EXCHANGE AGREEMENT
EXCHANGE AGREEMENT (the "Agreement"), dated as of November 24, 1998,
by and among AMBI Inc., a New York corporation, with headquarters located at 0
Xxxxxxxxxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000 (the "Company"), and the
investors listed on the Schedule of Investors attached hereto (individually,
an "Investor" and collectively, the "Investors").
WHEREAS:
A. Each of the Investors owns the number of shares of Series D
Preferred Stock, par value $.01 per share (the "Series D Preferred Stock") of
the Company as is set forth on the Schedule of Investors attached hereto.
B. This Agreement is being entered intow by the Company and the
Investors pursuant to that certain letter agreement, dated November 11, 1998
(the "Letter Agreement"), between the Company and the Investors, which Letter
Agreement described the principal terms set forth in this Agreement. The
Company has agreed and each of the Investors, severally and not jointly, has
agreed that (i) each Investor will tender all outstanding shares of Series D
Preferred Stock (the "Preferred Shares") to the Company and the Company will
(a) exchange the Preferred Shares for shares of a newly created series of
preferred stock designated Series F Convertible Preferred Stock (the "Series F
Preferred Stock"), which shall be convertible into shares of the Company's
Common Stock, par value $.005 per share (the "Common Stock") (as converted,
the "Conversion Shares"), subject to reduction pursuant to Section 9(q) in
accordance with the terms of the Company's Amended Certificate of
Incorporation (the "Amended Certificate") substantially in the form attached
hereto as Exhibit A, and (b) convert the dividends accrued on the Preferred
Shares through the Closing Date (as defined below) into that number of shares
of Common Stock, which is equal to the quotient determined by dividing such
accrued amount by $.7606 (the "Restructuring Shares") and (ii) the Company
will reset the exercise price for the warrants of the Company (the
"Warrants"), issued pursuant to the terms of the Securities Purchase Agreement
dated May 8, 1997 by and between the Company and the purchasers listed on the
execution pages thereof, to $1.25. The Series F Preferred Stock and the
Restructuring Shares shall be allocated among the Investors pro rata based on
the number of shares of Series D Preferred Stock set forth on the Schedule of
Investors attached hereto (the "Pro Rata Allocation"). The rights and
preferences of the Series F Preferred Stock, including the terms on which the
Series F Preferred Stock may be converted into Common Stock, are set forth in
the Amended Certificate, which shall have been executed, acknowledged, filed,
recorded and become effective in accordance with the Business Corporation Law
of the State of New York (the "NYBCL").
C. The solicitation of this Agreement and, if accepted by the
Company, the issuance of Series F Preferred Stock is being made in reliance
upon the provisions of Section 3(a)(9) of the Securities Act of 1933, as
amended (the "1933 Act"). The shares of
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Series F Preferred Stock and the Conversion Shares issuable upon conversion
thereof are sometimes collectively referred to in this Agreement as the
"Securities."
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form attached hereto as Exhibit B (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Investors hereby agree as follows:
1. AGREEMENT; EXCHANGE, CONVERSION AND AMENDMENT OF
WARRANTS.
1.1 Agreement. Each Investor, severally and not jointly,
hereby agrees that at the Closing (as defined below) it will (i) exchange
Preferred Shares for shares of Series F Preferred Stock and (ii) convert the
accrued dividends on the Preferred Shares into the Restructuring Shares, each
in the amounts set forth in the Schedule of Investors and on the terms and
conditions set forth herein.
1.2 Amendment. The Company and each of the Investors hereby
agree that the exercise price of the Warrants is hereby amended by changing
the number $2.72244 (which is set forth in the preamble to the Warrants) to
$1.25.
1.3 Closing Date. The closing of the transactions
contemplated hereby (the "Closing") shall occur at the offices of Xxxxxx
Xxxxxx & Xxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx
00000-0000, on the third business day after receipt by each of the Investors
of written notice from the Company (the "Closing Notice"), which Closing
Notice confirms that the Registration Statement (as defined in the
Registration Rights Agreement) has been declared effective by the Securities
and Exchange Commission (the "SEC"), or such other date and place as the
Company and the Investors shall agree (the "Closing Date") and shall occur
only upon the valid issuance and receipt of the Closing Notice and the
satisfaction of all of the conditions to the Company's and the Investors'
obligations under Sections 6 and 7, respectively, or the waiver thereof by the
appropriate party. The Company shall give the Closing Notice no sooner than
the first business day after the SEC declares the Registration Statement
effective and no later than the third business day after the SEC declares the
Registration Statement effective.
1.4 Exchange and Conversion Consideration. On the Closing
Date, the Company shall issue to each Investor its Pro Rata Allocation of (i)
the Series F Preferred Stock and (ii) the Restructuring Shares, each in the
denominations as such Investor shall request and in the name of such Investor
or its designee.
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2. INVESTOR'S REPRESENTATIONS AND WARRANTIES.
Each Investor represents and warrants with respect to only
itself that:
a. Holding Period. Such Investor (i) purchased the Preferred
Shares directly from the Company and (ii) has held the Preferred Shares for
more than one year, which period has been calculated as described in Rule
144(d) under the 0000 Xxx.
b. Not an Affiliate. Such Investor is not an "affiliate" (as
that term is defined in Rule 405 of the 0000 Xxx) of the Company.
c. Reliance on Exemptions. Such Investor understands that
the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and
state securities laws and that the Company is relying in part upon the truth
and accuracy of, and such Investor's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Investor
set forth herein in order to determine the availability of such exemptions and
the eligibility of such Investor to acquire such securities.
d. Information. Such Investor and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Investor. Such Investor and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigations
conducted by such Investor or its advisors, if any, or its representatives
shall modify, amend or affect such Investor's right to rely on the Company's
representations and warranties contained in Section 3 below. Such Investor
understands that its investment in the Securities involves a high degree of
risk. Such Investor has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to
its acquisition of the Securities.
e. No Governmental Review. Such Investor understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the
Securities or the fairness or suitability of the investment in the Securities
nor have such authorities passed upon or endorsed the merits of the offering
of the Securities.
f. Transfer or Resale. Such Investor understands that except
as provided in the Registration Rights Agreement: (i) the Securities have not
been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless
(A) subsequently registered thereunder, (B) such Investor shall have delivered
to the Company an opinion of counsel, in a generally acceptable form, to the
effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, or
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(C) such Investor provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144
promulgated under the 1933 Act (or a successor rule thereto) ("Rule 144");
(ii) any sale of the Securities made in reliance on Rule 144 may be made only
in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of
the SEC thereunder; and (iii) neither the Company nor any other person is
under any obligation to register such securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of any
exemption thereunder.
g. Legends. Such Investor understands that the certificates
or other instruments representing the Series F Preferred Stock and until such
time as the sale of the Conversion Shares have been registered under the 1933
Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Conversion Shares, except as set forth below,
shall bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it
is stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for sale under the 1933 Act, (ii) in connection with
a sale transaction, such holder provides the Company with an opinion of
counsel, in a generally acceptable form, to the effect that a public sale,
assignment or transfer of the Securities may be made without registration
under the 1933 Act, or (iii) such holder provides the Company with reasonable
assurances that the Securities can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a particular date
that can then be immediately sold.
h. Validity; Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Investor and is a
valid and binding
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agreement of such Investor enforceable against such Investor in accordance
with its terms, subject as to enforceability to general principles of equity
and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
i. Residency. Such Investor is a resident of that country
specified in its address on the Schedule of Investors.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Investors
that:
a. Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated,
and have the requisite corporate power and authorization to own their
properties and to carry on their business as now being conducted. Each of the
Company and its Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its ownership
of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results or operations,
financial condition or prospects of the Company and its Subsidiaries, if any,
taken as a whole, or on the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection herewith, or on
the authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined below). The Company has no Subsidiaries
except as set forth on Schedule 3(a), and all such Subsidiaries are 100%
wholly-owned by the Company.
b. Authorization; Enforcement; Validity. (i) The Company has
the requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement, the Irrevocable Transfer Agent
Instructions (as defined in Section 5), and each of the other agreements
entered into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the "Transaction Documents"),
and to issue the Securities in accordance with the terms hereof and thereof,
(ii) the execution and delivery of the Transaction Documents and the Amended
Certificate by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation the issuance of
the Series F Preferred Stock and the reservation for issuance and the issuance
of the Conversion Shares issuable upon conversion thereof, have been duly
authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders, (iii) the Transaction Documents have been duly executed and
delivered by the
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Company, (iv) the Transaction Documents constitute the valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally,
the enforcement of creditors' rights and remedies, and (v) prior to the
Closing Date, the Amended Certificate has been filed with the Secretary of
State of the State of New York and will be in full force and effect,
enforceable against the Company in accordance with its terms.
c. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 65,000,000 shares of Common
Stock, of which as of the date hereof, 26,549,062 shares are issued and
outstanding, 3,000,000 shares are reserved for issuance pursuant to the
Company's stock option and purchase plans and 2,500,000 shares are issuable
and reserved for issuance pursuant to securities (other than the Preferred
Shares and the shares of Series F Preferred Stock) exercisable or exchangeable
for, or convertible into, shares of Common Stock; (ii) 1,000 shares of Series
C Preferred Stock, of which as of the date hereof, 222 shares are issued and
outstanding; (iii) 100,000 shares of Series D Preferred Stock, of which as of
the date hereof; 5,750 shares are issued and outstanding; (iv) 1,500 shares of
Series E Preferred Stock, none of which are issued and outstanding as of the
date hereof; and (v) 575 shares of Series F Preferred Stock, none of which are
issued and outstanding as of the date hereof. All of such outstanding shares
have been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(c), (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company, (ii)
there are no outstanding debt securities, (iii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company or any of its Subsidiaries, or
contracts, commitments, understandings or arrangements by which the Company or
any of its Subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its Subsidiaries or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares
of capital stock of the Company or any of its Subsidiaries, (iv) there are no
agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933
Act (except the Registration Rights Agreement), (v) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement, and (vii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or
any similar plan or agreement. The Company has furnished to the Investor true
and correct copies of the Company's Certificate of Incorporation, as amended
and as
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in effect on the date hereof (the "Certificate of Incorporation"), and the
Company's By-laws, as amended and as in effect on the date hereof (the
"By-laws"), and the terms of all securities convertible into or exercisable
for Common Stock and the material rights of the holders thereof in respect
thereto.
d. Issuance of Securities. The shares of Series F Preferred
Stock are duly authorized and, upon issuance in accordance with the terms
hereof, shall be (i) validly issued, fully paid and non-assessable, (ii) free
from all taxes, liens and charges with respect to the issue thereof and (iii)
entitled to the rights and preferences set forth in the Amended Certificate.
At least 690,000 shares of Common Stock (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(e) below) have been duly authorized
and reserved for issuance upon conversion of the Series F Preferred Stock.
Upon conversion in accordance with the Amended Certificate, the Conversion
Shares will be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Stock. The
issuance by the Company of the Securities is exempt from registration under
the 1933 Act.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the
Company, the performance by the Company of its obligations under the Amended
Certificate and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the
reservation for issuance and issuance of the Conversion Shares) will not (i)
result in a violation of the Amended Certificate, including, but not limited
to, the rights of any outstanding series of preferred stock of the Company or
the By-laws or (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the Principal Market (as
defined below)) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected. Except as disclosed in Schedule 3(e), neither the Company nor its
Subsidiaries is in violation of any term of or in default under its Amended
Certificate, including, but not limited to, the rights of any outstanding
series of preferred stock of the Company or By-laws or their organizational
charter or by-laws, respectively. Except as disclosed in Schedule 3(e),
neither the Company or any of its Subsidiaries is in violation or any term of
or in default under any contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries, except for such
violation or default which, individually or in the aggregate, would not have a
Material Adverse Effect. The business of the Company and its Subsidiaries is
not being conducted, and shall not be conducted, in violation of any law,
ordinance, or regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required
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under the 1933 Act, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or governmental agency or any regulatory or self-regulatory agency in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents or to perform its obligations under
the Amended Certificate, in each case in accordance with the terms hereof or
thereof. Except as disclosed in Schedule 3(e), all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior
to the date hereof. The Company and its Subsidiaries are unaware of any facts
or circumstances which might give rise to any of the foregoing. The Company is
not in violation of the listing requirements of the Principal Market (as
defined below), including, without limitation, the requirements set forth in
Rule 4460 of the Principal Market.
f. SEC Documents; Financial Statements. Since June 30, 1997,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934
Act") (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Investors or their respective
representatives true and complete list of the SEC Documents, including the
filing dates thereof. As of their respective dates, or as subsequently
amended, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in
the SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of its operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments). No
other information provided by or on behalf of the Company to the Investors
which is not included in the SEC Documents, including, without limitation,
information referred to in Section 2(d) of this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading. Neither the Company nor any of
its
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Subsidiaries or any of their officers, directors, employees or agents have
provided the Investors with any material, nonpublic information.
g. Absence of Certain Changes. Except as disclosed in
Schedule 3(g), since June 30, 1998 there has been no material adverse change
and no material adverse development in the business, properties, operations,
financial condition, results of operations or prospects of the Company or its
Subsidiaries. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law
nor does the Company or any of its Subsidiaries have any knowledge or reason
to believe that its creditors intend to initiate involuntary bankruptcy
proceedings. Except as disclosed in Schedule 3(g), since June 30, 1998, the
Company has not declared or paid any dividends, sold any assets in excess of
$500,000 outside of the ordinary course of business or had capital
expenditures in excess of $500,000.
h. Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company's Subsidiaries
or any of the Company's or the Company's Subsidiaries' officers or directors
in their capacities as such, except as set forth in Schedule 3(h).
i. Acknowledgment Regarding Investors' Purchase of
Securities. The Company acknowledges and agrees that each of the Investors is
acting solely in the capacity of arm's length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby and thereby.
The Company further acknowledges that each Investor is not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to the Transaction Documents and the transactions contemplated
hereby and thereby and any advice given by any of the Investors or any of
their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to such Investor's purchase of the Securities. The Company further
represents to each Investor that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by
the Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred
or exists with respect to the Company or its Subsidiaries or their respective
business, properties, prospects, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws on
a registration statement filed with the SEC relating to an issuance and sale
by the Company of its Common Stock and which has not been publicly announced
(each a "Disclosable Event") and no Disclosable Event is contemplated to
occur, except where such Disclosable Event, individually, or in the aggregate
is not likely to have a Material Adverse Effect.
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k. No General Solicitation. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would require registration of
any of the Securities under the 1933 Act or cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes
of the 1933 Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of any exchange or
automated quotation system on which any of the securities of the Company are
listed or designated, nor will the Company or any of its Subsidiaries take any
action or steps that would require registration of any of the Securities under
the 1933 Act or cause the offering of the Securities to be integrated with
other offerings.
m. Intentionally Omitted.
n. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of
the Company or any of its Subsidiaries, is any such dispute threatened. None
of the Company's or its Subsidiaries' employees is a member of a union,
neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe that their
relations with their employees are good. No executive officer (as defined in
Rule 501(f) of the 0000 Xxx) has notified the Company that such officer
intends to leave the Company or otherwise terminate such officer's employment
with the Company. No executive officer, to the best knowledge of the Company
and its Subsidiaries, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the foregoing
matters.
o. Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx registrations, service names,
patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct
their respective businesses as now conducted. Except as set forth on Schedule
3(o), none of the Company's trademarks, trade names, service marks, service
xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets or
other intellectual property rights have expired or terminated, or are expected
to expire or terminate within two years from the date of this Agreement. The
Company and its Subsidiaries do not have any knowledge of any
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infringement by the Company or its Subsidiaries of trademark, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service
names, service marks, service xxxx registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, except as set forth on
Schedule 3(o), there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the Company
or its Subsidiaries regarding trademark, trade name, patents, patent rights,
copyrights, inventions, license, service names, service marks, service xxxx
registrations, trade secret or other infringement; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise
to any of the foregoing. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties.
p. Environmental Laws. The Company and its Subsidiaries (i)
are in compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance with
all terms and conditions of any such permit, license or approval except in
each of the three foregoing cases, the failure to so comply would have,
individually or in the aggregate, a Material Adverse Effect.
q. Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(q) or such
as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company and
any of its Subsidiaries. Any real property and facilities held under lease by
the Company and any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property
and buildings by the Company and its Subsidiaries.
r. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company
nor any such Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or operations of
the Company and its Subsidiaries, taken as a whole.
-11-
s. Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification
of any such certificate, authorization or permit.
t. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
u. No Materially Adverse Contracts, Etc. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other
legal restriction, or any judgment, decree, order, rule or regulation which in
the reasonable judgment of the Company's officers has or is currently expected
in the future to have a Material Adverse Effect. Neither the Company nor any
of its Subsidiaries is a party to any contract or agreement which in the
reasonable judgment of the Company's officers has or is currently expected to
have a Material Adverse Effect.
v. Tax Status. The Company and each of its Subsidiaries has
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless
and only to the extent that the Company and each of its Subsidiaries has set
aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provision reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.
w. Transactions With Affiliates. Except as set forth on
Schedule 3(w) and in the SEC Documents filed at least ten days prior to the
date hereof and other than the grant of stock options disclosed on Schedule
3(c), none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the
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Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
x. Application of Takeover Protections. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation or the laws of
the state of its incorporation which is or could become applicable to the
Investors as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Securities and
the Investor's ownership of the Securities.
y. Rights Agreement. The Company has not adopted a
shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change in control of the Company.
z. Foreign Corrupt Practices. Neither the Company, nor any
of its Subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any of its Subsidiaries has, in the
course of its actions for, or on behalf of, the Company, used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.
aa. No Other Agreements. The Company has not, directly or
indirectly, made any agreements with any Investors relating to the terms or
conditions of the transactions contemplated by the Transaction Documents
except as set forth in the Transaction Documents.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts
timely to satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
b. Blue Sky. The Company shall, on or before the Closing
Date, take such action as the Company shall reasonably determine is necessary
in order to obtain an exemption for or to qualify the Securities for sale to
the Investors at the Closing pursuant to this Agreement under applicable
securities or "Blue Sky" laws of the states of the United States, and shall
provide evidence of any such action so taken to the Investors on or prior to
the Closing Date. The Company shall make all filings and reports relating to
the offer
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and sale of the Securities required under applicable securities or "Blue Sky"
laws of the states of the United States following the Closing Date.
c. Reporting Status. Until the earlier of (i) the date which
is one year after the date as of which the Investors (as that term is defined
in the Registration Rights Agreement) may sell all of the Conversion Shares
without restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto), or (ii) the date on which (A) the Investors shall have
sold all the Conversion Shares and (B) none of the shares of Series F
Preferred Stock is outstanding (the "Registration Period"), the Company shall
file all reports required to be filed with the SEC pursuant to the 1934 Act,
and the Company shall not terminate its status as an issuer required to file
reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would otherwise permit such termination.
d. Financial Information. The Company agrees to send the
following to each Investor (as that term is defined in the Registration Rights
Agreement) during the Registration Period: (i) within two (2) days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) including amendments to any
of the foregoing filed pursuant to the 1933 Act, provided that if any such
report or registration statement is not filed with the SEC through XXXXX then
the Company shall deliver a copy of such report or registration statement to
each Investor by facsimile on the same day it is filed with the SEC; (ii) on
the same day as the release thereof, facsimile copies of all press releases
issued by the Company or any of its Subsidiaries; and (iii) copies of any
notices and other information made available or given to the stockholders of
the Company generally, contemporaneously with the making available or giving
thereof to the stockholders.
e. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 100% of the number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares.
f. Additional Financing; Right of First Refusal. Subject to
the exceptions described below, the Company and its Subsidiaries shall not
negotiate or contract with any party for any equity financing (including any
debt financing with an equity component) or issue any equity securities of the
Company or any Subsidiary or securities convertible or exchangeable into or
for equity securities of the Company or any Subsidiary (including debt
securities with an equity component) in any form ("Future Offerings") during
the period beginning on the date hereof and ending on, and including, the
first anniversary of the date hereof, unless it shall have first delivered to
each Investor or a designee appointed by such Investor written notice (the
"Future Offering Notice") describing the proposed Future Offering, including
the terms and conditions thereof, and providing each Investor an option to
purchase up to its Aggregate Percentage (as defined below) of the securities
to be issued in such Future Offering, as of the date of delivery of the Future
Offering Notice, in the
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Future Offering (the limitations referred to in this and the preceding
sentence are collectively referred to as the "Capital Raising Limitations").
For purposes of this Section 4(f), "Aggregate Percentage" at any time with
respect to any Investor shall mean the percentage obtained by dividing (i) the
aggregate number of the Preferred Shares owned by such Investor as set forth
on the Schedule of Investors by (ii) the aggregate number of the Preferred
Shares owned by all the Investors as set forth on the Schedule of Investors.
An Investor can exercise its option to participate in a Future Offering by
delivering written notice thereof to participate to the Company within five
(5) business days after receipt of a Future Offering Notice, which notice
shall state the quantity of securities being offered in the Future Offering
that such Investor will purchase, up to its Aggregate Percentage, and that
number of securities it is willing to purchase in excess of its Aggregate
Percentage. In the event that one or more Investors fail to elect to purchase
up to each such Investor's Aggregate Percentage, then each Investor which has
indicated that it is willing to purchase a number of securities in such Future
Offering in excess of its Aggregate Percentage shall be entitled to purchase
its pro rata portion (determined in the same manner as described in the
preceding sentence) of the securities in the Future Offering which one or more
of the Investors have not elected to purchase. In the event the Investors fail
to elect to fully participate in the Future Offering within the periods
described in this Section 4(f), the Company shall have 60 days thereafter to
sell the securities of the Future Offering that the Investors did not elect to
purchase, upon terms and conditions, no more favorable to the purchasers
thereof than specified in the Future Offering Notice. In the event the Company
has not sold such securities of the Future Offering within such 60 day period,
the Company shall not thereafter issue or sell such securities without first
offering such securities to the Investors in the manner provided in this
Section 4(f). The Capital Raising Limitations shall not apply to (i) a loan
from a commercial bank which does not have any equity feature (other than
warrants to acquire that number of shares of Common Stock at an aggregate
exercise price which is less than 10% of the amount of such loan), (ii) any
transaction involving the Company's issuances of securities (A) as
consideration in a merger or consolidation, (B) in connection with any
strategic partnership or joint venture (the primary purpose of which is not to
raise equity capital), or (C) as consideration for the acquisition of a
business, product, license or other assets by the Company, (iii) the issuance
of Common Stock in a firm commitment, underwritten public offering, (iv) the
issuance of securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of the date hereof or
hereafter issued pursuant to clause (v) below, (v) the grant of additional
options or warrants, or the issuance of additional securities, (A) under any
Company stock option plan, restricted stock plan or stock purchase plan for
the benefit of the Company's employees or directors or (B) in connection with
services rendered to the Company by accountants, attorneys or consultants. The
Investors shall not be required to participate or exercise their right of
first refusal with respect to a particular Future Offering in order to
exercise their right of first refusal with respect to later Future Offerings.
g. Listing. The Company shall promptly secure the listing of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national
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securities exchange and automated quotation system, if any, upon which shares
of Common Stock are then listed (subject to official notice of issuance) and
shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all Registrable Securities from time to time issuable
under the terms of the Transaction Documents and the Amended Certificate. The
Company shall maintain the Common Stock's authorization for quotation on the
Nasdaq National Market, The New York Stock Exchange, Inc. or The American
Stock Exchange, Inc. (collectively, the "Principal Market"). Neither the
Company nor any of its Subsidiaries shall take any action which would be
reasonably expected to result in the delisting or suspension of the Common
Stock on the Principal Market. The Company shall promptly, and in no event
later than the following business day, provide to each Investor copies of any
notices it receives from the Principal Market regarding the continued
eligibility of the Common Stock for listing on such automated quotation system
or securities exchange. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(g).
h. Expenses. Subject to Section 9(l) below, at the Closing,
the Company shall pay a nonaccountable expense allowance of $5,000 to the
Investors or their designee(s).
i. Filing of Form 8-K. On or before the first (1st) business
day following the Closing Date, the Company shall file a Form 8-K with the SEC
describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act.
j. Transactions With Affiliates. So long as (i) any shares
of Series F Preferred Stock are outstanding or (ii) any Investor owns
Conversion Shares with a market value equal to or greater than $500,000, the
Company shall not, and shall cause each of its Subsidiaries not to, enter
into, amend, modify or supplement, or permit any Subsidiary to enter into,
amend, modify or supplement, any agreement, transaction, commitment or
arrangement with any of its or any Subsidiary's officers, directors, persons
who were officers or directors at any time during the previous two years,
stockholders who beneficially own 5% or more of the Common Stock, or
affiliates or with any individual related by blood, marriage or adoption to
any such individual or with any entity in which any such entity or individual
owns a 5% or more beneficial interest (each a "Related Party"), except for (a)
customary employment arrangements and benefit programs on reasonable terms,
(b) any agreement, transaction, commitment or arrangement on an arms-length
basis on terms no less favorable than terms which would have been obtainable
from a person other than such Related Party, or (c) any agreement,
transaction, commitment or arrangement which is approved by a majority of the
disinterested directors of the Company. For purposes hereof, any director who
is also an officer of the Company or any Subsidiary of the Company shall not
be a disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "Affiliate" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or
indirectly, (i) has a 5% or more equity interest in that person or entity,
(ii) has 5% or more common ownership with that person or entity, (iii)
controls that person or entity, or (iv) shares common control with that person
or entity. "Control" or "controls" for purposes
-16-
hereof means that a person or entity has the power, direct or indirect, to
conduct or govern the policies of another person or entity.
k. Capital and Surplus; Special Reserves. The Company agrees
that the stated capital of the Company (as such term is used in Section 506 of
the NYBCL) in respect of the Series F Preferred Stock shall be equal to the
aggregate par value of such shares of Series F Preferred Stock. Except in
connection with the initial issuance of securities after the date hereof, the
Company shall not increase its stated capital with respect to any shares of
the Company's capital stock at anytime on or after the date of this Agreement.
The amount to be represented in the capital account for the Series F Preferred
Stock at all times for each outstanding share of Series F Preferred Stock
shall be an amount equal to the product of (i) the Liquidation Preference (as
defined in the Amended Certificate) and (ii) 125%.
l. Stockholder Approval. At a meeting held on July 15, 1997,
the Company held a special meeting of its stockholders, at which meeting the
Company's stockholders approved of the Company's issuance of all of the Common
Stock issuable upon conversion of the Series D Preferred Stock. The Company
further represents that no further stockholder approval is required, pursuant
to Nasdaq Rule 4460 or otherwise, for the issuance of all of the Securities as
described in this Agreement, including without limitation, the issuance of the
Conversion Shares upon conversion of the Series F Preferred Stock.
m. Rule 144. The Company shall not, directly or indirectly,
dispute or otherwise interfere with any claim by a holder of Series E
Preferred Stock that such holder's holding period of any Security for purposes
of Rule 144 promulgated under the 1933 Act (or a successor rule thereto)
("Rule 144") relates back (i.e., tacks) to the holding period for the
Preferred Shares. The Company acknowledges and agrees that under Rule 144 and
noaction letters issued by the SEC, such tacking is permitted.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of each Investor or its respective nominee(s), for the
Conversion Shares in such amounts as specified from time to time by each
Investor to the Company upon conversion of the Series F Preferred Stock (the
"Irrevocable Transfer Agent Instructions"). Prior to registration of the
Conversion Shares under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares,
prior to registration of the Conversion Shares under the 0000 Xxx) will be
given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as
and to the extent provided in this Agreement and the Registration Rights
Agreement. Nothing in this Section 5 shall affect in any way each
-17-
Investor's obligations and agreements set forth in Section 2(g) to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Securities. If an Investor provides the Company with an opinion of counsel, in
a generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act
or the Investor provides the Company with reasonable assurances that the
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold, the Company shall permit the transfer, and, in the case of
the Conversion Shares, promptly instruct its transfer agent to issue one or
more certificates in such name and in such denominations as specified by such
Investor and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Investors by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions
of this Section 5, that the Investors shall be entitled, in addition to all
other available remedies, to an order and/or injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO CONSUMMATE
THE RESTRUCTURING.
The obligation hereunder of the Company to consummate the
Restructuring as contemplated hereby is subject to the satisfaction, at or
before the Closing, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Investor with prior
written notice thereof:
a. Such Investor shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
b. The Amended Certificate shall have been filed with the
Secretary of State of the State of New York.
c. Such Investor shall have delivered to the Company (i)
certificates representing all shares of Series D Preferred Stock owned by such
Investor as of the date of the Closing and (ii) a Notice of Conversion for the
Restructuring Shares in accordance with the terms of the Preferred Shares.
d. The representations and warranties of such Investor shall
be true and correct in all material respects as of the date when made and as
of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and such Investor shall have
performed, satisfied and complied in all material
-18-
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Investor at or
prior to the Closing.
e. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Company or its securities which prohibits or
adversely affects any of the transactions contemplated by this Agreement, nor
shall any proceeding have been commenced which may have the effect of
prohibiting or adversely affecting any of the transactions contemplated by
this Agreement.
7. CONDITIONS TO EACH INVESTOR'S OBLIGATION TO
CONSUMMATE THE RESTRUCTURING.
The obligation of each Investor to consummate the
Restructuring as contemplated hereby is subject to the satisfaction, at or
before the Closing, of each of the following conditions, provided that these
conditions are for each Investor's sole benefit and may be waived by such
Investor at any time in its sole discretion by providing the Company with
prior written notice thereof:
a. The Company shall have executed each of the Transaction
Documents and delivered the same to such Investor.
b. The Amended Certificate, shall have been duly filed with
the Secretary of State of the State of New York, and a copy thereof certified
by such Secretary of State shall have been delivered to such Investor.
c. The Common Stock shall be authorized for quotation on the
Principal Market, trading in the Common Stock shall not have been suspended by
the SEC or the Principal Market and the Conversion Shares shall be listed upon
the Principal Market.
d. The representations and warranties of the Company shall
be true and correct in all material respects (except to the extent that any of
such representations and warranties is already qualified as to materiality in
Section 3 above, in which case, such representations and warranties shall be
true and correct without further qualification) as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the
Closing Date. Such Investor shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested
by such Investor including, without limitation, an update as of the Closing
Date
-19-
regarding the representation contained in Section 3(c) above, in the form
attached hereto as Exhibit C.
e. Such Investor shall have received the opinion of the
Company's counsel dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to such Investor and in substantially the form of
Exhibit D attached hereto.
f. The Company shall have (i) (A) executed and delivered to
such Investor the certificates representing the Series F Preferred Stock (in
such certificate denominations as such Investor shall request and in the name
of such Investor or its designee) and (B) duly authorized, validly issued and
delivered to such Investor the certificates for the Restructuring Shares, each
in the amounts set forth on the Schedule of Investors, subject to reduction as
provided in Section 9(q), and (ii) paid to the Investors, or their
designee(s), by wire transfer of immediately available funds, the amount
provided for in Section 4(h) hereof.
g. The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form reasonably
acceptable to such Investor.
h. The Irrevocable Transfer Agent Instructions, in the form
of Exhibit E attached hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
i. The Company shall have delivered to such Investor a
certificate evidencing the incorporation and good standing of the Company and
each Subsidiary in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within 10 days
of the Closing Date.
j. As of the Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Series F Preferred Stock, at least 690,000
shares of Common Stock.
k. The Company shall have delivered to such Investor a
certified copy of the Certificate of Incorporation, as certified by the
Secretary of State of the State of New York within ten days of the Closing
Date.
l. The Company shall have delivered to such Investor a
secretary's certificate, dated as the Closing Date, as to (i) the resolutions
described in Section 7(g), (ii) the Certificate of Incorporation, and (iii)
the Bylaws, each as in effect at the Closing.
m. The Company shall have made all filings under all
applicable federal and state securities laws necessary to consummate the
issuance of the Securities pursuant to this Agreement in compliance with such
laws.
-20-
n. The Company shall have delivered to such Investor such
other documents relating to the transactions contemplated by this Agreement as
such Investor or its counsel may reasonably request.
o. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which
prohibits or adversely affects any of the transactions contemplated by this
Agreement, nor shall any proceeding have been commenced which may have the
effect of prohibiting or adversely affecting any of the transactions
contemplated by this Agreement.
p. The Company has filed a supplement to the registration
statement covering the Warrants and such supplement reflects the amendment to
the Warrants pursuant to Section 1.2 hereof.
q. The Registration Statement has been declared effective by
the SEC, and no stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose are pending or
threatened by the SEC.
8. INDEMNIFICATION. In consideration of each Investor's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the
Transaction Documents and the Amended Certificate, the Company shall defend,
protect, indemnify and hold harmless each Investor and each other holder of
the Securities and all of their stockholders, officers, directors, employees
and direct or indirect investors and any of the foregoing person's agents or
other representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnities") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any
such Indemnitee is a party to the action for which indemnification hereunder
is sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company
contained in the Transaction Documents or the Amended Certificate or any other
certificate, instrument or document contemplated hereby or thereby, (c) any
cause of action, suit or claim brought or made against such Indemnitee and
arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or the Amended Certificate or any
other certificate, instrument or document contemplated hereby or thereby, (d)
any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (e) the
status of such
-21-
Investor or holder of the Securities as an investor in the Company. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. The corporate
laws of the State of New York shall govern all issues concerning the relative
rights of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of
the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New York.
Each party hereby irrevocably submits to the non-exclusive jurisdiction of the
state and federal courts sitting in the City of New York, 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, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of
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 mailing a copy thereof to such party at the
address for such 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 HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party; provided that a facsimile
signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the
-22-
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. Except as set forth in the
following sentence, this Agreement, the Transaction Documents and the Amended
Certificate supersede all other prior oral or written agreements between the
Investors, the Company, their affiliates and persons acting on their behalf
with respect to the matters discussed herein, including, without limitation,
the Letter Agreement, and the instruments referenced herein and therein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. The Warrants,
as amended hereby, the Registration Rights Agreement dated as of May 8, 1997,
by and among the Company and the Investors and certain other investors, and
the Securities Purchase Agreement dated May 8, 1997, by and among the Company
and the Investors and certain other investors, shall remain in full force and
effect with respect to the securities and transactions contemplated thereby.
No provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the holders of at least two-thirds (2/3) of
the Series F Preferred Stock then outstanding, and no provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the shares of Series F Preferred
Stock then outstanding. No consideration shall be offered or paid to any
person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents or the Amended Certificate unless the same
consideration also is offered to all of the parties to the Transaction
Documents or holders of Series F Preferred Stock, as the case may be.
f. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i)
upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
AMBI Inc.
0 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: President
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With a copy to:
Law Offices of Xxxxx Xxxxxx
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxxx, Esq.
If to the Transfer Agent:
American Stock Transfer & Trust Co.
0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxxx Xxxxxx, Esq.
If to an Investor, to it at the address and facsimile number set forth on the
Schedule of Investors, with copies to such Investor's representatives as set
forth on the Schedule of Investors, or at such other address and/or facsimile
number and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five (5) days prior to
the effectiveness of such change. Written confirmation of receipt (A) given by
the recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the
first page of such transmission or (C) provided by a nationally recognized
overnight delivery service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and assigns, including any purchasers of the shares of Series F Preferred
Stock. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of at
least two-thirds (2/3) of the Series F Preferred Stock then outstanding,
including by merger or consolidation, except pursuant to a Major Transaction
(as defined in Section 3(c) of the Amended Certificate) with respect to which
the Company is in compliance with Section 3 of the Amended Certificate. An
Investor may assign some or all of its rights hereunder without the consent of
the Company, provided, however, that any such assignment shall not release
such Investor from its obligations hereunder unless such obligations are
assumed by such assignee and the Company has consented to such assignment and
assumption. Notwithstanding anything to the contrary contained in the
Transaction Documents, the Investors shall be entitled to pledge the
Securities in connection with a bona fide margin account.
-24-
h. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
i. Survival. Unless this Agreement is terminated under
Section 9(l), the representations and warranties of the Company and the
Investors contained in Sections 2 and 3, the agreements and covenants set
forth in Sections 4, 5 and 9, and the indemnification provisions set forth in
Section 8, shall survive the Closing. Each Investor shall be responsible only
for its own representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and each Investor shall have the
right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Investor, to make any press release or other public disclosure with respect to
such transactions as is required by applicable law and regulations (although
each Investor shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release and shall be
provided with a copy thereof).
k. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
occurred on or before five (5) business days from the date hereof due to the
Company's or the Investors' failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the nonbreaching party's failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party;
provided, however, that if this Agreement is terminated pursuant to this
Section 9(l), the Company shall remain obligated to reimburse the nonbreaching
Investors for the expenses described in Section 4(h) above.
m. Placement Agent. The Company acknowledges that it has not
engaged a placement agent in connection with the Restructuring. The Company
shall be responsible for the payment of any placement agent's fees or broker's
commissions relating to or arising out of the transactions contemplated
hereby. The Company shall pay, and hold each Investor harmless against, any
liability, loss or expense (including, without limitation, attorneys' fees and
out of pocket expenses) arising in connection with any such claim.
-25-
n. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.
o. Remedies. Each Investor and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
the Amended Certificate and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any Person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a
payment or payments to the Investors hereunder or pursuant to the Amended
Certificate or the Investors enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a
trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
q. Pre-Closing Conversions. In the event that any of the
Investors converts any of the Preferred Shares into shares of Common Stock
prior to the Closing Date, such Investor's Pro Rata Allocation of the shares
of Series F Preferred Stock shall be reduced by an amount, expressed as a
percentage, equal to a fraction, the numerator of which is (A) the number of
Preferred Shares set forth opposite such Investor's name on the Schedule of
Investors less the number of Preferred Shares held by such Investor as of the
Closing Date and (B) the denominator of which is the number of Preferred
Shares set forth opposite such Investor's name on the Schedule of Investors.
* * * * * *
-26-
IN WITNESS WHEREOF, the Investors and the Company have caused this
Exchange Agreement to be duly executed as of the date first written above.
COMPANY: INVESTORS:
AMBI INC. NP PARTNERS (formerly known as
Xxxxxx Partners)
By: By:
------------------------------- -----------------------------
Name: Xxxxxxx X. Xxxxx Name: Xxxxxxx X. Simpler
Its: Chief Executive Officer Its: Authorized Signatory
OLYMPUS SECURITIES, LTD.
By:
-----------------------------
Name: Xxxxxxx X. Simpler
Its: Authorized Signatory
SCHEDULE OF INVESTORS
Investor Address Number of
Investor's Name and Facsimile Number Preferred Shares
------------------------------- ------------------------------------- -----------------
NP Partners (formerly known as c/o Citadel Investment Group, L.L.C. 2,875
Xxxxxx Partners) 000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Simpler
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Illinois
Olympus Securities, Ltd. c/o Citadel Investment Group, L.L.C. 2,875
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Simpler
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Illinois
Investor's Name Investor's Legal Representatives'
------------------------------- Restructuring Consideration Address and Facsimile Number
---------------------------------------- -----------------------------------
Shares of Restructuring
Series F Shares
Preferred
Stock
-------------- -------------
NP Partners (formerly known as 287.5 (1) Xxxxxx Xxxxxx & Xxxxx
Xxxxxx Partners) 000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Olympus Securities, Ltd. 287.5 (1) Xxxxxx Xxxxxx & Zavis
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
(1) The Restructuring Shares are equal to the accrued dividends on the
Preferred Shares through the Closing Date divided by $.7606.
