misrepresentation and
(c) contribution by any seller of securities under the Registration Statement
shall be limited in amount to the proceeds received by such seller from the
sale of such securities.
I.A.13.6. Reports Under Exchange Act. With a view to making
available to the Purchasers the benefits of Rule 144, the Company agrees to:
(a) furnish to each Purchaser so long as such Purchaser owns
Registrable Securities, promptly upon request, (i) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company and (ii) such other information as may be necessary to
permit the Purchasers to sell such securities pursuant to Rule 144 without
registration; and
(b) if at any time the Company is not required to file such reports
with the SEC, use its best efforts to, upon the request of a Purchaser, make
publicly available other information so long as is necessary to permit
publication by brokers and dealers of quotations for
26
the Common Stock and sales of the Registrable Securities in accordance with
Rule 15c2-11 under the Exchange Act.
I.A.13.7. Survival. The indemnity and contribution agreements
contained in this Article 13 shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement or any underwriting
agreement, (ii) any investigation made by or on behalf of any Indemnified
Party or by or on behalf of the Company and (iii) the consummation of the sale
or successive resales of the Shares.
I.A.14. REPLACEMENT OF CONVERTIBLE NOTES.
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Convertible Note and, in the case of
any such loss, theft, or destruction, upon delivery of a bond of indemnity
satisfactory to the Company (provided that, in the case of any Purchaser, the
written Affidavit of Loss and undertaking of such Purchaser to indemnify the
Company shall be satisfactory to the Company) or in the case of any such
mutilation, upon surrender and cancellation of such Convertible Note, the
Company will issue a new Convertible Note of like tenor as if the lost,
stolen, destroyed or mutilated Convertible Note were then surrendered for
exchange in lieu of such lost, stolen, destroyed or mutilated Convertible
Note.
I.A.15. AMENDMENT AND WAIVER.
Except as set forth in Article 5, this Agreement and the Convertible
Notes may be amended (or any provision thereof waived) with the consent of the
Company and the Purchasers holding in excess of fifty percent (50%) in
aggregate principal amount of the Convertible Notes then outstanding. The
Company and each holder of a Convertible Note then or thereafter outstanding
shall be bound by any amendment or waiver effected in accordance with the
provisions of this Article, whether or not (y) any such holder consented to
such amendment or waiver or (z) such Convertible Note shall have been marked
to indicate such modification, but any Convertible Note issued thereafter
shall bear a notation as to any such modification. Promptly after obtaining
the written consent of the holders herein provided, the Company shall transmit
a copy of such modification to all of the holders of the Convertible Notes
then outstanding.
I.A.16. HOME OFFICE PAYMENT.
The Company will make payments of principal and any other cash
payments required pursuant to the terms of this Agreement by check payable to
the order of the holder of any such Convertible Notes duly mailed or delivered
to such holder at the address of such holder specified in Exhibit "A", or at
such other address as such holder may designate in writing, or , if requested
by any holder of the Convertible Notes, by wire transfer to its (or its
nominee's) account at any bank or trust company in the United States of
America, notwithstanding any contrary provisions herein or in any Convertible
Note with respect to the place of payment. All such payments shall be made in
immediately available funds. The Purchasers agree that, before any such
Convertible Note is assigned or transferred, the Purchasers will make or cause
to be made a notation thereon of principal payments previously made thereon
and of the date to which interest
27
thereon has been paid and will notify the Company of the name and address of
the transferee of such Convertible Note if such name and address are known to
such Purchaser.
I.A.17. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered by
courier or mailed express mail or transmitted by telex, facsimile, or other
means of electronic transmission:
(a) if to a Purchaser or its nominee, at such Purchaser's address as
set forth in Exhibit "A" hereto, or at such other address as may have been
furnished to the Company by a Purchaser in writing; or
(b) if to any other holder of a Convertible Note, at such address as
the payee thereof shall have designated to the Company by a written notice
stating that such holder has acquired such Convertible Note and designating
such an address, or at such other address as may have been furnished to the
Company by such holder in writing; or
(c) if to the Company, at 000 Xxxxxxxx Xxxxx Xxxxxx, Xxxxx X-000,
Xxx, Xxx Xxxx 00000 (fax number (000) 000-0000; Attention: President), or
at such other address as may have been furnished to the Purchasers or
other holders of Convertible Notes in writing by the Company, with a copy
to Xxxxxx X. Xxxxxxxx, Esq., Xxxx Xxxxxxx, P.C., 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (fax number (000) 000-0000).
I.A.18. ENTIRE AGREEMENT.
This Agreement and the Convertible Notes embody the entire agreement
and understanding between the Purchasers and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
I.A.19. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Agreement contained by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed
or not.
I.A.20. HEADINGS.
The headings of the articles and sections of this Agreement have
been inserted for convenience of reference only and shall in no way restrict
or otherwise modify any of the terms or provisions hereof.
28
I.A.21. GOVERNING LAW, JURY TRIAL.
This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of New York, without giving effect to
its conflict of laws rules. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, or that such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or
proceeding by receiving a copy thereof sent to such party at the address in
effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL
BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
I.A.22. COUNTERPARTS.
This Agreement may be signed in any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument. Facsimile signatures shall be deemed acceptable and binding.
I.A.23. SEVERABILITY.
Any provision hereof or of the Convertible Notes which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
I.A.24. DEFINITIONS.
The following terms, when used in this Agreement, shall have the
meanings described below. A copy of the definitions section to the Credit
Facility is attached hereto as Exhibit "E".
"Additional Shares" shall mean that number of registered shares of
Common stock that is derived at by multiplying (i) 360,000 by (ii) the
principal amount of the Convertible Note then being repaid or redeemed, as the
case may be, divided by the Original Principal Amount.
"Affiliate" shall mean any person that controls, is controlled by or
is under common control with the person in question. For purposes hereof,
"control" and the
29
correlative definitions "controlled by" and "under common control with" shall
mean the power and ability to direct the management and affairs of the person
in question, whether through the ownership of voting securities, by contract
or otherwise.
"Agreement" has the meaning set forth in Article 1.
"Arbitrage Transaction" shall mean any puts, calls, future
contracts, short sales, hedging and other related arbitrage transactions with
respect to the Company's equity securities.
"Associate" shall include:
(a) any corporation or organization (other than the Company or any
of its majority-owned subsidiaries) of which the Purchaser is an executive
officer or partner, or of which the Purchaser is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity securities;
(b) any trust or other estate in which the Purchaser has a
substantial beneficial interest or as to which the Purchaser serves serve as
trustee or in a similar fiduciary capacity;
(c) any relative or spouse of the Purchaser, or any relative of such
spouse, who has the same home as the Purchaser or who is a director or officer
of the Company or any of its subsidiaries; and
(d) any of the Purchaser's agents or representatives.
"beneficial owner" has the meaning set forth in Rule 13d-3
promulgated by the Commission under the Exchange Act.
"Board" or "Board of Directors" means, with respect to any person
which is a corporation, a joint stock company or a business trust, the board
of directors or other group, however designated, which is charged with legal
responsibility for the management of such person, or any committee of such
board of directors or group, however designated, which is authorized to
exercise the power of such board or group in respect of the matter in
question.
"Bolle Australia Acquisition" shall have the meaning ascribed to
such term in the Credit Facility.
"Bolle UK Acquisition" shall have the meaning ascribed to such term
in the Credit Facility.
"Business Day" means any day other than a Saturday, Sunday or other
day on which banks in the State of New York are legally authorized to close.
"Capital Lease" shall mean a lease of property which is capitalized
on the financial statements of the lessee in accordance with generally
accepted accounting principles, as well as, conditional sales or similar
retention agreements.
30
"Closing" has the meaning set forth in Article 3.
"Closing Date" has the meaning set forth in Article 3.
"Closing Price" means (i) the last reported sale price as reported
on the NASDAQ National Market System or the successor principal National
securities exchange on which the Common Stock is listed or admitted to
trading, or (ii) if the Common Stock is not listed or admitted to trading on
any national securities exchange or on the NASDAQ National Market System, the
average of the highest reported bid and lowest reported asked price as
furnished by NASDAQ, the National Quotation Bureau, Inc., or comparable system
or organization, or (iii) in the absence of any of the foregoing, the fair
market value as determined in good faith by the Board of Directors of the
Company (which determination shall be conclusive).
"Commission" means the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering the
Securities Act or the Exchange Act.
"Company" means Bolle Inc., a Delaware corporation, and its
successors and assigns.
"Consolidated EBITDA" shall have the meaning ascribed to such term
in the Credit Facility.
"Consolidated Funded Indebtedness" shall have the meaning ascribed
to such term in the Credit Facility.
"Consolidated Leverage Ratio" shall have the meaning ascribed to
such term in the Credit Facility.
"Conversion Date" has the meaning set forth in Section 11.2.
"Conversion Penalty" shall mean the amount of actual damages caused
directly by the Company's failure to deliver certificates representing Shares
on or prior to the Deadline Day.
"Conversion Price" means $5.25 per share, as the same may be
adjusted from time to time in accordance with the terms of this Agreement.
"Convertible Notes" has the meaning set forth in Article 1.
"Credit Facility" has the meaning set forth in Section 5.7.
"Deadline Day" has the meaning set forth in Section 11.2.
"EBITDA" shall have the meaning ascribed to such term in the Credit
Facility.
31
"Event of Default" has the meaning set forth in Article 10.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"generally accepted accounting principles" or "GAAP" means, unless
otherwise stated, generally accepted accounting principles in effect from time
to time.
"Holders" has the meaning set forth in Section 13.3.
"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) all Capital Leases and other
leases of the Company and its Subsidiaries 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, (v) all amounts from time to time owing
to trade creditors whether arising in the ordinary course of such person's
business, or otherwise, (vi) obligations of the Company for the reimbursement
of any obligor on any Letter of Credit, banker's acceptance or similar credit
transaction, and (vii) any deferrals, renewals and extensions of any
indebtedness described in clauses (i) through (vi) above.
"Indebtedness for Money Borrowed" shall have the meaning ascribed to
such term in the Credit Facility.
"Maturity Date" shall mean May 29, 2002
"Merger" shall mean a merger or consolidation of the Company with or
into another corporation or a sale of all or substantially all of the assets
of the Company, but shall not be deemed to include such a transaction
involving a Subsidiary of the Company.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Original Principal Amount" shall mean the aggregate principal
amount of the Convertible Notes issued by the Company on the Closing Date.
"Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, an
unincorporated association, a joint venture, a trust or other entity or a
governmental authority.
"Purchaser" has the meaning set forth in Article 1.
32
"Redemption Price" means 108% of the principal amount of the
Convertible Notes then being redeemed or repaid.
"Registrable Securities" shall mean the Shares and the Additional
Shares.
"Registration Statement" has the meaning set forth in Article 13.
"SEC Reports" shall have the meaning set forth in Section 4.3.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" has the meaning set forth in Section 5.7.
"Share" or "Shares" has the meaning set forth in Article 1.
"Trading Day" means (a) a day on which the Common Stock is traded on
the NASDAQ National Market or other stock exchange or market on which the
Common Stock is then listed, or (b) if the Common Stock is not listed on the
NASDAQ National Market or any stock exchange or market, a day on which the
Common Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as
set forth in (a), (b) and (c) hereof, then Trading Day shall mean any day
except Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York are authorized or required
by law or other government action to close.
I.A.25. EXPENSES.
Each party to this Agreement shall bear all of its own expenses in
connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby, including without limitation all fees
and expenses of its agents, representatives, counsel and accountants;
provided, however, that the Company shall be responsible the reasonable fees
and expenses of Xxxxxxx X.X. Xxxx, counsel to the Purchasers in an amount up
to $20,000.
33
If the foregoing correctly sets forth our understanding, please sign
below on the enclosed counterpart of this Agreement and return the same to the
undersigned.
Very truly yours,
BOLLE INC.
By: /s/ Ian X. X. Xxxxxx
------------------------------------
Name: Ian X. X. Xxxxxx
Title: Executive Vice President and
Chief Financial Officer
The foregoing Agreement is hereby accepted and agreed to as of the date
first above written:
PURCHASER:
By: /s/ Xxxxxx X. Och
------------------------------------
Name: Xxxxxx X. Och
Title: Managing Member
OZ Management, L.L.C.
as Investment Manager of
OZ Master Fund, Ltd.
34
EXHIBIT "A"
PURCHASERS
PRINCIPAL AMOUNT TO BE
PERCENTAGE NAME AND ADDRESS OF PURCHASER PURCHASED OF
OFFERING - ----------------------------- ---------
-----------
(a) Name: $7,000,000 100%
OZ Master Fund, Ltd.
(b) Address for communications:
c/o OZ Management, L.L.C.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxx, CFO
Facsimile: 000-000-0000
(c) Address for payment of principal and interest by wire
transfer of immediately available funds:
